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Forbearance And Peaceful Possession Agreement

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FORBEARANCE AND PEACEFUL POSSESSION AGREEMENT
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THIS FORBEARANCE AND PEACEFUL POSSESSION AGREEMENT (this "Agreement"), dated as of May 29, 2003, by and among Smithfield Foods, Inc. ("Smithfield"), and PENNEXX Foods, Inc., f/k/a Pinnacle Foods, Inc. ("PENNEXX"), recites and provides as follows:


RECITALS
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A. Pursuant to that certain Credit Agreement, dated June 27, 2001, by and between PENNEXX and Smithfield (as it has been amended from time to time, the "Credit Agreement"), Smithfield agreed to extend, subject to certain conditions, a $30,000,000 revolving line of credit to PENNEXX.


B. Pursuant to that certain Guaranty Agreement, dated December 31, 2002 (the "Guaranty"), by and between Smithfield and Commerce Commercial Leasing, LLC (the "Lessor"), Smithfield guaranteed up to an aggregate amount of $12.1 million of PENNEXX's obligations under certain equipment leases by and between the Lessor and PENNEXX (collectively, the "Leases") for certain equipment located at 5501 Tabor Road, Philadelphia, Pennsylvania (the "Tabor Road Facility").


C. In connection with the Credit Agreement, PENNEXX and Smithfield entered into related security agreements and an open-ended mortgage (collectively, the "Security Documents," and together with the Credit Agreement, the "Loan Documents"), pursuant to which PENNEXX granted to Smithfield a blanket lien and security interest in all of PENNEXX's property, including without limitation all real and personal property used in connection with the operation, use or enjoyment of PENNEXX's business, all land and improvements, accounts, equipment, vehicles, inventory, books and records, office furniture and supplies and all proceeds from the foregoing (collectively and as more specifically defined in the Loan Documents, the "Collateral").


D. Numerous Events of Default (as that phrase is defined in the Credit Agreement) have occurred under the Loan Documents, and all applicable cure periods, if any, have expired without such Events of Default being cured.


E. By letter dated May 7, 2003, Smithfield notified PENNEXX of the continuing Events of Default and accelerated and declared immediately due and payable all of PENNEXX's obligations to Smithfield under the Loan Documents (collectively, the "Loan Obligations").


F. On or about May 7, 2003, Smithfield demanded that PENNEXX turn over the Collateral to Smithfield pursuant to the terms of the Loan Documents.


G. Similarly, on May 14, 2003, Smithfield again demanded in writing that PENNEXX surrender Smithfield's Collateral to Smithfield.


H. Following PENNEXX's failure to comply with Smithfield's demands, on May 19,


2003, Smithfield commenced an action for replevin of all of the tangible property constituting Collateral in the United States District Court for the Eastern District of Pennsylvania (the "District Court"), styled Smithfield Foods, Inc. v. Pennexx Foods, Inc., Civil Action No. 03-3155 (the "Replevin Action").


I. In addition to commencing the Replevin Action, on May 19, 2003, Smithfield commenced an action in the Court of Common Pleas of Philadelphia County (the "State Court") styled Smithfield Foods, Inc. v. Pennexx Foods, Inc., May Term 2003 Action No. 002218 (the "Foreclosure Action"), to gain possession of certain real property and fixtures underlying the Tabor Road Facility pursuant to the Open-end Mortgage from PENNEXX to Smithfield (the "Mortgage"), which Mortgage includes a warrant of attorney and confession of judgment. Accordingly, pursuant to the terms of the Mortgage, on May 19, 2003, the State Court entered judgment granting possession to Smithfield, subject only to PENNEXX's right to file a petition seeking relief from the judgment with the State Court on or before June 18, 2003 pursuant to Pennsylvania Rules of Civil Procedure 2970, et seq.


J. On May 22, 2003, following an emergency hearing in the Replevin Action, the District Court entered an Order (the "Order") directing the Clerk of the District Court to issue a Writ of Seizure directing the United States Marshall to seize all tangible property located at the Tabor Road Facility (the "Writ"), provided that Smithfield post a bond in the amount of $12,510,396.64 (the "Bond").


K. In addition, the Order required that, following seizure, the Collateral that is subject to the Writ be placed in the possession of Joseph Beltrami, the Chief Financial Officer of PENNEXX, subject to PENNEXX's right to post a counter-bond as set forth in the Order.


L. On May 23, 2003, Smithfield posted the Bond and effected service of the Writ.


M. On May 28, 2003 the Court agreed to enter an Order extending the time for payment or posting of a counter-bond and dealing with certain related matters. A form of Stipulated Order was submitted to the Court for signature on May 29, 2003.


N. PENNEXX has requested that Smithfield forbear from exercising its rights and remedies under the Order and the Loan Documents on account of the Events of Default.


O. Smithfield has agreed to forbear from exercising its rights and remedies on the terms and conditions in this Agreement.


AGREEMENT
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NOW, THEREFORE, for and in consideration of the promises, mutual covenants, releases, and agreements herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:


1. Defined Terms. Terms herein with an initial capital not required by standard capitalization rules are defined terms, and each such term not parenthetically defined herein shall have the meaning assigned to it in the Loan Documents.


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2. Forbearance. From and after the execution by PENNEXX and delivery to Smithfield of this Agreement through 11:59 p.m. Eastern Daylight Time on June 18, 2003 (the "Forbearance Period"), and provided that no Default has occurred under this Agreement during the Forbearance Period, Smithfield shall and hereby agrees to forbear from exercising any of its rights or remedies under the Order, the Loan Documents, the Guaranty or applicable law in respect of the existing defaults or Events of Default under the Credit Agreement.


