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 28, 1998
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 11, 1998
INDEX
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited):
Condensed consolidated balance sheets:
March 28, 1998 and September 27, 1997
Consolidated statements of income (loss):
Three months and six months ended March 28, 1998 and March 29, 1997
Consolidated statements of cash flows:
Six months ended March 28, 1998 and March 29, 1997
Notes to condensed consolidated financial statements-March 28, 1998
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
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ITEM 1: FINANCIAL STATEMENTS :
<S> <C> <C> <C> <C>
March 28, September 27,
1998 1997
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 7,256 $ 20,338
Trade accounts and other receivables,
less allowance for doubtful accounts 73,894 77,967
Inventories 150,365 146,180
Deferred income taxes 3,279 3,998
Prepaid expenses 2,114 2,353
Other current assets 311 311
Total Current Assets 237,219 251,147
Other Assets 17,703 18,094
Property, Plant and Equipment 535,440 510,661
Less accumulated depreciation 215,557 200,778
319,883 309,883
$ 574,805 $ 579,124
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ - $ -
Accounts payable 61,057 71,225
Accrued expenses 32,055 34,784
Current maturities of long-term debt 11,589 11,596
Total Current Liabilities 104,701 117,605
Long-Term Debt, less current maturities 219,394 224,743
Deferred Income Taxes 50,295 53,418
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 119,534 102,477
Total Stockholders' Equity 199,573 182,516
$ 574,805 $ 579,124
</TABLE>
See notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 28 1998
<TABLE>
<CAPTION>
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 28, MARCH 29, MARCH 28, MARCH 29,
1998 1997 1998 1997
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
Net Sales $324,446 $303,401 $662,333 $601,207
Costs and Expenses:
Cost of sales 297,585 280,316 606,092 547,855
Selling, general
and administrative 15,463 13,425 29,472 27,378
313,048 293,741 635,564 575,233
Operating income 11,398 9,660 26,769 25,974
Other Expense (Income):
Interest expense, net 5,093 5,284 10,129 10,733
Foreign exchange loss 574 99 1,102 536
Miscellaneous, net (488) (397) (951) (2,906)
5,179 4,986 10,280 8,363
Income before income taxes 6,219 4,674 16,489 17,611
Income tax (benefit) expense (549) (280) (1,396) 2,552
Net income $ 6,768 $ 4,954 $ 17,885 $ 15,059
Net income per common share $ .25 $ .18 $ .65 $ .55
Dividends per common share $ .015 $ .015 $ .03 $ .03
Weighted average
shares outstanding 27,589,250 27,589,250 27,589,250 27,589,250
</TABLE>
See Notes to condensed consolidated financial statements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 28 1998
<TABLE>
<CAPTION>
PILGRIM'S PRIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C> <C> <C>
MARCH 28, 1998 MARCH 29, 1997
Cash Flows From Operating Activities:
Net income $17,885 $15,059
Adjustments to reconcile net income to cash
Provided by operating activities:
Depreciation and amortization 16,066 14,229
(Gain) loss on property disposals (37) 46
Provision for doubtful accounts 921 (779)
Deferred income taxes (2,404) 1,689
Changes in operating assets and liabilities:
Accounts and other receivable 3,151 (5,783)
Inventories (4,185) (1,061)
Prepaid expenses 234 703
Accounts payable and accrued expenses (12,897) (14,269)
Other 11 (162)
Cash Flows Provided by Operating Activities 18,745 9,672
Investing Activities:
Acquisitions of property, plant and equipment (25,801) (12,162)
Proceeds from property disposals 512 330
Other, net (98) (258)
Net Cash Used In Investing Activities (25,387) (12,090)
Financing Activities:
Proceeds from notes payable to bank 21,000 31,500
Re-payment of notes payable to banks (21,000) (34,500)
Proceeds from long-term debt 21,126 -
Payments on long-term debt (26,556) (4,068)
Cash dividends paid (828) (828)
Cash Used In Financing Activities (6,258) (7,896)
Effect of exchange rate changes on cash and
cash equivalents (183) (9)
Decrease in cash and cash equivalents (13,083) (10,323)
Cash and cash equivalents at beginning of year 20,339 18,040
Cash and cash equivalents at end of period $7,256 $7,717
Supplemental disclosure information:
Cash paid during the period for
Interest (net of amount capitalized) $10,547 $10,961
Income Taxes $480 $1,807
</TABLE>
See notes to condensed consolidated financial statements.
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. Operating results for the period ended March 28,
1998 are not necessarily indicative of the results that may
be expected for the year ended September 26, 1998. 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 27, 1997.
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.
NOTE B--NET INCOME PER COMMON SHARE
Earnings per share for the periods ended March 28, 1998 and
March 29, 1997 are based on the weighted average shares
outstanding for the periods.
NOTE C--INVENTORIES
The following table presents certain information regarding
the Company's U.S. and Mexican operations.
Inventories consist of the following:MARCH 28, 1998 SEPTEMBER
27, 1997
(in thousands)
Live chickens and hens $ 65,669 $ 68,034
Feed, eggs and other 46,429 43,878
Finished chicken products 38,267 34,268
$ 150,365 $ 146,180
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
March 28 1998
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Profitability in the chicken industry can be materially
affected by the commodity prices of feed grains and the
commodity prices of chicken and chicken parts, each of which
are determined largely by supply and demand. As a result,
the chicken industry as a whole has been characterized by
cyclical earnings. Cyclical fluctuations in earnings of
individual chicken companies can be mitigated somewhat by:
(i) business strategy, (ii) product mix, (iii) sales and
marketing plans, and (iv) operating efficiencies. In an
effort to reduce price volatility and to generate higher,
more consistent profit margins, the Company has concentrated
on the production and marketing of prepared food products,
which generally have higher margins than the Company's other
products. Additionally, the production and sale in the U.S.
of prepared foods products reduces the impact of feed grain
costs on the Company's profitability. As further processing
is performed, feed grain costs become a decreasing percentage
of a product's total production costs.
The following table presents certain information regarding
the Company's U.S and Mexican operations.
<TABLE>
<CAPTION>
Net Sales Net Sales
Three Months Ended Six Months Ended
March 28, March 29, March 28, March 29,
1998 1997 1998 1997
(In Thousands)
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers:
United States $254,342 $242,223 $513,918 $473,761
Mexico 70,104 61,178 148,415 127,446
Operating Income:
United States $ 3,104 $ 4,031 $ 5,577 $14,400
Mexico 8,294 5,629 21,192 11,574
</TABLE>
The following table presents certain items as a percentage of
net sales for the periods indicated.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
Three Months Ended Six Months Ended
March 28, March 29, March 28, March 29,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 91.7% 92.4% 91.5% 91.1%
Gross Profit 8.3% 7.6% 8.5% 8.9%
Selling, General
and Administravite 4.8% 4.4% 4.5% 4.6%
Operating Income 3.5% 3.2% 4.0% 4.3%
Interest Expense 1.6% 1.7% 1.5% 1.8%
Income before
Income Taxes 1.9% 1.5% 2.5% 2.9%
Net Income (Loss) 2.1% 1.6% 2.7% 2.5%
</TABLE>
SECOND QUARTER 1998, COMPARED TO SECOND QUARTER
1997
NET SALES. Consolidated net sales were $324.4
million for the second quarter of fiscal 1998, an
increase of $21.0 million, or 6.9%, over the second
quarter of fiscal 1997. The increase in
consolidated net sales resulted from a $14.1
million increase in U.S. chicken sales to $218.2
million, a $8.9 million increase in Mexican chicken
sales to $70.1 million, offset by a $2.0 million
decrease of sales of other U.S. products to $36.1
million. The increase in U.S. chicken sales was
primarily due to a 9.8% increase in dressed pounds
produced resulting primarily from the Company's
expansion of existing facilities and the purchase
of poultry producing assets capable of producing
650,000 chickens per week from Green Acre Foods,
Inc. on April 15, 1997, offset partially by a 2.6
% decrease in total revenue per dressed pound
produced. The increase in Mexican chicken sales was
primarily due to a 16.2% increase in total revenue
per dressed pound offset partially by a 1.4 %
decrease in dressed pound produced. The decrease
in sales of other U.S. products was primarily the
result of decreased sales of the Company's poultry
by-products group. Increased revenues per dressed
pound produced in Mexico were primarily the result
of higher sales prices as well as generally
improved economic conditions in Mexico compared to
the prior year.
