Pennexx Foods, Inc. Brings $226 Million Fraud Claim against Smithfield Foods, Inc.

Business Editors

PHILADELPHIA--(BUSINESS WIRE)--Dec. 3, 2003

Pennexx Foods, Inc. (NASDAQ pink sheets: PNNX) today announced it has filed a thirteen count Cross-Claim against Smithfield Foods, Inc. (NYSE: SFD) seeking damages of $226,000,000.00 in a class action securities suit brought against Pennexx and Smithfield and former Pennexx directors on July 24, 2003 in federal court in Philadelphia.

In the Cross-Claim, Pennexx alleges various wrongful acts of Smithfield in seizing all of the Pennexx's assets and in taking over the company's operations. The wrongful acts alleged in the Cross-Claim include fraud, breach of fiduciary duty with regard to a Pennexx/Smithfield joint venture, and tortuous interference with Pennexx's contracts. The Cross-Claim also alleges breach of contract claims and seeks contribution from Smithfield in the securities class action case. In the Cross-Claim, Pennexx seeks compensatory damages of $226,000,000.00 plus punitive damages.

Pennexx has hired the Philadelphia office of Frey, Petrakis, Deeb, Blum, Briggs & Mitts, P.C., to defend the corporation and certain directors against the class action securities litigation brought by shareholders and to bring the Cross-Claim against Smithfield. Attorneys Maurice R. Mitts and Eric F. Spade of the firm are handling the litigation for Pennexx. Attorney Mitts was featured in the September 11, 2000 edition of the National Law Journal regarding a two-month-long jury trial that resulted in one of the largest verdicts ever in Pennsylvania--$352,000,000.00. That case involved complex lender liability claims against a U.S. bank.

Pennexx ceased operations in June 2003 after Smithfield foreclosed on its assets and took over its operations. Prior to the takeover by Smithfield, Pennexx was a leading provider of case-ready meat to retail supermarkets in the Northeast, such as Pathmark. Pennexx cut, packaged, processed and delivered case-ready beef, pork, lamb and veal in compliance with the United States Department of Agriculture ("USDA") regulations.

"Case-ready" refers to meat products that can be taken out of a box and put directly into a retailer's meat case without any further processing or packaging. For the consumer, case-ready meat enhances food safety, provides leak-proof packaging and a greater variety of meat in stock because the packaging offers longer shelf life.

Pennexx commenced operations in 1999, as the company recognized the opportunity to stake out a first-to-market position in the emerging market category for case-ready meat. The Cross-Claim alleges that in early 2001, Pennexx rejected an inquiry to purchase the company by Smithfield. In June 2001, Smithfield acquired 50% of the common stock of Pennexx and provided the company a credit facility to fund the expansion of its operations. Smithfield is the leading processor and marketer of fresh pork and processed meats in the United States with annual sales of $8 billion. According to the Cross-Claim, Pennexx and Smithfield were to work together through a joint venture in servicing the market in the Northeast United States with case-ready meat. The Cross-Claims states that Pennexx also agreed to assist Smithfield by servicing Smithfield's branded pork to the New York market.

To meet increased demand and accommodate future growth under its joint venture with Smithfield, Pennexx purchased a 145,000 square foot building on ten acres in Philadelphia in April 2002. As part of the joint venture, Smithfield agreed to renovate the building into a state-of-the-art, automated plant for producing case-ready meats. The Cross-Claim alleges that Smithfield mis-designed the new plant in Philadelphia. The design problems with the plant then allegedly caused Pennexx to suffer financial losses that triggered a default under the company's credit facility with Smithfield. Smithfield then foreclosed upon Pennexx, seized its assets and took over its operations. The Cross-Claim further alleges that Smithfield now operates the Philadelphia plant under a legal entity called Showcase.

Pennexx filed its Cross-Claim against Smithfield in a securities class action case pending before Judge John R. Padova in federal court in Philadelphia. The securities class action case is captioned The Winer Family Trust v. Michael Queen, Dennis Bland, Thomas McGreal, Joseph W. Luter, IV, Michael H. Cole, Smithfield Foods, Inc., and Pennexx Foods, Inc., Case No. 03-4318, United States District Court for the Eastern District of Pennsylvania. The Court has ordered that the case will enter the Civil Trial Pool on November 1, 2004, and the final pre-trial conference will be held November 4, 2004 with all parties prepared to commence trial on that date.

Safe Harbor 

Certain statements made herein that use the words "alleges," "alleged," "allegedly," "seeks," "will be held," "claims," and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties which could cause the actual results, performance or achievements of the Company to be materially different from those which may be expressed or implied by such statements, including, among others, risks or uncertainties associated with the market for the Company's products, and other laws, changes in competition and the loss of key personnel. For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission.