SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----
ACT OF 1934
For the quarterly period ended January 26, 1997
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from.......................to.....................
COMMISSION FILE NUMBER 0-2258
SMITHFIELD FOODS, INC.
900 Dominion Tower
999 Waterside Drive
Norfolk, Virginia 23510
(757) 365-3000
Delaware 52-0845861
--------------------- -----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- -----
Shares outstanding
Class at March 10, 1997
- ------------------- -----------------
Common Stock, $.50
par value per share 18,093,015
1-14
<PAGE>
SMITHFIELD FOODS, INC.
CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - January 26, 1997 and
April 28, 1996 3-4
Consolidated Statements of Operations - 13 Weeks Ended
January 26, 1997 and January 28, 1996 and 39 Weeks
Ended January 26, 1997 and January 28, 1996 5
Consolidated Statements of Cash Flows - 39 Weeks Ended
January 26, 1997 and January 28, 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II. OTHER INFORMATION
Item 2. Legal Proceedings 11-12
Item 6. Exhibits and Reports on Form 8-K 12-13
2-14
<PAGE>
PART I. FINANCIAL INFORMATION
SMITHFIELD FOODS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 26, April 28,
(In thousands) 1997 1996
ASSETS (Unaudited)
<S> <C>
Current assets:
Cash $ 21,562 $ 28,529
Accounts receivable less allowances
of $1,148 and $1,084 192,938 144,956
Inventories 223,731 210,759
Advances to joint hog production
arrangements 7,656 7,578
Prepaid expenses and other current assets 32,956 28,585
--------- --------
Total current assets 478,843 420,407
--------- --------
Property, plant and equipment 597,882 536,589
Less accumulated depreciation (185,514) (163,866)
--------- ---------
Net property, plant and equipment 412,368 372,723
--------- ---------
Other assets:
Investments in partnerships 37,004 29,662
Other 46,631 34,827
--------- ---------
Total other assets 83,635 64,489
--------- ---------
$ 974,846 $ 857,619
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3-14
<PAGE>
SMITHFIELD FOODS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 26, April 28,
(In thousands) 1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
<S> <C>
Current liabilities:
Notes payable $100,500 $110,563
Current portion of long-term debt
and capital lease obligations 8,262 13,392
Accounts payable 137,536 113,344
Accrued expenses and other current
liabilities 106,677 95,082
-------- --------
Total current liabilities 352,975 332,381
-------- --------
Long-term debt and capital lease
obligations 265,123 188,618
-------- --------
Other noncurrent liabilities:
Pension and post-retirement benefits 51,543 59,128
Other 16,934 14,975
-------- --------
Total other noncurrent liabilities 68,477 74,103
-------- --------
Series C 6.75% cumulative convertible
redeemable preferred stock, $1.00 par
value, 2,000 shares authorized, issued
and outstanding 20,000 20,000
-------- --------
Stockholders' equity:
Preferred stock, $1.00 par value,
authorized 1,000,000 shares - -
Common stock, $.50 par value,
authorized 25,000,000 shares;
issued 18,530,015 and
18,453,015 shares 9,265 9,227
Additional paid-in capital 93,994 92,762
Retained earnings 172,655 148,171
Treasury stock, at cost, 437,000 shares (7,643) (7,643)
-------- --------
Total stockholders' equity 268,271 242,517
-------- --------
$974,846 $857,619
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4-14
<PAGE>
SMITHFIELD FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks 13 Weeks 39 Weeks 39 Weeks
Ended Ended Ended Ended
(In thousands, except per share data) Jan. 26, 1997 Jan. 28, 1996 Jan. 26, 1997 Jan. 28, 1996
- ------------------------------------- ------------- ------------- ------------- -------------
<S> <C>
Sales $1,080,979 $ 687,000 $2,943,075 $1,510,127
Cost of sales 992,275 630,681 2,722,032 1,397,373
---------- ---------- ---------- ----------
Gross profit 88,704 56,319 221,043 112,754
Selling, general and administrative expenses 48,423 27,585 135,296 60,216
Depreciation expense 9,036 6,945 26,141 18,193
Interest expense 7,278 5,329 20,378 14,870
--------- ---------- ---------- ---------
Income from continuing operations
before income taxes 23,967 16,460 39,228 19,475
Income taxes 8,233 5,673 13,731 6,667
--------- ---------- ---------- ---------
Income from continuing operations 15,734 10,787 25,497 12,808
Loss from discontinued operations, net of tax - (2,100) - (3,900)
--------- ---------- ---------- ---------
Net income $ 15,734 $ 8,687 $ 25,497 $ 8,908
========= ========== ========== =========
Net income available to common stockholders $ 15,397 $ 8,151 $ 24,485 $ 8,034
========= ========== ========== =========
Income (loss) per common share:
Continuing operations $ .82 $ .58 $ 1.32 $ .70
Discontinued operations - (.12) - (.23)
--------- ---------- ---------- ---------
Net income $ .82 $ .46 $ 1.32 $ .47
========= ========== ========== =========
Weighted average common shares outstanding 18,796 17,633 18,569 17,152
========= ========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
5-14
<PAGE>
SMITHFIELD FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks 39 Weeks
Ended Ended
(In thousands) Jan. 26, 1997 Jan. 28, 1996
- -------------- ------------- -------------
<S> <C>
Cash flows from operating activities:
Net income $ 25,497 $ 8,908
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 28,451 19,935
Increase in accounts receivable (39,680) (11,753)
Increase in inventories (980) (19,931)
(Increase) decrease in prepaid expenses
and other current assets (3,925) 201
Increase in other assets (9,271) (12,102)
Increase in accounts payable,
accrued expenses and other
liabilities 19,544 28,867
(Gain) loss on sale of property,
plant and equipment (2,893) 1,816
-------- --------
Net cash provided by operating activities 16,743 15,941
-------- --------
Cash flows from investing activities:
Capital expenditures (47,258) (61,808)
Payments for acquisitions, net of
cash acquired (34,086) (14,079)
Proceeds from sale of property, plant
and equipment 3,452 1,993
Investments in partnerships (7,387) (235)
-------- --------
Net cash used in investing activities (85,279) (74,129)
-------- --------
Cash flows from financing activities:
Net (repayments) borrowings on notes payable (10,063) 6,029
Proceeds from issuance of long-term debt 146,250 50,000
Principal payments on long-term debt
and capital lease obligations (74,876) (8,177)
Exercise of common stock options 1,270 585
Proceeds from issuance of preferred stock - 20,000
Preferred dividends (1,012) (874)
-------- --------
Net cash provided by financing activities 61,569 67,563
-------- --------
Net (decrease) increase in cash (6,967) 9,375
Cash at beginning of period 28,529 14,790
-------- --------
Cash at end of period $ 21,562 $ 24,165
======== ========
Supplemental disclosures of cash flow information: Cash payments
during period:
Interest (net of amount capitalized) $ 19,421 $ 14,599
======== ========
Income taxes $ 7,968 $ 1,892
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6-14
<PAGE>
SMITHFIELD FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) These statements should be read in conjunction with the Consolidated
Financial Statements and related notes which are included in the
Registrant's Annual Report for the fiscal year ended April 28, 1996.
(2) The financial information furnished herein is unaudited. The information
reflects all adjustments (which include only normal recurring adjustments)
which are, in the opinion of management, necessary to a fair statement of
the financial position and the results of operations for the periods
included in this report.
(3) Inventories consist of the following:
<TABLE>
<CAPTION>
January 26, April 28,
(In thousands) 1997 1996
-------------- ----------- -------
<S> <C>
Fresh and processed meats $157,167 $154,110
Livestock and manufacturing supplies 57,783 51,145
Other 8,781 5,504
-------- --------
$223,731 $210,759
======== ========
</TABLE>
(4) On November 4, 1996, the Registrant purchased substantially all of the
assets and business of the Lykes Meat Group ("Lykes") from Lykes Bros. Inc.
for $34.1 million in cash and the assumption of $10.6 million of current
liabilities.
The acquisition was accounted for under the purchase method of
accounting and the results of Lykes are included in the accompanying
consolidated financial statements since November 4, 1996. Lykes has four
principal meat processing plants in Florida and Georgia, operates a
distribution center in Georgia, and markets a full line of processed meats
primarily in the Southern and Southeastern United States under a variety of
brand names, including Lykes and Sunnyland.
The following unaudited pro forma information combines the results of
the Registrant and Lykes as if the acquisition had occurred at the
beginning of the periods presented.
<TABLE>
<CAPTION>
39 Weeks 39 Weeks
Ended Ended
(In thousands, except per share data) Jan. 26, 1997 Jan. 28, 1996
------------------------------------- ------------- -------------
<S> <C>
Sales $3,020,555 $1,697,048
Income from continuing operations 18,508 8,206
Net income 18,508 4,306
Income per common share:
Continuing operations .94 .43
Net income .94 .20
</TABLE>
The Registrant filed a report on Form 8-K/A on January 17, 1997 which
provides complete pro forma information related to the acquisition of
Lykes.
7-14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On December 20, 1995, the Registrant acquired all of the capital stock of John
Morrell & Co. ("John Morrell"). On November 4, 1996, the Registrant acquired
substantially all of the assets and business of the Lykes Meat Group ("Lykes")
from Lykes Bros. Inc. Accordingly, the Registrant's results for the third
quarter and the first nine months of fiscal 1997 include the results of
operations of John Morrell and Lykes.
13 Weeks Ended January 26, 1997 -
13 Weeks Ended January 28, 1996
Sales in the third quarter of fiscal 1997 increased $394.0 million, or 57.3%,
from the same quarter a year ago. The increase was primarily due to the
inclusion of the sales of John Morrell and Lykes for the period. In addition,
significant increases in unit sales prices of both fresh pork and processed
meats, reflecting the passthrough of higher raw material costs due to higher
live hog costs, and increased sales of fresh pork related to an increase in the
number of hogs slaughtered on the second shift at the Registrant's Bladen
County, North Carolina plant, also contributed to the increase in sales. The
sales-dollar increase is the result of a 15.9% increase in unit sales prices
combined with a 35.8% increase in sales tonnage, of which the latter is
primarily the result of the inclusion of the sales of John Morrell and Lykes.
The increase in sales tonnage reflected a 33.4% increase in fresh pork tonnage
and a 40.3% increase in processed meats tonnage.
Cost of sales increased $361.6 million, or 57.3%, in the third quarter of
fiscal 1997, reflecting the increased sales tonnage and a 26.9% increase in live
hog costs. Gross profit in the third quarter of fiscal 1997 increased $32.4
million, or 57.5%, compared with the same quarter of fiscal 1996. The increase
in gross profit was primarily due to the inclusion of the operations of John
Morrell and Lykes. In addition, the increase in gross profit was due in part to
improved margins on sales of processed meats which were substantially offset by
sharply lower margins on sales of fresh pork. These poor fresh pork margins have
continued into the fourth quarter of fiscal 1997 and as a result, the Registrant
temporarily closed the second shift at John Morrell's Sioux City, Iowa slaughter
plant in February, 1997.
