SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended MARCH 30, 1996
Commission file number 1-9273
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1285071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 SOUTH TEXAS, PITTSBURG, TX 75686-0093
(Address of principal executive offices) (Zip code)
(903) 855-1000
(Telephone number of principle executive offices)
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last
report.
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 periods 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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
COMMON STOCK $.01 PAR VALUE--- 27,589,250 SHARES AS OF MAY 13, 1996
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
March 30, 1996 and September 30, 1995
Consolidated statements of income:
Three months and six months ended March 30, 1996 and April 1,
1995
Consolidated statements of cash flows:
Six months ended March 30, 1996 and April 1, 1995
Notes to condensed consolidated financial statements--March 30,
1996
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
<TABLE>
PART I. FINANCIAL INFORMATION
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED):
March 30, 1996 September 30, 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,228 $ 11,892
Trade accounts and other receivables,
less allowance for doubtful accounts 65,067 60,031
Inventories 129,346 110,404
Deferred income taxes 9,196 9,564
Prepaid expenses 1,624 526
Other current assets 739 953
Total Current Assets 214,200 193,370
Other Assets 19,348 20,918
Property, Plant and Equipment 464,411 442,781
Less accumulated depreciation 171,257 159,465
293,155 283,316
$ 526,703 $ 497,604
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 26,000 $ 13,000
Accounts payable 59,880 55,658
Accrued expenses 30,383 31,130
Current maturities of long-term debt 7,121 5,187
Total Current Liabilities 123,384 104,975
Long-Term Debt, less current maturities 202,128 182,988
Deferred Income Taxes 53,143 56,725
Minority Interest in Subsidiary 842 842
Stockholders' Equity:
Common stock; $.01 par value 276 276
Additional paid-in capital 79,763 79,763
Retained earnings 67,167 72,035
Total Stockholders' Equity 147,206 152,074
$ 526,703 $ 497,604
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 30, 1996 APRIL 1, 1995 MARCH 30, 1996 APRIL 1, 1995
<S> <C> <C>
Net sales $ 272,004 $ 216,830 $ 539,479 $ 443,830
Costs and expenses:
Cost of sales 255,957 209,253 502,460 415,488
Selling, general and administrative 12,363 12,239 24,510 24,262
268,320 221,492 526,970 439,750
Operating income (loss) 3,684 (4,662) 12,509 4,080
Other expense (income):
Interest expense, net 5,210 4,028 10,331 8,355
Foreign exchange (gain) loss (94) 3,270 1,222 5,615
Miscellaneous, net (329) 1,136 (577) 889
4,787 8,434 10,976 14,859
Income (loss) before income taxes
and extraordinary charge (1,103) (13,096) 1,533 (10,779)
Income tax (benefit) expense (548) 3,208 2,792 4,969
Net loss before extraordinary charge (555) (16,304) (1,259) (15,748)
Extraordinary charge-early repayment of debt,
net of tax (2,780) - (2,780) -
Net loss $ (3,335) $ (16,304) $ (4,039) $ (15,748)
Net loss per common share
before extraordinary charge $ (.02) $ (.59) $ (.05) $ (.57)
Extraordinary charge per common share $ (.10) $ - $ (.10) $ -
Net loss per common share $ (.12) $ (.59) $ (.15) $ (0.57)
Dividends per common share $ .015 $ .015 $ .03 $ .03
Weighted average shares outstanding
shares outstanding 27,589,250 27,589,250 27,589,250 27,589,250
See Notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
<TABLE>
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
MARCH 30, 1996 APRIL 1, 1995
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (4,039) $ (15,748)
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 14,639 12,738
Gain on property disposals (221) (126)
Provision for losses on accounts receivable 206 (2,315)
Deferred income tax liability (3,214) 1,791
Extraordinary charge 4,587 -
Changes in operating assets and liabilities:
Accounts and other receivable (5,242) 10,068
Inventories (18,845) 12,700
Prepaid expenses (1,828) (436)
Accounts payable and accrued expenses 3,475 (2,505)
Other (186) 983
Net Cash Flows (Used In) Provided
By Operating Activities (10,668) 17,150
Investing Activities:
Acquisitions of property, plant and equipment (23,937) (14,397)
Business acquisitions - (918)
Proceeds from property disposals 1,314 193
Other, net 361 (300)
Net Cash Used In Investing Activities (22,262) (15,422)
Financing Activities:
Proceeds from notes payable to banks 56,500 -
Re-payments of notes payable to banks (43,500) -
Proceeds from long-term debt 50,028 15,030
Payments on long-term debt (29,001) (14,726)
Extraordinary charge, cash items (3,920) -
Cash dividends paid (828) (828)
Cash Provided By (Used In)
Financing Activities 29,279 (524)
Effect of exchange rate changes on cash
and cash equivalents (13) (1,154)
(Decrease) Increase in cash and
cash equivalents (3,664) 50
Cash and cash equivalents at beginning of year 11,892 11,244
Cash and cash equivalents at end of period $ 8,228 $ 11,294
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount capitalized) $ 9,530 $ 8,100
Income Taxes $ 4,014 $ 2,805
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
______________________________________________________________________________
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. The
balance sheet at September 30, 1995, has been derived from the audited
financial statements at the date. Operating results for the period ended
March 30, 1996 are not necessarily indicative of that results that may be
expected for the year ended September 28, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto
included in Pilgrim's annual report on Form 10-K for the year ended
September 30, 1995.
The consolidated financial statements include the accounts of Pilgrim's and
its wholly and majority owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.
The assets and liabilities of the foreign subsidiaries are translated at
end-of-period exchange rates, except for and non-monetary assets which are
translated at equivalent dollar costs at dates of acquisition using
historical rates. Operations of foreign subsidiaries are translated at
average exchange rates in effect during the period. The translation
adjustments are reflected in the Consolidated Statements of Income (Loss).
NOTE B--NET INCOME PER COMMON SHARE
Earnings per share for the periods ended March 30, 1996 and April 1, 1995
are based on the weighted average shares outstanding for the periods.
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
NOTE C--INVENTORIES
Inventories consist of the following:
<TABLE>
MARCH 30, 1996 SEPTEMBER 30, 1995
(in thousands)
<S> <C> <C>
Live broilers and hens $ 61,180 $ 55,353
Feed, eggs and other 40,806 32,087
Finished poultry products 27,360 22,964
$ 129,346 $ 110,404
</TABLE>
NOTE D--IMPACT OF MEXICAN PESO DEVALUATION
Included in results of operations for the three and six months ended March
30, 1996 are foreign exchange gains (losses) of $.1 million and ($1.2)
million, respectively, and $3.3 million and $5.6 million for three and six
months ended April 1, 1995, respectively. These gains (losses) result from
the appreciation (devaluation) of the Mexican peso against the U.S. dollar.
Also, for the period ended April 1, 1995, the carrying value of inventories
was adjusted to end-of-period exchange rates as was necessary to record
inventories at the lower of cost or market. These adjustments are
presented in the March 30, 1996 Condensed Consolidated Balance Sheet and
Consolidated Statement of Cash Flows as components of the specific line
items affected with the exception that the exchange rate effect on cash and
cash equivalents has been separately stated in the Consolidated Statement
of Cash Flows. See Management's Discussion and Analysis of Financial
Condition and Results of Operations - Impact of Mexican Peso Devaluation.
NOTE E--EARLY REPAYMENT OF DEBT
On February 16, 1996 the Company completed a refinancing of two issues of
Senior Secured debt of $22.0 million and $3.4 million with interest rates
of 10.49% and 9.55%, respectively, payable to an insurance company maturing
on September 21, 2002 and October 1, 1998, respectively, by borrowing $50
million pursuant to a new 10-year term loan bearing interest at 7.21%
payable in 120 fixed monthly installments of $455,305 beginning on April 1,
1996 and a final balloon payment of $22.9 million due on February 28, 2006.
The additional proceeds from this refinancing was used primarily to finance
expansions of the Company's domestic production facilities.
The extraordinary charges of $2.8 million, net of $1.8 million tax benefit,
is the result of the early repayment of the above mentioned debt
obligations.
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table presents certain items as a percentage of net sales for
the periods indicated.
<TABLE>
Percentage of Net Sales Percentage of Net Sales
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 30, 1996 APRIL 1, 1995 MARCH 30, 1996 APRIL 1, 1995
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 94.1% 96.5% 93.1% 93.6%
Gross profit 5.9% 3.5% 6.7% 6.4%
Selling, general and
administrative 4.5% 5.6% 4.5% 5.5%
Operating income (loss) 1.4% (2.2%) 2.3% .9%
Interest expense 1.9% 1.9% 1.9% 1.9%
Income (loss) before
income taxes and
extraordinary charge (.4%) (6.0%) .3% (2.4%)
Extraordinary charge-early
repayment of debt,
net of tax 1.0% - .5% -
Net Income (loss) (1.2%) (7.5%) (.7%) (3.5%)
</TABLE>
SECOND QUARTER 1996, COMPARED TO
SECOND QUARTER 1995
Consolidated net sales were $272.0 million for the second quarter of fiscal
1996, an increase of $55.2 million, or 25.5%, over the second quarter of
fiscal 1995. The increase in consolidated net sales resulted from a $27.7
million increase in Mexican chicken sales to $56.3 million, a $16.4 million
increase in domestic chicken sales to $180.2 million, and an $11.1 million
increase in sales of other domestic products to $35.5 million. The
increase in Mexican chicken sales was primarily due to a 58.2% increase in
total revenue per dressed pound produced and by a 24.5% increase in dressed
pounds produced resulting primarily from the July 5, 1995 acquisition of
five chicken companies located near Queretaro, Mexico. The increase in
domestic chicken sales was primarily due to a 5.8% increase in the dressed
pounds produced and a 4.0% increase in total revenue per dressed pound
produced. The increase in sales to other domestic products was primarily
the result of higher sales prices for commercial eggs and increased sales
of the Company's poultry by- products group. Increased revenues per
dressed pound produced both domestically and in Mexico were primarily the
result of higher sales prices.
Consolidated cost of sales was $256.0 million in the second quarter of
fiscal 1996, an increase of $46.7 million, or 22.3%, over the second
quarter of fiscal 1995. The increase primarily resulted from a $35.5
million increase in cost of sales of domestic operations, and a $11.2
million increase in the cost of sales in Mexican operations.
The cost of sales increase in domestic operations of $35.5 million was due
to a 42.3% increase in feed ingredient costs, a 5.8% increase in dressed
pounds produced and increased production of higher margin products in
prepared foods. Since year end, feed costs have increased substantially
due to lower crop yields in the 1995 harvest season and if feed costs
remain at their current level or increase and sales prices do not
correspondingly increase, future results will continue to be negatively
impacted. The Company anticipates that higher corn prices will continue at
least through the forth fiscal quarter.
The $11.2 million cost of sales increase in Mexican operations was
primarily due to a 24.5% increase in dressed pounds produced and a 2.0%
increase in average costs of sales per dressed pound. See Impact of
Mexican Peso Devaluation discussed below.
Gross profit as a percentage of sales increased to 5.9% in the second
quarter of fiscal 1996 from 3.5% in the second quarter of 1995. The
increased gross profit resulted mainly from improved performance in the
Company's Mexican operation and the U.S. dollar exchange rate of the
Mexican peso being relatively stable during the second quarter of fiscal
1996 compared to the significant devaluation experienced during the same
period of the prior year.
Consolidated selling, general and administrative expenses were $12.4
million for the second quarter of fiscal 1996, an increase of $.1 million,
or 1.0%, when compared to the second quarter of fiscal 1995. Consolidated
selling, general and administrative expenses as a percentage of sales
decreased in the second quarter of fiscal 1996 to 4.5% compared to 5.6% in
the second quarter of fiscal 1995 due to higher sales volume with
consolidated selling, general and administrative expenses remaining
relatively stable.
Consolidated operating income was $3.7 million for the second quarter of
fiscal 1996 an increase of $8.3 million, when compared to the second
quarter of fiscal 1995 resulting primarily from improved results in the
Company's Mexico operation as discussed above.
Consolidated net interest expense was $5.2 million in the second quarter of
fiscal 1996 an increase of $1.2 million, or 29.3%, when compared to the
second quarter of fiscal 1995. This increase was due to higher outstanding
debt levels resulting primarily from the prior year acquisitions in Mexico,
offset slightly by lower interest rates when compared to the second quarter
of fiscal 1995.
Consolidated income tax benefit in the second quarter of fiscal 1996 was
$.5 million compared to an expense of $3.2 million in the second quarter of
fiscal 1995.
The extraordinary charge-early repayment of debt in the amount of $2.8
million, net of tax, was incurred while refinancing certain debt at a lower
interest rate, which should result in long term interest expense
reductions. See Note E to the Condensed Consolidated Financial Statements.
SIX MONTHS ENDED MARCH 30, 1996, COMPARED TO
SIX MONTHS ENDED APRIL 1, 1995
Consolidated net sales were $539.5 million for the first six months of
fiscal 1996, an increase of $95.7 million, or 21.6%, over the first six
months of fiscal 1995. The increase in consolidated net sales resulted
from a $42.1 million increase in domestic chicken sales to $362.1 million,
a $34.0 million increase in Mexican chicken sales to $108.5 million, and a
$19.6 million increase in sales of other domestic products to $68.8
million. The increase in domestic chicken sales was primarily due to a
6.6% increase in total revenue per dressed pound produced and a 6.1%
increase in the dressed pounds produced. The increase in Mexican chicken
sales was primarily due to a 35.2% increase in dressed pounds produced
resulting primarily from the July 5, 1995 acquisition of five chicken
companies located near Queretaro, Mexico and by a 7.7% increase in total
revenue per dressed pound produced. The increase in sales of other
domestic products was primarily the result of higher sales prices for the
Company's commercial eggs and increased sales of the Company's poultry by-
products group. Increased revenues per dressed pound produced both
domestically and in Mexico were primarily the result of higher sales
prices.
Consolidated cost of sales was $502.5 million in the first six months of
fiscal 1996, an increase of $87.0 million, or 20.9%, over the first six
months of fiscal 1995. The increase primarily resulted from a $65.3
million increase in cost of sales of domestic operations, and a $21.7
million increase in the cost of sales in Mexican operations.
The cost of sales increase in domestic operations of $65.3 million was due
to a 36.3% increase in feed ingredient costs, a 6.1% increase in dressed
pounds produced, and increased production of higher margin products in
prepared foods. Since year end, feed costs have increased substantially
due to lower crop yields in the 1995 harvest season and if feed costs
remain at their current level or increase and sales prices do not
correspondingly increase, future results will continue to be negatively
impacted. The Company anticipates that higher corn prices will continue at
least through the forth fiscal quarter.
The $21.7 million cost of sales increase in Mexican operations was
primarily due to a 35.2% increase in dressed pounds produced offset
partially by a 7.1% decrease in average costs of sales per dressed pound
resulting primarily from the effects of the devaluation of the Mexican
peso. See Impact of Mexican Peso Devaluation discussed below.
Gross profit as a percentage of sales increased to 6.9% in the first six
months of fiscal 1996 from 6.4% in the first six months of 1995. The
increased gross profit resulted from improved performance in the Company's
Mexican operation and the Mexican peso devaluation having a lesser negative
impact on the current periods gross profit than on the gross profit of the
same period in the prior year.
Consolidated selling, general and administrative expenses were $24.5
million for the first six months of fiscal 1996, an increase of $.2
million, or 1.0%, when compared to the first six months of fiscal 1995.
Consolidated selling, general and administrative expenses as a percentage
of sales decreased in the first six months of fiscal 1996 to 4.5% compared
to 5.5% in the first six months of fiscal 1995 due to higher sales with
consolidating selling, general and administrative expenses remaining
relatively stable.
Consolidated operating income was $12.5 million for the first six months of
fiscal 1996 an increase of $8.4 million, when compared to the first six
months of fiscal 1995 resulting primarily from improved results in the
Company's Mexico operations as discussed above.
Consolidated net interest expense was $10.3 million in the first six months
of fiscal 1996 an increase of $2.0 million, or 23.7%, when compared to the
first six months of fiscal 1995. This increase was due to higher
outstanding debt levels resulting primarily from the prior year
acquisitions in Mexico, offset slightly by lower interest rates when
compared to the first six months of fiscal 1995.
Consolidated income tax expense in the first six months of fiscal 1996
decreased to 2.8 million compared to $5.0 million in the first six months
of fiscal 1995. The decrease in income tax expense resulted from lower
domestic profits for the period when compared to the same period in the
prior year.
The extraordinary charge-early repayment of debt in the amount of $2.8
million, net of tax, was incurred while refinancing certain debt at a lower
interest rate, which should result in long term interest expense
reductions. See Note E to the Condensed Consolidated Financial Statements.
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
LIQUIDITY AND CAPITAL RESOURCES
Liquidity in first six months of fiscal 1996 remained strong. However,
operating losses in Mexico resulting primarily from the Mexican peso
devaluation and higher feed ingredient costs affected most financial ratios
negatively. The Company's working capital at March 30, 1996 increased to
$90.8 million from $88.4 million at September 30, 1995. The current ratio
at March 30, 1996 decreased to 1.74 to 1 from 1.84 to 1 at September 30,
1995 and the Company's stockholders' equity decreased to $147.2 million at
March 30, 1996 from $152.1 million at September 30, 1995. Total debt to
capitalization increased to 61.5% at March 30, 1996 from 56.9% at September
30, 1995. The Company maintains $85 million in revolving credit facilities
with available unused lines of credit of $49.8 million at May 9, 1996.
Trade accounts and other receivables were $65.1 million at March 30, 1996,
a $5.0 million increase from September 30, 1995. The 8.4% increase was due
primarily to increased consolidated sales. Allowances for doubtful
accounts, as a percentage of trade accounts and notes receivable were 5.7%
at March 30, 1996 compared to 6.7% at September 30, 1995.
Inventories were $129.3 million at March 30, 1996, an increase of $18.9
million from September 30, 1995. This 17.2% increase was due primarily to
the higher feed ingredient costs affecting the carrying value of feed on
hand and feed cost in the live birds and finished products.
Accounts payable were $59.9 million at March 30, 1996, a 7.6% increase from
September 30, 1995, due primarily to higher production levels and feed
ingredient.
Capital expenditures for the first six months of fiscal 1996 were $23.9
million and were primarily incurred to expand production capacities
domestically, improve efficiencies, reduce costs and for the routine
replacement of equipment. The Company anticipates that it will spend
approximately $42.0 million for capital expenditures in fiscal year 1996
and expects to finance such expenditures with available operating cash
flows, leases and long-term financing. The Company closed a $50 million
long-term financing arrangement in the second fiscal quarter which was used
to finance some of the above mentioned capital expenditures and to
refinance certain existing long-term debt at a lower interest rate. See
Note E to the Condensed Consolidated Financial Statements.
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
IMPACT OF MEXICAN PESO DEVALUATION
In December 1994, the Mexican government changed its policy of defending
the peso against the U.S. dollar and allowed it to float freely on the
currency markets. These events resulted in the Mexican peso exchange rate
declining from 3.39 to 1 U.S. dollar at October 1, 1994 to a low of 7.91 at
November 15, 1995. On May 9, 1996 the Mexican peso closed at 7.47 to 1
U.S. dollar. No assurance can be given as to the future valuation of the
Mexican peso and further movement in the Mexican peso could affect future
earnings positively or negatively.
Adjustments resulting from changes in currency exchange rates on net
monetary assets are reflected in the Consolidated Statements of Income
(Loss). Classification of the effects in the Consolidated Statements of
Income (Loss) is dependent upon the nature of the underlying asset and, in
general, exchange rate effects on net monetary assets are reflected as
"Other expenses (income) - Foreign exchange (gain) loss."
OTHER
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF." SFAS No.
121 establishes accounting standards for the impairment of long-lived
assets to be held and used and for long-lived assets to be disposed of.
SFAS No. 121 is scheduled to become mandatory for the Company's 1997 fiscal
year. The Company has not determined the effect of adopting SFAS No. 121.
There will be no cash flow impact from this accounting change.
The statements contained in this filing which are not historical facts,
such as future feed costs, sales prices, capital expenditures, and
movements in the exchange rate between the U.S. dollar and the Mexican peso
are forward-looking statements that are subject to risks and uncertainties
that could cause actual results to differ materially from those set forth
in the forward-looking statements. Among the factors that could cause
actual results to differ materially are competitive pressures, crop yields,
the strength of the U.S. and Mexican economies, and the demand for
Pilgrim's Pride products in the marketplace.
<PAGE>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 30, 1996
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the six months
ended April 1, 1995.
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.
PILGRIM'S PRIDE CORPORATION
Date 5/10/96 Clifford E. Butler
Vice Chairman of the Board,
Chief Financial Officer and
Secretary and Treasurer
in his respective capacity
as such
PILGRIM'S PRIDE CORPORATION
and
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
NOTE PURCHASE AGREEMENT
Dated February 15, 1996
$50,000,000 Notes due 2006
<PAGE>
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "Agreement") dated February 15,
1996, by and between John Hancock Mutual Life Insurance Company, a
Massachusetts corporation ("Purchaser"), and Pilgrim's Pride Corporation, a
Delaware corporation (the "Company").
R E C I T A L S:
WHEREAS, the Company desires to sell its Fixed Rate Notes in the
aggregate principal amount of $50,000,000 (the "Notes") to Purchaser for
the purpose of refinancing the Company's existing debt and other general
corporate purposes; and
WHEREAS, Purchaser desires to purchase the Notes from the Company upon
the terms and subject to the conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth in this Agreement, the parties to this Agreement
mutually agree as follows:
ARTICLE 1.
DEFINITIONS
1.`. DEFINED TERMS. As used herein the following terms have the
following respective meanings:
ACQUIRED PROPERTY: the meaning specified in Section 9.4.
ADVERSE ENVIRONMENTAL IMPACT: the meaning specified in Section 11.1.
AFFILIATE: with respect to any Person, (a) any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with, such Person, or (b) any director, officer, partner or
employee of such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise. The term "control" shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and shall in any event include the
ownership or power to vote ten percent (10%) or more of the outstanding
equity interests of such other Person. For purposes hereof, Archer Daniels
Midland Company ("ADM") shall not be deemed an Affiliate of the Company so
long as ADM does not own or control more than twenty percent (20%) of the
outstanding stock of the Company.
APPRAISED VALUE: The appraised value of the Mortgaged Properties, as
determined by Bryan A. Carrell, MIA, or such other appraiser selected by
Purchaser.
BANKRUPTCY CODE: the meaning provided in Section 14.1(e).
BUSINESS DAY: any day on which national banks are open in Dallas,
Texas and Boston, Massachusetts.
CALLED PRINCIPAL: with respect to any Note, the principal of such
Note that is to be prepaid pursuant to Section 8.2 or is declared to be
immediately due and payable pursuant to Article 14, as the context
requires.
CAPITAL EXPENDITURES: for any period, expenditures (including,
without limitation, the aggregate amount of Capital Lease Obligations
incurred during such period) made by the Company or any Subsidiary to
acquire or construct fixed assets, plant and equipment (including renewals,
improvements and replacements, but excluding repairs) during such period
computed in accordance with GAAP.
CAPITAL LEASE OBLIGATIONS: all obligations to pay rent or other
amounts under a lease of (or other agreement conveying the right to use)
Property to the extent such obligations are required to be classified and
accounted for as a capital lease on a balance sheet under GAAP, and for
purposes of this Agreement, the amount of such obligation shall be the
capitalized amount thereof, determined in accordance with GAAP.
CERTIFICATE: the meaning specified in Section 4.4(d).
CLOSING: the meaning specified in Article 3.
CLOSING DATE: the meaning specified in Article 3.
CODE: the Internal Revenue Code of 1986, as amended from time to
time.
COLLATERAL: the Mortgaged Properties and the properties described in
the Financing Statements.
COLLATERAL AGREEMENTS: the Security Documents, the Financing
Statements, the Receipt of Funds, the Certificate and all other documents
and instruments that may be executed or delivered hereunder or in
connection herewith.
COMMISSION: the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
COMPANY: Pilgrim's Pride Corporation, a Delaware corporation, or any
successor thereto by merger, consolidation, or otherwise.
CONSOLIDATED INTEREST EXPENSE: for any period, the aggregate
consolidated interest expense of the Company and the Subsidiaries for such
period, as determined in accordance with GAAP (minus, to the extent
included therein, any interest expense not paid in cash) including, without
limitation (and without duplication in any instance), (a) all interest paid
on Debt of the Company and the Subsidiaries, (b) all commissions, discounts
and other fees and charges owed with respect to letters of credit and
banker's acceptances allocable to or amortized over such period, (c) net
costs under Interest Rate Agreements and (d) the portion of any amount
payable under Capital Lease Obligations that is, in accordance with GAAP,
allocable to interest expense.
CONSOLIDATED NET INCOME: for any period means all amounts which, in
conformity with GAAP, would be included under net income (or deficit) on a
consolidated income statement of the Company and the Subsidiaries for such
period, after deducting all operating expenses, provisions for all taxes
and reserves (including, but not limited to, reserves for deferred income
taxes), and all other proper deductions, all in conformity with GAAP.
CONSOLIDATED WORKING CAPITAL: total Current Assets less Current
Liabilities of the Company and its Subsidiaries on a consolidated basis.
CURRENT ASSETS: the consolidated assets of the Company and its
Subsidiaries which can be readily converted into cash within one year and
all other assets deemed current assets in accordance with GAAP.
CURRENT LIABILITIES: Debt, trade payables, accrued expenses and other
obligations which must be satisfied or have maturities within one year,
including the outstanding balance of the Company's revolving credit
facility which may be due and payable within one year.
DEBT: (a) indebtedness for borrowed money, including long-term and
short-term debt, obligations and liabilities secured by any Lien existing
on property owned subject to such Lien, whether or not the indebtedness,
obligation or liability secured thereby shall have been assumed, and (b)
all guarantees given by such Person (other than with respect to the
Company, guarantees of trade payables of Pilgrim's Pride-Mexico).
DEFAULT RATE: nine and 21/100 percent (9.21%) per annum (or, if the
interest rate is reset pursuant to Section 7.4, an amount equal the reset
fixed rate plus two percent (2%)), but not to exceed the Highest Lawful
Rate.
DISCOUNTED VALUE: with respect to the Called Principal of any Note,
the amount obtained by discounting all Remaining Scheduled Payments with
respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance
with accepted financial practice and at a discount factor (applied on a
semiannual basis) equal to the Reinvestment Yield with respect to such
Called Principal.
EBITDA: for any period, shall mean consolidated net income of the
Company and the Subsidiaries after restoring amounts deducted for
depreciation, amortization, interest expense and taxes.
ELIGIBLE SUBSIDIARY: any corporation or other legal entity organized
under the laws of a state of the United States and located entirely within
the United States and 100% of all equity interests of which is owned by the
Company either directly or through another Eligible Subsidiary.
ENVIRONMENTAL ACTIVITY: the meaning specified in Section 11.1.
ENVIRONMENTAL CERTIFICATE: the meaning specified in Section 4.16.
ENVIRONMENTAL CONDITION: the meaning specified in Section 11.1.
ENVIRONMENTAL DAMAGES: the meaning specified in Section 11.1.
ENVIRONMENTAL LAWS: the meaning specified in Section 11.1.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended from time to time.
EVENT OF DEFAULT: the meaning specified in Section 14.1.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
FINANCIAL STATEMENTS: the meaning specified in Section 5.3.
FINANCING STATEMENTS: the meaning specified in Section 4.4(b).
FISCAL YEAR: the fiscal year of the Company for purposes of Article
9.
FIXED CHARGE COVERAGE RATIO: the ratio of (A) EBITDA plus total lease
payments relating to non-cancelable operating leases (other than payments
under Capital Lease Obligations) to (B) the sum of (i) Consolidated
Interest Expense, (ii) total lease payments relating to non-cancelable
operating leases (other than Capital Lease Obligations), (iii) principal
payments due on or scheduled mandatory redemptions of Debt (including the
Notes) within one year, whether or not actually paid and (iv) the current
portion of Capital Lease Obligations, all determined on a consolidated
basis for the Company and its Subsidiaries.
GAAP: generally accepted accounting principles as set forth from time
to time in the opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements of the Financial
Accounting Standards Board or in such opinions and statements of such other
entities as shall be approved by a significant segment of the accounting
profession.
HAZARDOUS SUBSTANCES: the meaning specified in Section 11.1.
HIGHEST LAWFUL RATE: the meaning specified in Section 16.4.
INDEMNIFIED PARTY: the meaning specified in Section 11.2.
INTEREST OPTION NOTICE: the meaning specified in Section 7.2.
INTEREST RATE AGREEMENT: any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest
rate cap or other interest rate hedge or arrangement under which the
Company or any of the Subsidiaries is a party or a beneficiary.
INVESTMENT: any direct or indirect purchase or other acquisition by a
Person of stock or other securities of any other Person, or any direct or
indirect loan, advance or capital contribution by a Person to any other
Person, including all indebtedness and accounts receivable from such other
Person that did not arise from sales to such other Person in the ordinary
course of business.
LIEN: with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement, a Person shall be deemed to own,
subject to a Lien, any Property that it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement (other than an operating
lease) relating to such Property.
MAKE-WHOLE PREMIUM: with respect to any Note, a premium equal to the
excess, if any, of the Discounted Value of the Called Principal of such
Note over the sum of (i) such Called Principal plus (ii) interest accrued
thereon as of (including interest due on) the Settlement Date with respect
to such Called Principal. The Make-Whole Premium shall in no event be less
than zero.
MATERIAL ADVERSE EFFECT: a material adverse effect on the business,
operations, affairs, condition, properties or prospects of the Company, or
the ability of the Company to perform its obligations hereunder or under
the Collateral Agreements.
MATURITY DATE: February 28, 2006 or such earlier date upon which the
maturity of the Notes is accelerated pursuant to Section 14.2.
MOODY'S: Moody's Investors Services, Inc.
MORTGAGED PROPERTIES: the aggregate of all properties pledged,
conveyed and encumbered under or pursuant to the Security Documents.
NET TANGIBLE ASSETS: total consolidated assets of the Company and its
Subsidiaries less consolidated intangible assets of the Company and its
Subsidiaries such as goodwill, patents and similar assets that would be of
an intangible nature in accordance with GAAP.
NOTES: the meaning specified in Section 2.1.
OFFICERS' CERTIFICATE: a certificate executed by the Chief Financial
Officer of the Company.
PBGC: the Pension Benefit Guaranty Corporation or any governmental
authority succeeding to any of its functions.
PAYMENT DATE: the first day of each calendar month, but if such day
is not a Business Day, the first Business Day of such month.
PERMITTED EXCEPTIONS: those Liens permitted under the Security
Documents.
PERMITTED INVESTMENTS: (a) direct obligations of the United States,
or of any agency thereof, or obligations guaranteed as to principal and
interest by the United States, or of any agency thereof, in either case
maturing not more than one year from the date of acquisition thereof; (b)
direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of the acquisition thereof
and, at the time of such acquisition, having the highest rating obtainable
from either S&P or Moody's; (c) certificates of deposit issued by any bank
or trust company organized under the laws of the United States or any state
thereof and having capital, surplus and undivided profits of at least
$50,000,000, maturing not more than six months from the date of acquisition
thereof; (d) commercial paper rated A-1 or better or P-1 or better by S&P
or Moody's, respectively, maturing not more than six months from the date
of acquisition thereof; and (e) Eurodollar time deposits having a maturity
of less than six months purchased directly from any such bank (whether such
deposit is with such bank or any other such bank). Notwithstanding the
foregoing, the Company shall be permitted to have collected balances with
First State Bank of Pittsburg, Pittsburg, Texas, in an amount not to exceed
at any time 80% of such Bank's capital base.
PERSON: a corporation, an association, a partnership, an
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
PILGRIM'S PRIDE-MEXICO: Pilgrim's Pride S.A. de C.V., a Mexican
corporation and a wholly owned subsidiary of the Company.
PLAN: an "employee pension benefit plan" (as defined in Section 3(2)
of ERISA) that is or has been established or maintained, or to which
contributions are or have been made, by the Company or any of the
Subsidiaries or any Related Person with respect to any of them, or an
employee pension benefit plan as to which the Company or any of the
Subsidiaries or any Related Person with respect to any of them, would be
treated as a contributory sponsor under Section 4069 of ERISA if it were to
be terminated.
POTENTIAL EVENT OF DEFAULT: a default that, with notice or lapse of
time or both, becomes an Event of Default.
PREMIUM: a Make-Whole Premium.
PROPERTY: any right or interest in or to property of any kind
whatsoever, whether real, personal (including, without limitation, cash) or
mixed and whether tangible or intangible.
PURCHASER: John Hancock Mutual Life Insurance Company and its
successors and assigns.
RECEIPT OF FUNDS: the meaning specified in Section 4.4(c).
REINVESTMENT YIELD: with respect to the Called Principal of any Note,
the yield to maturity implied by (a) the yields reported, as of 10:00 a.m.
(New York City time) on the Business Day next preceding the Settlement Date
with respect to such Called Principal, on the display designated as "Page
5" on the Telerate Service (or such other display as may replace Page 5 on
the Telerate Service) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Life of such Called Principal as of such
Settlement Date, plus 100 basis points, or (b) if such yields shall not be
reported as of such time or the yields reported as of such time shall not
be ascertainable, the Treasury Constant Maturity Series yields reported,
for the latest day for which such yields shall have been so reported as of
the Business Day next preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Life of such
Called Principal as of such Settlement Date, plus 100 basis points. Such
implied yield shall be determined, if necessary, by (x) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (y) interpolating linearly between reported
yields.
RELATED PERSON: as to any Person, either (a) any corporation or trade
or business that is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person, or
(b) is under common control (within the meaning of Section 414(c) of the
Code) with such Person, or (c) is a member of any affiliated service group
(within the meaning of Section 414(m) of the Code) that includes such
Person, or (d) is otherwise treated as part of the controlled group that
includes such Person (within the meaning of Section 414(o) of the Code).
RELEASE: the meaning specified in Section 11.1.
REMAINING LIFE: with respect to the Called Principal of any Note, the
number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
REMAINING SCHEDULED PAYMENTS: with respect to the Called Principal of
any Note, all payments of such Called Principal and interest thereon that
would be due on or after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date.
REPORTABLE QUANTITY: the meaning specified in Section 11.1
RESPONSIBLE OFFICER: the President, the Secretary, the Treasurer, the
Chief Executive Officer, the Chief Operating Officer or the Chief Financial
Officer of the Company.
S&P: Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
SCHEDULE OF INFORMATION FOR PAYMENT AND NOTICES: the meaning
specified in Article 13.
SECURED DEBT: all indebtedness for borrowed money or evidenced by a
bond, debenture, note or similar evidence of indebtedness, which is secured
by a Lien on any assets of the Company or any Subsidiary or any shares of
stock or Debt of any Subsidiary.
SECURITIES ACT: the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
SECURITY DOCUMENTS: the meaning specified in Section 4.4(a).
SETTLEMENT DATE: with respect to the Called Principal of any Note,
the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or is declared to be immediately due and payable pursuant to
Article 14.
SPECIAL COUNSEL: Locke Purnell Rain Harrell (A Professional
Corporation) as special counsel to Purchaser in connection with this
Agreement.
STOCK: all shares, options, warrants, interests, participations or
other equity equivalents (regardless of how designated) of a corporation or
equivalent entity whether voting or nonvoting, including, without
limitation, common stock, preferred stock, or any other "equity security"
(as such term is defined in Rule 3(a)11-1 of the General Rules and
Regulations promulgated by the Commission under the Exchange Act).
SUBORDINATED DEBT: all Debt of the Company that by its terms is
subordinated to any other Debt.
SUBSIDIARY: any corporation or other entity of which more than 50% of
the outstanding voting shares are at the time owned (either alone or
through Subsidiaries or together with Subsidiaries) by the Company or
another Subsidiary.
TOTAL LIABILITIES: total consolidated liabilities of the Company and
its Subsidiaries as shown on its annual audited balance sheet, determined
in accordance with GAAP.
UNFUNDED CURRENT LIABILITY: as to any Plan, the amount, if any, by
which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year, determined in
accordance with Statement of Financial Accounting Standards No. 35, based
upon the actuarial assumptions used by the Plan's actuary in the most
recent annual valuation of the Plan, exceeds the fair market value of the
assets allocable thereto, determined in accordance with Section 412 of the
Code.
WELFARE PLAN: an employee welfare benefit plan (as defined in Section
3(1) of ERISA) or a group health plan (as defined in Section 4980B(g)(2) of
the Code) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any of the
Subsidiaries or any Related Person with respect to any of them.
2.`. MISCELLANEOUS. References herein to an "Exhibit" or "Schedule"
are, unless otherwise specified, to one of the exhibits or schedules
attached to this Agreement, and references herein to a "Section" are,
unless otherwise specified, to one of the Sections of this Agreement. As
used in this Agreement, the words "herein," "hereof," "hereby," and
"hereunder" refer to this Agreement as a whole and not to any particular
Section or subdivision of this Agreement. References herein to masculine
or neuter are construed to include masculine, feminine or neuter, where
applicable, and references herein to singular include plural and to plural
include singular, where applicable.
ARTICLE 2.
THE NOTES
1.`. AUTHORIZATION OF NOTES. The Company has authorized the issue and
sale of $50,000,000 aggregate principal amount of its 7.21% Fixed Rate
Notes (together with all notes issued in substitution or exchange therefor
pursuant to Article 12, the "Notes") pursuant to this Agreement. Each Note
will be in the amount of $1,000 or a multiple thereof, will bear interest
on the unpaid principal balance thereof from the date of the Note as
prescribed herein, payable as set forth in Articles 7 and 8, will mature on
February 28, 2006 and will be substantially in the form of EXHIBIT A.
2.`. SALE AND PURCHASE OF NOTES. The Company will issue and sell to
Purchaser and, subject to the terms and conditions hereof, Purchaser will
purchase from the Company, at the Closing provided for in Article 3,
$50,000,000 aggregate principal amount of the Notes.
ARTICLE 3.
CLOSING
The closing of the sale of the Notes to Purchaser (the "Closing")
shall take place at the offices of Locke Purnell Rain Harrell (A
Professional Corporation), 2200 Ross Avenue, Suite 2200, Dallas, Texas
75201, at 10:00 a.m. Dallas, Texas time (with funding to occur no later
than 12:00 p.m.), on such date as the parties may mutually agree (the
"Closing Date"). At the Closing the Company will deliver to Purchaser the
Notes in the form of a single Note or Notes as prescribed by Purchaser,
dated the Closing Date and registered in Purchaser's name (or the name of
its nominee), against delivery by Purchaser to the Company of immediately
available funds in the aggregate amount of the purchase price therefor.
ARTICLE 4.
CONDITIONS TO CLOSING
Purchaser's obligation to purchase and pay for the Notes is subject to
the fulfillment to Purchaser's satisfaction, by the time of Closing, of the
following conditions:
1.`. OPINION OF COUNSEL. Purchaser shall have received an opinion,
dated the Closing Date and satisfactory in form and substance to Purchaser,
from (i) Godwin & Carlton, A Professional Corporation, counsel for the
Company, and (ii) Special Counsel covering such matters relevant to the
transactions contemplated hereby as Purchaser may reasonably request.
2.`. REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of the Company contained in this Agreement shall be true and
correct at the time of Closing as if made at and as of such time, and the
Company shall have complied with all agreements and covenants hereunder
required to be performed by the Company on or prior to the time of Closing.
3.`. NOTES. The Notes, in the form and substance of EXHIBIT A (with
appropriate insertions), to be issued to and accepted by Purchaser, shall
have been duly executed and delivered to Purchaser by the Company and shall
be in full force and effect and no term or condition thereof shall have
been amended, modified or waived, except with the prior written consent of
Purchaser and the Company.
4.`. COLLATERAL AGREEMENTS.
(a) The Texas Deed of Trust and Security Agreement substantially
in the form of EXHIBIT B-1, the Arkansas Mortgage and Security Agreement
substantially in the form of EXHIBIT B-2 and the Assignment of Leases and
Rents substantially in the form of EXHIBIT B-3 (collectively, the "Security
Documents"), shall have been duly executed and delivered by the Company for
the benefit of Purchaser and the registered holders from time to time of
the Notes, the beneficiary named in the Security Documents and shall be in
full force and effect.
(b) UCC-1 Financing Statements (the "Financing Statements")
shall have been duly executed and delivered by the Company.
(c) A Receipt of Funds, substantially in the form of EXHIBIT C
(the "Receipt of Funds"), shall have been duly executed and delivered by
the Company and shall be in full force and effect.
(d) A certificate, substantially in the form of EXHIBIT D (the
"Certificate"), shall have been duly executed and delivered by the Company
and shall be in full force and effect.
5.d. RECORDINGS, FILINGS AND PRIORITY. Except as waived in writing by
Purchaser, all recordings and filings of or with respect to the Security
Documents and the Financing Statements shall have been duly made and all
other instruments relating thereto shall have been duly executed, delivered
and recorded or filed, in all such places as may be required by law, or as
may be deemed necessary or desirable by Special Counsel, in order to
establish, protect and perfect as of the Closing Date the interests and
rights (and the priority thereof) created or intended to be created
thereby. The Lien of the Security Documents and Financing Statements shall
constitute a first Lien of record on and a first security interest of
record in the Mortgaged Properties, subject only to the Permitted
Exceptions.
6.d. TITLE INSURANCE; SURVEY. Purchaser shall have received (a) a
title insurance policy with respect to the Mortgaged Properties located in
the State of Arkansas, in the form of the American Land Title Association
Loan Policy (10/17/92) issued by a title underwriter acceptable to
Purchaser, and a mortgagee policy of title insurance with respect to the
Mortgaged Properties located in the State of Texas, in the form promulgated
in the State of Texas, issued by a title underwriter acceptable to
Purchaser, and containing affirmative coverages and reinsurance
arrangements and agreements satisfactory in form and substance to Purchaser
and Special Counsel, insuring in the amount of approximately $50,000,000,
Purchaser's interest under the Security Documents as the holder of a valid
first lien of record on the Mortgaged Properties or, in the case of leased
properties, a valid first Lien on the Company's leasehold interest, subject
only to the Permitted Exceptions, containing no exception as to creditors'
rights, and containing affirmative zoning endorsements, affirmative
coverage as to claims and liens of mechanics and materialmen, affirmative
endorsements as to claims relating to the environmental conditions of the
Mortgaged Properties, and such other affirmative conditions and coverages
as are available and as Purchaser may request, all satisfactory in
substance and form to Purchaser and Special Counsel; (b) reports of Uniform
Commercial Code searches in the Uniform Commercial Code central filing
offices of the Secretary of State of Arkansas and Texas issued by the
States of Arkansas and Texas, and such other evidence concerning Uniform
Commercial Code filings as is requested by Purchaser, in each case
reasonably satisfactory in form and substance to Purchaser and Special
Counsel; (c) a report of a tax and judgment lien search in the recording
district of each county or similar jurisdiction where each of the Mortgaged
Properties is located, satisfactory in form and substance to Purchaser and
Special Counsel; and (d) surveys of each part of the Mortgaged Properties
as Purchaser shall approve in accordance with ALTA/ACSM Class A standards
and certificates.
7.d. COMPLIANCE WITH SECURITIES LAWS. The offering and sale of the
Notes to be issued at the Closing shall have complied with all applicable
requirements of federal and state securities laws, and Purchaser shall have
received evidence thereof reasonably satisfactory to Purchaser and Special
Counsel.
8.d. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents
and instruments incident to such transactions shall be reasonably
satisfactory to Purchaser and Special Counsel, and Purchaser and Special
Counsel shall have received an original executed counterpart of this
Agreement, and all such other counterpart originals or certified or other
copies of such documents as Purchaser or Special Counsel may reasonably
request.
9.d. NO EVENT OF DEFAULT OR POTENTIAL EVENT OF DEFAULT. There shall
not exist and, upon consummation of the transactions contemplated hereby,
there shall not exist any Event of Default or Potential Event of Default.
10.d. PAYMENT OF CLOSING FEES. The Company shall have paid the
reasonable fees, expenses and disbursements of Special Counsel and special
local counsel that are reflected in statements of such counsel rendered
prior to or on the Closing Date, without limitation on the Company's
obligation to pay any additional fees and disbursements of all such counsel
pursuant to Article 15.
11.d. ORIGINAL DOCUMENTS. Purchaser shall have received an original
executed counterpart of the Notes, the Security Documents, the Financing
Statements, the Receipt of Funds, the Certificate, and the title insurance
policies and surveys referred to in Section 4.6.
12.d. LOAN TO APPRAISED VALUES. The Appraised Value of the Mortgaged
Properties shall be not less than $67,000,000.
13.d. INSURANCE. Purchaser shall have received certificates
reasonably satisfactory to Purchaser as to, or copies of, all insurance
policies required by the Security Documents
14.d. DUE DILIGENCE. The results of any due diligence review of the
Company and the Subsidiaries and their respective Properties, businesses,
operations, affairs, results of operations, financial condition and
prospects and the proposed organizational, legal and tax aspects of the
proposed transactions, performed by or on behalf of Purchaser shall be
reasonably satisfactory to Purchaser and Special Counsel.
15.d. ENVIRONMENTAL MATTERS. The Company shall have delivered to
Purchaser a Phase I environmental assessment (either recently completed at
the request of Purchaser or previously completed for the Company or to be
completed together with updated reports with respect thereto), addressed to
Purchaser, in form and substance acceptable to Purchaser and prepared by
Law Engineering, Inc. (the "Environmental Certificate"), to the effect
that, except as otherwise disclosed in writing, (i) all current activities
at the Mortgaged Properties comply in all respects with applicable
requirements of any governmental authority relating to air or water
pollution, hazardous substance or waste management and disposal, or other
Environmental Laws, and (ii) none of the Mortgaged Properties is impacted
by Hazardous Substances in any respect that would require investigation,
reporting, monitoring, cleanup or other response under current law.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
The Company represents and warrants that:
1.d. ORGANIZATION, STANDING, ETC. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority (i) to own and
operate its properties, (ii) to carry on its business as now conducted and
as proposed to be conducted, (iii) to enter into this Agreement, the
Security Documents and each of the other Collateral Agreements, (iv) to
issue and sell the Notes, and (v) to carry out the terms of this Agreement,
the Notes, the Security Documents and each of the other Collateral
Agreements. This Agreement, the Notes, the Security Documents and the
other Collateral Agreements have been duly executed and delivered and are
valid and binding agreements of the Company, enforceable in accordance with
their terms, except as enforceability may be subject to and limited by
applicable principles of equity and by bankruptcy, reorganization,
moratorium, insolvency or other similar laws from time-to-time in effect
affecting the enforcement of creditors' rights generally.
2.d. QUALIFICATION. The Company is duly qualified and in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its activities or the character of the
properties it owns or leases makes such qualification necessary. Set forth
on SCHEDULE 5.2 is a list of each jurisdiction in which the Company owns
Property or otherwise conducts business, other than those jurisdictions
where the failure to qualify would not have a Material Adverse Effect.
3.d. BUSINESS AND FINANCIAL STATEMENTS. The Company has delivered to
Purchaser true, complete and correct copies of the Company's audited
consolidated financial statements for the Fiscal Year ended September 30,
1995, and the unaudited financial statements for the three months ended
December 30, 1995 (collectively, the "Financial Statements"). The
Financial Statements have been prepared in accordance with GAAP (except
that the unaudited financial statements contain no footnotes) applied on a
consistent basis throughout the periods specified and present fairly the
historical financial positions of the Company as of the respective dates
and for the respective periods specified.
4.d. ADVERSE CHANGES. There has been no Material Adverse Effect on
the Company since September 30, 1995.
5.d. TAX RETURNS AND PAYMENTS. The Company is a corporation subject
to United States federal income taxation. The Company has timely and
accurately filed all tax returns required by law to be filed by it and has
paid all taxes, assessments and other governmental charges levied upon it
or any of its properties, assets, income or franchises that are due and
payable, other than those presently being contested in good faith by
appropriate proceedings diligently conducted for which such reserves and
other appropriate provision as are required by GAAP have been made. There
are no material tax Liens upon any of the assets of the Company except for
statutory liens in respect of taxes or assessments the payment of which is
not yet delinquent. If the Company is contesting any such tax or
assessment in accordance with this Section 5.5, the Company has disclosed
to Purchaser, in writing, the nature and extent of such contest.
6.d. DEBT. Other than the Notes and the indebtedness disclosed in the
Financial Statements or as listed on SCHEDULE 5.6, the Company has no
secured or unsecured Debt outstanding. Other than as provided in this
Agreement and the Collateral Agreements, or in the instruments or
agreements listed on SCHEDULE 5.6, no instrument or agreement applicable to
or binding on the Company contains any restrictions on the incurrence by
the Company of any Debt.
7.d. TITLE TO PROPERTIES AND ASSETS; LIENS. The Company has good and
marketable fee title to all the real property purported to be owned by it
and good and marketable title to all other property and assets purported to
be owned by it, free and clear of all Liens, except for Liens and other
matters that constitute Permitted Exceptions. At the time of the Closing
and upon giving effect to the transactions contemplated hereby, and except
for the Permitted Exceptions, (a) no currently effective financing
statement under the Uniform Commercial Code that names the Company as
debtor or lessee will be on file in any jurisdiction in which the Company
owns or leases real or personal property or in which the inventory of the
Company is located or in any other jurisdiction, (b) neither the Company
nor any Subsidiary has signed any currently effective financing statement
or any currently effective security agreement authorizing any secured party
thereunder to file any such financing statement, except (i) as required to
perfect the Liens created by the Collateral Agreements, (ii) as listed on
SCHEDULE 5.7, or (iii) as evidenced by any Permitted Exception, and (c) the
personal property comprising any portion of the Mortgaged Properties is
free and clear of any and all purchase money security interests and other
Liens.
8.d. LITIGATION. Except as set forth on SCHEDULE 5.8, there is no
action, proceeding or investigation pending or, to the best knowledge of
the Company, threatened (or any basis therefor known to the Company)
against the Company or any of its Subsidiaries or any of their respective
Properties which if adversely determined, could have a Material Adverse
Effect.
9.d. COMPLIANCE WITH COLLATERAL AGREEMENTS. The Company has performed
and complied in all material respects with every term, covenant, condition
and provision of the Collateral Agreements to be performed or complied with
by the Company on or prior to the date hereof, every representation or
warranty of the Company contained in the Collateral Agreements is true and
correct in all material respects on and as of the date hereof, and no
default or Event of Default (as any such term may be defined in the
Collateral Agreements) has occurred and is continuing (without regard to
any applicable cure period) under the Collateral Agreements.
10.d. COMPLIANCE WITH OTHER INSTRUMENTS. The Company (a) is not in
violation of any term of any agreement or instrument to which it is a party
or by which it is bound, or of any applicable law, ordinance, rule or
regulation of any governmental authority, or of any applicable order,
judgment or decree of any court, arbitrator or governmental authority
(including, without limitation, any such law, ordinance, rule, regulation,
order, judgment or decree relating to environmental protection or pollution
control, occupational health and safety standards and controls, consumer
protection or equal employment practice requirements), the consequence of
any of which violations would, with reasonable probability, result in a
Material Adverse Effect; and (b) is not in violation of any term of its
Certificate of Incorporation or Bylaws. Neither the execution, delivery
and performance of this Agreement, any Collateral Agreement, or the Notes
nor the consummation of the transactions contemplated hereby or thereby
will result in any violation of or be in conflict with or constitute a
default under any such term or result in the creation of (or impose any
obligation on the Company to create) any Lien upon any of the properties of
the Company pursuant to any such term. There are no such terms in the
aforementioned documents that, either in any individual case or in the
aggregate, materially and adversely affect the business, operations,
affairs, condition or properties of the Company, including the Mortgaged
Properties.
11.d. GOVERNMENTAL CONSENTS. Other than those that have been duly
obtained and are in full force and effect (copies of which have been
delivered to Purchaser or Special Counsel) and any filings contemplated by
the Security Documents and the Financing Statements (which filings will be
made promptly after Closing), no consent, approval or authorization of, or
declaration or filing with, any governmental authority on the part of the
Company is currently required for the valid execution and delivery of this
Agreement or any Collateral Agreement, or the consummation of the
transactions contemplated hereby or thereby, or the valid offer, issue,
sale and delivery of the Notes pursuant to this Agreement.
12.d. PERMITS AND LICENSES. Except for any failure to obtain or
recover permits and licenses that could not reasonably be expected to have
a Material Adverse Effect, the Company has all permits and licenses
necessary for the operation of its business as presently conducted.
13.d. FEDERAL RESERVE REGULATIONS. The Company will not use any of
the proceeds of the sale of the Notes for the purpose, whether immediate,
incidental or ultimate, of buying any "margin stock" or of maintaining,
reducing or retiring any indebtedness originally incurred to purchase a
stock that is currently any "margin stock," or for any other purpose that
might constitute this transaction a "purpose credit," in each case within
the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 C.F.R. 207, as amended), or otherwise take or permit to
be taken any action that would involve a violation of such Regulation G or
of Regulation T (12 C.F.R. 220, as amended), Regulation U (12 C.F.R. 221,
as amended) or Regulation X (12 C.F.R. 224, as amended) or any other
regulation of such board. No indebtedness being reduced or retired out of
the proceeds of the sale of the Notes was incurred for the purpose of
purchasing or carrying any such "margin stock," and the Company does not
own and has no present intention of acquiring any such "margin stock."
14.d. STATUS UNDER CERTAIN FEDERAL STATUTES. The Company is not (a) a
"holding company" or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended, (b) a "public utility," as such term is
defined in the Federal Power Act, as amended, (c) an "investment company,"
or a company "controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended, or (d) a "rail carrier," or
a "person controlled by or affiliated with a rail carrier," within the
meaning of Title 49, U.S.C., or a "carrier" to which 49 U.S.C.
<section> 11301(b)(1) is applicable.
15.d. COMPLIANCE WITH ERISA.
(a) Each Plan that is or has been maintained for employees of
the Company or any of the Subsidiaries, or any Related Person with respect
to any of them, or to which the Company or any of the Subsidiaries, or any
Related Person with respect to any of them, has made or was required to
make contributions has been administered in material compliance with its
terms and all applicable statutes (including but not limited to ERISA and
the Code, and all regulations and interpretations thereunder). No
reportable event (as defined in Section 4043 of ERISA and regulations
issued thereunder) has occurred with respect to any Plan that is a defined
benefit plan (as defined in Section 3(35) of ERISA and regulations issued
thereunder) and subject to Title IV of ERISA ("Title IV Plan"). No
material liability to the PBGC has been incurred, or is expected to be
incurred, by the Company or any of the Subsidiaries or any Related Person
with respect to any Title IV Plan. The PBGC has not instituted any
proceedings, and there exists no event or condition that would constitute
grounds for institution of proceedings, against the Company, the
Subsidiaries or any Related Person by the PBGC to terminate any Title IV
Plan under Section 4042 of ERISA. No case, matter or action with respect
to any Plan, pursuant to any federal or state law, has been brought, is
pending or is threatened, against the Company or any of the Subsidiaries or
any Related Person with respect to any of them, or any officer, director or
employee of any of them, or any fiduciary of any Plan.
(b) No Title IV Plan had an accumulated funding deficiency (as
such term is defined in Section 302 of ERISA and regulations issued
thereunder) as of the last day of the most recent plan year of such Plan
ended prior to the date hereof. All contributions payable to each
qualified Plan of the Company or any of the Subsidiaries (that is an
employee pension benefit plan as defined in Section 3(2) of ERISA and
regulations issued thereunder and that is intended to meet the
qualification requirements of the Code ("Qualified Plan")), for all
benefits earned or other liabilities accrued through the end of the latest
plan year for such Qualified Plan, determined in accordance with the terms
and conditions of such Qualified Plan, ERISA and the Code, have been paid
or otherwise provided for, and to the extent unpaid are reflected in the
pro forma consolidated balance sheet of the Company. No waiver of the
minimum funding standard requirements of Section 302 of ERISA and Section
412 of the Code has been obtained, applied for or is contemplated with
respect to any Title IV Plan.
(c) None of the Company or any of the Subsidiaries nor any
Related Person with respect to any of them, is or has been a contributor to
any multi-employer plan within the meaning of Section 3(37) of ERISA and
regulations issued thereunder.
(d) The execution and delivery of this Agreement and the
Collateral Agreements, the issue of the Notes hereunder and the
consummation of the transactions contemplated hereby will not involve any
transaction that is subject to the prohibitions of Section 406 of ERISA or
in connection with which a tax would be imposed pursuant to Section 4975 of
the Code.
(e) No Lien imposed under Section 412(n) of the Code exists in
favor of any Plan upon any property belonging to the Company or any of the
Subsidiaries, or any Related Person of any of them.
16.e. DISCLOSURE. Neither this Agreement, the Financial Statements
nor any other document, certificate or instrument delivered to Purchaser by
or on behalf of the Company in connection with the transactions
contemplated hereby, when all such documents, certificates and instruments
are taken as a whole, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact actually
known to the Company that may have a Material Adverse Effect that has not
been set forth herein or in the other documents, certificates and
instruments delivered to Purchaser by or on behalf of the Company
specifically for use in connection with the transactions contemplated
hereby.
17.e. USE OF PROCEEDS. The Company will apply the proceeds of the
sale of the Notes to refinance existing debt of the Company and for general
corporate purposes.
18.e. SOLVENCY OF THE COMPANY. The fair saleable value of the
business and assets of the Company, upon giving effect to the transactions
contemplated hereby, will be in excess of the amount that will be required
to pay the probable liabilities of the Company (including contingent,
subordinated, unmatured and unliquidated liabilities) on existing debts as
they may become absolute and matured. The Company, upon giving effect to
the transactions contemplated hereby, will not be engaged in any business
or transaction, or about to engage in any business or transaction, for
which the Company has an unreasonably small capital, and the Company has no
intent (a) to hinder, delay or defraud any entity to which it is, or will
become, on or after the Closing Date, indebted, or (b) to incur debts that
would be beyond its ability to pay as they mature.
19.e. ENVIRONMENTAL MATTERS. The Company has been complying with, and
is in compliance with, all Environmental Laws in each jurisdiction where it
is presently doing business except for failures to comply which would not
have a Material Adverse Effect. To the best knowledge of the Company, none
of the Mortgaged Properties is impacted by Hazardous Substances in any
respect that would require investigation, reporting, monitoring, cleanup or
other response under any Environmental Law.
20.e. BROKERS. The Company represents that it has not dealt with any
brokers or finders in connection with the transactions contemplated by this
Agreement.
21.e. NO DEFAULTS. At the time of the Closing, there exists no Event
of Default or Potential Event of Default.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES RELATING
TO SECURITY FOR THE NOTES
The Company represents and warrants that:
1.e. EASEMENTS AND UTILITY SERVICES. The Company has all easements
and other rights, including those for use, maintenance, repair and
replacement of and access to structures, facilities or space for support,
mechanical systems, roads, utilities (including electricity, gas, water,
sewer disposal, telephone and CATV) and any other private or municipal
improvements, services and facilities necessary or appropriate to the
proper operation, repair, maintenance, occupancy or use of the Mortgaged
Properties as currently being and proposed to be used.
2.e. CONTRACTS. There are no service (other than utility) or
construction contracts currently outstanding relating to any part of the
Mortgaged Properties providing for payment in excess of $100,000 per year,
per contract (but not in excess of $1,000,000 in the aggregate), except
those contracts that are set forth on SCHEDULE 6.2 and have been delivered
to Purchaser, nor have any labor or materials been supplied to the
Mortgaged Properties, other than in the ordinary course of business, that
have not been fully paid for.
3.e. PERMITS. There are no permits, licenses, certificates or
approvals that are required to occupy or operate (except as specified in
Section 5.8) any part of the Mortgaged Properties as presently operated,
except those permits, licenses, certificates and approvals that are set
forth on SCHEDULE 6.3 and have been delivered to Purchaser.
4.e. REPORTS OF ENGINEERS. The Company does not possess and is not
aware of any reports of engineers, architects or other Persons relating to
any part of the Mortgaged Properties, except those reports that are set
forth on SCHEDULE 6.4 and have been delivered to Purchaser.
5.e. PLANS AND SPECIFICATIONS. The Company does not possess and is
not aware of any plans and specifications relating to any part of the
Mortgaged Properties, except those plans and specifications that are set
forth on SCHEDULE 6.5 and that will be delivered to Purchaser upon request.
6.e. SOIL REPORTS. There are no soil reports in the possession of the
Company or its Affiliates relating to any part of the Mortgaged Properties.
7.e. ZONING. The Mortgaged Properties that constitutes real property
are zoned in the manner that permits the use of the Mortgaged Properties as
currently being and proposed to be used by the Company and its
Subsidiaries.
8.e. CERTIFICATES OF OCCUPANCY. A certificate of occupancy or similar
permit has been issued by the appropriate governmental authority for each
of the Mortgaged Properties that constitutes improvements to real property
that permits the occupancy of the Mortgaged Properties as currently or
proposed to be occupied by the Company.
ARTICLE 7.
INTEREST RATE PROVISIONS
1.e. INTEREST ON NOTES. Interest on the outstanding principal balance
of the Notes shall accrue at the lesser of (i) 7.21% per annum or (ii) the
Highest Lawful Rate, and shall be due and payable in accordance with
Section 8.1. Interest on the unpaid principal of the Notes shall be
calculated on the basis of the actual days elapsed in a year consisting of
360 days.
2.e. RESETTING OF INTEREST RATES. During the period of time not more
than ten days nor less than five days prior to March 1, 2003, provided that
(i) no Event of Default or Potential Event of Default has occurred and is
continuing, and (ii) Purchaser owns the Notes at such time, Purchaser and
the Company shall in good faith attempt to reset the interest rate on the
Notes. The parties shall consider Purchaser's then-current interest rate
spreads (based on average remaining life of the Notes), the then-current
financial condition of the Company and then-current market conditions when
attempting to agree upon new rates. If the parties agree upon new rates,
they shall promptly execute an amendment to this Agreement and the Company
shall execute and deliver to Purchaser new notes reflecting the new rates.
In the event that the parties are unable to reasonably agree upon new rates
for the Notes by March 1, 2003, the Notes will become immediately due and
payable and the Company shall be required to pay all principal and accrued
interest thereon. If the Company is obligated to prepay the Notes pursuant
to this Section 7.2, no Make-Whole Premium shall be due and owing on the
Notes. Purchaser shall have no liability to the Company in the event the
parties are unable to agree upon new rates pursuant to this Section 7.2.
3.e. PAST DUE PAYMENTS. All payments of principal and, to the extent
permitted by law, the Make-Whole Premium (if any) and interest on or in
respect of any Note or this Agreement that are not made when due shall bear
interest at the Default Rate from the date due and payable to the date
paid. Any payment in respect of any other obligation or amount payable
hereunder that is not paid when due shall bear interest at the Default Rate
from the date due and payable to the date paid.
ARTICLE 8.
PAYMENT OF NOTES
1.e. REQUIRED PAYMENTS OF NOTES.
(a) On March 1, 1996, the Company shall make a payment on the
Notes, in cash in an amount equal to $150,208.33. Thereafter, on each
Payment Date while the Notes are outstanding, commencing April 1, 1996, the
Company shall make a payment on the Notes, in cash, in an amount equal to
$455,304.80, which payment shall consist of principal and accrued interest.
If the interest rate on the Notes are reset in accordance with Section 7.2,
Purchaser shall recompute the monthly principal and interest payment, and
the Company shall thereafter be required to make payments equal to such
recomputed amount. On the Maturity Date, the entire outstanding principal
balance of the Notes, together with interest accrued thereon, shall be due
and payable.
(b) If at any time the outstanding principal balance of the
Notes exceeds 65% of the Appraised Value, the Company shall immediately
make a prepayment of principal of the Notes (together with accrued interest
thereon) in an amount such that following the prepayment, the outstanding
principal balance is less than or equal to 65% of the Appraised Value. No
Premium shall be due and payable with respect to a prepayment pursuant to
this Section 8.1(b). Unless the Company directs otherwise, the prepayment
shall be applied pro rata among all of the Notes at the time outstanding.
(c) No partial prepayment of the Notes pursuant to Section 8.2
shall relieve the Company from its obligation to make the payments required
under this Section 8.1, except to the extent that the outstanding principal
balance of the Notes is less than the amount of the scheduled payment
otherwise due under this Section 8.1.
2.c. OPTIONAL PREPAYMENTS OF NOTES; ALLOCATIONS.
(a) At any time or from time to time, the Company is hereby
granted the right, at its option, upon notice as provided in Section 8.3,
to prepay all or any part (in integral multiples of principal of $100,000)
of the Notes, which prepayment shall be applied to the outstanding
principal amount thereof in the inverse order of maturity. Unless the
Company directs otherwise, the prepayment shall be applied pro rata among
all of the Notes at the time outstanding. Each such prepayment shall
include the principal amount of the Notes so prepaid, plus interest accrued
thereon to the date of payment, plus the Premium described in Section
8.2(b) (based on such principal amount so prepaid). In the case of each
partial prepayment of the Notes, unless the Company otherwise directs, the
principal amount of the Notes to be prepaid shall be allocated among all of
the Notes at the time outstanding in proportion, as nearly as practicable,
to the respective unpaid principal amounts thereof not theretofore called
for prepayment, rounded upward to the nearest $1,000 for each Note, with
adjustments to the extent practicable, to compensate for any prior
prepayments not made exactly in such proportion.
(b) Any prepayment of the Notes shall be subject to and include
the Make-Whole Premium. Notwithstanding the foregoing, no Premium shall be
due if the Notes are prepaid (i) pursuant to Section 8.1(c) or (ii)
following a resetting of the interest rate pursuant to Section 7.2 and the
Company and Purchaser are unable to agree upon mutually acceptable interest
rates pursuant to Section 7.2.
3.b. NOTICE OF PREPAYMENTS; OFFICERS' CERTIFICATE. The Company will
give each registered holder of any Note written notice of each prepayment
of the Notes under Section 8.2 not less than thirty (30) days and not more
than sixty (60) days prior to the date fixed for such prepayment, which
notice shall be irrevocable. Each such notice and each such prepayment
shall be accompanied by an Officers' Certificate (a) stating the principal
amount and serial number of each Note to be prepaid and the principal
amount thereof to be prepaid; (b) stating the proposed date of prepayment;
(c) stating the accrued interest on each such Note to such date to be paid
in accordance with Section 8.4; and (d) estimating the Make-Whole Premium
required under Section 8.2 (calculated as of the date of such prepayment
and proffered solely as an estimate of the Make-Whole Premium due upon
prepayment) and setting forth the method of determination and calculations
used in computing such Premium, accompanied by a copy of the Statistical
Release H.15(519) (or other source of market data) used in determining the
United States Treasury Yield.
4.b. MATURITY; SURRENDER. In the case of each prepayment of the
Notes, the principal amount of each Note to be prepaid shall mature and
become due and payable on the date fixed for such prepayment, together with
interest on such principal amount accrued to such date and the Premium
payable, if any. From and after such date, unless the Company shall fail
to pay such principal amount when so due and payable, together with the
interest and Premium, if any, as aforesaid, interest on such principal
amount shall cease to accrue. Any Note paid or prepaid in full shall be
surrendered to the Company and canceled and shall not be reissued, and no
Note shall be issued in lieu of any prepaid principal amount of any Note.
ARTICLE 9.
ACCOUNTING, REPORTING AND INSPECTION COVENANTS OF THE COMPANY
From the date hereof through the Closing and thereafter so long as any
Note shall be outstanding, the Company will perform and comply with each of
the following covenants:
1.b. ACCOUNTING. The Company will maintain a system of accounting
established and administered in accordance with GAAP and will accrue all
such liabilities as shall be required by GAAP.
2.b. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company will
deliver (in duplicate) to Purchaser (except as hereinafter provided) so
long as Purchaser or Purchaser's nominee shall hold any Note, and to each
other registered holder of a Note:
(a) within ninety (90) days after the end of each Fiscal Year,
the balance sheet of the Company as of the end of such Fiscal Year and the
related statements of income and retained earnings and of cash flows of the
Company for such Fiscal Year, setting forth in each case in comparative
form the figures for the previous Fiscal Year, all in reasonable detail and
(i) accompanied by the report thereon of any independent public accountants
of recognized national standing selected by the Company, which report shall
state that (v) such financial statements present fairly the financial
position of the Company as of the dates indicated and the results of its
operations and cash flows for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except as otherwise
specified in the report), and (w) the audit by such accountants in
connection with such financial statements has been made in accordance with
generally accepted accounting principles, (ii) accompanied by a written
statement of such accountants that without any independent investigation
except that conducted in the ordinary course of their audit, the
accountants do not have knowledge of the existence of any condition or
event that constitutes an Event of Default or Potential Event of Default,
or, if any such condition or event existed or exists, specifying the nature
and period of existence thereof, and (iii) certified by the chief financial
officer of the Company as presenting fairly, in accordance with GAAP,
applied (except as specifically set forth therein) on a basis consistent
with such prior fiscal periods, the information contained therein;
(b) within forty-five (45) days after the end of the first three
fiscal quarters of each Fiscal Year, the balance sheet of the Company as of
the end of such fiscal quarter and the related statements of income and of
cash flows of the Company for such fiscal quarter and for the portion of
the Fiscal Year from the first day of such Fiscal Year through the end of
such fiscal quarter, setting forth in each case in comparative form the
figures for the corresponding periods in the previous Fiscal Year, all in
reasonable detail and certified by the chief financial officer of the
Company as presenting fairly, in accordance with GAAP, applied (except as
specifically set forth therein) on a basis consistent with such prior
fiscal periods, the information contained therein;
(c) together with each delivery of financial statements pursuant
to subsections (a) or (b) above, an officer's certificate in the form of
EXHIBIT E (i) showing in detail the determination of the ratios and other
financial calculations specified in Sections 10.1 through 10.7 during the
accounting period covered by such financial statements, (ii) stating that
the signer has reviewed the terms hereof and of the Notes and has made, or
caused to be made under his supervision, a review of the transactions and
condition of the Company during the accounting period covered by such
financial statements and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signer does
not have knowledge of the existence as of the date of such officer's
certificate, of any condition or event that constitutes an Event of Default
or Potential Event of Default, or, if any such condition or event existed
or exists, specifying the nature and period of existence thereof and what
action the Company has taken or is taking or proposes to take with respect
thereto; and (iii) if not specified in the related financial statements
being delivered pursuant to subsection (a) above, specifying the aggregate
amount of interest and rentals received or accrued by the Company, and the
aggregate amount of depreciation, depletion and amortization charged on the
books of the Company during the accounting period covered by such financial
statements;
(d) promptly upon receipt thereof, copies of all reports
submitted to the Company by independent public accountants in connection
with each annual audit, or special audit (if any) of the books of the
Company made by such accountants, including, without limitation, any
comment letter submitted to management by such accountants in connection
with their annual audit;
(e) promptly upon their becoming available, copies of all press
releases and other statements made available generally by the Company to
the public concerning material developments in the business of the Company;
(f) within five (5) days of any Responsible Officer of the
Company obtaining knowledge of any condition or event that constitutes an
Event of Default or Potential Event of Default, or that the registered
holder of any Note has given any notice or taken any other action with
respect to a claimed Event of Default or Potential Event of Default under
this Agreement or that any person has given notice to the Company or taken
any other action with respect to a claimed default or event or condition of
the type referred to in Article 14, an Officers' Certificate describing the
same and the period of existence thereof and specifying what action the
Company has taken, is taking and proposes to take with respect thereto;
(g) promptly upon (and in any event within ten (10) Business
Days of) any Responsible Officer of the Company obtaining knowledge of the
occurrence of any (i) "reportable event," as such term is defined in
Section 4043 of ERISA, or (ii) "prohibited transaction," as such term is
defined in Section 4975 of the Code, that is not exempt by law or ruling in
connection with any Plan relating to the Company or any trust created
thereunder, a written notice specifying the nature thereof, what action the
Company has taken, is taking and proposes to take with respect thereto, and
any action taken or threatened by the Internal Revenue Service or the PBGC
with respect thereto, provided that, with respect to the occurrence of any
"reportable event" as to which the PBGC has waived the 30-day reporting
requirement, such written notice need not be given;
(h) immediately upon the occurrence of any of the following
events, an Officers' Certificate describing such event: (i) the
Certificate of Incorporation or Bylaws of the Company shall have been
amended or the Company shall have changed its jurisdiction of organization;
or (ii) the Company shall have changed its name or shall do business under
any name other than as set forth on SCHEDULE 9.2; or (iii) the Company
shall have changed its principal place of business or its chief executive
offices; or (iv) the Company shall have become a party to any suit, action
or proceeding that, if adversely determined, would have a Material Adverse
Effect or in which the projected settlement amount involved therein could
equal $3,000,000 or more (in addition to any insurance coverage); or (v)
the Company shall have opened or closed any material place of business; or
(vi) there shall occur any strike, walkout, work stoppage or other material
employee disruption relating to any of the Mortgaged Properties, or the
expiration of any labor contract affecting any of the Mortgaged Properties
(unless there exists a new labor contract in substitution therefor) that
reasonably could be expected to have a Material Adverse Effect; or (vii)
the Company shall have obtained knowledge that any of its insurance
policies or any insurance policies affecting any of the Mortgaged
Properties will be canceled or not renewed (unless there exists a similar
insurance policy in substitution therefor);
(i) promptly (i) upon receipt thereof, copies of any notices to
the Company from any federal or state administrative agency relating to any
order, ruling, statute or other law or regulation that would, with
reasonable probability, have a Material Adverse Effect; and (ii) following
filing with the Commission, any reports or statements filed with the
Commission;
(j) promptly upon receipt thereof, copies of any notice
delivered pursuant to Article 14; and
(k) with reasonable promptness, such other information and data
with respect to the Company as from time to time may be reasonably
requested by any registered holder of a Note, including, without
limitation, any projections or business plans prepared by or for the
Company.
3.k. INSPECTION. The Company will permit, subject to rights of
parties in possession, any authorized representatives designated by a
Purchaser, so long as such Purchaser or its nominee shall hold any Notes,
or designated by any other registered holder of any Notes, without expense
to the Company, at such reasonable times and as often as may be reasonably
requested, to (a) visit and inspect the Mortgaged Properties, including its
books of account, and (b) upon the prior written consent of the Company,
which consent shall not be unreasonably withheld, discuss the Company's
affairs, finances and accounts with the Company's directors, officers and
independent public accountants (and by this provision the Company
authorizes such directors, officers and accountants to discuss with such
representatives the affairs, finances and accounts of the Company, whether
or not an officer or other representative of the Company is present,
provided that the Company shall receive notice of any such meeting and be
given a reasonable opportunity to have a representative attend).
4.k. ACQUIRED REAL PROPERTY. The Company shall deliver to Purchaser
so long as Purchaser or Purchaser's nominee shall hold any Note, and to
each other registered holder of a Note, upon request of Purchaser or any
other registered holder of a Note, but in any event not less than ninety
(90) days after the end of each Fiscal Year of the Company, a list and
description of all real property purchased or newly leased by the Company
during the period specified in such request or the past Fiscal Year, as
applicable, that is to be used for any new processing plant, hatchery or
feed mill in which an existing processing plant, hatchery or feed mill on
any Mortgaged Property is to be shut down or operations are to be
substantially decreased ("Acquired Property"), and, unless otherwise
specified in this Agreement or by the registered holder or registered
holders (other than the Company or any Affiliate) of the Notes, the Company
shall execute and deliver a deed of trust or mortgage and assignment of
leases and rents, substantially in the form attached hereto as EXHIBITS B-
1, B-2 AND B-3 (with any changes to such form of mortgage as appropriate in
the applicable jurisdiction and as requested by Purchaser or Purchaser's
nominee or any registered holder of a Note other than the Company or any of
the Company's Affiliates), to Purchaser or a mortgage trustee, for the
benefit of Purchaser so long as Purchaser or Purchaser's nominee shall hold
any Note, and to each other registered holder of a Note or a mortgage
trustee, for the benefit of each such other holder, granting a first Lien
of record on and a first security interest in the Acquired Property,
subject only to existing Liens, the Permitted Exceptions, and any purchase
money Liens incurred by the Company in connection with the acquisition of
any Acquired Property, and the Acquired Property shall thereafter be part
of the Mortgaged Properties. The Company shall permit Purchaser so long as
Purchaser or Purchaser's nominee shall hold any Note, and each other
registered holder of a Note, the right to inspect any Acquired Property and
to conduct such other investigation and due diligence with respect to any
Acquired Property that Purchaser or such other registered holder deems
necessary, and to the extent the proposed acquisition is in excess of
$250,000, the Company shall pay all reasonable costs of Purchaser or such
other registered holder in inspecting any Acquired Property and conducting
such investigation, including, without limitation, any costs of an
environmental consulting firm and attorneys' fees.
ARTICLE 10.
BUSINESS AND FINANCIAL COVENANTS OF THE COMPANY
So long as any Note shall be outstanding, the Company will perform and
comply, and will cause each Subsidiary (other than Pilgrim's Pride-Mexico
and any other Subsidiary located or doing business in Mexico or Central or
South America) to perform and comply, as applicable, with each of the
following covenants:
1.k. ASSET RATIO. The Company shall at all times maintain a ratio of
Net Tangible Assets to Total Liabilities of not less than 1.30:1.
2.k. CONSOLIDATED NET WORTH. The Company shall at all times maintain
a Consolidated Net Worth of not less than $125,000,000, as increased from
time to time by (i) the proceeds of any Stock of the Company or any
Subsidiary issued and sold to third Persons, (ii) the amount of
Subordinated Debt of the Company or any Subsidiary owed by third parties
converted into or exchanged for Stock of the Company or any Subsidiary, and
(iii) 25% of the Company's annual Consolidated Net Income.
3.k. CONSOLIDATED WORKING CAPITAL. The Company and its Subsidiaries
shall at all times maintain Consolidated Working Capital of not less than
$40,000,000.
4.k. CURRENT RATIO. The Company shall at all times maintain a ratio
on a consolidated basis of Current Assets to Current Liabilities of not
less that 1.25:1.
5.k. FIXED CHARGE COVERAGE. The Company shall at all times maintain
for the period of eight consecutive fiscal quarters then ended on a
consolidated basis a Fixed Charge Coverage Ratio of not less than 1.40:1.
6.k. CAPITAL EXPENDITURES. The Company and its Subsidiaries shall not
incur Capital Expenditures in excess of $45,000,000 in the aggregate for
Fiscal Year 1996. Thereafter, the limitation on Capital Expenditures shall
be 115% of the Company's consolidated total depreciation and amortization
for the immediately preceding Fiscal Year, as reflected on the Company's
consolidated audited financial statements for such Fiscal Year. Any unused
portion of the maximum permitted amount of Capital Expenditures (up to
$5,000,000 per Fiscal Year) may be carried over to the next succeeding
Fiscal Year, but not thereafter.
7.k. LIENS. The Company will not, and will not permit any Subsidiary
to, directly or indirectly, create, incur, assume or permit to exist any
Lien on or with respect to any property or asset of the Company or such
Subsidiary, whether now owned or held or hereafter acquired, or any income
or profits therefrom, other than (a) the Liens and security interests
created to secure the Notes, (b) Liens that constitute Permitted
Exceptions, (c) any Lien on any property acquired, constructed or improved
by the Company after Closing and created contemporaneously with or within
12 months of such acquisition, construction or improvement to secure Debt
incurred to provide for all or a portion of the purchase price of such
property as acquired, constructed or improved, (d) Liens on property of the
Company in favor of the United States of America or any political
subdivision thereof to secure partial payments pursuant to any contract,
(e) pledges or deposits to secure obligations under worker's compensation
laws or similar judgments thereunder that are not currently dischargeable,
and pledges, deposits, performance bonds or similar security interests in
connection with bids, tenders, contracts and leases to which the Company is
a party (all of which are in the ordinary course of business and which do
not relate to indebtedness of the Company), (f) Liens for taxes,
assessments or governmental charges not then due and delinquent or the
validity of which is being contested in good faith and a bond or other
security satisfactory to Purchaser has been posted by the Company, (g)
Liens arising in connection with court proceedings, provided the execution
of such Liens is effectively stayed and such Liens are contested in good
faith and a bond or other security satisfactory to Purchaser has been
posted by the Company, (h) Liens arising in the ordinary course of business
(including easements and similar encumbrances) that are not incurred in
connection with the borrowing of money, provided that such Liens do not
materially interfere with the conduct of the business of the Company, (i)
inchoate Liens, (j) any Lien resulting from renewing, extending or
refunding outstanding Secured Debt provided that the principal amount of
the Debt secured thereby is not increased and the Lien is not extended to
any other property, and (k) Liens on assets (other than the Collateral) to
secure Debt provided that no Event of Default or Potential Event of Default
exists or would result therefrom.
8.k. INVESTMENTS, GUARANTIES, ETC. The Company shall not, and shall
not permit any Subsidiary to, directly or indirectly, (a) make or own any
Investment other than Permitted Investments, or (b) create or become liable
with respect to any guaranty, except that the Company or a Subsidiary may
(i) purchase or own assets or stock and other securities of a Subsidiary;
(ii) make loans to officers, directors, stockholders, employees or
Subsidiaries to the extent that following such loan, no Event of Default or
Potential Event of Default would exist; (iii) guaranty the trade payables
of Pilgrim's Pride-Mexico; (iv) make investments, payments, loans and
capital contributions to entities other than Subsidiaries as permitted by
Section 10.9 below; and (v) acquire all or substantially all of the
Property of any Person or acquire substantially as an entirety the business
of any other Person if the aggregate fair market value of all consideration
paid or payable by the Company in all such acquisitions made in any Fiscal
Year does not exceed 3% of Net Tangible Assets, as determined at the
conclusion of the fiscal month immediately preceding the date of the
proposed acquisition.
9.k. RESTRICTED PAYMENTS. The Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, (i) redeem, purchase, or
otherwise acquire for value any shares of the Company's capital stock,
except out of the net cash proceeds received by the Company after Closing
from the issuance of additional shares of capital stock or other securities
subsequently converted into capital stock, (ii) make loans or advances to,
and investments in the assets or stock or securities of entities other than
Subsidiaries after Closing, except (A) out of the net cash proceeds
received by the Company after Closing from the issuance of additional
shares of capital stock or other securities subsequently converted into
capital stock and (B) as permitted by Section 10.8(a), subject to subparts
(i), (ii), and (iii) of Section 10.8, or (iii) declare or pay any dividends
or any other distributions (other than dividends payable in shares of
capital stock of the Company) on any shares of the Company's capital stock
after Closing in excess of $2,300,000 in the aggregate in any Fiscal Year.
10.k. LEASES. The Company shall not, and shall not permit any
Subsidiary to, incur non-cancelable non-Capitalized Lease Obligations or
sale and leaseback transactions if the aggregate annual amount of all
minimum or guaranteed net rentals payable under such leases would exceed 4%
of Consolidated Net Tangible Assets (as determined immediately preceding
the execution of such lease).
11.k. CONSOLIDATION, MERGER AND SALE OF SUBSTANTIALLY ALL ASSETS. The
Company shall not, and shall not permit any Subsidiary to, directly or
indirectly, (a) consolidate with or merge into any other Person or permit
any other Person to consolidate with or merge into it (other than a
consolidation or merger between (i) the Company and an Eligible Subsidiary,
(ii) Eligible Subsidiaries or any Subsidiary located or doing business in
Mexico or Central or South America); or (b) sell, transfer, lease, abandon
or otherwise dispose of all or substantially all of its assets in a single
or series of related transactions.
12.k. FORMATION OF SUBSIDIARIES. Without the prior written consent of
Purchaser, which consent shall not be unreasonably withheld, the Company
shall not, and shall not permit any of its existing Subsidiaries to,
directly or indirectly, form or acquire any new Subsidiaries other than
Eligible Subsidiaries and Subsidiaries located or doing business in Mexico
or Central or South America. The Company shall promptly give Purchaser
written notice of the formation of any Eligible Subsidiary or any
Subsidiary located or doing business in Mexico or Central or South America,
but in any event within ten (10) days following formation thereof.
13.k. INTERESTED PARTY TRANSACTIONS. The Company shall not, nor
permit any Subsidiary to, conduct any transactions with any Affiliate on
terms that are not fair and reasonable and not materially less favorable to
the Company or such Subsidiary than it would obtain in a comparable arm's-
length transaction with a Person not an Affiliate other than ongoing
transactions with Affiliates of a similar nature to those disclosed in the
Company's Proxy Statement relating to its Fiscal Year-end September 30,
1995.
14.k. EXISTENCE. The Company will, or will cause to be done, all
things necessary to, and cause each Subsidiary to, preserve, keep and
maintain in full force and effect its corporate existence, rights (charter
and statutory), franchises and authority to do business and the corporate
existence, rights (charter and statutory), franchises and authority to do
business of each of the Subsidiaries, except for such matters that would
not result in a Materal Adverse Effect.
15.k. PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Company
will, and cause the Subsidiaries to, pay and cause to be paid all taxes,
assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of the franchises, business,
income or profits of the Company before any penalty or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums that have become due and payable
and that by law have or might become a Lien upon any of the properties or
assets of the Company, provided that no such charge or claim need be paid
if being contested in good faith by appropriate proceedings promptly
initiated and diligently conducted, such bonds or escrows are in place as
registered holders of the Notes at the time shall request, and if such
reserves or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor. The Company will not file or permit
the filing of any consolidated income tax return with any Person (other
than a Subsidiary).
16.k. COMPLIANCE WITH ERISA. The Company will not, and will not
permit any employee benefit plan (as that term is defined in Section 3 of
ERISA) maintained by the Company, any Subsidiary or any Related Person to
(a) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Code, as amended from time to time, which is likely to
result in a liability for such Person; (b) incur any "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, whether or
not waived which is likely to result in a liability of such Person; or (c)
terminate any such benefit plan in a manner which could result in the
imposition of a lien or encumbrance on the assets of such Person pursuant
to Section 4068 of ERISA.
17.k. MAINTENANCE OF PROPERTIES; INSURANCE. The Company will maintain
or cause to be maintained in good repair, working order and condition
(reasonable wear and tear excepted) all properties used or useful in, and
deemed material to, the business of the Company or any Subsidiary and from
time to time will make or cause to be made all appropriate repairs,
renewals and replacements thereof. The Company will maintain or cause to
be maintained, with financially sound and reputable insurers, insurance
with respect to the properties and business of the Company and its
Subsidiaries, against loss or damage of the kinds customarily insured
against by companies of established reputation engaged in the same or
similar business and similarly situated, of such types and in such amounts
as are customarily carried under similar circumstances by such other
companies. In any event, the Company shall, at a minimum, comply with all
maintenance, insurance and similar requirements under the Security
Documents.
18.k. TITLE.
(a) As of the Closing Date and upon giving effect to the
transactions contemplated hereby, except Liens and other matters that may
constitute Permitted Exceptions, the Company will have good (and, with
respect to non-leasehold real property, indefeasible) title to all of its
properties and assets that are material to its business as presently
conducted and as proposed to be conducted and none of such properties or
assets will be subject to any Liens, other than Permitted Exceptions. As
of the Closing Date and upon giving effect to the transactions contemplated
hereby, the Company will have good (and, with respect to non-leasehold real
property, indefeasible) fee simple title to the Mortgaged Properties
subject only to the Permitted Exceptions.
(b) The Company acknowledges that its predecessor in title
acquired title to certain real property (which is part of the Mortgaged
Properties) described as Lots 1 through 3, Block 10 and Lots 5 through 7,
Block 11, all in Park Addition to the City of DeQueen, Arkansas, a 2.78
acre tract and a 2.05 acre tract in Section 31, Township 8 South, Range 31
West, DeQueen, Arkansas, and part of a 36.50 acre tract lying NE 1/4 NW 1/4
of Section 31, Township 8 South, Range 31 West, DeQueen, Arkansas
(collectively, the "DEQUEEN PROPERTY"), through a Tax Deed from the State
of Arkansas, and that such Tax Deed may not have extinguished the claim or
interest in title to the DeQueen Property (the "TITLE CLAIM") by certain
heirs of such predecessor in title. The Company covenants to Purchaser
that until the Title Claim is resolved in favor of the Company, and any
exception to title pertaining thereto, as may be reflected in the title
policy referred to in Section 4.6 hereof, is deleted by endorsement to such
policy, and evidence of same is furnished to Purchaser, without the prior
written consent of Purchaser, no improvements shall be constructed on the
DeQueen Property that are essential to the operation of the Company's
processing plant in DeQueen, Arkansas.
19.b. CONDUCT OF BUSINESS. The Company will not, and will not permit
any Subsidiary to, engage in any business other than businesses engaged in
by the Company on the date hereof, other businesses or activities
substantially similar or related thereto, and other lines of business
consented to by the registered holders of the Notes and businesses that are
not material to the Company or its business or operations.
20.b. CAPITAL IMPROVEMENTS. Subject to the limitations of Section
10.7, the Company and the Subsidiaries shall incur not less than $3,000,000
in the aggregate per Fiscal Year for capital improvements and repair and
maintenance of the Collateral.
21.b. SALE OF ASSETS. The Company shall not, and shall not permit any
Subsidiary to, sell, lease, transfer, or otherwise dispose of Collateral in
excess of 5% of the lower of the book value or fair market value of the
Company's total assets.
ARTICLE 11.
ENVIRONMENTAL MATTERS
1.b. DEFINITIONS. As used in this Article 11, the following terms
shall be defined as indicated:
(a) "ACQUISITION DATE," with respect to any portion of the
Mortgaged Properties, means the date on which Purchaser or the registered
holder of any Note becomes an owner of such portion of the Mortgaged
Properties.
(b) "ADVERSE ENVIRONMENTAL IMPACT" means (i) a Release of a
Hazardous Substance in a Reportable Quantity or (ii) any material adverse
impact on human health, livestock or the quality of any Property.
(c) "ENVIRONMENTAL ACTIVITY" shall mean any storage, holding,
manufacture, emission, discharge, generation, processing, treatment,
abatement, removal, disposition, handling, transportation or disposal, or
any actual or threatened release of any "Hazardous Substances" from, under,
into or on the Mortgaged Properties or otherwise relating to the Mortgaged
Properties, including but not limited to (i) the migration or emanation of
"Hazardous Substances" from the Mortgaged Properties onto or into the
environment beyond the physical boundaries of the Mortgaged Properties;
(ii) the off-site disposal of Hazardous Substances from the Mortgaged
Properties; and (iii) any of the previously described activities occurring
in connection with ambient air, surface and subsurface soil conditions, and
all surface and subsurface waters.
(d) "ENVIRONMENTAL CONDITION" shall mean (i) the presence or
existence in, on, at, or under the Mortgaged Properties of any Hazardous
Substances, "industrial or solid waste," as that term is defined under the
Environmental Laws, and (ii) the presence or existence in, on, at, or under
the environment beyond the physical boundaries of the Mortgaged Properties
of any Hazardous Substances, that migrated or emanated from the Mortgaged
Properties.
(e) "ENVIRONMENTAL DAMAGES" means all claims, judgments,
damages, losses, penalties, fines, liabilities (including strict
liability), encumbrances, liens, costs and expenses of investigation and
defense of any claim, whether or not such is ultimately defeated, and of
any settlement of judgment, of whatever kind or nature, contingent or
otherwise, matured or unmatured, foreseeable or unforeseeable, including
without limitation reasonable attorneys' fees and disbursements and
consultants' fees, any of which are incurred at any time, and including,
but not limited to (i) damages for personal injury, or injury to property
or natural resources occurring upon or off of the Mortgaged Properties,
foreseeable or unforeseeable, including, without limitation, lost profits,
consequential damages, the cost of demolition, redesign and rebuilding of
any improvements on real property, and interest and penalties as allowed by
law; (ii) diminution in the value of the Mortgaged Properties, and damages
for the loss of or restriction on the use of or adverse impact on the
marketing of rentable or usable space or of any amenity of the Mortgaged
Properties; (iii) reasonable fees incurred for the services of consultants,
contractors, experts, laboratories and all other reasonable costs incurred
in connection with the investigation, remediation, removal, or disposal of
Hazardous Substances or violation of the Environmental Laws, including, but
not limited to, the preparation of any feasibility studies or reports or
the performance of any response, cleanup, remediation, removal, abatement,
containment, closure, restoration, disposal, or monitoring work required by
and in conformity with any federal, state or local governmental agency or
political subdivision, or reasonably necessary to make full economic use of
the Mortgaged Properties or any other property or otherwise expended in
connection with such conditions, and including, without limitation, any
reasonable attorneys' fees, costs and expenses incurred in connection with
any of the foregoing or in enforcing this Agreement or collecting any sums
due hereunder; and (iv) liability to any person or entity to indemnify such
person or entity for costs expended in connection with the items referenced
in this subsection (d).
(f) "ENVIRONMENTAL LAWS" means all federal, state or local laws,
rules or regulations pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. <section> 9601, ET
SEQ.), the Resource Conservation and Recovery Act (42 U.S.C.
<section> 6901, ET SEQ.), the Federal Clean Air Act (42 U.S.C.
<section> 7401, ET SEQ.), and the Federal Clean Water Act (42 U.S.C.
<section> 1251, ET SEQ.), each as amended from time to time, and
regulations and rules issued thereunder.
(g) "HAZARDOUS SUBSTANCES" means (i) any "hazardous substance,"
as such term is defined in either the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. <section> 9601 ET SEQ.)
and the regulations promulgated thereunder (as amended, "CERCLA"); (ii) any
"hazardous waste," as such term is defined in the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. <section> 6901 ET SEQ.) and the regulations
promulgated thereunder (as amended, "RCRA"); (iii) any substances or
materials listed as hazardous or toxic in the United States Department of
Transportation Table, as amended from time to time; (iv) asbestos in any
form or any asbestos containing materials; (v) polychlorinated biphenyls
("PCB's"); (vi) any explosive or radioactive materials; (vii) hydrocarbons,
petroleum products, or any derivative thereof; or (viii) any other
chemical, material or substance that is regulated as hazardous or toxic or
exposure to which is prohibited, limited or regulated by any federal,
state, county, regional, local or other governmental authority or that,
even if not so regulated, poses a material threat to the health and safety
of the occupants or livestock of the Mortgaged Properties or the owners or
occupants of property adjacent thereto.
(h) "RELEASE" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including, without limitation, the
abandonment or discarding of barrels, containers or other receptacles
containing any Hazardous Substance).
(i) "REPORTABLE QUANTITY" means that quantity of a material as
set forth in 40 C.F.R. Part 302 or the quantity of a material that is
sufficient to trigger a remediation, response, closure or notification
obligation under applicable Environmental Laws.
2.i. INDEMNIFICATION.
(a) Subject to subsections (b) and (c) below, notwithstanding
any provision in this Agreement or any Collateral Agreement limiting or
negating the Company's liability, the Company shall protect, indemnify,
save harmless and defend Purchaser and each present and former registered
holder (or beneficial holder through participation or otherwise) of a Note
and their respective past, present and future officers, directors,
shareholders, partners, employees, agents, contractors, tenants and
representatives (individually, an "Indemnified Party," and collectively,
the "Indemnified Parties") from and against any and all Environmental
Damages imposed upon, suffered or incurred by or asserted against any
Indemnified Party or the Mortgaged Properties arising in any manner in
connection with the existence of an Environmental Condition at the
Mortgaged Properties or the occurrence of any Environmental Activity at the
Mortgaged Properties, whether arising, occurring, or in existence during or
prior to the Company's ownership or operation of the Mortgaged Properties,
whether arising, occurring, or in existence prior to the issuance of the
Notes or at any time thereafter, whether arising, occurring, or in
existence before, during or after enforcement of the rights and remedies of
Purchaser or any other registered holder of a Note upon default and whether
or not the Company is responsible therefor, including, without limitation,
the violation of Environmental Laws, or any representations, warranties or
covenants contained herein, any imposition by any governmental authority of
any lien or so-called "super priority lien" upon the Mortgaged Properties,
cleanup costs, liability for personal injury or property damage or damage
to the environment and any fines, penalties and punitive damages with
respect thereto. An Indemnified Party may elect to conduct its own defense
through counsel of its own choice, and the Company agrees to pay the
reasonable fees and expenses of such counsel for conducting such defense
but only if an Indemnified Party determines in good faith that the conduct
of its defense by the Company could be materially prejudicial to the
Indemnified Party's interests. THESE PROVISIONS ARE INTENDED TO INDEMNIFY
THE INDEMNIFIED PARTIES AGAINST (i) THE RESULTS OF THEIR OWN NEGLIGENCE AND
(ii) ANY STRICT LIABILITY IMPOSED ON THE INDEMNIFIED PARTIES.
(b) Notwithstanding the foregoing, the Company's obligations
hereunder shall not apply with respect to an Environmental Condition or
Environmental Activity arising for the first time after the Acquisition
Date unless such Environmental Condition or Environmental Activity is
caused by the Company or its contractors, agents or representatives after
the Acquisition Date or arose out of an Environmental Condition or
Environmental Activity, whether caused by the Company or not, occurring or
existing prior to the Acquisition Date. For purposes of this Agreement,
the Company shall bear the burden of proving when an Environmental
Condition or Environmental Activity occurred or existed. In addition, any
Hazardous Substances located upon, about or beneath the Mortgaged
Properties or having migrated to or from the Mortgaged Properties shall be
presumed to have been present prior to the Acquisition Date unless the
Company can demonstrate (i) that a portion of the Hazardous Substances were
introduced to the Mortgaged Properties after the Acquisition Date and were
not introduced by the Company, and (ii) the Environmental Damages are
divisible between the portion of the Hazardous Substances introduced before
and after the Acquisition Date. If the Company can demonstrate both
conditions, then its indemnity shall not extend to the portion of any
divisible Environmental Damages attributable to Hazardous Substances
introduced to the Mortgaged Properties after the Acquisition Date by
parties other than the Company.
(c) In no event shall the provisions of this Agreement be deemed
to constitute a waiver of, or to be in lieu of, any right or claim,
including without limitation any right of contribution or other right of
recovery that any person entitled to enforce this Agreement might otherwise
have against the Company under the Environmental Laws.
3.c. AGREEMENT TO REMEDIATE. Notwithstanding the obligation of the
Company to indemnify the Indemnified Parties pursuant to this Agreement,
the Company shall upon demand of the registered holders (other than the
Company or any Affiliate) of, in the aggregate, sixty-six and two-thirds
percent (66-2/3%) or more in principal amount of the Notes at the time
outstanding (excluding any Notes directly or indirectly owned by the
Company or any Affiliate), and at the sole cost and expense of the Company,
promptly take all actions in connection with an Environmental Condition or
Environmental Activity causing an Adverse Environmental Impact that are
required by any governmental agency or by Environmental Laws. Such actions
shall include, but not be limited to, the investigation of the
Environmental Condition of the Mortgaged Properties, the preparation of any
feasibility studies, reports or remedial plans, and the performance of any
cleanup, remediation, containment, operation, maintenance, monitoring or
restoration work, whether on or off of the Mortgaged Properties. All such
work shall be performed by one or more qualified and experienced
contractors, selected by the Company. The Company shall proceed
continuously and diligently with such investigatory and remedial actions,
provided that in all cases such actions shall be in accordance with all
applicable requirements of the appropriate governmental agencies. Any such
actions shall be performed in a good, safe and workmanlike manner and shall
minimize any impact on the business conducted at the Mortgaged Properties.
The Company shall pay all costs in connection with such investigatory and
remedial activities, including but not limited to all power and utility
costs, and any and all taxes or fees that may be applicable to such
activities. The Company shall promptly provide to Purchaser and the
registered holder of any Note copies of testing results and reports that
are generated in connection with the above activities. Promptly upon
completion of such investigation and remediation, the Company shall
permanently seal or cap all monitoring wells and test holes to industrial
standards as required by the Environmental Laws, remove all associated
equipment, and restore the Mortgaged Properties to the maximum extent
possible, which shall include, without limitation, the repair of any
material surface damage, including paving, and the repair, restoration or
re-construction of any damaged improvements caused by such investigation or
remediation.
4.c. COVENANTS. The Company shall during its ownership or operation
of the Mortgaged Properties (a) comply with all Environmental Laws relating
to the Mortgaged Properties and the ownership or operation of the Mortgaged
Properties, and not engage in or permit others to engage in any
Environmental Activity in violation of the Environmental Laws; (b)
establish and maintain, as required by the Environmental Laws, policies,
procedures and programs to monitor and assure compliance with the
Environmental Laws relating to the Mortgaged Properties or the ownership or
operation of the Mortgaged Properties and provide an Indemnified Party upon
request with evidence of the existence and implementation of these
policies, procedures, and programs; (c) deliver to Purchaser and the
registered holder of any Note within fifteen (15) days following the
occurrence of any such event, written notice of the discovery by the
Company of any event, the occurrence of which would render any
representation or warranty contained in Section 6.2 incorrect if made at
the time of such discovery; (d) promptly comply with Environmental Laws
requiring the remediation, abatement, removal, treatment or disposal of
Hazardous Substances or remediation of an Environmental Condition; (e)
cause any party who occupies the Mortgaged Properties to comply with this
Section 11.4; and (f) not cause or suffer any liens to be recorded against
or imposed against any of the Mortgaged Properties as a result of an
Environmental Condition or Environmental Activity and which liens violate
the terms of Section 14.1(g). The Company shall cause ROWEnvironmental,
or other qualified environmental consultants approved by Purchaser, to
investigate each of the environmental issues (the "Environmental Issues")
identified on Exhibit F in the manner and within the time periods described
in Exhibit F and provide Purchaser with a written report within such time
periods that concludes whether or not each issue represents a violation of
Environmental Laws or an Adverse Environmental Impact or whether further
investigation is needed to make such a determination. The Company shall
work diligently to complete all investigations of Environmental Issues
needed to make such a determination, shall correct any violation of
Environmental Laws identified, and shall remediate any Adverse
Environmental Impact in the manner described in Section 11.3. The Company
acknowledges and agrees that these Environmental Issues and any
Environmental Damages related to them are within the scope of the
indemnification obligation of Section 11.2.
5.c. SITE ASSESSMENTS. The registered holders (other than the Company
or any Affiliate) of, in the aggregate, a majority of the principal amount
of the Notes at the time outstanding (excluding any Notes directly or
indirectly owned by the Company or any Affiliate) (by its officers,
employees and agents, as applicable) at any time and from time to time,
either prior to or after the occurrence of an Event of Default, may
contract for the services of persons (the "Site Reviewers") to perform
environmental site assessments ("Site Assessments") on the Mortgaged
Properties for the purpose of determining whether there exists on the
Mortgaged Properties any Environmental Condition or Environmental Activity,
or other ownership or operation of the Mortgaged Properties that is in
violation of Environmental Laws or could reasonably be expected to result
in Environmental Damages. The Site Assessments may be performed at any
time or times, upon reasonable notice, and under reasonable conditions
established by the Company that do not unreasonably impede the performance
of the Site Assessments. The Company hereby grants, and shall cause any
tenant to grant, to an Indemnified Party, its agents, attorneys, employees,
consultants, and contractors and the Site Reviewers, an irrevocable license
and authorization to enter upon and inspect the Mortgaged Properties and
perform such tests, including without limitation, subsurface testing, soil
and ground water testing, and other tests that may physically invade the
Mortgaged Properties, as the registered holders (other than the Company or
any Affiliate) of, in the aggregate, a majority of the principal amount of
the Notes at the time outstanding (excluding any Notes directly or
indirectly owned by the Company or any Affiliate), in their sole
discretion, determine is necessary to protect their liens, assignments,
and/or security interests in the Mortgaged Properties. The Company will
supply to the Site Reviewers such historical and operational information
regarding the Mortgaged Properties as may be reasonably requested by the
Site Reviewers to facilitate the Site Assessments and will make reasonably
available for meetings with the Site Reviewers appropriate personnel having
knowledge of such matters. On request, Purchaser (if it shall remain the
holder of any Notes) or any registered holder of any Note shall make the
results of such Site Assessments fully available to the Company within a
reasonable period of time after such request, and the Company (prior to an
Event of Default) may at its election participate under reasonable
procedures in the direction of such Site Assessments and the description of
tasks of the Site Reviewers. The cost of performing such Site Assessments
shall be paid by the Company upon demand of the registered holders (other
than the Company or any Affiliate) of, in the aggregate, a majority of the
principal amount of the Notes at the time outstanding (excluding any Notes
directly or indirectly owned by the Company or any Affiliate).
6.c. DEFAULT; REMEDIES; SUBROGATION. If the Company fails to proceed
with any removal or remediation of Hazardous Substances causing any Adverse
Environmental Impact required by Environmental Laws or to comply with
Environmental Laws or otherwise fails to perform its obligations under this
Article 11, at the option of the registered holders (other than the Company
or any Affiliate) of, in the aggregate, a majority of the principal amount
of the Notes at the time outstanding (excluding any Notes directly or
indirectly owned by the Company or any Affiliate), such registered holders
may, but shall not be obligated to, do whatever is reasonable and in
conformity with the Environmental Laws at the Company's sole cost and
expense to remove or remediate such Hazardous Substances causing an Adverse
Environmental Impact or otherwise comply with Environmental Laws, and the
indemnity provided in 11.2 hereof shall cover all such reasonable and
necessary costs and expenses and shall be payable by the Company on demand.
Without in any way limiting or affecting the Company's liability hereunder,
Purchaser and each registered holder of a Note shall be subrogated to any
rights the Company may have under any indemnifications from or agreements
entered into with any present, future or former owners, tenants, occupants
or other users of the Mortgaged Properties.
7.c. SURVIVAL. The obligations of the Company under this Article 11
shall survive any payment of the Notes, any discharge, satisfaction,
release or assignment of any Security Document, the discharge of the
Company's obligations under the Collateral Agreements, any transfer of the
Mortgaged Properties or any part thereof, any exercise of remedies by
Purchaser or the registered holder of any Notes, including, without
limitation, the appointment of a receiver, any foreclosure of the Security
Documents or any transfer of the Mortgaged Properties (or any part thereof)
by deed in lieu of foreclosure, any investigation or any information that
may be obtained by Purchaser or the registered holder of any Notes before
or after the Acquisition Date, and any other event or circumstance
whatsoever.
8.c. CONFLICTS. In the event of any conflict between the terms of
this Article 11 and those contained in the Mortgages, the terms hereof
shall control.
ARTICLE 12.
REGISTRATION, TRANSFER, AND SUBSTITUTION OF NOTES
1.c. NOTE REGISTER; OWNERSHIP OF NOTES. The Company will keep at its
principal office a register in which the Company will provide for the
registration of the Notes and the registration of transfers of the Notes.
The Company may treat the Person in whose name any Note is registered on
such register as the owner thereof for the purpose of receiving payment of
the principal of and the Premiums, if any, and interest on such Note and
for all other purposes, whether or not such Note shall be overdue, and the
Company shall not be affected by any notice to the contrary.
2.c. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note for
registration of transfer or for exchange to the Company at its principal
office, at the expense of the transferring parties, the Company will
execute and the Company will authenticate and deliver in exchange therefor
a new Note or Notes in denominations, as requested by the registered holder
or transferee, which aggregate the unpaid principal amount of such
surrendered Note. Each such new Note shall be registered in the name of
such Person as such registered holder or transferee may request, shall be
dated so that there will be no loss of interest on such surrendered Note
and shall be otherwise of like tenor.
3.c. REPLACEMENT OF NOTES. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of any Note and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to the Company
from the registered holder of such Note and financial information
reasonably satisfactory to the Company verifying such registered holder's
ability to provide such indemnification, or in the case of any such
mutilation, upon the surrender of such Note for cancellation to the Company
at its principal office, at the expense of the party requesting
replacement, the Company will execute, authenticate and deliver, in lieu
thereof, a new Note of like tenor, dated so that there will be no loss of
interest on such lost, stolen, destroyed or mutilated Note. Any Note in
lieu of which any such new Note has been executed and delivered by the
Company shall not be deemed to be an outstanding Note for any purpose
hereof.
ARTICLE 13.
PAYMENTS ON NOTES
So long as Purchaser or its nominee shall hold any Note, the Company
will pay all sums becoming due on such Note for principal, Premiums, if
any, and interest in immediately available funds by the method and at the
address specified for such purpose in the Schedule of Information for
Payment and Notices at the end hereof (the "Schedule of Information for
Payment and Notices"), or by such other method or at such other address as
Purchaser shall have specified from time to time to the Company in writing
for such purpose, without the presentation or surrender of such Note or the
making of any notation thereon, except that any Note paid or prepaid in
full shall be surrendered to the Company for cancellation at its principal
office. Prior to any sale or other disposition of any Note held by
Purchaser or its nominee, Purchaser will, at its election, either (a)
endorse thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon, or (b) surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 12.2. The
Company will afford the benefits of this Article 13 to any registered
holder of a Note that has made the same agreement relating to such Note as
Purchaser have made in this Article 13.
ARTICLE 14.
EVENTS OF DEFAULT AND ACCELERATION
1.c. EVENTS OF DEFAULT. The occurrence of any of the following
conditions or events shall constitute an "Event of Default" under this
Agreement:
(a) PAYMENTS. The Company shall default in the payment when due
of any principal, Premium, if any, or interest on any Note (whether the
same becomes due and payable at maturity, by declaration or otherwise) or
any other amounts owing hereunder; or
(b) REPRESENTATIONS, ETC. Any representation or warranty made
in writing by or on behalf of the Company herein or in any Collateral
Agreement or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made; or
(c) BREACH OF CERTAIN COVENANTS. The Company shall default in
the due performance or observance by it of any term, covenant or agreement
contained in Section 10.7 (to the extent such default could reasonably be
expected to have a Material Adverse Effect or adversely affect Purchaser's
rights in the Collateral), 10.8, 10.9, 10.11, 10.12, 10.13, 10.14, 10.18(b)
or 10.19; or
(d) BREACH OF OTHER COVENANTS. The Company shall default in the
due performance or observance by it of any term, covenant or agreement
(other than those referred to in subsections (a), (b) or (c) of this
Section 14.1) contained in this Agreement and such default shall continue
unremedied for a period of at least 30 calendar days after the earlier of
(x) written notice to the defaulting party by any registered holder of a
Note or (y) a Responsible Officer has knowledge of such default; or
(e) DEFAULT UNDER OTHER AGREEMENTS. (i) The Company shall
default in the payment when due of any principal of or interest on any Debt
(which Debt is in an aggregate principal amount of $2,000,000 or more) and
such default shall not be waived or cured within any applicable grace or
cure period; or (ii) the maturity of any Debt of the Company in an
aggregate principal amount of $2,000,000 shall be accelerated or subject to
acceleration due to a default thereunder; or
(f) BANKRUPTCY, ETC. The Company shall commence a voluntary
case concerning itself under title 11 of the United States Code entitled
"Bankruptcy", as now or hereafter in effect, or any successor statute
thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Company under the Bankruptcy Code and the petition is not
controverted within 10 Business Days, or is not dismissed within 60 days,
after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of the Company; or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction whether now or hereafter in effect relating to the
Company; or there is commenced against the Company any such proceeding
which remains undismissed for a period of 60 days; or the Company is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company suffers
any appointment of any custodian or the like for it or any substantial part
of its property to continue undischarged or unstayed for a period of 60
days; or the Company makes a general assignment for the benefit of
creditors; or any corporate action is taken by the Company for the purpose
of effecting any of the foregoing; or
(g) ERISA. (i) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof or a waiver of
such standard or extension of any amortization period is sought or granted
under Section 412 of the Code, any Plan is, shall have been or is
reasonably likely to be terminated or the subject of termination
proceedings under ERISA, any Plan shall have an Unfunded Current Liability,
the Company or any Related Person has incurred or is reasonably likely to
incur a liability to or on account of a Plan under Section 405, 409,
502(i), 501(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 4971 or 4975 of the Code, or the Company or any Related Person has
incurred or is reasonably likely to incur liabilities pursuant to one or
more employee welfare benefit plan that provide benefits to retired
employees or other former employees (other than as required by Section 601
of ERISA); and (ii) there shall result from any event or events described
in clause (i) of this subsection (f) the imposition or granting of a Lien,
or a liability or a material risk of incurring a liability; and (iii) any
Lien or liability referred to in clause (ii) of this subsection (f) could
reasonably be expected to have a Material Adverse Effect; or
(h) JUDGMENTS. There shall remain in force, undischarged,
unsatisfied, unstayed and unbonded, for more than 60 days, any final
judgment entered against any one or more of the Company which is not funded
by insurance in due course in accordance with applicable insurance
coverage, from which no further appeal may be taken and which, with other
outstanding undischarged, unsatisfied, unstayed and unbonded final
judgments against such Person not funded by insurance in due course in
accordance with applicable insurance coverage, exceeds $2,500,000 in the
aggregate.
2.h. ACCELERATION.
(a) Upon the occurrence of any Event of Default described in
Section 14.1(f), the unpaid principal amount of and accrued interest on the
Notes shall automatically become due and payable, and there shall also be
due and payable the applicable Premium in respect of the unpaid principal
amount of the Notes, all without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration, or any other notice of any
kind, which are hereby waived.
(b) Upon the occurrence of any Event of Default other than as
described in Section 14.1(f), any registered holder or registered holders
(other than the Company or any Affiliate thereof) of, in the aggregate,
fifty-one percent (51%) or more in principal amount of the Notes at the
time outstanding (excluding any Notes directly or indirectly owned by the
Company or any Affiliate) may at any time (unless all defaults shall
theretofore have been remedied and all costs and expenses including,
without limitation, reasonable attorneys' fees and expenses incurred by or
on behalf of the registered holders of the Notes by reason thereof shall
have been paid in full by the Company) at its or their option, by written
notice or notices to the Company, declare all the Notes to be due and
payable, whereupon the same shall forthwith mature and become due and
payable, together with interest accrued thereon, and there shall also be
due and payable the applicable Premium in respect of the principal amount
of the Notes so declared due and payable, all without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration, or any
other notice of any kind (except as otherwise specifically provided
herein), which are hereby waived. The Company acknowledges that Purchaser
purchased the Notes on the basis and assumption that Purchaser and the
registered holders from time to time of the Notes would receive the
payments of principal and/or interest set forth in Section 2.1 and Articles
7 and 8 hereof for the full term of the Notes; therefore, whenever the
maturity of the Notes has been accelerated by reason of an Event of
Default, a tender of the amount necessary to satisfy any part or all of the
indebtedness represented by the Notes paid at any time following such Event
of Default and prior to a foreclosure or trustee's sale shall be deemed a
voluntary prepayment, and such payment shall include the applicable
Premium. Similarly, any purchase at a foreclosure sale or a trustee's sale
shall be deemed a voluntary prepayment, and the registered holders of the
Notes shall, to the extent permitted by law, receive out of the proceeds of
such sale, in addition to all other amounts to which they are entitled, the
applicable Premium.
3.b. REMEDIES. If any Event of Default shall occur and be continuing,
the registered holder of any Note at the time outstanding may proceed to
protect and enforce the rights available to such registered holder at law,
in equity, by statute or otherwise, whether for the specific performance of
any agreement contained herein or, in the case of any registered holder of
Notes, in such Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise. In case of a default in the
payment of any principal of or Premium, if any, or interest on any Note,
the Company will pay to the registered holder thereof such further amount
as shall be sufficient to cover the costs and expenses of collection,
including, without limitation, reasonable attorneys' fees, expenses and
disbursements incurred in connection therewith. No course of dealing and
no delay on the part of any registered holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise
prejudice such registered holder's rights, powers or remedies except as
expressly provided for herein. No right, power or remedy conferred hereby
upon any registered holder of any Note or by any Note upon any registered
holder thereof shall be exclusive of any other right, power or remedy
referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise. Subject to Section 14.2(b), any
registered holder or registered holders (other than the Company or any
Affiliate) of, in the aggregate, a majority in principal amount of the
Notes at the time outstanding (excluding any Notes directly or indirectly
owned by the Company or any Affiliate) may at any time pursue any remedies
available under this Agreement or any of the Collateral Agreements.
ARTICLE 15.
EXPENSES
The Company will pay all reasonable expenses in connection with the
negotiation, execution and delivery, performance and enforcement, and
amendment or waiver of any terms or provisions of this Agreement, any
Collateral Agreement, and the Notes, including, without limitation: (a)
the cost and expenses of preparing and reproducing this Agreement, the
Collateral Agreements and the Notes, of furnishing all opinions of Special
Counsel, Purchaser's special local counsel, and counsel for the Company
(including any opinions requested by Special Counsel as to any legal matter
arising hereunder) and all certificates on behalf of the Company and of the
Company's performance of and compliance with all agreements and conditions
contained therein on its part to be performed or complied with; (b) the
cost of delivering to Purchaser's principal office, insured to Purchaser's
satisfaction, the Notes sold to Purchaser hereunder; (c) the reasonable
out-of pocket expenses and reasonable fees, expenses and disbursements of
Special Counsel and Purchaser's special local counsel in connection with
any amendments or waivers hereunder; and (d) the cost and expense related
to title insurance and charges, survey, environmental audit, engineering
and architect fees, recording fees, and real estate taxes contemplated
herein or in the Collateral Agreements. The Company also will pay, and
will save Purchaser and each registered holder of any Notes harmless from,
(i) all claims in respect of the fees of any brokers and finders, except
those engaged by Purchaser, and (ii) any and all liabilities with respect
to any taxes (including interest and penalties), other than federal income
taxes, that may be payable in respect of (A) the execution and delivery
hereof and of the Collateral Agreements, (B) the issue of the Notes
hereunder, and (C) any amendment or waiver under or in respect hereof, of
any Collateral Agreement or of the Notes.
ARTICLE 16.
MISCELLANEOUS
1.b. SURVIVAL. All representations, warranties and covenants
contained herein, in the Notes and in any other Collateral Agreement or
made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby and thereby shall survive the execution
and delivery hereof, any investigation at any time made by Purchaser or on
Purchaser's behalf, the purchase of the Notes hereunder, or any disposition
or payment of the Notes. All statements contained in any certificate
delivered by or on behalf of the Company pursuant hereto or in connection
with the transactions contemplated hereby shall be deemed representations
and warranties of the Company hereunder.
2.b. AMENDMENTS AND WAIVERS. Any term hereof or of the Notes may be
amended (with written consent of the Company), and the observance of any
term hereof or of the Notes may be waived (either generally or in a
particular instance and either retroactively or prospectively), only upon
the written consent of the registered holder or registered holders (other
than the Company or any Affiliate) of, in the aggregate, sixty-six and two-
thirds percent (66-2/3%) or more in principal amount of the Notes at the
time outstanding (excluding any Notes directly or indirectly owned by the
Company or any Affiliate), provided that without the prior written consent
of the registered holders of all the Notes at the time outstanding
(excluding any Notes directly or indirectly owned by the Company or any
Affiliate), no such amendment or waiver shall (a) extend the fixed maturity
or reduce the amount or extend the time of payment of any principal or
premium payable (whether as an installment or upon any prepayment) on any
Note of such class; (b) reduce the percentage set forth above of the
principal amount of the Notes, the registered holders of which are required
to consent to any amendment or waiver set forth in such subdivision; or (c)
change the percentage of the principal amount of the Notes, the registered
holders of which may declare the Notes to be due and payable as provided in
Section 14.2. Any amendment or waiver effected in accordance with this
Section 16.2 shall be binding upon each registered holder of any Note, at
the time outstanding, each future registered holder of any Note, and the
Company.
3.b. INDEMNIFICATION. The Company will indemnify and hold harmless
each Indemnified Party from and against any and all losses, claims, damages
and liabilities, joint or several (including all reasonable legal fees or
other expenses reasonably incurred by any Indemnified Party in connection
with the preparation for or defense of any pending or threatened claim,
action or proceeding, whether or not resulting in any liability), to which
such Indemnified Party may become subject (whether or not such Indemnified
Party is a party thereto) under any applicable federal or state law or
otherwise caused by or arising out of, or allegedly caused by or arising
out of, this Agreement, any Collateral Agreement, or any transaction
contemplated hereby, other than losses, claims, damages or liabilities
resulting from any grossly negligent or unlawful act by Indemnified Party
seeking indemnification hereunder. THESE PROVISIONS ARE INTENDED TO
INDEMNIFY THE INDEMNIFIED PARTIES AGAINST THE RESULTS OF THEIR OWN
NEGLIGENCE.
Promptly after receipt by an Indemnified Party of notice of any claim,
action or proceeding with respect to which an Indemnified Party is entitled
to indemnity hereunder, such Indemnified Party will notify the Company of
such claim or the commencement of such action or proceeding, provided that
the failure of an Indemnified Party to give notice as provided herein shall
not relieve the Company of its obligations under this Section 16.3 with
respect to such Indemnified Party, except to the extent that the Company is
actually prejudiced by such failure. The Company will assume the defense
of such claim, action or proceeding and will employ counsel satisfactory to
the Indemnified Party and will pay the fees and expenses of such counsel.
Notwithstanding the preceding sentence, the Indemnified Party will be
entitled, at the expense of the Company, to employ counsel separate from
counsel for the Company, and for any other party in such action, if the
Indemnified Party reasonably determines that a conflict of interest or
other reasonable basis exists that makes representation by counsel chosen
by the Company not advisable. If an Indemnified Party appears as a witness
in any action or proceeding brought against the Company or any of its
Affiliates (or any of their partners, officers, directors or employees) in
which an Indemnified Party is not named as a defendant, the Company agrees
to reimburse such Indemnified Party for all out-of-pocket expenses incurred
by it (including fees and expenses of counsel) in connection with the
appearance as a witness. The Indemnified Party shall settle no claim or
take any other action prejudicing the Company's defense without the consent
of the Company, which consent will not be unreasonably withheld or delayed.
Purchaser agrees to reasonably cooperate with the Company in the defense of
any such action or proceeding.
4.b. USURY NOT INTENDED. The Company, Purchaser and all other
registered holders of any Notes intend to conform strictly to the usury
laws in force that apply to the transactions evidenced or contemplated
hereby. Accordingly, all agreements among the Company, Purchaser, and any
other registered holder of any Notes, whether now existing or hereafter
arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of the
Notes, or otherwise, shall the interest (and all other sums that are deemed
to be interest) contracted for, charged, received, paid or agreed to be
paid exceed the Highest Lawful Rate (as defined below). The Company and
Purchaser stipulate and agree that the terms and provisions contained in
this Agreement and the Collateral Agreements are not intended to and shall
never be construed to create a contract to pay for the use, forbearance or
detention of money an amount in excess of the maximum amount permitted to
be charged by applicable law, if any.
Anything in this Agreement or the Collateral Agreements to the
contrary notwithstanding, neither the Company nor any other party now or
hereafter becoming liable for payment of the Notes shall ever be required
to pay interest on or with respect to the Notes or any other obligation
hereunder at a rate in excess of the Highest Lawful Rate, and if the
effective rate of interest that would otherwise be payable under this
Agreement or on or with respect to the Notes would exceed the Highest
Lawful Rate, or if the registered holders of such Notes or obligation shall
receive anything of value that is deemed or determined to constitute
interest that would increase the effective rate of interest payable under
this Agreement or on or with respect to the Notes or the Collateral
Agreements to a rate in excess of the Highest Lawful Rate, then (a) the
amount of interest that would otherwise be payable under this Agreement,
the Notes or the Collateral Agreements shall be reduced to the amount
allowed at the Highest Lawful Rate under applicable law, and (b) any
unearned interest paid by the Company or any interest paid by the Company
in excess of the Highest Lawful Rate shall, at the option of the registered
holders of the Notes, be either refunded to the Company or credited on the
principal of such Notes. It is further agreed that, without limitation of
the foregoing, all calculations of the rate of interest contracted for,
charged or received by any registered holder of the Notes, or under this
Agreement, that are made for the purpose of determining whether such rate
exceeds the Highest Lawful Rate, shall be made, to the extent permitted by
applicable law (now or, to the extent permitted by law, hereafter enacted)
governing the Highest Lawful Rate, by (i) characterizing any nonprincipal
payment as an expense, fee or premium rather than as interest, and (ii)
amortizing, prorating, allocating and spreading in equal parts during the
period of the full term of the Notes (including the period of any renewal
or extension thereof), all interest at any time contracted for, charged or
received by such registered holder in connection therewith. As used in
this Section 16.4, the term "Highest Lawful Rate" means the maximum
nonusurious rate of interest permitted from time to time to be contracted
for, taken, charged or received with respect to the Notes by the registered
holders thereof, under applicable law as in effect with respect to this
Agreement or the Notes.
5.b. NOTICES.
(a) For all purposes under this Agreement, the address of the
Company shall be P.O. Box 93, 110 South Texas Street, Pittsburg, Texas
75686, Attention: Cliff Butler, Chief Financial Officer, telecopy no.
903-856-7505 and for Purchaser shall be the address set forth on the
Schedule of Information for Payment and Notices or such other address of
which all such Persons have received ten (10) days prior written notice.
(b) Any notice, demand, request or report required or permitted
to be given or made to the Company or Purchaser under this Agreement shall
be in writing and shall be deemed given or made when delivered in person,
when sent if by overnight courier or telecopy (if followed by hard copy) or
five (5) Business Days after the date when sent by United States registered
or certified mail to any such Person at its address referenced in Section
16.5(a) above.
6.b. REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed, (b) documents received by
Purchaser at the Closing (except the Notes themselves), and (c) financial
statements, certificates and other information previously or hereafter
furnished to Purchaser, may be reproduced by Purchaser or the registered
holder of any Notes by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and Purchaser or the
registered holder of any Notes may destroy any original document so
reproduced. The Company agrees and stipulates that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by Purchaser or the registered
holder of any Notes in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
7.b. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not, and shall inure to the
benefit of and be enforceable by any registered holder or registered
holders from time to time of any Notes. The representations, warranties
and covenants of the Company hereunder are intended to be for the benefit
of, and inure to, all registered holders from time to time of any of the
Notes.
(b) The Company acknowledges that Purchaser intends to
participate all or a portion of the Notes to one or more of Purchaser's
Affiliates and that all of the representations, warrantees, covenants and
agreements of the Company shall be for the benefit of Purchaser's
Affiliates as well as Purchaser.
8.b. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
9.b. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS (WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS).
10.b. INVALID PROVISIONS. If any provision hereof or any application
thereof shall be invalid or unenforceable, the remainder hereof and any
other application of such provision shall not be affected thereby.
11.b. HEADINGS. The Table of Contents and Section headings herein are
for purposes of reference only and shall not constitute a part hereof.
12.b. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
13.b. FURTHER ACTION. The parties shall execute all documents,
provide all information, and take or refrain from taking all actions as may
be necessary or appropriate to achieve the purposes of this Agreement.
14.b. CREDITORS. None of the provisions of this Agreement shall be
for the benefit of or enforceable by any creditors of the Company, except
as otherwise expressly provided herein.
15.b. WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this
Agreement or to exercise any right or remedy consequent upon a breach
thereof shall constitute a waiver of any such breach or any other covenant,
duty, agreement, or condition. No single or partial exercise of any power
or right shall preclude any other or further exercise thereof or the
exercise of any other power or right. No waiver by a party of any right
hereunder or of any default by another shall be binding upon such party
unless in writing.
-v-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PILGRIM'S PRIDE CORPORATION
By:_______________________________
Name:__________________________
Title:_________________________
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:_______________________________
Name:__________________________
Title:_________________________
-v-
<PAGE>
SCHEDULE OF INFORMATION FOR PAYMENT AND NOTICES
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
1. All payments on account of the Notes or other obligations in
accordance with the provisions thereof shall be made by bank wire
transfer of immediately available funds at the opening of business on
the due date, through the Automated Clearing House system for credit,
to:
Federal Reserve Bank of Chicago
for the Account of Bank Illinois
ABA No. 0711-0199-6
Champaign, Illinois
Attention: Insurance Division
Account of: John Hancock Mutual Life Insurance Company
On Order of: Pilgrim's Pride Corporation
2. Contemporaneous with the above wire transfer, advice setting forth (1)
the full name, interest rate and maturity date of the Notes or other
obligations; (2) allocation of payment between principal and interest
and any special payment; and (3) name and address of Bank (or Trustee)
from which wire transfer was sent, shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Portfolio Management &
Investment Services T-56
3. All other communications shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, Agricultural
Team, T-57
Fax No.: 617-572-1606
With a copy to:
John Hancock Mutual Life Insurance Company
2305 Cedar Springs Road
Suite 230
Dallas, Texas 75201
Fax No.: 214-922-8105
4. Tax I.D. No. 04-1414660
-v-
<PAGE>
SCHEDULE 5.2
JURISDICTIONS WHERE QUALIFIED
-v-
<PAGE>
SCHEDULE 5.6
OUTSTANDING DEBT
-v-
<PAGE>
SCHEDULE 5.7
FINANCING STATEMENTS OF RECORD
-v-
<PAGE>
SCHEDULE 6.2
SERVICE AND CONSTRUCTION CONTRACTS
-v-
<PAGE>
SCHEDULE 6.3
PERMITS, LICENSES, ETC.
-v-
<PAGE>
SCHEDULE 6.4
REPORTS OF ENGINEERS
-v-
<PAGE>
SCHEDULE 6.5
PLANS AND SPECIFICATIONS
-v-
<PAGE>
SCHEDULE 9.2
ASSUMED NAMES
E:\CORP\45936\41029\docs\NOTE-AGT.5
<<Date>>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of January 31, 1996 is entered into
among PILGRIM'S PRIDE, S.A. DE C.V., (the ``BORROWER'') and INTERNATIONALE
NEDERLANDEN (U.S.) CAPITAL CORPORATION (the ``LENDER''), PILGRIM'S PRIDE
CORPORATION (the ``COMPANY''), AVICOLA PILGRIM'S PRIDE DE MEXICO, S.A. DE
C.V. (the ``PARENT''), COMPANIA INCUBADORA AVICOLA PILGRIM'S PRIDE, S.A. DE
C.V., PRODUCTORA Y DISTRIBUIDORA DE ALIMENTOS, S.A. DE C.V., IMMOBILIARIA
AVICOLA PILGRIM'S PRIDE, S. DE R.L. DE C.V. and CIA. INCUBADORA HIDALGO,
S.A. DE C.V. The Borrower, the Lender, the Company and the Parent agree as
follows:
SECTION 1.
DEFINITIONS
1.@ DEFINED TERMS.
As used in this Agreement, the following terms have the following
meanings:
``ACCOUNTS RECEIVABLE'' means with respect to Parent and its
Subsidiaries any right to payment owed by any Person (other than an
affiliate of Parent or any of its Subsidiaries) that is due within one
year from any invoice date for goods sold or leased or for services
rendered no matter how evidenced, including, but not limited to,
accounts receivable, contract rights, notes, drafts, acceptances and
other forms of obligations and receivables, all as determined in
conformity with GAAP.
``AGREEMENT'' means this Credit Agreement, as amended,
supplemented or modified from time to time.
``APPLICABLE MARGIN'' means, with respect to each LIBO Rate Loan
and Prime Rate Loan, the rate of interest per annum shown below for
the range of Leverage Ratio specified for each column:
<CAPTION>
<0.45 *.45 TO 1 AND *.50 TO 1 AND *.60 TO 1
LEVERAGE RATIO TO 1 <0.5 TO 1 <.60 TO 1 AND <.70 TO 1
<S> <C> <C> <C> <C>
LIBO Rate Loans 1.75% 2.125% 2.375% 2.75%
Prime Rate Loans 1.00% 1.125% 1.375% 1.75%
Not later than 5 Business Days after receipt by the Lender of the
financial statements called for by Section 7.4 of the Company Credit
Agreement for the applicable fiscal quarter of Company, the Lender
shall determine the Leverage Ratio for the applicable period and shall
promptly notify the Borrower of such determination and of any change
in the Applicable Margins resulting therefrom. Any such change in the
Applicable Margins shall be effective as of the date the Lender so
notifies the Borrower with respect to all Loans outstanding on such
date, and such new Applicable Margins shall continue in effect until
the effective date of the next quarterly redetermination in accordance
with this Section. Each determination of the Leverage Ratio and
Applicable Margins by the Lender in accordance shall be conclusive and
binding absent manifest error. From the Closing Date until the date
the Applicable Margins are first adjusted as set forth above, the
Applicable Margins shall be (x) 2.375% per annum with respect to each
LIBO Rate Loan and 1.375% per annum with respect to each Prime Rate
Loan.
``BORROWER'' has the meaning set forth in the introductory
paragraph of this Agreement.
``BORROWING'' has the meaning assigned that term in
subsection 2.1.
``BUSINESS DAY'' means a day other than a Saturday, Sunday or a
day on which commercial banks in New York or the New York Stock
Exchange are authorized or required by law to close.
``CAPITAL LEASE'' means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as
lessee which would, in accordance with GAAP, be required to be
accounted for as a capital lease on the balance sheet of that Person.
``CLOSING DATE'' means the date of execution of this Agreement by
the parties hereto.
``COMMITMENT'' means the amount of $10,000,000 as such amount may
be reduced pursuant to subsection 2.1D.
``COMPANY'' has the meaning set forth in the introductory
paragraph of this Agreement.
``COMPANY CREDIT AGREEMENT'' means that certain Secured Credit
Agreement dated as of May 27, 1993 by and among Company, Harris Trust
and Savings Bank, individually and as agent thereunder, and the other
lenders party thereto, as such agreement may be amended, supplemented
or modified from time to time.
``COMPANY CUMULATIVE NET OPERATING PROFITS'', means, an amount
determined as of the last day of a fiscal quarter or fiscal year of
Company equal to (a) gross revenues LESS (b) cost of goods sold, LESS
(c) sales, general and administrative expenses, all as determined on a
consolidated cumulative basis for Company and its Subsidiaries from
the first day of such fiscal year through the date of determination.
``CONSOLIDATED CURRENT ASSETS'' means, at any date of
determination, the total assets of the Parent and its Subsidiaries on
a consolidated basis which may properly be classified as current
assets in conformity with GAAP.
``CONSOLIDATED CURRENT LIABILITIES'' means, at any date of
determination, the consolidated liabilities of the Parent and its
Subsidiaries which may properly be classified as current liabilities
in conformity with GAAP, excluding liabilities classified on the
financial statements of Borrower as a ``return of capital payable'' in
accordance with the Parent's historical accounting practices.
``DEBT'' means with respect to any Person as of any time the same
is to be determined, the aggregate of:
(a) all indebtedness, obligations and liabilities of such Person
with respect to borrowed money (including by the issuance of debt
securities);
(b) all guaranties, endorsements and other contingent
obligations of such Person with respect to indebtedness arising from
money borrowed by others;
(c) all reimbursement and other obligations with respect to
letters of credit, bankers acceptances, customer advances and other
extensions of credit whether or not representing obligations for
borrowed money;
(d) the aggregate of the principal components of all leases and
other agreements for the use, acquisition or retention of real or
personal property which are required to be capitalized under generally
accepted accounting principles consistently applied;
(e) all indebtedness, obligations and liabilities representing
the deferred purchase price property or services; and
(f) all indebtedness secured by a lien on the Property of such
Person, whether or not such Person has assumed or become liable for
the payment of such indebtedness.
``DOLLARS'' and ``$'' means Dollars in lawful currency of the
United States of America.
``FEDERAL FUNDS RATE'' means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Lender from three Federal funds brokers
of recognized standing selected by the Lender.
``GAAP'' means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession.
``GUARANTOR'' means each of Company, Parent, Compania Incubadora
Avicola Pilgrim's Pride, S.A. de C.V., Productora y Distribuidora de
Alimentos, S.A. de C.V., Immobiliaria Avicola Pilgrim's Pride, S. de
R.L. de C.V., and CIA. Incubadora Hidalgo, S.A. de C.V. and
``GUARANTORS'' means Company, Parent, Compania Incubadora Avicola
Pilgrim's Pride, S.A. de C.V., Productora y Distribuidora de
Alimentos, S.A. de C.V., Immobiliaria Avicola Pilgrim's Pride, S. de
R.L. de C.V., and CIA. Incubadora Hidalgo, S.A. de C.V., collectively.
``GUARANTY'' means that certain Guaranty dated as of the Closing
Date in substantially the form of EXHIBIT B annexed hereto, executed
and delivered by each Guarantor pursuant to subsection 4.1A.
``HIGHEST LAWFUL RATE'' has the meaning set forth in
subsection 8.10.
``INTEREST PAYMENT DATE'' means, as to any Prime Rate Loan until
payment in full, the Maturity Date and the last day of each March,
June, September and December commencing on the first of such days to
occur after a Prime Rate Loan is made. As to any LIBO Rate Loan with
an Interest Period of three months or less, until payment in full, the
last day of such Interest Period and the Maturity Date, and as to any
LIBO Rate Loan with an Interest Period in excess of three months,
until payment in full, (i) the same day of each three months following
the beginning of such Interest Period, (ii) the last day of such
Interest Period and (iii) the Maturity Date.
``INTEREST PERIOD'' means, with respect to any LIBO Rate Loan:
(i) initially, the period commencing on, as the case may
be, the Borrowing or conversion date with respect to such LIBO
Rate Loan and ending one, two, three or six months thereafter as
selected by the Borrower in its notice of Borrowing as provided
in subsection 2.1B or its notice of conversion as provided in
subsection 2.4; and
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such LIBO Rate
Loan and ending one, two, three or six months thereafter as
selected by the Borrower in its notice of continuation as
provided in subsection 2.4;
PROVIDED, that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(a) if any Interest Period for a LIBO Rate Loan would
otherwise end on a day which is not a LIBO Business Day, that
Interest Period shall be extended to the next succeeding LIBO
Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
LIBO Business Day;
(b) the Borrower may not select an Interest Period with
respect to any portion of principal of a LIBO Rate Loan which
extends beyond a date on which the Borrower is required to make a
scheduled payment of that portion of principal; and
(c) there shall be no more than six Interest Periods with
respect to LIBO Loans outstanding at any time.
``INVENTORY'' means all raw materials, work in process, finished
goods and goods held for sale or lease or furnished or to be furnished
under contracts of service in which Parent or any of its Subsidiaries
now has or hereafter acquires any right, all as determined in
conformity with GAAP.
``LEVERAGE RATIO'' means the ratio for the Company and its
Subsidiaries of (a) the aggregate outstanding principal amount of all
Debt (other than Debt consisting of reimbursement and other
obligations with respect to undrawn letters of credit) to (b) the sum
of the aggregate outstanding principal amount of all Debt included in
the clause (a) above PLUS Net Worth.
``LENDER'', has the meaning set forth in the introductory
paragraph of this Agreement.
``LENDING OFFICE'' means Lender's office located at its address
identified on the signature pages hereof as its Lending Office, or
such other office as such Lender may hereafter designate as its
Lending Office by notice to the Borrower.
``LIBO BUSINESS DAY'' means a day which is a Business Day and on
which dealings in Dollar deposits may be carried out in the London
interbank market.
``LIBO RATE'' means, for each Interest Period (i) the rate of
interest determined by the Lender at which deposits for the relevant
Interest Period would be offered to the Lender in the approximate
amount of the relevant LIBO Rate Loan in the London interbank market
upon request of the Lender at 11:00 A.M. (London time) on the day
which is two (2)LIBO Business Days prior to the first day of such
Interest Period, divided by (ii) a number equal to 1.0 minus the
aggregate (but without duplication) of the rates (expressed as a
decimal fraction) of reserve requirements in effect on the day which
is two (2) LIBO Business Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other governmental authority having
jurisdiction with respect thereto, as in effect at the time the Lender
quotes the rate to the Borrower) for Eurocurrency funding of domestic
assets (currently referred to as ``Eurocurrency liabilities'' in
Regulation D of such Board) which are required to be maintained by a
member bank of such System (such rate to be adjusted to the next
higher 1/16 of 1%).
``LIBO RATE LOANS'' means Loans hereunder at such time as they
accrue interest at a rate based upon the LIBO Rate.
``LIEN'' means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
``LOANS'' means loans made by the Lender to the Borrower pursuant
to subsection 2.1.
``LOAN DOCUMENTS'' means this Agreement, the Note, the Guaranty,
and any other document required by the Lender in connection with this
Agreement and/or the credit extended hereunder.
``MATURITY DATE'' means January 31, 1998.
``NET WORTH'' means the Total Assets minus the Total Liabilities
of the Company and its Subsidiaries, all determined on a consolidated
basis in accordance with GAAP.
``NOTE'' has the meaning assigned that term in subsection 2.1E.
``PARENT'' has the meaning set forth in the introductory
paragraph to this Agreement.
``PARENT CUMULATIVE NET OPERATING PROFITS'', means, an amount
determined as of the last day of each fiscal quarter of each fiscal
year of Parent equal to (a) gross revenues LESS (b) cost of goods
sold, LESS (c) sales, general and administrative expenses, all as
determined on a consolidated cumulative basis for Parent and its
Subsidiaries from the first day of such fiscal year through the date
of determination.
``PERSON'' means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of
whatever nature.
``POTENTIAL EVENT OF DEFAULT'' means a condition or event which,
after notice or lapse of time or both, would constitute an Event of
Default if that condition or event were not cured or removed within
any applicable grace or cure period.
``PRIME RATE'' means the higher of (i) the Federal Funds Rate
PLUS 1/2 of 1% per annum and (ii) the average of the prime commercial
lending rates of The Chase Manhattan Bank, National Association (or
its successor by merger with Chemical Bank), Citibank, N.A. and Morgan
Guaranty Trust Company of New York, as announced from time to time at
their respective head offices, it being understood that such rates are
simply reference rates and may not necessarily be the rates of
interest charged to their most creditworthy customers or the lowest of
their respective reference rates. The Prime Rate shall be adjusted
automatically on and as of the effective date of any change in any
such lending rate.
``PRIME RATE LOANS'' means Loans hereunder at such time as they
accrue interest at a rate based upon the Prime Rate.
``REGULATIONS G, T, U AND X'' means Regulations G, T, U and X,
respectively, promulgated by the Board of Governors of the Federal
Reserve System, as amended from time to time, and any successors
thereto.
``SUBSIDIARY'' means a corporation of which shares of stock
having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation are at
the time owned, directly, or indirectly through one or more
intermediaries, or both, by the Borrower.
``TOTAL ASSETS'' means, at any date, the aggregate amount of
assets of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
``TOTAL LIABILITIES'' means, at any date, the aggregate amount of
all liabilities of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
2.@ OTHER DEFINITIONAL PROVISIONS.
A. All terms defined in this Agreement shall have the defined
meanings when used in the Note or Guaranty or any certificate or other
document made or delivered pursuant hereto.
B. As used herein, in the Note and in the Guaranty, and any
certificate or other document made or delivered pursuant hereto, accounting
terms not defined in subsection 1.1, and accounting terms partly defined in
subsection 1.1 to the extent not defined, shall have the respective
meanings given to them under GAAP.
C. The words ``hereof'', ``herein'' and ``hereunder'' and words of
similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
SECTION 2.
THE LOANS
1.C THE LOANS.
A. THE COMMITMENT. The Lender agrees, on the terms and conditions
hereinafter set forth, to make loans (``LOANS'') to the Borrower from time
to time during the period from the date hereof to and including the
Maturity Date in an aggregate amount not to exceed the lesser of (x) the
Commitment or (y) an amount equal to 300% of the Accounts Receivable and
Inventory of Parent and its Subsidiaries as of the last day of Parent's
fiscal month immediately preceding the date of the proposed Borrowing, as
such amount may be reduced pursuant to subsection 2.1D. Each borrowing
under this Section (a ``BORROWING'') shall be in a minimum amount of
$100,000 and in an integral multiple of $50,000; PROVIDED that a Loan
consisting of a LIBO Rate Loan shall be in a minimum amount of $500,000 or
an integral multiple of $100,000 above such amount. Within the limits of
the Commitment and prior to the Maturity Date, the Borrower may borrow,
repay pursuant to subsection 2.2C and reborrow under this subsection 2.1A.
B. MAKING THE LOANS. The Borrower may borrow under the Commitment
on any Business Day if the Borrowing is to consist of a Prime Rate Loan and
on any LIBO Business Day if the Borrowing is to consist of a LIBO Rate
Loan; PROVIDED that the Borrower shall give the Lender irrevocable notice
(which notice must be received by the Lender prior to 12:00 Noon., New York
time) (i) three LIBO Business Days prior to the requested Borrowing date in
the case of a LIBO Rate Loan, and (ii) on or before the requested Borrowing
date in the case of a Prime Rate Loan, specifying (A) the amount of the
proposed Borrowing, (B) the requested date of the Borrowing, (C) whether
the Borrowing is to consist of a LIBO Rate Loan or a Prime Rate Loan,
(D) if the Loan is to be a LIBO Rate Loan, the length of the Interest
Period therefor and certifying that the amount of the proposed Borrowing,
together with the aggregate principal amount of any outstanding Loans does
not exceed 300% of the Accounts Receivable and Inventory of Parent and its
Subsidiaries as of the last day of Parent's fiscal month most recently
ended. Upon satisfaction of the applicable conditions set forth in
Section 4, the proceeds of all such Loans will then be made available to
the Borrower by the Lender by crediting the account of the Borrower at
Lender's Lending office, or as otherwise directed by the Borrower.
The notice of Borrowing may be given orally (including telephonically)
or in writing (including telex or facsimile transmission) and any conflict
regarding a notice or between an oral notice and a written notice
applicable to the same Borrowing shall be conclusively determined by the
Lender's books and records. The Lender's failure to receive any written
notice of a particular Borrowing shall not relieve the Borrower of its
obligations to repay the Borrowing made and to pay interest thereon. The
Lender shall not incur any liability to the Borrower in acting upon any
notice of Borrowing which the Lender believes in good faith to have been
given by a Person duly authorized to borrow on behalf of the Borrower.
C. COMMITMENT FEE. The Borrower agrees to pay to the Lender a
commitment fee on the average daily unused portion of the Commitment from
the Closing Date until the Maturity Date at the rate of 1/2 of one percent
(1%) per annum, payable on the last day of each calendar quarter commencing
the first such date occurring after the date of this Agreement, and on the
Maturity Date.
D. REDUCTION OF THE COMMITMENT. The Borrower shall have the right,
upon at least two (2) Business Days' notice to the Lender, to terminate in
whole or reduce in part the unused portion of the Commitment, without
premium or penalty; PROVIDED that each partial reduction shall be in the
aggregate amount of $500,000 or an integral multiple of $100,000 above such
amount and that such reduction shall not reduce the Commitment to an amount
less than the amount outstanding hereunder on the effective date of the
reduction.
E. THE NOTE. The Loans made by the Lender pursuant hereto shall be
evidenced by a promissory note or notes of the Borrower, substantially in
the form of Exhibit A, with appropriate insertions (the ``NOTE''), payable
to the order of the Lender and representing the obligation of the Borrower
to pay the aggregate unpaid principal amount of all Loans made by the
Lender, with interest thereon as prescribed in Section 2.3. The Lender is
hereby authorized to record in its books and records and on any schedule
annexed to the Note, the date and amount of each Loan made by the Lender,
and the date and amount of each payment of principal thereof, and in the
case of LIBO Rate Loans, the Interest Period and interest rate with respect
thereto and any such recordation shall constitute PRIMA FACIE evidence of
the accuracy of the information so recorded; PROVIDED that failure by the
Lender to effect such recordation shall not affect the Borrower's
obligations hereunder. Prior to the transfer of a Note, the Lender shall
record such information on any schedule annexed to and forming a part of
such Note.
F. LOAN FEE. Upon execution of this Agreement and on the first
anniversary of the Closing Date, the Borrower shall pay to the Lender a
non-refundable fee in the amount of $25,000.
2.F REPAYMENT.
A. MANDATORY REPAYMENTS. The aggregate principal amount of the
Loans outstanding on the Maturity Date, together with accrued interest
thereon, shall be due and payable in full on the Maturity Date.
B. OTHER REPAYMENTS REQUIREMENT. If for any reason prior to the
Maturity Agreement, either (x) all obligations for money borrowed and with
respect to letters of credit issued pursuant to the Company Credit
Agreement are repaid in full or (y) Lender shall no longer be a ``Bank''
under the Company Credit Agreement, at the request of the Lender, all or
such portion of the Loans designated by the Lender shall be repaid and the
Commitments with respect thereto terminated. In addition, if at any time
outstanding Loans exceed an amount equal to 300% of Accounts Receivable and
Inventory of Parent and its Subsidiaries as of the last day of the fiscal
month most recently ended, Borrower shall repay Loans, no later than three
Business Days after obtaining knowledge of the existence of such excess, in
an amount equal to the excess of (x) the aggregate principal amount of all
outstanding Loans over (y) 300% of the amount of such Accounts Receivables
and Inventory.
C. OPTIONAL REPAYMENTS. The Borrower may, at its option repay the
Loans, in whole or in part, at any time and from time to time; PROVIDED
that the Lender shall have received from the Borrower notice of any such
payment at least one (1) Business Day prior to the date of the proposed
payment if such date is not the last day of the then current Interest
Period for each Loan being paid, in each case specifying the date and the
amount of payment. Partial payments hereunder shall be in an aggregate
principal amount of the lesser of $50,000 or any whole multiple thereof.
3.C INTEREST RATE AND PAYMENT DATES.
A. PAYMENT OF INTEREST. Interest with respect to each Loan shall be
payable in arrears on each Interest Payment Date for such Loan.
B. PRIME RATE LOANS. Loans which are Prime Rate Loans shall bear
interest on the unpaid principal amount thereof at a rate per annum equal
to the lesser of (x) Prime Rate PLUS the Applicable Margin and (y) the
Highest Lawful Rate.
C. LIBO RATE LOANS. Loans which are LIBO Rate Loans shall bear
interest for each Interest Period with respect thereto on the unpaid
principal amount thereof at a rate per annum equal to the lesser of (x) the
LIBO Rate determined for such Interest Period in accordance with the terms
hereof plus the Applicable Margin or (y) the Highest Lawful Rate.
4.C CONTINUATION AND CONVERSION OPTIONS.
The Borrower may elect from time to time to convert its outstanding
Loans from Loans bearing interest at a rate determined by reference to one
basis to Loans bearing interest at a rate determined by reference to an
alternative basis by giving the Lender (i) irrevocable notice of an
election to convert Loans to Prime Rate Loans and (ii) at least three (3)
LIBO Business Days' prior irrevocable notice of an election to convert
Loans to LIBO Rate Loans, PROVIDED that any conversion of Loans other than
Prime Rate Loans shall only be made on the last day of an Interest Period
with respect thereto; PROVIDED, FURTHER that, no Loan may be converted to a
Loan other than a Prime Rate Loan so long as an Event of Default or
Potential Event of Default has occurred and is continuing. The Borrower
may elect from time to time to continue its outstanding LIBO Rate Loans
upon the expiration of the Interest Period(s) applicable thereto by giving
to the Lender at least three (3) LIBO Business Days' prior irrevocable
notice of continuation of a LIBO Rate Loan and the succeeding Interest
Period(s) of such continued Loan or Loans will commence on the last day of
the Interest Period of the Loan to be continued; PROVIDED that no Loan may
be continued as a Loan other than a Prime Rate Loan so long as an Event of
Default or Potential Event of Default has occurred and is continuing. Each
notice electing to convert or continue a Loan shall specify: (i) the
proposed conversion/continuation date; (ii) the amount of the Loan to be
converted/continued; (iii) the nature of the proposed
continuation/conversion; and (iv) in the case of a conversion to, or
continuation of a Loan other than a Prime Rate Loan, the requested Interest
Period, and shall certify that no Event of Default or Potential Event of
Default has occurred and is continuing. On the date on which such
conversion or continuation is being made the Lender shall take such action
as is necessary to effect such conversion or continuation. In the event
that no notice of continuation or conversion is received by the Lender with
respect to outstanding Loans other than Prime Rate Loans, upon expiration
of the Interest Period(s) applicable thereto, such Loans shall convert to
Prime Rate Loans. Subject to the limitations set forth in this Section and
in the definition of Interest Period, all or any part of outstanding Loans
may be converted or continued as provided herein, PROVIDED that partial
conversions or continuations with respect to Loans other than Prime Rate
Loans shall be in an aggregate minimum amount of $500,000 and in an
integral multiple of $100,000.
SECTION 3.
GENERAL PROVISIONS CONCERNING THE LOANS
1.C USE OF PROCEEDS.
The proceeds of the Loans hereunder shall be used by the Borrower for
general working capital purposes of the Borrower and its Subsidiaries.
2.C POST MATURITY INTEREST.
Notwithstanding anything to the contrary contained in subsection 2.3,
if all or a portion of the principal amount of any of the Loans made
hereunder or any interest accrued thereon shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), any such
overdue amount shall bear interest at a rate per annum which is equal to
two percent (2%) above the highest rate which would otherwise be applicable
pursuant to subsection 2.3, payable on demand. In addition, such Loan, if
a Loan other than a Prime Rate Loan, shall be converted to a Prime Rate
Loan at the end of the then current Interest Period therefor.
3.C COMPUTATION OF INTEREST AND FEES.
A. CALCULATIONS. Interest in respect of the Prime Rate Loans shall
be calculated on the basis of a 360 day year for the actual days elapsed.
Any change in the interest rate on a Prime Rate Loan resulting from a
change in the Prime Rate shall become effective as of the opening of
business on the day on which such change in the Prime Rate shall become
effective. Interest in respect of the LIBO Rate Loans shall be calculated
on the basis of a 360 day year for the actual days elapsed.
B. DETERMINATION BY LENDER. Each determination of an interest rate
or fee by the Lender pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower in the absence of manifest error.
4.B PAYMENTS.
The Borrower shall make each payment of principal, interest and fees
hereunder and under the Note, without set-off or counterclaim, not later
than 2:00 P.M., New York time, on the day when due in lawful money of the
United States of America to the Lender at the office of the Lender
designated from time to time in immediately available funds.
5.B PAYMENT ON NON-BUSINESS DAYS.
Whenever any payment to be made hereunder or under the Note with
respect to Prime Rate Loans shall be stated to be due on a day which is not
a Business Day, such payment may be made on the next succeeding Business
Day, and with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
6.B REDUCED RETURN.
If the Lender shall have determined that any applicable law,
regulation, rule or regulatory requirement (``REQUIREMENT'') regarding
capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender with any request or
directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the Lender's capital as a
consequence of its Commitments and obligations hereunder to a level below
that which would have been achieved but for such Requirement, change or
compliance (taking into consideration the Lender's policies with respect to
capital adequacy) by an amount deemed by the Lender to be material (which
amount shall be determined by the Lender's reasonable allocation of the
aggregate of such reductions resulting from such events), then from time to
time, within five (5) Business Days after demand by the Lender, the
Borrower shall pay to the Lender such additional amount or amounts as will
compensate the Lender for such reduction.
7.B INDEMNITIES, ETC.
A. INDEMNITIES. Whether or not the transactions contemplated hereby
shall be consummated, the Borrower and each Guaranty, jointly and
severally, agree to indemnify, pay and hold the Lender, and the
shareholders, officers, directors, employees and agents of the Lender,
harmless from and against any and all claims, liabilities, losses, damages,
costs and expenses (whether or not any of the foregoing Persons is a party
to any litigation), including, without limitation, reasonable attorneys'
fees and costs (including, without limitation, the reasonable estimate of
the allocated cost of in-house legal counsel and staff) and costs of
investigation, document production, attendance at a deposition, or other
discovery, with respect to or arising out of this Agreement or any other
Loan Document or any use of proceeds hereunder, or any claim, demand,
action or cause of action being asserted against the Borrower, any
Guarantor or any of their respective Subsidiaries (collectively, the
``INDEMNIFIED LIABILITIES''); PROVIDED neither the Borrower nor any
Guarantor shall have any obligation hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any
such Persons. If any claim is made, or any action, suit or proceeding is
brought, against any Person indemnified pursuant to this subsection, the
indemnified Person shall notify the Borrower of such claim or of the
commencement of such action, suit or proceeding, and the Borrower and each
Guarantor will assume the defense of such action, suit or proceeding,
employing counsel selected by the Borrower and each Guarantor and
reasonably satisfactory to the indemnified Person, and pay the fees and
expenses of such counsel. This covenant shall survive termination of this
Agreement and payment of the Note.
B. FUNDING LOSSES. The Borrower agrees to indemnify the Lender and
to hold the Lender harmless from any loss or expense including, but not
limited to, any such loss or expense arising from interest or fees payable
by the Lender to lenders of funds obtained by it in order to maintain its
LIBO Rate Loans hereunder, which the Lender may sustain or incur as a
consequence of (i) default by the Borrower in payment of the principal
amount of or interest on the LIBO Rate Loans of the Lender, (ii) default by
the Borrower in making a conversion or continuation after the Borrower has
given a notice thereof, (iii) default by the Borrower in making any payment
after the Borrower has given a notice of payment or (iv) the Borrower
making any payment of a LIBO Rate Loan on a day other than the last day of
the Interest Period for such Loan. For purposes of this subsection and
subsection 3.7, it shall be assumed that the Lender had funded or would
have funded, as the case may be, 100% of its LIBO Rate Loans in the London
interbank market for a corresponding amount and term. The determination by
the Lender of amount owed under subsection 3.7 shall be presumed correct in
the absence of manifest error. This covenant shall survive termination of
this Agreement and payment of the Note.
8.B FUNDING SOURCES.
Nothing in this Agreement shall be deemed to obligate the Lender to
obtain the funds for any Loan in any particular place or manner or to
constitute a representation by the Lender that it has obtained or will
obtain the funds for any Loan in any particular place or manner.
9.B INABILITY TO DETERMINE INTEREST RATE.
In the event that the Lender shall have determined (which
determination shall be conclusive and binding upon the Borrower) that by
reason of circumstances affecting the interbank LIBOR market, adequate and
reasonable means do not exist for ascertaining the LIBO Rate applicable
pursuant to subsection 2.3 for any Interest Period with respect to a LIBO
Rate Loan that will result from a requested LIBO Rate Loan or that such
rate of interest does not adequately cover the cost of funding such Loan,
the Lender shall forthwith give notice of such determination to the
Borrower not later than 1:00 P.M., New York time, on the requested
Borrowing date, the requested conversion date or the last day of an
Interest Period of a Loan which was to have been continued as a LIBO Rate
Loan. If such notice is given and has not been withdrawn (i) any requested
LIBO Rate Loan shall be made as a Prime Rate Loan (or a Loan bearing
interest at such other rate, if any, as may be mutually acceptable to the
Borrower and the Lender), or, at the Borrower's option, such Loan shall not
be made, (ii) any Loan that was to have been converted to a LIBO Rate Loan
shall be continued as, or converted into, a Prime Rate Loan and (iii) any
outstanding LIBO Rate Loan shall be converted, on the last day of the then
current Interest Period with respect thereto, to a Prime Rate Loan. Until
such notice has been withdrawn by the Lender, no further LIBO Rate Loans
shall be made and the Borrower shall not have the right to convert a Loan
to a LIBO Rate Loan. The Lender will review the circumstances affecting
the interbank LIBO market from time to time and the Lender will withdraw
such notice at such time as it shall determine that the circumstances
giving rise to said notice no longer exist.
10.B REQUIREMENTS OF LAW.
In the event that any law, regulation or directive or any change
therein or in the interpretation or application thereof or compliance by
the Lender with any request or directive (whether or not having the force
of law) from any central bank or other governmental authority, agency or
instrumentality:
A. does or shall impose, modify or hold applicable any reserve,
assessment rate, special deposit, compulsory loan or other requirement
against assets held by, or deposits or other liabilities in or for the
account of, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of the Lender which are not
otherwise included in the determination of any LIBO Rate at the last
Borrowing, conversion or continuation date of a Loan;
B. does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or other requirement against
Commitments to extend credit;
C. does or shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the
Lender of making, renewing or maintaining its Commitment or the LIBO
Rate Loans or to reduce any amount receivable thereunder (which
increase or reduction shall be determined by the Lender's reasonable
allocation of the aggregate of such cost increases or reduced amounts
receivable resulting from such events), then, in any such case, the
Borrower shall pay to the Lender, within three Business Days of its
demand, any additional amounts necessary to compensate the Lender for
such additional cost or reduced amount receivable as determined by the
Lender with respect to this Agreement. If the Lender becomes entitled
to claim any additional amounts pursuant to this subsection, it shall
notify the Borrower of the event by reason of which it has become so
entitled. A statement incorporating the calculation as to any
additional amounts payable pursuant to the foregoing sentence
submitted by the Lender to the Borrower shall be conclusive in the
absence of manifest error.
11.C ILLEGALITY.
Notwithstanding any other provisions herein, if any law, regulation,
treaty or directive or any change therein or in the interpretation or
application thereof, shall make it unlawful, impossible, or impracticable
for the Lender to make or maintain LIBO Rate Loans as contemplated by this
Agreement, (a) the commitment of the Lender hereunder to make LIBO Rate
Loans or convert Prime Rate Loans to LIBO Rate Loans shall forthwith be
cancelled and (b) the Lender's Loans then outstanding as LIBO Rate Loans,
if any, shall be converted automatically to Prime Rate Loans on the next
succeeding Interest Payment Date or within such earlier period as allowed
by law. The Borrower hereby agrees to pay the Lender, within three (3)
Business Days of its demand, any additional amounts necessary to compensate
the Lender for any costs incurred by the Lender in making any conversion in
accordance with this subsection, including, but not limited to, any
interest or fees payable by the Lender to lenders of funds obtained by it
in order to make or maintain its LIBO Rate Loans hereunder (the Lender's
notice of such costs, as certified to the Borrower to be conclusive absent
manifest error).
12.C TAXES.
A. Any and all payments made by the Borrower hereunder shall be made
free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges and withholdings (whether
imposed under the laws of the United States or Mexico), and all liabilities
with respect thereto, excluding taxes imposed on net income and all income
and franchise taxes of the United States and any political subdivisions
thereof (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as ``TAXES'').
If the Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to the Lender, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable
hereunder) the Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
B. In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, the
obligations (hereinafter referred to as ``OTHER TAXES'').
C. The Borrower will indemnify the Lender for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this subsection)
paid by the Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 10 days from the date the Lender makes
written demand therefor.
D. Within 10 days after the date of any payment of Taxes, the
Borrower will furnish to the Lender, at its address specified herein, the
original or a certified copy of a receipt evidencing payment thereof. If
no Taxes are payable in respect of any payment hereunder, the Borrower will
furnish to the Lender a certificate from each appropriate taxing authority,
or an opinion of counsel acceptable to the Lender, in either case stating
that such a payment is exempt from or not subject to Taxes.
E. Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements of the Borrower contained in this
subsection 3.12 shall survive the payment in full of the principal of and
interest on the Note.
13.E JUDGMENT.
A. If, for the purposes of obtaining a judgment in any court with
respect to any obligation under any Loan Document, it is necessary to
convert a sum due hereunder in United States dollars into another currency,
the parties agree, to the fullest extent permitted by law, that the rate of
exchange used shall be that at which in accordance with normal lending
procedures the Lender could purchase United States dollars with such other
currency on the Business Day preceding that on which final judgment is
given.
B. The obligation of the Borrower and each Guarantor in respect of
any sum due from time to the Lender under any Loan Document shall,
notwithstanding any judgment in a currency other than United States
dollars, be discharged only to the extent that on the Business Day
following receipt by the Lender of any sum adjudged to be so due in such
other currency the Lender may in accordance with normal banking procedures
purchase United States dollars with such other currency; if the United
States dollars to purchased are less than the sum originally due to the
Lender in United States dollars, the Borrower and Guarantors, jointly and
severally, agree, as a separate obligation and notwithstanding any such
judgment, to indemnify the Lender against such loss, and if the United
States dollars so purchase exceed the sum originally due to the Lender in
United States dollars, the Lender agrees to remit to the Borrower or such
Guarantor, as the case may be, such excess.
SECTION 4.
CONDITIONS OF LENDING
1.B CONDITIONS PRECEDENT TO INITIAL LOANS.
The obligation of the Lender to make its initial Loan is subject to
the conditions precedent that:
A. The Lender shall have received on or before the day of the
initial Borrowing the following, in form and substance satisfactory to
the Lender (and which, if any such document is written in Spanish, at
the request of Lender, shall include an English translation thereof):
(i) The Note issued by the Borrower to the order of the
Lender;
(ii) Copies of the Articles, Certificate of Incorporation
or other organizational document of the Borrower and each
Guarantor, certified by its Secretary or Assistant Secretary,
(iii) Copies of the Bylaws of the Borrower and each
Guarantor, certified by its Secretary or Assistant Secretary;
(iv) Copies of resolutions of the Board of Directors or
other authorizing documents of the Borrower and each Guarantor,
in form and substance satisfactory to the Lender, approving the
Loan Documents and the Borrowings hereunder;
(v) An incumbency certificate executed by the Secretary or
an Assistant Secretary of the Borrower and each Guarantor or
equivalent document, certifying the names and signatures of the
officers of the Borrower and each Guarantor or other Persons
authorized to sign the Loan Documents and the other documents to
be delivered hereunder;
(vi) A favorable opinion of counsel to the Borrower and
Guarantors, in the form of EXHIBIT C hereto, and as to such other
matters as the Lender may reasonably request; and
(vii) Executed copies of the Guaranty.
B. All corporate and legal proceedings and all instruments and
documents in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in content, form and substance
to the Lender and its counsel, and the Lender and such counsel shall have
received any and all further information and documents which the Lender or
such counsel may reasonably have requested in connection therewith, such
documents where appropriate to be certified by proper corporate or
governmental authorities.
2.B CONDITIONS PRECEDENT TO EACH BORROWING.
The obligation of the Lender to make a Loan on the occasion of each
Borrowing (including the initial Borrowing) shall be subject to the further
conditions precedent that on the date of such Borrowing (a) the following
statements shall be true and the Lender shall have received the notice
required by subsection 2.1B, which notice shall be deemed to be a
certification by the Borrower that:
(i) The representations and warranties contained in
subsection 5.1 are true and correct on and as of the date of such
Borrowing as though made on and as of such date,
(ii) No event has occurred and is continuing, or would result
from such Borrowing, which constitutes an Event of Default or
Potential Event of Default, and
(iii) All Loan Documents are in full force and effect.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
1.A REPRESENTATIONS AND WARRANTIES.
The Borrower and each Guarantor represents and warrants as follows:
A. ORGANIZATION. The Borrower and each Guarantor is duly
organized, validly existing and in good standing under the laws of the
state or other jurisdiction of its formation. The Borrower and each
Guarantor is also, in all material respects, duly authorized,
qualified and licensed in all applicable jurisdictions, and under all
applicable laws, regulations, ordinances or orders of public
authorities, to carry on its business in the locations and in the
manner presently conducted.
B. AUTHORIZATION. The execution, delivery and performance by
the Borrower and each Guarantor of the Loan Documents to which it is a
party, and with respect to the Borrower, the making of Borrowings
hereunder, are within the Borrower's and each Guarantor's corporate
powers, have been duly authorized by all necessary corporate action
and do not contravene (i) the Borrower's or any Guarantor's charter,
by-laws or other organizational document or (ii) any law or regulation
(including, without limitation, Regulations G, T, U and X) or any
contractual restriction binding on or affecting the Borrower or any
Guarantor.
C. GOVERNMENTAL CONSENTS. No authorization or approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body (except, in the case of Company, routine
reports required pursuant to the Securities Exchange Act of 1934, as
amended), which reports will be made in the ordinary course of
business) is required for the due execution, delivery and performance
by the Borrower and each Guarantor of the Loan Documents to which it
is a party.
D. VALIDITY. Each of the Loan Documents is the binding
obligation of the Borrower and each Guarantor party thereto,
enforceable in accordance with its terms; except in each case as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting
creditors' rights.
E. FINANCIAL CONDITION. The consolidated balance sheet of the
Parent and its Subsidiaries as at September 30, 1995 and the related
statements of income and retained earnings of the Parent and its
consolidated Subsidiaries for such fiscal year, copies of which have
been furnished to the Lender, fairly present the financial condition
of the Parent and its consolidated Subsidiaries as at such dates and
the results of the operations of the Parent and its consolidated
Subsidiaries for the respective periods ended on such dates, all in
accordance with GAAP, consistently applied, and since September 30,
1995, there has been no material adverse change in the business,
operations, properties, assets or condition (financial or otherwise)
of the Parent and its Subsidiaries, taken as a whole.
F. LITIGATION. There is no pending or threatened action or
proceeding affecting the Borrower, any Guarantor or any of their
respective Subsidiaries before any court, governmental agency or
arbitrator, which may materially and adversely affect the consolidated
financial condition or operations of the Borrower or any Guarantor or
which may have a material adverse effect on the Borrower's or any
Guarantor's ability to perform its obligations under the Loan
Documents, having regard for its other financial obligations.
G. DISCLOSURE. No representation or warranty of the Borrower
or any Guarantor contained in this Agreement or any other document,
certificate or written statement furnished to the Lender by or on
behalf of the Borrower or any Guarantor for use in connection with the
transactions contemplated by this Agreement contains any untrue
statement of a material fact or omits to state a material fact (known
to the Borrower or any Guarantor in the case of any document not
furnished by it) necessary in order to make the statements contained
herein or therein not misleading. There is no fact known to the
Borrower or any Guarantor (other than matters of a general economic
nature) which materially adversely affects the business, operations,
property, assets or condition (financial or otherwise) of the Borrower
or any Guarantor and their respective Subsidiaries, taken as a whole,
which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Lender for use in
connection with the transactions contemplated hereby.
H. REPRESENTATIONS AND WARRANTIES INCORPORATED FROM COMPANY
CREDIT AGREEMENT. Each of the representations and warranties given by
Company pursuant to the Company Credit Agreement are true and correct
in all material respects as of the date made (whether given on or
after the Closing Date) and such representations and warranties are
hereby incorporated herein by this reference with the same effect as
though set forth in their entirety herein, subject to the
qualifications set forth in the Company Credit Agreement.
SECTION 6.
COVENANTS
1.H AFFIRMATIVE COVENANTS.
So long as the Note shall remain unpaid or the Lender shall have any
Commitment hereunder, the Parent will, unless the Lender shall otherwise
consent in writing:
A. FINANCIAL INFORMATION. Furnish to the Lender:
(i) Copies of all financial and other information delivered
pursuant to Section 7.4 of the Company Credit Agreement as and
when delivered thereunder.
(ii) Not later than 45 days after the end of each fiscal
month of Parent, a compliance certificate, in form and substance
satisfactory to the Lender, demonstrating in reasonable detail
compliance with the restrictions contained in subsections 6.2A
and 6.2B hereof.
B. OTHER NOTICES AND INFORMATION. Deliver to the Lender:
(i) promptly upon any officer of the Parent or the Borrower
obtaining knowledge (a) of any condition or event which
constitutes an Event of Default or Potential Event of Default,
(b) that any Person has given any notice to the Parent or any
Subsidiary of the Parent or taken any other action with respect
to a claimed default or event or condition of the type referred
to in subsection 7.1E, (c) of the institution of any litigation
involving an alleged liability (including possible forfeiture of
property) of the Parent or any of its Subsidiaries equal to or
greater than $500,000 or any adverse determination in any
litigation involving a potential liability of the Parent or any
of its Subsidiaries equal to or greater than $500,000, or (d) of
a material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the
Parent and its Subsidiaries, taken as a whole, an officers'
certificate specifying the nature and period of existence of any
such condition or event, or specifying the notice given or action
taken by such holder or Person and the nature of such claimed
default, Event of Default, Potential Event of Default, event or
condition, and what action the Parent has taken, is taking and
proposes to take with respect thereto;
(ii) promptly, and in any event within ten (10) days after
request, such other information and data with respect to the
Parent or any of its Subsidiaries as from time to time may be
reasonably requested by the Lender.
C. CORPORATE EXISTENCE, ETC. At all times preserve and keep in
full force and effect its and its Subsidiaries' corporate existence
and rights and franchises material to its business and those of each
of its Subsidiaries; PROVIDED, HOWEVER, that the corporate existence
of any such Subsidiary may be terminated if such termination is in the
best interest of the Parent and Borrower and is not materially
disadvantageous to the holder of any Note.
D. PAYMENT OF TAXES AND CLAIMS. Pay, and cause each of its
Subsidiaries to pay, all taxes, assessments and other governmental
charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business, income or property before
any penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law
have or may become a lien upon any of its properties or assets, prior
to the time when any penalty or fine shall be incurred with respect
thereto; PROVIDED that no such charge or claim need be paid if being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall
have been made therefor.
E. MAINTENANCE OF PROPERTIES; INSURANCE. Maintain or cause to
be maintained in good repair, working order and condition all material
properties used or useful in the business of the Parent and its
Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. The Parent
will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and
business and the properties and business of its Subsidiaries against
loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar
businesses and similarly situated, of such types and in such amounts
as are customarily carried under similar circumstances by such other
corporations.
F. INSPECTION. Permit any authorized representatives
designated by the Lender to visit and inspect any of the properties of
the Parent or any of its Subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts
with its and their officers and independent public accountants, all at
such reasonable times during normal business hours and as often as may
be reasonably requested.
G. COMPLIANCE WITH LAWS, ETC. Exercise, and cause each of its
Subsidiaries to exercise, all due diligence in order to comply with
the requirements of all applicable laws, rules, regulations and orders
of any governmental authority, including, without limitation, all
environmental laws, rules, regulations and orders, noncompliance with
which would materially adversely affect the business, properties,
assets, operations or condition (financial or otherwise) of the Parent
and its Subsidiaries, taken as a whole.
2.G NEGATIVE COVENANTS.
So long as any Note shall remain unpaid or the Lender shall have any
Commitment hereunder, the Parent will not, and, with respect to subdivision
C below, Company will not, without the written consent of the Lender:
A. CURRENT RATIO. Permit the ratio of Consolidated Current
Assets to Consolidated Current Liabilities at any time to be less than
1.0 to 1.0.
B. MINIMUM NET OPERATING PROFITS. Company will not permit
Company Cumulative Net Operating Profits to be less than
(x) $5,000,000 for the fiscal quarter ending March 31, 1996,
(y) $9,000,000 for the fiscal quarter ending June 30, 1996 and
(z) $29,100,000 for fiscal year 1996. Parent will not permit Parent
Cumulative Net Operating Profits (x) for fiscal year 1996, to be less
than negative $12,000,000 as of the end of any fiscal quarter and
(y) for each fiscal year thereafter, as of the end of any fiscal
quarter, to be less than $1.
C. LIENS, ETC. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien upon or with
respect to any of its properties, whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, in each case to secure any Debt of any
Person.
D. DEBT. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Debt, other than
(i) Debt reflected on the Parent's financial statements referred to in
subsection 5.1E hereof and other Debt existing on the date hereof;
(ii) Debt owed to the Lender; (iii) Debt of a Subsidiary of Borrower
to another Subsidiary of Borrower or to the Borrower, (iv) Debt owed
to Parent or Company; PROVIDED that no such indebtedness owed to
Parent or Company shall be required to be repaid or shall be prepaid,
in whole or in part, at any time any Loan is outstanding; (v) ordinary
course trade payables and (vi) obligations not in excess of $2,000,000
with respect to Capital Leases.
E. DIVIDENDS, ETC. Declare or pay any dividends, purchase or
otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as
such, or permit any of its Subsidiaries to purchase or otherwise
acquire for value any stock of the Borrower.
F. CONSOLIDATION, MERGER. Consolidate with or merge into any
other corporation or entity except that a Subsidiary of the Borrower
may consolidate with or merge into the Borrower, PROVIDED that the
Borrower shall be the surviving entity of such merger or
consolidation, and PROVIDED, FURTHER, that immediately after the
consummation of such consolidation or merger there shall exist no
condition or event which constitutes an Event of Default or a
Potential Event of Default.
G. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make or permit
to remain outstanding, or permit any Subsidiary to make or permit to
remain outstanding, any loan or advance to, or guarantee, induce or
otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stock or dividends of, or own,
purchase or acquire any stock, obligations or securities of or any
other interest in, or make any capital contribution to, any other
Person, except that the Borrower and its Subsidiaries may:
(i) own, purchase or acquire commercial paper rated Moody's
P-I, municipal bonds rated Moody's AA or better, direct
obligations of the United States of America or its agencies, and
obligations guaranteed by the United States of America;
(ii) acquire and own stock, obligations or securities
received from customers in connection with debts created in the
ordinary course of business owing to the Borrower or a
Subsidiary;
(iii) continue to own the existing capital stock of its
Subsidiaries;
(iv) endorse negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business;
(v) allow the Borrower's Subsidiaries to make or permit to
remain outstanding advances from the Borrower's Subsidiaries to
the Borrower;
(vi) make or permit to remain outstanding loans or advances
to the Borrower's Subsidiaries;
(vii) make or permit to remain outstanding Loans to
employees in an aggregate principal amount not in excess of
$500,000;
(viii) Company may make loans to Parent; and
(ix) short term investments with a maturity of 90 days or
less in major Mexican banking institutions.
H. ASSET SALES. Convey, sell, lease, transfer or otherwise
dispose of, or permit any Subsidiary to convey, sell, lease, transfer
or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its or any Subsidiary's business,
property or fixed assets outside the ordinary course of business,
whether now owned or hereafter acquired, except that the Borrower and
its Subsidiaries may convey, sell, lease, transfer or otherwise
dispose of business, property or fixed assets for consideration which
in the aggregate do not exceed 5% of the aggregate book value of the
consolidated assets of Parent and its Subsidiaries as of the Closing
Date.
3.H INCORPORATION OF COVENANTS FROM COMPANY CREDIT AGREEMENT.
The Borrower and each of the Guarantors hereby agrees that it will
honor and perform each of the covenants and other obligations set forth in
the Company Credit Agreement, to the extent applicable to the Borrower or
such Guarantor, and each such covenant and other obligation is hereby
incorporated herein by this reference with the same effect as though set
forth in their entirety herein, subject to the qualifications set forth in
the Company Credit Agreement, as it may be amended from time to time.
SECTION 7.
EVENTS OF DEFAULT
1.H EVENTS OF DEFAULT.
If any of the following events (``EVENTS OF DEFAULT'') shall occur and
be continuing:
A. The Borrower shall fail to pay any installment of the
principal when due, or shall fail to pay any installment of interest
or other amount payable hereunder when due, within two (2) Business
Days after notice from Lender; or
B. Any representation or warranty made by the Borrower or any
Guarantor herein or by the Borrower or any Guarantor (or any of their
respective officers) in connection with this Agreement shall prove to
have been incorrect in any material respect when made; or
C. Company shall fail to retain voting control of Parent and,
indirectly through Parent, Borrower; or
D. The Borrower or any Guarantor shall fail to perform or
observe any term, covenant or agreement contained in this Agreement
other than those referred to in subsections 7.1A and B above on its
part to be performed or observed and any such failure shall remain
unremedied for thirty (30) days after the Borrower or such Guarantor
knows of such failure; or
E. (i) The Borrower, any Guarantor or any of their respective
Subsidiaries shall (A) fail to pay any principal of, or premium or
interest on, any Debt, the aggregate outstanding principal amount of
which is at least $1,000,000 (excluding Debt evidenced by the Note),
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt, or (B) fail to perform or observe
any term, covenant or condition on its part to be performed or
observed under any agreement or instrument relating to any such Debt,
when required to be performed or observed, and such failure shall
continue after the applicable grace period, if any, specified in such
agreement or instrument; or
F. (i) The Borrower, any Guarantor or any of their respective
Subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of
its assets, or the Borrower, any Guarantor or any of their respective
Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower, any
Guarantor or any of their respective Subsidiaries any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded
for a period of thirty (30) days; or (iii) there shall be commenced
against the Borrower, any Guarantor or any of their respective
Subsidiaries any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within thirty
(30) days from the entry thereof; or (iv) the Borrower, any Guarantor
or any of their respective Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) and
(iii) above; or (v) the Borrower, any Guarantor or any of their
respective Subsidiaries shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due; or
G. One or more judgments or decrees shall be entered against
the Borrower, any Guarantor or any of their respective Subsidiaries
involving in the aggregate a liability (not paid or fully covered by
insurance) equal to or greater than $2,000,000 and all such judgments
or decrees shall not have been vacated, discharged, or stayed or
bonded pending appeal within thirty (30) days from the entry thereof;
or
H. The Guaranty, for any reason other than satisfaction in full
of all obligations of the Borrower under the Loan Documents, ceases to
be in full force and effect or is declared null and void, or any
Guarantor denies that it has any further liability under such guaranty
or gives notice to such effect;
THEN, (i) upon the occurrence of any Event of Default described in
clause F above, the Commitment shall immediately terminate and all Loans
hereunder with accrued interest thereon, and all other amounts owing under
this Agreement, the Note and the other Loan Documents shall automatically
become due and payable; and (ii) upon the occurrence of any other Event of
Default, the Lender may, by notice to the Borrower, declare the Commitment
to be terminated forthwith, whereupon the Commitment shall immediately
terminate, and/or, by notice to the Borrower, declare the Loans hereunder,
with accrued interest thereon, and all other amounts owing under this
Agreement, the Note and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
Except as expressly provided above in this subsection, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
SECTION 8.
MISCELLANEOUS
1.H AMENDMENTS, ETC.
No amendment or waiver of any provision of the Loan Documents nor
consent to any departure by the Borrower or any Guarantor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
2.H NOTICES, ETC.
Except as otherwise set forth in this Agreement, all notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telex or facsimile communication) and mailed or telegraphed or
telexed or sent by facsimile or delivered, if to the Borrower or any
Guarantor, at their addresses set forth on the signature page hereof; and
if to the Lender, at its address set forth on the signature page hereof;
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other parties. All such notices and
communications shall be effective when deposited in the mails, delivered to
the telegraph company, sent by telex or sent by facsimile, respectively,
except that notices and communications to the Lender pursuant to Section 2
or 7 shall not be effective until received by the Lender.
3.H RIGHT OF SETOFF; DEPOSIT ACCOUNTS.
Upon and after the occurrence of any Event of Default, the Lender is
hereby authorized by the Borrower, at any time and from time to time,
without notice, (a) to set off against, and to appropriate and apply to the
payment of, the obligations and liabilities of the Borrower under the Loan
Documents (whether matured or unmatured, fixed or contingent or liquidated
or unliquidated) any and all amounts owing by the Lender to the Borrower
(whether payable in Dollars or any other currency, whether matured or
unmatured, and, in the case of deposits, whether general or special, time
or demand and however evidenced) and (b) pending any such action, to the
extent necessary, to hold such amounts as collateral to secure such
obligations and liabilities and to return as unpaid for insufficient funds
any and all checks and other items drawn against any deposits so held as
the Lender in its sole discretion may elect. The Borrower and each
Guarantor hereby grants to the Lender a security interest in all deposits
and accounts maintained with the Lender. The Lender is authorized to debit
any account maintained with it or any affiliate of Lender by the Borrower
and each Guarantor for any amount of principal, interest or fees which are
then due and owing to the Lender. The rights of the Lender under this
subsection are in addition to other rights and remedies (including other
rights of set-off) which the Lender may have.
4.H NO WAIVER; REMEDIES.
No failure on the part of the Lender to exercise, and no delay in
exercising, any right under any of the Loan Documents shall operate as a
waiver thereof; nor shall any single or partial exercise of any right under
any of the Loan Documents 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.
5.H COSTS AND EXPENSES.
The Borrower and the Guarantors, jointly and severally, agree to pay
on demand all costs and expenses of the Lender (including attorney's fees
and the reasonable estimate of the allocated cost of in-house counsel and
staff) in connection with the preparation, amendment, modification,
enforcement (including, without limitation, in appellate, bankruptcy,
insolvency, liquidation, reorganization, moratorium or other similar
proceedings) or restructuring of the Loan Documents.
6.H PARTICIPATIONS.
The Lender may sell, assign, transfer, negotiate or grant
participations to other financial institutions in all or part of the
obligations of the Borrower and the Guarantors outstanding under the Loan
Documents, PROVIDED that any such sale, assignment, transfer, negotiation
or participation shall be in compliance with the applicable federal and
state securities laws; and PROVIDED, FURTHER that any assignee or
transferee agrees to be bound by the terms and conditions of this
Agreement. The Lender may, in connection with any actual or proposed
assignment or participation, disclose to the actual or proposed assignee or
participant, any information relating to the Borrower, the Guarantors or
any of their respective Subsidiaries.
7.H EFFECTIVENESS; BINDING EFFECT; GOVERNING LAW.
This Agreement shall become effective when it shall have been executed
by the Borrower, each Guarantor, and the Lender and thereafter shall be
binding upon and inure to the benefit of the Borrower, each Guarantor, the
Lender and their respective successors and assigns, except that neither the
Borrower nor any Guarantor shall have the right to assign its rights
hereunder or any interest herein or under any Loan Document without the
prior written consent of the Lender. THIS AGREEMENT AND THE NOTE(S) SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW DOCTRINE.
8.H WAIVER OF JURY TRIAL.
THE BORROWER, EACH GUARANTOR AND THE LENDER HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION AND THE LENDER/BORROWER/GUARANTOR RELATIONSHIP THAT IS BEING
ESTABLISHED. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to
the subject matter of this transaction, including without limitation,
contract claims, tort claims, breach of duty claims, and all other common
law and statutory claims. The Lender, the Borrower and each Guarantor
acknowledge that this waiver is a material inducement to enter into a
business relationship, that each has already relied on the waiver in
entering into this Agreement, and that each will continue to rely on the
waiver in their related future dealings. The Lender, the Borrower and each
Guarantor further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its
jury trial rights following consultation with legal counsel. THIS WAIVER
IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. In the event of
litigation, this Agreement may be filed as a written consent to a trial by
the court.
9.H CONSENT TO JURISDICTION; VENUE; LENDER FOR SERVICE OF PROCESS.
All judicial proceedings brought against the Borrower or any
Guarantor, with respect to this Agreement and the other Loan Documents may
be brought in any state or federal court of competent jurisdiction in The
City of New York or in the State of New York, and by execution and delivery
of this Agreement, the Borrower and each Guarantor, accepts for itself and
in connection with its properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees
to be bound by any judgment rendered thereby in connection with this
Agreement. The Borrower and each Guarantor irrevocably waives any right it
may have to assert the doctrine of FORUM NON CONVENIENS or to object to
venue to the extent any proceeding is brought in accordance with this
subsection. The Borrower and each Guarantor designates and appoints CT
Corporation Systems and such other Persons as may hereafter be selected by
the Borrower or any Guarantor, as the case may be, irrevocably agreeing in
writing to so serve as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being
hereby acknowledged by the Borrower and each Guarantor to be effective and
binding service in every respect. A copy of any such process so served
shall be mailed by registered mail to the Borrower or such Guarantor at its
address provided in the applicable signature page hereto, except that
unless otherwise provided by applicable law, any failure to mail such copy
shall not affect the validity of service of process. If any agent
appointed by the Borrower or any Guarantor refuses to accept service, the
Borrower and each Guarantor hereby agree that service upon it by mail shall
constitute sufficient notice. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right
of the Lender to bring proceedings against the Borrower or any Guarantor in
courts of any jurisdiction.
10.H LAWFUL RATE.
All agreements between the Borrower, any Guarantor and the Lender,
whether now existing or hereafter arising and whether written or oral, are
expressly limited so that in no contingency or event whatsoever, whether by
reason of demand or acceleration of the maturity of any of the indebtedness
hereunder or otherwise, shall the amount contracted for, charged, received,
reserved, paid or agreed to be paid to the Lender for the use, forbearance,
or detention of the funds advanced hereunder or otherwise, or for the
performance or payment of any covenant or obligation contained in any
document executed in connection herewith, exceed the highest lawful rate
permissible under applicable law (the ``HIGHEST LAWFUL RATE''), it being
the intent of the Borrower, each Guarantor and the Lender in the execution
hereof and of the Loan Documents to contract in strict accordance with
applicable usury laws. If, as a result of any circumstances whatsoever,
fulfillment by the any of the Borrower, any Guarantor or the Lender of any
provision hereof or of any of such documents, at the time performance of
such provision shall be due, shall involve transcending the limit of
validity prescribed by applicable usury law or result in the Lender having
or being deemed to have contracted for, charged, reserved or received
interest ( or amounts deemed to be interest) in excess of the maximum,
lawful rate or amount of interest allowed by applicable law to be so
contracted for, charged, reserved or received by the Lender, then, ipso
facto, the obligation to be fulfilled by the Borrower, or any Guarantor, as
the case may be, shall be reduced to the limit of such validity, and if,
from any such circumstance, the Lender shall ever receive interest or
anything which might be deemed interest under applicable law which would
exceed the Highest Lawful Rate, such amount which would be excessive
interest shall be refunded to the Borrower or such Guarantor, as the case
may be, or, to the extent (i) permitted by applicable law and (ii) such
excessive interest does not exceed the unpaid principal balance of the Note
and the amounts owing on other obligations of the Borrower or such
Guarantor, as the case may be, to the Lender under any Loan Document
applied to the reduction of the principal amount owing on account of the
Note or the amounts owing on other obligations of the Borrower or such
Guarantor, as the case may be, to the Lender under any Loan Document and
not to the payment of interest. All interest paid or agreed to be paid to
the Lender shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period of the
indebtedness hereunder until payment in full of the principal of the
indebtedness hereunder (including the period of any renewal or extension
thereof) so that the interest on account of the indebtedness hereunder for
such full period shall not exceed the highest amount permitted by
applicable law. This paragraph shall control all agreements between the
Borrower, the Guarantors, and the Lender.
11.H ENTIRE AGREEMENT.
This Agreement with Exhibits and the other Loan Documents embody the
entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
12.H SEPARABILITY OF PROVISIONS.
In case any one or more of the provisions contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
13.H EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
[Remainder of page intentionally left blank.]
<PAGE>
EXECUTION
CREDIT AGREEMENT
DATED AS OF JANUARY 31, 1996
AMONG
PILGRIM'S PRIDE, S.A. DE C.V.,
AS BORROWER,
PILGRIM'S PRIDE CORPORATION,
AVICOLA PILGRIM'S PRIDE DE MEXICO, S.A. DE C.V.,
COMPANIA INCUBADORA AVICOLA PILGRIM'S PRIDE, S.A. DE C.V.,
PRODUCTORA Y DISTRIBUIDORA DE ALIMENTOS, S.A. DE C.V.,
IMMOBILIARIA AVICOLA PILGRIM'S PRIDE, S. DE R.L. DE C.V.,
AND
CIA. INCUBADORA HIDALGO, S.A. DE C.V.,
AS GUARANTORS,
AND
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION,
AS LENDER
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 8,228
<SECURITIES> 0
<RECEIVABLES> 65,067
<ALLOWANCES> 0
<INVENTORY> 129,346
<CURRENT-ASSETS> 214,200
<PP&E> 464,411
<DEPRECIATION> 171,257
<TOTAL-ASSETS> 526,703
<CURRENT-LIABILITIES> 123,384
<BONDS> 202,128
276
0
<COMMON> 0
<OTHER-SE> 147,482
<TOTAL-LIABILITY-AND-EQUITY> 526,703
<SALES> 272,004
<TOTAL-REVENUES> 272,004
<CGS> 255,503
<TOTAL-COSTS> 268,320
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,968
<INTEREST-EXPENSE> 5,210
<INCOME-PRETAX> (1,103)
<INCOME-TAX> (548)
<INCOME-CONTINUING> (555)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,780)
<CHANGES> 0
<NET-INCOME> (3,355)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
