<PAGE>

                                      -1-


                                                                  EXHIBIT 4.2(b)

                               SECURITY AGREEMENT

          SECURITY AGREEMENT dated as of December 6, 2001 (the "Agreement")
                                                                ---------
among SMITHFIELD FOODS, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware (the "Borrower"); each of the
                                              --------
Subsidiaries of the Borrower identified under the caption "SUBSIDIARY
GUARANTORS" on the signature pages hereof and, together with any Person that
becomes a "Subsidiary Guarantor" pursuant to Section 6.11, (individually, a
"Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors" and,
 --------------------                          ---------------------
together with the Borrower, the "Obligors"); and JPMORGAN CHASE BANK, as
                                 --------
collateral agent for the Secured Parties referred to below (in such capacity,
together with its successors in such capacity, the "Collateral Agent").
                                                    ----------------

          The Borrower, the Subsidiary Guarantors, certain lenders and the
Administrative Agent are parties to a Credit Agreement dated as of December 6,
2001 (as modified and supplemented and in effect from time to time, the "Credit
                                                                         ------
Agreement"), providing, subject to the terms and conditions thereof, for
---------
extensions of credit (including by means of the making of loans and the issuance
of letters of credit) to be made by said lenders to the Borrower in an aggregate
principal or face amount not exceeding $750,000,000.  In addition, (i) the
Borrower may from time to time be obligated to various of said lenders (or their
affiliates) in respect of one or more Hedging Agreements under and as defined in
the Credit Agreement and (ii) the Borrower and the Lenders may, pursuant to the
Credit Agreement, agree that certain other indebtedness of the Borrower shall be
designated as "Pari Passu Debt" and shall be entitled to the benefits of this
Agreement.

          To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder and to extend credit under Hedging Agreements, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each Obligor has agreed to grant a security interest in the
Collateral (as hereinafter defined) as security for the Secured Obligations (as
so defined).  Accordingly, the parties hereto agree as follows:

          Section 1.  Definitions.  Terms defined in the Credit Agreement are
                      -----------
used herein as defined therein.  In addition, as used herein:

          "Accounts" shall have the meaning ascribed thereto in Section 3(b).
           --------

          "Collateral" shall have the meaning ascribed thereto in Section 3.
           ----------

          "Collateral Account" shall have the meaning ascribed thereto in
           ------------------
     Section 4.01.

          "Default" shall mean a "Default" under, and as defined in, the Credit
           -------
     Agreement.

          "Documents" shall have the meaning ascribed thereto in Section 3(g).
           ---------

          "Event of Default" shall mean an "Event of Default" under, and as
           ----------------
     defined in, the Credit Agreement.

          "Farm Products" shall have the meaning ascribed thereto in Section
           -------------
     3(e).

          "Hedging Agreement" shall mean any swap agreement, cap agreement,
           -----------------
     collar agreement, put or call, futures contract, forward contract or
     similar agreement or arrangement entered into in respect of interest rates,
     foreign exchange rates or prices of commodities.

          "Hedging Obligations" shall mean all obligations of the Borrower owing
           -------------------
     to one or more of the Lenders (or any affiliate of a Lender) under Hedging
     Agreements.

          For purposes hereof, it is understood that any Hedging Obligations to
     a Person arising under an agreement entered into at the time such Person
     (or an affiliate thereof) is a "Lender" party to the Credit Agreement shall
     nevertheless continue to constitute Hedging Obligations for purposes
     hereof, notwithstanding that such Person (or its affiliate) may have
     assigned all of its Loans and other interests in the Credit Agreement and,
     at the time a claim is to be made in respect of such Hedging Obligations,
     such Person (or its affiliate) is no longer a "Lender" party to the Credit
     Agreement.

          "Instruments" shall have the meaning ascribed thereto in Section 3(c).
           -----------

          "Inventory" shall have the meaning ascribed thereto in Section 3(d).
           ---------

          "Pari Passu Debt" shall have the meaning ascribed thereto in the
           ---------------
     Credit Agreement.

          "Proceeds" of any Collateral shall mean cash, securities and other
           --------
     property realized in respect of, and distributions in kind of, Collateral,
     including any thereof received under any
<PAGE>

                                      -2-

     reorganization, liquidation or adjustment of debt of the Obligors or any
     issuer of or obligor on any of the Collateral.

          "Secured Obligations" shall mean (a) in the case of the Borrower, (i)
           -------------------
     the principal of and interest on the loans made by the Lenders to the
     Borrower under the Credit Agreement, the reimbursement obligations owing by
     the Borrower in respect of letters of credit issued under the Credit
     Agreement and all other amounts from time to time owing by the Borrower to
     the Lenders or the Administrative Agent under the "Loan Documents" referred
     to in the Credit Agreement and (ii) the Hedging Obligations and (b) in the
     case of each Subsidiary Guarantor, all obligations of such Subsidiary
     Guarantor under the Credit Agreement (including, without limitation, in
     respect of its Guarantee under Article VIII of the Credit Agreement) and
     the other "Loan Documents" referred to in the Credit Agreement.

          "Secured Parties" shall mean the Administrative Agent, the Collateral
           ---------------
     Agent and the Lenders, any holder of Hedging Obligations and any holder of
     Pari Passu Debt.

          "Uniform Commercial Code" shall mean the Uniform Commercial Code as in
           -----------------------
     effect from time to time in the State of New York.

          Section 2.  Representations and Warranties.  Each Obligor represents
                      ------------------------------
and warrants to the Secured Parties that:

          (a) Title and Priority.  Such Obligor is the sole beneficial owner of
              ------------------
     the Collateral in which it purports to grant a security interest pursuant
     to Section 3, and no Lien exists upon such Collateral, except for Liens
     permitted under Section 6.02 of the Credit Agreement and except for the
     security interest in favor of the Secured Parties created pursuant hereto.
     The security interest created pursuant hereto constitutes a valid and
     perfected security interest in the Collateral in which such Obligor
     purports to grant a security interest pursuant to Section 3, subject to no
     equal or prior Lien except (i) as expressly permitted by said Section 6.02
     of the Credit Agreement and (ii) Liens created under the Federal Packers
     and Stockyards Act, as amended.

          (b) Names, Etc.  The full and correct legal name, type of
              -----------
     organization, jurisdiction of organization, organizational ID number (if
     applicable) and mailing address of each Obligor as of the date hereof are
     correctly set forth in Annex 1.

          (c) Changes in Circumstances.  Such Obligor has not (i) within the
              ------------------------
     period of four months prior to the date hereof, changed its location (as
     defined in Section 9-307 of the Uniform Commercial Code), (ii) except as
     specified in Annex 1, heretofore changed its name, or (iii) except as
     specified in Annex 2, heretofore become a "new debtor" (as defined in
     Section 9-102(a)(56) of the Uniform Commercial Code) with respect to a
     currently effective security agreement previously entered into by any other
     Person.

          (d) Fair Labor Standards Act.  Any goods now or hereafter produced by
              ------------------------
     such Obligor or any of its Subsidiaries included in the Collateral have
     been and will be produced in compliance with the requirements of the Fair
     Labor Standards Act, as amended.

          Section 3.  Collateral.  As collateral security for the prompt payment
                      ----------
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations owing by such Obligor, each Obligor hereby pledges and
grants to the Collateral Agent for the benefit of the Secured Parties a security
interest in all of such Obligor's right, title and interest in the following
property, whether now owned by such Obligor or hereafter acquired and whether
now existing or hereafter coming into existence (all being collectively referred
to herein as "Collateral"):
              ----------

          (a)  all moneys due or to become due to the Borrower in respect of
     loans and advances from time to time made by it to the Subsidiary
     Guarantors or any of them and all collateral security provided hereunder
     for the payment of any such loans or advances;

          (b)  all accounts and general intangibles (each as defined in the
     Uniform Commercial Code) of such Obligor constituting any right to the
     payment of money in respect of any loans or advances or for Inventory, Farm
     Products or other goods sold or leased or for services rendered, all moneys
     due and to become due to such Obligor under any guarantee (including a
     letter of credit) of any such account or general intangible (such accounts,
     general intangibles and moneys due and to become due being herein called
     collectively "Accounts");
                   --------

          (c)  all instruments, chattel paper and letter-of-credit rights (each
     as defined in the Uniform Commercial Code) of such Obligor evidencing,
     representing, arising from or existing in respect of, relating to, securing
     or otherwise supporting the payment of, any of the Accounts,
<PAGE>

                                      -3-

     including (but not limited to) promissory notes, drafts, bills of exchange
     and trade acceptances (herein collectively called "Instruments");
                                                        -----------

          (d)  all inventory (as defined in the Uniform Commercial Code) of such
     Obligor, in all of its forms, wherever located, now or hereafter existing
     (including, but not limited to, (i) all livestock purchased in the ordinary
     course of business and held for slaughter and resale, 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 such
     Obligor has an interest in mass or a joint or other interest or right of
     any kind (including, without limitation, goods in which such Obligor has an
     interest or right as consignee), (iii) goods which are returned to or
     repossessed by such Obligor and all accessions thereto and products thereof
     and documents therefor, and (iv) all goods obtained by such Obligor in
     exchange for such inventory, and any products made or processed from such
     inventory including all substances, if any, commingled therewith or added
     thereto (any and all such inventory, accessions, products and documents
     herein collectively called "Inventory");
                                 ---------

          (e)  all farm products (as defined in the Uniform Commercial Code) of
     such Obligor, in all of their respective forms, wherever located, now or
     hereafter existing, including but not limited to (i) livestock, meat and
     products thereof and (ii) all agricultural supplies used or consumed in
     such Obligor'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 herein collectively called "Farm
                                                                    ----
     Products");
     --------

          (f)  each contract and other agreement of such Obligor relating to the
     sale or other disposition of Inventory or Farm Products;

          (g)  all documents of title (as defined in the Uniform Commercial
     Code) or other receipts of such Obligor covering, evidencing or
     representing Inventory or Farm Products (herein collectively called
     "Documents");
     ----------

          (h)  all rights, claims and benefits of such Obligor against any
     Person arising out of, relating to or in connection with Inventory or Farm
     Products of such Obligor, including, without limitation, any such rights,
     claims or benefits against any Person storing, raising, breeding or
     transporting such Inventory or Farm Products;

          (i)  the balance from time to time in the Collateral Account,
     including all cash, financial assets and investment property (as defined in
     the Uniform Commercial Code) from time to time standing to the credit
     thereof; and

          (j)  all proceeds, products, offspring (including unborn offspring),
     accessions, rents, profits, income, benefits, substitutions and
     replacements of and to any of the property of such Obligor described in the
     preceding clauses of this Section 3 (including, without limitation, any
     proceeds of insurance thereon and all causes of action, claims and
     warranties now or hereafter held by any Obligor in respect of any of the
     items listed above) and, to the extent related to any property described in
     said clauses or such proceeds, products and accessions, all books,
     correspondence, credit files, records, invoices and other papers, including
     without limitation all tapes, cards, computer runs and other papers and
     documents in the possession or under the control of such Obligor or any
     computer bureau or service company from time to time acting for such
     Obligor.

          Section 4.  Cash Proceeds of Collateral.
                      ---------------------------

          4.01  Collateral Account.  The Collateral Agent will cause to be
                ------------------
established at Chase a cash collateral account (the "Collateral Account"), which
                                                     ------------------

          (i)  to the extent of all Investment Property or Financial Assets
     (other than cash) shall be a "securities account" (as defined in Section 8-
     501 of the Uniform Commercial Code) in respect of which the Collateral
     Agent shall be the "entitlement holder" (as defined in Section 8-102(a)(7)
     of the Uniform Commercial Code) and

          (ii)  to the extent of any cash, shall be a deposit account (as
     defined in Section 9-102(29)) of the Uniform Commercial Code and

into which there shall be deposited from time to time the cash proceeds of any
of the Collateral (including proceeds of insurance thereon) required to be
delivered to the Collateral Agent pursuant hereto and into which the Obligors
may from time to time deposit any additional amounts that any of them wishes to
<PAGE>

                                      -4-

pledge to the Collateral Agent for the benefit of the Secured Parties as
additional collateral security hereunder.  The balance from time to time in the
Collateral Account shall constitute part of the Collateral hereunder and shall
not constitute payment of the Secured Obligations until applied as hereinafter
provided.  Except as expressly provided in the next sentence, the Collateral
Agent shall remit the collected balance standing to the credit of the Collateral
Account to or upon the order of the respective Obligor as such Obligor through
the Borrower shall from time to time instruct.  However, at any time following
the occurrence and during the continuance of an Event of Default, the Collateral
Agent may (and, if instructed by the Lenders as specified in Article IX of the
Credit Agreement, shall) in its (or their) discretion apply or cause to be
applied (subject to collection) the balance from time to time standing to the
credit of the Collateral Account to the payment of the Secured Obligations in
the manner specified in Section 5.09.  The balance from time to time in the
Collateral Account shall be subject to withdrawal only as provided herein.

          4.02  Proceeds of Accounts.  Each Obligor shall, upon request of the
                --------------------
Collateral Agent made at any time that an Event of Default exists, instruct all
account debtors and other Persons obligated in respect of all Accounts to make
all payments in respect of the Accounts either (a) directly to the Collateral
Agent (by instructing that such payments be remitted to a post office box which
shall be in the name and under the control of the Collateral Agent) or (b) to
one or more other banks in the United States of America (by instructing that
such payments be remitted to a post office box which shall be in the name and
under the control of the Collateral Agent) under arrangements, in form and
substance satisfactory to the Collateral Agent pursuant to which such Obligor
shall have irrevocably instructed such other bank (and such other bank shall
have agreed) to remit all proceeds of such payments directly to the Collateral
Agent for deposit into the Collateral Account.  All payments made to the
Collateral Agent, as provided in the preceding sentence, shall be immediately
deposited in the Collateral Account.  In addition to the foregoing, each Obligor
agrees that if the Proceeds of any Collateral hereunder (including the payments
made in respect of Accounts) shall be received by it at any time after the
Collateral Agent makes such request, such Obligor shall as promptly as possible
deposit such Proceeds into the Collateral Account.  Until so deposited, all such
Proceeds shall be held in trust by such Obligor for and as the property of the
Collateral Agent and shall not be commingled with any other funds or property of
such Obligor.

          4.03  Investment of Balance in Collateral Account.  Amounts on deposit
                -------------------------------------------
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the respective Obligor through the Borrower (or, after the
occurrence and during the continuance of an Event of Default, the Collateral
Agent) shall determine, which Permitted Investments shall be held in the name
and be under the control of the Collateral Agent, provided that (i) at any time
                                                  --------
after the occurrence and during the continuance of an Event of Default, the
Collateral Agent may (and, if instructed by the Required Secured Parties, shall)
in its (or their) discretion at any time and from time to time elect to
liquidate any such Permitted Investments and to apply or cause to be applied the
proceeds thereof to the payment of the Secured Obligations in the manner
specified in Section 5.08 and (ii) if requested by the respective Obligor
through the Borrower, such Permitted Investments may be held in the name and
under the control of one or more of the Lenders (and in that connection each
Lender, pursuant to the Credit Agreement) has agreed that such Permitted
Investments shall be held by such Lender as a collateral sub-agent for the
Collateral Agent hereunder).

          4.04  Cover for Letter of Credit Liabilities.  Amounts deposited into
                --------------------------------------
the Collateral Account as cover for LC Exposure under the Credit Agreement
pursuant to Section 2.05(j), 2.10(b) or Article VII thereof shall be held by the
Collateral Agent in a separate sub-account (designated "LC Exposure Sub-
Account") and subject to Section 2.05(j) of the Credit Agreement, all amounts
held in such sub-account shall constitute collateral security first for the LC
                                                              -----
Exposure outstanding from time to time and second as collateral security for the
                                           ------
other Secured Obligations hereunder.

          Section 5.  Further Assurances; Remedies.  In furtherance of the grant
                      ----------------------------
of the pledge and security interest pursuant to Section 3, the Obligors hereby
jointly and severally agree with each Secured Party and the Collateral Agent as
follows:

          5.01  Delivery and Other Perfection.  Each Obligor shall:
                -----------------------------

          (a)  deliver and pledge to the Collateral Agent any and all
     Instruments and Documents, endorsed and/or accompanied by such instruments
     of assignment and transfer in such form and substance as the Collateral
     Agent may request; provided, that so long as no Event of Default shall have
                        --------
     occurred and be continuing, such Obligor may retain for presentation in the
     ordinary course any Instruments or Documents received by such Obligor in
     the ordinary course of business and the Collateral Agent shall, promptly
     upon request of such Obligor through the Borrower, make
<PAGE>

                                      -5-

     appropriate arrangements for making any Instrument or Document pledged by
     such Obligor available to such Obligor for purposes of presentation,
     collection or renewal (any such arrangement to be effected, to the extent
     deemed appropriate by the Collateral Agent, against trust receipt or like
     document);

          (b)  give, execute, deliver, file and/or record any financing
     statement, notice, instrument, document, agreement or other papers that may
     be necessary or desirable (in the judgment of the Collateral Agent) to
     create, preserve, perfect or validate the security interest granted
     pursuant hereto or to enable the Collateral Agent to exercise and enforce
     its rights hereunder with respect to such pledge and security interest,
     provided that notices to account debtors in respect of any Accounts or
     --------
     Instruments shall be subject to the provisions of clause (e) below;

          (c)  keep full and accurate books and records relating to the
     Collateral, and stamp or otherwise mark such books and records in such
     manner as the Collateral Agent may reasonably require in order to reflect
     the security interests granted by this Agreement;

          (d)  permit representatives of the Collateral Agent, upon reasonable
     notice, at any time during normal business hours to inspect and make
     abstracts from its books and records pertaining to the Collateral, and
     permit representatives of the Collateral Agent to be present at such
     Obligor's place of business to receive copies of all communications and
     remittances relating to the Collateral, and forward copies of any notices
     or communications received by such Obligor with respect to the Collateral,
     all in such manner as the Collateral Agent may require; and

          (e)  upon the occurrence and during the continuance of any Event of
     Default, upon request of the Collateral Agent, promptly notify (and such
     Obligor hereby authorizes the Collateral Agent so to notify) each account
     debtor in respect of any Accounts or Instruments that such Collateral has
     been assigned to the Collateral Agent hereunder, and that any payments due
     or to become due in respect of such Collateral are to be made directly to
     the Collateral Agent.

          5.02  Other Financing Statements.  No Obligor shall file or suffer to
                --------------------------
be on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Collateral Agent is not named as the sole secured party
for the benefit of the Secured Parties.

          5.03  Preservation of Rights.  The Collateral Agent shall not be
                ----------------------
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.

          5.04  Events of Default, Etc.  During the period during which an Event
                ----------------------
of Default shall have occurred and be continuing:

          (a)  each Obligor shall, at the request of the Collateral Agent,
     assemble the Collateral owned by it at such place or places, reasonably
     convenient to both the Collateral Agent and such Obligor, designated in its
     request;

          (b)  the Collateral Agent may make any reasonable compromise or
     settlement deemed desirable with respect to any of the Collateral and may
     extend the time of payment, arrange for payment in installments, or
     otherwise modify the terms of, any of the Collateral;

          (c)  the Collateral Agent shall have all of the rights and remedies
     with respect to the Collateral of a secured party under the Uniform
     Commercial Code (whether or not said Code is in effect in the jurisdiction
     where the rights and remedies are asserted) and such additional rights and
     remedies to which a secured party is entitled under the laws in effect in
     any jurisdiction where any rights and remedies hereunder may be asserted,
     including, without limitation, the right, to the maximum extent permitted
     by law, to exercise all voting, consensual and other powers of ownership
     pertaining to the Collateral as if the Collateral Agent were the sole and
     absolute owner thereof (and each Obligor agrees to take all such action as
     may be appropriate to give effect to such right);

          (d)  the Collateral Agent in its discretion may, in its name or in the
     name of the Obligors or otherwise, demand, sue for, collect or receive any
     money or property at any time payable or receivable on account of or in
     exchange for any of the Collateral, but shall be under no obligation to do
     so; and

          (e)  the Collateral Agent may, upon ten business days' prior written
     notice to the Obligors of the time and place, with respect to the
     Collateral or any part thereof that shall then be or shall thereafter come
     into the possession, custody or control of the Collateral Agent, any
     Secured Party or any of their respective agents, sell, lease, assign or
     otherwise dispose of all or any part of such Collateral, at such place or
     places as the Collateral Agent deems best, and for cash or for credit or
<PAGE>

                                      -6-

     for future delivery (without thereby assuming any credit risk), at public
     or private sale, without demand of performance or notice of intention to
     effect any such disposition or of the time or place thereof (except such
     notice as is required above or by applicable statute and cannot be waived),
     and the Collateral Agent or any Lender or anyone else may be the purchaser,
     lessee, assignee or recipient of any or all of the Collateral so disposed
     of at any public sale (or, to the extent permitted by law, at any private
     sale) and thereafter hold the same absolutely, free from any claim or right
     of whatsoever kind, including any right or equity of redemption (statutory
     or otherwise), of the Obligors, any such demand, notice and right or equity
     being hereby expressly waived and released.  The Collateral Agent may,
     without notice or publication, adjourn any public or private sale or cause
     the same to be adjourned from time to time by announcement at the time and
     place fixed for the sale, and such sale may be made at any time or place to
     which the sale may be so adjourned.

The proceeds of each collection, sale or other disposition under this Section
5.04 shall be applied in accordance with Section 5.08.

          5.05  Deficiency.  If the Proceeds of sale, collection or other
                ----------
realization of or upon the Collateral pursuant to Section 5.04 are insufficient
to cover the costs and expenses of such realization and the payment in full of
the Secured Obligations owing by it, each Obligor shall remain liable for any
deficiency.

          5.06  Removals, Etc.  Without at least 30 days' prior written notice
                -------------
to the Collateral Agent, no Obligor shall change its location (as defined in
Section 9-307 of the Uniform Commercial Code) or change its name from the name
shown as its current legal name on Annex 1.

          5.07  Private Sale.  The Collateral Agent and the Lenders shall incur
                ------------
no liability as a result of the sale of the Collateral, or any part thereof, at
any private sale pursuant to Section 5.04 conducted in a commercially reasonable
manner.  Each Obligor hereby waives any claims against the Collateral Agent or
any Lender arising by reason of the fact that the price at which the Collateral
may have been sold at such a private sale was less than the price that might
have been obtained at a public sale or was less than the aggregate amount of the
Secured Obligations, even if the Collateral Agent accepts the first offer
received and does not offer the Collateral to more than one offeree.

          5.08  Application of Proceeds.  Except as otherwise herein expressly
                -----------------------
provided and except as provided below in this Section 5.08, the Proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Collateral Agent
under Section 4 or this Section 5, shall be applied by the Collateral Agent:

          First, to the payment of the costs and expenses of such collection,
          -----
     sale or other realization, including reasonable out-of-pocket costs and
     expenses of the Collateral Agent and the fees and expenses of its agents
     and counsel, and all expenses incurred and advances made by the Collateral
     Agent in connection therewith;

          Second, to the payment of the costs and expenses of such collection,
          ------
     sale or other realization, including reasonable out-of-pocket costs and
     expenses of the Administrative Agent and the fees and expenses of its
     agents and counsel, and all expenses incurred and advances made by the them
     in connection therewith, pro rata in accordance with the respective amounts
     owing to them;

          Third, to the payment in full of the Secured Obligations, in each case
          -----
     equally and ratably in accordance with the respective amounts thereof then
     due and owing or as the Lenders (or other Persons) holding the same may
     otherwise agree; and

          Fourth, to the payment to the respective Obligor, or their respective
          ------
     successors or assigns, or as a court of competent jurisdiction may direct,
     of any surplus then remaining.

Notwithstanding the foregoing, the Proceeds of any cash or other amounts held in
the "LC Exposure Sub-Account" of the Collateral Account pursuant to Section 4.04
shall be applied first to the obligations owing in respect of such LC Exposure
                 -----
outstanding from time to time and second to the other Secured Obligations in the
                                  ------
manner provided above in this Section 5.08.

          For purposes of applying payments received in accordance with this
Section 5, the Collateral Agent shall be entitled to rely upon the
Administrative Agent or directly on any other Secured Party as necessary for a
determination of the outstanding Secured Obligations owed as the case may be.
Each Secured Party hereby agrees to provide, or to cause its representative to
provide, on any date requested by the Collateral Agent a certificate as to the
outstanding Secured Obligations owed to such Secured Party.
<PAGE>

                                      -7-

          5.09  Attorney-in-Fact.  Without limiting any rights or powers granted
                ----------------
by this Agreement to the Collateral Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default the Collateral Agent is hereby appointed the attorney-in-fact of each
Obligor for the purpose of carrying out the provisions of this Section 5 and
taking any action and executing any instruments that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof, which appointment
as attorney-in-fact is irrevocable and coupled with an interest.  Without
limiting the generality of the foregoing, so long as the Collateral Agent shall
be entitled under this Section 5 to make collections in respect of the
Collateral, the Collateral Agent shall have the right and power to receive,
endorse and collect all checks made payable to the order of any Obligor
representing any dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.

          5.10  Perfection.  Prior to or concurrently with the execution and
                ----------
delivery of this Agreement, each Obligor shall file such financing statements
and other documents in such offices as the Collateral Agent may request to
perfect the security interests granted by Section 3 of this Agreement.  Each
Obligor consents that UCC financing statements may be filed describing the
Collateral in the manner specified in Section 3).

          5.11  Termination.  When all Secured Obligations shall have been paid
                -----------
in full, the commitments of the Lenders to extend further credit under the
Credit Agreement have terminated, the letters of credit issued under the Credit
Agreement have expired or been canceled and all Hedging Agreements between the
Borrower and the Lenders (or any affiliates thereof) have terminated, then
(regardless of whether any Pari Passu Debt shall have been paid in full), this
Agreement shall terminate, and the Collateral Agent shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the respective Obligor.  The
Collateral Agent shall also execute and deliver to the respective Obligor upon
such termination such Uniform Commercial Code termination statements and such
other documentation as shall be reasonably requested by the respective Obligor
to effect the termination and release of the Liens on the Collateral.

          5.12  Prompt Payment to Livestock Sellers.  Each Obligor who purchases
                -----------------------------------
livestock, for whatever purpose, shall promptly deliver to the seller of such
livestock or his duly authorized representative the full amount of the purchase
price and such obligations shall not remain outstanding for more than three
Business Days unless such amount is in dispute.  Such Obligors shall also file
and maintain a bond with the United States Department of Agriculture for the
benefit of unpaid sellers in an amount required by the Federal Packers and
Stockyards Act, as amended, and the regulations promulgated thereunder.

          5.13  Further Assurances.  Each Obligor agrees that, from time to time
                ------------------
upon the written request of the Collateral Agent, such Obligor will execute and
deliver such further documents and do such other acts and things as the
Collateral Agent may reasonably request in order fully to effect the purposes of
this Agreement.

          Section 6.  Miscellaneous.
                      -------------

          6.01  No Waiver.  No failure on the part of the Collateral Agent or
                ---------
any Secured Party to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral Agent
or any Lender of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.

          6.02  Notices.  All notices and other communications provided for
                -------
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:

          (a)  if to the Borrower, to it at Smithfield Foods, Inc. at 200
     Commerce Street, Smithfield, VA, 23430, Attention:  Mr. Dan Stevens
     (Telecopy No. 757-365-3025) and Orville Lunking (Telecopy No. 757-365-
     3025);

          (b)  if to any Subsidiary Guarantor, at the address for notices to the
     Borrower as provided herein;

          (c)  if to the Administrative Agent, to JPMorgan Chase Bank, Agent
     Bank Services Group, 1 Chase Manhattan Plaza, New York, New York 10017,
     Attention of Deidre Wall
<PAGE>

                                      -8-

     Telecopy No. (212-552-7391), with a copy to JPMorgan Chase Bank, 270 Park
     Avenue, New York, New York 10017, Attention of Gary L. Spevack (Telecopy
     No. 212-270-0998); and

          (d)  if to the Collateral Agent, to JPMorgan Chase Bank, Agent Bank
     Services Group, 1 Chase Manhattan Plaza, New York, New York 10017,
     Attention of Deidre Wall Telecopy No. (212-552-7391), with a copy to
     JPMorgan Chase Bank, 270 Park Avenue, New York, New York  10017, of Gary L.
     Spevack (Telecopy No. 212-270-0998).

Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto.  All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

          6.03  Expenses.  The Obligors jointly and severally agree to reimburse
                --------
each of the Secured Parties for all reasonable costs and expenses of the Secured
Parties (including, without limitation, the reasonable fees and expenses of
legal counsel) in connection with (i) any Event of Default and any enforcement
or collection proceeding resulting therefrom, including, without limitation, all
manner of participation in or other involvement with (w) performance by the
Collateral Agent of any obligations of the Obligors in respect of the Collateral
that the Obligors have failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Collateral Agent
in respect thereof, by litigation or otherwise, including expenses of insurance,
(y) judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 6.03, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to Section
3.

          6.04  Amendments, Etc.  The terms of this Agreement may be waived,
                ---------------
altered or amended only by an instrument in writing duly executed by the parties
hereto.  Any such amendment or waiver shall be binding upon each holder of any
of the Secured Obligations and each Obligor.

          6.05  Successors and Assigns.  This Agreement shall be binding upon
                ----------------------
and inure to the benefit of the respective successors and assigns of the parties
hereto and each holder of any of the Secured Obligations (provided, however,
                                                          --------
that no Obligor shall assign or transfer its rights hereunder without the prior
written consent of the Collateral Agent).

          6.06  Captions.  The captions and section headings appearing herein
                --------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.

          6.07  Counterparts.  This Agreement may be executed in any number of
                ------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.  Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.

          6.08  Governing Law.   This Agreement shall be governed by, and
                -------------
construed in accordance with, the law of the State of New York.

          6.09  Agents and Attorneys-in-Fact.  The Collateral Agent may employ
                ----------------------------
agents and attorneys-in-fact in connection herewith and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith.

          6.10  Severability.  If any provision hereof is invalid and
                ------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Collateral Agent
and the Lenders in order to carry out the intentions of the parties hereto as
nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.

          6.11  Additional Subsidiary Guarantors.  As contemplated by Section
                --------------------------------
5.09 of the Credit Agreement, the Borrower may at any time and from time to time
designate any of its Subsidiaries to become a Subsidiary Guarantor hereunder and
under the Credit Agreement by executing and delivering to the Collateral Agent a
Guarantee Assumption Agreement in the form of Exhibit C to the Credit Agreement.
Accordingly, upon the execution and delivery of any such Guarantee Assumption
Agreement by any such Subsidiary, such Subsidiary shall automatically and
immediately, and without any further action on the part
<PAGE>

                                      -9-

of any Person, become a "Subsidiary Guarantor" under and for all purposes of
this Agreement, and Annexes 1 and 2 hereto shall be deemed to be supplemented in
the manner specified in such Guarantee Assumption Agreement.

          6.12  Pari Passu Debt.  By its acceptance of collateral security
                ---------------
hereunder, each holder of Pari Passu Debt shall be deemed to have appointed the
Collateral Agent as its agent hereunder upon the same terms and conditions as
the Administrative Agent has been appointed pursuant to Article IX of the Credit
Agreement (and the provisions of said Article IX are hereby incorporated herein,
mutatus mutandis, as if set forth herein in full).  It is understood and agreed
------- --------
that no holder of Pari Passu Debt shall have any right to consent to a
termination of this Agreement in the event that the Administrative Agent, or the
requisite Lenders under the Credit Agreement, shall authorize such termination.
<PAGE>

                                      -10-

          IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Collateral Agency and Security Agreement to be duly executed and
delivered by their respective authorized officers as of the day and year first
above written.

                                    SMITHFIELD FOODS, INC.


                                    By:/s/ Daniel G. Stevens
                                       ---------------------
                                       Name: Daniel G. Stevens
                                       Title: Vice President


                             SUBSIDIARY GUARANTORS
                             ---------------------

CODDLE ROASTED MEATS, INC.             BROWN'S OF CAROLINA LLC
GWALTNEY OF SMITHFIELD, LTD.           CARROLL'S FOODS LLC
HANCOCK'S OLD FASHIONED                CARROLL'S FOODS OF
 COUNTRY HAM, INC.                      VIRGINIA LLC
IOWA QUALITY MEATS, LTD.               CENTRAL PLAINS FARMS LLC
JOHN MORRELL & CO.                     CIRCLE FOUR LLC
LYKES MEAT GROUP, INC.                 MURPHY FARMS LLC
MOYER PACKING COMPANY                  QUARTER M FARMS LLC,
MURCO FOODS, INC.                      each a Delaware limited liability company
NORTH SIDE FOODS CORP.
PACKERLAND PROCESSING
 COMPANY, INC.                         By  MURPHY-BROWN LLC,
PACKERLAND HOLDINGS, INC.                  a Delaware limited liability company,
PATRICK CUDAHY INCORPORATED                as a sole member of each
PREMIUM PORK, INC.
QUIK-TO-FIX FOODS, INC.
STADLER'S COUNTRY HAMS, INC.               By  JOHN MORRELL & CO.,
SUN LAND BEEF COMPANY                          a Delaware corporation,
SUNNYLAND, INC.                                as its sole member
THE SMITHFIELD COMPANIES, INC.
THE SMITHFIELD PACKING
 COMPANY, INCORPORATED                         By:/s/ Daniel G. Stevens
                                                  ---------------------
                                               Name: Daniel G. Stevens
                                               Title: Vice President
By:/s/ Daniel G. Stevens
   ---------------------
Name: Daniel G. Stevens
Title: Vice President

MURPHY-BROWN LLC,                      GREAT LAKES CATTLE CREDIT COMPANY, LLC,
 a Delaware limited liability company   a Delaware limited liability company,


By  JOHN MORRELL & CO.,                    By  PACKERLAND HOLDINGS,
    a Delaware corporation,                     INC.,
    as its sole member                         a Delaware corporation,
                                               as its sole member

    By:/s/ Daniel G. Stevens
       ---------------------
    Name: Daniel G. Stevens                    By:/s/ Daniel G. Stevens
                                                  ---------------------
    Title: Vice President                      Name: Daniel G. Stevens
                                               Title: Vice President

                           Assignment and Acceptance
                           -------------------------
<PAGE>

                                      -11-

                                    JPMORGAN CHASE BANK
                                    as Collateral Agent


                                    By: /s/ Gary L. Spevack
                                        -------------------
                                    Name: Gary L. Spevack
                                    Title: Vice President


                                    JPMORGAN CHASE BANK
                                    as Administrative Agent


                                    By: /s/ Gary L. Spevack
                                        -------------------
                                    Name: Gary L. Spevack
                                    Title: Vice President