Gross profit was also favorably affected by a $5.5 million reduction in
cost of sales as a result of the performance of the Registrant's hog production
group. In the same quarter of fiscal 1996, gross profit was favorably affected
by a $0.4 million reduction in cost of sales as a result of the performance of
the group.
Selling, general and administrative expenses increased $20.8 million, or
75.5%, in the third quarter of fiscal 1997. The increase was primarily due to
the inclusion of the operations of John Morrell and Lykes. Additionally, the
increase reflected higher selling and marketing costs associated with the
increase in fresh pork tonnage.
Depreciation expense increased $2.1 million, or 30.1%, in the third quarter
of fiscal 1997. The increase was primarily due to the inclusion of the
operations of John Morrell and Lykes.
Interest expense increased $1.9 million, or 36.6%, in the third quarter of
fiscal 1997, reflecting the higher cost of long-term debt placed during the
period, a portion of the proceeds of which were used to repay short-term
borrowings at lower interest rates, and the interest costs associated with the
cash portion of the purchase price related to the acquisition of Lykes.
8-14
<PAGE>
The effective income tax rate for the third quarter of fiscal 1997 was
34.4% compared with 34.5% in the corresponding period a year ago.
Income from continuing operations increased to $15.7 million in the third
quarter of fiscal 1997 compared with income from continuing operations of $10.8
million a year ago, reflecting the factors disclosed above. The third quarter
results included a small loss at Lykes since acquisition date. Lykes' management
has sharply reduced operating costs and increased both its domestic and export
business, and as a result, it is expected that Lykes will be operating
profitably by the end of fiscal 1997.
In the third quarter of fiscal 1996, the Registrant incurred a $2.1 million
loss from discontinued operations related to the disposition of the assets and
business of Ed Kelly, Inc., its former retail electronics subsidiary, which is
reported separately as discontinued operations in the Registrant's consolidated
statements of operations.
Reflecting the factors discussed above, net income increased to $15.7
million in the third quarter of fiscal 1997 compared with net income of $8.7
million for the same quarter of the prior fiscal year.
39 Weeks Ended January 26, 1997 -
39 Weeks Ended January 28, 1996
Sales in the first nine months of fiscal 1997 increased $1.43 billion, or 94.9%,
from the same period a year ago. The increase was primarily due to the inclusion
of the sales of John Morrell for the period. In addition, significant increases
in unit sales prices of both fresh pork and processed meats, reflecting the
passthrough of higher raw material costs due to higher live hog costs, and
increased sales of fresh pork related to an increase in the number of hogs
slaughtered on the second shift at the Registrant's Bladen County, North
Carolina plant also contributed to the increase in sales. The sales-dollar
increase is the result of an 18.2% increase in unit sales price combined with a
64.9% increase in sales tonnage, of which the latter is primarily the result of
the inclusion of the sales of John Morrell. The increase in sales tonnage
reflected a 72.0% increase in fresh pork tonnage and a 56.3% increase in
processed meats tonnage.
Cost of sales increased $1.32 billion, or 94.8%, in the first nine months
of fiscal 1997, reflecting the increased sales tonnage and a 24.5% increase in
live hog costs. Gross profit in the first nine months of fiscal 1997 increased
$108.3 million, or 96.0%, compared with the same period of fiscal 1996. The
increase in gross profit was primarily due to the inclusion of the operations of
John Morrell. In addition, the increase in gross profit was due in part to
improved margins on sales of processed meats which were substantially offset by
lower margins on sales of fresh pork. Gross profit was also favorably affected
by a $16.8 million reduction in cost of sales as a result of the performance of
the Registrant's hog production group. In the same period of fiscal 1996, gross
profit was favorably affected by a $9.1 million reduction in cost of sales as a
result of the performance of the group.
Selling, general and administrative expenses increased $75.1 million, or
124.7%, in the first nine months of fiscal 1997. The increase was primarily due
to the inclusion of the operations of John Morrell. Additionally, the increase
reflected higher selling and marketing costs associated with the increase in
fresh pork tonnage.
9-14
<PAGE>
Depreciation expense increased $7.9 million, or 43.7%, in the first nine
months of fiscal 1997. The increase was related to the inclusion of the
operations of John Morrell.
Interest expense increased $5.5 million, or 37.0%, in the first nine months
of fiscal 1997, reflecting increased carrying costs on higher levels of
inventories and accounts receivable related to higher live hog costs and the
higher cost of long-term debt placed during the period, a portion of the
proceeds of which were used to repay short-term borrowings at lower interest
rates.
The effective income tax rate for the first nine months of fiscal 1997
increased to 35.0% from 34.2% in the corresponding period a year ago, reflecting
the reduced impact of federal and state tax credits.
Income from continuing operations increased to $25.5 million in the first
nine months of fiscal 1997 compared with income from continuing operations of
$12.8 million a year ago, reflecting the factors discussed above.
In fiscal 1996, the Registrant incurred a $3.9 million loss from
discontinued operations related to the disposition of the assets and business of
Ed Kelly, Inc., its former retail electronics subsidiary, which is reported
separately as discontinued operations in the Registrant's consolidated
statements of operations.
Reflecting the factors discussed above, net income increased to $25.5
million in the first nine months of fiscal 1997 compared with net income of $8.9
million for the same period of the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
In the first nine months of fiscal 1997, the Registrant's cash provided by
operations was $16.7 million, largely the result of profitable operations and
noncash charges reduced by increased requirements for working capital.
Capital expenditures in the first nine months of fiscal 1997 totaled $47.3
million, consisting primarily of $23.2 million related to plant renovation and
expansion projects at certain of the Registrant's processing plants and $15.3
million related to hog production facilities and a feedmill at Brown's of
Carolina, Inc.
On November 4, 1996, the Registrant acquired from Lykes Bros. Inc.
substantially all the assets and business of Lykes for $34.1 million in cash
(borrowed under the Registrant's revolving credit facility) and the assumption
of $10.6 million of current liabilities.
In the second quarter, the Registrant privately placed $140 million of
senior secured notes with a group of institutional lenders. The placement
consisted of $40 million of seven-year 8.34% notes and $100 million of 10-year
8.52% notes secured by four of the Registrant's major processing plants. The
proceeds of the financing were used to repay $65.2 million of long-term bank
debt and reduce short-term borrowings. In conjunction with the placement of the
senior secured notes, the Registrant refinanced $59.7 million of existing
institutional long-term debt with the same institutional lenders. The
refinancing resulted in revised maturity dates and repayment schedules for the
refinanced debt; however, no additional proceeds resulted from this refinancing.
10-14
<PAGE>
During the current quarter, the Registrant increased its line of credit to
$300 million from $255 million. The increased line consists of a 364-day, $225
million revolving credit facility and a two-year, $75 million revolving credit
facility. The Registrant is using the short-term facility for seasonal inventory
and receivable needs and the long-term facility for working capital and capital
expenditures. In the first nine months of fiscal 1997, the Registrant funded its
capital expenditures with internally generated funds and borrowings under the
line of credit.
As of January 26, 1997, the Registrant had definitive commitments of $26.7
million for capital expenditures related to current capital projects underway at
its meat processing plants and completion of its hog production expansion
program at Brown's. The Registrant intends to fund these capital expenditures
with internally generated funds.
PART II - OTHER INFORMATION
Item 2. Legal Proceedings.
Reference is made to the disclosure appearing in Part I, Item 1 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended April
28, 1996, under the caption "BUSINESS-Regulation," as supplemented by
the disclosures appearing in Part II, Item 2 of the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended July 28, 1996 and Part II,
Item 2 of the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 27, 1996.
As reported in prior disclosures, on December 16, 1996, the U.S.
Department of Justice ("DOJ") filed a civil action in the United States District
Court for the Eastern District of Virginia, Norfolk Division, against the
Registrant and two of its operating subsidiaries, The Smithfield Packing
Company, Incorporated ("Smithfield Packing") and Gwaltney of Smithfield, Ltd.
("Gwaltney") seeking civil penalties for approximately 5,000 alleged violations
of the federal Clean Water Act by Smithfield Packing and Gwaltney at pork
processing plants in the Town of Smithfield, Virginia. The vast majority of the
alleged violations are based upon permit exceedences by Smithfield Packing and
Gwaltney occurring from November 1991 to the present which are expressly excused
under an administrative consent order issued in 1991 by the Virginia State Water
Control Board (the "SWCB"). Under the 1991 order, the Registrant is obliged to
connect its two wastewater treatment facilities to the public sewer system
operated by the Hampton Roads Sanitation District (the "HRSD") as soon as that
system is extended to the Town of Smithfield. The Registrant connected the
Gwaltney wastewater treatment facility to the public sewer system in June 1996,
when that system was first available; and the Registrant plans to connect the
Smithfield Packing wastewater treatment facility to the public sewer system by
the end of March 1997, upon receiving notice from the HRSD that the public sewer
system is ready to accept the second facility's wastewater. Notwithstanding the
fact that the Commonwealth of Virginia, acting through the SWCB, has primary
enforcement responsibility in the Clean Water Act's cooperative federal-state
permitting scheme, and the fact that the SWCB advised federal authorities of the
administrative consent order when issued, DOJ has taken the position in its suit
that the State-issued administrative consent order does not bar a federal action
seeking relief for permit violations. Each violation is subject to a civil
penalty of up to a maximum of $25,000. The Registrant intends to defend the suit
vigorously.
The Registrant reaffirms its belief, based on its knowledge
of the facts and circumstances surrounding the violations and
investigations, as summarized herein and in prior disclosures, that
11-14
<PAGE>
the ultimate resolution of these matters will not have a material
adverse effect on its financial position or annual results of operations.
As reported in prior disclosures, a federal criminal investigation
led to the conviction of a former employee who filed false Clean Water
Act reports on behalf of the Registrant. Since that conviction, federal
and Virginia authorities have been investigating allegations by another
former employee concerning falsified Clean Water Act reports. This other
former employee was terminated for failing to perform his work
duties satisfactorily, and the Registrant believes that his allegations
concerning falsified reports are untrue. Neither the Registrant
nor any of its other employees has been, or is expected to be, charged
with any criminal violations arising from such allegations.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits
Exhibit 4.6 - Fourth Amended, Restated and Continued
Revolving Credit Agreement dated as of April 30, 1996 among
Gwaltney of Smithfield, Ltd., The Smithfield Packing Company,
Incorporated, Patrick Cudahy Incorporated, Esskay, Inc.,
Brown's of Carolina, Inc. and John Morrell & Co., and
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch, as agent, and each
bank a party thereto (incorporated by reference to Exhibit
4.6 to the Company's Form 10-K Annual Report for the fiscal
year ended April 28, 1996); a First Amendment to such Credit
Agreement dated as of July 29, 1996 (incorporated by
reference to Exhibit 4.6 to the Registrant's Form 10-Q
Quarterly Report for the fiscal quarter ended July 28, 1996);
and a Second Amendment to such Credit Agreement dated as of
January 15, 1997.