COST OF SALES. Consolidated cost of sales was
$297.6 million in the second quarter of fiscal
1998, an increase of $17.3 million, or 6.2%, over
the second quarter of fiscal 1997. The increase
primarily resulted from a $12.5 million increase in
cost of sales of U.S. operations, and a $4.8
million increase in the cost of sales in Mexican
operations. The cost of sales increase in U.S.
operations of $12.5 million was due to a 9.8%
increase in dressed pounds produced and increased
production of higher cost and margin products in
prepared foods partially offset by a 9.5% decrease
in feed ingredient cost per pound when compared to
second quarter 1997. The $4.8 million cost of sales
increase in the Mexican operations was due
primarily to a 10.6% increase in average costs of
sales per pound offset partially by a 1.4% decrease
in dressed pounds produced.
GROSS PROFIT. Gross profit as a percentage of sales
increased to 8.3% in the second quarter of fiscal
1998 from 7.6% in the second quarter of fiscal
1997. The increased gross profit resulted from
significantly higher margins in Mexico.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Consolidated selling, general and administrative
expenses were $15.5 million in the second quarter
of fiscal 1998, and $13.4 million in second quarter
of fiscal 1997. Consolidated selling, general and
administrative expenses as a percentage of sales
increased in the second quarter of fiscal 1998 to
4.8% compared to 4.4% in the second quarter of
fiscal 1997. The dollar increases were due to
higher selling, general and administration expenses
associated with higher sales volumes experienced in
both U.S. and Mexican operations.
OPERATING INCOME. Consolidated operating income was
$11.4 million for the second quarter of fiscal
1998, an increase of $1.7, or 17.5%, million when
compared to the second quarter of fiscal 1997,
resulting primarily from higher margins experienced
in the Mexican operations.
INTEREST EXPENSE. Consolidated net interest expense
decreased to $5.1 million, or 3.6%, in the second
quarter of fiscal 1998, when compared to $5.3
million in the second quarter of fiscal 1997, due
to lower outstanding debt level. As a percentage of
sales, interest expense decreased to 1.6% in the
second quarter of fiscal 1998 compared to 1.7% in
the second quarter of fiscal 1997.
INCOME TAXES. The increase in consolidated income
tax benefit from $.3 million in the second quarter
of fiscal 1997 to $.6 million in the second quarter
of fiscal 1998 is due to an increase in earnings of
the Company's Mexican operations as a percentage of
consolidated earnings. Mexican earnings are not
currently subject to income taxes.
FISCAL FIRST SIX MONTHS 1998 COMPARED TO
FISCAL FIRST SIX MONTHS 1997
NET SALES. Consolidated net sales were $662.3
million for the first six months fiscal 1998, an
increase of $61.1 million, or 10.2%, over the first
six months fiscal 1997. The increase in
consolidated net sales resulted from a $39.7
million increase in U.S. chicken sales to $436.9
million, a $21.0 million increase in Mexican
chicken sales to $148.4 million and by a $.4
million increase of sales of other U.S. products to
$77.0 million. The increase in U.S. chicken sales
was primarily due to a 14.3% increase in dressed
pounds produced resulting primarily from the
Company's expansion of existing facilities and the
purchase of poultry producing assets capable of
producing 650,000 chickens per week from Green Acre
Foods, Inc. on April 15, 1997, offset partially by
a 3.7% decrease in total revenue per dressed pound
produced. The increase in Mexican chicken sales was
primarily due to a 9.7% increase in total revenue
per dressed pound and by a 6.2% increase in
dressed pound produced. Increased revenues per
dressed pound produced in Mexico were primarily the
result of higher sales prices as well as generally
improved economic conditions in Mexico compared to
the prior year. The increase in sales of other U.S.
products was primarily the result of increased
sales of the Company's wholesale feed operations
and poultry by-products group.
COST OF SALES. Consolidated cost of sales was
$606.1 million in the first six months fiscal 1998,
an increase of $58.2 million, or 10.6%, over the
first six months fiscal 1997. The increase
primarily resulted from a $49.2 million increase in
cost of sales of U.S. operations, and a $9.0
million increase in the cost of sales in Mexican
operations. The cost of sales increase in U.S.
operations of $49.2 million was due to a 14.3%
increase in dressed pounds produced and increased
production of higher cost and margin products in
prepared foods partially offset by a 6.7% decrease
in feed ingredient cost per pound when compared to
second quarter 1997. The $9.0 million cost of sales
increase in the Mexican operations was due
primarily to a 6.2% increase in dressed pounds
produced and by a 1.9% increase in average costs of
sales per pound.
GROSS PROFIT. Gross profit as a percentage of sales
decreased to 8.5% in the first six months fiscal
1998 from 8.9% in the first six months fiscal 1997.
The decreased gross profit resulted mainly from
lower margins in U.S. operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Consolidated selling, general and administrative
expenses were $29.5 million in the first six months
fiscal 1998 and $27.4 million in first six months
fiscal 1997. Consolidated selling, general and
administrative expenses as a percentage of sales
decreased slightly in the first six months fiscal
1998 to 4.5% compared to 4.6% in the first six
months fiscal 1997. The 7.6% increase in dollar
amounts when compared to the same period in 1997
was due to due to higher selling, general and
administration expenses associated with higher
sales volumes experienced in both U.S. and Mexican
operations.
OPERATING INCOME. Consolidated operating income was
$26.8 million for the first six months fiscal 1998,
an increase of $.8 million, or 3.1%, when compared
to the first six months fiscal 1997, resulting
primarily from higher margins experienced in the
Mexican operations.
INTEREST EXPENSE. Consolidated net interest expense
decreased to $10.1 million, or 5.6%, in the first
six months fiscal 1998, when compared to $10.7
million in the first six months fiscal 1997, due to
lower outstanding debt levels when compared to the
first six months fiscal 1997. As a percentage of
sales interest expense decreased to 1.5% in the
first six months fiscal 1998 compared to 1.8% in
the first six months fiscal 1997.
MISCELLANEOUS EXPENSE. Consolidated miscellaneous,
net, a component of "Other Expense (Income)", for
the first six months of fiscal 1997 includes a $2.2
million final settlement of claims resulting from
the January 8, 1992 fire at the Company's prepared
foods plant in Mt. Pleasant, Texas.
INCOME TAXES. The change in consolidated income tax
from an expense of $2.6 million in the first six
months of fiscal 1997 to a $1.4 million benefit in
the first six months of fiscal 1998 is due to an
increase in earnings of the Company's Mexican
operations as a percentage of consolidated
earnings. Mexican earnings are not currently
subject to income taxes.
LIQUIDITY AND CAPITAL RESOURCES
At March 28, 1998, the Company's working capital
was at $132.5 million and its current ratio
increased to 2.27 to 1 compared with working
capital of $133.5 million and a current ratio of
2.14 to 1 at September 27, 1997. Strong profits
improved financial ratios in the fiscal first six
months of 1998.
Trade accounts and other receivables were $73.9
million at March 28, 1998, a $4.1 million decrease
from September 27, 1997. The 5.2% decrease was due
primarily to generally faster collections of
receivables in the Company's Mexican operations
during the period.
Inventories were $150.4 million at March 28,
1998,compared to $146.2 million at September 27,
1997. The $4.2 million increase between September
27, 1997 and March 28, 1998 was due primarily to
higher finished poultry products inventories.
Accounts payable were $61.1 million at March 28,
1998, a 14.2% decrease from September 27, 1997, due
primarily to lower feed ingredient costs
experienced during the period.
Accrued expenses were $32.1 million at March 28,
1998, a $2.7 million decrease from September 27,
1997. The 7.8 % decrease was primarily due to
normal seasonal variations in expense accruals.
Capital expenditures for the six months ended March
28, 1998 were $25.8 million and were incurred
primarily to acquire or expand production
capacities in the U.S., improve efficiencies,
reduce costs and for the routine replacement of
equipment. The Company anticipates that it will
spend approximately $55 million for capital
expenditures in fiscal year 1998 and expects to
finance such expenditures with available operating
cash flows and long-term financing.
At March 28, 1998, the company's stockholder's
equity increased to $199.6 million from $182.5
million at September 27, 1997. Total debt to
capitalization decreased to 53.6% at March 28, 1998
compared to 56.4% at September 27, 1997. On March
2, 1998, the Company secured $20 million in
unsecured revolving borrowing capacity for its
Mexican operation from a new lender at interest
rates of 1.5% and 1.75% over LIBOR. The Company
maintains $120 million in revolving credit
facilities and $45 million in secured term
borrowing facilities. The credit facilities provide
for interest at rates ranging from LIBOR plus one
and three-eighths percent to LIBOR plus two percent
and are secured by inventory, trade accounts
receivable and fixed assets or are unsecured. As of
May 11, 1998, $97.4 million was available under the
revolving credit facilities and $15 million was
available under the term borrowing facilities.
IMPACT OF MEXICO PESO EXCHANGE RATE. 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 3, 1994 to a low of 8.68 to 1 U.S. dollar
at March 11, 1998. The decline in the Mexican peso
exchange rate affected the Company's operations
directly and indirectly as a result of the related
economic recession in Mexico in fiscal 1995.
Similarly, the Company's results of operations were
adversely affected by: (i) the continuation of the
economic recession in Mexico in fiscal 1996, as
well as, (ii) significantly higher feed grain costs
in fiscal 1996 (which included record high corn
prices).In fiscal 1997 and the first six months of
fiscal 1998, however, the Company benefited
substantially from: (i) a rebounding economy in
Mexico when compared to fiscal 1996 and 1995, and,
(ii) the adjustment in the supply of poultry
products in Mexico to the levels of demand existing
after the economic recession. On May 8, 1998 the
Mexican peso closed at 8.48 to 1 U.S. dollar. No
assurance can be given as to the future valuation
of the Mexican peso and how further movement in the
Mexican peso could affect future earnings
positively or negatively.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
10.32 Revolving Credit Agreement dated March 2,
1998 by and between Pilgrim's Pride de
Mexico, S.A. de C.V., (the borrower); Avicola
Pilgrim's Pride de Mexico, S.A. de C.V. (the
Mexican Guarantor), Pilgrim's Pride
Corporation (the U.S. Guarantor), and
COAMERICA Bank (the bank).
The Company did not file any reports on Form 8-K
during the three months ended March 28, 1998.
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
/s/ Richard A. Cogdill
Date 5/11/98 Richard A. Cogdill
Executive Vice President and
Chief Financial Officer and
Secretary and Treasurer
in his respective
capacity as such
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-END> MAR-28-1998
<CASH> 7256
<SECURITIES> 0
<RECEIVABLES> 73894
<ALLOWANCES> 4744
<INVENTORY> 150365
<CURRENT-ASSETS> 237219
<PP&E> 535440
<DEPRECIATION> 215557
<TOTAL-ASSETS> 574805
<CURRENT-LIABILITIES> 104701
<BONDS> 219394
0
0
<COMMON> 276
<OTHER-SE> 199297
<TOTAL-LIABILITY-AND-EQUITY> 574805
<SALES> 324446
<TOTAL-REVENUES> 324446
<CGS> 297585
<TOTAL-COSTS> 313048
<OTHER-EXPENSES> 86
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5093
<INCOME-PRETAX> 6219
<INCOME-TAX> (549)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6768
<EPS-PRIMARY> .25
<EPS-DILUTED> 0
</TABLE>
REVOLVING CREDIT AGREEMENT
Pilgrim's Pride, S.A. de C.V. a corporation organized and existing
under the laws of the United Mexican States (hereinafter referred to as
the "BORROWER"), Avicola Pilgrim's Pride de M<e'>xico, S.A. de C.V.,
corporation organized and existing under the laws of the United Mexican
States (hereinafter referred to as the "MEXICAN GUARANTOR") and Pilgrim's
Pride Corporation, corporation organized and existing under the laws of
the State of Delaware of the United States of America (hereinafter
referred to as the "U.S.GUARANTOR"), and COMERICA BANK, a banking
institution organized under the laws of the State of Michigan of the
United States of America (hereinafter referred to as the "BANK"), hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms shall have the following meanings, such meanings to
be equally applicable to both the singular and plural forms of the terms
defined:
(a) "ADVANCE" means each advance on the Loan made by the Bank to
the Borrower.
(b) "BUSINESS DAY" means a day on which banks in the cities of
Detroit, Michigan, London, England, and Mexico City, Federal District,
are open for business.
(c) "DATE OF ADVANCE" means the date on which the proceeds of each
Advance are disbursed by the Bank to the Borrower, pursuant to the terms
hereof.
(d) "DOLLARS" means dollars, lawful currency of the United States
of America.
(e) "EVENTS OF DEFAULT" means any of the events described in
Section 7.01 hereof.
(f) "GUARANTORS" means (i) the U.S. Guarantor, which will guarantee
the Loan for an amount not less than U.S.$10,000,000.00 (Ten Million
Dollars), of the principal amount and (ii) the Mexican Guarantor which
will guarantee the total outstanding amount of the Loan plus accrued
interest.
(g) "GUARANTY" means the guarantees granted by the Guarantors
pursuant to the terms of Article IV hereto.
(h) "FEDERAL FUNDS ADVANCE" means an Advance which bears an
interest at the Federal Funds Rate as defined below.
(i) "FEDERAL FUNDS RATE" means a per annum rate of interest
determined on the basis of quotations for overnight federal funds
transactions appearing on Page 60 of the Knight-Ridder Moneycenter News
Services (Garvin GuyButler-Domestic Composite Indicators - Term Federal
Funds for Domestic Banks), on any day that he Federal Funds Rate shall be
the applicable interest rate with respect to the indebtedness outstanding
hereunder . If, for any reason, such rates do not appear on said Page 60
of the Knight-Rider Moneycenter News Services (or otherwise on such
service), the "Federal Funds Rate" shall be determined by reference to
such other publicly available service for displaying Federal Funds Rates,
as shall be designated by the Bank from time to time.
(j) "EURODOLLAR RATE" means, a per annum interest rate which is
equal to the quotient of:
(i) the per annum interest rate at which Bank's Eurodollar
Lending Office offers deposits to prime banks in the eurodollar
market in an amount comparable to the relevant Advance and for a
period equal to the period from the Advance Date to the Payment
Date, at or about 11:00 a.m. (Detroit, Michigan time)(or as soon
thereafter as practical) on the first day of such Advance divided by
(ii) a percentage equal to 100% minus the maximum rate during
the period from the Advance Date to the Payment Date at which Bank
is required to maintain reserves on "Euro-currency Liabilities" as
defined in and pursuant to Regulation D of the Board of Governors of
the Federal Reserve System or, if such regulation or definition is
modified, and as long as Bank is required to maintain reserves
against a category of liabilities which includes eurodollar deposits
or includes a category of assets which includes eurodollar loans,
the rate at which such reserves are required to be maintained on
such category.
(k) "EURODOLLAR LENDING OFFICE" means Bank's office located in
Cayman Islands, British West Indies, or such other branch of the Bank,
domestic or foreign, as it may hereinafter designate as its Eurodollar
Lending Office by notice to the Borrower.
(l) "INDENTURE" means, the Indenture dated as of June 3, 1993,
between Pilgrim's Pride Corporation, as the issuer and Ameritrust Texas
National Association, as the trustee.
(m) "LIBOR RATE" shall mean, with respect to each day during the
applicable Advance pertaining to any portion of the Indebtedness
outstanding under a Note, the rate of interest determined on the basis of
the rate for deposits in United States Dollars for a period equal up to 3
(three) months commencing on the first day of such Date of Advance,
appearing on Page 3750 of the Telerate Service as of 11:00 a.m. (Detroit,
Michigan time) (or as soon thereafter as practical), 3 (three) Business
Days prior to each Date of Advance, for up to 3 (three) month-dollar
deposits. In the event that such rate does not appear on Page 3750 of
the Telerate Service (or otherwise on such Service), the "Libor Rate"
shall be determined by reference to such other publicly available service
for displaying eurodollar rates as may be agreed upon by Bank and
Borrower, or, in the absence of such agreement, the "Libor Rate" shall,
instead, be the per annum rate equal to the average (rounded upward, if
necessary, to the nearest one-sixtyfourth of one percent (1/64%) of the
rate at which Bank is offered dollar deposits at or about 11:00 a.m.
(Detroit, Michigan time)(or as soon thereafter as practical), three (3)
Business Days prior to each Date of Advance for up to 3(three) month-
dollar deposits. in the interbank eurodollar market in an amount
comparable to the principal amount under the relevant Notice of Borrowing
which is to bear interest for a period of up to .3 (three) months.
(n) "LOAN" means the loan granted by the Bank to the Borrower
pursuant to Article II hereof for the principal amount of up to U.S.
$20,000,000.00 (Twenty Million Dollars), lawful currency of the United
States of America.
(o) "MATURITY DATE" shall mean the maturity date for each Advance.
(p) "MEXICO" means the United Mexican States.
(q) "NOTE" means the promissory notes made by the Borrower to the
order of the Bank, and guaranteed (POR AVAL) (i) by the U.S. Guarantor,
substantially in the form attached hereto as Exhibit "B and (ii) by the
Mexican Guarantor in the form attached hereto as Exhibit "C"evidencing
the obligation of the Borrower and the Guarantors to repay the Bank the
principal amount stated thereof and interest.
(r) "PAYMENT DATE" means a date on which the Borrower must make to
the Bank a payment on account of principal and interest hereunder or
under the Note(s).
(s) "REVOLVING CREDIT MATURITY DATE" shall mean the date which is 3
(three) years after the date hereof.
(t) "UNITED STATES" or "US" means the Unites States of America.
SECTION 1.02. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with
accounting principles generally accepted in the United States of America,
and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles, and in accordance with
accounting practices and policies consistently applied (except for
changes in application as disclosed therein) by the Borrower and the
Mexican Guarantor in prior fiscal years.
ARTICLE II
AMOUNT AND TERMS OF THE LOAN
SECTION 2.01. THE LOAN.
(a) Subject to the terms and conditions hereinafter set forth, the
Bank will make advances of the Loan to the Borrower from the date hereof
to the Revolving Credit Maturity Date, on the Date of the Advance, which
shall occur on the date requested by the Borrower to the Bank in a notice
of borrowing, in the terms of Exhibit "A" hereto, (the "NOTICE OF
BORROWING"), at any time from and after the date hereof.
(b) The principal amount of the Loan shall be for an aggregate
amount up to U.S.$20,000,000.00 (Twenty Million Dollars), without
including therein interest, commissions, fees or any other expenses which
must be paid by the Borrower to the Bank hereunder.
(c) The total amounts represented by the Advances outstanding
hereunder may not exceed the sum of (i) one hundred percent (100%) of net
third party accounts receivable, which include accounts receivable less
any reserves for doubtful accounts, plus fifty percent (50%) of the
inventory and/or (ii) along with the amounts disposed under a Loan
Agreement entered into with Comerica Bank M<e'>xico, S.A., Instituci<o'>n
de Banca M<u'>ltiple, and Bancomer, S.A., Instituci<o'>n de Banca
M<u'>ltiple to the amount equivalent to U.S.$20,000,000.00 (Twenty
million Dollars of the United States of America). In the event the
Borrower requests an Advance, which in addition to the then outstanding
Advances exceeds the limit set forth above, the Bank will not be
obligated to make such Advance.
(d) The Notice of Borrowing shall be delivered by the Borrower to
the Bank, specifying the Date of Advance and the amount of the Loan that
should be advanced by the Bank to the Borrower hereunder. If the Notice
of Borrowing is delivered by the Borrower to the Bank (i) 3 (three)
Business Days prior to the corresponding Date of Advance, any such
Advance shall bear interest at a per annum rate equal to the result of
adding the applicable margin (as set forth in Section 2.04) to the Libor
Rate ("LIBOR RATE ADVANCE"), and (ii) on the same Business Day as the
Date of the Advance, any such Advance shall bear interest at a per annum
rate equal to the result of adding the applicable margin (as set forth in
Section 2.04) to the Eurodollar Rate ("EURODOLLAR RATE ADVANCE").
Any Eurodollar Rate Advance may be converted into a Libor Rate Advance
with a written notice delivered by the Borrower to the Bank 3 (three)
Business Days after the corresponding Eurodollar Rate Advance ("NOTICE OF
CONVERSION"). The Bank, on the day such Notice of Conversion is received,
shall confirm to the Borrower the interest rate applicable to the Advance
as of such date, in the understanding that the interest rate conversion
shall be at the discretion of the Bank and this confirmation shall be
conclusive and binding to the Borrower.
SECTION 2.02. REPAYMENT OF THE ADVANCE. The principal amount of
and interest accrued under each Advance made to the Borrower pursuant to
Section 2.01 above shall be repaid by the Borrower on the Payment Date
indicated in the Notice of Borrowing issued in respect of such Advance,
but in any event, not later than 90 (ninety) days after the Date of
Advance corresponding to any such Borrowing. Principal amounts paid by
the Borrower may be subsequently reborrowed provided that no advance may
mature after the Revolving Credit Maturity Date.
SECTION 2.03. REVIEW DATE. Without commitment by either party, the
Bank and the Borrower agree to review the Agreement during 1999 and
consider the extension of the Agreement for an additional one year
period, subject to the Lender's satisfaction with the financial
performance and economic situation of the Borrower.
SECTION 2.04. INTEREST ON THE ADVANCE. The principal amount of
each Advance from time to time outstanding shall bear interest from the
Date of Advance and until its corresponding Payment Date, payable on such
Payment Date, at a per annum rate equal to the result obtained by adding
(i) 1.50% (one point fifty percent) to the then applicable Libor Rate or
Eurodollar Rate (as determined in accordance with Section 2.01), as the
case may be, on the date of the Advance if the amount is guaranteed by
the U.S. Guarantor , and (ii) 1.75% (one point seventy five percent) to
the then applicable Libor Rate or Eurodollar Rate (as determined in
accordance with Section 2.01), as the case may be, on the date of the
Advance if the amount is to be guaranteed by the Mexican Guarantor only.
If the Bank determines that due to circumstances affecting the foreign
exchange and interbank markets it is not possible to maintain the funding
at such rate, then the Bank shall forthwith give notice thereof to the
Borrower. Thereafter, until the Bank notifies the Borrower that such
circumstances no longer exist, the right of the Borrower to request a
Eurodollar Rate or Libor Rate Advance shall be suspended and the Borrower
shall only be permitted to request Federal Funds Advances.
SECTION 2.05. ALTERNATIVE INTEREST RATE.
(a) In the event that the Bank determines (which determination
shall be binding and conclusive for all the parties hereto) that by
virtue of circumstances affecting the London Interbank Market, adequate
and reasonable means do not exist to determine the Eurodollar Rate
applicable to an Advance and/or to the Loan, the Bank shall immediately
notify the Borrower of such circumstances by fax, telex or cable, and in
that event, the interest rate applicable to Advances made thereafter
shall be at all times equal to the result obtained by adding (i) 1.625%
(one point six hundred and twenty five percent) to the Federal Funds Rate
if the amount is to be guaranteed by the U.S. Guarantor and the Mexican
Guarantors, or (ii) 1.875% (one point eight hundred and seventy five
percent) to the Federal Funds Rate if the amount is to be guaranteed by
the Mexican Guarantor only.
Interest on the unpaid balance of each outstanding Federal Funds
Advance shall be payable monthly on the first Business Day of each month,
commencing on the first Business Day of the month next following the Date
of Advance, and on the Maturity Date.
(b) The Borrower hereby agrees that in the event it does not accept
the alternative interest rate referred to in paragraph (a) above of this
Section 2.05 then the Bank shall be released from its obligation to
maintain the Loan. In such an event the Borrower shall pay, precisely on
the next succeeding Payment Date following the Bank's notification, the
principal amount of the Loan, together with accrued interest and fees to
the date of such payment. The Borrower hereby also agrees that in the
event of such payment all of the Bank's obligations hereunder shall
terminate immediately without any liability for the Bank. The Bank
hereby also agrees that in the event of payment in full of all of the
Borrower's obligations hereunder, the Borrower's obligations shall
terminate immediately without any liability for the Borrower.
SECTION 2.06. FAILURE TO PAY OR TO BORROW. If Borrower makes any
payment of principal with respect to any Advance on any day other than
the last day of the Interest Period applicable thereto (whether
voluntarily, by acceleration, or otherwise), or if Borrower fails to
borrow any Advance after notice has been given by Borrower to Bank in
accordance with the terms hereof, or if Borrower fails to make any
payment of principal or interest in respect of an Advance when due,
Borrower shall reimburse Bank, on demand, for any resulting loss, cost or
expense incurred by Bank as a result thereof, including, without
limitation, any such loss, cost or expense incurred in obtaining,
liquidating, employing or redeploying deposits from third parties,
whether or not Bank shall have funded or committed to fund such Advance.
Such amount payable by Borrower to Bank may include, without limitation,
an amount equal to the excess, if any, of (a) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed,
refunded or converted, for the period from the date of such prepayment or
of such failure to borrow, refund or convert, through the Payment Date,
at the applicable rate of interest for said Advance, over (b) the amount
of interest (as reasonably determined by Bank) which would have accrued
to Bank on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank eurodollar market.
Calculation of any amounts payable to Bank hereunder shall be made as
though Bank shall have actually funded or committed to fund the relevant
Advance through the purchase of an underlying deposit in an amount equal
to the amount of such Advance and having a maturity comparable to the
period from the Advance Date to the Payment Date; provided, however, that
Bank may fund any Advance in any manner it deems fit and the foregoing
assumptions shall be utilized only for the purpose of the calculation of
amounts payable under this paragraph. Upon the written request of
Borrower, Bank shall deliver to Borrower a certificate setting forth the
basis for determining such losses, costs and expenses, which certificate
shall be PRIMA FACIE evidence of the amount owing.
SECTION 2.07. DEFAULT INTEREST. In the event that the Borrower
fails to pay all or
part of the principal amount of the Advances hereunder or under the
Note(s) on the respective Payment Date, the past due amount will bear
interest from and after the corresponding maturity and until payment in
full at a rate equal to the rate of interest otherwise prevailing
hereunder in respect of each Advance or under the Note(s) plus 2% (two
percent) per annum.
SECTION 2.08. COMPUTATION OF INTEREST. Interest corresponding to
any Libor Rate-based or Eurodollar Rate-based, as the case may be,
Advance hereunder shall be computed by the actual number of calendar days
elapsed based on a 360 (three hundred and sixty) day year factor.
Interest corresponding to any Federal Funds Rate-based Advance shall be
computed on the basis of a year of 360 (three hundred and sixty) days,
and shall be assessed for the actual number of days elapsed, and in such
computation, effect shall be given to any change in the Federal Funds
Rate as a result of any change in the Federal Funds Rate on the date of
each such change.
SECTION 2.09. UP-FRONT FEE. The Borrower shall pay the Bank on the
first Date of Advance an up-front fee equal to U.S.$25,000.00 (Twenty
Five Thousand Dollars), calculated by applying 0.125% (zero point one
hundred and twenty five percent) to U.S. $20,000,000.00 (Twenty Million
Dollars).
SECTION 2.10. COMMITMENT FEE. The Borrower agrees to pay the Bank a
commitment fee calculated by multiplying 0.125% (zero point one hundred
and twenty five percent) by the unutilized amount of U.S.$20,000,000.00
(Twenty Million Dollars) measured from the date of the first Advance to
the first anniversary date from the execution of this Agreement and each
anniversary date thereof until the Revolving Credit Maturity Date.
SECTION 2.11. THE NOTE(S). The Borrower's obligation to repay the
principal amount of and interest on each Advance, will be evidenced by
two Notes, made by the Borrower to the order of the Bank and guaranteed
(POR AVAL) (i) by the U.S. Guarantor and Mexican Guarantor in the form of
Exhibit "B" hereto, for an amount equal to U.S.$10,000,000.00 (Ten
Million Dollars) and, (ii) by the Mexican Guarantor only in the form of
Exhibit "C" hereto, for an amount equal to U.S.$10,000,000.00 (Ten
Million Dollars).
SECTION 2.12. TAXES.
(a) The Borrower will pay all amounts whether for principal,
interest, fees, commissions and all other amounts payable hereunder or
under the Note(s), free and clear of and without deductions for any and
all present and future taxes, duties, levies, deductions, charges,
withholdings and any other present or future tax liabilities, with the
exception of income and franchise taxes of the United States of America
and its political subdivisions, which shall be for the account of the
Bank. The Borrower will pay the Bank additional amounts of interest
equal to the income tax applicable to interest paid abroad, pursuant to
the Income Tax Law of Mexico (LEY DEL IMPUESTO SOBRE LA RENTA). In the
event mandatory withholding of taxes is required by law, the Borrower
will pay such additional amounts of interest as necessary so that the
Bank receives a net amount equal to the amount it would have received had
no such deduction been made.
(b) If any of the taxes specified in Subsection (a) above are paid
by the Bank, the Borrower will indemnify the Bank, upon demand, for such
payment, together with all applicable interest, expenses and fines. The
aforesaid notwithstanding, the Bank hereby agrees to notify the Borrower
of any such tax payments prior to the date on which they are made.
(c) The Borrower is obligated to deliver to the Bank all
documentation evidencing payment of any taxes imposed by Mexico or any
political subdivision thereof arising as a consequence of this Agreement
or the Note(s) within 45 (forty five) days following the date on which
said taxes are due and payable.
(d) The Borrower must ascertain that on the documentation
evidencing payment of any taxes applicable in Mexico or in any of its
political subdivisions to this Agreement or the Note(s), the
corresponding authorities insert the foreign Bank registration number as
follows: 38-I-SI.
(e) If the Bank should receive a foreign tax credit or deduction in
respect of Taxes paid, it will reimburse the Borrower for any amount or
tax benefit so received.
SECTION 2.13. ADDITIONAL COSTS.
(a) The Borrower agrees with the Bank that if at any time during
the term of this Agreement any reserve and/or capital requirements with
respect to United States Dollar deposits, or with respect to loans
granted in United States Dollars, are imposed by the United States or by
any other jurisdiction or political subdivision of the United States,
then the interest rate referred to in Sections 2.04, 2.05 and 2.06 hereof
will be subject, for Advances made following such imposition to an
increased adjustment to compensate the Bank for the costs (as such are
determined in good faith by the Bank) connected with the fulfillment of
such requirements; PROVIDED HOWEVER, that the Bank shall forthwith notify
the Borrower and furnish the Borrower with evidence of such additional
costs, together with any other reasonable information requested by the
Borrower in connection with such additional cost and which may be
available in the Bank's file.
(b) The Borrower hereby agrees that in the event that it does not
agree to pay the additional costs referred to in this Section 2.13, then
the Bank shall be released from its obligation to maintain the Loan
hereunder. In such an event the Borrower shall pay precisely on the next
succeeding Payment Date following the Bank's notification of the need for
such additional costs, the outstanding principal amount of the Loan,
together with accrued interest and fees to the date of such payment. The
Borrower hereby further agrees that in the event of such payment all of
the Bank's obligations hereunder shall terminate immediately without any
liability for the Bank. The Bank hereby also agrees that in the event of
payment in full of all of the Borrower's obligations hereunder, the
Borrower's obligations shall terminate immediately without any liability
for the Borrower.
SECTION 2.14. PLACE AND MANNER OF PAYMENT. All payments made by
the Borrower hereunder or under the Note(s), whether on account of
principal of, interest or fees on the Loan shall be made in Dollars, in
immediately available funds at the offices of the Bank referred to in
Section 8.04 hereof.
SECTION 2.15. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment
to be made hereunder shall be stated to be due on a non-Business Day,
such payment will be made on the next succeeding Business Day, and such
extension of time shall be in such case included in the computation of
payment of interest on the corresponding Advance and under the
corresponding Note; PROVIDED HOWEVER, that if such extension should cause
the payment to fall on the next calendar month, then the payment will be
made on the next preceding Business Day.
SECTION 2.16. USE OF THE LOAN. The Borrower is obligated to use
the principal amount of the Loan for financing of its working capital
needs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
AND OF THE GUARANTORS
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER AND OF
THE GUARANTORS. The Borrower and Guarantors hereby represent and warrant
that:
(a) The Borrower and the Mexican Guarantor, and the U.S. Guarantor
are corporations duly incorporated, validly existing and in good standing
under the laws of Mexico and United States, respectively, and are duly
qualified to do business.
(b) Both the Borrower and the Guarantors have all requisite power
and authority, corporate or otherwise, to conduct their business, to own
their properties and to execute and deliver, and to perform all of their
obligations under this Agreement and the Note(s).
(c) The execution, delivery and performance of this Agreement and
the Note(s) have been duly authorized by all necessary corporate and/or
shareholder action of both the Borrower and the Guarantors in the case of
the Agreement, and the respective Guarantors in the case of the note, and
do not and will not (i) violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to the Borrower or the
Guarantors or the charter or by-laws of the Borrower or the Guarantors,
(ii) result in a breach, charge or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower or the Guarantors are a party or by
which their properties may be bound or affected or (iii) result in, or
require the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any
nature upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower or the Guarantors, and the Borrower
and the Guarantors are not in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination,
indenture or agreement, lease or instrument.
(d) This Agreement constitutes, and the Note(s) when executed and
delivered by the Borrower and the respective Guarantors will constitute,
the legal, valid and binding obligations of the Borrower and of the
Guarantors, enforceable against the Borrower and against the Guarantors
in accordance with their terms.
(e) The obligations of the Borrower and the Mexican Guarantor under
this Agreement and the Note(s) will rank at least pari passu with all
other present and future indebtedness of the Borrower and of the Mexican
Guarantor.
(f) There is no action, suit or proceeding pending against, or, to
the knowledge of the Borrower and/or the Guarantors, threatened against
or affecting the Borrower or the Guarantors before any court or
arbitrator or any governmental body, agency or official in which there is
a reasonable possibility of an adverse decision which could materially
adversely affect the business, financial position or results of
operations of the Borrower and/or of the Guarantors.
(g) The Borrower and the Guarantors have filed all income tax
returns and all other material tax returns which are required to be filed
and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower and by the Guarantors. The charges,
accruals and reserves on the books of the Borrower and of the Guarantors
in respect of taxes or other governmental charges are, in the opinion of
the Borrower and of the Guarantors, adequate.
(h) The Borrower and the Guarantors have complied with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, environmental
laws, social security laws, housing and pension provisions) and have made
payment of all quotas or contributions required to be made thereunder,
except where non-compliance thereof would not materially adversely affect
the business, financial position or results of operations of the Borrower
and/or of the Guarantors.
ARTICLE IV
GUARANTY
SECTION 4.01. GUARANTY.
(a) The Guarantors, subject to the limitations set forth in Section
1.01 (f), hereby jointly and severally, unconditionally and absolutely
guarantee to the Bank or any holder of the Note(s), the prompt payment
when due, whether at stated maturity, demand, acceleration or otherwise
of, not less than 100% (one hundred percent) of the principal amounts,
accrued interest, fees, commissions or other amounts payable by the
Borrower under this Loan Agreement or the Note(s) and any amendments,
renewals or extensions thereto. The Guarantors shall also pay, on demand,
any and all fees, expenses (including without limitation reasonable
attorneys fees) or costs which may be incurred or paid by the Bank in
preserving, protecting or enforcing any of its rights or remedies in
connection with, or collecting against the Borrower and the Guarantors
under, this Loan Agreement or under any Note(s) (the "GUARANTEED
OBLIGATIONS").
This Guaranty is a continuing guaranty of payment and not of
collection. The obligation of the Guarantors under this Guaranty shall
be absolute and primary, and complete and binding as to the Guarantors
and subject to no condition whatsoever, other than those in section 1.01
(f), precedent or otherwise, irrespective of the validity, regularity or
enforceability of any of the Borrower's obligations hereunder or under
the Note(s), the absence of any action to enforce the same, any waiver or
consent with respect thereto, or any failure or delay in the enforcement
thereof. This Guaranty shall remain effective whether the Guaranteed
Obligations are from time to time reduced and later increased or entirely
extinguished and later reincurred or if the Guaranteed Obligations or
this Guaranty are revoked, terminated, surrendered or discharged and
later reinstated in the event payment of the Guaranteed Obligations is
disgorged, returned, rescinded under any applicable law. Notice of
acceptance hereof or action in reliance hereon shall not be required.
(b) The Guarantors waive presentment, demand, protest, notice of
protest or dishonor, diligence in collecting the guaranteed obligations,
any requirement first to proceed against the Borrower or against any
guarantor or other party, to collect upon the assets of the Borrower or
any other party, or to exhaust any security for the performance of any of
such payment obligations, including but not limited to the benefits of
order, excussion and division foreseen in Articles 2814, 2815, 2817,
2818, 2820, 2821, 2822, 2823, 2827, 2836, 2837, the benefits of Articles
2845, 2846, 2847, 2848 and 2849 of the Civil Code of the Federal
District, Mexico, and its correlative articles in the Civil Codes of the
remaining States of the Mexican Republic, as well as to the provisions
contained in Section 9-504 of the Michigan or other applicable Uniform
Commercial Code. Any collateral or other security of the Borrower or any
other party or any guaranty or other obligation of any party which the
Bank now or subsequently holds may be released or otherwise dealt with by
the Bank in all respects as though this Guaranty were not in existence
and the Guaranty shall be in no way affected thereby, the Guarantors
hereby waiving and foregoing all rights in respect of any action, or
failure to act, by the Bank regarding such collateral or other security.
Likewise, the Guarantors agree that the Bank may grant extensions,
releases or reductions to the Borrower without the need of its consent,
and that such extensions, releases or reductions shall in no way affect
the Guaranty.
(c) The Guarantors agree to guaranty (POR AVAL) the Note(s) referred
to in Section 2.11 herein.
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE BORROWER AND THE
GUARANTORS. So long as any amounts hereunder or under the Note(s) shall
remain unpaid, the Borrower and the Guarantors, as the case may be, will
unless the Bank shall otherwise consent in writing:
(a) Furnish to the Bank:
(i) As soon as possible and in any event within 10 (ten) days after
obtaining knowledge of the occurrence of each Event of Default, or each
event which with the giving of notice or lapse of time or both would
constitute an Event of Default, which is continuing on the date of such
statement, the statement of an authorized officer of the Borrower or the
Guarantors setting forth details of such Event of Default or event which
would constitute an Event of Default, and the action which the Borrower
or the Guarantors propose to take with respect thereto;
(ii) As soon as available and in any event within 60 (sixty) days
after the end of each of the quarters of each fiscal year of the Borrower
and of the Guarantors, a balance sheet of the Borrower and the Guarantors
as of the end of such quarter and statements of income and retained
earnings of the Borrower and of the Guarantors for the period commencing
at the end of the previous fiscal year and ending with the end of such
quarter, (i) in Dollars and in Pesos for the Borrower and the Mexican
Guarantor, and (ii) in Dollars for the U.S. Guarantor, all in reasonable
detail and duly certified (subject to year end audit adjustments) by an
officer of the Borrower or of the Guarantors, as the case may be, as
having been prepared in accordance with accounting principles generally
accepted in Mexico or in the United States, as the case may be,
consistently applied, and together with (x) a certificate of said officer
stating that the covenants set forth in 5.01 (g), (h), (i), (j) and (k)
are being complied with, together with a sheet setting forth the
calculations to determine the foregoing, and (y) a certificate of said
officer stating that he has no knowledge that an Event of Default, or an
event which with the giving of notice or lapse of time or both would
constitute an Event of Default, has occurred and is continuing or, if an
Event of Default or such event has occurred and is continuing, a
statement as to the nature thereof and the action which the Borrower or
the Guarantors propose to take with respect thereto;
(iii) As soon as available and in any event within 120 (one hundred
twenty) days after the end of each fiscal year of the Borrower and of the
Guarantors, a copy of the audited balance sheets and statements of income
and retained earnings for the Borrower and for the Guarantors, (i) in
Dollars and in Pesos for the Borrower and the Mexican Guarantor, and (ii)
in Dollars for the U.S. Guarantor in each case certified by independent
public accountants of recognized standing acceptable to the Bank,
together with (x) a certificate of an officer of the Borrower and of the
Guarantors, stating that the covenants set forth in 5.01 (g), (h), (i),
(j) and (k) are being complied with, together with a sheet setting forth
the calculations to determine the foregoing, and (y) a certificate of an
officer of the Borrower and of the Guarantors stating that he has no
knowledge that an Event of Default, or an event which with notice or
lapse of time or both would constitute an Event of Default, has occurred
and is continuing, or if, in the opinion of such officer, an Event of
Default or such an event has and is continuing, a statement as to the
nature thereof and the action which the Borrower or the Guarantors
propose to take with respect thereto;
(iv) Immediately after the commencement thereof, notice in writing
of all actions, suits and proceedings in excess of U.S.$5,000,000.00
(Five Million Dollars of the United States of America) which
substantially affect the financial condition of the Borrower or of the
Mexican Guarantor, as the case may be;
(v) In the case of the Borrower, on a monthly basis within the first
15 (fifteen) Business Days, a report listing the third party accounts
receivable, any reserves for doubtful accounts and inventory.
(vi) In the case of the Borrower or the Mexican Guarantor, notice
within the following 5 (five) Business Days after the approval from the
Shareholders Meeting, of any dividends and/or repatriation of capital
paid to the Borrower's or Guarantor's shareholders.
(vii) In the case of the Borrower, upon submission of the
documentation mentioned in paragraphs (ii) and (iii) above, and to the
extent applicable, submit to the Bank a calculation of the financial
covenants, as well as a compliance certificate stating the fulfillment of
the Borrower to all the obligations stated herein.
(viii) Such other information respecting the business, properties
or the conditions of operations, financial or otherwise of the Borrower
and the Guarantors as the Bank may from time to time reasonably request.
(b) Duly pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Borrower and the Guarantors or upon
their income or profits, or upon any properties belonging to the them, by
Mexico, the United States, or by any other jurisdiction, or any political
subdivision thereof, prior to the date on which penalties are attached
thereto, and all lawful claims which, if not paid, may become a lien or
charge upon any properties of the Borrower or of the Guarantors,
PROVIDED, HOWEVER, that the Borrower and the Guarantors shall not be
required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and by proper legal proceedings.
(c) Maintain insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Borrower and
the Guarantors operate.
(d) Preserve and maintain their corporate existence, rights,
franchises and privileges in Mexico or the United States, as the case may
be; except when said rights, franchises and privileges shall be
terminated by operation of law or order of authority.
(e) Maintain and preserve all of their properties necessary or
useful in the proper conduct of their business in good working order and
condition, ordinary wear and tear excepted.
(f) Comply with all applicable laws and regulations of any
governmental entity and the terms of any indenture, contract or other
instrument to which the Borrower or the Guarantors may be a party or
under which their respective properties may be bound or affected, if non-
compliance would have a material adverse effect upon the Borrower's or
the Guarantors' condition (financial or otherwise), except where
contested in good faith and by proper proceedings.
(g) In the case of the Borrower, maintain, in accordance with its
consolidated balance sheet, a minimum ratio of current assets to current
liabilities of 1.0 to 1.0 for the interim quarterly and annual audited
financial statements, during the term hereof.
(h) In the case of the Borrower, maintain, in accordance with its
consolidated balance sheet, a maximum ratio of liabilities to liabilities
plus net worth equal to (i) 0.60 to 1.0, for interim quarterly financial
statements and (ii) 0.66 to 1.00 for annual audited financial statements
during the term hereof.
(i) In the case of the Borrower, maintain, in accordance with its
consolidated quarterly and annual financial statements, a minimum ratio
of operating profit plus depreciation and amortization, to the Borrower's
total interest expenses equal to 2 to 1 during the term hereof, measured
on a 4 (four) quarter rolling basis.
(j) In the case of the Borrower, maintain, in accordance with its
consolidated financial statements on an interim quarterly and annual
basis, a minimum net worth of total assets less loans or advances
receivable from the Guarantors less total liabilities of U.S.
40,000,000.00 (Forty Million Dollars).
(k) In the case of the Mexican Guarantor, maintain as a consolidated
entity of Grupo Av<i'>cola Pilgrim's Pride de M<e'>xico, S.A. de C.V. the
following financial ratios on a quarterly and annual basis (in the
understanding that accounting terms shall be interpreted in accordance to
generally accepted accounting principles):
(1) A Liquidity Ratio higher or equal to 1.25 to 1; for the effect
hereof, Liquidity Ratio shall mean the result of dividing the
Guarantor's current assets between its current liabilities.
(2) An Indebtedness Ratio lower than or equal to 0.50 to 1; for the
effects hereof Indebtedness Ratio shall mean the result from
dividing total liabilities between its total liabilities plus net
worth.
(3) A Debt Coverage Ratio, measured on a quarterly basis on a
rolling 4 (four) quarter basis, higher than or equal to 2.0 to 1.0;
for the effects hereof Debt Coverage Ratio means the quotient
obtained by dividing the operating profit plus, depreciation and
amortization between the interest paid during such fiscal year.
(4) A minimum net worth of total assets less loans or advances
receivable from the U.S. Guarantor less total liabilities of U.S.
40,000,000.00 (Forty Million Dollars).
(l) In the case the Borrower or the Mexican Guarantor are in default
then, any claims that the U.S. Guarantor may have against them will be
subordinated to the Loan.
(m) Notwithstanding anything in this Agreement to the contrary, to
the extent that any provisions of this Agreement conflict with or violate
any of the provisions of Section 3.9 of that certain Indenture dated as
of June 3, 1993, between Pilgrim's Pride Corporation, as issuer and
Ameritrust Texas National Association, as trustee, such provision of this
Agreement shall not be binding on or enforceable against any of the
Borrower, Parent or any of their respective Subsidiaries.
SECTION 5.02. NEGATIVE COVENANTS OF THE BORROWER AND THE
GUARANTORS. So long as any amount hereunder or under the Note(s) shall
remain unpaid, the Borrower and the Guarantors, as the case may be, will
not unless the Bank shall otherwise consent in writing:
(a) In the case of the Borrower, create, incur, assume or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature to any third party, upon or
with respect to the third party accounts receivables and the inventory.
(b) In the case of the Borrower or the Mexican Guarantor, incurr
additional indebtedness, made available on the basis of account
receivables and inventory. that together with the outstanding amounts
under the Advances, would exceed the sum of (i) one hundred percent
(100%) of the net third party accounts receivable, which include accounts
receivable less any reserves for doubtful accounts, and (ii) fifty
percent (50%) of the inventory.
(c) In the case of the Borrower or Mexican Guarantor, merge or
consolidate with another corporation, unless the Borrower or the Mexican
Guarantor, as the case may be, is the surviving entity and PROVIDED,
HOWEVER, that the Borrower or Guarantors are not in default of any of
their obligations hereunder or under the Note(s).
(d) Sell, assign, lease, transfer or in any other manner dispose of
(whether in one transaction or in a series of transactions) all or
substantially all of their assets (whether now owned or hereafter
acquired).
(e) Make any material change in the nature of their businesses and
operations.
(f) Change the participation of the current shareholders of the
Borrower or the Mexican Guarantor in a manner that the Guarantors cease
to maintain, directly or indirectly, a majority interest in the capital
stock of the Borrower, unless the Bank has given the Borrower and
Guarantors, prior written approval of such changes which will not be
unreasonably withheld.
(g) In the case of the Borrower or the Mexican Guarantor, carry out
any arrangements to finance the current assets which are being financed
under this Agreement, and will not create any security interest granted
herein to any party.
(h) In the case of the Borrower, to the extent not prohibited by
the Indenture, that it and its affiliates will not guarantee the debt of
Pilgrim`s Pride Corporation.
ARTICLE VI
CONDITIONS OF LENDING
SECTION 6.01. CONDITIONS PRECEDENT TO THE ADVANCES UNDER THE LOAN.
The obligation of the Bank to disburse the initial Advance is subject to
the conditions precedent that the Bank shall have received on or before
the date of the initial Advance all of the following, in form and
substance satisfactory to the Bank:
(a) A certified copy of the public deeds (ESCRITURAS P<u'>BLICAS)
containing the appointment, names and powers of attorney of the officers
of the Borrower and Guarantors authorized to execute this Agreement, the
Note(s) and any other instruments or certifications which the Borrower
and the Guarantors must make hereunder; together with a signed copy of a
certificate of an authorized officer of the Borrower and the Guarantors
containing the true signatures of such officers. The Bank may
conclusively rely on such certificates until it shall receive a further
certificate of an authorized officer of the Borrower or the Guarantors
canceling or amending the prior certificate and submitting the signatures
of the officers named in such further certificate.
(b) Certified copies of the public deeds containing the bylaws
(ESTATUTOS SOCIALES) of the Borrower and of the Guarantors, as currently
in effect.
(c) A signed copy of a certificate of an authorized officer of the
Borrower and the Guarantors, which shall certify that on the initial Date
of Advance there is no Event of Default or event which but for the notice
given or the lapse of time or both would constitute an Event of Default.
(d) A favorable opinion of the Borrower's legal counsel as to
matters referred to in Article III hereof.
(e) A favorable opinion of the Guarantors' legal counsel as to
matters referred to in Article III hereof.
(f) The Note, made to the order of the Bank, substantially in the
form of Exhibit "B" and "C" hereto, evidencing the Borrower's obligation
to repay the principal amount of and interest on each Advance, on the
relevant payment date, and the guaranty (POR AVAL) thereof by the
Guarantors.
(g) The payment of the fee provided for in Section 2.08 hereof.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. EVENTS OF DEFAULT. If any of the following events
shall occur and be continuing, the Bank may declare all of its
obligations hereunder to be terminated, whereupon the commitment of the
Bank hereunder shall forthwith terminate and the Bank may declare the
entire unpaid principal amount of the Loan, together with all interest
and fees accrued and unpaid thereon and all other amounts payable
hereunder to be forthwith due and payable, whereupon the Loan, all such
accrued interest, fees and all such amounts shall become and be forthwith
due and payable without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by the Borrower and
the Guarantors.
(a) The Borrower shall fail to pay the Advances when due, or shall
fail to pay any interest on the Advances when due; or
(b) Any representation or warranty made by the Borrower or by the
Guarantors in this Agreement or in any certificate, agreement, instrument
or statement contemplated hereby or thereby shall prove to have been
incorrect when made in any material respect; or
(c) The Borrower or the Guarantors shall fail to perform or observe
any other term, covenant or agreement contained in this Agreement; or
(d) The Borrower or the Guarantors shall fail to pay any
substantial indebtedness which may affect their operations or financial
condition, as determined in the sole discretion of the Bank, or any
interest or premium thereon when due, whether such indebtedness becomes
due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise; or the Borrower or the Guarantors shall fail to
perform any term, covenant or agreement on their part to be performed
under any agreement or instrument other than this Agreement and the
Note(s), evidencing or securing or relating to any indebtedness owing by
the Borrower or the Guarantors when required to be performed, if the
effect of such failure is to accelerate, or to permit a holder or holders
of such indebtedness under any such agreement or instrument to accelerate
the maturity of such indebtedness; or
(e) The Borrower fails to maintain any of the ratios set forth in
Section 5.01 subsection (g), Section 5.01 subsection (h), Section 5.01
subsection (i); or Section 5.01 subsection (j); or
(f) The Mexican Guarantor, fails to maintain as a consolidated
entity of Grupo Av<i'>cola Pilgrim's Pride de M<e'>xico, S.A. de C.V.,
any of the ratios set forth in Section 5.01 subsection (k)(1); Section
5.01 subsection (k)(2); Section 5.01 subsection (k) (3) hereof; and
Section 5.01 subsection (k) (4) hereof.
(g) The participation of the current shareholders of the Borrower
or the Mexican Guarantor, is modified in any way whatsoever resulting, in
the Guarantors ceasing to maintain, directly or indirectly, a majority
interest in the capital stock of the Borrower, without the prior written
consent of the Bank given to the Borrower and the Mexican Guarantor which
will not be unreasonably withheld; or
(h) This Agreement or the Note(s) shall at any time for any reason
cease to be in full force and effect or shall be declared to be null and
void or the validity or enforceability thereof shall be contested by the
Borrower or the Guarantors or the Government of Mexico, or any political
subdivision or agency thereof, or the Borrower or the Guarantors shall
deny that it is any further liability or obligation hereunder; or
(i) The Borrower or the Guarantors under such laws as shall be
controlling with respect to their properties, shall be adjudicated
bankrupt or insolvent or admit in writing their inability to pay their
debts as they mature, or make an assignment for the benefit of creditors,
or petition or apply to any tribunal for a receiver or trustee for
themselves or any substantial part of their properties, or commence any
proceeding under any reorganization, arrangement, readjustment of debt,
dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or there shall be commenced against the
Borrower or the Guarantors any such proceeding which shall remain
undismissed for a period of 60 (sixty) days; or the Borrower or the
Guarantors shall by any act indicate their consent to, approval of or
acquiescence in, any such proceeding or the appointment of any receiver
of, or trustee for, themselves or any substantial part of their
properties, or shall suffer any such receivership or trusteeship to
continue undischarged for a period of 30 (thirty) days; or there shall be
any reorganization, arrangement, readjustment, dissolution or liquidation
with respect to the Borrower or the Guarantors which does not involve a
judicial proceeding; or any substantial part of the properties of the
Borrower or the Guarantors shall be requisitioned, condemned,
sequestered, seized or intervened by any actual or purported governmental
authorities.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. NO WAIVER; CUMULATIVE REMEDIES. No omission or delay
on the part of the Bank or on the part of the holder of the Note(s), in
the exercise of any right, privilege or remedy hereunder shall be
considered as a waiver of such right, privilege or remedy; and no partial
or isolated exercise of any such right, privilege or remedy shall
preclude the further exercise of that or any other right, privilege or
remedy hereunder. All the remedies contained herein are cumulative and
do not exclude any statutory remedies.
SECTION 8.02. AMENDMENTS, ETC. No amendment, modification,
termination or waiver of any provision of this Agreement or of the
Note(s), nor consent to any departure by the Borrower or the Guarantors,
or in the case of some of the notes the Mexican Guarantor, therefrom,
shall in any event be effective unless the same shall be in writing and
signed by the Bank, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
given.
SECTION 8.03. NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing and, if to the
Borrower or the Guarantors, telegraphed, telexed, telefaxed or delivered
to them addressed to them at:
If to the Borrower:Pilgrim's Pride, S.A. de C.V.
Avenida 5 de Febrero No. 1408
Queretaro, Queretaro
Telephone: (42) 17 15 86
Fax: (42) 17 97 80
Attention: Alejandro Mann
If to the Guarantors: Avicola Pilgrim's Pride de M<e'>xico, S.A. de C.V.
Avenida 5 de Febrero No. 1408
Queretaro, Queretaro
Telephone: (42) 17 15 86
Fax: (42) 17 97 80
Attention: Alejandro Mann
Pilgrim's Pride Corporation
110 South Texas Street
Pittsburg, Texas 75686
Telephone: 001 903 855 1000
Fax: 001 903 856 7505
Attention: Alejandro Mann
If to the Bank: Comerica Bank
500 Woodward Ave.,
Detroit, Michigan 48226-3330,
U.S.A., Attention: International Department; Latin
Group
or to any of the parties hereto to any other address as they may notify
the other parties in writing during the term hereof.
SECTION 8.04. COSTS AND EXPENSES. The Borrower agrees to pay on
demand all costs and expenses of the Bank in connection with the
enforcement of this Agreement, the Note(s) and the other instruments and
documents to be delivered hereunder or thereunder (including without
limitation, reasonable attorneys fees). In addition, the Borrower shall
pay any and all taxes and fees payable or determined to be payable in
connection with the execution and delivery, filing or recording if any,
of this Agreement, the Note(s) and the other instruments and documents to
be delivered hereunder or thereunder, and agrees to hold the Bank
harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such costs,
expenses, taxes or fees. The Borrower shall furnish the Bank, in each
case, evidence of the payments contemplated in this Section.
SECTION 8.05. 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 and delivered shall
be deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
SECTION 8.06. BINDING EFFECT; ASSIGNMENT.
(a) This Agreement shall become effective when it shall have been
executed by the Borrower, the Guarantors and the Bank, and thereafter
shall be binding upon and inure to the benefit of the Borrower, the
Guarantors and the Bank and their respective successors and assigns,
except that the Borrower and the Guarantors shall not have the right to
assign their rights hereunder or any interest herein without the prior
written consent of the Bank, which will not be unreasonably withheld.
The Bank may sell, assign, transfer, negotiate or participate the
outstanding indebtedness of the Borrower hereunder and under the Note(s),
or assign in any other manner all or part of the Borrower's outstanding
indebtedness hereunder and under the Note(s) in favor of financial
entities domiciled outside of Mexico and belonging to foreign
governments, or in favor of private foreign credit institutions domiciled
outside of Mexico registered with the Ministry of Finance and Public
Credit of Mexico (SECRETAR<i'>A DE HACIENDA Y CR<e'>DITO P<u'>BLICO)
pursuant to Article 154, Section I of the Income Tax Law of Mexico (LEY
DEL IMPUESTO SOBRE LA RENTA) (hereinafter referred to as the
"Participants"); PROVIDED, HOWEVER that such assignment does not result
in an increase in the additional amounts payable by the Borrower pursuant
to Section 2.11 hereunder, and PROVIDED FURTHER that such assignment
cannot be perfected in a manner that would require registration in
accordance with the provisions of the Federal Securities Act of 1933 of
the United States of America as enacted or amended during the term
hereof. Likewise, such assignment cannot be made in a manner that would
require registration under any securities acts of the various states of
the United States of America. In any case the Bank must notify the
Borrower and Guarantors of any such assignment.
(b) The Borrower and the Guarantors hereby acknowledge and agree
that any such assignment will create a direct obligation of the Borrower
and the Guarantors with the Participant and that such Participant will be
considered as the Bank for all purposes contemplated in this Agreement.
SECTION 8.07. GOVERNING LAW. This Agreement and the Note(s),
except to the extent a legal proceeding is brought in Mexico in respect
of the Notes, in which even this Agreement and the Notes shall be deemed
to be made under the laws of Mexico, shall be deemed to be contracts
made under the laws of the State of Texas and of the United States, and
for all purposes shall be governed by, and construed in accordance with,
the laws of such State and of the United States.
SECTION 8.08. SUBMISSION TO JURISDICTION.
(a) The parties hereto represent, warrant, and irrevocably agree
that any legal action or proceeding with respect to this Agreement and
the Note(s) may be brought in the state courts or in the United States
courts for the State of Texas, and, by the execution and delivery of this
Agreement, the parties hereto hereby irrevocably submit to each such
jurisdiction.
(b) The parties further submit to the jurisdiction of the competent
courts or their respective domiciles for any action that may be brought
against them as a defendant, and hereby waive all rights of jurisdiction
in any proceeding, which they may now or hereafter have by reason of
their present or future domiciles.
SECTION 8.09. HEADINGS. Article and Section headings used in this
Agreement are for convenience only and shall not affect the construction
of this Agreement.
IN WITNESS WHEREOF, the parties executed this Agreement as follows:
The Borrower and the Guarantors in Mexico City, D.F., United Mexican
States on March 2, 1998, and the Bank in the City of Detroit, Michigan,
United States of America on March 9, 1998.
THE BANK
COMERICA BANK
/s/ Tim Hogan
BY:___________________
Vice President
ITS:___________________
THE BORROWER
PILGRIM'S PRIDE , S.A. DE C.V.
/s/ Alejandro Mann Gianni
____________________________
By: Alejandro Mann Gianni
Its:Attorney in fact
/s/ David Goldstein
____________________________
By: David Goldstein
Its: Attorney in fact
THE GUARANTORS
AVICOLA PILGRIM'S PRIDE DE MEXICO, S.A. DE C.V.
/s/ Alejandro Mann Gianni
____________________________
By: Alejandro Mann Gianni
Its:Attorney in fact
/s/ David Goldstein
____________________________
By: David Goldstein
Its: Attorney in fact
PILGRIM'S PRIDE CORPORATION
/s/ C.E. Butler
By:__________________
Executive President
Its:__________________
