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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 1, 1994 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)
Registrant's telephone number, including area code: (903) 855-1000
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, Par Value $0.01 New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's Common Stock, $0.01 par
value, held by non- affiliates of the Registrant as of December 15, 1994,
was $43,597,875. For purposes of the foregoing calculation only, all
directors, executive officers, and 5% beneficial owners have been deemed
affiliates.
27,589,250 shares of the Registrant's common stock, $.01 par value, were
outstanding as of December 15, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's proxy statement for the annual meeting of
stockholders to be held February 1, 1995, are incorporated by reference
into Part III.
PILGRIM'S PRIDE CORPORATION
FORM 10-K
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Propertiess
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Stock and Related Security Holder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Item 8. Financial Statements and Supplementary Data (see Index to
Financial Statements and Schedules below)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
Signatures
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Report of Ernst & Young LLP--Independent Auditors
Consolidated Balance Sheets as of October 1, 1994 and October 2, 1993
Consolidated Statements of Income (Loss) for the years ended
October 1, 1994, October 2, 1993 and September 26, 1992
Consolidated Statements of Stockholder's Equity for the years ended
October 1, 1994, October 2, 1993 and September 26, 1992
Consolidated Statements of Cash Flows for the years ended
October 1, 1994, October 2, 1993 and September 26, 1992
Notes to Consolidated Financial Statements
Schedule II - Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees other than Related Parties for the years
ended October 1, 1994, October 2, 1993 and September 26, 1992
Schedule V - Property, Plant and Equipment for the years ended
October 1, 1994, October 2, 1993 and September 26, 1992
Schedule VI - Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment for the years ended October 1,
1994, October 2, 1993 and September 26, 1992
Schedule VIII - Valuation and Qualifying Accounts for the years ended
October 1, 1994, October 2, 1993 and September 26, 1992
Schedule IX - Short-Term Borrowings for the years ended October 1, 1994,
October 2, 1993 and September 26, 1992.
Schedule X - Supplementary Income Information for the years ended
October 1, 1994, October 2, 1993 and September 26, 1992
PART I
Item 1. Business
General
The Company, which was incorporated in Texas in 1968 and
reincorporated in Delaware in 1986, is the successor to a predecessor
partnership founded in 1946 by Lonnie "Bo" Pilgrim and his brother, Aubrey
E. Pilgrim, as a retail feed store. Over the years, the Company grew
through both internal growth and various acquisitions of farming operations
and chicken processors. In addition to domestic growth, the Company
expanded into Mexico through acquisitions beginning in 1988 and subsequent
substantial capital investments.
The Company is a vertically integrated producer of chicken
products, controlling the breeding, hatching and growing of chickens and
the processing, preparation and packaging of its product lines. The
Company is the fifth largest producer of chicken in the United States, with
production and distribution facilities located in Texas, Arkansas, Oklahoma
and Arizona, and the second largest producer of chicken in Mexico, with
production and distribution facilities located in Mexico City and the
states of Coahuila, San Louis Potosi, Queretaro and Hidalgo. The Company
is also a producer of table eggs, animal feeds and ingredients. See Note H
to the Consolidated Financial Statements of the Company for information
concerning revenues, operating profit and identifiable assets attributable
to the Company's U.S. and Mexican operations.
The Company's chicken products consist primarily of (i) prepared
foods, which include portion-controlled breast fillets, tenderloins and
strips, formed nuggets and patties and bone-in chicken parts, which are
generally sold frozen and may be either fully cooked or ready to cook; (ii)
fresh foodservice chicken, which includes whole or cut-up chicken for the
foodservice industry; (iii) prepackaged chicken, which includes various
combinations of chicken parts in trays and fresh whole chickens labeled and
priced ready for the retail grocer's fresh meat counter; and (iv) bulk
packaged chicken parts and whole chicken, which is sold eviscerated in the
U.S. and in both eviscerated and uneviscerated forms in Mexico.
During recent years, the Company's strategy has been to identify
and develop specific, defined markets where it can achieve significant
advantages over competing suppliers. Management believes that this
strategy has enabled the Company to achieve both higher rates of growth and
higher profits than otherwise would have resulted. The Company has
targeted three principal markets: U.S. foodservice, U.S. consumer and
Mexico. The following table sets forth, for the periods since 1990, net
sales attributable to each of the Company's primary markets and net sales
attributable to certain products sold within such market. The table is
based on the Company's internal sales reports and its classification of
product types and customers.
Fiscal Year Ended
September September September October October
29, 1990 28, 1991 26, 1992 2, 1993 1, 1994
(52 Weeks)(52 Weeks)(52 Weeks)(53 Weeks)(52 Weeks)
(in thousands)
Chicken Sales:
U.S. Foodservice:
Prepared foods........... $112,509 $151,661 $178,185 $183,165 $205,224
Fresh Foodservice chicken 118,158 127,303 126,472 149,197 155,294
Total U.S. Foodservice.. 230,667 278,964 304,657 332,362 360,518
U.S. Consumer:
Prepared foods........... 60,069 60,188 85,700 89,822 61,068
Prepackaged chicken..... 122,907 125,897 105,636 100,063 125,133
Bulk-packaged chicken... 95,907 85,323 72,724 77,709 88,437
Total U.S. Consumer.... 278,883 271,408 264,060 267,594 274,638
Mexico:
Bulk-packaged chicken.... 110,632 141,570 160,620 188,754 188,744
Total Chicken Sales..... 620,182 691,942 729,337 788,710 823,900
Sales of Other
Domestic Products........ 100,373 94,709 88,024 99,133 98,709
Total Net Sales......... $720,555 $786,651 $817,361 $887,843 $922,609
United States
The following table sets forth, since fiscal 1990, the percentage
of net U.S. chicken sales attributable to each of the Company's primary
U.S. markets and certain products sold within such markets. The table and
related discussion are based on the Company's internal sales reports and
its classification of product types and customers.
Fiscal Year Ended
September September September October October
29, 1990 28, 1991 26, 1992 2, 1993 1, 1994
(52 Weeks)(52 Weeks)(52 Weeks)(53 Weeks)(52 Weeks)
Foodservice:
Prepared foods ........... 22.1% 27.6% 31.3% 30.5% 32.3%
Fresh Foodservice chicken. 23.2 23.1 22.2 24.9 24.5
Total Foodservice........ 45.3% 50.7% 53.5% 55.4% 56.8%
Consumer:
Prepared foods............ 11.8% 10.9% 15.1% 15.0% 9.6%
Prepackaged chicken....... 24.1 22.9 18.6 16.6 19.7
Bulk-packaged chicken..... 18.8 15.5 12.8 13.0 13.9
Total Consumer........... 54.7% 49.3% 46.5% 44.6% 43.2%
Strategy
Domestic chicken sales can be segmented into two principal markets
- - - foodservice and consumer. The Company's strategy is to (i) focus on the
development of the prepared foods business within each of these two
markets, which is generally characterized by higher growth and more stable
margins than the chicken industry as a whole; and (ii) achieve significant
cost and product advantages over competing suppliers across all market
segments, thereby achieving greater growth in sales and profits than would
otherwise result.
U.S. Foodservice
The majority of the Company's U.S. chicken sales are derived from
products sold to the foodservice market. The foodservice market
principally consists of chain restaurants, institutions and foodservice
distributors located throughout the continental United States, which
purchase chicken products ranging from fully cooked and frozen chicken
nuggets to portion-controlled refrigerated chicken parts. As the second
largest full-line supplier of chicken to the foodservice market, the
Company believes it is well-positioned to be a major supplier to large
customers who require multiple suppliers of chicken products.
Additionally, the Company believes it is well- positioned to meet the needs
of midsized customers who require a primary supplier of chicken products.
Due to its comparatively large size in this market, management believes the
Company has significant competitive advantages in terms of product
capability, production capacity, research and development expertise, and
distribution and marketing experience relative to smaller producers. As a
result of these competitive advantages, the Company's sales to the
foodservice market from fiscal 1990 through fiscal 1994 grew at a compound
annual growth rate of approximately 12%, while, based on industry data, the
Company estimates that total industry dollar sales to the foodservice
market during this period grew at a compound annual growth rate of
approximately 5%. The Company markets two main types of products to the
foodservice market: prepared foods and fresh foodservice chicken.
Prepared Foods: Prepared foods sales to the foodservice market
were $205 million in fiscal 1994 and have increased at a compound annual
growth rate of approximately 16% from fiscal 1990 through fiscal 1994. The
Company's prepared foods products include portion-controlled breast
fillets, tenderloins and strips, formed nuggets and patties and bone-in
chicken parts, which are generally sold frozen and in various stages of
preparation, including blanched, battered, breaded and partially or fully-
cooked. The Company attributes this growth in sales of prepared foods to
the foodservice market to a number of factors:
First, there has been significant growth in the number of
foodservice operators offering chicken on their menus and the number of
chicken items offered;
Second, there is a strong need among larger foodservice companies
for a second supplier upon which they rely to ensure supply, encourage
innovation and new product development and provide price competition due,
in part, to the dominance of the Company's principal competitor in the
prepared foods market. The Company has been successful in its attempt to
become a second supplier to many large foodservice companies because it (i)
is vertically integrated, giving the Company control over raw material
supplies, (ii) has the capability to produce many types of chicken items
and (iii) has established a reputation for dependable quality, service and
technical support;
Third, as a result of the experience and reputation developed with
larger customers, the Company has increasingly become the principal
supplier to midsized foodservice organizations; and
Fourth, the Company's in-house product development group,
responding to the changing needs of the foodservice market, has enabled the
Company to provide foodservice customers with new and improved prepared
foods. Approximately $94 million of the Company's sales to foodservice
customers in 1994 consisted of products which were not sold by the Company
in 1990.
The Company establishes prices for its prepared chicken products
based primarily upon perceived value to the customer, production costs and
prices of competing products. However, many of these products are priced
according to formulas which are based on an underlying commodity market,
and this factor causes some revenue fluctuation correspondingly with such
markets.
Fresh Foodservice Chicken: The Company produces and markets
fresh, refrigerated chicken for sale to domestic quick-service restaurant
chains, delicatessens and other customers. These chickens have the giblets
removed, are usually of specific weight ranges and are usually pre-cut to
customer specifications. By growing and processing to customers
specifications, the Company is able to assist quick service restaurant
chains in controlling costs and maintaining size consistency of chicken
pieces sold to the consumer. Most of these products are sold to
established customers based upon certain weekly market prices reported by
the U.S.D.A., plus a markup, which is dependent upon the customer's
location, volume, product specifications and other factors.
U.S. Consumer
The U.S. consumer market consists primarily of grocery store
chains, retail distributor and wholesale clubs. The Company concentrates
its efforts in this market on sales of prepared foods, branded, prepackaged
chicken and bulk-packaged, whole chicken to grocery chains and retail
distributors in the midwestern, southwestern and western portions of the
United States. This regional marketing focus enables the Company to
capitalize on proximity to the ultimate consumer, both in terms of lower
transportation costs and enhanced product freshness. For a number of years
the Company has invested in both trade and consumer marketing designed to
establish high levels of brand name awareness and consumer preferences
within these markets.
Prepared Foods: The Company sells consumer-prepared foods to
grocery store chains primarily located in the midwestern, southwestern and
western portions of the U.S. and, until January 1994, to wholesale clubs
located throughout the continental U.S. The wholesale club industry is
characterized by a limited number of large national operators, each tending
to purchase particular products from a limited number of suppliers. During
1994 the wholesale club industry consolidated significantly with the
acquisition of Pace Membership Warehouse by Sam's Club and the merger of
Price Club and Costco Wholesale Club. As a result of these consolidations,
in January 1994 the Company lost a substantial portion of its wholesale
club business; however, it was able to direct this prepared foods capacity
to other lines of business with better overall gross margins and a more
diversified customer base.
Prepackaged Chicken: The Company's prepackaged products include
various combinations of fresh whole chickens and chicken parts in trays,
labeled and priced ready for the retail grocer's fresh meat counter.
The Company utilizes numerous marketing techniques, including
advertising, to develop and strengthen trade and consumer awareness and
increase brand loyalty for its Pilgrim's Pride products. The Company's
founder, Lonnie "Bo" Pilgrim, is the featured spokesman in the Company's
television and radio commercials and a trademark cameo of a person in a
Pilgrim's hat appears on all of the Company's branded products. As a
result of this marketing strategy, the Company has established a well-known
brand name in certain southwestern metropolitan markets, including the
Dallas/Fort Worth area where, according to a market research company, the
Company's brand name was recognized by 96% of grocery shoppers in an aided
brand recall study conducted in 1994. Management believes that its branded
products command a price premium in certain southwestern markets, which the
Company believes can be attributed to its efforts to achieve brand
awareness. The Company also maintains an active program to identify
consumer preferences primarily by testing new product ideas, packaging
designs and methods through taste panels and focus groups located in key
geographic markets.
Bulk-Packaged Chicken: The Company sells bulk whole chickens and
cut-up parts primarily to retail grocers and food distributors in the
United States. In recent years, the Company has de-emphasized its
marketing of bulk-packaged chicken in the United States in favor of more
value-added products. Historically, sales of the Company's bulk-packaged,
whole chicken have been characterized by lower prices and greater price
volatility than the Company's more value-added product lines. In the
United States, prices of these products are negotiated daily or weekly and
are generally lower than market prices quoted by the U.S.D.A.
A significant portion of the Company's sales to the foodservice
market and to the U.S. consumer market is governed by agreements with
customers that provide for the pricing methods and volume of products to be
purchased. The Company believes its practices with respect to sales to the
foodservice market and the U.S. consumer market are generally consistent
with those of its competitors.
Mexico
Strategy
In Mexico, the Company has made capital investments in advanced
production technology, transferred experienced management personnel and
utilized proven domestic production techniques in order to be a low cost
producer of chicken. At the same time, the Company has directed its
marketing efforts toward more value added chicken products. Management
believes that this strategy has resulted in increased market share and
higher profit margins relative to other Mexican chicken producers and has
positioned the Company to participate in any growth in chicken demand which
may occur in the future. Recent demand growth in Mexico is evidenced by
the increase in per capita consumption of chicken in Mexico, from
approximately 24 pounds in 1982 to approximately 38 pounds in 1994,
according to an industry source.
Background: The Mexican market is one of the Company's fastest
growing markets and represented approximately 20% of the Company's net
sales in fiscal 1994. The Company entered the Mexican market in 1981 when
it began selling eggs on a limited basis. Recognizing favorable
demographic trends and improving economic conditions in Mexico, the Company
began exploring opportunities to produce and market chicken in Mexico. In
fiscal 1988, the Company acquired four vertically integrated poultry
production operations in Mexico for approximately $15.1 million. Since
such acquisitions and through fiscal 1994, the Company has made capital
expenditures in Mexico totaling $106 million to expand and improve such
operations. The Company believes its facilities are among the most
technologically advanced in Mexico. As a result of these expenditures, the
Company has increased weekly production in its Mexico operations by over
300%. The Company believes that it is one of the lowest cost producers of
chicken in Mexico. The Company continues to explore its business
alternatives in the Mexican market, including possible acquisitions or the
expansion of its existing operations.
Products: During the last three years, the Company's Mexico
operation has dramatically increased its value added sales of chicken
products, which should provide higher, more stable margins. Although
changing now, the market for chicken products in Mexico is less developed
than in the United States with sales attributed to fewer, more basic
products.
Markets: The Company sells its Mexican chicken products primarily
to large wholesalers and, to a lesser extent, to retailers through its own
distribution network, which includes several warehouse facilities located
throughout Central Mexico. The Company's customer base in Mexico covers a
broad geographic area from Mexico City, the capital of Mexico with a
population estimated to be over 20 million, to Saltillo, the capital of the
State of Coahuila, about 500 miles north of Mexico City, and from Tampico
on the Gulf of Mexico to Acapulco on the Pacific, which region includes the
cities of San Luis Potosi and Queretaro, capitals of the states of the same
name.
Competition
The chicken industry is highly competitive and certain of the
Company's competitors have greater financial and marketing resources than
the Company. In the United States and Mexico, the Company competes
principally with other vertically integrated chicken companies. In
general, the competitive factors in the domestic chicken industry include
price, product quality, brand identification, breadth of product line and
customer service. Competitive factors vary by major market. In the
foodservice market, competition is based on consistent quality, product
development, service and price. In the domestic consumer market,
management believes that product quality, brand awareness and customer
service are the primary bases of competition. In Mexico, where product
differentiation is limited, price and product quality are the most critical
competitive factors.
Other Activities
The Company markets fresh eggs under the Pilgrim's Pride brand
name as well as private labels in various sizes of cartons and flats to
domestic retail grocery and institutional foodservice customers located
primarily in Texas. The Company has a housing capacity for approximately
2.3 million commercial egg laying hens which can produce approximately 41
million dozen eggs annually. Domestic egg prices are determined weekly
based upon reported market prices. The domestic egg industry has been
consolidating over the last few years with the 20 largest producers
accounting for approximately 65% of the total number of egg laying hens in
service during 1994. The Company competes with other domestic egg
producers, primarily on the basis of product quality, reliability, price
and customer service. According to an industry publication, the Company is
the twenty-fourth largest producer of eggs in the United States.
In fiscal 1994, the Company exported a small percentage of its
domestically produced poultry products, primarily to Asian, Middle Eastern
and European countries. While current activity in these markets
contributes only a small percentage of sales, if export market conditions
become more favorable, management believes the Company is well-positioned
to increase sales to foreign countries.
The Company has regional distribution centers located in
Arlington, El Paso, Mt. Pleasant and San Antonio, Texas; Phoenix and
Tucson, Arizona; and Oklahoma City, Oklahoma that distribute the Company's
poultry products along with certain non-poultry products purchased from
third parties to quick service restaurants. The Company's non-poultry
distribution business is conducted primarily as an accommodation to these
customers.
The Company also converts chicken by-products into protein
products primarily for sale to manufacturers of pet foods. In addition,
the Company produces and sells livestock feeds at its feed mill and farm
supply store in Pittsburg, Texas, to dairy farmers and livestock producers
in northeastern Texas.
Regulation
The chicken industry is subject to government regulation,
particularly in the health and environmental areas. The Company's domestic
poultry processing facilities are subject to on-site examination,
inspection and regulation by the U.S.D.A. The F.D.A. inspects the
production of the Company's domestic feed mills. The Company's Mexican
food processing facilities and feed mills are subject to on-site
examination, inspection and regulation by a Mexican governmental agency
which performs functions similar to those performed by the U.S.D.A. and
F.D.A. Since commencement of operations by the Company's predecessor in
1946, compliance with applicable regulations has not had a material adverse
effect upon the Company's earnings or competitive position and such
compliance is not anticipated to have a materially adverse effect in the
future. Management believes that the Company is in substantial compliance
with all applicable laws and regulations relating to the operations of its
facilities.
The Company anticipates increased regulation by the U.S.D.A.
concerning food safety, as well as by the F.D.A. concerning the use of
medications in feed. Although the Company does not anticipate any such
regulation having a material adverse effect upon the Company, no assurances
can be given to that effect.
Employees and Labor Relations
As of December 15, 1994, the Company employed approximately 7,200
persons in the U.S. and 3,100 persons in Mexico. Approximately 650
employees at the Company's Lufkin, Texas facility are members of a
collective bargaining unit represented by Local 540 of the United Food and
Commercial Workers Union (the "UFCW"). None of the Company's other
domestic employees have union representation. The Company has operated the
Lufkin facility since its purchase in 1986 without a collective bargaining
agreement. Since February 1993, the Company has been negotiating with the
UFCW to reach a collective bargaining agreement. On May 24 and 25, 1993,
the Company experienced a UFCW-initiated work stoppage involving
approximately 200 employees at the Lufkin facility. By May 26, 1993,
substantially all of the employees had returned to work. On June 22, 1993,
negotiations with the UFCW reached an impasse, and the Company implemented
the terms of the last contract offer. The National Labor Relations Board
has been asked to rule regarding the status of the impasse, but as of this
filing, no ruling has been made. Unless and until a collective bargaining
agreement is reached, there may be further work disruptions at this
facility. However, because of the adequate labor supply in the Lufkin area
and the Company's ability to shift portions of its production to other
facilities, the Company does not believe that additional work disruptions,
if any, will have a material adverse effect on the Company's operations or
financial condition. In Mexico, most of the Company's hourly employees
are covered by collective bargaining agreements as most employees are in
Mexico. Except as described above, the Company has not experienced any
work stoppages, and management believes that relations with the Company's
employees are satisfactory.
Executive Officers of the Registrant
As of December 15, 1994, the following were the Executive Officers
of the Company. Officers are elected annually by the Board of Directors to
serve at the pleasure of the Board of Directors.
Executive Officers of the Company Age Positions
Lonnie "Bo" Pilgrim 66 Chief Executive Officer
Lindy M. "Buddy" Pilgrim 40 President and
Chief Operating Officer
Clifford E. Butler 52 Chief Financial Officer,
Secretary and Treasurer
David Van Hoose 52 President, Mexican Operations
Robert L. Hendrix 58 Executive Vice President
Operations
Terry Berkenbile 44 Senior Vice President
Sales & Marketing,
Retail and Fresh Products
Richard A. Cogdill 34 Senior Vice President
Corporate Controller
Ray Gameson 46 Senior Vice President
Human Resources
O.B. Goolsby, Jr. 47 Senior Vice President
Prepared Foods
Michael D. Martin 40 Senior Vice President
DeQueen, Arkansas Complex
James J. Miner, Ph.D. 66 Senior Vice President
Technical Services
Michael J. Murray 36 Senior Vice President
Sales & Marketing, Prepared Foods
Robert N. Palm 50 Senior Vice President,
Lufkin, Texas Complex
Mr. L. A. Pilgrim has served as Chairman of the Board and Chief Executive
Officer since the organization of the Company in 1968. Prior to the
incorporation of the Company, Mr. Pilgrim was a partner in the Company's
predecessor partnership business founded in 1945.
Mr. L. M. Pilgrim has been employed by the Company as President and Chief
Operating Officer since March 1994, and was elected a Director on March 8,
1993. He was previously President of U.S. Operations and Sales & Marketing
from April 1993 to March 1994. Up to October 1990, Mr. Pilgrim was
employed by the Company for 12 years in marketing and 9 years in
operations. From October 1990 to April 1993, he was President of Integrity
Management Services, Inc., as consulting firm to the poultry industry. He
is a nephew of Lonnie "Bo" Pilgrim.
Mr. Butler has been employed by the Company since 1969. He has been a
Director of the Company since 1969, was named Senior Vice President of
Finance in 1973, and became Chief Financial Officer and Vice Chairman of
the Board in July 1983.
Mr. Van Hoose has been President of Mexican Operations since April 1993.
He was previously Senior Vice President, Director General, Mexican
Operations since August 1990. Mr. Van Hoose was employed by Pilgrim's
Pride in September 1988 as Senior Vice President, Texas Processing. Prior
to that, Mr. Van Hoose was employed by Cargill, Inc., as General Manager of
one of its chicken operations.
Mr. Hendrix has been Executive Vice President, Operations, of the Company
since March 1994. Prior to that he served as Senior Vice President, NETEX
Processing from August 1992 to March 1994 and as President and Chief of
Complex Operations from July 1983 to March 1992. He became Senior Vice
President in September 1981 when Pilgrim's Pride acquired Mountaire
Corporation of DeQueen, Arkansas, and, prior thereto, he was Vice President
of Mountaire Corporation.
Mr. Berkenbile was named Senior Vice President, Sales & Marketing, Retail
and Fresh Products in July 1994. Prior to that he was Vice President,
Sales & Marketing, Retail and Fresh Products since May 1993. From February
1991 to April 1993 Mr. Berkenbile was Director Retail Sales & Marketing at
Hudson Foods. Prior to February 1991, Mr. Berkenbile was Director Plant
Sales at Pilgrim's Pride.
Mr. Cogdill has been Senior Vice President, Corporate Controller, since
August 1992. He was previously Vice President, Corporate Controller since
October 1991. Prior to that he was a Senior Manager with Ernst & Young.
He is a Certified Public Accountant.
Mr. Gameson has been Senior Vice President of Human Resources since October
1994. He previously served as Vice President of Human Resources since
August, 1993. From December 1991 to July 1993, he was employed by
Townsends, Inc. and served as Complex Human Resource, Manager. Prior to
that he was employed by the Company as Complex Human Resource, Manager, at
its Mt. Pleasant, Texas location.
Mr. Martin has been Senior Vice President, DeQueen, Arkansas Complex
Manager, of the Company since April 1993. He previously served as Plant
Manager at the Company's Lufkin, Texas operations and Vice President,
Processing, at the Company's Mt. Pleasant, Texas, operations from September
1981 to April 1993. Prior to that he was employed by Mountaire Corporation
of DeQueen, Arkansas, until it was acquired by the Company in 1981.
Dr. Miner, Ph.D., has been Senior Vice President, Technical Services, since
April 1994. He has been employed by the Company and its predecessor
partnership since 1966 and previously served as Senior Vice President
responsible for live production and feed nutrition. He has been a Director
since the incorporation of the Company in 1968.
Mr. Murray has been Senior Vice President, Sales & Marketing, Prepared
Foods since October 1994. He previously served as Vice President of Sales
and Marketing, Food Service since August 1993. From 1990 to July 1993, he
was employed by Cargill, Inc. Prior to that, from March 1987 to 1990 he
was employed by Pilgrim's Pride in a sales and marketing position and prior
thereto, he was employed by Tyson Foods, Inc.
Mr. Palm has been Senior Vice President, Lufkin, Texas, Complex Manager of
the Company, since 1985 and was previously employed by Plus-Tex Poultry,
Inc., a company acquired by Pilgrim's Pride in 1985.
Item 2. Properties
Production and Facilities
Breeding and Hatching
The Company supplies all of its domestic chicks by producing its
own hatching eggs from domestic breeder flocks owned by the Company,
approximately 38% of which are maintained on 38 Company-operated breeder
farms. The Company currently owns or contracts for approximately 6.4
million square feet of breeder housing on approximately 178 breeder farms.
In Mexico, all of the Company's breeder flocks are maintained on Company-
owned farms.
The Company owns six hatcheries in the Unites States, located in
Nacogdoches and Pittsburg, Texas, and DeQueen and Nashville, Arkansas,
where eggs are incubated and hatched in a process requiring 21 days. Once
hatched, the day-old chicks are inspected and vaccinated against common
poultry diseases and transported by Company vehicles to grow-out farms.
The Company's six domestic hatcheries have an aggregate production capacity
of approximately 6.3 million chicks per week. In Mexico, the Company owns
four hatcheries, which have an aggregate production capacity of
approximately 1.9 million chicks per week.
Grow-out
The Company places its domestically grown chicks on approximately
929 grow-out farms located in Texas and Arkansas. These farms provide the
Company with approximately 43 million square feet of growing facilities.
The Company operates 32 grow-out farms which account for approximately 10%
of its total annual domestic chicken capacity. The Company also places
chicks with farms owned by affiliates of the Company under grow-out
contracts. The remaining chicks are placed with independent farms under
grow-out contracts. Under such grow-out contracts, the farmers provide the
facilities, utilities and labor. The Company supplies the chicks, the feed
and all veterinary and technical services. Contract grow-out farmers are
paid based on live weight under an incentive arrangement. In Mexico, the
Company owns approximately 58% of its grow-out farms and contracts with
independent farmers for the balance of its production. Arrangements with
independent farmers in Mexico are similar to the Company's arrangements
with contractors in the United States.
Feed Mills
An important factor in the production of chicken is the rate at
which feed is converted into body weight. The Company purchases feed
ingredients on the open market. The primary feed ingredients include corn,
milo and soybean meal, which historically have been the largest component
of the Company's total production cost. The quality and composition of the
feed is critical to the conversion rate, and accordingly, the Company
formulates and produces its own feed. Domestically, the Company operates
four feed mills located in Nacogdoches and Pittsburg, Texas and Nashville
and Hope, Arkansas. The Company currently has annual domestic feed
requirements of approximately 1.6 million tons and the capacity to produce
approximately 1.9 million tons. The Company owns three feed mills in
Mexico which produce all of the requirements of its Mexican operations.
Mexican feed requirements are approximately .5 million tons with a capacity
to produce approximately .6 million tons. In fiscal 1994, approximately
49% of the grain used was imported from the United States. However, this
percentage fluctuates based on the availability and cost of local grain
supplies.
Feed grains are commodities subject to volatile price changes
caused by weather, size of harvest, transportation and storage costs and
the agricultural policies of the United States and foreign governments.
Although the Company can and sometimes does purchase grain in forward
markets, it cannot eliminate the potential adverse effect of grain price
increases.
Processing
Once the chickens reach processing weight, they are transported in
the Company's trucks to the Company's processing plants. These plants
utilize modern, highly automated equipment to process and package the
chickens. The Company periodically reviews possible application of new
processing technologies in order to enhance productivity and reduce costs.
The Company's five domestic processing plants, two of which are located in
Mt. Pleasant, Texas, and the remainder of which are located in Dallas and
Lufkin, Texas, and DeQueen, Arkansas, have the capacity, under present
U.S.D.A. inspection procedures, to produce approximately 1 billion pounds
of dressed chicken annually. The Company's three processing plants located
in Mexico, which perform fewer processing functions than the Company's U.S.
facilities, have the capacity to process approximately 340 million pounds
of dressed chicken annually.
Prepared Foods Plant
The Company's prepared foods plant in Mt. Pleasant, Texas, was
constructed in 1986 and expanded in 1987. This facility has deboning
lines, marination systems, batter/breading systems, fryers, ovens, both
mechanical and cryogenic freezers, a variety of packaging systems and cold
storage. This plant is currently operating at the equivalent of two shifts
a day for five and one- half days a week. If necessary, the Company could
add additional shifts during the remaining days of the week.
Egg Production
The Company produces eggs at three farms near Pittsburg, Texas.
One farm is owned by the Company, while two farms are operated under
contract by an entity owned by a major stockholder of the Company. The
eggs are cleaned, sized, graded and packaged for shipment at processing
facilities located on the egg farms. The farms have a housing capacity for
approximately 2.3 million producing hens and are currently housing
approximately 1.9 million hens.
Other Facilities and Information
The Company operates a rendering plant located in Mt. Pleasant,
Texas, that currently processes by-products from approximately 1.6 million
chickens daily into protein products, which are used in the manufacture of
chicken and livestock feed and pet foods. The Company operates a feed
supply store in Pittsburg, Texas, from which it sells various bulk and
sacked livestock feed products. The Company owns an office building in
Pittsburg, Texas, which houses its executive offices, and an office
building in Mexico City, which houses the Company's Mexican marketing
offices. The Company also owns approximately 16,500 acres of farmland
previously used in the Company's non-poultry farming operations. The
Company is currently in the process of disposing of such land and related
assets.
Substantially all of the Company's property, plant and equipment
is pledged as collateral on its secured debt.
Item 3. Legal Proceedings
From time to time the Company is named as a defendant or co-
defendant in lawsuits arising in the course of its business. The Company
does not believe that such pending lawsuits will have a material adverse
impact on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
NOT APPLICABLE
Part II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
Quarterly Stock Prices and Dividends
High and low sales prices and dividends were:
Prices Prices
1994 1993 Dividends
Quarter High Low High Low 1994 1993
First 8 1/4 6 5/8 $7 $5 3/8 $.015 $. --
Second 9 1/4 6 5/8 9 1/2 6 1/4 .015 . --
Third 9 6 3/8 9 1/8 7 1/2 .015 .015
Fourth 9 5/8 7 1/4 8 5/8 7 .015 .015
Pursuant to an agreement with some of the Company's secured
lenders, dividends were suspended until the completion of the refinancing
plans. Dividends were reinstated for the quarter ended July 3, 1993.
The Company's stock is traded on the New York Stock Exchange
(ticker symbol CHX). The Company estimates there were approximately 12,500
holders (including individual participants in security position listings)
of the Company's common stock as of December 15, 1994.
S E L E C T E D F I N A N C I A L D A T A
Pilgrim's Pride Corporation and Subsidiaries
Years Ended
1994 1993(a) 1992(b) 1991 1990 1989
(in thousands, except per share data)
OPERATING RESULTS SUMMARY:
Net sales $922,609(c) $887,843 $817,361(c) $786,651 $720,555 $661,077
Gross margin 110,827 106,036(d) 32,802(d) 75,567 74,190 83,356
Operating
income (loss) 59,955 56,102 (13,475) 31,039 33,379 47,014
Income (loss)
before income
taxes and
extraordinary
charge 42,448 32,838 (33,712) 12,235 20,463 31,027
Income tax
expense
(benefit) 11,390 10,543 (4,048) (59) 4,826 10,745
Income (loss)
before
extraordinary
charge 31,058 22,295 (29,664) 12,294 15,637 20,282
Extraordinary
charge -
early repayment
of debt,
net of tax - (1,286) - - - -
Net income
(loss) 31,058 21,009 (29,664) 12,294 15,637 20,282
Per common share data:
Income (loss
before
extraordinary
charge $ 1.1 $ 0.81 $ (1.24) $ 0.54 $ 0.69 $ 0.90
Extraordinary
charge -
early repayment
of debt - (0.05) - - - -
Net income
(loss) 1.13 0.76 (1.24) 0.54 0.69 0.90
Cash dividends 0.06 0.03 0.06 0.06 0.06 0.06
Book value(e) 5.86 4.80 4.06 4.97 4.49 3.86
BALANCE SHEET SUMMARY:
Working
capital $ 99,724 $ 72,688 $ 11,227 $ 44,882 $ 54,161 $ 60,313
Total assets 438,683 422,846 434,566 428,090 379,694 291,102
Short-term
debt 4,493 25,643 86,424 44,756 30,351 9,528
Long-term
debt, less
current
maturities 152,631 159,554 131,534 175,776 154,277 109,412
Total
stockholders'
equity 161,696 132,293 112,112 112,353 101,414 87,132
KEY INDICATORS (As a percent of sales):
Gross Margin 12.0% 11.9%(d) 4.0%(d) 9.6% 10.3% 12.6%
Selling,
general and
administrative
expenses 5.5% 5.6%(d) 5.7%(d) 5.7% 5.7% 5.5%
Operating income
(loss) 6.5% 6.3% (1.6)% 3.9% 4.6% 7.1%
Net interest
expense 2.1% 2.9% 2.8% 2.5% 2.3% 2.7%
Net income (loss) 3.4% 2.4% (3.6)% 1.6% 2.2% 3.1%
(a) 1993 had 53 weeks.
(b) During 1992, the Company changed the fiscal year-end of its
Mexican subsidiaries from August to September to coincide with that of
its domestic operations. 1992 operating results included the operations
of the Mexican subsidiaries for the twelve months ended September 26,
1992. Operating results for the Mexican subsidiaries during the month of
September, 1991 have been reflected as a direct addition to stockholders'
equity. (See Note A to the Consolidated Financial Statements.)
(c) Excluded from net sales in 1994 and 1992 is approximately $.7
million and $2.2 million, respectively, of business interruption
insurance proceeds resulting from a fire at the Company's prepared foods
plant in Mt. Pleasant, Texas. (See Note I to the Consolidated Financial
Statements.)
(d) Reflects reclassification of certain expenses from selling,
general and administrative to cost of sales of $4.2 million and $1.8
million in 1993 and 1992, respectively. (See Note A to the Consolidated
Financial Statements).
(e) Amounts are based on end-of-period shares of common stock
outstanding.
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
General
The profitability of the chicken industry is affected by market
prices of chicken and of feed grains, both of which may fluctuate
significantly and exhibit cyclical characteristics. 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. This concentration has resulted in an increase in sales of
prepared food products as a percentage of total domestic net sales from
28.3% in fiscal 1990 to 39.0% in fiscal 1993. Management believes that
sales of prepared food products will become a larger component of its
total chicken sales, and, accordingly, changes in market prices for chicken
and feed costs should have less impact on profitability.
RESULTS OF OPERATIONS
Fiscal 1994 Compared to Fiscal 1993:
The Company's accounting cycle resulted in 52 weeks of operations
in fiscal 1994 and 53 weeks in fiscal 1993.