Exhibit 4.6(h) - Guarantee dated as of January 15, 1997, made
by Lykes Meat Group, Inc. in favor of Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New
York Branch, as agent for the banks a party to the Credit
Agreement, as defined therein.
Exhibit 4.6(i) - Security Agreement dated as of January 15,
1997, made by Lykes Meat Group, Inc. to Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New
York Branch, as agent for the banks a party to the Credit
Agreement, as defined therein.
Exhibit 4.6(j) - Security Agreement dated as of January 15,
1997, made by Sunnyland, Inc. to Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New
York Branch, as agent for the banks a party to the Credit
Agreement, as defined therein.
Exhibit 11 - Computation of Net Income Per Share.
Exhibit 27 - Financial Data Schedule.
12-14
<PAGE>
B. Reports on Form 8-K
1. A Current Report on Form 8-K for November 12, 1996 was
filed with the Securities and Exchange Commission on
November 14, 1996, to report under Item 5, the
resignation of John O. Nielson, the Registrant's
President and Chief Operating Officer.
2. A Current Report on Form 8-K for November 4, 1996 was
filed with the Securities and Exchange Commission on
November 18, 1996, to report, under Items 2 and 7, that
the Registrant had purchased substantially all of the
assets of the Lykes Meat Group of Lykes Bros. Inc.
3. A Current Report on Form 8-K for December 16, 1996, was
filed with the Securities and Exchange Commission on
December 26, 1996, to report, under Item 5, that the U.
S. Justice Department had filed a civil action in
federal district court in Norfolk, Virginia against the
Registrant and certain of its subsidiaries seeking civil
penalties for alleged violations of the federal Clean
Water Act.
4. An Amended Current Report on Form 8-K for November 4,
1996 was filed with the Securities and Exchange
Commission on January 17, 1997, to report, under Items 2
and 7, that the Registrant had purchased substantially
all of the assets of the Lykes Meat Group of Lykes Bros.
Inc.
13-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SMITHFIELD FOODS, INC.
/s/ Aaron D. Trub
------------------------------
Aaron D. Trub
Vice President, Secretary and Treasurer
/s/ C. Larry Pope
---------------------------------
C. Larry Pope
Vice President and Controller
Date: March 10, 1997
14-14
EXHIBIT 4.6
1
[EXECUTION COUNTERPART]
SECOND AMENDMENT
OF CREDIT AGREEMENT
This SECOND AMENDMENT OF CREDIT AGREEMENT (this "Agreement" or this
"Second Amendment"), dated as of January 15, 1997, is entered into by and among
GWALTNEY OF SMITHFIELD, LTD., a Delaware corporation (for itself and as
successor by merger to Esskay, Inc) ("Gwaltney"), THE SMITHFIELD PACKING
COMPANY, INCORPORATED, a Virginia corporation ("Packing"), PATRICK CUDAHY
INCORPORATED, a Delaware corporation ("Cudahy"), BROWN'S OF CAROLINA, INC., a
North Carolina corporation ("Brown's"), JOHN MORRELL & CO., a Delaware
Corporation ("Morrell"), LYKES MEAT GROUP, INC., a Delaware corporation
("Lykes") and SUNNYLAND, INC., a Georgia corporation ("Sunnyland"; Gwaltney,
Packing, Cudahy, Brown's, Morrell, Lykes and Sunnyland being individually
referred to as a "Borrower" and collectively referred to as the "Borrowers"),
and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "Rabobank Nederland",
New York Branch (individually, "Rabobank"), as Agent for the Banks (the
"Agent"), and each financial institution a party hereto (being individually
referred to as a "Bank" and collectively referred to as the "Banks").
PRELIMINARY STATEMENTS
(1) The Borrowers (other than Lykes and Sunnyland), the Agent and the
Banks (other than AgriBank FCB ("AgriBank") and FBS Ag Credit, Inc. ("FBS"))
have entered into a Fourth Amended, Restated and Continued Credit Agreement,
dated as of April 30, 1996, as amended by the First Amendment, dated as of July
29, 1996 (as amended, the "Credit Agreement"). Capitalized terms used herein but
not defined herein shall have the meanings assigned to such terms in the Credit
Agreement, as amended hereby.
(2) The parties hereto desire to amend the Credit Agreement to (i) add
Lykes and Sunnyland as Borrowers, (ii) add AgriBank and FBS as Banks, (iii)
remove Farm Credit Services of the Midlands, PCA ("Farm Credit") as a Bank and
(iv) increase the Facility A Commitment and the Facility B Commitment.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
<PAGE>
2
ARTICLE I
AMENDMENT OF CREDIT AGREEMENT
SECTION 1.01. Amendment of Credit Agreement.
(a) The Credit Agreement shall be, effective as of the date
hereof, amended as follows:
(i) The opening recital of the Credit Agreement is hereby
amended by deleting the parenthetical phrase after the words "JOHN
MORRELL & CO., a Delaware corporation" and substituting therefor the
following:
("Morrell"), LYKES MEAT GROUP, INC., a Delaware corporation
("Lykes") and SUNNYLAND, INC., a Georgia corporation
("Sunnyland"; Gwaltney, Packing, Cudahy, Brown's, Morrell,
Lykes and Sunnyland being individually referred to as a
"Borrower" and collectively referred to as the "Borrowers"),
(ii) Section 1.01(a) of the Credit Agreement is hereby
amended by replacing, in each case, the dollar amount "$205,000,000"
with the dollar amount "$225,000,000".
(iii) Section 1.01(b) of the Credit Agreement is hereby
amended by replacing, in each case, the dollar amount "$50,000,000"
with the dollar amount "$75,000,000".
(iv) Section 1.04(a) of the Credit Agreement is hereby
amended by replacing the words "and Exhibit A-6 (as to Morrell)" in the
first sentence thereof, with the words", Exhibit A-6 (as to Morrell),
Exhibit A-7 (as to Lykes) and Exhibit A-8 (as to Sunnyland)".
(v) The definitions of "Security Agreement" and "Security
Agreements" in Section 3.01(c) of the Credit Agreement are hereby
amended to include each of the Security Agreements to be executed by
Lykes and Sunnyland pursuant to Section 3.01(iv) hereof.
(vi) Annex I, Schedule 5.01(e) and Schedule 6.01(d) to the
Credit Agreement are hereby deleted in their entirety and Annex I,
Schedule 5.01(e) and Schedule 6.01(d) in the forms attached hereto are
substituted therefor.
(vii) The Exhibits to the Credit Agreement are hereby
amended by renumbering Exhibit B as Exhibit B-1 and adding new Exhibits
A-7, A-8 and B-2 in the forms attached hereto.
ARTICLE II
<PAGE>
3
ADDITION AND REMOVAL OF PARTIES
SECTION 2.01. Agreements of New Parties. Each of Lykes and Sunnyland
hereby agrees to be bound by the terms and conditions of the Credit Agreement as
Borrowers thereunder with the same force and effect as if each such party had
been an original party thereto. Each of Lykes and Sunnyland, as Borrowers under
the Credit Agreement, hereby makes the representations, warranties and covenants
set forth in Articles IV and V of the Credit Agreement to the Banks, including
AgriBank and FBS, with the same force and effect as if each of Lykes and
Sunnyland had been an original party to the Credit Agreement. Each of AgriBank
and FBS hereby agrees to be bound by the terms and conditions of the Credit
Agreement as a Bank thereunder with the same force and effect as if each had
been an original party thereto.
SECTION 2.02. Removal of Farm Credit. Each of the parties hereto hereby
agrees that from and after the effective date of this Amendment the rights and
obligations of Farm Credit under the Credit Agreement shall be terminated. On
the effective date of this Amendment the Banks, including AgriBank and FBS,
shall pay to Farm Credit an amount, in immediately available funds, equal to the
outstanding amount of Farm Credit's Commitment on such date, together with
accrued but unpaid interest thereon and fees, if any, related thereto.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions of Effectiveness. This Second Amendment shall
become effective on the date when, and only when, (a) the Agent shall have
received counterparts of this Second Amendment duly executed by each of the
parties hereto, (b) all outstanding fees and expenses of counsel to the Agent
and the Lenders shall have been paid in full, (c) the representations and
warranties contained herein shall be true on and as of the date of the
effectiveness of this Second Amendment (the "Effective Date"), there shall exist
on the Effective Date no Event of Default or Default and there shall exist no
material adverse change in the financial condition, business, operation or
prospects of the Guarantor or its Subsidiaries since October 27, 1996, and each
of the Borrowers is in compliance with its Borrowing Base requirements; and (d)
the Agent shall have received all of the following documents, each (unless
otherwise indicated) being dated the date hereof, in form and substance
satisfactory to the Agent and the Banks:
(i) Cancelled Facility A Notes and Facility B Notes issued
under the Credit Agreement on April 30, 1996;
(ii) Duly executed Facility A Notes and Facility B Notes
issued under the Credit Agreement, as amended hereby, by each of the
Borrowers;
(iii) A guaranty, duly executed by Lykes, in substantially
the form of Exhibit B-2 attached hereto;
<PAGE>
4
(iv) A Security Agreement dated as of the date hereof duly
executed by each of Lykes and Sunnyland, in substantially the form of
Exhibit J-2 to the Credit Agreement, in favor of the Agent on behalf of
the Banks (the "New Borrower Security Agreements"), together with:
(a) Acknowledgment copies of proper Financing
Statements (Form UCC-1 or equivalent forms) duly filed under
the Uniform Commercial Code of all jurisdictions as may be
necessary or, in the opinion of the Agent, desirable to
perfect the security interests created by the New Borrower
Security Agreements,
(b) Certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, listing the
Financing Statements referred to in paragraph (a) above and
all other effective financing statements which name each
such Borrower (under its present name and any previous name)
as debtor and which are filed in the jurisdictions referred
to in said paragraph (a), together with copies of such other
financing statements (none of which shall cover the
collateral purported to be covered by the New Borrower
Security Agreements),
(c) Evidence of the insurance required by the terms
of the New Borrower Security Agreements,
(d) Evidence that all other actions necessary or,
in the opinion of the Agent, desirable to perfect and
protect the security interests created by the New Borrower
Security Agreements have been taken;
(v) Copies of all documents evidencing all requisite
corporate action of each Borrower (including any and all resolutions of
the Board of Directors of each Borrower) authorizing the execution,
delivery and performance of this Second Amendment and the matters
contemplated hereby, certified by the Secretary or Assistant Secretary
of each Borrower;
(vi) A certificate of the Secretary or an Assistant
Secretary of each of Lykes and Sunnyland certifying the names and true
signatures of the officers of such Borrower authorized to sign each
Loan Document to which it is a party and the other documents to be
delivered by it hereunder;
(vii) A favorable opinion of McGuire, Woods, Battle & Boothe
LLP, special counsel for the Borrowers, in form and substance
satisfactory to the Agent and the Banks and with respect to, without
limitation, the enforceability of this Second Amendment and the Notes
and the Security Agreements being delivered herewith and the perfection
of the security interests of the Agent, on behalf of the Banks, granted
in such Security Agreements upon the filing in specified jurisdictions
of the forms UCC-1 or equivalent forms prepared in connection herewith,
<PAGE>
5
(viii) An Officer's Certificate of each Borrower, dated the
Effective Date, to the effect that the representations and warranties
contained herein shall be true on and as of the Effective Date; there
shall exist on the Effective Date, no Event of Default or Default;
there shall exist no material adverse change in the financial
condition, business, operation or prospects of such Borrower since
November 4, 1996, with respect to Lykes and Sunnyland and October 27,
1996 with respect to Borrowers other than Lykes and Sunnyland; and the
Borrowers are in compliance with the Borrowing Base requirements; and
(ix) Such other documents, instruments, approvals (and, if
required by the Agent, certified duplicates of executed copies thereof)
or opinions as the Agent or any Lender may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrowers. (a) Each
of the Borrowers (other than Lykes and Sunnyland) hereby repeats and confirms
each of the representations and warranties made by it in the Credit Agreement,
as amended hereby, as though made on and as of the date hereof, with each
reference therein to "this Agreement", "hereof", "hereunder", "thereof",
"thereunder" and words of like import being deemed to be a reference to the
Credit Agreement and the Loan Documents, in each case, as amended hereby.