3. Payment of Loan Obligations, Trade Obligations and Related Amounts. On or before 3:00 p.m. Eastern Daylight Time on June 9, 2003, PENNEXX shall pay to Smithfield the sum of $13,019,651.59 (plus (i) $2,340.80 per diem for each day after the date hereof during May 2003 and (ii) $2,354.64 per diem for each day of June 2003) which represents (i) the outstanding balance of the Loan Obligations, including without limitation all principal, accrued interest, and costs and expenses associated with enforcing Smithfield's rights under the Credit Agreement (including legal fees, auditor's fees, public sale advertising fees, the costs of hiring outside security to protect the Collateral, and all similar expenses) (collectively, "Costs"), (ii) all outstanding amounts PENNEXX owes to Smithfield or any of Smithfield's subsidiaries or affiliates on account of meat or related products or inventory delivered to PENNEXX prior to June 2, 2003 (collectively, the "Trade Obligations"), and (iii) the Guaranty Fee payable by PENNEXX to Smithfield for providing the Guaranty through the period ending May 31, 2003.


4. Release of Guaranty. No later than June 18, 2003, PENNEXX shall provide Smithfield with an absolute and irrevocable release and discharge of the Guaranty in form and substance reasonably acceptable to Smithfield in its sole discretion.


5. Repossession of the Collateral; Cooperation. Immediately upon the occurrence of a Default (i) the Forbearance Period shall end, (ii) Smithfield shall be entitled immediately to exercise all of its rights as a secured party under the Credit Agreement and applicable law, and (iii) PENNEXX shall grant to Smithfield and its agents immediate peaceful possession of all of the Collateral (including, without limitation, the Collateral that is not subject to the Writ). Simultaneously with Smithfield's repossession of the Collateral, PENNEXX shall make available to Smithfield such books of account, financial statements, account receivable listings, inventory reports, and other business and financial information, whether written or computerized, as Smithfield may reasonably request. In addition, PENNEXX hereby agrees to take such other and further actions as may be reasonably requested by Smithfield for the purpose of liquidating or otherwise realizing value from the Collateral.


6. Defaults. The occurrence of any of the following shall constitute a "Default" hereunder:


(a) Failure of PENNEXX to pay any amount to Smithfield under the
terms of this Agreement when due and payable, time being of the
essence, including those amounts due and payable pursuant to
Paragraph 3 above;


(b) Failure of PENNEXX to provide the release of the Guaranty
pursuant to Paragraph 4 above, time being of the essence;


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(c) Material breach of any covenant made by PENNEXX hereunder;


(d) Any representation or warranty made by PENNEXX herein proves to
have been materially false or misleading when made;


(e) The occurrence of an Event of Default under the Leases, other
than an Event of Default existing as of the date hereof; or


(f) PENNEXX's commencement of, causing or inducing creditors to
commence, or voluntarily becoming a debtor under any state or
federal insolvency proceeding.


7. No Cure Periods. Notwithstanding any other provision herein or in the Loan Documents, PENNEXX shall have no period in which to cure a Default hereunder.


8. Post-Default Waivers. PENNEXX hereby renounces and waives all notices otherwise required by the Uniform Commercial Code, as enacted in Virginia and Pennsylvania (the "UCC") or applicable law, including without limitation the notice of sale pursuant to Section 9-611 of the UCC. PENNEXX further hereby renounces and waives any requirement of compulsory disposition under Section 9-620 of the UCC, irrevocably consents to Smithfield's acceptance of the Collateral (should it decide to do so in its discretion) in full or partial satisfaction of the Loan Obligations, and renounces and waives any right to redeem any or all of the Collateral under Section 9-623 of the UCC. Further, PENNEXX hereby renounces and waives (a) its rights under Pennsylvania state law to answer, petition or otherwise move the State Court or any other court of competent jurisdiction to stay, amend, modify or otherwise set aside the judgment entered in the Foreclosure Action and (b) its rights, if any, to redeem the property that is the subject of the Foreclosure Action. In the event PENNEXX becomes a "debtor" in a voluntary or involuntary case under any Chapter of the United States Bankruptcy Code, 11 U.S.C. ss.ss. 101-1330 (the "Bankruptcy Code"), PENNEXX hereby irrevocably and absolutely (x) waives the automatic stay of ss. 362(a) of the Bankruptcy Code to the extent necessary to permit Smithfield to enforce its rights and/or remedies hereunder and/or under the Loan Documents and the Order, (y) consents to, and agrees not to oppose, any and all motions, adversary proceedings, and/or other proceedings filed or otherwise commenced by or on behalf of Smithfield for relief from the automatic stay of ss. 362(a) of the Bankruptcy Code to enforce Smithfield's rights and/or remedies hereunder and/or under the Loan Documents, and (z) represents and warrants that "cause" for such relief from the automatic stay under ss. 362(d)(1) of the Bankruptcy Code exists. Notwithstanding the foregoing, Smithfield acknowledges and agrees that the foregoing provision is subject to bankruptcy court review and approval and is not self-executing. Nothing in this Paragraph 8 modifies or effects Smithfield's obligation to forbear under the terms and conditions of this Agreement.


9. No Release, Discharge or Termination of Loan Obligations Until Performance. Notwithstanding any other provision herein, Smithfield has not released or discharged, and is not hereby releasing or discharging, any or all of the Loan Obligations or any other obligation of PENNEXX to Smithfield. Notwithstanding any other provision herein, Smithfield has not released or terminated, and is not hereby releasing or terminating, in whole or in part, any or all of the security interests in or liens on the Collateral granted to Smithfie
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