Consolidated net sales were $922.6 million for fiscal 1994, an
increase of $34.8 million, or 3.9%, over fiscal 1993. The increase in
consolidated net sales resulted from a $35.2 million increase in domestic
chicken sales to $635.2 million, partially offset by a $.4 million
decrease in sales of other domestic products to $98.7 million. Mexican
chicken sales remained constant at $188.7 million. The increase in
domestic chicken sales was primarily due to a 3.9% increase in the total
revenue per dressed pound produced and a 1.9% increase in dressed pounds
produced. The constant Mexican chicken sales resulted from a 2.4% increase
in dressed pounds produced offset by a 2.3% decrease in the total revenue
per dressed pound produced.
Consolidated cost of sales was $812.5 million in fiscal 1994, an
increase of $30.7 million, or 3.9%, over fiscal 1993. The increase
primarily resulted from a $35.9 million increase in cost of sales of
domestic operations offset by a $5.2 million decrease in the cost of sales
from Mexican operations.
The cost of sales increase in domestic operations of $35.9 million
was primarily due to a 5.7% increase in feed ingredient cost and a 1.9%
increase in dressed pounds produced.
The cost of sales decrease in Mexican operations of $5.2 million
was primarily the result of a decrease in the average cost of sales per
dressed pound produced, offset by a 2.4% increase in dressed pounds
produced. The decrease in the average cost of sales per dressed pound
produced when compared to the same period in 1993 was due to lower live
production costs due to increased efficiencies.
Gross profit as a percentage of sales increased to 12.0% in fiscal
1994 from 11.9% in fiscal 1993. The improved gross profit resulted
primarily from increased gross profit in the Company's domestic chicken
operations resulting primarily from increased total revenue per dressed
pound. The increase in gross profit as a percentage of sales in Mexican
chicken operations resulted from a decrease in the average cost of sales
per dressed pound produced, resulting from reduced live production costs.
Consolidated selling, general and administrative expenses were
$50.9 million for fiscal 1994, an increase of $0.9 million, or 1.9%, when
compared to fiscal 1993. Consolidated selling, general and administrative
expenses as a percentage of sales decreased in fiscal 1994 to 5.5% from
5.6% in fiscal 1993.
Consolidated operating income for fiscal 1994 was $60.0 million
compared to $56.1 million in fiscal 1993. The increase was due primarily
to higher margins in domestic and Mexican chicken operations as described
previously.
Consolidated net interest expense was $19.2 million in fiscal
1994, a decrease of $6.5 million, or 25.5%, when compared to fiscal 1993.
This decrease was due to a reduction of fees and expenses incurred for
refinancing and lower amounts of outstanding debt when compared to fiscal
1993.
Fiscal 1993 Compared to Fiscal 1992:
The Company's accounting cycle resulted in 53 weeks of operations
in fiscal 1993 compared to 52 weeks in fiscal 1992.
Consolidated net sales were $887.8 million for fiscal 1993, an
increase of $70.5 million or 8.6%, over fiscal 1992. The increase in
consolidated net sales resulted from a $31.2 million increase in domestic
chicken sales to $600.0 million, a $28.2 million increase in Mexican
chicken sales to $188.7 million and a $11.1 million increase in sales of
other domestic products to $99.1 million. The increase in domestic chicken
sales was primarily due to a 4.9% increase in dressed pounds produced and a
.6% increase in the total revenue per dressed pound produced. The increase
in Mexican chicken sales resulted from a 6.8% increase in dressed pounds
produced and a 10.1% increase in the total revenue per dressed pound
produced.
Consolidated cost of sales was $781.8 million in fiscal 1993, a
decrease of $5.0 million, or .6% over fiscal 1992. The decrease primarily
resulted from an $8.8 million decrease in cost of sales of domestic
operations offset by a $5.7 million increase in the cost of sales from
Mexican operations.
The cost of sales decrease in domestic operations of $8.8 million,
occurring while dressed pounds produced increased 4.9%, was due primarily
to reduced live production cost, improved efficiencies, lower feed cost and
elimination of cost of sales resulting from the cessation of non-poultry
farming operations. While average feed costs were lower in fiscal 1993
than the previous year, since the third quarter of fiscal 1993, feed costs
have increased primarily attributable to flooding which occurred during the
summer of 1993 in the Midwestern United States. Due to the commodity
nature of feed there can be no assurance as to future feed costs.
The cost of sales increase in Mexican operations of $5.7 million
was primarily the result of a 6.8% increase in dressed pounds produced
offset by a decrease in the average cost of sales per dressed pound
produced. The decrease in the average cost of sales per dressed pound
produced when compared to the same period in 1992, was due to decreased feed
prices and reduced production costs resulting from improved performance
levels which are a result of capital expenditures made by the Company in
1990 and 1991.
Gross profit as a percentage of sales increased to 11.9% in fiscal
1993 from 4.0% in fiscal 1992. The improved gross profit resulted
primarily from increased gross profit in the Company's domestic chicken
operations resulting primarily from improved results in live production,
improved efficiencies and decreased feed costs. The improved gross profit
also results from significant improvement in gross profit on other domestic
products including the elimination of the negative gross profit experienced
in the same period of fiscal 1992 upon the cessation of non-poultry farming
operations, and improved margins in the Company's commercial egg
operations. The increase in gross profit as a percentage of sales in
Mexican chicken operations resulted from a 10.1% increase in total revenue
per dressed pound produced and a decrease in the average cost of sales per
dressed pound produced, resulting from decreased feed prices and reduced
production costs.
Consolidated selling, general and administrative expenses were
$49.9 million for fiscal 1993, an increase of $3.7 million, or 7.9%, when
compared to fiscal 1992. The increase was not significantly attributable
to any individual expense category with the exception of accrued retirement
and bonuses which are dependent upon consolidated profits. Consolidated
selling, general and administrative expenses as a percentage of sales
decreased in fiscal 1993 to 5.6% compared to 5.7% in fiscal 1992.
Consolidated operating income for fiscal 1993 was $56.1 million
compared to an operating loss of $13.5 million in fiscal 1992. The
increase was due primarily to higher margins in all areas of the Company's
operations as described previously.
Consolidated net interest expense was $25.7 million in fiscal
1993, an increase of $3.2 million, or 14.3% when compared to fiscal 1992.
The increase was primarily due to higher rates on short-term borrowings due
to the renegotiation of revolving credit agreements with lenders occurring
in the third quarter of fiscal 1992 and the amortization of issue costs on
interim financing agreements.
Liquidity and Capital Resources:
The Company's liquidity improved from the previous year-end due to
record net income. The Company's working capital increased to $99.7
million ($93.3 million, excluding current deferred income taxes recorded in
connection with the adoption of FAS 109) from $72.7 million at the prior
year-end. The current ratio increased to 2.34 to 1 (2.25 to 1, excluding
current deferred income taxes recorded in connection with the adoption of
FAS 109) from 1.77 to 1 at the prior year-end. Stockholder's equity for
the Company increased to $161.7 million from $132.3 million at the prior
year-end. The Company also reduced the ratio of total debt to
capitalization from 58.3% at the prior year-end to 49.3%. The Company
maintains a $75 million revolving credit facility maturing in May 1997 with
unused lines of credit of $61.7 million available at November 15, 1994. In
July 1994, the Company secured $10 million in stand-by long-term financing
from an existing lender, secured by existing collateral. The facility is
available through June 20, 1995 and the Company expects to renew the
facility annually unless drawn upon.
Trade accounts and other accounts receivable at October 1, 1994,
were $53.3 million, a $6.3 million decrease from the 1993 fiscal year-end
balance. This 10.6% decrease was due primarily to a decrease in the
amounts of insurance claims receivable at year end 1994. See Note I to the
Consolidated Financial Statements.
Inventories were $100.7 million at October 1, 1994, a $9.0 million
increase from October 2, 1993. This 9.8% increase was primarily due to
increased production which requires higher inventories and higher feed
costs which are included in live broiler and hens and feed, eggs and other
inventories until such time as they are sold.
Deferred tax assets recorded in accordance with FAS 109 were $14.4
million as of October 1, 1994, a $4.7 million decrease from October 2,
1993. The Company believes that all remaining deferred tax assets will be
realized through the reversal of existing temporary differences and
anticipated future taxable earnings.
Other current assets were $1.2 million at October 1, 1994, a 87.3%
decrease from October 2, 1993, due primarily to the reclassification of
assets held for sale, principally farmland which had previously been used
in the Company's non-poultry farming operation, to other assets. The
reclassification was made upon conclusion that liquidation of these assets
is not likely to occur within the next fiscal year.
Capital expenditures for fiscal 1994 were $25.6 million primarily
for additional production facilities and other projects designed to improve
efficiencies and the routine replacement of equipment. The Company's
capital budget for fiscal 1995 provides for capital expenditures of
approximately $29 million, which the Company anticipates will be used to
improve efficiencies. The Company expects to finance its 1995 capital
expenditures with available operating cash flow and leases.
Cash flows provided by (used in) operating activities were $60.7
million, $45.0 million and $(1.6) million in fiscal 1994, 1993 and 1992,
respectively. The increase in cash flows provided by operating activities
from fiscal 1993 to fiscal 1994 and fiscal 1992 to fiscal 1993 resulted
primarily from increased net income in both fiscal 1994 and fiscal 1993.
Cash provided by (used in) financing activities was $(30.3)
million, $(40.3) million and $25.1 million in fiscal 1994, 1993 and 1992,
respectively. The cash provided by (used in) financing activities
primarily reflects the proceeds from the sales of stock in fiscal 1992 and
debt retirements in fiscal 1994, 1993 and 1992.
The Company's deferred income taxes have resulted primarily from
the Company's change from the cash method of accounting to the accrual
method of accounting for taxable periods beginning after July 2, 1988. The
Company's deferred income taxes arising from such change in method of
accounting will continue to be deferred as long as (i) at least 50% of the
voting stock and at least 50% of all other classes of stock of the Company
continue to be owned by the Lonnie "Bo" Pilgrim family and (ii) the
Company's net sales from its agricultural operation in a taxable year equal
or exceed the Company's net sales from such operations in its taxable year
ending July 2, 1988. Failure of the first requirement will cause all of
the deferred taxes attributable to the change in accounting method to be
due. Failure of the second requirement will cause a portion of such
deferred taxes to be due based upon the amount of the relative decline in
net sales from the agricultural operations. The family of Lonnie "Bo"
Pilgrim currently owns approximately 65.1% of the stock of the company.
However, a sufficient amount of that stock is pledged to secure obligations
to third parties such that foreclosure on that pledged stock by such third
parties could result in the failure to satisfy one of the conditions to the
continuation of the deferral of such deferred taxes. Management believes
that likelihood of the (i) Pilgrim family ownership falling below 50%, or
(ii) gross receipts from agricultural activities falling below the 1988
level, is remote.
Impact of Inflation:
Due to moderate inflation and the Company's rapid inventory
turnover rate, the results of operations have not been adversely affected
by inflation during the past three-year period.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements together with the report of
independent auditors, and financial statement schedules are included on
pages 34 through 51 of this document. Financial statement schedules other
than those included herein have been omitted because the required
information is contained in the consolidated financial statements or
related notes, or such information is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
NOT APPLICABLE
PART III
Item 10. Directors and Executive Officers of Registrant
Reference is made to "Election of Directors" on pages 3 through 5
of Registrant's Proxy Statement for its 1994 Annual Meeting of
Stockholders, which section is incorporated herein by reference.
Reference is made to "Compliance with Section 16(a) of the
Exchange Act" on page 9 of Registrant's Proxy Statement for its 1994 Annual
Meeting of Stockholders, which section is incorporated herein by reference.
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
Information responsive to Items 11, 12 and 13 is incorporated by
reference from sections entitled "Security Ownership", "Election of
Directors", "Executive Compensation", and "Certain Transactions" of the
Registrant's Proxy Statement for its 1994 Annual Meeting of Stockholders.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8- K
(a) (1) The financial statements listed in the accompanying index
to financial statements and schedules are filed as part of this report.
(2) The schedules listed in the accompanying index to
financial statements and schedules are filed as part of this report.
(3) Exhibits
2.1 Agreement and Plan of Reorganization dated September 15, 1986, by
and among Pilgrim's Pride Corporation, A Texas corporation; Pilgrim's Pride
Corporation, a Delaware corporation; and Doris Pilgrim Julian, Aubrey Hal
Pilgrim, Paulette Pilgrim Rolston, Evanne Pilgrim, Lonnie "Bo" Pilgrim,
Lonnie Ken Pilgrim, Greta Pilgrim Owens and Patrick Wayne Pilgrim
(incorporated by reference from Exhibit 2.1 to the Company's Registration
Statement on Form S-1 (No. 33-8805) effective November 14, 1986).
3.1 Certificate of Incorporation of the Company (incorporated by
reference from Exhibit 3.1 of the Company's Registration Statement on Form
S-1 (No. 33-8805) effective November 14, 1986).
3.2 By-Laws of the Company (incorporated by reference from Exhibit 3.2
to the Company's Registration Statement on Form S-1 (No. 33-8805) effective
November 14, 1986).
4.1 Certificate of Incorporation of the Company (incorporated by
reference from Exhibit 3.1 of the Company's Registration Statement on Form
S-1 (No. 33-8805) effective November 14, 1986).
4.2 By-Laws of the Company (incorporated by reference from Exhibit 3.2
of the Company's Registration Statement on Form S-1 (No. 33-8805) effective
November 14, 1986).
4.3 Indenture dated as of May 1, 1988, between the Company and Mtrust
Corporation National Association relating to the Company's 14 1/4% Senior
Notes Due 1995 (incorporated by reference from Exhibit 4.1 of the Company's
Registration Statement on Form S-1 (No. 33- 21057) effective May 2, 1988).
4.4 First Supplemental Indenture dated as of October 4, 1990, between
the Company and Ameritrust Texas, N.A. supplementing the Indenture dated as
of May 1, 1988, between the Company and Mtrust Corporation National
Association relating to the Company's 14 1/4% Senior Notes Due 1995
(incorporated by reference from Exhibit 4.4 of the Company's Form 8 filed
on July 1, 1992).
4.5 Form of 14 1/4% Senior Note Due 1995 (incorporated by reference
from Exhibit 4.2 of the Company's Registration Statement on Form S-1 (No.
33-21057) effective May 2, 1988).
4.6 Specimen Certificate for shares of Common Stock, Par value $.01
per share, of the Company (incorporated by reference from Exhibit 4.6 of
the Company's Form 8 filed on July 1, 1992).
4.7 Form of Indenture between the Company and Ameritrust Texas
National Association relating to the Company's 10 7/8% Senior Subordinated
Notes Due 2003 (incorporated by reference from Exhibit 4.6 of the Company's
Registration Statement on Form S-1 (No. 33-59626) filed on March 16, 1993).
4.8 Form of 10 7/8% Senior Subordinated Note Due 2003 (incorporated by
reference from Exhibit 4.8 of the Company's Registration Statement on Form
S-1 (No. 33-61160) filed on June 16, 1993).
10.1 Pilgrim Industries, Inc., Profit Sharing Retirement Plan, restated
as of July 1, 1987 (incorporated by reference from Exhibit 10.1 of the
Company's Form 8 filed on July 1, 1992).
10.2 Bonus Plan of the Company (incorporated by reference from Exhibit
10.2 to the Company's Registration Statement on Form S-1 (No. 33- 8805)
effective November 14, 1986).
10.3 Aircraft Lease dated November 15, 1984, by and between L.A.
Pilgrim d/b/a B.P. Leasing Company and the Company (incorporated by
reference from Exhibit 10.5 to the Company's Registration Statement on Form
S-1 (No. 33-8805) effective November 14, 1986).
10.4 Broiler Grower Contract dated November 11, 1985, between the
Company and Lonnie "Bo" Pilgrim (Farm #30) (incorporated by reference from
Exhibit 10.9 to the Company's Registration Statement on Form S-1 (No.
33-8805) effective November 14, 1986).
10.5 Broiler Growing Agreements dated October 28, 1985, between the
Company and Monty K. Henderson d/b/a Central Farms and Lone Oak Farms
(incorporated by reference from Exhibit 10.11 to the Company's Registration
Statement on Form S-1 (No. 33-8805) effective November 14, 1986).
10.6 Broiler Growing Agreement dated March 27, 1986, between the
Company and Clifford E. Butler (incorporated by reference from Exhibit
10.12 to the Company's Registration Statement on Form S-1 (No. 33-8805)
effective November 14, 1986).
10.7 Broiler Grower Contract dated July 10, 1990 between the Company
and James J. Miner d/b/a/ BJM Farms (incorporated by reference from Exhibit
10.7 of the Company's Form 8 filed on July 1, 1992).
10.8 Commercial Egg Grower Contract dated July 1, 1986, between the
Company and Pilgrim Poultry, Ltd. (incorporated by reference from exhibit
10.14 to the Company's Registration Statement on Form S-1 (No. 33-8805)
effective November 14, 1986).
10.9 Agreement dated November 28, 1978, by and between the Company and
Pilgrim Poultry, Ltd. (incorporated by reference from Exhibit 10.15 to the
Company's Registration Statement on Form S-1 (No. 33- 8805) effective
November 14, 1986).
10.10 Agreement between the Company and its Principal Shareholders dated
October 2, 1974, as amended July 1, 1979 (incorporated by reference from
Exhibit 10.19 to the Company's Registration Statement on Form S-1 (No.
33-8805) effective November 14, 1986).
10.11 Note Purchase Agreement dated as of October 1, 1986, by and
between the Company and Aetna Life Insurance Company with related
Collateral Trust Indenture, as amended by First Supplemental Indenture
dated as of November 1, 1986, and by letter dated September 29, 1987, Texas
Mortgage, Arkansas Mortgage, Guarantee Agreement, as amended by First
Amendment to Guarantee Agreement dated June 9, 1987, and Cash Pledge
Agreement (incorporated by reference from Exhibit 10.21 of the Company's
Registration Statement on Form S-1 (No. 33-21057) effective May 2, 1988).
10.12 Letter Agreement dated April 26, 1988, by and among Aetna Life
Insurance Company, The Aetna Casualty and Surety Company, The Connecticut
Bank and Trust Company and the Company and Letter Agreement dated April 26,
1988, by and among Bank of America National Trust and Savings Association,
The Connecticut Bank and Trust Company and the Company amending Note
Purchase Agreement dated as of October 1, 1986 (incorporated by reference
from Exhibit 10.36 of the Company's Registration Statement on Form S-1 (No.
33-21057) effective May 2, 1988).
10.13 Note Purchase Agreement dated as of September 21, 1990, by and
among the Company, Aetna Life Insurance Company and Bank of America
National Trust and Savings Association (incorporated by reference from
Exhibit 10.20 of the Company's Form 8 filed on July 1, 1992).
10.14 Amended and Restated Collateral Trust Indenture dated as of
September 21, 1990, by and between the Company and State Street Bank and
Trust Company of Connecticut, N.A. with related Notes, Modification
Agreements and First Amendment to Guaranty (incorporated by reference from
Exhibit 10.21 of the Company's Form 8 filed on July 1, 1992).
10.15 Supplemental Indenture and Waiver dated as of December 9, 1991, by
and between the Company and State Street Bank and Trust Company of
Connecticut, N.A. with related Notes, Modification Agreements and First
Amendment to Guaranty, Amended and Restated Collateral Trust Indenture
dated as of September 20, 1990 (incorporated by reference from Exhibit
10.24 of the Company's Form 10-K for the year ended September 26, 1992).
10.16 Loan Agreement dated as of August 1, 1988, by and between the
Company and Angelina and Neches River Authority Industrial Development
Corporation, with related Reimbursement and Credit Agreement (incorporated
by reference from Exhibit 10.22 of the Company's Form 8 filed on July 1,
1992).
10.17 Indenture of Trust dated as of August 1, 1988, related to Loan
Agreement by and between the Company and Angelina and Neches River
Authority Industrial Development Corporation, with related Bond,
Irrevocable Letter of Credit, Deed of Trust, Security Agreement, Assignment
of Rents and Financing Statement (incorporated by reference from Exhibit
10.23 of the Company's Form 8 filed on July 1, 1992).
10.18 Assumption Agreement by and between the Company, Lonnie "Bo"
Pilgrim and RepublicBank Lufkin, as trustee, dated June 14, 1985
(incorporated by reference from Exhibit 10.31 to the Company's Registration
Statement on Form S-1 (No. 33-8805) effective November 14, 1986).
10.19 Stock Purchase Agreement dated September 15, 1986, among the
Company, Doris Pilgrim Julian, Aubrey Hal Pilgrim, Paulette Pilgrim Rolston
and Evanne Pilgrim (incorporated by reference from Exhibit 2.2 to the
Company's Registration Statement on Form S-1 (No. 33-8805) effective
November 14, 1986).
10.20 Amendment No. 1 to Stock Purchase Agreement, dated as of October
31, 1986, among the Company, Doris Pilgrim Julian, Aubrey Hal Pilgrim,
Paulette Pilgrim Rolston and Evanne Pilgrim (incorporated by reference from
Exhibit 2.3 to the Company's Registration Statement on Form S-1 (No.
33-8805) effective November 14, 1986).
10.21 Limited Partnership Interest Purchase Agreement dated September
15, 1986, by and between the Company and Doris Pilgrim Julian (incorporated
by reference from Exhibit 2.5 to the Company's Registration Statement on
Form S-1 (No. 33-8805) effective November 14, 1986).
10.22 Employee Stock Investment Plan of the Company (incorporated by
reference from Exhibit 10.28 of the Company's Registration Statement on
Form S-1 (No. 33-21057) effective May 2, 1988).
10.23 Promissory Note dated February 1, 1988, by and between the Company
and John Hancock Mutual Life Insurance Company with related Deed of Trust,
Assignment of Rents and Security Agreement and Mortgage and Guaranty of
Note and Mortgage (incorporated by reference from Exhibit 10.29 of the
Company's Registration Statement on Form S-1 (No. 33-21057) effective May
2, 1988).
10.24 Letter from John Hancock Mutual Life Insurance Company dated April
25, 1988, amending Deed of Trust, Assignment of Rents and Security
Agreement dated February 1, 1988 (incorporated by reference from Exhibit
10.35 of the Company's Registration Statement on Form S-1 (No. 33-21057)
effective May 2, 1988).
10.25 Promissory Note dated April 25, 1991, by and between the Company
and John Hancock Mutual Life Insurance Company, with related Modification
Agreement and Guaranty of Note and Mortgage (incorporated by reference from
Exhibit 10.31 of the Company's Form 8 filed on July 1, 1992).
10.26 Stock Purchase Agreement dated May 12, 1992, between the Company
and Archer Daniels Midland Company (incorporated by reference from Exhibit
10.45 of the Company's Form 10-K for the year ended September 26, 1992).
10.27 Promissory Note dated September 21, 1988, by and between the
Company and Charles Schreiner Bank, with related Warranty Deed with
Vendor's Lien and Deed of Trust and Security Agreement (incorporated by
reference from Exhibit 10.40 of the Company's Form 8 filed on July 1,
1992).
10.28 Promissory Note dated November 1, 1988, by and between the Company
and The Connecticut Mutual Life Insurance Company, with related Deed of
Trust (incorporated by reference from Exhibit 10.41 of the Company's Form 8
filed on July 1, 1992).
10.29 Promissory Note dated September 20, 1990, by and between the
Company and Hibernia National Bank of Texas (incorporated by reference from
Exhibit 10.42 of the Company's Form 8 filed on July 1, 1992).
10.30 Loan Agreement dated October 16, 1990, by and among the Company,
Lonnie "Bo" Pilgrim and North Texas Production Credit Association, with
related Variable Rate Term Promissory Note and Deed of Trust (incorporated
by reference from Exhibit 10.43 of the Company's Form 8 filed on July 1,
1992).
10.31 Secured Credit Agreement dated May 27, 1993, by and among the
Company and Harris Trust and Savings Bank, and FBS AG Credit, Inc.,
Internationale Nederlanden Bank, N.V., Boatmen's First National Bank of
Kansas City, and First Interstate Bank of Texas, N.A. (incorporated by
reference from Exhibit 10.31 of the Company's Registration Statement on
Form S-1 (No. 33-61160) filed on June 16, 1993).
10.32 Loan and Security Agreement dated as of June 3, 1993, by and among
the Company, the banks party thereto and Creditanstalt-Bankverein, as agent
(incorporated by reference from Exhibit 10.32 of the Company's Registration
Statement on Form S-1 (No. 33-61160) filed on June 16, 1993).
10.33 First Amendment to Secured Credit Agreement dated June 30, 1994 to
the Secured Credit Agreement dated May 27, 1993, by and among the Company
and Harris Trust and Savings Bank, and FBS AG Credit, Inc., Internationale
Nederlanden Bank N.V., Boatman's First National Bank of Kansas City and
First Interstate Bank of Texas, N.A.
10.34 Amended and Restated Loan and Security Agreement date July 29,
1994, by and among the Company, the banks party thereto and
Creditanstalt-Bankverein, as agent.
10.35 Supplemental Indenture dated October 2, 1994, by and between the
Company and State Street Bank and Trust Company of Connecticut, N.A., and
Guarantee Agreement, as amended by Second Amendment to Guarantee Agreement
dated October 2, 1994.
22. Subsidiaries of Registrant.*
23. Consent of Ernst & Young LLP.*
27. Financial Data Statement.
* Filed herewith
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K promulgated
by the Securities and Exchange Commission, the Company has not filed as
exhibits certain other instruments defining the rights of holders of long-
term debt of the Company which instruments do not pertain to indebtedness
in excess of 10% of the total assets of the Company. The Company hereby
agrees to furnish copies of such instruments to the Securities and Exchange
Commission upon request.
(b) Reports on Form 8-K
NOT APPLICABLE
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the issuer has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 16th day
of December 1994.
PILGRIM'S PRIDE CORPORATION
By: _________________________
Clifford E. Butler
Vice Chairman of the Board and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dated indicated.
Signature Title Date
________________________ Chairman of the Board 12/16/94
Lonnie "Bo" Pilgrim of Directors and Chief
Executive Officer
(Principal Executive
Officer)
_______________________ Vice Chairman of the 12/16/94
Clifford E. Butler Board of Directors,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
________________________ President and 12/16/94
Lindy M. "Buddy" Pilgrim Chief Operating Officer and
Director
_______________________ Executive Vice President 12/16/94
Robert L. Hendrix Operations and
Director
_______________________ Senior Vice President 12/16/94
James J. Miner Technical Services and
Director
_______________________ Vice President and 12/16/94
Lonnie Ken Pilgrim Director
_______________________ Director 12/16/94
Robert E. Hilgenfeld
_______________________ Director 12/16/94
Vance C. Miller
_______________________ Director 12/16/94
James J. Vetter, Jr.
_______________________ Director 12/16/94
Donald L. Wass
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Pilgrim's Pride Corporation
We have audited the accompanying consolidated balance sheets of Pilgrim's
Pride Corporation and subsidiaries as of October 1, 1994, and October 2,
1993, and the related consolidated statements of income (loss),
stockholders' equity and cash flows for each of the three years in the
period ended October 1, 1994. Our audits also included the financial
statement schedules listed on the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Pilgrim's Pride Corporation and subsidiaries at October 1,
1994, and October 2, 1993, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended
October 1, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information
set forth therein.
ERNST & YOUNG LLP
2121 San Jacinto Street
Dallas, Texas 75201
November 15, 1994
C O N S O L I D A T E D B A L A N C E S H E E T S
Pilgrim's Pride Corporation and Subsidiaries
October 1, 1994 October 2, 1993
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11,244,000 $ 4,526,000
Trade accounts and other
receivables, less allowance
for doubtfulaccounts 53,264,000 59,608,000
Inventories 100,749,000 91,794,000
Deferred income taxes 6,459,000 -
Prepaid expenses 1,280,000 1,260,000
Other current assets 1,249,000 9,843,000
TOTAL CURRENT ASSETS 174,245,000 167,031,000
OTHER ASSETS 20,891,000 13,114,000
PROPERTY, PLANT AND EQUIPMENT
Land 15,153,000 14,824,000
Buildings, machinery and equipment 332,289,000 317,657,000
Autos and trucks 27,457,000 25,877,000
Construction-in-progress 4,853,000 7,863,000
379,752,000 366,221,000
Less accumulated depreciation and
amortization 136,205,000 123,520,000
243,547,000 242,701,000
$ 438,683,000 $ 422,846,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ - $ 12,000,000
Accounts payable 38,675,000 38,330,000
Accrued expenses 31,353,000 30,370,000
Current maturities of long-term debt 4,493,000 13,643,000
TOTAL CURRENT LIABILITIES 74,521,000 94,343,000
LONG-TERM DEBT, less current maturities 152,631,000 159,554,000
DEFERRED INCOME TAXES 49,835,000 36,656,000
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value,
authorized 5,000,000 shares; none issued - -
Common stock, $.01 par value, authorized
45,000,000 shares; 27,589,250 issued and
outstanding in 1994 and 1993 276,000 276,000
Additional paid-in capital 79,763,000 79,763,000
Retained earnings 81,657,000 52,254,000
TOTAL STOCKHOLDERS' EQUITY 161,696,000 132,293,000
COMMITMENTS AND CONTINGENCIES - -
$ 438,683,00 $ 422,846,000
See notes to consolidated financial statements.
C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E (L O S S)
Pilgrim's Pride Corporation and Subsidiaries
Years Ended
October October September
1, 1994 2, 1993 26, 1992
(52 weeks) (53 weeks) (52 weeks)
Net sales $922,609,000 $887,843,000 $817,361,000
Business interruption
insurance 731,000 - 2,225,000
923,340,000 887,843,000 819,586,000
Costs and expenses:
Cost of sales 812,513,000 781,807,000 786,784,000
Selling, general and
administrative 50,872,000 49,934,000 46,277,000
863,385,000 831,741,000 833,061,000
OPERATING INCOME (LOSS) 59,955,000 56,102,000 (13,475,000)
Other expenses (income):
Interest expense, net 19,173,000 25,719,000 22,502,000
Miscellaneous, net (1,666,000) (2,455,000) (2,265,000)
Total other expenses, net 17,507,000 23,264,000 20,237,000
Income (loss) before income
taxes and extraordinary
charge 42,448,000 32,838,000 (33,712,000)
Income tax expense
(benefit) 11,390,000 10,543,000 (4,048,000)
Net income (loss) before
extraordinary charge 31,058,000 22,295,000 (29,664,000)
Extraordinary charge-early
repayment of debt, net
of tax - (1,286,000) -
NET INCOME (LOSS) $ 31,058,000 $ 21,009,000 $(29,664,000)
Net income (loss) per
common share before
extraordinary charge $ 1.1 $ 0.81 $ (1.24)
Extraordinary charge
per common share - (0.05) -
Net income (loss) per
common share $ 1.1 $ 0.76 $ (1.24)
See notes to consolidated financial statements.
C O N S O L I D A T E D S T A T E M E N T S O F
S T O C K H O L D E R S ' E Q U I T Y
Pilgrim's Pride Corporation and Subsidiaries
Number Additional
of Common Paid-in Retained
Shares Stock Capital Earnings Total
Balance at
September
28, 1991 22,589,250 $226,000 $49,890,000 $62,237,000 $112,353,000
Net income
for the month
ended
September
28, 1991,
excluded
below due
to the
change in
fiscal
year-end
of Mexican
subsidiaries - - - 931,000 931,000
Net loss for year - - - (29,664,000) (29,664,000)
Common stock
issued 5,000,000 50,000 29,873,000 - 29,923,000
Cash
dividends
declared
($0.06 per
share) - - - (1,431,000) (1,431,000)
Balance at
September
26, 1992 27,589,250 276,000 79,763,000 32,073,000 112,112,000
Net income
for year - - - 21,009,000 21,009,000
Cash dividends
declared ($0.03
per share) - - - (828,000) (828,000)
Balance at
October
2, 1993 27,589,250 276,000 79,763,000 52,254,000 132,293,000
Net income
for year - - - 31,058,000 31,058,000
Cash dividends
declared
($0.06 per share) - - - (1,655,000) (1,655,000)
Balance at
October
1, 1994 27,589,250 $ 276,000 $79,763,000 $81,657,000 $161,696,000
See notes to consolidated financial statements.
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
Pilgrim's Pride Corporation and Subsidiaries
Years Ended
October October September
1, 1994 2, 1993 26, 1992
(52 weeks) (53 weeks) (52 weeks)
Cash Flows From Operating Activities:
Net income (loss) $ 31,058,000 $ 21,009,000 $ (29,664,000)
Adjustments to
reconcile net income
(loss) to cash
provided by (used in)
operating activities:
Depreciation and
amortization 25,177,000 26,034,000 24,090,000
Gain on property
disposals (608,000) (2,187,000) (620,000)
Provision for
doubtful accounts 2,666,000 2,124,000 1,045,000
Deferred income taxes 6,720,000 5,028,000 (5,382,000)
Extraordinary charge - 1,904,000 -
Net income for the
month ended
September 28, 1991
excluded above due
to the change in
fiscal year of
Mexican subsidiaries - - 931,000
Changes in operating
assets and liabilities:
Accounts and other
receivables 3,412,000 (6,555,000) (9,720,000)
Inventories (8,955,000) (2,366,000) 7,807,000
Prepaid expenses (459,000) 4,175,000 (4,416,000)
Accounts payable and
accrued expenses 1,742,000 (4,168,000) 14,598,000
Other (89,000) (28,000) (242,000)
Net Cash Flows Provided
by (Used In) Operating
Activities 60,664,000 44,970,000 (1,573,000)
Investing Activities:
Acquisitions of
property, plant and
equipment (25,547,000) (15,201,000) (18,043,000)
Proceeds from
property disposal 2,103,000 2,977,000 3,766,000
Other assets (128,000) 713,000 (536,000)
Net Cash Used in
Investing Activities (23,572,000) (11,511,000) (14,813,000)
Financing Activities:
Proceeds from notes
payable to banks 7,000,000 28,419,000 163,629,000
Repayments on notes
payable to banks (19,000,000) (81,398,000) (156,150,000)
Proceeds from
long-term debt 31,000 126,468,000 -
Payments on
long-term debt (16,253,000) (106,302,000) (11,502,000)
Cost of refinancing
debt - (5,510,000) -
Extraordinary charge,
cash items - (1,188,000) -
Proceeds from leasing
transaction - - 565,000
Net proceeds from
sale of stock - - 29,923,000
Cash dividends paid (2,069,000) (828,000) (1,355,000)
Cash (Used in)
Provided by
Financing Activities (30,291,000) (40,339,000) 25,110,000
Effect of exchange
rate changes on cash
and cash equivalents (83,000) (144,000) (49,000)
Increase (decrease) in
cash and cash
equivalents 6,718,000 (7,024,000) 8,675,000
Cash and cash
equivalents at
beginning of year 4,526,000 11,550,000 2,875,000
Cash and cash
equivalents at
end of year $11,244,000 $ 4,526,000 $11,550,000
Supplemental disclosure information:
Cash paid during the year for:
Interest (net of
amount capitalized) $19,572,000 $23,015,000 $22,507,000
Income taxes $ 7,108,000 $ 3,688,000 $ 1,455,000
See notes to consolidated financial statements.
N O T E S T O C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
Pilgrim's Pride Corporation and Subsidiaries
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Pilgrim's Pride Corporation and its wholly owned subsid
iaries (the "Company"). Significant intercompany accounts and transactions
have been eliminated.
The financial statements of the Company's Mexican subsidiaries are
remeasured as if the U.S. dollar were the functional currency. According
ly, assets and liabilities of the Mexican subsidiaries are translated at
end-of-period exchange rates, except for non current assets which are
translated at equivalent dollar costs at dates of acquisition using
historical rates. Operations are translated at average exchange rates in
effect during the period. Translation (gains) losses for 1994, 1993 and
1992 of $(257,000), $243,000, and $736,000, respectively, are included in
the statements of income as components of "Costs and expenses - Selling,
general and administrative" in the Consolidated Statement of Income (Loss).
During the fourth quarter of fiscal 1994, the Company reclassified certain
expenses of its Mexican subsidiaries to conform to the classification in
the United States. The effect of this change was to decrease selling,
general and administrative expense and increase cost of sales by
$4,177,000 and $1,844,000 in 1993 and 1992, respectively.
During the fourth quarter of fiscal 1992, the Company changed the fiscal
year-end for its Mexican subsidiaries from August 31 to a 52-53 week year-
end coinciding with the fiscal year of its domestic operations.
