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Assumption And Subordination Agreement

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EXHIBIT 10.20


ASSIGNMENT AND


ASSUMPTION AND SUBORDINATION AGREEMENT


THIS ASSUMPTION AGREEMENT (the "AGREEMENT") is made this 8th day of March, 2004 by and between PIERRE FOODS, INC., a North Carolina corporation (the "ASSIGNEE"), and PF MANAGEMENT, INC., a North Carolina corporation (the "ASSIGNOR"). Capitalized Terms not expressly defined herein shall have the meaning ascribed to them in the Indenture (as such term is defined below).


W I T N E S S E T H :


WHEREAS, on June 9, 1998, the Assignee issued that certain debt evidenced by those certain 10--3/4% Senior Notes Due 2006 (hereafter, together with any and all renewals, extensions, substitutions, modifications and consolidations of the indebtedness, sometimes referred to as the "SENIOR NOTES");


WHEREAS, the Assignee has certain obligations to the holders of the Senior Notes (the "SENIOR NOTEHOLDERS") under that certain Indenture dated as of June 9, 1998 among Assignee, each of several subsidiaries of Assignee as Guarantors and State Street Bank and Trust Company ("SSBT"), as supplemented by a First Supplemental Indenture dated as of September 5, 1998 among Assignee, Pierre Leasing, LLC, a North Carolina limited liability company, as Additional Guarantor, and SSBT as trustee, a Second Supplemental Indenture dated as of February 26, 1999 among Assignee, Fresh Foods Restaurant Group, LLC, a Delaware limited liability company as Additional Guarantor, and SSBT as trustee, a Third Supplemental Indenture dated as of October 8, 1999 among Assignee and SSBT as trustee, and, as supplemented and amended by a Fourth Supplemental Indenture dated as of March 8, 2004, among Assignee, Fresh Foods Properties, LLC and U.S. Bank, N.A. as trustee (the "INDENTURE TRUSTEE") as successor to SSBT (the "FOURTH SUPPLEMENTAL INDENTURE"), providing for, inter alia, the issuance of the Senior Notes due 2006 (as so supplemented and amended, together with any and all renewals, extensions, substitutions, modifications and consolidations, referred to collectively as the "INDENTURE");


WHEREAS, Assignor, Assignee and Fleet Capital Corporation, a Rhode Island Corporation (together with its successors and assigns, including any other lender or lenders refinancing or refunding all or any portion of the indebtedness owing to Fleet, "Fleet") are parties to a certain Loan and Security Agreement, dated as of August 13, 2003 (as amended and modified from time to time, together with any and all renewals, extensions, substitutions, and consolidations, referred to collectively as the "FLEET LOAN AGREEMENT"), pursuant to which Fleet has agreed to make loans and extend credit to Assignee;


WHEREAS, Assignor and the holders listed on EXHIBIT A hereto (the "HOLDERS") have entered into certain agreements and obligations (the "Subordinated Obligation Documents), pursuant to which the Holders have loaned or advanced to Assignor certain sums of money, pursuant to which Assignor has certain obligations to the Holders (the "SUBORDINATED


OBLIGATIONS"), all as more fully set forth therein;


WHEREAS, on the date hereof, Assignor has agreed to assign all of its right, title and interest in and to the Subordinated Obligation Documents and the Subordinated Obligations to Assignee, and Assignee has agreed to assume such Subordinated Obligation Documents and the Subordinated Obligations and pay the Subordinated Obligations, subject to the subordination provisions contained in the Subordination Agreements (as hereinafter defined);


WHEREAS, in consideration of such assignment of the Subordinated Obligation Documents and the Subordinated Obligations to Assignee and the assumption by Assignee of the Subordinated Obligation Documents and the Subordinated Obligations, which results in certain benefits to the Holders, each Holder has agreed to subordinate the payment of the Subordinated Obligation owing to such Holder to the prior payment in full of certain indebtedness of Assignee; and


WHEREAS, each Holder has consented to the assignment of its respective Subordinated Obligation Documents and the Subordinated Obligations by Assignor to Assignee, and the assumption of such Subordinated Obligation Documents and the Subordinated Obligations by Assignee, pursuant to the terms of a Consent to Assignment and Assumption and Subordination Agreement (the "SUBORDINATION AGREEMENT," and collectively the "SUBORDINATION AGREEMENTS"), substantially in the form attached hereto as EXHIBIT B;