(b) Each of the Borrowers (including Lykes and Sunnyland)
further represents and warrants as follows:
(i) The execution, delivery and performance by such Borrower
of this Second Amendment and the Notes executed in connection herewith
are within its corporate powers, have been duly authorized by all
necessary corporate action and do not contravene (A) such Borrower's
charter or by-laws, (B) any law or (C) any legal or contractual
restriction binding on or affecting such Borrower; and such execution,
delivery and performance do not or will not result in or require the
creation of any Lien upon or with respect to any of its properties
(other than Liens contemplated by this Second Amendment).
(ii) No governmental approval is required for the due
execution, delivery and performance by such Borrower of this Second
Amendment.
(iii) This Second Amendment and the Notes in connection
herewith each constitutes the legal, valid and binding obligations of
such Borrower enforceable against such Borrower in accordance with its
terms.
<PAGE>
6
ARTICLE V
CONFIRMATION OF SECURITY AGREEMENTS
SECTION 5.01. Confirmation of Security Agreements. Each Borrower (other
than Lykes and Sunnyland) as a Grantor under its Security Agreement, hereby
consents and agrees to this Second Amendment. Each such Borrower hereby confirms
and agrees that its Security Agreement is, and shall continue to be, in full
force and effect and is hereby ratified and confirmed in all respects, except
each reference in each such Borrower's Security Agreement to "the Credit
Agreement", "thereunder", "thereof" or words of like import shall mean and be a
reference to Credit Agreement, as amended by this Second Amendment. Each such
Borrower agrees that no consent or acknowledgment by such Borrower is or shall
be required with respect to any other amendment or modification of the Credit
Agreement or any other Loan Document in order to ensure the continued
effectiveness and enforceability of its Security Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Reference to and Effect on the Loan Documents. (a) Upon
the effectiveness of this Second Amendment, on and after the date hereof, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement and each reference in the
other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words
of like import referring to the Credit Agreement, shall mean and be a reference
to the Credit Agreement, as amended hereby.
(b) Except as specifically amended above, the Credit Agreement and the
Notes and all other Loan Documents are and shall continue to be in full force
and effect and are hereby in all respects ratified and confirmed. Without
limiting the generality of the foregoing, each Security Agreement and all of the
Collateral described therein do and shall continue to secure the payment of all
obligations of the Borrowers under the Credit Agreement, the Notes and the other
Loan Documents, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this Second Amendment
shall not operate as a waiver of any right, power or remedy of any Lender or the
Agent under any of the Loan Documents, nor constitute a waiver of any provision
of any of the Loan Documents.
SECTION 6.02. Costs and Expenses/Fees. The Borrowers jointly and
severally agree to pay on demand all costs and expenses incurred by the Agent in
connection with the preparation, execution and delivery of this Second Amendment
and the other documents to be delivered hereunder and thereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent with respect thereto and with respect to advising the Agent and
the Lenders as to their rights and responsibilities under this Second Amendment.
The Borrowers
<PAGE>
7
jointly and severally further agree to pay on demand all costs and expenses, if
any (including, without limitation, reasonable counsel fees and expenses of
counsel), incurred by the Agent and the Banks in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Second
Amendment, the Credit Agreement as amended hereby and the other documents to be
delivered hereunder and thereunder, including, without limitation, counsel fees
and expenses in connection with the enforcement of rights under this Section
6.02.
SECTION 6.03. Execution in Counterparts. This Second Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 6.04. Governing Law. This Second Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York (without
giving effect to its conflicts of laws principles).
[Signatures on the next page]
<PAGE>
8
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
GWALTNEY OF SMITHFIELD, LTD.
Aaron D. Trub
Secretary
THE SMITHFIELD PACKING
COMPANY, INCORPORATED
Aaron D. Trub
Secretary
PATRICK CUDAHY INCORPORATED
Aaron D. Trub
Secretary
BROWN'S OF CAROLINA, INC.
Aaron D. Trub
Secretary
<PAGE>
9
JOHN MORRELL & CO.
Aaron D. Trub
Secretary
LYKES MEAT GROUP, INC.
Aaron D. Trub
Vice President
SUNNYLAND, INC.
Aaron D. Trub
Vice President
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK,
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH,
individually and as Agent
Joanna Solowski
Authorized Officer
[signature not legible]
Authorized Officer
NATIONSBANK, N.A.
Michael R. Heredia
Vice President
DG BANK, DEUTSCHE
GENOSSENSCHAFTSBANK,
<PAGE>
10
CAYMAN ISLANDS BRANCH
J. W. Somers
S.V.P. and Manager
William J. Bartlett
A.V.P.
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
[signature not readable]
Joint General Manager
SUNTRUST BANK, ATLANTA
Robert V. Hoyatt
A.V.P.
Gregory L. Cannon
Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE
W. Leroy Startz
First Vice President
BOATMEN'S NATIONAL BANK
Ellen Isch
Vice President
<PAGE>
11
FARM CREDIT SERVICES OF THE
MIDLANDS, PCA
James R. Knuth
Vice President
FBS AG CREDIT, INC.
Kenneth L. Warlich
Vice President
AGRIBANK FCB
Alfred S. Compton
Senior Lending Officer
<PAGE>
12
CONFIRMATION OF GUARANTY
The undersigned as Guarantor under its Fourth Amended, Restated and
Continued Guaranty dated as of April 30, 1996, as amended by Amendment No.1 to
Guaranty, dated as of July 26, 1996 and Amendment No. 2 to Guaranty, dated as of
July 29, 1996 (the "Guaranty") hereby consents and agrees to the foregoing
Second Amendment of Credit Agreement, dated as of January 15, 1997. The
undersigned hereby confirms and agrees that (i) the Guaranty is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects; (ii) all representations and warranties made by the undersigned in
the Guaranty are hereby ratified and confirmed as if made on the date hereof;
(iii) on the date hereof no Default or Event of Default (as each term is defined
in the Guaranty), or event which with the passing of time or giving of notice
would become a Default or Event of Default, has occurred or is continuing; and
(iv) upon the effectiveness of such Second Amendment, each reference in the
undersigned's Guaranty to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Credit Agreement, as amended by such Second Amendment. The
undersigned agrees that no consent or acknowledgment by the undersigned is or
shall be required with respect to any other amendment or modification of the
Credit Agreement or any other Loan Document in order to ensure the continued
effectiveness and enforceability of its Guaranty.
SMITHFIELD FOODS, INC.
Name: Aaron D. Trub
Title: Vice President, Secretary
and Treasurer
EXHIBIT 4.6(h)
1
EXECUTION COUNTERPART
GUARANTY
GUARANTY, dated as of January 15, 1997 made by LYKES MEAT GROUP, INC.,
a corporation organized and existing under the laws of Delaware (the
"Guarantor"), in favor of COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH, as Agent for the banks a party to the
Credit Agreement, as defined below (the "Agent").
PRELIMINARY STATEMENTS.
The Agent and certain banks have entered into a Fourth Amended,
Restated and Continued Revolving Credit Agreement dated as of April 30, 1996, as
amended by the First Amendment, dated as of July 29, 1996 and the Second
Amendment, dated as of the date hereof (the "Second Amendment") (said Agreement,
as it may hereafter be amended or otherwise modified from time to time, being
the "Credit Agreement", the terms defined therein and not otherwise defined
herein being used herein as therein defined) among Gwaltney of Smithfield, Ltd.
("Gwaltney"), The Smithfield Packing Company, Incorporated ("Packing"), Patrick
Cudahy Incorporated ("Cudahy"), Brown's of Carolina, Inc. ("Brown's"), John
Morrell & Co. ("Morrell"), the Guarantor and Sunnyland, Inc. ("Sunnyland")
(individually, a "Borrower" and collectively, the "Borrowers") and the Agent and
each of the banks a party thereto. It is a condition precedent to the
effectiveness of the Second Amendment that the Guarantor, as owner of 100
percent of the outstanding shares of stock of Sunnyland, shall have executed and
delivered this Guaranty.
The Credit Agreement, as amended to date, is a complete Amendment,
Restatement and Continuation of the Third Amended, Restated and Continued
Revolving Credit Agreement (the "1995 Agreement") dated as of July 31, 1995, as
amended by First Amendment to the 1995 Agreement dated as of July 31, 1995, and
as amended by Amendment Agreement dated December 20, 1995, among Gwaltney,
Packing, Cudahy, Esskay, Inc. ("Esskay") and Brown's, Rabobank as agent for the
Banks and each financial institution a party thereto, with the 1995 Agreement
being a complete amendment, restatement and continuation of the Second Amended,
Restated and Continued Revolving Credit Agreement (the "1994 Agreement") dated
as of March 1, 1994, as amended by amendments dated as of May 1, 1994, November
28, 1994, January 31, 1995, February 24, 1995, March 27, 1995, April 30, 1995,
May 31, 1995 and July 12, 1995 among Gwaltney, Packing, Cudahy, Esskay, Brown's
and Carolina Food Processors, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch
("Rabobank"),
<PAGE>
2
with the 1994 Agreement being a complete amendment, restatement and continuation
of (a) the Amended, Restated and Continued Revolving Credit Agreement (the "1991
Agreement") dated as of November 27, 1991, as amended as of August 12, 1992 and
as of October 28, 1992, among Gwaltney, Packing, Cudahy and Esskay and Rabobank,
with the 1991 Agreement being a complete amendment, restatement and continuation
of the Revolving Credit Agreement dated as of October 26, 1990, as amended as of
October 30, 1991 between Gwaltney and Rabobank and (b) the Amended and Restated
and Continued Oral Finance Facility (the "1991 Oral Finance Facility") dated as
of November 27, 1991 among Gwaltney, Packing, Cudahy and Esskay and Rabobank,
with the 1991 Oral Finance Facility being a complete amendment, restatement and
continuation of the Oral Finance Facility dated as of October 26, 1990, as
amended, between Gwaltney and Rabobank.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to make Advances under the Credit Agreement, the Guarantor hereby
agrees as follows:
SECTION 1. Guaranty. The Guarantor hereby unconditionally guarantees
the punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of Sunnyland now or hereafter existing under the
Credit Agreement, the Notes thereunder, the other Loan Documents to which
Sunnyland is a party, and any other agreement or instrument relating thereto,
whether for principal, interest, fees, expenses, indemnities or otherwise (such
obligations being the "Obligations"), and agrees to pay any and all expenses
(including counsel fees and expenses) incurred by the Agent or any Bank in
enforcing any rights under this Guaranty.
SECTION 2. Guaranty Absolute. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of the Credit
Agreement, the Notes thereunder and the other Loan Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Agent or a Bank with respect
thereto. The liability of the Guarantor under this Guaranty shall be absolute
and unconditional irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, the Notes thereunder, any other Loan Document, or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from the Credit
Agreement, the Notes
<PAGE>
3
thereunder, any other Loan Document and any other agreement or
instrument relating thereto;
(iii) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Obligations;
or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrower or a guarantor.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned by a Bank upon the insolvency, bankruptcy or
reorganization of Sunnyland or otherwise, all as though such payment had not
been made.
SECTION 3. Waiver. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Obligations
and this Guaranty and any requirement that the Agent or a Bank protect, secure,
perfect or insure any security interest or lien or any property subject thereto
or exhaust any right or take any action against Sunnyland or any other person or
entity or any collateral.
SECTION 4. Waiver of Subrogation. The Guarantor hereby waives any
claim, right or remedy which the Guarantor may now have or hereafter acquire
against Sunnyland that arises hereunder and/or from the performance by the
Guarantor hereunder including, without limitation, any claim, remedy or right of
subrogation, reimbursement, exoneration, contribution, indemnification, or
participation in any claim, right or remedy of the Agent or a Bank against any
Borrower or any security which the Agent or a Bank now has or hereafter
acquires, whether or not such claim, right or remedy arises in equity, under
contract, by statute, under common law or otherwise until the Agent and the
Banks are paid in full and the Credit Agreement is terminated.
SECTION 5. Representations and Warranties. The Guarantor hereby repeats
and affirms each of the representions and warranties set forth in Article IV of
the Credit Agreement as though made on and as of the date hereof , with each
reference to "this Agreement", "hereof", "hereunder" "thereof", "thereunder" and
words of like import being deemed to be a reference to this Guaranty.
SECTION 6. Covenants. The Guarantor hereby covenants to the Agent and
the Banks as set forth in Article V of the Credit Agreement.
<PAGE>
4
SECTION 7. Amendments, Etc. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantor therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Majority Banks, and then, in any event, such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 8. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and mailed, telecopied or delivered
by hand or overnight courier, if to the Guarantor, at its address at 4611 Lykes
Road, Plant City, Florida 33567, Attention: Tim Davis, telephone: (813)
752-1102, telecopier: (813) 759-4201 with a copy to Smithfield Foods, Inc. 900
Dominion Tower, 999 Waterside Drive, Norfolk, Virginia 23510 Attention: Mr.
Aaron Trub, if to the Agent or a Bank, at its address specified in the Credit
Agreement, or as to each party at such other address as shall be designated by
such party in a written notice to the other party. All such notices and other
communications shall be effective (i) if mailed, when received, (ii) if
telecopied, when transmitted and (iii) if delivered by hand or overnight
courier, when received.
SECTION 9. No Waiver; Remedies. No failure on the part of the Agent or
a Bank to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 10. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default each Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Bank to
or for the credit or the account of the Guarantor against any and all of the
obligations of the Guarantor now or hereafter existing under this Guaranty,
irrespective of whether or not the Agent on behalf of the Banks shall have made
any demand under this Guaranty and although such deposits, indebtedness or
obligations may be unmatured or contingent. Such Bank agrees promptly to notify
the Guarantor after any such set-off and application, provided that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which such Bank may have.
SECTION 11. Continuing Guaranty; Transfer of Notes. This Guaranty is
a continuing guaranty and shall (i) remain in full force and effect until the
later of payment in full of the Obligations and all other amounts payable under
this Guaranty
<PAGE>
5
or the Termination Date, (ii) be binding upon the Guarantor, its successors and
assigns, and (iii) inure to the benefit of and be enforceable by the Agent on
behalf of the Banks and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), if a Bank shall comply
with Section 8.10 of the Credit Agreement, such Bank may assign or otherwise
transfer the Notes delivered under the Credit Agreement to any other person or
entity, and such other person or entity shall thereupon become vested with all
the rights in respect thereof granted to such Bank herein or otherwise.
SECTION 12. Consent to Jurisdiction. (a) The Guarantor hereby
irrevocably submits to the jurisdiction of any New York State or Federal court
sitting in New York City in any action or proceeding arising out of or relating
to this Guaranty, and the Guarantor hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State court or in such Federal court. The Guarantor hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding. The
Guarantor irrevocably consents to the service of copies of the summons and
complaint and any other process which may be served in any such action or
proceeding by the mailing of copies of such process to the Guarantor to its
address specified in Section 8. The Guarantor agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 12 shall affect the right of the Agent on
behalf of the Banks to serve legal process in any other manner permitted by law
or affect the right of the Agent on behalf of the Banks to bring any action or
proceeding against the Guarantor or its property in the courts of any other
jurisdictions.
SECTION 13. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 14. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS GUARANTY.
<PAGE>
6
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
LYKES MEAT GROUP, INC.
Aaron D. Trub
Vice President
<PAGE>
7
SCHEDULE 6(f)
Liens
[To Be Provided By Lykes]
EXHIBIT 4.6(i)
1
[EXECUTION COUNTERPART]
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of January 15, 1997, made by LYKES MEAT
GROUP, INC., a Delaware corporation (the "Borrower") located at 4611 Lykes Road,
Plant City, Florida 33567, to COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "Rabobank Nederland", New York Branch, with an office at 245 Park Avenue,
New York, New York 10167, as Agent under the Credit Agreement, defined below
("Agent").
PRELIMINARY STATEMENTS.
The Agent and certain banks have entered into a Fourth Amended,
Restated and Continued Revolving Credit Agreement dated as of April 30, 1996, as
amended by the First Amendment, dated as of July 29, 1996, as amended by the
Second Amendment, dated as of the date hereof (said Agreement, as it may
hereafter be amended or otherwise modified from time to time, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with The Smithfield Packing Company,
Incorporated ("Smithfield"), Gwaltney of Smithfield, Ltd. ("Gwaltney"), Patrick
Cudahy Incorporated ("Cudahy"), Brown's of Carolina, Inc. ("Brown's"), John
Morrell & Co. ("Morrell"), the Borrower and Sunnyland, Inc. ("Sunnyland").
The Credit Agreement, as amended to date, is a complete Amendment,
Restatement and Continuation of the Third Amended, Restated and Continued
Revolving Credit Agreement (the "1995 Agreement") dated as of July 31, 1995, as
amended by First Amendment to the 1995 Agreement dated as of July 31, 1995, and
as amended by Amendment Agreement dated December 20, 1995, among Gwaltney,
Packing, Cudahy, Esskay and Brown's, Rabobank as agent for the Banks and each
financial institution a party thereto, with the 1995 Agreement being a complete
amendment, restatement and continuation of the Second Amended, Restated and
Continued Revolving Credit Agreement (the "1994 Agreement") dated as of March 1,
1994, as amended by Amendments dated as of May 1, 1994, November 28, 1994,
January 31, 1995, February 24, 1995, March 27, 1995, April 30, 1995, May 31,
1995 and July 12, 1995 among Smithfield, Gwaltney, Cudahy, Esskay, Inc.
("Esskay"), Brown's and Carolina Food Processors, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch
("Rabobank"), with the 1994 Agreement being a complete amendment, restatement
and continuation of (a) of the Amended, Restated and Continued Revolving Credit
Agreement (the "1991 Agreement") dated as of November 27, 1991, as amended as of
August 12, 1992, and as of October 28, 1992, among Gwaltney, Packing, Cudahy and
Esskay and Rabobank, with the 1991 Agreement being a complete amendment,
restatement and continuation of the Revolving Credit Agreement dated as of
October 26, 1990, as amended as of October 30, 1991 between Gwaltney and
Rabobank and (b) the Amended and Restated and Continued Oral Finance Facility
(the "1991 Oral Finance Facility") dated as of November 27, 1991 among Gwaltney,
Packing, Cudahy and Esskay and Rabobank, with the 1991 Oral Finance Facility
being a
<PAGE>
2
complete amendment, restatement and continuation of the Oral Finance Facility
dated as of October 26, 1990, as amended, between Gwaltney and Rabobank.
It is a condition precedent to the making of Advances by the Banks
under the Credit Agreement that the Borrower shall have granted the security
interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Banks to make Advances under the Credit Agreement, the Borrower
hereby agrees as follows:
SECTION 1. Grant of Security. The Borrower hereby pledges and assigns
to the Agent on behalf of the Banks, and hereby grants to the Agent on behalf of
the Banks a security interest in, all of the Borrower's right, title and
interest in and to the following, whether now owned or hereafter acquired (the
"Collateral"):
(a) All inventory in all of its forms, wherever located, now
or hereafter existing (including, but not limited to, (i) all meat,
meat products and raw materials and work in process therefor,
finished goods thereof, and materials used or consumed in the
manufacture or production thereof including packaging and processing
supplies, (ii) goods in which the Borrower has an interest in mass or
a joint or other interest or right of any kind (including, without
limitation, goods in which the Borrower has an interest or right as
consignee), and (iii) goods which are returned to or repossessed by
the Borrower), and all accessions thereto and products thereof and
documents therefor (any and all such inventory, accessions, products
and documents being the "Inventory");
(b) All farm products in all of their respective forms,
wherever located, now or hereafter existing, including but not
limited to (i) meat and products thereof and (ii) all agricultural
supplies used or consumed in the Borrower's operations, including
without limitation all feed, meal, ingredients, seeds, drugs,
medications, vaccines, supplements and other chemicals used in
feeding, maintaining, growing, preserving or producing any farm
products, and (iii) all accessions to and products of and documents
for any of the foregoing (any and all such farm products, accessions,
products and documents being the "Farm Products");
(c) All accounts, contract rights, chattel paper,
instruments, general intangibles and other obligations of any kind
(including, without limitation, payment-in-kind certificates, rights
to any government subsidy, set aside, diversion, deficiency or
disaster payment, and payments in kind), now or hereafter existing,
whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, leases, and
other contracts securing or otherwise relating to any such accounts,
contract rights, chattel paper, instruments, general intangibles or
obligations (any and all such accounts, contract rights, chattel
paper, instruments, general intangibles
<PAGE>
3
and obligations being the "Receivables", and any and all such leases,
security agreements and other contracts being the "Related
Contracts"); and
(d) Subject to Section 9(a) hereof, all proceeds of any and
all of the foregoing Collateral (including, without limitation,
proceeds which constitute property of the types described in clauses
(a), (b) and (c) of this Section 1) and, to the extent not otherwise
included, all payments under insurance (whether or not the Agent on
behalf of the Banks is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
SECTION 2. Security for Obligations. This Agreement secures the
payment of all obligations of any or all of the Borrowers now or hereafter
existing under the Credit Agreement and each of the Notes thereunder, whether
for principal, interest, fees, expenses or otherwise, and all or any obligations
of any Borrower under any Loan Document and all obligations of the Borrower now
or hereafter existing under this Agreement (all such obligations being the
"Obligations").
SECTION 3. Borrower Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Agent on behalf of the
Banks of any of the rights hereunder shall not release the Borrower from any of
its duties or obligations under the contracts and agreements included in the
Collateral, and (c) neither the Agent nor any Bank shall have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Agent or any Bank be obligated to
perform any of the obligations or duties of the Borrower thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
SECTION 4. Representations and Warranties. The Borrower represents
and warrants as follows:
(a) All of the Inventory and Farm Products are located at
the places specified in the Schedule hereto. The chief place of
business and chief executive office of the Borrower and the office
where the Borrower keeps its records concerning the Receivables, and
all originals of all chattel paper which evidence Receivables, are
located at the address first specified above for the Borrower. None
of the Receivables is evidenced by a promissory note or other
instrument.
(b) The Borrower owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for the
security interest created by this Agreement. No effective financing
statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except
such
<PAGE>
4
as may have been filed in favor of the Agent on behalf of the Banks
relating to this Agreement. The Borrower does not conduct business
under any other name.
(c) The Borrower has exclusive possession and control of the
Inventory and Farm Products.
(d) This Agreement creates a valid and perfected first
priority security interest in the Collateral, securing the payment of
the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been
duly taken.
(e) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required either (i) for the grant by the Borrower of the
security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Borrower or (ii) for the
perfection of or the exercise by the Agent on behalf of the Banks of
its rights and remedies hereunder, except for such financing
statements as may be filed in favor of the Agent on behalf of the
Banks relating to this Agreement.
SECTION 5. Further Assurances. (a) The Borrower agrees that from time
to time, at the expense of the Borrower, the Borrower will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Agent or a Bank may request, in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable the Agent on behalf of the Banks to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, the Borrower will: (i) mark conspicuously each
document included in the Inventory and each chattel paper included in the
Receivables and, at the request of the Agent on behalf of the Banks, each
Related Contract and each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Agent, indicating that such
document, chattel paper, Related Contract or Collateral is subject to the
security interest granted hereby; (ii) if any Receivable shall be evidenced by a
promissory note or other instrument, deliver and pledge to the Agent on behalf
of the Banks hereunder such note or instrument duly indorsed and accompanied by
duly executed instruments of transfer or assignment, all in form and substance
satisfactory to the Agent on behalf of the Banks; and (iii) execute and file
such financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Agent may
request, in order to perfect and preserve the security interest granted or
purported to be granted hereby.
(b) The Borrower hereby authorizes the Agent on behalf of the Banks
to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
the Borrower where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
<PAGE>
5
(c) The Borrower will furnish to the Agent or the Banks from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Agent or a Bank
may reasonably request, all in reasonable detail.
SECTION 6. As to Inventory and Farm Products. The Borrower shall:
(a) Keep the Inventory and Farm Products (other than
Inventory and Farm Products sold in the ordinary course of business)
at the places therefor specified in Section 4(a) or, upon 30 days'
prior written notice to the Agent and the Banks, at such other places
in jurisdictions where all action required by Section 5 shall have
been taken with respect to the Inventory and Farm Products.
(b) Pay promptly when due all property and other taxes,
assessments and government charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Inventory and Farm Products, except to the extent the validity
thereof is being contested in good faith.
SECTION 7. Insurance. (a) The Borrower shall, at its own expense,
maintain insurance with respect to the Inventory and Farm Products in such
amounts, against such risks, in such form and with such insurers, as shall be
satisfactory to the Agent from time to time. Each policy for (i) liability
insurance shall provide for all losses to be paid to the Agent on behalf of the
Banks and the Borrower as their respective interests may appear and (ii)
property damage insurance shall provide for all losses (except for losses of
less than $3,000,000 per occurrence) to be paid directly to the Agent on behalf
of the Banks. Each such policy shall in addition (i) name the Borrower and the
Agent on behalf of the Banks as insured parties thereunder (without any
representation or warranty by or obligation upon the Agent or the Banks) as
their interests may appear, (ii) contain the agreement by the insurer that any
loss as set forth above shall be payable to the Agent on behalf of the Banks
notwithstanding any action, inaction or breach of representation or warranty by
the Borrower, (iii) provide that there shall be no recourse against the Agent or
the Banks for payment of premiums or other amounts with respect thereto and (iv)
provide that at least ten days' prior written notice of cancellation or of lapse
shall be given to the Agent by the insurer. The Borrower shall, if so requested
by the Agent, deliver to the Agent original or duplicate policies of such
insurance and, as often as the Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Further, the Borrower
shall, at the request of the Agent, duly execute and deliver instruments of
assignment of such insurance policies to comply with the requirements of Section
5 and cause the respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by the
Borrower pursuant to this Section 7 may be paid directly to the person who shall
have incurred liability covered by such insurance. In case of any loss involving
damage to Inventory or Farm Products when subsection (c) of this Section 7 is
not applicable, the Borrower shall make or cause to be made the necessary
replacements of such Inventory or Farm Products, and any proceeds of insurance
<PAGE>
6
maintained by the Borrower pursuant to this Section 7 shall be paid to the
Borrower as reimbursement for the costs of such replacements.
(c) Upon (i) the occurrence and during the continuance of any Event
of Default, or (ii) the actual or constructive total loss (in excess of
$3,000,000 per occurrence) of any Inventory or Farm Products, all insurance
payments in respect of such Inventory or Farm Products shall be paid to and
applied by the Agent on behalf of the Banks as specified in Section 13(b).
SECTION 8. As to Receivables. (a) The Borrower shall keep its chief
place of business and chief executive office and the office where it keeps its
records concerning the Receivables, and all originals of all chattel paper which
evidence Receivables, at the location therefor specified in Section 4(a) or,
upon 30 days' prior written notice to the Agent and the Banks, at such other
locations in a jurisdiction where all action required by Section 5 shall have
been taken with respect to the Receivables. The Borrower will hold and preserve
such records and chattel paper and will permit representatives of the Agent and
the Banks at any time during normal business hours to inspect and make abstracts
from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), the Borrower
shall continue to collect, at its own expense, all amounts due or to become due
the Borrower under the Receivables. In connection with such collections, the
Borrower may take (and, at the Agent's reasonable direction, shall take) such
action as the Borrower or the Agent may deem necessary or advisable to enforce
collection of the Receivables; provided, however, that the Agent on behalf of
the Banks shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default or an event which, with the giving of notice
or the lapse of time, or both, would become an Event of Default and upon written
notice to the Borrower of its intention to do so, to notify the account debtors
or obligors under any Receivables of the assignment of such Receivables to the
Agent on behalf of the Banks and to direct such account debtors or obligors to
make payment of all amounts due or to become due to the Borrower thereunder
directly to the Agent on behalf of the Banks and, upon such notification and at
the expense of the Borrower, to enforce collection of any such Receivables, and
to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as the Borrower might have done. After receipt by
the Borrower of the notice from the Agent referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including instruments)
received by the Borrower in respect of the Receivables shall be received in
trust for the benefit of the Banks hereunder, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Agent on behalf of
the Banks in the same form as so received (with any necessary indorsement) to be
held as cash collateral and either (A) released to the Borrower so long as no
Event of Default shall have occurred and be continuing or (B) if any Event of
Default shall have occurred and be continuing, applied as provided by Section
13(b), and (ii) the Borrower shall not adjust, settle or compromise the amount
or payment of any Receivable, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon.
SECTION 9. Transfers and Other Liens. The Borrower shall not:
<PAGE>
7
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business.
(b) Create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the
Collateral to secure Debt of any person or entity, except for the
security interests created by this Agreement.
SECTION 10. Agent Appointed Attorney-in-Fact. The Borrower hereby
irrevocably appoints the Agent on behalf of the Banks the Borrower's
attorney-in-fact, with full authority in the place and stead of the Borrower and
in the name of the Borrower, the Agent on behalf of the Banks or otherwise, from
time to time in the Agent's discretion, to take any action and to execute any
instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Borrower under Section
8), including, without limitation:
(i) to obtain and adjust insurance required to be paid to
the Agent on behalf of the Banks pursuant to Section 7,
(ii) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral,
(iii) instruments, documents and chattel paper, in
connection with clause (i) or (ii) above, and
(iv) proceedings which the Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Agent on behalf of the Banks with respect
to any of the Collateral.
SECTION 11. Agent May Perform. If the Borrower fails to perform any
agreement contained herein, the Agent on behalf of the Banks may itself perform,
or cause performance of, such agreement, and the expenses of the Agent incurred
in connection therewith shall be payable by the Borrower under Section 14(b).
SECTION 12. The Agent's Duties. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Agent shall have no duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral.
SECTION 13. Remedies. If any Event of Default shall have occurred and
be continuing:
<PAGE>
8
(a) The Agent on behalf of the Banks may exercise in respect
of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies
of a secured party on default under the Uniform Commercial Code (the
"Code") (whether or not the Code applies to the affected Collateral)
and also may (i) require the Borrower to, and the Borrower hereby
agrees that it will at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by the
Agent and make it available to the Agent at a place to be designated
by the Agent which is reasonably convenient to both parties and (ii)
without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any
of the Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Agent may deem
commercially reasonable. The Borrower agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to
the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. The Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given.
The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
(b) All cash proceeds received by the Agent in respect of
any sale of, collection from, or other realization upon all or any
part of the Collateral may, in the discretion of the Banks, be held
by the Agent on behalf of the Banks as collateral for, and/or then or
at any time thereafter applied (after payment of any amounts payable
to the Agent pursuant to Section 14) in whole or in part by the Agent
on behalf of the Banks against, all or any part of the Obligations in
such order as set forth in Section 1.11 of the Credit Agreement. Any
surplus of such cash or cash proceeds held by the Agent on behalf of
the Banks and remaining after payment in full of all the Obligations
shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 14. Indemnity and Expenses. (a) The Borrower agrees to
indemnify the Agent from and against any and all claims, losses and liabilities
growing out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities resulting
from the Agent's gross negligence or willful misconduct.
(b) The Borrower will upon demand pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and disbursements of
its counsel and of any experts and agents, which the Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent hereunder or (iv) the failure by the Borrower to
perform or observe any of the provisions hereof.
<PAGE>
9
SECTION 15. Continuing Security Interest; Transfer of Notes. This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the later of payment in full of
the Obligations or the Termination Date, (ii) be binding upon the Borrower, its
successors and assigns and (iii) inure to the benefit of and be binding on the
Agent and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), a Bank may assign or otherwise
transfer the Notes held by it and delivered under the Credit Agreement to any
other person or entity, and such other person or entity shall thereupon become
vested with all the benefits in respect thereof granted to a Bank herein or
otherwise. Upon the later of the payment in full of the Obligations or the
Termination Date, the security interest granted hereby shall terminate and all
rights to the Collateral shall revert to the Borrower. Upon any such
termination, the Agent on behalf of the Banks will, at the Borrower's expense,
execute and deliver to the Borrower such documents as the Borrower shall
reasonably request to evidence such termination.
SECTION 16. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the validity or perfection of the security interest hereunder,
or remedies hereunder, in respect of any particular Collateral are governed by
the laws of a jurisdiction other than the State of New York. Unless otherwise
defined herein or in the Credit Agreement, terms used in Article 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
[Signature on Next Page.]
<PAGE>
S-1
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
LYKES MEAT GROUP, INC.
Aaron D. Trub
Vice President
<PAGE>
S-2
SCHEDULE TO SECURITY AGREEMENT
Duval County, Florida
Hillsborough County, Florida
Orange County, Florida
Brooks County, Georgia
Colquitt County, Georgia
Dougherty County, Georgia
Fulton County, Georgia
Thomas County, Georgia
EXHIBIT 4.6(j)
1
[EXECUTION COUNTERPART]
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of January 15, 1997, made by SUNNYLAND,
INC., a Georgia corporation (the "Borrower") located at 4611 Lykes Road, Plant
City, Florida 33567, to COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"Rabobank Nederland", New York Branch, with an office at 245 Park Avenue, New
York, New York 10167, as Agent under the Credit Agreement, defined below
("Agent").
PRELIMINARY STATEMENTS.
The Agent and certain banks have entered into a Fourth Amended,
Restated and Continued Revolving Credit Agreement dated as of April 30, 1996, as
amended by the First Amendment, dated as of July 29, 1996, as amended by the
Second Amendment, dated as of the date hereof (said Agreement, as it may
hereafter be amended or otherwise modified from time to time, being the "Credit
Agreement", the terms defined therein and not otherwise defined herein being
used herein as therein defined) with The Smithfield Packing Company,
Incorporated ("Smithfield"), Gwaltney of Smithfield, Ltd. ("Gwaltney"), Patrick
Cudahy Incorporated ("Cudahy"), Brown's of Carolina, Inc. ("Brown's"), John
Morrell & Co. ("Morrell"), Lykes Meat Group, Inc. ("Lykes") and the Borrower.
The Credit Agreement, as amended to date, is a complete Amendment,
Restatement and Continuation of the Third Amended, Restated and Continued
Revolving Credit Agreement (the "1995 Agreement") dated as of July 31, 1995, as
amended by First Amendment to the 1995 Agreement dated as of July 31, 1995, and
as amended by Amendment Agreement dated December 20, 1995, among Gwaltney,
Packing, Cudahy, Esskay and Brown's, Rabobank as agent for the Banks and each
financial institution a party thereto, with the 1995 Agreement being a complete
amendment, restatement and continuation of the Second Amended, Restated and
Continued Revolving Credit Agreement (the "1994 Agreement") dated as of March 1,
1994, as amended by Amendments dated as of May 1, 1994, November 28, 1994,
January 31, 1995, February 24, 1995, March 27, 1995, April 30, 1995, May 31,
1995 and July 12, 1995 among Smithfield, Gwaltney, Cudahy, Esskay, Inc.
("Esskay"), Brown's and Carolina Food Processors, Inc. and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch
("Rabobank"), with the 1994 Agreement being a complete amendment, restatement
and continuation of (a) of the Amended, Restated and Continued Revolving Credit
Agreement (the "1991 Agreement") dated as of November 27, 1991, as amended as of
August 12, 1992, and as of October 28, 1992, among Gwaltney, Packing, Cudahy and
Esskay and Rabobank, with the 1991 Agreement being a complete amendment,
restatement and continuation of the Revolving Credit Agreement dated as of
October 26, 1990, as amended as of October 30, 1991 between Gwaltney and
Rabobank and (b) the Amended and Restated and Continued Oral Finance Facility
(the "1991 Oral Finance Facility") dated as of November 27, 1991 among Gwaltney,
Packing, Cudahy and
<PAGE>
2
Esskay and Rabobank, with the 1991 Oral Finance Facility being a complete
amendment, restatement and continuation of the Oral Finance Facility dated as of
October 26, 1990, as amended, between Gwaltney and Rabobank.
It is a condition precedent to the making of Advances by the Banks
under the Credit Agreement that the Borrower shall have granted the security
interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Banks to make Advances under the Credit Agreement, the Borrower
hereby agrees as follows:
SECTION 1. Grant of Security. The Borrower hereby pledges and assigns
to the Agent on behalf of the Banks, and hereby grants to the Agent on behalf of
the Banks a security interest in, all of the Borrower's right, title and
interest in and to the following, whether now owned or hereafter acquired (the
"Collateral"):
(a) All inventory in all of its forms, wherever located, now
or hereafter existing (including, but not limited to, (i) all meat,
meat products and raw materials and work in process therefor,
finished goods thereof, and materials used or consumed in the
manufacture or production thereof including packaging and processing
supplies, (ii) goods in which the Borrower has an interest in mass or
a joint or other interest or right of any kind (including, without
limitation, goods in which the Borrower has an interest or right as
consignee), and (iii) goods which are returned to or repossessed by
the Borrower), and all accessions thereto and products thereof and
documents therefor (any and all such inventory, accessions, products
and documents being the "Inventory");
(b) All farm products in all of their respective forms,
wherever located, now or hereafter existing, including but not
limited to (i) meat and products thereof and (ii) all agricultural
supplies used or consumed in the Borrower's operations, including
without limitation all feed, meal, ingredients, seeds, drugs,
medications, vaccines, supplements and other chemicals used in
feeding, maintaining, growing, preserving or producing any farm
products, and (iii) all accessions to and products of and documents
for any of the foregoing (any and all such farm products, accessions,
products and documents being the "Farm Products");
(c) All accounts, contract rights, chattel paper,
instruments, general intangibles and other obligations of any kind
(including, without limitation, payment-in-kind certificates, rights
to any government subsidy, set aside, diversion, deficiency or
disaster payment, and payments in kind), now or hereafter existing,
whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, leases, and
other contracts securing or otherwise relating to any such accounts,
contract rights, chattel paper, instruments, general intangibles or
obligations
<PAGE>
3
(any and all such accounts, contract rights, chattel paper,
instruments, general intangibles and obligations being the
"Receivables", and any and all such leases, security agreements and
other contracts being the "Related Contracts"); and
(d) Subject to Section 9(a) hereof, all proceeds of any and
all of the foregoing Collateral (including, without limitation,
proceeds which constitute property of the types described in clauses
(a), (b) and (c) of this Section 1) and, to the extent not otherwise
included, all payments under insurance (whether or not the Agent on
behalf of the Banks is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
SECTION 2. Security for Obligations. This Agreement secures the
payment of all obligations of any or all of the Borrowers now or hereafter
existing under the Credit Agreement and each of the Notes thereunder, whether
for principal, interest, fees, expenses or otherwise, and all or any obligations
of any Borrower under any Loan Document and all obligations of the Borrower now
or hereafter existing under this Agreement (all such obligations being the
"Obligations").
SECTION 3. Borrower Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Borrower shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Agent on behalf of the
Banks of any of the rights hereunder shall not release the Borrower from any of
its duties or obligations under the contracts and agreements included in the
Collateral, and (c) neither the Agent nor any Bank shall have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Agent or any Bank be obligated to
perform any of the obligations or duties of the Borrower thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
SECTION 4. Representations and Warranties. The Borrower represents
and warrants as follows:
(a) All of the Inventory and Farm Products are located at
the places specified in the Schedule hereto. The chief place of
business and chief executive office of the Borrower and the office
where the Borrower keeps its records concerning the Receivables, and
all originals of all chattel paper which evidence Receivables, are
located at the address first specified above for the Borrower. None
of the Receivables is evidenced by a promissory note or other
instrument.
(b) The Borrower owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for the
security interest created by this Agreement. No effective financing
statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except
such
<PAGE>
4
as may have been filed in favor of the Agent on behalf of the Banks
relating to this Agreement. The Borrower does not conduct business
under any other name.
(c) The Borrower has exclusive possession and control of the
Inventory and Farm Products.
(d) This Agreement creates a valid and perfected first
priority security interest in the Collateral, securing the payment of
the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been
duly taken.
(e) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required either (i) for the grant by the Borrower of the
security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Borrower or (ii) for the
perfection of or the exercise by the Agent on behalf of the Banks of
its rights and remedies hereunder, except for such financing
statements as may be filed in favor of the Agent on behalf of the
Banks relating to this Agreement.
SECTION 5. Further Assurances. (a) The Borrower agrees that from time
to time, at the expense of the Borrower, the Borrower will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Agent or a Bank may request, in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable the Agent on behalf of the Banks to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, the Borrower will: (i) mark conspicuously each
document included in the Inventory and each chattel paper included in the
Receivables and, at the request of the Agent on behalf of the Banks, each
Related Contract and each of its records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Agent, indicating that such
document, chattel paper, Related Contract or Collateral is subject to the
security interest granted hereby; (ii) if any Receivable shall be evidenced by a
promissory note or other instrument, deliver and pledge to the Agent on behalf
of the Banks hereunder such note or instrument duly indorsed and accompanied by
duly executed instruments of transfer or assignment, all in form and substance
satisfactory to the Agent on behalf of the Banks; and (iii) execute and file
such financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Agent may
request, in order to perfect and preserve the security interest granted or
purported to be granted hereby.
(b) The Borrower hereby authorizes the Agent on behalf of the Banks
to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
the Borrower where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
<PAGE>
5
(c) The Borrower will furnish to the Agent or the Banks from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Agent or a Bank
may reasonably request, all in reasonable detail.
SECTION 6. As to Inventory and Farm Products. The Borrower shall:
(a) Keep the Inventory and Farm Products (other than
Inventory and Farm Products sold in the ordinary course of business)
at the places therefor specified in Section 4(a) or, upon 30 days'
prior written notice to the Agent and the Banks, at such other places
in jurisdictions where all action required by Section 5 shall have
been taken with respect to the Inventory and Farm Products.
(b) Pay promptly when due all property and other taxes,
assessments and government charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Inventory and Farm Products, except to the extent the validity
thereof is being contested in good faith.
SECTION 7. Insurance. (a) The Borrower shall, at its own expense,
maintain insurance with respect to the Inventory and Farm Products in such
amounts, against such risks, in such form and with such insurers, as shall be
satisfactory to the Agent from time to time. Each policy for (i) liability
insurance shall provide for all losses to be paid to the Agent on behalf of the
Banks and the Borrower as their respective interests may appear and (ii)
property damage insurance shall provide for all losses (except for losses of
less than $3,000,000 per occurrence) to be paid directly to the Agent on behalf
of the Banks. Each such policy shall in addition (i) name the Borrower and the
Agent on behalf of the Banks as insured parties thereunder (without any
representation or warranty by or obligation upon the Agent or the Banks) as
their interests may appear, (ii) contain the agreement by the insurer that any
loss as set forth above shall be payable to the Agent on behalf of the Banks
notwithstanding any action, inaction or breach of representation or warranty by
the Borrower, (iii) provide that there shall be no recourse against the Agent or
the Banks for payment of premiums or other amounts with respect thereto and (iv)
provide that at least ten days' prior written notice of cancellation or of lapse
shall be given to the Agent by the insurer. The Borrower shall, if so requested
by the Agent, deliver to the Agent original or duplicate policies of such
insurance and, as often as the Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Further, the Borrower
shall, at the request of the Agent, duly execute and deliver instruments of
assignment of such insurance policies to comply with the requirements of Section
5 and cause the respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by the
Borrower pursuant to this Section 7 may be paid directly to the person who shall
have incurred liability covered by such insurance. In case of any loss involving
damage to Inventory or Farm Products when subsection (c) of this Section 7 is
not applicable, the Borrower shall make or cause to be made the necessary
replacements of such Inventory or Farm Products, and any proceeds of insurance
<PAGE>
6
maintained by the Borrower pursuant to this Section 7 shall be paid to the
Borrower as reimbursement for the costs of such replacements.
(c) Upon (i) the occurrence and during the continuance of any Event
of Default, or (ii) the actual or constructive total loss (in excess of
$3,000,000 per occurrence) of any Inventory or Farm Products, all insurance
payments in respect of such Inventory or Farm Products shall be paid to and
applied by the Agent on behalf of the Banks as specified in Section 13(b).
SECTION 8. As to Receivables. (a) The Borrower shall keep its chief
place of business and chief executive office and the office where it keeps its
records concerning the Receivables, and all originals of all chattel paper which
evidence Receivables, at the location therefor specified in Section 4(a) or,
upon 30 days' prior written notice to the Agent and the Banks, at such other
locations in a jurisdiction where all action required by Section 5 shall have
been taken with respect to the Receivables. The Borrower will hold and preserve
such records and chattel paper and will permit representatives of the Agent and
the Banks at any time during normal business hours to inspect and make abstracts
from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), the Borrower
shall continue to collect, at its own expense, all amounts due or to become due
the Borrower under the Receivables. In connection with such collections, the
Borrower may take (and, at the Agent's reasonable direction, shall take) such
action as the Borrower or the Agent may deem necessary or advisable to enforce
collection of the Receivables; provided, however, that the Agent on behalf of
the Banks shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default or an event which, with the giving of notice
or the lapse of time, or both, would become an Event of Default and upon written
notice to the Borrower of its intention to do so, to notify the account debtors
or obligors under any Receivables of the assignment of such Receivables to the
Agent on behalf of the Banks and to direct such account debtors or obligors to
make payment of all amounts due or to become due to the Borrower thereunder
directly to the Agent on behalf of the Banks and, upon such notification and at
the expense of the Borrower, to enforce collection of any such Receivables, and
to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as the Borrower might have done. After receipt by
the Borrower of the notice from the Agent referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including instruments)
received by the Borrower in respect of the Receivables shall be received in
trust for the benefit of the Banks hereunder, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Agent on behalf of
the Banks in the same form as so received (with any necessary indorsement) to be
held as cash collateral and either (A) released to the Borrower so long as no
Event of Default shall have occurred and be continuing or (B) if any Event of
Default shall have occurred and be continuing, applied as provided by Section
13(b), and (ii) the Borrower shall not adjust, settle or compromise the amount
or payment of any Receivable, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon.
SECTION 9. Transfers and Other Liens. The Borrower shall not:
<PAGE>
7
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except Inventory in the
ordinary course of business.
(b) Create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the
Collateral to secure Debt of any person or entity, except for the
security interests created by this Agreement.
SECTION 10. Agent Appointed Attorney-in-Fact. The Borrower hereby
irrevocably appoints the Agent on behalf of the Banks the Borrower's
attorney-in-fact, with full authority in the place and stead of the Borrower and
in the name of the Borrower, the Agent on behalf of the Banks or otherwise, from
time to time in the Agent's discretion, to take any action and to execute any
instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Borrower under Section
8), including, without limitation:
(i) to obtain and adjust insurance required to be paid to
the Agent on behalf of the Banks pursuant to Section 7,
(ii) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral,
(iii) instruments, documents and chattel paper, in
connection with clause (i) or (ii) above, and
(iv) proceedings which the Agent may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Agent on behalf of the Banks with respect
to any of the Collateral.
SECTION 11. Agent May Perform. If the Borrower fails to perform any
agreement contained herein, the Agent on behalf of the Banks may itself perform,
or cause performance of, such agreement, and the expenses of the Agent incurred
in connection therewith shall be payable by the Borrower under Section 14(b).
SECTION 12. The Agent's Duties. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Agent shall have no duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral.
SECTION 13. Remedies. If any Event of Default shall have occurred and
be continuing:
<PAGE>
8
(a) The Agent on behalf of the Banks may exercise in respect
of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies
of a secured party on default under the Uniform Commercial Code (the
"Code") (whether or not the Code applies to the affected Collateral)
and also may (i) require the Borrower to, and the Borrower hereby
agrees that it will at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by the
Agent and make it available to the Agent at a place to be designated
by the Agent which is reasonably convenient to both parties and (ii)
without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any
of the Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Agent may deem
commercially reasonable. The Borrower agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to
the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. The Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given.
The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned.
(b) All cash proceeds received by the Agent in respect of
any sale of, collection from, or other realization upon all or any
part of the Collateral may, in the discretion of the Banks, be held
by the Agent on behalf of the Banks as collateral for, and/or then or
at any time thereafter applied (after payment of any amounts payable
to the Agent pursuant to Section 14) in whole or in part by the Agent
on behalf of the Banks against, all or any part of the Obligations in
such order as set forth in Section 1.11 of the Credit Agreement. Any
surplus of such cash or cash proceeds held by the Agent on behalf of
the Banks and remaining after payment in full of all the Obligations
shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive such surplus.
SECTION 14. Indemnity and Expenses. (a) The Borrower agrees to
indemnify the Agent from and against any and all claims, losses and liabilities
growing out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses or liabilities resulting
from the Agent's gross negligence or willful misconduct.
(b) The Borrower will upon demand pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and disbursements of
its counsel and of any experts and agents, which the Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent hereunder or (iv) the failure by the Borrower to
perform or observe any of the provisions hereof.
<PAGE>
9
SECTION 15. Continuing Security Interest; Transfer of Notes. This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the later of payment in full of
the Obligations or the Termination Date, (ii) be binding upon the Borrower, its
successors and assigns and (iii) inure to the benefit of and be binding on the
Agent and its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), a Bank may assign or otherwise
transfer the Notes held by it and delivered under the Credit Agreement to any
other person or entity, and such other person or entity shall thereupon become
vested with all the benefits in respect thereof granted to a Bank herein or
otherwise. Upon the later of the payment in full of the Obligations or the
Termination Date, the security interest granted hereby shall terminate and all
rights to the Collateral shall revert to the Borrower. Upon any such
termination, the Agent on behalf of the Banks will, at the Borrower's expense,
execute and deliver to the Borrower such documents as the Borrower shall
reasonably request to evidence such termination.
SECTION 16. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the validity or perfection of the security interest hereunder,
or remedies hereunder, in respect of any particular Collateral are governed by
the laws of a jurisdiction other than the State of New York. Unless otherwise
defined herein or in the Credit Agreement, terms used in Article 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
[Signature on Next Page.]
<PAGE>
S-1
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
SUNNYLAND, INC.
Aaron D. Trub
Vice President
<PAGE>
S-2
SCHEDULE TO
SECURITY AGREEMENT
Duval County, Florida
Hillsborough County, Florida
Orange County, Florida
Brooks County, Georgia
Colquitt County, Georgia
Dougherty County, Georgia
Fulton County, Georgia
Thomas County, Georgia
SMITHFIELD FOODS, INC.
EXHIBIT 11
COMPUTATION OF NET INCOME PER COMMON SHARE
Net income and the number of common shares and common equivalent shares used to
present net income per common share were computed as follows:
<TABLE>
<CAPTION>
13 Weeks 13 Weeks 39 Weeks 39 Weeks
Ended Ended Ended Ended
Income (in thousands) Jan. 26, 1997 Jan. 28, 1996 Jan. 26, 1997 Jan. 28, 1996
- --------------------- ------------- ------------- ------------- -------------
<S> <C>
Net income $15,734 $ 8,687 $25,497 $ 8,908
Dividends accumulated for Series B
and C preferred stock (337) (536) (1,012) (874)
------- ------ ------- -------
Net income available to
common stockholders $15,397 $ 8,151 $24,485 $ 8,034
======= ======= ======= =======
Common shares (in thousands)
Weighted average common shares:
Outstanding 18,037 16,910 18,023 16,576
Net effect of dilutive stock options 759 723 546 576
------- ------- -------- -------
Common shares for computation 18,796 17,633 18,569 17,152
======= ======= ======== =======
Net income per common share $ .82 $ .46 $ 1.32 $ .47
======= ======= ======== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Apr-27-1997
<PERIOD-END> Jul-28-1996
<CASH> 21,562
<SECURITIES> 0
<RECEIVABLES> 194,086
<ALLOWANCES> 1,148
<INVENTORY> 223,731
<CURRENT-ASSETS> 478,843
<PP&E> 597,882
<DEPRECIATION> 185,514
<TOTAL-ASSETS> 974,846
<CURRENT-LIABILITIES> 352,975
<BONDS> 265,123
20,000
0
<COMMON> 9,265
<OTHER-SE> 259,006
<TOTAL-LIABILITY-AND-EQUITY> 974,846
<SALES> 1,080,979
<TOTAL-REVENUES> 1,080,979
<CGS> 992,275
<TOTAL-COSTS> 992,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,278
<INCOME-PRETAX> 23,967
<INCOME-TAX> 8,233
<INCOME-CONTINUING> 15,734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,734
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0
</TABLE>