NOW, THEREFORE, with reference to the above recitals, and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged:


1. Assignor hereby sells, conveys, assigns, transfers and delivers to Assignee all of its right, title and interest in and to the liabilities and obligations listed on Exhibit A attached hereto (the "ASSUMED LIABILITIES") and Assignee hereby accepts such assignment and hereby assumes and agrees to pay, perform and discharge when due, subject to the Subordination Agreements, the Assumed Liabilities, and shall indemnify and hold harmless Assignor for all costs, damages, claims and liabilities of Assignor (including without limitation reasonable attorneys fees and court costs) incurred with respect to the Assumed Liabilities.


2. Assignor and Assignee each, for itself and its successors and assigns, covenants and agrees that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered any and all such further acts, instruments, papers and documents, and will give such further assurances, as may be necessary, proper or convenient to carry out and effectuate the intent of this Assignment and Assumption Agreement and the Subordination Agreements.


3. Assignee and Assignor hereby consent, acknowledge and agree that the payment of the Assumed Liabilities shall be subordinated to the Senior Debt (as such term is defined in the Subordination Agreements), and all other indebtedness of the Assignee not expressly subordinated to the Assumed Liabilities or declared to be pari passu with the Assumed Liabilities, all upon the terms and conditions set forth in the Subordination Agreements duly executed by the Holders of each of the Assumed Liabilities. Assignor and Assignee hereby consent, acknowledge and agree that the terms and provisions of each Subordination Agreement with each Holder listed on EXHIBIT A are incorporated herein by reference as if fully set forth herein and as if each of Assignor and Assignee were parties signatory thereto, and the Assumed


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Liabilities shall be subject to repayment only in accordance with and subject to the terms and conditions of the Subordination Agreements.


4. Assignee and Assignor hereby consent, acknowledge and agree that Fleet, the Indenture Trustee and the Senior Noteholders, shall be deemed and recognized as intended third party beneficiaries under this Agreement and the Subordination Agreements, with rights to enforce the terms and provisions of this Agreement and the Subordination Agreements against Assignor, Assignee and the Holders. The Senior Noteholders shall have the unrestricted right at any time or from time to time, and without Assignor's, Assignee's or any Holder's consent, to assign and transfer the Senior Notes and to assign and transfer their rights hereunder and under the Subordination Agreements to one or more persons. Fleet shall have the unrestricted right at any time or from time to time, and without Assignor's, Assignee's or any Holder's consent, to assign and transfer the Fleet Loan Agreement and the indebtedness owing to Fleet thereunder and to assign and transfer its rights hereunder and under the Subordination Agreements to one or more persons. The Senior Noteholders and their respective successors and assigns, acting by and through the Indenture Trustee, and Fleet shall each have the right to enforce all of the terms and provisions of this Agreement and the Subordination Agreements against Assignor, Assignee and the Holders.


5. This Agreement, the Subordination Agreements and any documents and instruments delivered in connection herewith and therewith, and the rights and duties of Assignor, Assignee and the Holders hereunder and thereunder shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of North Carolina, without regard to principles of conflicts of law. Each of Assignor and Assignee hereby submits to the exclusive jurisdiction of the state and Federal courts located in the State of North Carolina.


6. This Agreement and the Subordination Agreements shall be binding upon Assignor, Assignee and each Holder and shall inure to the benefit of Assignor, Assignee, Fleet, the Indenture Trustee, the Senior Noteholders, and their respective representatives, administrators, successors and assigns.


7. This Agreement and the Subordination Agreements cannot be amended, modified or terminated without the prior written consent of Fleet and the Indenture Trustee.


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IN WITNESS WHEREOF, the parties, intending legally to be bound, have caused this Assumption Agreement to be duly executed as of the day and year first hereinabove written.


ASSIGNOR:


PF MANAGEMENT, INC., a North Carolina
corporation


By: /S/ David R. Clark
-------------------------------
Name: David R. Clark
Its: President


ASSIGNEE:


PIERRE FOODS, INC., a North Carolina
corporation


By: /S/ Pamela M. Witters
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