Accordingly, the fiscal 1992 Consolidated Statement of Loss includes the
operations of the Company's Mexican subsidiaries for the twelve-month period
ended September 26, 1992. Operating results for the Company's Mexican
subsidiaries during the month of September 1991 have been reflected as a
direct addition to stockholders' equity. If this change in the Company's
Mexican subsidiaries' fiscal year-end had not occurred, operating loss, net
loss, and net loss per common share for the fiscal year ended September 26,
1992, would have been $(8,760,000), $(24,683,000) and $(1.03), respect
ively. The effect of the change on the remaining components of the
Consolidated Statement of Loss was not significant.
Cash Equivalents: The Company considers highly liquid investments with a
maturity of 3 months or less when purchased to be cash equivalents.
Accounts Receivable: The Company does not believe it has significant
concentrations of credit risk. Credit evaluations are performed on all
significant customers and updated as circumstances dictate. The Company
generally does not require collateral. Allowances for doubtful accounts
were $ 5,906,000 and $3,240,000 in 1994 and 1993, respectively.
Inventories: Live poultry inventories of broilers are stated at the lower
of cost or market and hens at the lower of cost, less accumulated amorti
zation or market. The costs associated with hens are accumulated up to the
production stage and amortized over the productive lives using the
straight-line method. Finished poultry products, feed, eggs and other
inventories are stated at the lower of cost (first-in, first-out method) or
market. Under certain circumstances, the Company hedges purchases of its
major feed ingredients using futures contracts to minimize the risk of
adverse price fluctuations. Gains and losses on the hedge transactions are
deferred and recognized as a component of cost of sales when products are
sold.
Other Assets/Other Current Assets: Other assets includes approximately
$8.9 million of non poultry farming assets, primarily farmland, held for
sale. These assets, previously classified as other current assets in the
October 2, 1993 Consolidated Balance Sheet, were reclassified upon
the conclusion that their liquidation is not likely to occur within the
next fiscal year. Related debt on these assets has also been reclassified.
Property, Plant and Equipment: Property, plant and equipment is stated on
the basis of cost. For financial reporting purposes, depreciation is
computed using the straight-line method over the estimated useful lives of
these assets. Depreciation expense was $23.7 million, $23.4 million and
$23.1 million in 1994, 1993 and 1992, respectively.
Net Income (Loss) per Common Share: Net income (loss) per share is based
on the weighted average shares of common stock outstanding during the year.
The weighted average number of shares outstanding was 27,589,250 in 1994
and 1993 and 23,880,459 in 1992.
NOTE B - INVENTORIES
Inventories consist of the following:
October 1, 1994 October 2,1993
Live broilers and hens $ 47,743,000 $ 44,417,000
Feed, eggs and other 22,529,000 25,473,000
Finished poultry products 30,477,000 21,904,000
$ 100,749,000 $ 91,794,000
NOTE C - NOTES PAYABLE AND LONG-TERM DEBT
The Company maintains a $75 million credit facility with various banks
providing short-term lines of credit at interest rates of approximately one
and one-eighth percent above LIBOR and, at October 1, 1994, availability
under these lines totaled $63.9 million. Inventories and trade accounts
receivable of the Company are pledged as collateral on this facility. The
fair value of the Company's long-term debt was estimated using quoted
market prices, where available. For long-term debt not actively traded,
fair values were estimated using discounted cash flow analysis using
current market rates for similar types of borrowings. For certain debt
instruments recently issued or modified, including the credit facility,
the Company believes that their carrying amounts approximate fair value at
October 1, 1994 and October 2, 1993.
The table below sets forth maturities on long-term debt during the next
five years.
Year Amount
1995 $ 4,493,000
1996 7,595,000
1997 11,068,000
1998 8,480,000
1999 8,137,000
During 1993, the Company retired certain debt prior to their scheduled
maturities. These repayments resulted in an extraordinary charge of $1.3
million, net of $.6 million tax benefit.
In July 1994, the Company secured $10 million in stand-by long-term
financing from an existing lender, secured by existing collateral. The
facility is available through June 20, 1995 and the Company expects to
renew the facility annually unless drawn upon.
The Company is required, by certain provisions of its debt agreements, to
maintain minimum levels of working capital and net worth, to limit
dividends to a maximum of $1.7 million per year, to maintain various fixed
charge, leverage, current and debt-to-equity ratios, and to limit annual
capital expenditures to 115% of the prior year's depreciation and
amortization expense.
Total interest during 1994, 1993 and 1992 was $20,109,000, $26,415,000 and
$23,115,000, respectively. Interest related to new construction
capitalized in 1994, 1993 and 1992 was $525,000, $220,000 and $456,000,
respectively.
Long-term debt and the related fair values consist of the following:
October 1, 1994 October 2, 1993
Carrying Fair Carrying Fair
Amounts Value Amounts Value
Senior subordinated
notes due August 1,
2003, interest at
10 % (effective
rate of 11 %)
payable in semi-
annual installments,
less discount of
$1,330,000 and
$1,480,000 in 1994
and 1993,
respectively $ 98,670,000 $ 96,824,000 $ 98,520,000 $ 98,520,000
Notes payable to
bank, interest
at LIBOR plus
1.8% and 2.5%
in 1994 and 1993,
respectively,
principal
payments of
$700,000 in
quarterly
installments
including
interest plus
one final balloon
payment at maturity
on June 1, 2000 15,400,000 15,400,000 23,800,000 23,800,000
Senior secured debt
payable to an
insurance company
at 10.49%, payable
in equal annual
installments
beginning
October 5, 1996
through September
21, 2002 22,000,000 23,293,000 22,000,000 24,549,000
Note payable to an
insurance company
at 10.78%, payable
in equal monthly
installments
including
interest through
March 1, 1998 8,633,000 8,909,000 11,485,000 12,170,000
Senior secured
debt payable to
an insurance
company, interest
at 9.55%, payable
in equal annual
installments
through October
1, 1998 4,440,000 4,458,000 5,520,000 5,696,000
Note payable to
an insurance
company at 10.35%,
payable in equal
monthly
installments plus
interest through
May 1, 2001 3,544,000 3,683,000 4,220,000 4,568,000
Other notes
payable 4,437,000 4,925,000 7,652,000 7,652,000
157,124,000 157,492,000 173,197,000 176,955,000
Less current
maturities 4,493,000 13,643,000
$152,631,000 $159,554,000
Substantially all of the Company's property, plant and equipment is pledged
as collateral on its long-term debt.
NOTE D - INCOME TAXES
Income (loss) before income taxes after allocation of certain expenses to
foreign operations for 1994, 1993 and 1992 was $33,852,000, $30,816,000 and
($16,273,000), respectively, for domestic operations, and $8,596,000,
$2,022,000 and ($17,439,000), respectively, for foreign operations.
Provisions (benefits) for income taxes are based on pretax financial
statement income. The major components of the deferred tax liability are
related to the Company's prior use of the cash method of accounting for tax
purposes and differences in book and tax basis of depreciable assets.
The components of income tax expense (benefit) are set forth below:
Years Ended
October October September
1, 1994 2, 1993 26, 1992
Current:
Federal $ 4,573,000 $ 2,993,000 $ (49,000)
Foreign 423,000 2,775,000 1,892,000
Other (326,000) (253,000) (509,000)
4,670,000 5,515,000 1,334,000
Deferred:
Reinstatement (reversal) of deferred
taxes through utilization
(application) of net operating
losses 6,589,000 6,210,000 (5,971,000)
Accelerated tax depreciation 1,002,000 1,130,000 1,082,000
Effect of U.S. tax rate change on
temporary differences - 1,000,000 -
Expenses deductible in a different
year for tax and financial reporting
purposes (580,000) (1,782,000) -
Reversal of deferred foreign income
taxes upon Mexican tax law and
restructuring changes - (1,110,000) -
Other, net (291,000) (420,000) (493,000)
6,720,000 5,028,000 5,382,000)
$11,390,000 $10,543,000 (4,048,000)
The following is a reconciliation between the statutory U.S. federal income
tax rate and the Company's effective income tax rate:
Years Ended
October October September
1, 1994 2, 1993 26, 1992
Federal income tax rate 35.0% 34.8% (34.0)%
State tax rate, net 2.3 2.2 -
Reversal of deferred foreign
income taxes upon Mexican law and
restructuring changes - (3.4) -
Effect of U.S. tax rate change on
temporary differences - 3.0 -
Benefit of (prior) current year
losses not recognized - (5.3) 5.0
Difference in U.S. statutory tax
rate and Mexican effective tax rate (10.7) (2.5) 16.5
Other, net 0.2 3.3 0.5
26.8% 32.1% (12.0)%
Effective October 3, 1993, the Company adopted the provisions of FAS
Statement No. 109, "Accounting for Income Taxes." As permitted under the
new rules, prior years' financial statements have not been restated. The
cumulative effect of adopting FAS Statement No. 109 as of October 3, 1993
and the impact of the adoption on the reported net income amounts for 1994
was not material.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
Years Ended
October 1, 1994 October 2,1993
Deferred tax liabilities:
Tax over book depreciation $ 24,006,000 $ 23,004,000
Prior use of cash accounting 33,290,000 32,758,000
Other 516,000 -
Total deferred tax liabilities 57,812,000 55,762,000
Deferred tax assets:
AMT credit carryforward 6,629,000 3,967,000
General business credit carryforward 1,344,000 2,462,000
Net operating loss carryforward - 6,589,000
Other 6,463,000 6,088,000
Total deferred tax asset 14,436,000 19,106,000
Net deferred tax liabilities $ 43,376,000 $ 36,656,000
Pursuant to a restructuring of activities completed by the Company's
Mexican subsidiaries on January 1, 1993 approximately $1.1 million of
deferred taxes previously provided on earnings of the Company's
nonagricultural Mexican subsidiaries was reversed as a credit to income tax
expense in fiscal 1993. This restructuring, along with further
restructuring of activities completed on January 1, 1994, allowed
previously nonagricultural Mexican operations to be combined with existing
agricultural operations and, as such, qualify for taxability as
agricultural operations, which are currently not subject to taxes in
Mexico. The current provision for foreign income taxes in 1994 is the
result of taxes at certain of the Company's nonagricultural Mexican
subsidiaries which were subject to income taxes prior to the restructurings
or, absent earnings, an asset based minimum tax. The Company has not
provided any U.S. deferred federal income taxes on the undistributed
earnings of its Mexican subsidiaries based upon its determination that such
earnings will be indefinitely reinvested. As of October 1, 1994, the
cumulative undistributed earnings of these subsidiaries were approximately
$49,484,000. If such earnings were not considered indefinitely reinvested,
deferred federal and foreign income taxes would have been provided, after
consideration of estimated foreign tax credits. (Included in this amount
would be foreign taxes resulting from earnings of the Mexican agricultural
subsidiaries which would be due upon distribution of such earnings to the
U.S.). However, determination of the amount of deferred federal and
foreign income taxes is not practicable.
As of October 1, 1994, approximately $6,629,000 of alternative minimum tax
credits and $1,193,000 of targeted jobs credits were available to offset
future taxable income. The targeted jobs credits expire in years ending in
2001 through 2009. All credits have been reflected in the financial
statements as a reduction of deferred taxes. As these credits are utilized
for tax purposes, deferred taxes will be reinstated.
NOTE E - SAVINGS PLAN
The Company maintains a Section 401(k) Salary Deferral Plan (the "Plan").
Under the Plan, eligible domestic employees may voluntarily contribute a
percentage of their compensation. The Plan provides for a contribution of
up to four percent of compensation subject to an overall Company
contribution limit of five percent of income before taxes.
Under the plan outlined above, the Company's expenses were $2,636,000,
$1,074,000 and $831,000 in 1994, 1993 and 1992, respectively.
NOTE F - RELATED PARTY TRANSACTIONS
The major stockholder of the Company owns a broiler and egg operation.
Transactions with related entities are summarized as follows:
Years Ended
October October September
1, 1994 2, 1993 26, 1992
Contract egg grower fees to
major stockholder $ 5,137,000 $ 4,739,000 $ 4,326,000
Chick, feed and other sales
to major stockholder 9,373,000 8,298,000 15,146,000
Broiler purchases from
major stockholder 9,346,000 8,275,000 15,075,000
Purchases of feed
ingredients from Archer
Daniels Midland Company -
(See Note J) 56,499,000 37,757,000 51,549,000
The Company leases an airplane from its major stockholder under an
operating lease agreement. The terms of the lease agreement require
monthly payments of $33,000 plus operating expenses. Lease expense was
$396,000 for each of the years 1994, 1993 and 1992. Operating expenses
were $213,000 in 1994 and $108,000 in 1993 and 1992.
Expenses incurred for the guarantee of certain debt by stockholders were
$526,000, $1,192,000 and $1,632,000 in 1994, 1993 and 1992, respectively.
During 1992, the Company acquired real estate from its profit sharing plan
for approximately $574,000. The acquisition price was determined by an
independent appraisal and was approved by the Audit Committee of the Board
of Directors of the Company.
NOTE G - COMMITMENTS AND CONTINGENCIES
The Consolidated Statements of Income (Loss) included rental expense for
operating leases of approximately $10,058,000, $9,320,000 and $8,734,000
in 1994, 1993 and 1992, respectively. The Company's future minimum lease
commitments under noncancelable operating leases are as follows:
Year Amount
1995 $ 8,597,000
1996 6,316,000
1997 4,745,000
1998 4,146,000
1999 3,200,000
Thereafter 7,278,000
The estimated costs to complete construction-in-progress at various
locations at October 1, 1994, are approximately $4,419,000.
At October 1, 1994, the Company had $11,055,000 letters of credit
outstanding relating to normal business transactions.
The Company is subject to various legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of the
Company.
NOTE H - BUSINESS SEGMENTS
The Company operates in a single business segment as a producer of
agricultural products and conducts separate operations in the United States
and Mexico.
Interarea sales, which are not material, are accounted for at prices
comparable to normal trade customer sales. Identifiable assets by
geographic area are those assets that are used in the Company's operation
in each area.
Information about the Company's operations in these geographic areas is as
follows:
Years Ended
October October September
1, 1994 2, 1993 26, 1992
52 Weeks 53 Weeks 52 Weeks
Sales to unaffiliated customers:
United States $733,865,000 $699,089,000 $656,741,000
Mexico 188,744,000 188,754,000 160,620,000
$922,609,000 $887,843,000 $817,361,000
Operating profit (loss):
United States $ 46,421,000 $ 46,471,000 $ (1,565,000)
Mexico 13,534,000 9,631,000 (11,910,000)
$ 59,955,000 $ 56,102,000 $(13,475,000)
Identifiable assets:
United States $302,911,000 $288,761,000 $297,369,000
Mexico 135,772,000 134,085,000 137,197,000
$438,683,000 $422,846,000 $434,566,000
NOTE I - INSURANCE CLAIMS
The Company's Lufkin, Texas poultry processing production was shifted to
several of the Company's other processing facilities due to a fire that
occurred on July 26, 1993. Insurance claims covering this loss were
settled in 1994. Proceeds collected or estimated to be collected under the
property insurance claim exceeded the book value of the property destroyed,
resulting in a gain of approximately $.7 million and $1.9 million in fiscal
1994 and 1993, respectively; such gains are included as components of
"Other expenses (income) -Miscellaneous, net" in the fiscal 1994 and 1993
Consolidated Statements of Income.
The Company's prepared foods plant in Mt. Pleasant, Texas experienced a
temporary shutdown of the plant caused by a fire which occurred on January
8, 1992. Insurance claims covering this loss were settled in 1994. The
Company recorded approximately $.7 million and $2.2 million in fiscal 1994
and 1992, respectively, for amounts collected or expected to be collected
under the business interruption insurance claim. Proceeds collected under
the property insurance exceeded the book value of the property damaged by
$.8 million; such gain is included as a component of "Other expenses
(income) - Miscellaneous, net" in the fiscal 1992 Consolidated Statement of
Loss.
NOTE J - SALE OF COMMON STOCK
On May 12, 1992 the Company entered into a stock purchase agreement to sell
5,000,000 shares of its previously unissued but authorized common stock at
a purchase price of $6.00 per share to Archer Daniels Midland Company
("ADM"), a processor and merchandiser of agricultural products and a
supplier of several products to the Company. The stock purchase agreement
was closed on June 25, 1992 and proceeds from the sale of common stock to ADM
were applied immediately to repay notes payable to banks.
The 1992 net loss per common share computed on a supplemental basis, as if
the sale of common stock to ADM had occurred at the beginning of 1992 is
$1.03.
The stock purchase agreement also contains a "no-loss guarantee" issued by
the Company's major stockholder to ADM. Under the guarantee, ADM is
indemnified against loss and guaranteed a market rate return on their
investment through July 8, 1995. The guarantee is secured by 6,670,000
shares of Company stock owned by the Company's major stockholder.
NOTE K - QUARTERLY RESULTS - (Unaudited)
Year Ended October 1, 1994
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
Net sales $221,851,000 $223,167,000 $238,302,000 $239,289,000 $922,609,000
Business
Interruption
Insurance(a) - - - 731,000 731,000
Gross
profit(b) 29,354,000 24,684,000 28,675,000 28,114,000 110,827,000
Operating
income 16,508,000 12,632,000 15,322,000 15,493,000 59,955,000
Net income 8,421,000 7,920,000 7,196,000 7,521,000(c)31,058,000
Per share:
Net income(d) 0.31 0.29 0.26 0.27 1.13
Cash dividends 0.015 0.015 0.015 0.015 0.060
Market price:
High 8 1/4 9 1/4 9 9 5/8 9 5/8
Low 6 5/8 6 5/8 6 3/8 7 1/4 6 3/8
Year Ended October 2, 1993
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
(14 Weeks) (13 Weeks) (13 Weeks) (13 Weeks) (53 Weeks)
Net sales $220,453,000 $227,670,000 $220,645,000 $219,075,000 $887,843,000
Gross
profit(b) 27,002,000 31,876,000 24,088,000 23,070,000 106,036,000
Operating
income 14,143,000 18,911,000 11,529,000 11,519,000 56,102,000
Extraordinary
charge(e) - - (1,286,000) - 1,286,000
Net income 6,828,000 7,807,000 2,332,000 4,042,000(c)21,009,000
Per share:
Net income
before
extraordinary
charge(d) 0.25 0.28 0.14 0.14 0.81
Extraordinary
charge(d) - - (0.05) - (0.05)
Net income(d) 0.25 0.28 0.09 0.14 0.76
Cash dividends(f) - - 0.015 0.015 0.030
Market price:
High 7 9 1/2 9 1/8 8 5/8 9 1/2
Low 5 3/8 6 1/4 7 1/2 7 5 3/8
(a) Represents amounts collected under a business interruption
insurance claim resulting from a fire at the Company's prepared
foods plant in Mt. Pleasant, Texas on January 8, 1992. (See Note I)
(b) In the fourth quarter of fiscal 1994, the Company reclassified
certain expenses previously reflected in selling, general and
administrative expenses as cost of sales. Conforming changes have been
made and reflected in the first three quarters of fiscal 1994 and
the four quarters of fiscal 1993 presented above. (See Note A)
(c) Includes gains on property insurance settlement of $.7 million and
$1.9 million in fiscal 1994 and fiscal 1993, respectively. (See Note I)
(d) Amounts are based on the weighted average shares of common stock
outstanding during each of the quarters.
(e) The extraordinary charge of $1.3 million, net of tax, is the
result of the early repayment of the Company's $50 million, 14 1/4%
Senior Secured Notes and certain other debts.
(f) Pursuant to an agreement with some of the Company's secured lenders,
dividends were suspended until the completion of the refinancing plans.
Dividends were reinstated for the quarter ended July 3, 1993.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES.
Col. A Col. B Col. C Col. D Col. E
DEDUCTIONS BALANCE AT END
NAME OF BALANCE AT AMOUNTS OF PERIOD
DEBTOR BEGINNING OF AMOUNTS WRITTEN NOT
PERIOD ADDITIONS COLLECTED OFF CURRENT CURRENT
Year ended
October 1, 1994:
Accounts receivable:
Major Stockholder(1) $ 51,000 $ 9,523,000 $ 9,460,000 $ -- $114,000 $ --
Year ended
October 2, 1993:
Accounts receivable:
Major Stockholder(1) $111,000 $ 8,458,000 $ 8,518,000 $ -- $ 51,000 $ --
Year ended
September 26, 1992:
Accounts receivable:
Major Stockholder(1) $398,000 $15,300,000 $15,587,000 $ -- $111,000 $ --
(1) Includes amounts for both the major stockholder and Pilgrim
Poultry G.P., wholly owned by major stockholder.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Col. A Col. B Col. C Col. D Col. E Col. F
Other
Balance at Changes- Balance at
CLASSIFI- Beginning Additions Add (Deduct) End of
CATION of Period at Cost Retirements Describe Period
Year ended
October
1, 1994(3):
Land $ 14,824,000 $ 475,000 $ 177,000 $ 31,000 $ 15,153,000
Building,
machinery
and
equip. 317,657,000 25,069,000 10,401,000 (36,000) 332,289,000
Autos and
trucks 25,877,000 3,317,000 1,743,000 6,000 27,457,000
Construction in
progress 7,863,000 (3,010,000)(1) -- -- 4,853,000
TOTAL $366,221,000 $ 25,851,000(2) $12,321,000(5)$ 1,000(6)$ 379,752,000
Year ended
October
2, 1993(3):
Land $ 15,063,000 $ 168,000 $ 185,000 $ (222,000) $ 14,824,000
Building,
machinery
and
equip. 315,392,000 8,486,000 6,690,000 469,000 317,657,000
Autos and
trucks 24,622,000 1,623,000 550,000 182,000 25,877,000
Construction in
progress 2,939,000 4,924,000(1) -- -- 7,863,000
TOTAL $358,016,000 $15,201,000(2) $ 7,425,000(5)$ 429,000(6)$ 366,221,000
Year ended
September
26, 1992(3):
Land $ 23,111,000 $ 676,000 $ 223,000 $ (8,501,000) $ 15,063,000
Building,
machinery
and
equip. 288,913,000 34,794,000 7,821,000 (494,000) 315,392,000
Autos and
trucks 26,777,000 1,809,000 3,798,000 (166,000) 24,622,000
Construction in
progress 21,126,000 (18,123,000)(1) -- (64,000) 2,939,000
TOTAL $359,927,000 $19,156,000(2)(4)$11,842,000(5)$(9,225,000)(6)$358,016,000
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
(1) Represents net change in construction-in-progress.
(2) Additions relate primarily to expansion of poultry equipment and
facilities in both U.S. and Mexican operations.
(3) Provisions for depreciation have been computed using the following
range of useful lives:
Building, machinery and equipment 5 to 40 years
Autos and trucks 5 to 7 years
(4) Includes assets acquired under capital lease of approximately
$1,113,000.
(5) Amounts relate primarily to the retirement of fixed assets
destroyed in the fires at the prepared foods plant in fiscal 1992
and the Lufkin processing plant in fiscal 1993.
(See Note I to Consolidated Financial Statements).
(6) Amounts relate primarily to asset reclassification between Other
current assets and Property, Plant and Equipment.
(See Note A to Consolidated Financial Statements).
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Other
Balance at Charges to Changes Balance at
Beginning Cost and Add (Deduct) End of
DESCRIPTION of Period Expenses Retirements Describe Period
Year ended
October 1, 1994:
Building $107,853,000 $20,750,000 $ 9,345,000 $(133,000) $119,125,000
Autos and
trucks 15,667,000 2,974,000 1,561,000 -- 17,080,000
TOTAL $123,520,000 $23,724,000 $10,906,000(1)$(133,000) $136,205,000
Year ended
October 2, 1993:
Building $ 91,109,000 $20,424,000 $ 3,500,000 $ (180,000) $107,853,000
Autos and
trucks 12,891,000 2,995,000 342,000 123,000 15,667,000
TOTAL $104,000,000 $23,419,000 $ 3,842,000(1)$ (57,000) $123,520,000
Year ended
September 26, 1992 (2):
Building $ 76,471,000 $19,434,000 $ 4,625,000 $ (171,000) $ 91,109,000
Autos and
trucks 13,364,000 3,647,000 3,968,000 (152,000) 12,891,000
TOTAL $ 89,835,000 $23,081,000 $ 8,593,000(1) $ (323,000) $104,000,000
(1) Amounts relate primarily to retirement of fixed assets destroyed
in the fires at the prepared foods plant in fiscal 1992 and the Lufkin
processing plant in fiscal 1993.
(See Note I to Consolidated Financial Statements.)
(2) Provisions for depreciation include charges for the Company's
Mexican subsidiaries for the month of September, 1991 as follows:
Building, Machinery and Equipment $ 398,000
Autos and Trucks 68,000
$ 466,000
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Col. A Col. B Col. C Col. D Col. E
Balance at Charged to Charged to Balance
Beginning of Cost and Other Accts. Deductions at end
DESCRIPTION Period Expenses Describe Describe(1) of Period
Year ended October 1, 1994:
Reserves and
allowances deducted
from asset accounts:
Allowance $ 3,240,000 $ 2,666,000 $ -- $ -- $ 5,906,000
Year ended October 2, 1993:
Reserves and
allowances deducted
from asset accounts:
Allowance $ 1,146,000 $ 2,124,000 $ -- $ 30,000 $ 3,240,000
Year ended September 26, 1992 (2):
Reserves and
allowances deducted
from asset accounts:
Allowance $ 101,000 $ 1,045,000 $ -- $ -- $ 1,146,000
(1) Uncollectible accounts written off, net of recoveries.
(2) Fiscal 1992 amounts have been restated to exclude amounts related
to sales adjustments previously included.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
Col. A Col. B Col. C Col. D Col. E Col. F
Average Weighted
Maximum Amount Average
CATEGORY OF Weighted Amount Outstanding Interest
AGGREGATE Balance Average Outstanding During Rate During
SHORT-TERM at end Interest During the Period the Period
BORROWINGS of Period Rate the Period (1) (2)
Year ended October 1, 1994:
Notes payable
to banks $ -- 5.44% $12,000,000 $ 5,167,000 4.03%
Year ended October 2, 1993:
Notes payable
to banks $12,000,000 5.00% $64,979,000 $46,098,840 7.44%(3)
Year ended September 26, 1992:
Notes payable
to banks $64,979,000 6.63% $97,000,000 $71,657,000 5.97%
(1) The average amount outstanding during the period was computed by
dividing the total of month-end outstanding principal balances by 12.
(2) The weighted average interest rate during the period was computed
by dividing the actual interest expense by the average short-term
borrowings outstanding.
(3) The calculation of weighted average interest rate during the
period excludes interest expense of approximately $3.3 million relating
to issue costs on interim financing agreements.
PILGRIM'S PRIDE CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME INFORMATION
Col. A Col. B
Item Charged to Costs and Expenses
For Year Ended
1994 1993 1992 (1)
Maintenance and Repairs $ 30,824,000 $ 30,525,000 $ 29,954,000
Advertising Costs $ --(2) $ 8,957,000 $ 9,929,000
Amounts for royalties, taxes other than payroll and income taxes, and
amortization of preoperating costs and intangible assets are not presented
as such amounts are less than 1% of net sales.
(1) Amounts include charges for the Company's Mexican subsidiaries for
the month of September, 1991, as follows:
Maintenance and Repairs $824,000
Advertising Costs 20,000
$844,000
(2) Amount does not exceed 1% of total sales and revenue.
EXHIBIT 22-SUBSIDIARIES OF REGISTRANT
1. AVICOLA PILGRIM'S PRIDE DE MEXICO, S.A. DE C.V.
2. ALIMENTOS BLANCEADOS PILGRIM'S PRIDE S.A. DE C.V.
3. AVICOLA PILGRIM'S PRIDE, S.A. DE C.V.
4. AVICOLA SAN MIGUEL, S.A. DE C.V.
5. AVICOLA Y GANADERA COLIAH, S.A. DE C.V.
6. AVICOLA Y GRANADERA DEL BAJIO, S.A. DE C.V.
7. AVINDUSTRIA COMERCIAL, S.A. DE C.V.
8. AVINDUSTRIA E INVESTIGACION, S.A. DE C.V.
9. AVIPECUARIA IXTA, S.A. DE C.V.
10. AVIPECURIA VALVACO, S.A. DE C.V.
11. AVIPRODUCTORA, S.A. DE C.V.
12. COMPANIA INCUBADORA AVICOLA PILGRIM'S PRIDE, S.A. DE C.V.
13. CIA. INCUBADORA HIDALGO, S.A. DE C.V.
14. EMPACADORA CAMPO REAL, S.A. DE C.V.
15. INMOBILIARIA AVICOLA PILGRIM'S PRIDE, S. DE R.L. DE C.V.
16. PILGRIM'S PRIDE, S.A. DE C.V.
17. PRODUCTORA Y DISTRIBUIDORA DE ALIMENTOS, S.A. DE. C.V.
18. SERVICIOS AUXILIARES AVICOLAS, S.A. DE C.V.
19. TRANSCOMPO, S.A. DE C.V.
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 3-12043) of Pilgrim's Pride Corporation of our report dated
November 15, 1994, with respect to the consolidated financial statements
and schedules of Pilgrim's Pride Corporation included in this Annual
Report (Form 10-K) for the year ended October 1, 1994.
2121 San Jacinto
Dallas, Texas 75201
December 13, 1994
Secured Credit Agreement Among Pilgrim s Pride Corporation And Harris Trust
and Savings Bank Individually and as Agent
And FBS Ag Credit, Inc. Internationale Nederlanden Bank N. V.
Boatmen s First National Bank of Kansas City
First Interstate Bank of Texas, N.A. Dated as of May 27, 1993
Pilgrim s Pride Corporation
Secured Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
FBS Ag Credit, Inc.
Denver, Colorado
Internationale Nederlanden Bank N. V. ( ING Bank )
New York, New York
Boatmen s First National Bank of Kansas City
Kansas City, Missouri
First Interstate Bank of Texas, N.A.
Dallas, Texas
Ladies and Gentlemen:
The undersigned, Pilgrim s Pride Corporation, a Delaware
corporation (the Company ), applies to you for your several commitment,
subject to all the terms and conditions hereof and on the basis of the
representations and warranties hereinafter set forth, to make a revolving
credit (the Revolving Credit ) available to the Company, all as more fully
hereinafter set forth. Each of you is hereinafter referred to individually
as Bank and collectively as Banks. Harris Trust and Savings Bank in
its individual capacity is sometimes referred to herein as Harris , and in
its capacity as Agent for the Banks is hereinafter in such capacity called
the Agent.
.c1.1. The Credit;.
.c2.Section 1.1. The Revolving Credit.; (a) Subject to
all of the terms and conditions hereof, the Banks agree, severally and not
jointly, to extend a Revolving Credit to the Company which may be utilized
by the Company in the form of loans (individually a Revolving Credit Loan
and collectively the Revolving Credit Loans ), B/As and L/Cs (each as
hereinafter defined). The aggregate principal amount of all Revolving
Credit Loans under the Revolving Credit plus the amount available for
drawing under all L/Cs, the aggregate face amount of all B/As and the
aggregate principal amount of all unpaid Reimbursement Obligations (as
hereinafter defined) at any time outstanding shall not exceed the lesser of
(i) the sum of the Banks Revolving Credit Commitments (as hereinafter
defined) in effect from time to time during the term of this Agreement (as
hereinafter defined) and (ii) the Borrowing Base as determined on the basis
of the most recent Borrowing Base Certificate. The Revolving Credit shall
be available to the Company, and may be availed of by the Company from time
to time, be repaid (subject to the restrictions on prepayment set forth
herein) and used again, during the period from the date hereof to and
including May 31, 1995 (the Termination Date ).
(b) At any time not earlier than 120 days prior to, nor later
than 60 days prior to, the date that is one year before the Termination
Date then in effect (the Anniversary Date ), the Company may request that
the Banks extend the then scheduled Termination Date to the date one year
from such Termination Date. If such request is made by the Company each
Bank shall inform the Agent of its willingness to extend the Termination
Date no later than 20 days prior to such Anniversary Date. Any Bank s
failure to respond by such date shall indicate its unwillingness to agree
to such requested extension, and all Banks must approve any requested
extension. At any time more than 15 days before such Anniversary Date the
Banks may propose, by written notice to the Company, an extension of this
Agreement to such later date on such terms and conditions as the Banks may
then require. If the extension of this Agreement to such later date is
acceptable to the Company on the terms and conditions proposed by the
Banks, the Company shall notify the Banks of its acceptance of such terms
and conditions no later than the Anniversary Date, and such later date will
become the Termination Date hereunder and this Agreement shall otherwise be
amended in the manner described in the Banks notice proposing the
extension of this Agreement upon the Agent s receipt of (i) an amendment to
this Agreement signed by the Company and all of the Banks, (ii) resolutions
of the Company s Board of Directors authorizing such extension and (iii) an
opinion of counsel to the Company equivalent in form and substance to the
form of opinion attached hereto as Exhibit E and otherwise acceptable to
the Banks.
(c) The respective maximum aggregate principal amounts of the
Revolving Credit at any one time outstanding and the percentage of the
Revolving Credit available at any time which each Bank by its acceptance
hereof severally agrees to make available to the Company are as follows
(collectively, the Revolving Credit Commitments and individually, a
Revolving Credit Commitment ):
Harris Trust and Savings Bank $35,000,00046.66666667%
FBS Ag Credit, Inc. $15,000,000 20%
Internationale Nederlanden Bank N. V. $10,000,000 13.33333334%
Boatmen s First National Bank of Kansas City $10,000,000
13.33333334%
First Interstate Bank of Texas, N.A. $ 5,000,000 6.66666667%
Total $75,000,000 100%
(d) Loans under the Revolving Credit may be Eurodollar Loans,
CD Rate Loans or Domestic Rate Loans. All Loans under the Revolving Credit
shall be made from each Bank in proportion to its respective Revolving
Credit Commitment as above set forth. Each Domestic Rate Loan shall be in
an amount not less than $3,000,000 or such greater amount which is an
integral multiple of $500,000 and each Fixed Rate Loan shall be in an
amount not less than $3,000,000 or such greater amount which is an integral
multiple of $1,000,000.
(e) The initial borrowing under this Agreement shall be in an
amount sufficient to pay all amounts outstanding under that certain
Revolving Credit Agreement dated as of February 1, 1993 (the Existing
Agreement ) between the Company, Rabobank Nederland and the other banks
party thereto (the Existing Lenders ). The Company shall apply the
proceeds of the initial borrowing hereunder to pay all amounts outstanding
under the Existing Agreement and the Series D Notes.
.c2.Section 1.2. The Notes;. All Revolving Credit Loans
made by each Bank hereunder shall be evidenced by a single Secured
Revolving Credit Note of the Company substantially in the form of Exhibit A
hereto (individually, a Revolving Note and together, the Revolving Notes
) payable to the order of each Bank in the principal amount of such Bank s
Revolving Credit Commitment, but the aggregate principal amount of
indebtedness evidenced by such Revolving Note at any time shall be, and the
same is to be determined by, the aggregate principal amount of all
Revolving Credit Loans made by such Bank to the Company pursuant hereto on
or prior to the date of determination less the aggregate amount of
principal repayments on such Revolving Credit Loans received by or on
behalf of such Bank on or prior to such date of determination. Each
Revolving Note shall be dated as of the execution date of this Agreement,
shall be delivered concurrently herewith, and shall be expressed to mature
on the Termination Date and to bear interest as provided in Section 1.3
hereof. Each Bank shall record on its books or records or on a schedule to
its Revolving Note the amount of each Revolving Credit Loan made by it
hereunder, whether each Revolving Credit Loan is a Domestic Rate Loan, CD
Rate Loan or Eurodollar Loan, and, with respect to Eurodollar Loans, the
interest rate and Interest Period applicable thereto, and all payments of
principal and interest and the principal balance from time to time
outstanding, provided that prior to any transfer of such Revolving Note all
such amounts shall be recorded on a schedule to such Revolving Note. The
record thereof, whether shown on such books or records or on the schedule
to the Revolving Note, shall be prima facie evidence as to all such
amounts; provided, however, that the failure of any Bank to record or any
mistake in recording any of the foregoing shall not limit or otherwise
affect the obligation of the Company to repay all Revolving Credit Loans
made hereunder together with accrued interest thereon. Upon the request of
any Bank, the Company will furnish a new Revolving Note to such Bank to
replace its outstanding Revolving Note and at such time the first notation
appearing on the schedule on the reverse side of, or attached to, such
Revolving Note shall set forth the aggregate unpaid principal amount of
Revolving Credit Loans then outstanding from such Bank, and, with respect
to each Fixed Rate Loan, the interest rate and Interest Period applicable
thereto. Such Bank will cancel the outstanding Revolving Note upon receipt
of the new Revolving Note.
.c2.Section 1.3. Interest Rates;. (a) Domestic Rate
Loans. Each Domestic Rate Loan shall bear interest (computed on the basis
of a year of 360 days and actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is made until maturity (whether by
acceleration, upon prepayment or otherwise) at a rate per annum equal to
the lesser of (i) the Highest Lawful Rate and (ii) the sum of the
Applicable Margin plus the Domestic Rate from time to time in effect,
payable quarterly in arrears on the last day of each calendar quarter,
commencing on the first of such dates occurring after the date hereof and
at maturity (whether by acceleration, upon prepayment or otherwise).
(b) Eurodollar Loans. Each Eurodollar Loan under the
Revolving Credit shall bear interest (computed on the basis of a year of
360 days and actual days elapsed) on the unpaid principal amount thereof
from the date such Loan is made until the last day of the Interest Period
applicable thereto or, if earlier, until maturity (whether by acceleration
or otherwise) at a rate per annum equal to the lesser of (i) the Highest
Lawful Rate and (ii) the sum of the Applicable Margin plus the Adjusted
Eurodollar Rate, payable on the last day of each Interest Period applicable
thereto and at maturity (whether by acceleration or otherwise) and, with
respect to Eurodollar Loans with an Interest Period in excess of three
months, on the date occurring every three months from the first day of the
Interest Period applicable thereto.
(c) CD Rate Loans. Each CD Rate Loan under the Revolving
Credit shall bear interest (computed on the basis of a year of 360 days and
actual days elapsed) on the unpaid principal amount thereof from the date
such Loan is made until the last day of the Interest Period applicable
thereto or, if earlier, until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the lesser of (i) the Highest
Lawful Rate and (ii) the sum of the Applicable Margin plus the Adjusted CD
Rate, payable on the last day of each Interest Period applicable thereto
and at maturity (whether by acceleration of otherwise) and, with respect to
CD Rate Loans with an Interest Period in excess of 90 days, on the date
occurring every 90 days from the first day of the Interest Period
applicable thereto.
(d) Default Rate. During the existence of an Event of Default
all Loans and Reimbursement Obligations shall bear interest (computed on
the basis of a year of 360 days and actual days elapsed) from the date of
such Event of Default until paid in full, payable on demand, at a rate per
annum equal to the sum of 2.5% plus the Domestic Rate from time to time in
effect plus the Applicable Margin.
.c2.Section 1.4. Conversion and Continuation of Loans;.
(a) Provided that no Event of Default or Potential Default has occurred and
is continuing, the Company shall have the right, subject to the other terms
and conditions of this Agreement, to continue in whole or in part (but, if
in part, in the minimum amount specified for Fixed Rate Loans in Section
1.1 hereof) any Fixed Rate Loan from any current Interest Period into a
subsequent Interest Period, provided that the Company shall give the Bank
notice of the continuation of any such Loan as provided in Section 1.8
hereof.
(b) In the event that the Company fails to give notice
pursuant to Section 1.8 hereof of the continuation of any Fixed Rate Loan
or fails to specify the Interest Period applicable thereto, or an Event of
Default or Potential Default has occurred and is continuing at the time any
such Loan is to be continued hereunder, then such Loan shall be
automatically converted as (and the Company shall be deemed to have given
notice requesting) a Domestic Rate Loan, subject to Sections 1.8(b), 8.2
and 8.3 hereof, unless paid in full on the last day of the then applicable
Interest Period.
(c) Provided that no Event of Default or Potential Default has
occurred and is continuing, the Company shall have the right, subject to
the terms and conditions of this Agreement, to convert Loans of one type
(in whole or in part) into Loans of another type from time to time provided
that: (i) the Company shall give the Bank notice of each such conversion
as provided in Section 1.8 hereof, (ii) the principal amount of any Loan
converted hereunder shall be in an amount not less than the minimum amount
specified for the type of Loan in Section 1.1 hereof, (iii) after giving
effect to any such conversion in part, the principal amount of any Fixed
Rate Loan then outstanding shall not be less than the minimum amount
specified for the type of Loan in Section 1.1 hereof, (iv) any conversion
of a Loan hereunder shall only be made on a Banking Day, and (v) any Fixed
Rate Loan may be converted only on the last day of the Interest Period then
applicable thereto.
.c2.Section 1.5. Bankers Acceptances;. Subject to all the
terms and conditions hereof, satisfaction of all conditions precedent to
borrowing under this Agreement and so long as no Potential Default or Event
of Default is in existence, at the Company s request Harris, in its
discretion, may create acceptances in an amount of at least $5,000,000 (a
B/A and collectively the B/As ) for the Company within the limits of, and
subject to availability under the Revolving Credit, and the Banks hereby
agree to participate therein as more fully described in Section 1.9 hereof.
Each B/A shall be created pursuant to a General Acceptance Agreement (the
B/A Agreement ) in the form of Exhibit B hereto and an Acceptance Request
in Harris standard form at the time such B/A is requested with respect to
such draft presented to Harris for acceptance hereunder. To provide the
Company with immediate cash for the B/As created hereunder, Harris agrees
to discount such B/As at a rate determined by adding a rate per annum
(calculated on the basis of a 360-day year and actual days elapsed) equal
to the Applicable Margin to the then current bankers acceptance rate for
B/As on which Harris is the acceptor and to credit the proceeds of such
discounting to the Company s account at Harris. The face amount of each
B/A created and outstanding pursuant hereto shall be deducted from the
credit which may be otherwise available under the Revolving Credit. Each
B/A shall have a term of 30, 60, 90, 120, 150 or 180 days (but not later
than the Termination Date), and shall be an acceptance eligible for
discount with Federal Reserve Bank in accordance with paragraph 7A of
Section 13 of the Federal Reserve Act and regulations and interpretations
applicable thereto. The Company shall present to Harris evidence of such
eligibility satisfactory to the Banks, and Harris in its sole discretion
may refuse to issue any B/A.
.c2.Section 1.6. Letters of Credit.; Subject to all the
terms and conditions hereof, satisfaction of all conditions precedent to
borrowing under this Agreement and so long as no Potential Default or Event
of Default is in existence, at the Company s request Harris may in its
discretion issue letters of credit (an L/C and collectively the L/Cs )
for the account of the Company subject to availability under the Revolving
Credit, and the Banks hereby agree to participate therein as more fully
described in Section 1.9 hereof. Each L/C shall be issued pursuant to an
Application for Letter of Credit (the L/C Agreement ) in the form of
Exhibit C hereto. The L/Cs shall consist of standby letters of credit in
an aggregate face amount not to exceed $20,000,000. Each L/C shall have an
expiry date not more than one year from the date of issuance thereof (but
in no event later than the Termination Date). The amount available to be
drawn under each L/C issued pursuant hereto shall be deducted from the
credit otherwise available under the Revolving Credit. In consideration of
the issuance of L/Cs the Company agrees to pay Harris a fee (the L/C Fee )
in the amount per annum equal to 1.0% of the face amount of each
Performance L/C and 1.5% of the stated amount of each Financial Guarantee
L/C (in each case computed on the basis of a 360 day year and actual days
elapsed) of the face amount for any L/C issued hereunder. In addition the
Company shall pay Harris for its own account an issuance fee (the L/C
Issuance Fee ) in an amount equal to one-eighth of one percent (0.125%) of
the stated amount of each L/C issued by Harris hereunder. All L/C Fees and
L/C Issuance Fees shall be payable on the date of issuance of each L/C
hereunder and on the date of each extension, if any, of the expiry date of
each L/C.
.c2.Section 1.7. Reimbursement Obligation;. The Company
is obligated, and hereby unconditionally agrees, to pay in immediately
available funds to the Agent for the account of Harris and the Banks who
are participating in L/Cs and B/As pursuant to Section 1.9 hereof the face
amount of (a) each B/A created by Harris hereunder not later than 11:00
A.M. (Chicago Time) on the maturity date of such B/A, and (b) each draft
drawn and presented under an L/C issued by Harris hereunder not later than
11:00 a.m. (Chicago Time) on the date such draft is presented for payment
to Harris (the obligation of the Company under this Section 1.7 with
respect to any B/A or L/C is a Reimbursement Obligation ). If at any time
the Company fails to pay any Reimbursement Obligation when due, the Company
shall be deemed to have automatically requested a Domestic Rate Loan from
the Banks hereunder, as of the maturity date of such Reimbursement
Obligation, the proceeds of which Loan shall be used to repay such
Reimbursement Obligation. Such Loan shall only be made if no Potential
Default or Event of Default shall exist and upon approval by all of the
Banks, and shall be subject to availability under the Revolving Credit. If
such Loan is not made by the Banks for any reason, the unpaid amount of
such Reimbursement Obligation shall be due and payable to the Agent for the
pro rata benefit of the Banks upon demand and shall bear interest at the
rate of interest specified in Section 1.3(d) hereof.
.c2.Section 1.8. Manner of Borrowing and Rate Selection;.
(a) The Company shall give telephonic, telex or telecopy notice to the
Agent (which notice, if telephonic, shall be promptly confirmed in writing)
no later than (i) 11:00 a.m. (Chicago time) on the date the Banks are
requested to make each Domestic Rate Loan, (ii) 11:00 a.m. (Chicago time)
on the date at least three (3) Banking Days prior to the date of (A) each
Eurodollar Loan which the Banks are requested to make or continue, and (B)
the conversion of any CD Rate Loan or Domestic Rate Loan into a Eurodollar
Loan and (iii) 11:00 a.m. (Chicago time) on the date at least one (1)
Business Day prior to the date of (A) each CD Rate Loan which the Banks are
requested to make and (B) the conversion of any Eurodollar Loan or Domestic
Rate Loan into a CD Rate Loan. Each such notice shall specify the date of
the Loan requested (which shall be a Business Day in the case of Domestic
Rate Loans and CD Rate Loans and a Banking Day in the case of a Eurodollar
Loan), the amount of such Loan, whether the Loan is to be made available by
means of a Domestic Rate Loan, CD Rate Loan or Eurodollar Loan and, with
respect to Fixed Rate Loans, the Interest Period applicable thereto;
provided, that in no event shall the principal amount of any requested
Revolving Credit Loan plus the aggregate principal or face amount, as
appropriate, of all Loans, L/Cs, B/As and unpaid Reimbursement Obligations
outstanding hereunder exceed the amounts specified in Section 1.1 hereof.
The Company agrees that the Agent may rely on any such telephonic, telex or
telecopy notice given by any person who the Agent believes is authorized to
give such notice without the necessity of independent investigation and in
the event any notice by such means conflicts with the written confirmation,
such notice shall govern if any Bank has acted in reliance thereon. The
Agent shall, no later than 12:30 p.m. (Chicago time) on the day any such
notice is received by it, give telephonic, telex or telecopy (if
telephonic, to be confirmed in writing within one Business Day) notice of
the receipt of notice from the Company hereunder to each of the Banks, and,
if such notice requests the Banks to make, continue or convert any Fixed
Rate Loans, the Agent shall confirm to the Company by telephonic, telex or
telecopy means, which confirmation shall be conclusive and binding on the
Company in the absence of manifest error, the Interest Period and the
interest rate applicable thereto promptly after such rate is determined by
the Agent.
(b) Subject to the provisions of Section 6 hereof, the
proceeds of each Loan shall be made available to the Company at the
principal office of the Agent in Chicago, Illinois, in immediately
available funds, on the date such Loan is requested to be made, except to
the extent such Loan represents (i) the conversion of an existing Loan or
(ii) a refinancing of a Reimbursement Obligation, in which case each Bank
shall record such conversion on the schedule to its Revolving Note, or in
lieu thereof, on its books and records, and shall effect such conversion or
refinancing, as the case may be, on behalf of the Company in accordance
with the provisions of Section 1.4(a) hereof and 1.9 hereof, respectively.
Not later than 2:00 p.m. Chicago time, on the date specified for any Loan
to be made hereunder, each Bank shall make its portion of such Loan
available to the Company in immediately available funds at the principal
office of the Agent, except (i) as otherwise provided above with respect to
converting or continuing any outstanding Loans and (ii) to the extent such
Loan represents a refinancing of any outstanding Reimbursement Obligations.
(c) Unless the Agent shall have been notified by a Bank prior
to 1:00 p.m. (Chicago time) on the date a Loan is to be made by such Bank
(which notice shall be effective upon receipt) that such Bank does not
intend to make the proceeds of such Loan available to the Agent, the Agent
may assume that such Bank has made such proceeds available to the Agent on
such date and the Agent may in reliance upon such assumption (but shall not
be required to) make available to the Company a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by
such Bank, the Agent shall be entitled to receive such amount on demand
from such Bank (or, if such Bank fails to pay such amount forthwith upon
such demand, to recover such amount, together with interest thereon at the
rate otherwise applicable thereto under Section 1.3 hereof, from the
Company) together with interest thereon in respect of each day during the
period commencing on the date such amount was made available to the Company
and ending on the date the Agent recovers such amount, at a rate per annum
equal to the effective rate charged to the Agent for overnight Federal
funds transactions with member banks of the Federal Reserve System for each
day, as determined by the Agent (or, in the case of a day which is not a
Business Day, then for the preceding Business Day) (the Fed Funds Rate ).
Nothing in this Section 1.8(c) shall be deemed to permit any Bank to breach
its obligations to make Loans under the Revolving Credit or to limit the
Company s claims against any Bank for such breach.
.c2.Section 1.9. Participation in B/As and L/Cs;. Each of
the Banks will acquire a risk participation for its own account, without
recourse to or representation or warranty from Harris, in each B/A upon the
creation thereof and in each L/C upon the issuance thereof ratably in
accordance with its Commitment Percentage. In the event any Reimbursement
Obligation is not immediately paid by the Company pursuant to Section 1.7
hereof, each Bank will pay to Harris funds in an amount equal to such Bank
s ratable share of the unpaid amount of such Reimbursement Obligation
(based upon its proportionate share relative to its percentage of the
Revolving Credit (as set forth in Section 1.1 hereof)). At the election of
all of the Banks, such funding by the Banks of the unpaid Reimbursement
Obligations shall be treated as additional Revolving Credit Loans to the
Company hereunder rather than a purchase of participations by the Banks in
the related B/As and L/Cs held by Harris. The availability of funds to the
Company under the Revolving Credit shall be reduced in an amount equal to
any such B/A or L/C. The obligation of the Banks to Harris under this
Section 1.9 shall be absolute and unconditional and shall not be affected
or impaired by any Event of Default or Potential Default which may then be
continuing hereunder. Harris shall notify each Bank by telephone of its
proportionate share relative to its percentage of the total Banks
Revolving Credit Commitments set forth in Section 1.1 hereof (a Commitment
Percentage ) of such unpaid Reimbursement Obligation. If such notice has
been given to each Bank by 12:00 Noon, Chicago time, each Bank agrees to
pay Harris in immediately available and freely transferable funds on the
same Business Day. If such notice is received after 12:00 noon, Chicago
time, each Bank agrees to pay Harris in immediately available and freely
transferable funds no later than the following Business Day. Funds shall
be so made available at the account designated by Harris in such notice to
the Banks. Upon the election by the Banks to treat such funding as
additional Revolving Credit Loans hereunder and payment by each Bank, such
Loans shall bear interest in accordance with Section 1.3(a) hereof. Harris
shall share with each Bank on a pro rata basis relative to its Commitment
Percentage a portion of each payment of a Reimbursement Obligation (whether
of principal or interest) and any B/A commission and any L/C Fee (but not
any L/C Issuance Fee) payable by the Company. Any such amount shall be
promptly remitted to the Banks when and as received by Harris from the
Company.
.c2.Section 1.10. Capital Adequacy;. If, after the date
hereof, any Bank or the Agent shall have determined in good faith that the
adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein (including, without limitation, any
revision in the Final Risk-Based Capital Guidelines of the Board of
Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12
CFR Part 225, Appendix A) or of the Office of the Comptroller of the
Currency (12 CFR Part 3, Appendix A), or in any other applicable capital
rules heretofore adopted and issued by any governmental authority), 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 any Bank (or its
Lending Office) 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 such Bank s capital, or on the capital of any corporation
controlling such Bank, in each case as a consequence of its obligations
hereunder to a level below that which such Bank would have achieved but for
such adoption, change or compliance (taking into consideration such Bank s
policies with respect to capital adequacy) by an amount reasonably deemed
by such Bank to be material, then from time to time, within fifteen (15)
days after demand by such Bank (with a copy to the Agent), the Company
shall pay to such Bank such additional amount or amounts as will compensate
such Bank for such reduction.
.c1.2. Fees, Prepayments And Terminations.
.c2.Section 2.1. Facility Fee;. For the period from the
date hereof to and including the Termination Date, the Company shall pay to
the Agent for the account of the Banks a facility fee with respect to the
Revolving Credit at the rate of one-half of one percent (0.5%) per annum
(computed in each case on the basis of a year of 360 days for the actual
number of days elapsed) of the aggregate maximum amount of the Banks
Revolving Credit Commitments hereunder in effect from time to time and
whether or not any credit is in use under the Revolving Credit, all such
fees to be payable quarterly in arrears on the last day of each calendar
quarter commencing on the last day of June, 1993, and on the Termination
Date, unless the Revolving Credit is terminated in whole on an earlier
date, in which event the facility fee for the final period shall be paid on
the date of such earlier termination in whole.
.c2.Section 2.2. Agent s Fee;. The Company shall pay to
and for the sole account of the Agent such fees as may be agreed upon in
writing from time to time by the Agent and the Company. Such fees shall be
in addition to any fees and charges the Agent may be entitled to receive
under Section 10 hereunder or under the other Loan Documents.
.c2.Section 2.3. Optional Prepayments;. The Company shall
have the privilege of prepaying without premium or penalty and in whole or
in part (but if in part, then in a minimum principal amount of $2,500,000
or such greater amount which is an integral multiple of $100,000) any
Domestic Rate Loan at any time upon prior telex or telephonic notice to the
Agent on or before 12:00 Noon on the same Business Day. The Company may
not prepay any Fixed Rate Loan. Any amount prepaid under the Revolving
Credit may, subject to the terms and conditions of this Agreement, be
borrowed, repaid and borrowed again.
.c2.Section 2.4. Mandatory Prepayments
(a) Borrowing Base. The Company shall not permit the sum of
the principal amount of all Loans plus the aggregate face amount of all
B/As, the amount available for drawing under all L/Cs and the aggregate
principal amount of all unpaid Reimbursement Obligations at any time
outstanding to exceed the lesser of (i) the sum of the Banks Revolving
Credit Commitments or (ii) the Borrowing Base as determined on the basis of
the most recent Borrowing Base Certificate. In addition to the Company s
obligations to pay any outstanding Reimbursement Obligations as set forth
in Section 1.7 hereof, the Company will make such payments on any
outstanding Loans and Reimbursement Obligations (and, if any B/As are then
outstanding, deposit an amount equal to the aggregate face amount of all
such B/As into an interest bearing account with the Agent which shall be
held as additional collateral security for such B/As) which are necessary
to cure any such excess within three Business Days after the occurrence
thereof. Any amount prepaid under the Revolving Credit may, subject to the
terms and conditions of this Agreement, be borrowed, prepaid and borrowed
again.
(b) Excess Cash Flow. No later than 60 days after the last
day of each fiscal quarter (except the last fiscal quarter in each fiscal
year) of the Company and no later than 90 days after the last day of each
Fiscal Year of the Company, the Company shall apply an amount equal to 75%
of its Excess Cash Flow for such fiscal quarter if its Leverage Ratio for
such fiscal quarter was greater than 0.60 to 1, or 50% of its Excess Cash
Flow for such fiscal quarter if its Leverage Ratio for such fiscal quarter
was equal to or less than 0.60 to 1 but greater than 0.55 to 1, first to
the prepayment in full of Revolving Credit Loans and Reimbursement
Obligations outstanding hereunder and then to the prepayment of Funded
Debt.
.c2.Section 2.5. Closing Fee;. The Company shall pay to
the Agent for the pro rata benefit of the Banks a closing fee in an amount
equal to one-half of one percent (0.5%) of the Banks Revolving Credit
Commitments (determined without regard to any credit in use hereunder),
one-half of which fee shall be payable on the date of the execution and
delivery of this Agreement and the other half of which fee shall be payable
on the date that the initial Loan is made hereunder, the initial B/A is
created hereunder or the initial L/C is issued hereunder.
.c2.Section 2.6. Termination of Commitments;. The
Revolving Credit Commitments of the Banks hereunder shall automatically
terminate on June 15, 1993 if the initial extension of credit hereunder is
not made on or before June 15, 1993.
.c1.3. Place and Application of Payments;.
All payments of principal and interest made by the Company in
respect of the Notes and Reimbursement Obligations and all fees payable by
the Company hereunder, shall be made to the Agent at its office at 111 West
Monroe Street, Chicago, Illinois 60690 and in immediately available funds,
prior to 12:00 noon on the date of such payment. All such payments shall
be made without setoff or counterclaim and without reduction for, and free
from, any and all present and future levies, imposts, duties, fees,
charges, deductions withholdings, restrictions or conditions of any nature
imposed by any government or any political subdivision or taxing authority
thereof. Unless the Banks otherwise agree, any payments received after
12:00 noon Chicago time shall be deemed received on the following Business
Day. The Agent shall remit to each Bank its proportionate share of each
payment of principal, interest and facility fees, B/A fees and L/C fees
received by the Agent by 3:00 P.M. Chicago time on the same day of its
receipt if received by the Agent by 12:00 noon, Chicago time, and its
proportionate share of each such payment received by the Agent after 12:00
noon on the Business Day following its receipt by the Agent. In the event
the Agent does not remit any amount to any Bank when required by the
preceding sentence, the Agent shall pay to such Bank interest on such
amount until paid at a rate per annum equal to the Fed Funds Rate. The
Company hereby authorizes the Agent to automatically debit its account with
Harris for any principal, interest and fees when due under the Notes, the
B/A Agreement, any L/C Agreement or this Agreement and to transfer the
amount so debited from such account to the Agent for application as herein
provided. All proceeds of Collateral shall be applied in the manner
specified in the Security Agreement.
.c1.4. Definitions;.
The terms hereinafter set forth when used herein shall have the
following meanings:
4.1. Account Debtor shall mean the Person who is obligated on
a Receivable.
4.2. Adjusted CD Rate shall mean a rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined in accordance
with the following formula:
Adjusted CD Rate = CD Rate / 100% - CD Reserve Percentage +
Assessment Rate
4.3. Adjusted Eurodollar Rate means a rate per annum
determined pursuant to the following formula:
Adjusted Eurodollar Rate = Eurodollar Rate / 100% -
Reserve Percentage
4.4. Affiliate shall mean any person, firm or corporation
which, directly or indirectly controls, or is controlled by, or is under
common control with, the Company. As used in this Section 4.30 the term
controls (including the terms controlled by and under common control
with ) shall have the meaning given in Section 4.30.
4.5. Agent is defined in the first paragraph of this
Agreement.
4.6. Agreement shall mean this Secured Credit Agreement as
supplemented, modified, restated and amended from time to time.
4.7. Anniversary Date has the meaning specified in Section
1.1(b) hereof.
4.8. Applicable Margin shall mean, with respect to each type
of Loan and the B/As described in Column A below, the rate of interest per
annum shown in Columns B, C and D below for the range of Leverage Ratio
specified for each Column:
A B C D
Leverage Ratio <0.5 to 1 >.50 to 1 and
<.60 to 1 .60 to 1 and <.70 to 1
Eurodollar Loans 1.125% 1.375% 1.75%
B/As 1.125% 1.375% 1.75%
Domestic Rate Loans 0.125% 0.375% 0.75%
CD Rate Loans 1.25% 1.50% 1.875%
Not later than 5 Business Days after receipt by
the Agent of the financial statements called for by Section 7.4 hereof for
the applicable fiscal quarter, the Agent shall determine the Leverage Ratio
for the applicable period and shall promptly notify the Company and the
Banks 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 Agent so notifies the Company and the Banks
with respect to all Loans and B/As 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 Agent in
accordance with this Section shall be conclusive and binding on the Company
and the Banks absent manifest error. From the date hereof until the
Applicable Margins are first adjusted pursuant hereto, the Applicable
Margins shall be those set forth in column D above.
4.9. Assessment Rate shall mean the assessment rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) imposed by the Federal
Deposit Insurance Corporation or its successors for insuring the Agent s
liability for time deposits, as in effect from time to time.
4.10. B/A and B/As shall have the meanings specified in
Section 1.5 hereof.
4.11. B/A Agreement shall have the meaning set forth in
Section 1.5.
4.12. Bank and Banks shall have the meanings specified in
the first paragraph of this Agreement.
4.13. Banking Day shall mean a day on which banks are open for
business in Nassau, Bahamas, London, England, Dallas, Texas, Denver,
Colorado, Kansas City, Missouri, New York, New York and Chicago, Illinois,
other than a Saturday or Sunday, and dealing in United States Dollar
deposits in London, England and Nassau, Bahamas.
4.14. Borrowing Base , as determined on the basis of the
information contained in the most recent Borrowing Base Certificate, shall
mean an amount equal to:
(a) 80% of the amount of Eligible Receivables, plus
(b) 65% of the Value of Eligible Inventory consisting of feed
grains, feed and ingredients, plus
(c) 65% percent of the Value of Eligible Inventory consisting
of live and dressed broiler chickens and commercial eggs, plus
(d) 65% of the Value of Eligible Inventory consisting of
prepared foods, plus
(e) 100% of the Value of Eligible Inventory consisting of
breeder hens, breeder pullets, commercial hens, commercial pullets and
hatching eggs, plus
(f) 40% of the Value of Eligible Inventory consisting of
packaging materials, vaccines and supplies, minus
(g) the aggregate outstanding amount of all Grower Payables
that are more than 15 days past due.
4.15. Borrowing Base Certificate shall mean the certificate in
the form of Exhibit H hereto which is required to be delivered to the Banks
in accordance with Section 7.4(d) hereof.
4.16. Business Day shall mean any day except Saturday or
Sunday on which banks are open for business in Chicago, Illinois, Dallas,
Texas, Denver, Colorado, Kansas City, Missouri and New York, New York.
4.17. Capitalized Lease shall mean, as applied to any Person,
any lease of any Property the discounted present value of the rental
obligations of such person as lessee under which, in accordance with
generally accepted accounting principles, is required to be capitalized on
the balance sheet of such Person.
4.18. Capitalized Lease Obligation shall mean, as applied to
any Person, the discounted present value of the rental obligation, as
aforesaid, under any Capitalized Lease.
4.19. CD Rate shall mean, with respect to each Interest Period
applicable to a CD Rate Loan, the rate per annum determined by the Agent to
be the arithmetic average of the rate per annum determined by the Agent to
be the average of the bid rates quoted to the Agent at approximately 10:00
a.m. Chicago time (or as soon thereafter as practicable) on the first day
of such Interest Period by at least two certificate of deposit dealers of
recognized national standing selected by the Agent for the purchase at face
value of certificates of deposit of the Agent having a term comparable to
such Interest Period and in an amount comparable to the principal amount of
the CD Rate Loan to be made by the Agent for such Interest Period. Each
determination of the CD Rate made by the Agent in accordance with this
paragraph shall be conclusive and binding on the Company except in the case
of manifest error or willful misconduct.
4.20. CD Reserve Percentage shall mean the rate (as determined
by the Bank) of the maximum reserve requirement (including, without
limitation, any supplemental, marginal and emergency reserves) imposed on
the Agent by the Board of Governors of the Federal Reserve System (or any
successor) from time to time on non-personal time deposits having a
maturity equal to the applicable Interest Period and in an amount equal to
the unpaid principal amount of the relevant CD Rate Loan, subject to any
amendments of such reserve requirement by such Board or its successor,
taking into account any transitional adjustments thereto. The Adjusted CD
Rate shall automatically be adjusted as of the date of any change in the CD
Reserve Percentage.
4.21. CERCLA shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
4.22. CERCLIS shall mean the CERCLA Information System.
4.23. Change in Law shall have the meaning specified in
Section 9.3 hereof.
4.24. CoBank shall mean the National Bank for Cooperatives.
4.25. CoBank Agreement shall have the meaning specified in
Section 11.15(a) hereof.
4.26. CoBank Participation shall have the meaning set forth in
Section 11.15(a) hereof.
4.27. Collateral shall mean the collateral security provided
to the Agent for the benefit of the Banks pursuant to the Security
Agreement.
4.28. Commitment Percentage shall have the meaning set forth
in Section 1.9 hereof.
4.29. Company shall have the meaning specified in the first
paragraph of this Agreement.
4.30. Control or Controlled By or Under Common Control
shall mean possession, directly or indirectly, of power to direct or cause
the direction of management or policies (whether through ownership of
voting securities, by contract or otherwise); provided that, in any event
any Person which beneficially owns, directly or indirectly, 10% or more (in
number of votes) of the securities having ordinary voting power for the
election of directors of a corporation shall be conclusively presumed to
control such corporation, and provided further that any Consolidated
Subsidiary shall be conclusively presumed to be controlled by the Company.
4.31. Current Assets of any Person shall mean the aggregate
amount of assets of such Person which in accordance with generally accepted
accounting principles may be properly classified as current assets after
deducting adequate reserves where proper.
4.32. Current Liabilities shall mean all items (including
taxes accrued as estimated) which in accordance with generally accepted
accounting principles may be properly classified as current liabilities,
and including in any event all amounts outstanding from time to time under
this Agreement.
4.33. Current Ratio shall mean the ratio of Current Assets to
Current Liabilities of the Company and its Subsidiaries.
4.34. Debt of any Person shall mean 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 of 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.
4.35. Domestic Rate means for any day the rate of interest
announced by Harris from time to time as its prime commercial rate in
effect on such day, with any change in the Domestic Rate resulting from a
change in said prime commercial rate to be effective as of the date of the
relevant change in said prime commercial rate (the Harris Prime Rate ),
provided that if the rate per annum determined by adding 1/2 of 1% to the
rate at which Harris would offer to sell federal funds in the interbank
market on or about 10:00 a.m. (Chicago time) on any day (the Adjusted Fed
Funds Rate ) shall be higher than the Harris Prime Rate on such day, then
the Domestic Rate for such day and for any succeeding day which is not a
Business Day shall be such Adjusted Fed Funds Rate. The determination of
the Adjusted Fed Funds Rate by Harris shall be final and conclusive except
in the case of manifest error or willful misconduct.
4.36. Domestic Rate Loan means a Revolving Credit Loan which
bears interest as provided in Section 1.3(a) hereof.
4.37. EBITDA shall mean, in any fiscal year of the Company,
all earnings (other than extraordinary items) of the Company before
interest and income tax obligations of the Company for said year and before
depreciation and amortization charges of the Company for said year, all
determined in accordance with generally accepted accounting principles,
consistently applied.
4.38. Eligible Inventory shall mean any Inventory of the
Company in which the Agent has a first priority perfected security
interest, which the Banks in their sole judgment deem to be acceptable for
inclusion in the Borrowing Base and which complies with each of the
following requirements:
(a) it consists solely of feed grains, feed, ingredients, live
broiler chickens, dressed broiler chickens, commercial eggs, prepared food
products, breeder hens, breeder pullets, hatching eggs, commercial hens,
commercial pullets, packaging materials, vaccines and supplies;
(b) it is in first class condition, not obsolete, and is
readily usable or salable by the Company in the ordinary course of its
business;
(c) it substantially conforms to the advertised or represented
specifications and other quality standards of the Company, and has not been
determined by the Banks to be unacceptable due to age, type, category,
quality and/or quantity;
(d) all warranties as set forth in this Agreement and the
Security Agreement are true and correct with respect thereto;
(e) it has been identified to the Banks in the manner
prescribed pursuant to the Security Agreement;
(f) it is located at a location within the United States
disclosed to and approved by the Banks and, if requested by the Agent, any
Person (other than the Company) owning or controlling such location shall
have waived all right, title and interest in and to such Inventory in a
manner satisfactory to the Banks; and
(g) it is covered by a warehouse receipt issued by the
Warehouseman and delivered to the Agent.
4.39. Eligible Receivables shall mean any Receivable of the
Company in which the Agent has a first priority perfected security
interest, which the Banks, in their sole judgment deem to be acceptable for
inclusion in the Borrowing Base and which complies with each of the
following requirements:
(a) It arises out of a bona fide rendering of services or sale
of goods sold and delivered by or on behalf of the Company to, or in the
process of being delivered by or on behalf of the Company to, the Account
Debtor on said Receivables;
(b) all warranties set forth in this Agreement and the
Security Agreement are true and correct with respect thereto;
(c) it has been identified to the Banks in a manner
satisfactory to the Banks;
(d) it is evidenced by an invoice (dated not later than five
days after the date of shipment or performance of services) rendered to the
Account Debtor thereunder;
(e) the invoice representing such Receivable shall have a due
date not more than 45 days following the invoice date for such products;
(f) it is not owing by an Account Debtor who shall have failed
to pay 10% or more of all Receivables owed by such Account Debtor within
the period set forth in (g) below or who has become insolvent or is the
subject of any bankruptcy, arrangement, reorganization proceedings or other
proceedings for relief of debtors;
(g) it has not remained unpaid in whole or in part from and
after the due date thereof;
(h) it is payable in United States Dollars;
(i) it is not owing by the United States of America or any
department, agency or instrumentality thereof;
(j) it is not owing by any Account Debtor located outside of
the United States;
(k) it is net of any credit or allowance given by the Company
to such Account Debtor;
(l) the Receivable is not subject to any counterclaim or
defense asserted by the Account Debtor thereunder, nor is it subject to any
offset or contra account payable to the Account Debtor (in any case, unless
the amount of such Receivable is net of such counterclaim, defense, offset
or contra account); and
(m) it is not owing by an Account Debtor that is an Affiliate
of the Company other than Archer Daniels Midland.
4.40. Environmental Laws shall have the meaning specified in
Section 5.10 hereof.
4.41. ERISA shall mean the Employee Retirement Income Security
Act of 1974, as amended.
4.42. Eurodollar Loan shall mean a Revolving Credit Loan which
bears interest as provided in Section 1.3(b) hereof.
4.43. Eurodollar Rate shall mean for each Interest Period
applicable to a Eurodollar Loan, (a) the LIBOR Index Rate for such Interest
Period, if such rate is available, and (b) if the LIBOR Index Rate cannot
be determined, the arithmetic average of the rate of interest per annum
(rounded upwards, if necessary, to nearest 1/100 of 1%) at which deposits
in U.S. dollars in immediately available funds are offered to the Agent at
11:00 a.m. (London, England time) two (2) Business Days before the
beginning of such Interest Period by major banks in the interbank
eurodollar market for a period equal to such Interest Period and in an
amount equal or comparable to the principal amount of the Eurodollar Loan
scheduled to be made by the Agent during such Interest Period.
4.44. Event of Default shall mean any event or condition
identified as such in Section 8.1 hereof.
4.45. Excess Cash Flow shall mean an amount equal to (a) net
cash provided by operating activities (determined on a consolidated basis
in accordance with generally accepted accounting principles, consistently
applied) minus (b) the sum of capital expenditures (determined in
accordance with generally accepted accounting principles, consistently
applied) plus principal payments on Debt due during such period plus all
dividends paid during such period.
4.46. Existing Agreement shall have the meaning specified in
Section 1.1(e) hereof.
4.47. Existing Lenders shall have the meaning specified in
Section 1.1(e) hereof.
4.48. Fed Funds Rate shall have the meaning specified in
Section 1.8(c) hereof.
4.49. Financial Guarantee L/C shall mean an L/C issued
hereunder that constitutes a financial guaranty letter of credit under the
capital adequacy requirements applicable to any of the Banks.
4.50. Fiscal Year shall mean the 52 or 53 week period ending
on the Saturday closest to September 30 in each calendar year, regardless
of whether such Saturday occurs in September or October of any calendar
year.
4.51. Fixed Charge Coverage Ratio shall mean the ratio of (a)
the sum of EBITDA and all amounts payable under all non-cancellable
operating leases (determined on a consolidated basis in accordance with
generally accepted accounting principles, consistently applied) for the
period in question, to (b) the sum of (without duplication) (i) Interest
Expense for such period, (ii) the sum of the scheduled current maturities
(determined in accordance with generally accepted accounting principles
consistently applied, but excluding in any event any payments due under
Section 2.4(b) of this Agreement) of Funded Debt during the period in
question, (iii) all amounts payable under non-cancellable operating leases
(determined as aforesaid) during such period, and (iv) all amounts payable
with respect to capitalized leases (determined on a consolidated basis in
accordance with generally accepted accounting principles, consistently
applied) for the period in question.
4.52. Fixed Rate shall mean either of the Eurodollar Rate or
the Adjusted CD Rate.
4.53. Fixed Rate Loan shall mean a Eurodollar Loan or a CD
Rate Loan and Fixed Rate Loans shall mean either or both of such types of
Loans.
4.54. Funded Debt, with respect to any Person shall mean all
indebtedness for borrowed money of such Person and with respect to the
Company all indebtedness for borrowed money of the Company, in each case
maturing by its terms more than one year after, or which is renewable or
extendible at the option of such Person for a period ending one year or
more after, the date of determination, and shall include indebtedness for
borrowed money of such maturity created, assumed or guaranteed by such
Person either directly or indirectly, including obligations of such
maturity secured by liens upon Property of such Person and upon which such
entity customarily pays the interest, all current maturities of all such
indebtedness of such maturity and all rental payments under capitalized
leases of such maturity.
4.55. Grower Payables shall mean all amounts owed from time to
time by the Company to any Person on account of the purchase price of
agricultural products or services (including poultry and livestock) if the
Agent reasonably determines that such Person is entitled to the benefits of
any grower s lien, statutory trust or similar security arrangements to
secure the payment of any amounts owed to such Person.
4.56. Guaranty Fees shall have the meaning specified in
Section 7.30 hereof.
4.57. Harris shall have the meaning specified in the first
paragraph of this Agreement.
4.58. Highest Lawful Rate shall have the meaning specified in
Section 11.19 hereof.
4.59. Intangible Assets shall mean license agreements,
trademarks, trade names, patents, capitalized research and development,
proprietary products (the results of past research and development treated
as long term assets and excluded from Inventory) and goodwill (all
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied).
4.60. Interest Expense for any period shall mean all interest
charges during such period, including all amortization of debt discount and
expense and imputed interest with respect to capitalized lease obligations,
determined on a consolidated basis in accordance with generally accepted
accounting principles, consistently applied.
4.61. Interest Period shall mean with respect to (a) the
Eurodollar Loans, the period used for the computation of interest
commencing on the date the relevant Eurodollar Loan is made, continued or
effected by conversion and concluding on the date one, two, three or six
months thereafter and, (b) with respect to the CD Rate Loans, the period
used for the computation of interest commencing on the date the relevant CD
Rate Loan is made, continued or effected by conversion and concluding on
the date 30, 60, 90 or 180 days thereafter; provided, however, that no
Interest Period for any Fixed Rate Loan made under the Revolving Credit may
extend beyond the Termination Date. For purposes of determining an
Interest Period applicable to a Eurodollar Loan, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month; provided, however, that if
there is no numerically corresponding day in the month in which an Interest
Period is to end or if an Interest Period begins on the last day of a
calendar month, then such Interest Period shall end on the last Banking Day
of the calendar month in which such Interest Period is to end.
4.62. Inventory shall mean 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 the Company or any Subsidiary
now has or hereafter acquires any right.
4.63. L/C shall have the meaning set forth in Section 1.6
hereof.
4.64. L/C Agreement shall have the meaning set forth in
Section 1.6 hereof.
4.65. L/C Fee has the meaning specified in Section 1.6 hereof.
4.66. L/C Issuance Fee has the meaning specified in Section
1.6 hereof.
4.67. Leverage Ratio shall mean 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 clause (a) above plus
Net Worth.
4.68. LIBOR Index Rate shall mean, for any Interest Period
applicable to a Eurodollar Loan, the rate per annum (rounded upwards, if
necessary, to the next higher one hundred-thousandth of a percentage point)
for deposits in U.S. Dollars for a period equal to such Interest Period,
which appears on the Telerate Page 3750 as of 11:00 a.m. (London, England
time) on the day two Banking Days before the commencement of such Interest
Period.
4.69. Loan shall mean a Revolving Credit Loan and the term
Loans shall mean any two or more Revolving Credit Loans collectively.
4.70. Loan Documents shall mean this Agreement and any and all
exhibits hereto, the Notes, the B/A Agreement, the L/C Agreements and the
Security Agreement.
4.71. Net Income shall mean the net income of the Company and
its Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles, consistently applied.
4.72. Net Tangible Assets shall mean the excess of the value
of the Total Assets over the value of the Intangible Assets of the Company
and its Subsidiaries.
4.73. Net Working Capital shall mean the excess for the
Company of Current Assets over Current Liabilities.
4.74. Net Worth shall mean the Total Assets minus the Total
Liabilities of the Company and its Subsidiaries, all determined on a
consolidated basis in accordance with generally accepted accounting
principles, consistently applied.
4.75. Notes shall mean the Revolving Notes, and Note means
any of the Notes.
4.76. PBGC shall mean the Pension Benefit Guaranty
Corporation.
4.77. Performance L/C shall mean any L/C issued hereunder that
does not constitute a Financial Guarantee L/C.
4.78. Person shall mean and include any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, institution, entity, party or
government (whether national, federal, state, county, city, municipal, or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
4.79. Plan shall mean any employee benefit plan covering any
officers or employees of the Company or any Subsidiary, any benefits of
which are, or are required to be, guaranteed by the PBGC.
4.80. Potential Default shall mean any event or condition
which, with the lapse of time, or giving of notice, or both, would
constitute an Event of Default.
4.81. Property shall mean any interest in any kind of property
or asset, whether real, personal or mixed or tangible or intangible.
4.82. Receivables shall mean all accounts, contract rights,
instruments, documents, chattel paper and general intangibles in which the
Company now has or hereafter acquires any right.
4.83. Reimbursement Obligation has the meaning specified in
Section 1.7 hereof.
4.84. Required Banks shall mean any Bank or Banks which in the
aggregate hold at least 66-2/3% of the aggregate unpaid principal balance
of the Loans and Reimbursement Obligations or, if no Loans are outstanding
hereunder, any Bank or Banks in the aggregate having at least 66-2/3% of
the Revolving Credit Commitments. For purposes of determining the Required
Banks, CoBank shall be deemed to have a Revolving Credit Commitment in the
amount of the CoBank s Participation and Harris Revolving Credit
Commitment shall be reduced by a like amount.
4.85. Reserve Percentage means the daily arithmetic average
maximum rate at which reserves (including, without limitation, any
supplemental, marginal and emergency reserves) are imposed on member banks
of the Federal Reserve System during the applicable Interest Period by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on eurocurrency liabilities (as such term is defined in
Regulation D), subject to any amendments of such reserve requirement by
such Board or its successor, taking into account any transitional
adjustments thereto. For purposes of this definition, the Eurodollar Loans
shall be deemed to be eurocurrency liabilities as defined in Regulation D
without benefit or credit for any prorations, exemptions or offsets under
Regulation D.
4.86. Retained Percentage shall mean with respect to Harris
Revolving Credit Commitment a percentage determined by dividing (a) the
amount of Harris Revolving Credit Commitment minus the amount of the
CoBank Participation therein by (b) the amount of Harris Revolving Credit
Commitment without reduction for CoBank s Participation therein.
4.87. Revolving Credit shall have the meaning specified in the
first paragraph of this Agreement.
4.88. Revolving Credit Commitment and Revolving Credit
Commitments shall have the meanings specified in Section 1.1(c) hereof.
4.89. Revolving Credit Loan and Revolving Credit Loans shall
have the meanings specified in Section 1.1(a) hereof.
4.90. Revolving Note or Revolving Notes shall have the
meanings specified in Section 1.1(d) hereof.
4.91. Security Agreement shall mean that certain Security
Agreement Re: Accounts Receivable, Farm Products and Inventory from the
Company to Harris, as Agent, as such agreement may be supplemented and
amended from time to time.
4.92. Series D Notes shall mean the Company s Variable Rate
Senior Secured Notes, Series D, due December 31, 1996 in the original
aggregate principal amount of $18,000,000.
4.93. Senior Secured Notes shall mean, collectively, the
Company s 9.55% Senior Secured Notes, Series A, due October 1, 1998 in the
original principal amount of $12,000,000, the Company s 10.49% Senior
Secured Notes, Series C, due September 21, 2002 in the aggregate principal
amount of $22,000,000, the Company s promissory note dated February 1, 1988
payable to the order of John Hancock Mutual Life Insurance Company in the
original principal amount of $20,000,000, the Company s promissory note
dated April 25, 1991 in the original principal amount of $5,000,000 payable
to the order of John Hancock Mutual Life Insurance Company and the Company
s promissory notes in an aggregate principal amount not to exceed
$28,000,000 issued pursuant to the commitment described in Section 6.2(p)
hereof.
4.94. Subordinated Debt shall mean indebtedness for borrowed
money of the Company which is subordinate in right of payment to the prior
payment in full of the Company s indebtedness, obligations and liabilities
to the Banks under the Loan Documents pursuant to written subordination
provisions satisfactory in form and substance to the Banks.
4.95. Subsidiary shall mean collectively any corporation or
other entity at least a majority of the outstanding voting equity interests
(other than directors qualifying shares) of which is at the time owned
directly or indirectly by the Company or by one of more Subsidiaries or by
the Company and one or more Subsidiaries. The term Consolidated
Subsidiary shall mean any Subsidiary whose accounts are consolidated with
those of the Company in accordance with generally accepted accounting
principles.
4.96. Tangible Net Worth shall mean the Net Worth minus the
amount of all Intangible Assets of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principles, consistently applied.
4.97. Telerate Page 3750 shall mean the display designated as
Page 3750 on the Telerate Service (or such other page as may replace Page
3750 on that service or such other service as may be nominated by the
British Bankers Association as the information vendor for the purpose of
displaying British Bankers Association Interest Settlement Rates for U.S.
Dollar deposits).
4.98. Termination Date shall have the meaning set forth in
Section 1.1(a) hereof.
4.99. Total Assets shall mean at any date, the aggregate
amount of assets of the Company and its Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting
principles consistently applied.
4.100. Total Liabilities shall mean at any date, the aggregate
amount of all liabilities of the Company and its Subsidiaries determined on
a consolidated basis in accordance with generally accepted accounting
principles, consistently applied.
4.101. Value of Eligible Inventory shall mean as of any given
date with respect to Eligible Inventory:
(a) With respect to Eligible Inventory consisting of feed
grains, feed, ingredients, dressed broiler chickens and commercial eggs, an
amount equal to the lower of (i) costs determined on a first-in-first-out
inventory basis (determined in accordance with generally accepted
accounting principles consistently applied), or (ii) wholesale market
value;
(b) With respect to Eligible Inventory consisting of live
broiler chickens, the price quoted on the Arkansas live market on the date
of calculation;
(c) With respect to Eligible Inventory consisting of prepared
food products, the standard cost value;
(d) With respect to Eligible Inventory consisting of: breeder
hens, $1.50 per head; breeder pullets, $1.00 per head; commercial hens,
$0.70 per head; commercial pullets, $0.40 per head; and hatching eggs,
$1.25 a dozen; or in each case such other values as may be agreed upon by
the Company and the Required Banks; and
(e) With respect to Eligible Inventory consisting of packaging
materials, vaccines and supplies, actual costs.
4.102. Warehouseman shall mean Field Warehousing Corp., a
California corporation, and any other Person approved by the Agent and the
Required Banks.
4.103. Any accounting term or the character or amount of any
asset or liability or item of income or expense required to be determined
under this Agreement, shall be determined or made in accordance with
generally accepted accounting principles at the time in effect, to the
extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
.c1.5. Representations and Warranties.
The Company represents and warrants to the Banks as follows:
.c2.Section 5.1. Organization and Qualification;. The
Company is a corporation duly organized and existing and in good standing
under the laws of the State of Delaware, has full and adequate corporate
power to carry on its business as now conducted, is duly licensed or
qualified in all jurisdictions wherein the nature of its activities
requires such licensing or qualification except where the failure to be so
licensed or qualified would not have a material adverse effect on the
condition, financial or otherwise, of the Company, has full right and
authority to enter into this Agreement and the other Loan Documents, to
make the borrowings herein provided for, to issue the Notes in evidence
thereof, to encumber its assets as collateral security for such borrowings
and to perform each and all of the matters and things herein and therein
provided for; and this Agreement does not, nor does the performance or
observance by the Company of any of the matters or things provided for in
the Loan Documents, contravene any provision of law or any charter or
by-law provision or any covenant, indenture or agreement of or affecting
the Company or its Properties.
.c2.Section 5.2. Subsidiaries;. Each Subsidiary is duly
organized and existing under the laws of the jurisdiction of its
incorporation, has full and adequate corporate power to carry on its
business as now conducted and is duly licensed or qualified in all
jurisdictions wherein the nature of its business requires such licensing or
qualification and the failure to be so licensed or qualified would have a
material adverse effect upon the business, operations or financial
condition of such Subsidiary and the Company taken as a whole. The only
Subsidiaries of the Company are set forth on Exhibit I hereto.
.c2.Section 5.3. Financial Reports;. The Company has
heretofore delivered to the Banks a copy of the Audit Report as of
September 26, 1992 of the Company and its Subsidiaries and unaudited
financial statements (including a balance sheet, statement of income and
retained earnings, statement of cash flows, footnotes and comparison to the
comparable prior year period) of the Company as of, and for the period
ending April 3, 1993. Such audited financial statements have been prepared
in accordance with generally accepted accounting principles on a basis
consistent, except as otherwise noted therein, with that of the previous
fiscal year or period and fairly reflect the financial position of the
Company and its Subsidiaries as of the dates thereof, and the results of
its operations for the periods covered thereby. The Company and its
Subsidiaries have no material contingent liabilities other than as
indicated on said financial statements and since said date of April 3, 1993
there has been no material adverse change in the condition, financial or
otherwise, of the Company or any Subsidiary that has not been disclosed in
writing to the Banks.
.c2. Section 5.4. Litigation; Tax Returns; Approvals ;.
There is no litigation or governmental proceeding pending, nor to the
knowledge of the Company threatened, against the Company or any Subsidiary
which, if adversely determined, is likely to result in any material adverse
change in the Properties, business and operations of the Company or any
Subsidiary. All income tax returns for the Company required to be filed
have been filed on a timely basis, all amounts required to be paid as shown
by said returns have been paid. There are no pending or, to the best of
the Company s knowledge, threatened objections to or controversies in
respect of the United States federal income tax returns of the Company for
any fiscal year. No authorization, consent, license, exemption or filing
(other than the filing of financing statements) or registration with any
court or governmental department, agency or instrumentality, is or will be
necessary to the valid execution, delivery or performance by the Company of
the Loan Documents.
.c2.Section 5.5. Regulation U;. Neither the Company nor
any Subsidiary is engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) and
no part of the proceeds of any Loan made or any B/A created hereunder will
be used to purchase or carry any margin stock or to extend credit to others
for such a purpose.
.c2.Section 5.6. No Default;. As of the date of this
Agreement, the Company is in full compliance with all of the terms and
conditions of this Agreement, and no Potential Default or Event of Default
is existing under this Agreement.
.c2.Section 5.7. ERISA;. The Company and its Subsidiaries
are in compliance in all material respects with ERISA to the extent
applicable to them and have received no notice to the contrary from the
PBGC or any other governmental entity or agency.
.c2.Section 5.8. Security Interests and Debt;. There are
no security interests, liens or encumbrances on any of the Property of the
Company or any Subsidiary except such as are permitted by Section 7.16 of
this Agreement, and the Company and its Subsidiaries have no Debt except
such as is permitted by Section 7.17 of this Agreement.
.c2.Section 5.9. Accurate Information;. No information,
exhibit or report furnished by the Company to the Banks in connection with
the negotiation of the Loan Documents contained any material misstatement
of fact or omitted to state a material fact or any fact necessary to make
the statements contained therein not misleading in light of the
circumstances in which made. The financial projections furnished by the
Company to the Banks contain to the Company s knowledge and belief,
reasonable projections as of the date hereof of future results of
operations and financial position of the Company.
.c2.Section 5.10. Environmental Matters;. (a) Except as
disclosed on Exhibit D, the Company has not received any notice to the
effect, or has any knowledge, that its or any Subsidiary s Property or
operations are not in compliance with any of the requirements of applicable
federal, state and local environmental, health and safety statutes and
regulations ( Environmental Laws ) or are the subject of any federal or
state investigation evaluating whether any remedial action is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could have a material
adverse effect on the business, operations, Property, assets or conditions
(financial or otherwise) of the Company or any Subsidiary;
(b) there have been no releases of hazardous materials at, on
or under any Property now or previously owned or leased by the Company or
any Subsidiary that, singly or in the aggregate, have, or may reasonably be
expected to have, a material adverse effect on the financial condition,
operations, assets, business, Properties or prospects of the Company or
such Subsidiary;
(c) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property now
or previously owned or leased by the Company or any Subsidiary that, singly
or in the aggregate, have, or may reasonably be expected to have, a
material adverse effect on the financial condition, operations, assets,
business, Properties or prospects of the Company or such Subsidiary;
(d) neither the Company nor any Subsidiary has directly
transported or directly arranged for the transportation of any hazardous
material to any location which is listed or proposed for listing on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to material
claims against the Company or any Subsidiary thereof for any remedial work,
damage to natural resources or personal injury, including claims under
CERCLA; and
(e) no conditions exist at, on or under any Property now or
previously owned or leased by the Company or any Subsidiary which, with the
passage of time, or the giving of notice or both, would give rise to any
material liability under any Environmental Law.
.c2.Section 5.11. Enforceability;. This Agreement and the
other Loan Documents are legal, valid and binding agreements of the
Company, enforceable against it in accordance with their terms, except as
may be limited by (a) bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other similar laws or judicial decisions for the
relief of debtors or the limitation of creditors rights generally; and (b)
any equitable principles relating to or limiting the rights of creditors
generally.
.c2.Section 5.12. Restrictive Agreements;. Neither the
Company nor any Subsidiary is a party to any contract or agreement, or
subject to any charge or other corporate restriction, which affects its
ability to execute, deliver and perform the Loan Documents to which it is a
party and repay its indebtedness, obligations and liabilities under the
Loan Documents or which materially and adversely affects or, insofar as the
Company can reasonably foresee, could materially and adversely affect, the
property, business, operations or condition (financial or otherwise) of the
Company or any of its Subsidiaries, or would in any respect materially and
adversely affect the Collateral, the repayment of the indebtedness,
obligations and liabilities under the Loan Documents, or any Bank s or the
Agent s rights under the Loan Documents.
.c2.Section 5.13. Labor Disputes;. Except as set forth on
Exhibit K, (a) there is no collective bargaining agreement or other labor
contract covering employees of the Company or any of its Subsidiaries; (b)
no such collective bargaining agreement or other labor contract is
scheduled to expire during the term of this Agreement; (c) no union or
other labor organization is seeking to organize, or to be recognized as, a
collective bargaining unit of employees of the Company or any of its
Subsidiaries; and (d) there is no pending or (to the best of the Company s
knowledge) threatened strike, work stoppage, material unfair labor practice
claim or other material labor dispute against or affecting the Company or
any of its Subsidiaries or their respective employees.
.c2.Section 5.14. No Violation of Law;. Neither the
Company nor any Subsidiary is in violation of any law, statute, regulation,
ordinance, judgment, order or decree applicable to it which violation might
in any respect materially and adversely affect the Collateral, the
repayment of the indebtedness, obligations and liabilities under the Loan
Documents, any Bank s or the Agent s rights under the Loan Documents, or
the Property, business, operations or condition (financial or otherwise) of
the Company or such Subsidiary.
.c2.Section 5.15. No Default Under Other Agreements;.
Neither the Company nor any Subsidiary is in default with respect to any
note, indenture, loan agreement, mortgage, lease, deed, or other agreement
to which it is a party or by which it or its Property is bound, which
default might materially and adversely affect the Collateral, the repayment
of the indebtedness, obligations and liabilities under the Loan Documents,
any Bank s or the Agent s rights under the Loan Documents or the Property,
business, operations or condition (financial or otherwise) of the Company
or any Subsidiary.
.c2.Section 5.16. Status Under Certain Laws;. Neither the
Company nor any of its Subsidiaries is an investment company or a person
directly or indirectly controlled by or acting on behalf of an investment
company within the meaning of the Investment Company Act of 1940, as
amended, or a holding company, or a subsidiary company of a holding
company, or an affiliate of a holding company or a subsidiary company
of a holding company, within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
.c2.Section 5.17. Federal Food Security Act;. The Company
has received no notice given pursuant to Section 1324(e)(1) or (3) of the
Federal Food Security Act and there has not been filed any financing
statement or notice, purportedly in compliance with the provisions of the
Federal Food Security Act, purporting to perfect a security interest in
farm products purchased by the Company in favor of a secured creditor of
the seller of such farm products. The Company has registered, pursuant to
Section 1324(c)(2)(D) of the Federal Food Security Act, with the Secretary
of State of each State in which are produced farm products purchased by the
Company and which has established or hereafter establishes a central filing
system, as a buyer of farm products produced in such State; and each such
registration is in full force and effect.
.c2. Section 5.18. Certain Tax Benefits;. On the date of this
Agreement the aggregate amount of all net operating losses and credits or
other tax benefits available to the Company are approximately $37,500,000,
and $4,600,000, respectively.
.c2.Section 5.19. Fair Labor Standards Act;. The Company
and each Subsidiary has complied in all material respects with, and will
continue to comply with, the provisions of the Fair Labor Standards Act of
1938, 29 U.S.C. Section 201, et seq., as amended from time to time (the FLSA ),
including specifically, but without limitation, 29 U.S.C. Section 215(a). This
representation and warranty, and each reconfirmation hereof, shall
constitute written assurance from the Company, given as of the date hereof
and as of the date of each reconfirmation, that the Company and each
Subsidiary has complied with the requirements of the FLSA, in general, and
Section 15(a)(1), 29 U.S.C. Section 215(a)(1), thereof, in particular.
.c1.6. Conditions Precedent;.
The obligation of the Banks to make any Loan pursuant hereto or to
create any B/A or to issue any L/C shall be subject to the following
conditions precedent:
.c2.Section 6.1. General;. The Agent shall have received
the notice of borrowings and requests for L/Cs and B/As and the Notes
hereinabove provided for.
.c2.Section 6.2. Initial Extension of Credit;. Prior to
the initial Loan, L/C and B/A hereunder, the Company shall have delivered
the required Collateral and a Borrowing Base Certificate to the Agent, and
shall have delivered to the Agent for the benefit of the Banks in
sufficient counterparts for distribution to the Banks:
(a) a fully executed B/A Agreement;
(b) a fully executed Security Agreement ;
(c) appropriate forms of financing statements to perfect the
security interest of the Agent provided for by the Security Agreement;
(d) a fully executed counterpart of a Guaranty Agreement from
Mr. and Mrs. Lonnie A. Pilgrim to the Banks satisfactory in form and
substance to the Banks;
(e) a fully executed Warehousing Agreement among the Company
and the Warehouseman, and related delivery instructions and leases, in
substantially the form of Exhibit M attached hereto;
(f) a warehouse receipt issued by the Warehouseman covering
the Inventory shown on the Borrowing Base Certificate;
(g) an agreement between the Banks and each of the holders of
the Company s Senior Secured Notes, in substantially the form of Exhibit L
attached hereto;
(h) evidence of insurance required by Section 7.3 hereof and
by the Security Agreement showing the Agent as loss payee thereunder;
(i) a good standing certificate or certificate of existence
for the Company, dated as of the date no earlier than 30 days prior to the
date hereof, from the office of the secretary of state of the state of its
incorporation and each state in which it is qualified to do business as a
foreign corporation;
(j) copies of the Certificate of Incorporation, and all
amendments thereto, of the Company certified by the office of the secretary
of state of its state of incorporation as of the date no earlier than the
date 30 days prior to the date hereof;
(k) copies of the By-Laws, and all amendments thereto, of the
Company, certified as true, correct and complete on the date hereof by the
Secretary of the Company;
(l) copies, certified by the Secretary or Assistant Secretary
of the Company, of resolutions regarding the transactions contemplated by
this Agreement, duly adopted by the Board of Directors of the Company, and
satisfactory in form and substance to all of the Banks;
(m) an incumbency and signature certificate for the Company
satisfactory in form and substance to all of the Banks;
(n) copies of a fully executed Trust Indenture and other
documents providing for the issuance by the Company of senior Subordinated
Debt on terms and conditions acceptable to all of the Banks, certified as
true, complete and correct by the Secretary or Assistant Secretary of the
Company;
(o) evidence satisfactory in form and substance to all of the
Banks that (i) the Company has issued Subordinated Debt in an aggregate
principle amount of no less than $100,000,000.00, (ii) proceeds thereof in
amount of not less than $50,000,000.00 have been placed in escrow for the
sole purpose of funding the prepayment, redemption or repurchase by the
Company of its 14 1/4% Senior Notes due 1995 and to reduction of the
Company s Debt under the Existing Agreement (iii) the Company has given all
notices required to be given to prepay such 14 1/4% Senior Notes due 1995
no later than July 10, 1993;
(p) copies of a fully executed commitment issued by one or
more lenders or investors providing for the issuance of additional senior
indebtedness in an amount not greater than $28,000,000 to refinance
existing secured bank term debt, containing terms and conditions
satisfactory to the Banks;
(q) a pay-off letter satisfactory in form and substance to all
of the Banks from the Existing Lenders and the holders of the Series D
Notes;
(r) the closing fee payable pursuant to Section 2.5 of this
Agreement;
(s) evidence that the Company has given all required notices
for the prepayment in full of the $2,300,000 Angelinas and Neches River
Authority Industrial Development Corporation Variable Rate Demand Refunding
Revenue Bonds; and
(t) such other documents as the Banks may reasonably require.
.c2.Section 6.3. Each Extension of Credit;. As of the
time of the making of each Loan, the issuance of each L/C hereunder and
creation of each B/A hereunder (including the initial Loan, L/C or B/A, as
the case may be):
(a) each of the representations and warranties set forth in
Section 5 hereof shall be and remain true and correct as of said time as if
made at said time, except that (i) the representations and warranties made
under Section 5.3 shall be deemed to refer to the most recent financial
statements furnished to the Banks pursuant to Section 7.4 hereof and (ii)
with respect to the Company s Subsidiaries in Mexico the representations
and warranties made under Section 5.13(d) shall be deemed to refer only to
material, strikes, work stoppages, unfair labor practice claims or other
material labor disputes;
(b) the Company shall be in full compliance with all of the
terms and conditions hereof, and no Potential Default or Event of Default
shall have occurred and be continuing; and
(c) after giving effect to the requested extension of credit
and to each Loan that has been made, B/A created and L/C issued hereunder,
the aggregate principal amount of all Loans, the aggregate face amount of
all B/As, the amount available for drawing under all L/Cs and the aggregate
principal amount of all Reimbursement Obligations then outstanding shall
not exceed the lesser of (i) the sum of the Banks Revolving Credit
Commitments then in effect and (ii) the Borrowing Base as determined on the
basis of the most recent Borrowing Base Certificate, except as otherwise
agreed by the Company and all of the Banks;
and the request by the Company for any Loan, L/C or B/A pursuant hereto
shall be and constitute a warranty to the foregoing effects.
.c2.Section 6.4. Legal Matters;. Legal matters incident
to the execution and delivery of the Loan Documents shall be satisfactory
to each of the Banks and their legal counsel; and prior to the initial
Loan, L/C or B/A hereunder, the Agent shall have received the favorable
written opinion of Godwin & Carlton, counsel for the Company, substantially
in the form of Exhibit F, in substance satisfactory to each of the Banks
and their respective legal counsel.
.c2.Section 6.5. Documents;. The Agent shall have
received copies (executed or certified, as may be appropriate) of all
documents or proceedings taken in connection with the execution and
delivery of the Loan Documents to the extent any Bank or its respective
legal counsel requests.
.c2.Section 6.6. Lien Searches;. The Agent shall have
received lien searches showing that the Property of the Company is subject
to no security interest or liens except those permitted by Section 7.16
hereof.
.c1.7. Covenants;.
It is understood and agreed that so long as credit is in use or
available under this Agreement or any amount remains unpaid on any Note,
Reimbursement Obligation, L/C or B/A, except to the extent compliance in
any case or cases is waived in writing by the Required Banks:
.c2.Section 7.1. Maintenance;. The Company will, and will
cause each Subsidiary to, maintain, preserve and keep its plant, Properties
and equipment in good repair, working order and condition and will from
time to time make all needful and proper repairs, renewals, replacements,
additions and betterments thereto so that at all times the efficiency
thereof shall be preserved and maintained in all material respects, normal
wear and tear excepted.
.c2.Section 7.2. Taxes;. The Company will, and will cause
each Subsidiary to, duly pay and discharge all taxes, rates, assessments,
fees and governmental charges upon or against the Company or its
Subsidiaries or against their respective Properties in each case before the
same become delinquent and before penalties accrue thereon unless and to
the extent that the same are being contested in good faith and by
appropriate proceedings diligently conducted and for which adequate
reserves in form and amount reasonably satisfactory to the Required Banks
have been established, provided that the Company shall pay or cause to be
paid all such taxes, rates, assessments, fees and governmental charges
forthwith upon the commencement of proceedings to foreclose any lien which
is attached as security therefor, unless such foreclosure is stayed by the
filing of an appropriate bond in a manner satisfactory to the Required
Banks.
.c2.Section 7.3. Maintenance of Insurance;. The Company
will, and will cause each Subsidiary to, maintain insurance coverage by
good and responsible insurance underwriters in such forms and amounts and
against such risks and hazards as are customary for companies engaged in
similar businesses and owning and operating similar Properties, provided
that the Company and its Subsidiaries may self-insure for workmen s
compensation, group health risks and their live chicken inventory in
accordance with applicable industry standards. In any event, the Company
will insure any of its Property which is insurable against loss or damage
by fire, theft, burglary, pilferage and loss in transit, all in amounts and
under policies containing loss payable clauses to the Agent as its interest
may appear (and, if the Required Banks request, naming the Agent as
additional insured therein) and providing for advance notice to the Agent
of cancellation thereof, issued by sound and reputable insurers accorded a
rating of A-XII or better by A.M. Best Company, Inc. or A or better by
Standard & Poor s Corporation or Moody s Investors Service, Inc. and all
premiums thereon shall be paid by the Company and certificates summarizing
the same delivered to the Agent.
.c2.Section 7.4. Financial Reports;. The Company will,
and will cause each Subsidiary to, maintain a standard and modern system of
accounting in accordance with sound accounting practice and will furnish to
the Banks and their duly authorized representatives such information
respecting the business and financial condition of the Company and its
Subsidiaries as may be reasonably requested and, without any request, will
furnish to CoBank and the Banks:
(a) as soon as available, and in any event within 45 days
after the close of each monthly fiscal period of the Company a copy of the
consolidated and consolidating balance sheet, statement of income and
retained earnings, statement of cash flows, and the results of operations
for each division of the Company, for such period of the Company and its
Subsidiaries, together with all such information for the year to date, all
in reasonable detail, prepared by the Company and certified on behalf of
the Company by the Company s chief financial officer;
(b) as soon as available, and in any event within 90 days
after the close of each fiscal year, (i) a copy of the audit report for
such year and accompanying financial statements, including a consolidated
balance sheet, a statement of income and retained earnings, and a statement
of cash flows, together with all footnotes thereto, for the Company and its
Subsidiaries, and unaudited consolidating balance sheets, statement of
income and retained earnings and statements of cash flows for the Company
and its Subsidiaries, in each case, showing in comparative form the figures
for the previous fiscal year of the Company, all in reasonable detail,
accompanied by an unqualified opinion of Ernst & Young or other independent
public accountants of nationally recognized standing selected by the
Company and satisfactory to the Required Banks, such opinion to indicate
that such statements are made in accordance with generally accepted
accounting principles, and (ii) a written report of such independent public
accountants addressed to the Banks stating that they have reviewed the
Borrowing Base Certificate and the Compliance Certificate as of the Fiscal
Year end and that both of such certificates were prepared in accordance
with the requirements of this Agreement;
(c) each of the financial statements furnished to the Banks
pursuant to paragraph (a) and (b) above shall be accompanied by a
Compliance Certificate in the form of Exhibit G hereto signed on behalf of
the Company by its chief financial officer;
(d) within 10 Business Days after the end of each month, a
Borrowing Base Certificate in the form of Exhibit H hereto, setting forth a
computation of the Borrowing Base as of that month s end date, certified as
correct on behalf of the Company by the Company s chief financial officer
and certifying that as of the last day of the preceding monthly period the
signer thereof has re-examined the terms and provisions of this Agreement
and the Security Agreement and that to the best of his knowledge and
belief, no Potential Default or Event of Default has occurred or, if any
such Potential Default or Event of Default has occurred, setting forth the
description of such Potential Default or Event of Default and specifying
the action, if any, taken by the Company to remedy the same, accompanied by
a warehouse receipt issued by the Warehouseman covering no less than all of
the Inventory shown on such Borrowing Base Certificate;
(e) with 10 Business Days after the end of each month, an
accounts receivable aging report in the form of Exhibit J hereto, signed by
the chief financial officer of the Company;
(f) promptly upon preparation thereof copies in the form
presented to the Company s Board of Directors of its annual budgets and
forecasts of operations and capital expenditures including investments, a
balance sheet, an income statement and a projection of cash flow by months
for each fiscal year;
(g) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Company shall have filed with the Securities and Exchange Commission or any
governmental agency substituted therefor, or any national securities
exchange, including copies of the Company s form 10-K annual report,
including financial statements audited by Ernst & Young or other
independent public accountants of nationally recognized standing selected
by the Company and satisfactory to the Bank, its form 10-Q quarterly report
to the Securities and Exchange Commission and any Form 8 filed by the
Company with the Securities and Exchange Commission;
(h) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and
proxy statements so mailed; and
(i) within 45 days of the last day of each fiscal quarter of
the Company, a summary of the capital expenditures for the applicable
period and the year to date, all in reasonable detail, prepared by the
Company and certified on behalf of the Company by the Company s chief
financial officer.
.c2.Section 7.5. Inspection and Reviews;. The Company
shall, and shall cause each Subsidiary to, permit the Agent and the Banks,
by their representatives and agents, to inspect any of the properties,
corporate books and financial records of the Company and its Subsidiaries,
to review and make copies of the books of accounts and other financial
records of the Company and its domestic Subsidiaries, and to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with,
and to be advised as to the same by, its officers at such reasonable times
and intervals as the Agent or the Banks may designate. In addition to any
other compensation or reimbursement to which the Agent and the Banks may be
entitled under the Loan Documents, the Company shall pay to the Agent from
time to time upon demand (a) the amount necessary to compensate it for all
fees, charges and expenses incurred by the Agent or its designee and (b) up
to $10,000 per year to compensate the Banks, other than the Agent, for any
such fees, charges and expenses incurred by such Banks, in each case in
connection with the audits of Collateral, or inspections or review of the
books, records and accounts of the Company or any domestic Subsidiary
conducted by the Agent or its designee or any of the Banks.
.c2.Section 7.6. Consolidation and Merger;. The Company
will not, and will not permit any Subsidiary to, consolidate with or merge
into any Person, or permit any other Person to merge into it, or acquire
(in a transaction analogous in purpose or effect to a consolidation or
merger) all or substantially all the Property of the other Person, or
acquire substantially as an entirety the business of any other Person,
without the prior written consent of the Required Banks.
.c2.Section 7.7. Transactions with Affiliates;. The
Company will not, and will not permit any Subsidiary to, enter into any
transaction, including without limitation, the purchase, sale, lease or
exchange of any Property, or the rendering of any service, with any
Affiliate of the Company or such Subsidiary except (a) in the ordinary
course of and pursuant to the reasonable requirements of the Company s or
such Subsidiary s business and upon fair and reasonable terms not
materially less favorable to the Company than would be obtained in a
comparable arm s-length transaction with a Person not an Affiliate of the
Company or such Subsidiary, and (b) on-going transactions with Affiliates
of the type disclosed in the Company s proxy statement for its Fiscal Year
ended September 26, 1992.
.c2.Section 7.8. Leverage Ratio;. The Company will not
permit the ratio of its Leverage Ratio at any time during each period
specified below to exceed the ratio specified below for such period:
(a) from the date hereof through the next to last day in
Fiscal Year of 1994, 0.70 to 1;
(b) from the last day of Fiscal Year 1994 through the next to
last day of Fiscal Year 1995, 0.65 to 1; and
(c) on the last day of Fiscal Year 1995 and thereafter, 0.625
to 1.
.c2.Section 7.9. Tangible Net Worth;. The Company shall
maintain its Tangible Net Worth at all times during the periods specified
below in an amount not less than the minimum required amount for each
period set forth below:
(a) from the date hereof through the next to last day in
Fiscal Year 1993, $105,000,000;
(b) from the last day of Fiscal Year 1993 through the next to
last day of Fiscal Year 1994, $105,000,000 plus an amount equal to 75% of
the Company s Net Income (but not less than zero) for the last six months
of Fiscal Year 1993; and
(c) from the last day of Fiscal Year 1994 and at all times
thereafter, an amount equal to the minimum amount required to be maintained
during Fiscal Year 1994 plus an amount equal to 75% of the Company s Net
Income (but not less than zero) during Fiscal Year 1994.
.c2.Section 7.10. Current Ratio;. The Company will
maintain at all times and measured as of the last day of each monthly
fiscal accounting period a Current Ratio of not less than 1.5 to 1.
.c2.Section 7.11. Net Tangible Assets to Total
Liabilities;. The Company will not permit the ratio of its Net Tangible
Assets to its Total Liabilities at any time during each period specified
below to be less than the ratio specified for such period:
(a) from the date hereof through the next to last day in
Fiscal Year 1994, 1.20 to 1;
(b) from the last day of Fiscal Year 1994 through the next to
last day of Fiscal Year 1995, 1.25 to 1; and
(c) from the last day of Fiscal Year 1995 and at all times
thereafter, 1.30 to 1.
Section 7.12. Fixed Charge Coverage Ratio. The Company will not
permit its Fixed Charge Coverage Ratio to be less than 1.50 to 1 at any
time during any period specified below:
(a) the three consecutive fiscal quarters ending July 3, 1993;
(b) the four consecutive fiscal quarters of the Company ending
on October 2, 1993;
(c) the five consecutive fiscal quarters of the Company ending
December 31, 1993;
(d) the six consecutive fiscal quarters of the Company ending
April 2, 1994;
(e) the seven consecutive fiscal quarters of the Company
ending July 2, 1994; and
(f) the eight consecutive fiscal quarters of the Company
ending on the last day of each fiscal quarter thereafter commencing with
the fiscal quarter ending October 1, 1994.
.c2.Section 7.13. Minimum Net Working Capital;. The
Company will maintain Net Working Capital at all times during each period
specified below (measured as of the last day of each monthly fiscal
accounting period) in an amount not less than the amount specified below
for each period:
(a) from the date hereof through the next to last day in
Fiscal Year 1994, $65,000,000;
(b) from the last day of Fiscal Year 1994 through the next to
last day of Fiscal Year 1995, $70,000,000; and
(c) from the last day of Fiscal Year 1995 and at all times
thereafter, $75,000,000.
.c2.Section 7.14. Capital Expenditures;. The Company will
not, and will not permit any Subsidiary to, make or commit to make any
capital expenditures (as defined and classified in accordance with
generally accepted accounting principles consistently applied;) provided,
however, that if no Event of Default or Potential Default shall exist
before and after giving effect thereto, the Company and its Subsidiaries
may make capital expenditures during the period beginning on the date
hereof through the Termination Date in an aggregate amount in each Fiscal
Year commencing with Fiscal Year 1993 not to exceed the sum of (a)
$20,000,000 and (b) in Fiscal 1994 and each Fiscal Year thereafter the
amount, if any, by which such capital expenditures made by the Company in
the immediately preceding Fiscal Year was less than $20,000,000 but not to
exceed $5,000,000 in any Fiscal Year.
.c2.Section 7.15. Dividends and Certain Other Restricted
Payments;. The Company will not (a) declare or pay any dividends or make
any distribution on any class of its capital stock (other than dividends
payable solely in its capital stock) or (b) directly or indirectly
purchase, redeem or otherwise acquire or retire any of its capital stock
(except out of the proceeds of, or in exchange for, a substantially
concurrent issue and sale of capital stock) or (c) make any other
distributions with respect to its capital stock; provided, however, that if
no Potential Default or Event of Default shall exist before and after
giving effect thereto, the Company may pay dividends in an aggregate amount
not to exceed $1,700,000 in any Fiscal Year at any time after the Company s
Net Income for each of three consecutive fiscal quarters occurring no
earlier than Fiscal Year 1993 has equaled or exceeded $1,000,000.
.c2.Section 7.16. Liens;. The Company will not, and will
not permit any Subsidiary to, pledge, mortgage or otherwise encumber or
subject to or permit to exist upon or be subjected to any lien, charge or
security interest of any kind (including any conditional sale or other
title retention agreement and any lease in the nature thereof), on any of
its Properties of any kind or character other than:
(a) liens, pledges or deposits for workmen s compensation,
unemployment insurance, old age benefits or social security obligations,
taxes, assessments, statutory obligations or other similar charges, good
faith deposits made in connection with tenders, contracts or leases to
which the Company or a Subsidiary is a party or other deposits required to
be made in the ordinary course of business, provided in each case the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate proceedings and adequate reserves have been
provided therefor in accordance with generally accepted accounting
principles and that the obligation is not for borrowed money, customer
advances, trade payables or obligations to agricultural producers;
(b) the pledge of Property for the purpose of securing an
appeal or stay or discharge in the course of any legal proceedings,
provided that the aggregate amount of liabilities of the Company and its
Subsidiaries so secured by a pledge of Property permitted under this
subsection (b) including interest and penalties thereon, if any, shall not
be in excess of $1,000,000 at any one time outstanding;
(c) liens, pledges, mortgages, security interests, or other
charges granted to the Agent to secure the Notes, the B/As, L/Cs or the
Reimbursement Obligations;
(d) liens, pledges, security interests or other charges now or
hereafter created under the Security Agreement;
(e) security interests or other interests of a lessor in
equipment leased by the Company or any Subsidiary as lessee under any
financing lease, to the extent such security interest or other interest
secures rental payments payable by the Company thereunder;
(f) liens on the Collateral securing the Senior Secured Notes
created in accordance with the agreements described in Section 6.2(g),
provided such liens are subordinated to the Agent s liens therein and
provided that the Agent is concurrently granted a lien in the collateral
security for the Senior Secured Notes;
(g) liens of carriers, warehousemen, mechanics and materialmen
and other like liens, in each case arising in the ordinary course of the
Company s or any Subsidiary s business to the extent they secure
obligations that are not past due;
(h) such minor defects, irregularities, encumbrances,
easements, rights of way, and clouds on title as normally exist with
respect to similar properties which do not materially impair the Property
affected thereby for the purpose for which it was acquired;
(i) liens, pledges, mortgages, security interests or other
charges granted by any of the Company s Subsidiaries in Mexico in such
Subsidiary s Inventory and certain fixed assets located in Mexico and such
Subsidiary s accounts receivable, in each case securing only indebtedness
in an aggregate principal amount of up to $10,000,000 incurred by such
Subsidiaries for working capital purposes;
(j) statutory landlord s liens under leases;
(k) existing liens described on Exhibit E hereto;
(l) liens and security interests securing the Company s 14.25%
Senior Notes Due 1995;
(m) liens on the cash surrender value of the life insurance
policy maintained by the Company on the life of Mr. Lonnie A. Pilgrim, to
the extent such liens secure loans in an aggregate principal amount not to
exceed $700,000;
(n) liens, security interests, pledges, mortgages or other
charges in any Property other than the Collateral securing obligations in
an aggregate amount not exceeding $1,000,000 at any time; and
(o) liens and security interests in favor of Barclays Business
Credit, Inc. ( Barclays ) in certificates of deposit or other cash
equivalents in an aggregate amount not to exceed $5,000,000 securing
obligations owing to Barclays under that certain Lease Agreement dated
December 27, 1989, as amended, between the Company and Barclays.
.c2.Section 7.17. Borrowings and Guaranties;. The Company
will not, and will not permit any Subsidiary to, issue, incur, assume,
create or have outstanding any indebtedness for borrowed money (including
as such all indebtedness representing the deferred purchase price of
Property) or customer advances, nor be or remain liable, whether as
endorser, surety, guarantor or otherwise, for or in respect of any
liability or indebtedness of any other Person, other than:
(a) indebtedness of the Company arising under or pursuant to
this Agreement or the other Loan Documents;
(b) the liability of the Company arising out of the
endorsement for deposit or collection of commercial paper received in the
ordinary course of business;
(c) the indebtedness evidenced by the Company s 14-1/4% Senior
Notes Due 1995, provided such indebtedness is prepaid in full within 46
days of the date of this Agreement;
(d) trade payables of the Company arising in the ordinary
course of the Company s business;
(e) indebtedness disclosed on the audited financial statements
referred to in Section 5.3 hereof, except (i) indebtedness to the Existing
Lenders under the Existing Agreement, and (ii) from and after the initial
extension of credit under this Agreement, indebtedness evidenced by the
Series D Notes;
(f) indebtedness in an aggregate principal amount not to
exceed $28,000,000 incurred pursuant to the commitment described in Section
6.2(p);
(g) Subordinated Debt in an aggregate principal amount not to
exceed $100,000,000 maturing no earlier than August 1, 2003;
(h) indebtedness in an aggregate principal amount of up to
$10,000,000 incurred by the Company s Subsidiaries in Mexico for working
capital purposes;
(i) Debt arising from sale/leaseback transactions permitted by
Section 7.32 hereof and under Capitalized Lease Obligations;
(j) indebtedness of any Mexican Subsidiary to any other
Mexican Subsidiary; and
(k) loans in an aggregate principal amount of up to $700,000
against the cash surrender value of the life insurance policy maintained on
the life of Mr. Lonnie A. Pilgrim.
.c2.Section 7.18. Investments, Loans and Advances;. The
Company will not, and will not permit any Subsidiary to, make or retain any
investment (whether through the purchase of stock, obligations or
otherwise) in or make any loan or advance to, any other Person, other than:
(a) investments in certificates of deposit having a maturity
of one year or less issued by any United States commercial bank having
capital and surplus of not less than $50,000,000;
(b) investments in an aggregate amount of up to $8,000,000 in
deposits maintained with the First State Bank of Pittsburg;
(c) investments in commercial paper rated P1 by Moody s
Investors Service, Inc. or A1 by Standard & Poor s Corporation maturing
within 180 days of the date of issuance thereof;
(d) marketable obligations of the United States;
(e) marketable obligations guaranteed by or insured by the
United States, or those for which the full faith and credit of the United
States is pledged for the repayment of principal and interest thereof;
provided that such obligations have a final maturity of no more than one
year from the date acquired by the Company;
(f) repurchase, reverse repurchase agreements and security
lending agreements collateralized by securities of the type described in
subsection (c) and having a term of no more than 90 days, provided,
however, that the Company shall hold (individually or through an agent) all
securities relating thereto during the entire term of such arrangement;
(g) loans, investments (excluding retained earnings) and
advances by the Company to its Subsidiaries located in Mexico in an
aggregate outstanding amount not to exceed the sum of the amount thereof
outstanding on the date hereof (being $94,000,000) plus $5,000,000 at any
time, provided, however, that the Company may make loans, investments
(excluding retained earnings) and advances to its Subsidiaries located in
Mexico in an aggregate amount equal to the aggregate amount of any capital
withdrawn from its Mexican Subsidiaries after the date hereof but not to
exceed an aggregate amount of $25,000,000 in any Fiscal Year of the
Company, provided further that any such investments (excluding retained
earnings), loans and advances shall not cause the aggregate outstanding
amount of all such loans, investments (excluding retained earnings) and
advances to exceed $94,000,000 plus $5,000,000 at any time;
(h) loans and advances to employees and contract growers
(other than executive officers and directors of the Company) for reasonable
expenses incurred in the ordinary course of business; and
(i) loans and advances from one Mexican Subsidiary to another
Mexican Subsidiary.
.c2.Section 7.19. Sale of Property;. The Company will not,
and will not permit any Subsidiary to, sell, lease, assign, transfer or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or a material part of its Property to any other Person in
any Fiscal Year of the Company; provided, however, that this Section shall
not prohibit:
(a) sales of Inventory by the Company in the ordinary course
of business;
(b) sales or leases by the Company of its surplus, obsolete or
worn-out machinery and equipment; and
(c) sales of approximately 16,500 acres of farm land in Lamar
and Fannin Counties, Texas.
For purposes of this Section 7.19, material part shall mean 5% or more of
the lesser of the book or fair market value of the Property of the Company.
.c2.Section 7.20. Notice of Suit, Adverse Change in
Business or Default;. The Company shall, as soon as possible, and in any
event within fifteen (15) days after the Company learns of the following,
give written notice to the Banks of (a) any proceeding(s) that, if
determined adversely to the Company or any Subsidiary could have a material
adverse effect on the Properties, business or operations of the Company or
such Subsidiary being instituted or threatened to be instituted by or
against the Company or such Subsidiary in any federal, state, local or
foreign court or before any commission or other regulatory body (federal,
state, local or foreign); (b) any material adverse change in the business,
Property or condition, financial or otherwise, of the Company or any
Subsidiary; and (c) the occurrence of a Potential Default or Event of
Default.
.c2.Section 7.21. ERISA;. The Company will, and will cause
each Subsidiary to, promptly pay and discharge all obligations and
liabilities arising under ERISA of a character which if unpaid or
unperformed might result in the imposition of a lien against any of its
Property and will promptly notify the Agent of (i) the occurrence of any
reportable event (as defined in ERISA) which might result in the
termination by the PBGC of any Plan covering any officers or employees of
the Company or any Subsidiary any benefits of which are, or are required to
be, guaranteed by PBGC, (ii) receipt of any notice from PBGC of its
intention to seek termination of any Plan or appointment of a trustee
therefor, and (iii) its intention to terminate or withdraw from any Plan.
The Company will not, and will not permit any Subsidiary to, terminate any
Plan or withdraw therefrom unless it shall be in compliance with all of the
terms and conditions of this Agreement after giving effect to any liability
to PBGC resulting from such termination or withdrawal.
.c2.Section 7.22. Use of Loan Proceeds;. The Company will
use the proceeds of all Loans and B/As made or created hereunder solely to
refinance existing Debt and to finance its temporary working capital
requirements.
.c2.Section 7.23. Conduct of Business and Maintenance of
Existence;. The Company will, and will cause each Subsidiary to, continue
to engage in business of the same general type as now conducted by it, and
the Company will, and will cause each Subsidiary to, preserve, renew and
keep in full force and effect its corporate existence and its rights,
privileges and franchises necessary or desirable in the normal conduct of
business.
.c2.Section 7.24. Additional Information;. Upon request of
the Agent, the Company shall provide any reasonable additional information
pertaining to any of the Collateral.
.c2.Section 7.25. Supplemental Performance;. The Company
will at its own expense, register, file, record and execute all such
further agreements and documents, including without limitation financing
statements, and perform such acts as are necessary and appropriate, or as
the Agent or any Bank may reasonably request, to effect the purposes of the
Loan Documents.
.c2.Section 7.26. Company Chattel Paper - Delivery to
Bank;. The Company will keep in its exclusive possession all components of
its respective Receivables which constitute chattel paper. The Agent may
request in its sole discretion, and the Company agrees to deliver to the
Agent upon such request, any or all of such Receivables constituting
chattel paper.
.c2.Section 7.27. Compliance with Laws, etc. ;The Company
will, and will cause each of its Subsidiaries to, comply in all material
respects with all applicable laws, rules, regulations and orders, such
compliance to include (without limitation) (a) the maintenance and
preservation of its corporate existence and qualification as a foreign
corporation, (b) the registration pursuant to the Food Security Act of
1985, as amended, with the Secretary of State of each State in which are
produced any farm products purchased by the Company and which has
established a central filing system, as a buyer of farm products produced
in such state, and the maintenance of each such registration, (c)
compliance with the Packers and Stockyard Act of 1921, as amended, (d)
compliance with all applicable rules and regulations promulgated by the
United States Department of Agriculture and all similar applicable state
rules and regulations, and (e) compliance with all rules and regulations
promulgated pursuant to the Occupational Safety and Health Act of 1970, as
amended.
.c2.Section 7.28. Environmental Covenant;. The Company
will, and will cause each of its Subsidiaries to:
(a) use and operate all of its facilities and Properties in
material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all hazardous materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and provide copies upon
receipt of all material written claims, complaints, notices or inquiries
relating to the condition of its facilities and Property or compliance with
Environmental Laws, and shall promptly cure and have dismissed, to the
reasonable satisfaction of the Required Banks, any actions and proceedings
relating to compliance with Environmental Laws unless and to the extent
that the same are being contested in good faith and by appropriate
proceedings diligently conducted and for which adequate reserves in form
and amount reasonably satisfactory to the Required Banks have been
established, provided that no proceedings to foreclose any lien which is
attached as security therefor shall have been commenced unless such
foreclosure is stayed by the filing of an appropriate bond in a manner
satisfactory to the Required Banks; and
(c) provide such information and certifications which the
Agent may reasonably request from time to time to evidence compliance with
this Section 7.29.
.c2.Section 7.29. New Subsidiaries;. The Company will not,
directly or indirectly, create or acquire any Subsidiary.
Section 7.30. Guaranty Fees. The Company will not, and it will
not permit any Subsidiary to, directly or indirectly, pay to Mr. and/or
Mrs. Lonnie A. Pilgrim or any other guarantor of any of the Company s
indebtedness, obligations and liabilities, any fee or other compensation,
but excluding salary, bonus and other compensation for services rendered as
an employee (collectively the Guaranty Fees ) in an aggregate amount in
excess of $500,000.00 in any Fiscal Year of the Company, provided, however,
that if after the date hereof the Company s Net Income for any four
consecutive fiscal quarters of the Company equals or exceeds $1,000,000.00
for each of such consecutive fiscal quarters, beginning no earlier than the
first fiscal quarter of the current Fiscal Year of the Company, the Company
may pay Guaranty Fees in each Fiscal Year thereafter in an amount not to
exceed $1,400,000.00. Nothing contained herein shall prohibit the Company
from accruing, but not paying, Guaranty Fees in an aggregate amount of up
to $1,400,000.00 in any Fiscal Year in which it is permitted to pay no more
than $500,000.00, or from paying such accrued and unpaid Guaranty Fees once
it is permitted to pay Guaranty Fees in an aggregate amount not to exceed
$1,400,000.00 in any fiscal year, provided that all such accrued Guaranty
Fees and current Guaranty Fees actually paid in any Fiscal Year shall not
exceed an aggregate amount of up to $1,400,000.00.
Section 7.31. Key Man Life Insurance. The Company shall
continuously maintain a policy of insurance on the life of Mr. Lonnie A.
Pilgrim in the amount of $1,500,000.00, of which the Company shall be the
beneficiary, such policy to be maintained with a good and responsible
insurance company acceptable to the Required Banks.
Section 7.32. Sale and Leasebacks. The Company will not, and
will not permit any Subsidiary to, enter into any arrangement with any
lender or investor providing for the leasing by the Company or any
Subsidiary of any real or personal property previously owned by the Company
or any Subsidiary, except:
(a) any such sale and leaseback transaction, provided that (i)
such transactions may be entered into only in the year, or in the year
immediately preceding the year, in which net operating losses, credits or
other tax benefits would otherwise expire unutilized and the Company
delivers on officer s certificate to the Agent to the effect that such
expiration of such net operating losses, credits or other tax benefits
would occur but for entering into the sale/leaseback transaction; (ii) the
Company shall be completely discharged with respect to any Debt of the
Company or such Subsidiary assumed by the purchaser/lessor in such
sale/leaseback transaction; (iii) the Company shall deliver to the Agent an
opinion of counsel that the sale of assets and related lease will be
treated as a sale and lease, respectively, for federal income tax purposes;
and (iv) the proceeds of such transactions are applied to the payment of
Debt; and
(b) such transactions in which the aggregate consideration
received by the Company upon the sale of such property does not exceed
$6,000,000 during the term of this Agreement.
.c1.8. Events of Default and Remedies.
.c2.Section 8.1. Definitions;. Any one or more of the
following shall constitute an Event of Default:
(a) Default in the payment when due of any interest on or
principal of any Note or Reimbursement Obligation, whether at the stated
maturity thereof or as required by Section 2.4 hereof or at any other time
provided in this Agreement, or of any fee or other amount payable by the
Company pursuant to this Agreement;
(b) Default in the observance or performance of any covenant
set forth in Sections 7.4, 7.5, 7.6, 7.7, 7.15, 7.17, 7.19 and 7.20,
inclusive, hereof, or of any provision of any Security Document requiring
the maintenance of insurance on the Collateral subject thereto or dealing
with the use or remittance of proceeds of such Collateral;
(c) Default in the observance or performance of any covenant
set forth in Sections 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.16, 7.18,
7.21, 7.23 and 7.31, inclusive, hereof and such default shall continue for
10 days after written notice thereof to the Company by any Bank;
(d) Default in the observance or performance of any other
covenant, condition, agreement or provision hereof or any of the other Loan
Documents and such default shall continue for 30 days after written notice
thereof to the Company by any Bank;
(e) Default shall occur under any evidence of indebtedness in
a principal amount exceeding $1,000,000 issued or assumed or guaranteed by
the Company, or under any mortgage, agreement or other similar instrument
under which the same may be issued or secured and such default shall
continue for a period of time sufficient to permit the acceleration of
maturity of any indebtedness evidenced thereby or outstanding or secured
thereunder;
(f) Any representation or warranty made by the Company herein
or in any Loan Document or in any statement or certificate furnished by it
pursuant hereto or thereto, proves untrue in any material respect as of the
date made or deemed made pursuant to the terms hereof;
(g) Any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an aggregate
amount in excess of $1,000,000 shall be entered or filed against the
Company or any Subsidiary or against any of their respective Property or
assets and remain unbonded, unstayed and undischarged for a period of 30
days from the date of its entry;
(h) Any reportable event (as defined in ERISA) which
constitutes grounds for the termination of any Plan or for the appointment
by the appropriate United States District Court of a trustee to administer
or liquidate any such Plan, shall have occurred and such reportable event
shall be continuing thirty (30) days after written notice to such effect
shall have been given to the Company by any Bank; or any such Plan shall be
terminated; or a trustee shall be appointed by the appropriate United
States District Court to administer any such Plan; or the Pension Benefit
Guaranty Corporation shall institute proceedings to administer or terminate
any such Plan;
(i) The Company or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the Bankruptcy Code of
1978, as amended, (ii) admit in writing its inability to pay, or not pay,
its debts generally as they become due or suspend payment of its
obligations, (iii) make an assignment for the benefit of creditors, (iv)
apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, conservator, liquidator or similar official
for it or any substantial part of its property, (v) file a petition seeking
relief or institute any proceeding seeking to have entered against it an
order for relief under the Bankruptcy Code of 1978, as amended, to
adjudicate it insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, marshalling of assets, adjustment or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to file an answer
or other pleading denying the material allegations of any such proceeding
filed against it, or (vi) fail to contest in good faith any appointment or
proceeding described in Section 8.1(j) hereof;
(j) A custodian, receiver, trustee, conservator, liquidator or
similar official shall be appointed for the Company, any Subsidiary or any
substantial part of its respective Property, or a proceeding described in
Section 8.1(i)(v) shall be instituted against the Company or any Subsidiary
and such appointment continues undischarged or any such proceeding
continues undismissed or unstayed for a period of 60 days;
(k) The existence of an Event of Default as defined in the
Security Agreement;
(l) Any shares of the capital stock of the Company owned
legally or beneficially by Mr. and/or Mrs. Lonnie A. Pilgrim shall be
pledged, assigned or otherwise encumbered for any reason, other than (i)
the pledge of up to 6,670,000 shares pledged to secure that certain Stock
Purchase Agreement dated as of June 25, 1992 between the Company and Archer
Daniels Midland, as amended from time to time, and (ii) the pledge of up to
2,000,000 shares to secure personal obligations of Mr. and Mrs. Lonnie A.
Pilgrim or such other personal obligations incurred by any Person so long
as such obligations are not related to the financing of the Company of any
of its Subsidiaries;
(m) Mr. and Mrs. Lonnie A. Pilgrim and their descendants and
heirs shall for any reason cease to have legal and/or beneficial ownership
of no less than 51% of the issued and outstanding shares of all classes of
capital stock of the Company;
(n) Either Mr. or Mrs. Lonnie A. Pilgrim shall terminate,
breach, repudiate or disavow his or her guaranty of the Company s
indebtedness, obligations and liabilities to the Banks under the Loan
Documents or any part thereof, or any event specified in Sections 8.1(i) or
(j) shall occur with regard to either or both of Mr. and Mrs. Lonnie A.
Pilgrim;
(o) The Required Banks shall have determined that one or more
conditions exist or events have occurred which may result in a material
adverse change in the business, operations, Properties or condition
(financial or otherwise) of the Company or any Subsidiary; or
(p) The occurrence of a Change of Control as defined in that
certain Indenture dated as of May 1, 1993 from the Company to Ameritrust
Texas National Association, as Trustee, relating to the Company s ___%
Senior Subordinated Notes Due 2003.
.c2.Section 8.2. Remedies for Non-Bankruptcy Defaults;.
When any Event of Default, other than an Event of Default described in
subsections (i) and (j) of Section 8.1 hereof, has occurred and is
continuing, the Agent, if directed by the Required Banks, shall give notice
to the Company and take any or all of the following actions: (i) terminate
the remaining Revolving Credit Commitments hereunder on the date (which may
be the date thereof) stated in such notice, (ii) declare the principal of
and the accrued interest on the Notes and unpaid Reimbursement Obligations
to be forthwith due and payable and thereupon the Notes and unpaid
Reimbursement Obligations including both principal and interest, shall be
and become immediately due and payable without further demand, presentment,
protest or notice of any kind, and (iii) proceed to foreclose against any
Collateral under any of the Security Documents, take any action or exercise
any remedy under any of the Loan Documents or exercise any other action,
right, power or remedy permitted by law. Any Bank may exercise the right
of set off with regard to any deposit accounts or other accounts maintained
by the Company with any of the Banks.
.c2.Section 8.3. Remedies for Bankruptcy Defaults;. When
any Event of Default described in subsections (i) or (j) of Section 8.1
hereof has occurred and is continuing, then the Notes and all Reimbursement
Obligations shall immediately become due and payable without presentment,
demand, protest or notice of any kind, and the obligation of the Banks to
extend further credit pursuant to any of the terms hereof shall immediately
terminate.
.c2.Section 8.4. L/Cs and B/As;. Promptly following the
acceleration of the maturity of the Notes pursuant to Section 8.2 or 8.3
hereof, the Company shall immediately pay to the Agent for the benefit of
the Banks the full aggregate amount of all outstanding B/As and L/Cs. The
Agent shall hold all such funds and proceeds thereof as additional
collateral security for the obligations of the Company to the Banks under
the Loan Documents. The amount paid under any of the B/As and L/Cs for
which the Company has not reimbursed the Banks shall bear interest from the
date of such payment at the default rate of interest specified in Section
1.3(c)(i) hereof.
.c1.9. Change in Circumstances Regarding Fixed Rate Loans;.
.c2.Section 9.1. Change of Law;. Notwithstanding any
other provisions of this Agreement or any Note to the contrary, if at any
time after the date hereof with respect to Fixed Rate Loans, any Bank shall
determine in good faith that any change in applicable law or regulation or
in the interpretation thereof makes it unlawful for such Bank to make or
continue to maintain any Fixed Rate Loan or to give effect to its
obligations as contemplated hereby, such Bank shall promptly give notice
thereof to the Company to such effect, and such Bank s obligation to make,
relend, continue or convert any such affected Fixed Rate Loans under this
Agreement shall terminate until it is no longer unlawful for such Bank to
make or maintain such affected Loan. The Company shall prepay the
outstanding principal amount of any such affected Fixed Rate Loan made to
it, together with all interest accrued thereon and all other amounts due
and payable to the Banks under Section 9.4 of this Agreement, on the
earlier of the last day of the Interest Period applicable thereto and the
first day on which it is illegal for such Bank to have such Loans
outstanding; provided, however, the Company may then elect to borrow the
principal amount of such affected Loan by means of another type of Loan
available hereunder, subject to all of the terms and conditions of this
Agreement.
.c2.Section 9.2. Unavailability of Deposits or Inability
to Ascertain the Adjusted Eurodollar Rate or Adjusted CD Rate;.
Notwithstanding any other provision of this Agreement or any Note to the
contrary, if prior to the commencement of any Interest Period any Bank
shall determine (i) that deposits in the amount of any Fixed Rate Loan
scheduled to be outstanding are not available to it in the relevant market
or (ii) by reason of circumstances affecting the relevant market, adequate
and reasonable means do not exist for ascertaining the Adjusted Eurodollar
Rate or the Adjusted CD Rate, then such Bank shall promptly give telephonic
or telex notice thereof to the Company, the Agent and the other Banks (such
notice to be confirmed in writing), and the obligation of the Banks to
make, continue or convert any such Fixed Rate Loan in such amount and for
such Interest Period shall terminate until deposits in such amount and for
the Interest Period selected by the Company shall again be readily
available in the relevant market and adequate and reasonable means exist
for ascertaining the Adjusted Eurodollar Rate or the Adjusted CD Rate, as
the case may be. Upon the giving of such notice, the Company may elect to
either (i) pay or prepay, as the case may be, such affected Loan or (ii)
reborrow such affected Loan as another type of Loan available hereunder,
subject to all terms and conditions of this Agreement.
.c2.Section 9.3. Taxes and Increased Costs;. With respect
to the Fixed Rate Loans, if any Bank shall determine in good faith that any
change in any applicable law, treaty, regulation or guideline (including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System) or any new law, treaty, regulation or guideline, or any
interpretation of any of the foregoing by any governmental authority
charged with the administration thereof or any central bank or other
fiscal, monetary or other authority having jurisdiction over such Bank or
its lending branch or the Fixed Rate Loans contemplated by this Agreement
(whether or not having the force of law) ( Change in Law ) shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirements against assets held by, or deposits in or
for the account of, or Loans by, or any other acquisition of funds or
disbursements by, such Bank (other than reserves included in the
determination of the Adjusted Eurodollar Rate or the Adjusted CD Rate);
(ii) subject such Bank, any Fixed Rate Loan or any Note to any
tax (including, without limitation, any United States interest equalization
tax or similar tax however named applicable to the acquisition or holding
of debt obligations and any interest or penalties with respect thereto),
duty, charge, stamp tax, fee, deduction or withholding in respect of this
Agreement, any Fixed Rate Loan or any Note except such taxes as may be
measured by the overall net income of such Bank or its lending branch and
imposed by the jurisdiction, or any political subdivision or taxing
authority thereof, in which such Bank s principal executive office or its
lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Company to such Bank hereunder or under any Note
(other than by a change in taxation of the overall net income of such
Bank); or
(iv) impose on such Bank any penalty with respect to the
foregoing or any other condition regarding this Agreement, any Fixed Rate
Loan or any Note;
and such Bank shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to such
Bank of making or maintaining any Fixed Rate Loan hereunder or to reduce
the amount of principal or interest received by such Bank, then the Company
shall pay to such Bank from time to time as specified by such Bank such
additional amounts as such Bank shall reasonably determine are sufficient
to compensate and indemnify it for such increased cost or reduced amount.
If any Bank makes such a claim for compensation, it shall provide to the
Company a certificate setting forth such increased cost or reduced amount
as a result of any event mentioned herein specifying such Change in Law,
and such certificate shall be conclusive and binding on the Company as to
the amount thereof except in the case of manifest error. Upon the
imposition of any such cost, the Company may prepay any affected Loan,
subject to the provisions of Sections 2.3 and 9.4 hereof.
.c2.Section 9.4. Funding Indemnity;. (a) In the event any
Bank shall incur any loss, cost, expense or premium (including, without
limitation, any loss of profit and any loss, cost, expense or premium
incurred by reason of the liquidation or re-employment of deposits or other
funds acquired by such Bank to fund or maintain any Fixed Rate Loan or the
relending or reinvesting of such deposits or amounts paid or prepaid to
such Bank) as a result of:
(i) any payment or prepayment of a Fixed Rate Loan on a date
other than the last day of the then applicable Interest Period;
(ii) any failure by the Company to borrow, continue or convert
any Fixed Rate Loan on the date specified in the notice given pursuant to
Section 1.8 hereof; or
(iii) the occurrence of any Event of Default;
then, upon the demand of such Bank, the Company shall pay to such Bank such
amount as will reimburse such Bank for such loss, cost or expense.
(b) If any Bank makes a claim for compensation under this
Section 9.4, it shall provide to the Company a certificate setting forth
the amount of such loss, cost or expense in reasonable detail and such
certificate shall be conclusive and binding on the Company as to the amount
thereof except in the case of manifest error.
.c2.Section 9.5. Lending Branch;. Each Bank may, at its
option, elect to make, fund or maintain its Eurodollar Loans hereunder at
the branch or office specified opposite its signature on the signature page
hereof or such other of its branches or offices as such Bank may from time
to time elect, subject to the provisions of Section 1.8(b) hereof.
.c2.Section 9.6. Discretion of Bank as to Manner of
Funding;. Notwithstanding any provision of this Agreement to the contrary,
each Bank shall be entitled to fund and maintain its funding of all or any
part of its Loans in any manner it sees fit, it being understood however,
that for the purposes of this Agreement all determinations hereunder shall
be made as if the Banks had actually funded and maintained each Fixed Rate
Loan during each Interest Period for such Loan through the purchase of
deposits in the relevant interbank market having a maturity corresponding
to such Interest Period and bearing an interest rate equal to the Adjusted
Eurodollar Rate or Adjusted CD Rate, as the case may be, for such Interest
Period.
.c1.10. The Agent;.
.c2.Section 10.1. Appointment and Powers;. Harris Trust
and Savings Bank is hereby appointed by the Banks as Agent under the Loan
Documents, including but not limited to the Security Agreement, wherein the
Agent shall hold a security interest for the benefit of the Banks, solely
as the Agent of the Banks, and each of the Banks irrevocably authorizes the
Agent to act as the Agent of such Bank. The Agent agrees to act as such
upon the express conditions contained in this Agreement.
.c2.Section 10.2. Powers;. The Agent shall have and may
exercise such powers hereunder as are specifically delegated to the Agent
by the terms of the Loan Documents, together with such powers as are
incidental thereto. The Agent shall have no implied duties to the Banks,
nor any obligation to the Banks to take any action under the Loan Documents
except any action specifically provided by the Loan Documents to be taken
by the Agent.
.c2.Section 10.3. General Immunity;. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable to the
Banks or any Bank for any action taken or omitted to be taken by it or them
under the Loan Documents or in connection therewith except for its or their
own gross negligence or willful misconduct.
.c2.Section 10.4. No Responsibility for Loans, Recitals,
etc;. The Agent shall not (i) be responsible to the Banks for any
recitals, reports, statements, warranties or representations contained in
the Loan Documents or furnished pursuant thereto, (ii) be responsible for
the payment or collection of or security for any Loans or Reimbursement
Obligations hereunder except with money actually received by the Agent for
such payment, (iii) be bound to ascertain or inquire as to the performance
or observance of any of the terms of the Loan Documents, or (iv) be
obligated to determine or verify the existence, eligibility or value of any
Collateral, or the correctness of any Borrowing Base Certificate or
compliance certificate. In addition, neither the Agent nor its counsel
shall be responsible to the Banks for the enforceability or validity of any
of the Loan Documents or for the existence, creation, attachment,
perfection or priority of any security interest in the Collateral.
.c2.Section 10.5. Right to Indemnity;. The Banks hereby
indemnify the Agent for any actions taken in accordance with this Section
10, and the Agent shall be fully justified in failing or refusing to take
any action hereunder, unless it shall first be indemnified to its
satisfaction by the Banks pro rata against any and all liability and
expense which may be incurred by it by reason of taking or continuing to
take any such action, other than any liability which may arise out of Agent
s gross negligence or willful misconduct.
.c2.Section 10.6. Action Upon Instructions of Banks.; The
Agent agrees, upon the written request of the Required Banks, to take any
action of the type specified in the Loan Documents as being within the
Agent s rights, duties, powers or discretion. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder in
accordance with written instructions signed by the Required Banks, and such
instructions and any action taken or failure to act pursuant thereto shall
be binding on all of the Banks and on all holders of the Notes. In the
absence of a request by the Required Banks, the Agent shall have authority,
in its sole discretion, to take or not to take any action, unless the Loan
Documents specifically require the consent of the Required Banks or all of
the Banks.
.c2.Section 10.7. Employment of Agents and Counsel;. The
Agent may execute any of its duties as Agent hereunder by or through agents
(other than employees) and attorneys-in-fact and shall not be answerable to
the Banks, except as to money or securities received by it or its
authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it in good faith and with reasonable care.
The Agent shall be entitled to advice and opinion of legal counsel
concerning all matters pertaining to the duties of the agency hereby
created.
.c2. Section 10.8. Reliance on Documents; Counsel ;. The
Agent shall be entitled to rely upon any Note, notice, consent,
certificate, affidavit, letter, telegram, statement, paper or document
believed by it to be genuine and correct and to have been signed or sent by
the proper person or persons, and, in respect to legal matters, upon the
opinion of legal counsel selected by the Agent.
.c2.Section 10.9. May Treat Payee as Owner;. The Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment or transfer
thereof shall have been filed with the Agent. Any request, authority or
consent of any person, firm or corporation who at the time of making such
request or giving such authority or consent is the holder of any such Note
shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note issued in exchange therefor.
.c2.Section 10.10. Agent s Reimbursement;. Each Bank agrees
to reimburse the Agent pro rata in accordance with its Commitment
Percentage for any reasonable out-of-pocket expenses (including fees and
charges for field audits) not reimbursed by the Company (a) for which the
Agent is entitled to reimbursement by the Company under the Loan Documents
and (b) for any other reasonable out-of-pocket expenses incurred by the
Agent on behalf of the Banks, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents
and for which the Agent is entitled to reimbursement by the Company and has
not been reimbursed.
.c2.Section 10.11. Rights as a Lender;. With respect to its
commitment, Loans made by it, L/Cs and B/As issued by it and the Notes
issued to it, Harris shall have the same rights and powers hereunder as any
Bank and may exercise the same as though it were not the Agent, and the
term Bank or Banks shall, unless the context otherwise indicates,
include Harris in its individual capacity. Harris and each of the Banks
may accept deposits from, lend money to, and generally engage in any kind
of banking or trust business with the Company as if it were not the Agent
or a Bank hereunder, as the case may be.
.c2.Section 10.12. Bank Credit Decision;. Each Bank
acknowledges that it has, independently and without reliance upon the Agent
or any other Bank and based on the financial statements referred to in
Section 5.3 and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into the
Loan Documents. Each Bank also acknowledges that it will, independently
and without reliance upon the Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Loan Documents.
.c2.Section 10.13. Resignation of Agent;. Subject to the
appointment of a successor Agent, the Agent may resign as Agent for the
Banks under this Agreement and the other Loan Documents at any time by
sixty days notice in writing to the Banks. Such resignation shall take
effect upon appointment of such successor. The Required Banks shall have
the right to appoint a successor Agent who shall be entitled to all of the
rights of, and vested with the same powers as, the original Agent under the
Loan Documents. In the event a successor Agent shall not have been
appointed within the sixty day period following the giving of notice by the
Agent, the Agent may appoint its own successor. Resignation by the Agent
shall not affect or impair the rights of the Agent under Sections 10.5 and
10.10 hereof with respect to all matters preceding such resignation. Any
successor Agent must be a Bank, a national banking association, a bank
chartered in any state of the United States or a branch of any foreign bank
which is licensed to do business under the laws of any state or the United
States.
.c2.Section 10.14. Duration of Agency;. The agency
established by Section 10.1 hereof shall continue, and Sections 10.1
through and including Section 10.15 shall remain in full force and effect,
until the Notes and all other amounts due hereunder and thereunder,
including without limitation all Reimbursement Obligations, shall have been
paid in full and the Banks commitments to extend credit to or for the
benefit of the Company shall have terminated or expired.
.c1.11. Miscellaneous.
.c2.Section 11.1. Amendments and Waivers;. Any term,
covenant, agreement or condition of this Agreement may be amended only by a
written amendment executed by the Company, the Required Banks and, if the
rights or duties of the Agent are affected thereby, the Agent, or
compliance therewith only may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the
Company shall have obtained the consent in writing of the Required Banks
and, if the rights or duties of the Agent are affected thereby, the Agent,
provided, however, that without the consent in writing of the holders of
all outstanding Notes and unpaid Reimbursement Obligations and the creator
of any B/A and the issuer of any L/C, or all Banks if no Notes, L/Cs or
B/As are outstanding, no such amendment or waiver shall (i) change the
amount or postpone the date of payment of any scheduled payment or
required prepayment of principal of the Notes or reduce the rate or extend
the time of payment of interest on the Notes, or reduce the amount of
principal thereof, or modify any of the provisions of the Notes with
respect to the payment or prepayment thereof, (ii) give to any Note any
preference over any other Notes, (iii) amend the definition of Required
Banks, (iv) alter, modify or amend the provisions of this Section 11.1, (v)
change the amount or term of any of the Banks Revolving Credit Commitments
or the fees required under Section 2.1 hereof, (vi) alter, modify or amend
the provisions of Sections 1.10, 6 or 9 of this Agreement, (vii) alter,
modify or amend any Bank s right hereunder to consent to any action, make
any request or give any notice, (viii) change the advance rates under the
Borrowing Base or the definitions of Eligible Inventory or Eligible
Receivables, (ix) release any Collateral under the Security Documents or
release or discharge any guarantor of the Company s indebtedness,
obligations and liabilities to the Banks, in each case, unless such release
or discharge is permitted or contemplated by the Loan Documents, or (x)
alter, amend or modify any subordination provisions of any Subordinated
Debt. Any such amendment or waiver shall apply equally to all Banks and
the holders of the Notes and Reimbursement Obligations and shall be binding
upon them, upon each future holder of any Note and Reimbursement Obligation
and upon the Company, whether or not such Note shall have been marked to
indicate such amendment or waiver. No such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived. Harris
shall have the right to vote the amount of the CoBank Participation as
though the CoBank Participation were a separate extension of credit by
CoBank hereunder.
.c2.Section 11.2. Waiver of Rights;. No delay or failure
on the part of the Agent or any Bank or on the part of the holder or
holders of any Note or Reimbursement Obligation in the exercise of any
power or right shall operate as a waiver thereof, nor as an acquiescence in
any Potential Default or Event of Default, nor shall any single or partial
exercise of any power or right preclude any other or further exercise
thereof, or the exercise of any other power or right, and the rights and
remedies hereunder of the Agent, the Banks and of the holder or holders of
any Notes are cumulative to, and not exclusive of, any rights or remedies
which any of them would otherwise have.
.c2.Section 11.3. Several Obligations;. The commitments of
each of the Banks hereunder shall be the several obligations of each Bank
and the failure on the part of any one or more of the Banks to perform
hereunder shall not affect the obligation of the other Banks hereunder,
provided that nothing herein contained shall relieve any Bank from any
liability for its failure to so perform. In the event that any one or more
of the Banks shall fail to perform its commitment hereunder, all payments
thereafter received by the Agent on the principal of Loans and
Reimbursement Obligations hereunder, whether from any Collateral or
otherwise, shall be distributed by the Agent to the Banks making such
additional Loans ratably as among them in accordance with the principal
amount of additional Loans made by them until such additional Loans shall
have been fully paid and satisfied. All payments on account of interest
shall be applied as among all the Banks ratably in accordance with the
amount of interest owing to each of the Banks as of the date of the receipt
of such interest payment.
.c2.Section 11.4. Non-Business Day;. (a) If any payment of
principal or interest on any Domestic Rate Loan shall fall due on a day
which is not a Business Day, interest at the rate such Loan bears for the
period prior to maturity shall continue to accrue on such principal from
the stated due date thereof to and including the next succeeding Business
Day on which the same is payable.
(b) If any payment of principal or interest on any Eurodollar
Loan shall fall due on a day which is not a Banking Day, the payment date
thereof shall be extended to the next date which is a Banking Day and the
Interest Period for such Loan shall be accordingly extended, unless as a
result thereof any payment date would fall in the next calendar month, in
which case such payment date shall be the next preceding Banking Day.
.c2.Section 11.5. Survival of Indemnities;. All
indemnities and all provisions relative to reimbursement to the Banks of
amounts sufficient to protect the yield to the Banks with respect to
Eurodollar Loans, including, but not limited to, Sections 9.3 and 9.4
hereof, shall survive the termination of this Agreement and the payment of
the Notes for a period of one year.
.c2.Section 11.6. Documentary Taxes;. Although the Company
is of the opinion that no documentary or similar taxes are payable in
respect of this Agreement or the Notes, the Company agrees that it will pay
such taxes, including interest and penalties, in the event any such taxes
are assessed irrespective of when such assessment is made and whether or
not any credit is then in use or available hereunder.
.c.; .c2.Section 11.7. Representations;. All representations
and warranties made herein or in certificates given pursuant hereto shall
survive the execution and delivery of this Agreement and of the Notes, and
shall continue in full force and effect with respect to the date as of
which they were made and as reaffirmed on the date of each borrowing,
request for L/C or request for B/A and as long as any credit is in use or
available hereunder.
.c2.Section 11.8. Notices;. Unless otherwise expressly
provided herein, all communications provided for herein shall be in writing
or by telex and shall be deemed to have been given or made when served
personally, when an answer back is received in the case of notice by telex
or 2 days after the date when deposited in the United States mail
(registered, if to the Company) addressed if to the Company to 110 South
Texas, Pittsburg, Texas 75686 Attention: Clifford E. Butler; if to the
Agent or Harris at 111 West Monroe Street, Chicago, Illinois 60690,
Attention: Agribusiness Division; and if to any of the Banks, at the
address for each Bank set forth under its signature hereon; or at such
other address as shall be designated by any party hereto in a written
notice to each other party pursuant to this Section 11.8.
.c2. Section 11.9. Costs and Expenses; Indemnity ;. The
Company agrees to pay on demand all costs and expenses of the Agent, in
connection with the negotiation, preparation, execution and delivery of
this Agreement, the Notes and the other instruments and documents to be
delivered hereunder or in connection with the transactions contemplated
hereby, including the fees and expenses of Messrs. Chapman and Cutler,
special counsel to the Agent; all costs and expenses of the Agent
(including attorneys fees) incurred in connection with any consents or
waivers hereunder or amendments hereto, and all costs and expenses
(including attorneys fees), if any, incurred by the Agent, the Banks or
any other holders of a Note or any Reimbursement Obligation in connection
with the enforcement of this Agreement or the Notes and the other
instruments and documents to be delivered hereunder. The Company agrees to
indemnify and save harmless the Banks and the Agent from any and all
liabilities, losses, costs and expenses incurred by the Banks or the Agent
in connection with any action, suit or proceeding brought against the Agent
or any Bank by any Person which arises out of the transactions contemplated
or financed hereby or by the Notes, or out of any action or inaction by the
Agent or any Bank hereunder or thereunder, except for such thereof as is
caused by the gross negligence or willful misconduct of the party
indemnified. The provisions of this Section 11.9 shall survive payment of
the Notes and Reimbursement Obligations and the termination of the
Revolving Credit Commitments hereunder.
.c2.Section 11.10. Counterparts;. This Agreement may be
executed in any number of counterparts and all such counterparts taken
together shall be deemed to constitute one and the same instrument. One or
more of the Banks may execute a separate counterpart of this Agreement
which has also been executed by the Company, and this Agreement shall
become effective as and when all of the Banks have executed this Agreement
or a counterpart thereof and lodged the same with the Agent.
.c2.Section 11.11. Successors and Assigns.;. This Agreement
shall be binding upon each of the Company and the Banks and their
respective successors and assigns, and shall inure to the benefit of the
Company and each of the Banks and the benefit of their respective
successors and assigns, including any subsequent holder of any Note or
Reimbursement Obligation. The Company may not assign any of its rights or
obligations hereunder without the written consent of the Banks.
.c2.Section 11.12. No Joint Venture;. Nothing contained in
this Agreement shall be deemed to create a partnership or joint venture
among the parties hereto.
.c2.Section 11.13. Severability;. In the event that any
term or provision hereof is determined to be unenforceable or illegal, it
shall deemed severed herefrom to the extent of the illegality and/or
unenforceability and all other provisions hereof shall remain in full force
and effect.
.c2.Section 11.14. Table of Contents and Headings;. The
table of contents and section headings in this Agreement are for reference
only and shall not affect the construction of any provision hereof.
.c2.Section 11.15. Participants;. (a) Each Bank shall have
the right at its own cost to grant participations (to be evidenced by one
or more agreements or certificates of participation) in the Loans made,
and/or Revolving Credit Commitment and participations in L/Cs, B/As and
Reimbursement Obligations held, by such Bank at any time and from time to
time, and to assign its rights under such Loans, participations in L/Cs and
B/As and Reimbursement Obligations or the Notes evidencing such Loans to
one or more other Persons; provided that no such participation (except the
participation described in Section 11.15(b) hereof (the CoBank
Participation )) shall relieve any Bank of any of its obligations under
this Agreement, and any agreement pursuant to which such participation
(except the CoBank Participation) or assignment of a Note or the rights
thereunder is granted shall provide that the granting Lender shall retain
the sole right and responsibility to enforce the obligations of the Company
under the Loan Documents, including, without limitation, the right to
approve any amendment, modification or waiver of any provision thereof,
except that such agreement (except the CoBank Agreement) may provide that
such Bank will not agree without the consent of such participant or
assignee to any modification, amendment or waiver of this Agreement that
would (A) increase any Revolving Credit Commitment of such Lender, or (B)
reduce the amount of or postpone the date for payment of any principal of
or interest on any Loan or Reimbursement Obligation or of any fee payable
hereunder in which such participant or assignee has an interest or (C)
reduce the interest rate applicable to any Loan or other amount payable in
which such participant or assignee has an interest or (D) release any
collateral security for or guarantor for any of the Company s indebtedness,
obligations and liabilities under the Loan Documents, and provided further
that no such assignee or participant except CoBank shall have any rights
under this Agreement except as provided in this Section 11.15, and the
Agent shall have no obligation or responsibility to such participant or
assignee, except that nothing herein provided is intended to affect the
rights of an assignee of a Note to enforce the Note assigned. Any party to
which such a participation or assignment has been granted shall have the
benefits of Section 1.10, Section 9.3 and Section 9.4 hereof but shall not
be entitled to receive any greater payment under any such Section than the
Bank granting such participation or assignment would have been entitled to
receive with respect to the rights transferred.
(b) The Company acknowledges that concurrently with the
execution and delivery of this Agreement Harris has entered into that
certain Participation Agreement of even date herewith with CoBank (as such
agreement may be supplemented and amended from time to time, the CoBank
Agreement ) a copy of which has been provided to the Company. In the event
that CoBank fails to furnish to Harris its ratable participation in any
Loan to be made by Harris to the Company, notwithstanding anything
whatsoever contained in this Agreement to the contrary obligating Harris to
make such Loan to the Company, Harris shall not be obligated to advance to
the Company more than Harris Retained Percentage of such Loan plus any
amount of such Loan actually advanced by CoBank to Harris to fund CoBank s
Participation therein.
.c2.Section 11.16. Assignment of Commitments by Bank;. Each
Bank shall have the right at any time, with the prior consent of the
Company and the Agent (which consent will not be unreasonably withheld), to
sell, assign, transfer or negotiate all or any part of its Revolving Credit
Commitment to one or more commercial banks or other financial institutions;
provided that such assignment is in an amount of at least $10,000,000,
provided further that no Bank (except ING Bank) may so assign more than
one-half of its original Revolving Credit Commitment hereunder and provided
further that ING Bank may assign all of its interest hereunder to any of
its subsidiaries or affiliates that are Under Common Control with ING Bank.
Upon any such assignment, and its notification to the Agent, the assignee
shall become a Bank hereunder, all Loans and the Revolving Credit
Commitment it thereby holds shall be governed by all the terms and
conditions hereof, and the Bank granting such assignment shall have its
Revolving Credit Commitment and its obligations and rights in connection
therewith, reduced by the amount of such assignment. Upon each such
assignment the Bank granting such assignment shall pay to the Agent for the
Agent s sole account a fee of $2,500.
.c2.Section 11.17. Sharing of Payments;. Each Bank agrees
with each other Bank that if such Bank shall receive and retain any
payment, whether by set-off or application of deposit balances or otherwise
( Set-Off ), on any Loan, Reimbursement Obligation or other amount
outstanding under this Agreement in excess of its ratable share of payments
on all Loans, Reimbursement Obligations and other amounts then outstanding
to the Banks, then such Bank shall purchase for cash at face value, but
without recourse, ratably from each of the other Banks such amount of the
Loans and Reimbursement Obligations held by each such other Bank (or
interest therein) as shall be necessary to cause such Bank to share such
excess payment ratably with all the other Banks; provided, however, that if
any such purchase is made by any Bank, and if such excess payment or part
thereof is thereafter recovered from such purchasing Bank, the related
purchases from the other Banks shall be rescinded ratably and the purchase
price restored as to the portion of such excess payment so recovered, but
without interest. Each Bank s ratable share of any such Set-Off shall be
determined by the proportion that the aggregate principal amount of Loans
and Reimbursement Obligations then due and payable to such Bank bears to
the total aggregate principal amount of Loans and Reimbursement Obligations
then due and payable to all the Banks.
.c2. Section 11.18. Jurisdiction; Venue ;. The company
hereby submits to the nonexclusive jurisdiction of the united states
district court for the northern district of Illinois and of any Illinois
court sitting in Chicago for purposes of all legal proceedings arising out
of or relating to this agreement or the transactions contemplated hereby.
The company irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum.
.c2.Section 11.19. Lawful Rate;. All agreements between the
Company, the Agent and each of the Banks, 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 Agent or each Bank 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 (all such documents being
hereinafter collectively referred to as the Credit Documents ), exceed the
highest lawful rate permissible under applicable law (the Highest Lawful
Rate ), it being the intent of the Company, the Agent and each of the Banks
in the execution hereof and of the Credit Documents to contract in strict
accordance with applicable usury laws. If, as a result of any
circumstances whatsoever, fulfillment by the Company 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 Agent or any Bank
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 Agent or such Bank,
then, ipso facto, the obligation to be fulfilled by the Company shall be
reduced to the limit of such validity, and if, from any such circumstance,
the Agent or such Bank 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 Company or, to the extent (i) permitted by applicable law
and (ii) such excessive interest does not exceed the unpaid principal
balance of the Notes and the amounts owing on other obligations of the
Company to the Agent or any Bank under any Loan Document applied to the
reduction of the principal amount owing on account of the Notes or the
amounts owing on other obligations of the Company to the Agent or any Bank
under any Loan Document and not to the payment of interest. All interest
paid or agreed to be paid to the Agent or any Bank 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 Company, the Agent and the Banks.
.c2.Section 11.20. Governing Law;. (a) This Agreement and
the rights and duties of the parties hereto, shall be construed and
determined in accordance with the internal laws of the State of Illinois,
except to the extent provided in Section 11.20(b) hereof and to the extent
that the Federal laws of the United States of America may otherwise apply.
(b) Notwithstanding anything in Section 11.20(a) hereof to the
contrary, nothing in this Agreement, the Notes, or the Other Loan Documents
shall be deemed to constitute a waiver of any rights which the Company, the
Agent or any of the Banks may have under the National Bank Act or other
applicable Federal law.
.c2.Section 11.21. Limitation of Liability;. No claim may
be made by the Company, any Subsidiary or any Guarantor against any Bank or
its Affiliates, Directors, officers, employees, attorneys or Agents for any
special, indirect or consequential damages in respect of any breach or
wrongful conduct (whether the claim therefor is based on contract, tort or
duty imposed by law) in connection with, arising out of or in any way
related to the transactions contemplated and relationships established by
this Agreement or any of the Other Loan Documents, or any act, omission or
event occurring in connection therewith. The Company, each Subsidiary and
each Guarantor hereby waive, release and agree not to sue upon such claim
for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
.c2.Section 11.22. Nonliability of Lenders;. The
relationship between the Company and the Banks is, and shall at all times
remain, solely that of borrower and lenders, and the Banks and the Agent
neither undertake nor assume any responsibility or duty to the Company to
review, inspect, supervise, pass judgment upon, or inform the Company of
any matter in connection with any phase of the Company s business,
operations, or condition, financial or otherwise. The Company shall rely
entirely upon its own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment, or information
supplied to the Company by any Bank or the Agent in connection with any
such matter is for the protection of the Bank and the Agent, and neither
the Company nor any third party is entitled to rely thereon.
.c2.Section 11.23. No Oral Agreements.; This written
agreement, together with the Other Loan Documents executed
contemporaneously herewith, represent 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.
.c2.Section 11.24. Treatment of Certain Indebtedness;. The
Agent and the Banks agree that for purposes of determining compliance with
the financial covenants contained in this Agreement the Company s
indebtedness evidenced by its 14.25% Senior Notes Due 1995 shall be deemed
paid in an amount equal to the amount deposited with the trustee for such
notes in an escrow account for the payment of such notes and with respect
to which notice of redemption shall have been given to the holders of such
notes in accordance with the terms thereof.
Upon your acceptance hereof in the manner hereinafter set forth,
this Agreement shall be a contract between us for the purposes hereinabove
set forth.
Dated as of May 27, 1993.
Pilgrim s Pride Corporation
By Lonnie A. Pilgrim
Its Chief Executive Officer
Accepted and Agreed to as of the day and year last above written.
Harris Trust And Savings Bank individually and as Agent
By Carl A. Blackham
Its Vice President
Address: 111 West Monroe Street
Chicago, Illinois 60690
FBS Ag Credit, Inc.
By Douglas S. Hoffner
Its Vice President
Address: 4643 South Ulster Street,
Suite 1280
Denver, Colorado 80237
Internationale Nederlanden Bank N. V.
By Sheila M. Greatrex
Its Vice President
Address: 135 East 57th Street
New York, New York 10022-2101
Boatmen s First National Bank of Kansas City
By Martha Carpenter Smith
Its Senior Vice President
Address: 10th and Baltimore
Kansas City, Missouri 64183
First Interstate Bank of Texas, N.A.
By Connor J. Duffey
Its Vice President
Address: 1445 Ross Avenue
Dallas, Texas 75202
Pilgrim s Pride Corporation
First Amendment to Secured Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
FBS Ag Credit, Inc.
Denver, Colorado
Internationale Nederlanden (U.S) Capital Corporation, formerly known as
Internationale Nederlanden Bank N. V. ( ING Bank )
New York, New York
Boatmen s First National Bank of Kansas City
Kansas City, Missouri
First Interstate Bank of Texas, N.A.
Dallas, Texas
Ladies and Gentlemen:
Reference is hereby made to that certain Secured Credit Agreement
dated as of May 27, 1993 (the Credit Agreement ) among the undersigned,
Pilgrim s Pride Corporation, a Delaware corporation (the Company ), you
(the Banks ) and Harris Trust and Savings Bank, as agent for the Banks
(the Agent ). All defined terms used herein shall have the same meanings
as in the Credit Agreement unless otherwise defined herein.
The Banks extend a $75,000,000 revolving credit facility to the
Company on the terms and conditions set forth in the Credit Agreement. The
Company, the Agent and the Banks now wish to amend the Credit Agreement to,
among other things, extend the termination date thereof from May 31, 1995
to May 31, 1997, to provide for a competitive bid facility and change the
rate of interest applicable to loans made under the Credit Agreement, all
on the terms and conditions and in the manner set forth in this Amendment.
1. Amendments.
Upon satisfaction of all of the conditions precedent set forth in
Section 2 hereof, the Credit Agreement shall be amended as follows:
1.1. Sections 1, 2 and 3 of the Credit Agreement shall be
amended in their entirety to read as follows:
1. The Credit.
.c2.Section 1.1. The Revolving Credit.; (a) Subject to
all of the terms and conditions hereof, the Banks agree, severally and not
jointly, to extend a Revolving Credit to the Company which may be utilized
by the Company in the form of loans (individually a Revolving Credit Loan
and collectively the Revolving Credit Loans ), B/As and L/Cs (each as
hereinafter defined). The aggregate principal amount of all Revolving
Credit Loans under the Revolving Credit plus the aggregate principal amount
of all Bid Loans outstanding under this Agreement plus the amount available
for drawing under all L/Cs, the aggregate face amount of all B/As and the
aggregate principal amount of all unpaid Reimbursement Obligations (as
hereinafter defined) at any time outstanding shall not exceed the lesser of
(i) the sum of the Banks Revolving Credit Commitments (as hereinafter
defined) in effect from time to time during the term of this Agreement (as
hereinafter defined) or (ii) the Borrowing Base as determined on the basis
of the most recent Borrowing Base Certificate. The Revolving Credit shall
be available to the Company, and may be availed of by the Company from time
to time, be repaid (subject to the restrictions on prepayment set forth
herein) and used again, during the period from the date hereof to and
including May 31, 1997 (the Termination Date ).
(b) At any time not earlier than 120 days prior to, nor later
than 60 days prior to, the date that is two years before the Termination
Date then in effect (the Anniversary Date ), the Company may request that
the Banks extend the then scheduled Termination Date to the date one year
from such Termination Date. If such request is made by the Company each
Bank shall inform the Agent of its willingness to extend the Termination
Date no later than 20 days prior to such Anniversary Date. Any Bank s
failure to respond by such date shall indicate its unwillingness to agree
to such requested extension, and all Banks must approve any requested
extension. At any time more than 15 days before such Anniversary Date the
Banks may propose, by written notice to the Company, an extension of this
Agreement to such later date on such terms and conditions as the Banks may
then require. If the extension of this Agreement to such later date is
acceptable to the Company on the terms and conditions proposed by the
Banks, the Company shall notify the Banks of its acceptance of such terms
and conditions no later than the Anniversary Date, and such later date will
become the Termination Date hereunder and this Agreement shall otherwise be
amended in the manner described in the Banks notice proposing the
extension of this Agreement upon the Agent s receipt of (i) an amendment to
this Agreement signed by the Company and all of the Banks, (ii) resolutions
of the Company s Board of Directors authorizing such extension and (iii) an
opinion of counsel to the Company equivalent in form and substance to the
form of opinion attached hereto as Exhibit E and otherwise acceptable to
the Banks.
(c) The respective maximum aggregate principal amounts of the
Revolving Credit at any one time outstanding and the percentage of the
Revolving Credit available at any time which each Bank by its acceptance
hereof severally agrees to make available to the Company are as follows
(collectively, the Revolving Credit Commitments and individually, a
Revolving Credit Commitment ):
Harris Trust and Savings Bank $35,000,000 46.66666667%
FBS Ag Credit, Inc. $15,000,000 20%
Internationale Nederlanden (U.S.) Capital Corporation
$10,000,000 13.33333334%
Boatmen s First National Bank of Kansas City $10,000,000
13.33333334%
First Interstate Bank of Texas, N.A. $ 5,000,000 6.66666667%
Total $75,000,000 100%Each Bank s Revolving Credit
Commitment shall be reduced from time to time by the aggregate outstanding
principal amount of all Bid Loans made by such Bank, and shall be increased
(but in no event above the amount set forth above for each Bank) by the
aggregate principal amount of each principal repayment of such Bid Loans
made from time to time.
(d) Loans under the Revolving Credit may be Eurodollar Loans,
CD Rate Loans or Domestic Rate Loans. All Loans under the Revolving Credit
shall be made from each Bank in proportion to its respective Revolving
Credit Commitment as above set forth, as adjusted from time to time to
reflect outstanding Bid Loans. Each Domestic Rate Loan shall be in an
amount not less than $3,000,000 or such greater amount which is an integral
multiple of $500,000 and each Fixed Rate Loan shall be in an amount not
less than $3,000,000 or such greater amount which is an integral multiple
of $1,000,000.
.c2.Section 1.2. The Notes;. All Revolving Credit Loans
made by each Bank hereunder shall be evidenced by a single Secured
Revolving Credit Note of the Company substantially in the form of Exhibit A
hereto (individually, a Revolving Note and together, the Revolving Notes
) payable to the order of each Bank in the principal amount of such Bank s
Revolving Credit Commitment, but the aggregate principal amount of
indebtedness evidenced by such Revolving Note at any time shall be, and the
same is to be determined by, the aggregate principal amount of all
Revolving Credit Loans made by such Bank to the Company pursuant hereto on
or prior to the date of determination less the aggregate amount of
principal repayments on such Revolving Credit Loans received by or on
behalf of such Bank on or prior to such date of determination. Each
Revolving Note shall be dated as of the execution date of this Agreement,
and shall be expressed to mature on the Termination Date and to bear
interest as provided in Section 1.3 hereof. Each Bank shall record on its
books or records or on a schedule to its Revolving Note the amount of each
Revolving Credit Loan made by it hereunder, whether each Revolving Credit
Loan is a Domestic Rate Loan, CD Rate Loan or Eurodollar Loan, and, with
respect to Eurodollar Loans, the interest rate and Interest Period
applicable thereto, and all payments of principal and interest and the
principal balance from time to time outstanding, provided that prior to any
transfer of such Revolving Note all such amounts shall be recorded on a
schedule to such Revolving Note. The record thereof, whether shown on such
books or records or on the schedule to the Revolving Note, shall be prima
facie evidence as to all such amounts; provided, however, that the failure
of any Bank to record or any mistake in recording any of the foregoing
shall not limit or otherwise affect the obligation of the Company to repay
all Revolving Credit Loans made hereunder together with accrued interest
thereon. Upon the request of any Bank, the Company will furnish a new
Revolving Note to such Bank to replace its outstanding Revolving Note and
at such time the first notation appearing on the schedule on the reverse
side of, or attached to, such Revolving Note shall set forth the aggregate
unpaid principal amount of Revolving Credit Loans then outstanding from
such Bank, and, with respect to each Fixed Rate Loan, the interest rate and
Interest Period applicable thereto. Such Bank will cancel the outstanding
Revolving Note upon receipt of the new Revolving Note.
.c2.Section 1.3. Interest Rates;. (a) Domestic Rate
Loans. Each Domestic Rate Loan shall bear interest (computed on the basis
of a year of 360 days and actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is made until maturity (whether by
acceleration, upon prepayment or otherwise) at a rate per annum equal to
the lesser of (i) the Highest Lawful Rate and (ii) the sum of the
Applicable Margin plus the Domestic Rate from time to time in effect,
payable quarterly in arrears on the last day of each calendar quarter,
commencing on the first of such dates occurring after the date hereof and
at maturity (whether by acceleration, upon prepayment or otherwise).
(b) Eurodollar Loans. Each Eurodollar Loan under the
Revolving Credit shall bear interest (computed on the basis of a year of
360 days and actual days elapsed) on the unpaid principal amount thereof
from the date such Loan is made until the last day of the Interest Period
applicable thereto or, if earlier, until maturity (whether by acceleration
or otherwise) at a rate per annum equal to the lesser of (i) the Highest
Lawful Rate and (ii) the sum of the Applicable Margin plus the Adjusted
Eurodollar Rate, payable on the last day of each Interest Period applicable
thereto and at maturity (whether by acceleration or otherwise) and, with
respect to Eurodollar Loans with an Interest Period in excess of three
months, on the date occurring every three months from the first day of the
Interest Period applicable thereto.
(c) CD Rate Loans. Each CD Rate Loan under the Revolving
Credit shall bear interest (computed on the basis of a year of 360 days and
actual days elapsed) on the unpaid principal amount thereof from the date
such Loan is made until the last day of the Interest Period applicable
thereto or, if earlier, until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the lesser of (i) the Highest
Lawful Rate and (ii) the sum of the Applicable Margin plus the Adjusted CD
Rate, payable on the last day of each Interest Period applicable thereto
and at maturity (whether by acceleration of otherwise) and, with respect to
CD Rate Loans with an Interest Period in excess of 90 days, on the date
occurring every 90 days from the first day of the Interest Period
applicable thereto.
(d) Default Rate. During the existence of an Event of Default
all Loans and Reimbursement Obligations shall bear interest (computed on
the basis of a year of 360 days and actual days elapsed) from the date of
such Event of Default until paid in full, payable on demand, at a rate per
annum equal to the sum of 2.5% plus the Domestic Rate from time to time in
effect plus the Applicable Margin.
.c2.Section 1.4. Conversion and Continuation of Revolving
Credit Loans;. (a) Provided that no Event of Default or Potential Default
has occurred and is continuing, the Company shall have the right, subject
to the other terms and conditions of this Agreement, to continue in whole
or in part (but, if in part, in the minimum amount specified for Fixed Rate
Loans in Section 1.1 hereof) any Fixed Rate Loan made under the Revolving
Credit from any current Interest Period into a subsequent Interest Period,
provided that the Company shall give the Agent notice of the continuation
of any such Loan as provided in Section 1.8 hereof.
(b) In the event that the Company fails to give notice
pursuant to Section 1.8 hereof of the continuation of any Fixed Rate Loan
under the Revolving Credit or fails to specify the Interest Period
applicable thereto, or an Event of Default or Potential Default has
occurred and is continuing at the time any such Loan is to be continued
hereunder, then such Loan shall be automatically converted as (and the
Company shall be deemed to have given notice requesting) a Domestic Rate
Loan, subject to Sections 1.8(b), 8.2 and 8.3 hereof, unless paid in full
on the last day of the then applicable Interest Period.
(c) Provided that no Event of Default or Potential Default has
occurred and is continuing, the Company shall have the right, subject to
the terms and conditions of this Agreement, to convert Revolving Credit
Loans of one type (in whole or in part) into Revolving Credit Loans of
another type from time to time provided that: (i) the Company shall give
the Agent notice of each such conversion as provided in Section 1.8 hereof,
(ii) the principal amount of any Revolving Credit Loan converted hereunder
shall be in an amount not less than the minimum amount specified for the
type of Revolving Credit Loan in Section 1.1 hereof, (iii) after giving
effect to any such conversion in part, the principal amount of any Fixed
Rate Loan under the Revolving Credit then outstanding shall not be less
than the minimum amount specified for the type of Loan in Section 1.1
hereof, (iv) any conversion of a Revolving Credit Loan hereunder shall only
be made on a Banking Day, and (v) any Fixed Rate Loan may be converted only
on the last day of the Interest Period then applicable thereto.
.c2.Section 1.5. Bankers Acceptances;. Subject to all the
terms and conditions hereof, satisfaction of all conditions precedent to
borrowing under this Agreement and so long as no Potential Default or Event
of Default is in existence, at the Company s request Harris, in its
discretion, may create acceptances in an amount of at least $5,000,000 (a
B/A and collectively the B/As ) for the Company within the limits of, and
subject to availability under the Revolving Credit, and the Banks hereby
agree to participate therein as more fully described in Section 1.9 hereof.
Each B/A shall be created pursuant to a General Acceptance Agreement (the
B/A Agreement ) in the form of Exhibit B hereto and an Acceptance Request
in Harris standard form at the time such B/A is requested with respect to
such draft presented to Harris for acceptance hereunder. To provide the
Company with immediate cash for the B/As created hereunder, Harris agrees
to discount such B/As at a rate determined by adding a rate per annum
(calculated on the basis of a 360-day year and actual days elapsed) equal
to the Applicable Margin to the then current bankers acceptance rate for
B/As on which Harris is the acceptor and to credit the proceeds of such
discounting to the Company s account at Harris. The face amount of each
B/A created and outstanding pursuant hereto shall be deducted from the
credit which may be otherwise available under the Revolving Credit. Each
B/A shall have a term of 30, 60, 90, 120, 150 or 180 days (but not later
than the Termination Date), and shall be an acceptance eligible for
discount with Federal Reserve Bank in accordance with paragraph 7A of
Section 13 of the Federal Reserve Act and regulations and interpretations
applicable thereto. The Company shall present to Harris evidence of such
eligibility satisfactory to the Banks, and Harris in its sole discretion
may refuse to issue any B/A.
.c2.Section 1.6. Letters of Credit.; Subject to all the
terms and conditions hereof, satisfaction of all conditions precedent to
borrowing under this Agreement and so long as no Potential Default or Event
of Default is in existence, at the Company s request Harris may in its
discretion issue letters of credit (an L/C and collectively the L/Cs )
for the account of the Company subject to availability under the Revolving
Credit, and the Banks hereby agree to participate therein as more fully
described in Section 1.9 hereof. Each L/C shall be issued pursuant to an
Application for Letter of Credit (the L/C Agreement ) in the form of
Exhibit C hereto. The L/Cs shall consist of standby letters of credit in
an aggregate face amount not to exceed $20,000,000. Each L/C shall have an
expiry date not more than one year from the date of issuance thereof (but
in no event later than the Termination Date). The amount available to be
drawn under each L/C issued pursuant hereto shall be deducted from the
credit otherwise available under the Revolving Credit. In consideration of
the issuance of L/Cs the Company agrees to pay Harris a fee (the L/C Fee )
in the amount per annum equal to (a) 1.0% of the face amount of each
Performance L/C and (b) the Applicable Margin for Eurodollar Loans of the
stated amount of each Financial Guarantee L/C (in each case computed on the
basis of a 360 day year and actual days elapsed) of the face amount for any
L/C issued hereunder. In addition the Company shall pay Harris for its own
account an issuance fee (the L/C Issuance Fee ) in an amount equal to
one-eighth of one percent (0.125%) of the stated amount of each L/C issued
by Harris hereunder. All L/C Fees shall be payable quarterly in arrears on
the last day of each calendar quarter and on the Termination Date, and all
L/C Issuance Fees shall be payable on the date of issuance of each L/C
hereunder and on the date of each extension, if any, of the expiry date of
each L/C.
.c2.Section 1.7. Reimbursement Obligation;. The Company
is obligated, and hereby unconditionally agrees, to pay in immediately
available funds to the Agent for the account of Harris and the Banks who
are participating in L/Cs and B/As pursuant to Section 1.9 hereof the face
amount of (a) each B/A created by Harris hereunder not later than 11:00
A.M. (Chicago Time) on the maturity date of such B/A, and (b) each draft
drawn and presented under an L/C issued by Harris hereunder not later than
11:00 a.m. (Chicago Time) on the date such draft is presented for payment
to Harris (the obligation of the Company under this Section 1.7 with
respect to any B/A or L/C is a Reimbursement Obligation ). If at any time
the Company fails to pay any Reimbursement Obligation when due, the Company
shall be deemed to have automatically requested a Domestic Rate Loan from
the Banks hereunder, as of the maturity date of such Reimbursement
Obligation, the proceeds of which Loan shall be used to repay such
Reimbursement Obligation. Such Loan shall only be made if no Potential
Default or Event of Default shall exist and upon approval by all of the
Banks, and shall be subject to availability under the Revolving Credit. If
such Loan is not made by the Banks for any reason, the unpaid amount of
such Reimbursement Obligation shall be due and payable to the Agent for the
pro rata benefit of the Banks upon demand and shall bear interest at the
rate of interest specified in Section 1.3(d) hereof.
.c2.Section 1.8. Manner of Borrowing and Rate Selection;.
(a) The Company shall give telephonic, telex or telecopy notice to the
Agent (which notice, if telephonic, shall be promptly confirmed in writing)
no later than (i) 11:00 a.m. (Chicago time) on the date the Banks are
requested to make each Domestic Rate Loan, (ii) 11:00 a.m. (Chicago time)
on the date at least three (3) Banking Days prior to the date of (A) each
Eurodollar Loan which the Banks are requested to make or continue, and (B)
the conversion of any CD Rate Loan or Domestic Rate Loan into a Eurodollar
Loan and (iii) 11:00 a.m. (Chicago time) on the date at least one (1)
Business Day prior to the date of (A) each CD Rate Loan which the Banks are
requested to make and (B) the conversion of any Eurodollar Loan or Domestic
Rate Loan into a CD Rate Loan. Each such notice shall specify the date of
the Revolving Credit Loan requested (which shall be a Business Day in the
case of Domestic Rate Loans and CD Rate Loans and a Banking Day in the case
of a Eurodollar Loan), the amount of such Revolving Credit Loan, whether
the Revolving Credit Loan is to be made available by means of a Domestic
Rate Loan, CD Rate Loan or Eurodollar Loan and, with respect to Fixed Rate
Loans, the Interest Period applicable thereto; provided, that in no event
shall the principal amount of any requested Revolving Credit Loan plus the
aggregate principal or face amount, as appropriate, of all Revolving Credit
Loans, L/Cs, B/As and unpaid Reimbursement Obligations outstanding
hereunder exceed the amounts specified in Section 1.1 hereof. The Company
agrees that the Agent may rely on any such telephonic, telex or telecopy
notice given by any person who the Agent believes is authorized to give
such notice without the necessity of independent investigation and in the
event any notice by such means conflicts with the written confirmation,
such notice shall govern if any Bank has acted in reliance thereon. The
Agent shall, no later than 12:30 p.m. (Chicago time) on the day any such
notice is received by it, give telephonic, telex or telecopy (if
telephonic, to be confirmed in writing within one Business Day) notice of
the receipt of notice from the Company hereunder to each of the Banks, and,
if such notice requests the Banks to make, continue or convert any Fixed
Rate Loans, the Agent shall confirm to the Company by telephonic, telex or
telecopy means, which confirmation shall be conclusive and binding on the
Company in the absence of manifest error, the Interest Period and the
interest rate applicable thereto promptly after such rate is determined by
the Agent.
(b) Subject to the provisions of Section 6 hereof, the
proceeds of each Revolving Credit Loan shall be made available to the
Company at the principal office of the Agent in Chicago, Illinois, in
immediately available funds, on the date such Revolving Credit Loan is
requested to be made, except to the extent such Revolving Credit Loan
represents (i) the conversion of an existing Revolving Credit Loan or (ii)
a refinancing of a Reimbursement Obligation, in which case each Bank shall
record such conversion on the schedule to its Revolving Note, or in lieu
thereof, on its books and records, and shall effect such conversion or
refinancing, as the case may be, on behalf of the Company in accordance
with the provisions of Section 1.4(a) hereof and 1.9 hereof, respectively.
Not later than 2:00 p.m. Chicago time, on the date specified for any
Revolving Credit Loan to be made hereunder, each Bank shall make its
portion of such Revolving Credit Loan available to the Company in
immediately available funds at the principal office of the Agent, except
(i) as otherwise provided above with respect to converting or continuing
any outstanding Revolving Credit Loans and (ii) to the extent such
Revolving Credit Loan represents a refinancing of any outstanding
Reimbursement Obligations.
(c) Unless the Agent shall have been notified by a Bank prior
to 1:00 p.m. (Chicago time) on the date a Revolving Credit Loan is to be
made by such Bank (which notice shall be effective upon receipt) that such
Bank does not intend to make the proceeds of such Revolving Credit Loan
available to the Agent, the Agent may assume that such Bank has made such
proceeds available to the Agent on such date and the Agent may in reliance
upon such assumption (but shall not be required to) make available to the
Company a corresponding amount. If such corresponding amount is not in
fact made available to the Agent by such Bank, the Agent shall be entitled
to receive such amount on demand from such Bank (or, if such Bank fails to
pay such amount forthwith upon such demand, to recover such amount,
together with interest thereon at the rate otherwise applicable thereto
under Section 1.3 hereof, from the Company) together with interest thereon
in respect of each day during the period commencing on the date such amount
was made available to the Company and ending on the date the Agent recovers
such amount, at a rate per annum equal to the effective rate charged to the
Agent for overnight Federal funds transactions with member banks of the
Federal Reserve System for each day, as determined by the Agent (or, in the
case of a day which is not a Business Day, then for the preceding Business
Day) (the Fed Funds Rate ). Nothing in this Section 1.8(c) shall be
deemed to permit any Bank to breach its obligations to make Loans under the
Revolving Credit or to limit the Company s claims against any Bank for such
breach.
.c2.Section 1.9. Participation in B/As and L/Cs;. Each of
the Banks will acquire a risk participation for its own account, without
recourse to or representation or warranty from Harris, in each B/A upon the
creation thereof and in each L/C upon the issuance thereof ratably in
accordance with its Commitment Percentage. In the event any Reimbursement
Obligation is not immediately paid by the Company pursuant to Section 1.7
hereof, each Bank will pay to Harris funds in an amount equal to such Bank
s ratable share of the unpaid amount of such Reimbursement Obligation
(based upon its proportionate share relative to its percentage of the
Revolving Credit (as set forth in Section 1.1 hereof)). At the election of
all of the Banks, such funding by the Banks of the unpaid Reimbursement
Obligations shall be treated as additional Revolving Credit Loans to the
Company hereunder rather than a purchase of participations by the Banks in
the related B/As and L/Cs held by Harris. The availability of funds to the
Company under the Revolving Credit shall be reduced in an amount equal to
any such B/A or L/C. The obligation of the Banks to Harris under this
Section 1.9 shall be absolute and unconditional and shall not be affected
or impaired by any Event of Default or Potential Default which may then be
continuing hereunder. Harris shall notify each Bank by telephone of its
proportionate share relative to its percentage of the total Banks
Revolving Credit Commitments set forth in Section 1.1 hereof (a Commitment
Percentage ) of such unpaid Reimbursement Obligation. If such notice has
been given to each Bank by 12:00 Noon, Chicago time, each Bank agrees to
pay Harris in immediately available and freely transferable funds on the
same Business Day. If such notice is received after 12:00 noon, Chicago
time, each Bank agrees to pay Harris in immediately available and freely
transferable funds no later than the following Business Day. Funds shall
be so made available at the account designated by Harris in such notice to
the Banks. Upon the election by the Banks to treat such funding as
additional Revolving Credit Loans hereunder and payment by each Bank, such
Loans shall bear interest in accordance with Section 1.3(a) hereof. Harris
shall share with each Bank on a pro rata basis relative to its Commitment
Percentage a portion of each payment of a Reimbursement Obligation (whether
of principal or interest) and any B/A commission and any L/C Fee (but not
any L/C Issuance Fee) payable by the Company. Any such amount shall be
promptly remitted to the Banks when and as received by Harris from the
Company.
.c2.Section 1.10. Capital Adequacy;. If, after the date
hereof, any Bank or the Agent shall have determined in good faith that the
adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein (including, without limitation, any
revision in the Final Risk-Based Capital Guidelines of the Board of
Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12
CFR Part 225, Appendix A) or of the Office of the Comptroller of the
Currency (12 CFR Part 3, Appendix A), or in any other applicable capital
rules heretofore adopted and issued by any governmental authority), 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 any Bank (or its
Lending Office) 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 such Bank s capital, or on the capital of any corporation
controlling such Bank, in each case as a consequence of its obligations
hereunder to a level below that which such Bank would have achieved but for
such adoption, change or compliance (taking into consideration such Bank s
policies with respect to capital adequacy) by an amount reasonably deemed
by such Bank to be material, then from time to time, within fifteen (15)
days after demand by such Bank (with a copy to the Agent), the Company
shall pay to such Bank such additional amount or amounts as will compensate
such Bank for such reduction.
Section 2. The Competitive Bid Facility;.
.c2.Section 2.1. Amount and Term;. The Company may from
time to time before the Termination Date request Competitive Bids from the
Banks and the Banks may make, at their sole discretion, Bid Loans to the
Company on the terms and conditions set forth in this Agreement.
Notwithstanding any provision to the contrary contained in this Agreement,
(a) the aggregate principal amount of all Bid Loans outstanding hereunder
at any time may not exceed $50,000,000, (b) no Bank may make Bid Loans in
an aggregate principal amount in excess of the maximum amount of such Bank
s Revolving Credit Commitment set forth in Section 1.1(b) of this
Agreement, and (c) the aggregate principal amount of all Bid Loans
outstanding hereunder at any time together with the aggregate principal
amount of all Revolving Credit Loans outstanding under the Revolving Credit
shall not exceed the Banks Revolving Credit Commitments from time to time
in effect. The Company may request Competitive Bids and the Banks may, in
their discretion, make such Competitive Bids on the terms and conditions
set forth in this Section 2.
.c2.Section 2.2. Competitive Bid Requests;. In order to
request Competitive Bids, the Company shall give telephonic notice to be
received by the Agent no later than 11:00 A.M., Chicago time, one Business
Day before the date, which must be a Business Day, on which a proposed Bid
Loan is to be made (the Borrowing Date ), followed on the same day by a
duly completed Competitive Bid Request Confirmation in the form of Exhibit
N hereto to be received by the Agent not later than 11:30 A.M., Chicago
time. Competitive Bid Request Confirmations that do not conform
substantially to the format of Exhibit N may be rejected and the Agent
shall give telephonic notice to the Company of such rejection promptly
after it determines (which determination shall be conclusive) that a
Competitive Bid Request Confirmation does not substantially conform to the
format of Exhibit N. Competitive Bid Requests shall in each case refer to
this Agreement and specify (x) the proposed Borrowing Date (which shall be
a Business Day), (y) the aggregate principal amount thereof (which shall
not be less than $3,000,000 and shall be an integral multiple of
$1,000,000), and (z) up to 3 Interest Periods with respect to the entire
amount specified in such Competitive Bid Request (which must be of no less
than 30 and no more than 180 days duration and may not end after the
Termination Date). Upon receipt by the Agent of a Competitive Bid Request
Confirmation which conforms substantially to the format of Exhibit N
attached hereto, the Agent shall invite, by telephone promptly confirmed in
writing in the form of Exhibit O attached hereto, the Banks to bid, on the
terms and conditions of this Agreement, to make Bid Loans pursuant to the
Competitive Bid Request.
.c2.Section 2.3. Submission of Competitive Bids;. Each
Bank may, in its sole discretion, make one or more Competitive Bids to the
Company responsive to the Competitive Bid Request. Each Competitive Bid by
a Bank must be received by the Agent by telephone not later than 8:45 A.M.,
Chicago time, on the Borrowing Date, promptly confirmed in writing by a
duly completed Confirmation of Competitive Bid substantially in the form of
Exhibit P attached hereto to be received by the Agent no later than 9:00
A.M. on the same day; provided, however, that any Competitive Bid made by
Harris must be made by telephone to the Company no later than 8:30 A.M.,
Chicago time, and confirmed by telecopier to the Company no later than 8:45
A.M., Chicago time, on the Borrowing Date. Competitive Bids which do not
conform precisely to the terms of this Section 2.3 may be rejected by the
Agent and the Agent shall notify the Bank submitting such Competitive Bid
of such rejection by telephone as soon as practicable after determining
that the Competitive Bid does not conform precisely to the terms of this
Section 2.3. Each Competitive Bid shall refer to this Agreement and
specify (x) the maximum principal amount (which shall not be less than
$3,000,000 and shall be an integral multiple of $1,000,000) of the Bid Loan
that the Bank is willing to make to the Company (y) the Yield (which shall
be computed on the basis of a 360-day year and actual days elapsed and for
a period equal to the Interest Period applicable thereto) at which the Bank
is prepared to make the Bid Loan and (z) the Interest Period applicable
thereto. The Agent shall reject any Competitive Bid if such Competitive
Bid (i) does not specify all of the information specified in the
immediately preceding sentence, (ii) contains any qualifying, conditional,
or similar language, (iii) proposes terms other than or in addition to
those set forth in the Competitive Bid Request to which it responds, or
(iv) is received by the Agent later than 8:45 A.M. (Chicago time). Any
Competitive Bid submitted by a Bank pursuant to this Section 2.3 shall be
irrevocable and shall be promptly confirmed in writing in the form of
Exhibit P; provided that in all events the telephone Competitive Bid
received by the Agent shall be binding on the relevant Bank and shall not
be altered, modified, or in any other manner affected by any inconsistent
terms contained in, or terms missing from, the Bank s Confirmation of
Competitive Bid.
.c2.Section 2.4. Notice of Bids;. The Agent shall give
telephonic notice to the Company no later than 9:15 A.M., Chicago time, on
the proposed Borrowing Date, of the number of Competitive Bids made, the
Yield with respect to each proposed Bid Loan, the Interest Period
applicable thereto and the maximum principal amount of each Bid Loan in
respect of which a Competitive Bid was made and the identity of the Bank
making each bid. The Agent shall send a summary of all Competitive Bids
received by the Agent to the Company as soon as practicable after receipt
of a Competitive Bid from each Bank that has made a Competitive Bid.
.c2.Section 2.5. Acceptance or Rejection of Bids;. The
Company may in its sole and absolute discretion, subject only to the
provisions of this Section, irrevocably accept or reject, in whole or in
part, any Competitive Bid referred to in Section 2.4 above. No later than
9:45 A.M., Chicago time, on the proposed Borrowing Date, the Company shall
give telephonic notice to the Agent of whether and to what extent it has
decided to accept or reject any or all the Competitive Bids referred to in
Section 2.4 above, which notice shall be promptly confirmed in a writing to
be received by the Agent on the proposed Borrowing Date; provided, however,
that (x) no bid shall be accepted for a Bid Loan in a minimum principal
amount of less than $3,000,000, (y) the Company shall accept bids solely on
the basis of ascending Yields for each Interest Period, (z) if the Company
declines to borrow, or it is restricted by other conditions hereof from
borrowing, the maximum principal amount of Bid Loans in respect of which
bids at such Yield have been made, then the Company shall accept a pro rata
portion of each bid made at the same Yield, based as nearly as possible on
the ratio of the maximum aggregate principal amounts of Bid Loans for which
each such bid was made (provided that if the available principal amount of
Bid Loans to be so allocated is not sufficient to enable Bid Loans to be so
allocated to each such Bank in integral multiples of $1,000,000, the
Company shall select which Banks will be allocated such Bid Loans and will
round allocations up or down to the next higher or lower multiple of
$1,000,000 as it shall deem appropriate but in no event shall any Bid Loan
be allocated in a principal amount of less than $3,000,000), and (w) the
aggregate principal amount of all Competitive Bids accepted by the Company
shall not exceed the amount contained in the related Confirmation of
Competitive Bid Request. A notice given by the Company pursuant to this
Section 2.5 shall be irrevocable and shall not be altered, modified, or in
any other manner affected by any inconsistent terms contained in, or terms
missing from, any written confirmation of such notice.
.c2.Section 2.6. Notice of Acceptance or Rejection of
Bid;. The Agent shall promptly (but in any event no later than 10:30 A.M.,
Chicago time) give telephonic notice to the Banks whether or not their
Competitive Bids have been accepted (and if so, in what amount and at what
Yield) on the proposed Borrowing Date, and each successful bidder will
thereupon become bound, subject to Section 7 and the other applicable
conditions hereof, to make the Bid Loan in respect of which its bid has
been accepted. Each Bank so bound shall notify the Agent upon making the
Bid Loan. As soon as practicable on each Borrowing Date, the Agent shall
notify each Bank of the aggregate principal amount of all Bid Loans made
pursuant to a Competitive Bid Request on such Borrowing Date, the Interest
Period(s) applicable thereto and the highest and lowest Yields at which
such Bid Loans were made for each Interest Period.
.c2.Section 2.7. Restrictions on Bid Loans;. A Bid Loan
shall not be made if an Event of Default or Potential Default shall have
occurred and be continuing on the date on which such Bid Loan is to be made
and the Company may not obtain more than three Bid Loans in any calendar
week.
.c2.Section 2.8. Minimum Amount;. Each Bid Loan made to
the Company on any date shall be in an integral multiple of $1,000,000 and
in a minimum principal amount of $3,000,000. Bid Loans shall be made in
the amounts accepted by the Company in accordance with Section 2.5.
.c2.Section 2.9. The Notes;. The Bid Loans made by each
Bank to the Company shall be evidenced by the Revolving Note of the Company
payable to the order of such Bank as described in Section 1.2. The
outstanding principal balance of each Bid Loan, as evidenced by a Note,
shall be payable at the end of every Interest Period applicable to such Bid
Loan. Each Bid Loan evidenced by each Revolving Note shall bear interest
from the date such Bid Loan is made on the outstanding principal balance
thereof as set forth in Section 2.10 below.
.c2.Section 2.10. Term of and Interest on Bid Loans;. Each
Bid Loan shall bear interest during the Interest Period applicable thereto
at a rate per annum equal to the rate of interest offered in the
Competitive Bid therefor submitted by the Bank making such Bid Loan and
accepted by the Company pursuant to Section 2.5 above. The principal
amount of each Bid Loan, together with all accrued interest thereon, shall
be due and payable on the last day of the Interest Period applicable
thereto and at maturity (whether by acceleration or otherwise) and, with
respect to any Interest Period in excess of three months, interest on the
unpaid principal amount shall be due on the date occurring every three
months after the date the relevant Bid Loan was made. If any payment of
principal or interest on any Bid Loan is not made when due, such Bid Loan
shall bear interest (computed on the basis of a year of 360 days and actual
days elapsed) from the date such payment was due until paid in full,
payable on demand, at a rate per annum equal to the sum of 2.5% plus the
rate of interest in effect thereon at the time of such default until the
end of the Interest Period then applicable thereto, and, thereafter, at a
rate per annum equal to the sum of 2.5 plus the Domestic Rate from time to
time in effect.
.c2.Section 2.11. Disbursement of Bid Loans;. (a) Subject
to the provisions of Section 6 hereof, the proceeds of each Bid Loan shall
be made available to the Company by, at the Company s option, crediting an
account maintained by the Company at Harris Trust and Savings Bank or by
wire transfer of such proceeds to such account as the Company shall
designate in writing to the Agent from time to time, in immediately
available funds. Not later than 12:00 Noon, Chicago time, on the date
specified for any Bid Loan to be made hereunder, each Bank which is bound
to make such Bid Loan pursuant to Section 2.6 hereof shall make its portion
of such Bid Loan available to the Company in immediately available funds at
the principal office of the Agent in Chicago, Illinois.
(b) Unless the Agent shall have been notified by a Bank no
later than the time the Agent gives such Bank a notice pursuant to Section
2.6 hereof (which notice shall be effective upon receipt) that such Bank
does not intend to make the proceeds of such Bid Loan available to the
Agent, the Agent may assume that such Bank has made such proceeds available
to the Agent on such date and the Agent may in reliance upon such
assumption (but shall not be required to) make available to the Company a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank, the Agent shall be entitled to receive
such amount on demand from such Bank (or, if such Bank fails to pay such
amount forthwith upon such demand, to recover such amount from the Company)
together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Company and
ending on the date the Agent recovers such amount, at a rate per annum
equal to the effective rate charged to the Agent for overnight Federal
funds transactions with member banks of the Federal Reserve System for each
day, as determined by the Agent (or, in the case of a day which is not a
Business Day, then for the preceding Business Day). Nothing in this
Section 2.11(b) shall be deemed to permit any Bank to breach its
obligations to make Bid Loans hereunder, or to limit the Company s claims
against any Bank for such breach.
.c2.Section 2.12. Reliance on Telephonic Notices;
Indemnity;. (a) The Company agrees that the Agent may rely on any
telephonic notice referred to in this Section 2 and given by any person the
Agent reasonably believes is authorized to give such notice without the
necessity of independent investigation, and in the event any such
telephonic notice conflicts with any written notice relating thereto, or in
the event no such written notice is received by the Agent, such telephonic
notice shall govern if the Agent or any Bank has acted in reasonable
reliance thereon. The Agent s books and records shall be prima facie
evidence of all of the matters set forth in Sections 2.2, 2.3, 2.4., 2.5
and 2.6 hereof.
(b) The Company hereby agrees to indemnify and hold the Agent harmless
from and against any and all claims, damages, losses, liabilities and
expenses, including court costs and legal expenses, paid or incurred by the
Agent in connection with any action the Agent may take, or fail to take, in
reasonable reliance upon and in accordance with any telephonic notice
received by the Agent as described in this Section 2.
(c) The Banks hereby agree to indemnify and hold the Agent
harmless from and against any and all claims, damages, losses, liabilities
and expenses, including court costs and legal expenses, paid or incurred by
the Agent in connection with any action the Agent may take, or fail to
take, in reasonable reliance upon and in accordance with any telephonic
notice received by the Agent as described in this Section 2, to the extent
the Agent is not promptly reimbursed therefor by the Company.
.c2.Section 2.13. Telephonic Notice;. Each Bank s
telephonic notice to the Agent of its Competitive Bid pursuant to Section
2.3, and the Company s telephonic acceptance of any offer contained in a
Bid pursuant to Section 2.5, shall be irrevocable and binding on such Bank
and the Company, as applicable, and shall not be altered, modified, or in
any other manner affected by any inconsistent terms contained in, or
missing from, any written confirmation of such telephonic notice. It is
understood and agreed by the parties hereto that the Agent shall be
entitled to act, or to fail to act, hereunder in reliance on its records of
any telephonic notices provided for herein and that the Agent shall not
incur any liability to any Person in so doing if its records conflict with
any written confirmation of a telephone notice or otherwise, provided that
any such action taken or omitted by the Agent is taken or omitted
reasonably and in good faith. It is further understood and agreed by the
parties hereto that each party hereto shall in good faith endeavor to
provide the notices specified herein by the times of day as set forth in
this Section 2 but that no party shall incur any liability or other
responsibility for any failure to provide such notices within the specified
times; provided, however, that the Agent shall have no obligation to notify
the Company of any Competitive Bid received by it later than 8:45 A.M.
(Chicago time) on the proposed Borrowing Date, and no acceptance by the
Company of any offer contained in a Competitive Bid shall be effective to
bind any Bank to make a Bid Loan, nor shall the Agent be under any
obligation to notify any Person of an acceptance, if notice of such
acceptance is received by the Agent later than 9:45 A.M. (Chicago time) on
the proposed Borrowing Date.
3. Fees, Prepayments, Terminations and Place and Application of
Payments.
.c2.Section 3.1. Facility Fee;. For the period from the
date hereof to and including the Termination Date, the Company shall pay to
the Agent for the account of the Banks a facility fee with respect to the
Revolving Credit at the rate of three-eighths of one percent (0.375%) per
annum if the Company s Leverage Ratio is equal to or greater than 0.45 to 1
and one-quarter of one percent (0.25%) per annum if the Company s Leverage
Ratio is less than 0.45 to 1 (in each case computed in each case on the
basis of a year of 360 days for the actual number of days elapsed) of the
aggregate maximum amount of the Banks Revolving Credit Commitments
hereunder in effect from time to time and whether or not any credit is in
use under the Revolving Credit, all such fees to be payable quarterly in
arrears on the last day of each calendar quarter commencing on the last day
of June, 1993, and on the Termination Date, unless the Revolving Credit is
terminated in whole on an earlier date, in which event the facility fee for
the final period shall be paid on the date of such earlier termination in
whole.
.c2.Section 3.2. Agent s Fee;. The Company shall pay to
and for the sole account of the Agent such fees as may be agreed upon in
writing from time to time by the Agent and the Company. Such fees shall be
in addition to any fees and charges the Agent may be entitled to receive
under Section 10 hereunder or under the other Loan Documents.
.c2.Section 3.3. Optional Prepayments;. The Company shall
have the privilege of prepaying without premium or penalty and in whole or
in part (but if in part, then in a minimum principal amount of $2,500,000
or such greater amount which is an integral multiple of $100,000) any
Domestic Rate Loan at any time upon prior telex or telephonic notice to the
Agent on or before 12:00 Noon on the same Business Day. The Company may
not prepay any Eurodollar Loan, CD Rate Loan or Bid Loan. Any amount
prepaid under the Revolving Credit may, subject to the terms and conditions
of this Agreement, be borrowed, repaid and borrowed again.
.c2.Section 3.4. Mandatory Prepayments - Borrowing Base.
The Company shall not permit the sum of the principal amount of all Loans
plus the aggregate face amount of all B/As, the amount available for
drawing under all L/Cs and the aggregate principal amount of all unpaid
Reimbursement Obligations at any time outstanding to exceed the lesser of
(i) the sum of the Banks Revolving Credit Commitments or (ii) the
Borrowing Base as determined on the basis of the most recent Borrowing Base
Certificate. In addition to the Company s obligations to pay any
outstanding Reimbursement Obligations as set forth in Section 1.7 hereof,
the Company will make such payments on any outstanding Loans and
Reimbursement Obligations (and, if any B/As are then outstanding, deposit
an amount equal to the aggregate face amount of all such B/As into an
interest bearing account with the Agent which shall be held as additional
collateral security for such B/As) which are necessary to cure any such
excess within three Business Days after the occurrence thereof. Any amount
prepaid under the Revolving Credit may, subject to the terms and conditions
of this Agreement, be borrowed, prepaid and borrowed again.
Section 3.5. Place and Application of Payments. All payments
of principal and interest made by the Company in respect of the Notes and
Reimbursement Obligations and all fees payable by the Company hereunder,
shall be made to the Agent at its office at 111 West Monroe Street,
Chicago, Illinois 60690 and in immediately available funds, prior to 12:00
noon on the date of such payment. All such payments shall be made without
setoff or counterclaim and without reduction for, and free from, any and
all present and future levies, imposts, duties, fees, charges, deductions
withholdings, restrictions or conditions of any nature imposed by any
government or any political subdivision or taxing authority thereof.
Unless the Banks otherwise agree, any payments received after 12:00 noon
Chicago time shall be deemed received on the following Business Day. The
Agent shall remit to each Bank its proportionate share of each payment of
principal, interest and facility fees, B/A fees and L/C fees received by
the Agent by 3:00 P.M. Chicago time on the same day of its receipt if
received by the Agent by 12:00 noon, Chicago time, and its proportionate
share of each such payment received by the Agent after 12:00 noon on the
Business Day following its receipt by the Agent. In the event the Agent
does not remit any amount to any Bank when required by the preceding
sentence, the Agent shall pay to such Bank interest on such amount until
paid at a rate per annum equal to the Fed Funds Rate. The Company hereby
authorizes the Agent to automatically debit its account with Harris for any
principal, interest and fees when due under the Notes, the B/A Agreement,
any L/C Agreement or this Agreement and to transfer the amount so debited
from such account to the Agent for application as herein provided. All
proceeds of Collateral shall be applied in the manner specified in the
Security Agreement.
1.2. Section 4.8 of the Credit Agreement shall be amended to
read as follows:
4.8. Applicable Margin shall mean, with respect to each type
of Loan and the B/As described in Column A below, the rate of interest per
annum shown in Columns B, C, D and E below for the range of Leverage Ratio
specified for each Column:
A B C D E
Leverage Ratio 0.45 to 1 .45 to 1 and 0.5 to 1 .50 to
1 and .60 to 1 .60 to 1 and .70 to 1
Eurodollar Loans 0.75% 1.125% 1.375% 1.75%
B/As 0.75% 1.125% 1.375% 1.75%
Domestic Rate Loans 0.0% 0.125% 0.375% 0.75%
CD Rate Loans 0.875% 1.25% 1.50% 1.875%
Not later than 5 Business Days after receipt by the Agent of the financial
statements called for by Section 7.4 hereof for the applicable fiscal
quarter, the Agent shall determine the Leverage Ratio for the applicable
period and shall promptly notify the Company and the Banks 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 Agent so notifies the Company and the Banks with respect to
all Loans and B/As 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 Agent in
accordance with this Section shall be conclusive and binding on the Company
and the Banks absent manifest error. From the date hereof until the
Applicable Margins are first adjusted pursuant hereto, the Applicable
Margins shall be those set forth in column E above.
1.3. Section 4.45 of the Credit Agreement shall be amended to
read as follows:
4.45. Intentionally Omitted.
1.4. Section 4.53 of the Credit Agreement shall be amended to
read as follows:
4.53. Fixed Rate Loan shall mean a Eurodollar Loan, a CD Rate
Loan or a Bid Loan, and Fixed Rate Loans shall mean any one or more of
such types of Loans.
1.5. Section 4.61 of the Credit Agreement shall be amended to
read as follows:
4.61. Interest Period shall mean with respect to (a) the
Eurodollar Loans, the period used for the computation of interest
commencing on the date the relevant Eurodollar Loan is made, continued or
effected by conversion and concluding on the date one, two, three or six
months thereafter and, (b) to the CD Rate Loans, the period used for the
computation of interest commencing on the date the relevant CD Rate Loan is
made, continued or effected by conversion and concluding on the date 30,
60, 90 or 180 days thereafter, and (c) the Bid Loans, the period used for
the computation of interest commencing on the date the relevant Bid Loan is
made and ending on the date such Bid Loan is scheduled to mature, but in no
event may such period have a duration of less than 30 days or more than 180
days; provided, however, that no Interest Period for any Fixed Rate Loan
may extend beyond the Termination Date. For purposes of determining an
Interest Period applicable to a Eurodollar Loan, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month; provided, however, that if
there is no numerically corresponding day in the month in which an Interest
Period is to end or if an Interest Period begins on the last day of a
calendar month, then such Interest Period shall end on the last Banking Day
of the calendar month in which such Interest Period is to end.
1.6. Section 4.69 of the Credit Agreement shall be amended to
read as follows:
4.69. Loan shall mean a Revolving Credit Loan as a Bid Loan,
and Loans shall mean any two or more Revolving Credit Loans and/or Bid
Loans.
1.7. The Credit Agreement shall be amended by adding the
following provisions after Section 4.103 as Section 4.104, 4.105 and 4.106
of the Credit Agreement:
4.104. Bid Loan shall mean an advance from a Bank to the
Company pursuant to the binding procedures described in Section 2 hereof.
4.105. Competitive Bid shall mean an offer by a Bank to make a
Bid Loan pursuant to Section 2 hereof.
4.106. Competitive Bid Request shall mean a request made by the
Company pursuant to Section 2.2 hereof.
1.8. Section 7.4(b) of the Credit Agreement shall be amended to
read as follows:
(b) as soon as available, and in any event within 90 days
after the close of each fiscal year, a copy of the audit report for such
year and accompanying financial statements, including a consolidated
balance sheet, a statement of income and retained earnings, and a statement
of cash flows, together with all footnotes thereto, for the Company and its
Subsidiaries, and unaudited consolidating balance sheets, statement of
income and retained earnings and statements of cash flows for the Company
and its Subsidiaries, in each case, showing in comparative form the figures
for the previous fiscal year of the company, all in reasonable detail,
accompanied by an unqualified opinion of Ernst & Young or other independent
public accountants of nationally recognized standing selected by the
Company and satisfactory to the Required Banks, such opinion to indicate
that such statements are made in accordance with generally accepted
accounting principles; .
1.9. Sections 7.4(d) and (e) shall each be amended by replacing
the phrase 10 Business Days appearing in the first lines thereof with the
phrase 30 days .
1.10. Section 7.4(f) of the Credit Agreement shall be amended by
deleting the phrase by month appearing in the least line thereof.
1.11. Section 7.4(i) of the Credit Agreement shall be amended to
read as follows:
(i) within 90 days of the last day of each Fiscal Year of the
Company, a summary of the capital expenditures made or incurred by the
Company and its Subsidiaries during such Fiscal Year, all in reasonable
detail, prepared by the Company and certified on behalf of the Company by
the Company s chief financial officer.
1.12. Section 7.6 of the Credit Agreement shall be amended to
read as follows:
.c2. Section 7.6. Consolidation and Merger;. The Company
will not, and will not permit any Subsidiary to, consolidate with or merge
into any Person, or permit any other Person to merge into it, or acquire
(in a transaction analogous in purpose or effect to a consolidation or
merger) all or substantially all the Property of the other Person, or
acquire substantially as an entirety the business of any other Person,
without the prior written consent of the Required Banks; provided, however,
that if no Potential Default or Event of Default shall have occurred and be
continuing the Company may acquire all or substantially all the Property of
the other 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 $10,000,000.
1.13. Sections 7.8 and 7.9 of the Credit Agreement shall be
amended to read as follows:
.c2. Section 7.8. Leverage Ratio;. The Company will not permit
the ratio of its Leverage Ratio at any time during each period specified
below to exceed the ratio specified below for such period:
(a) from the date hereof through the next to last day in
Fiscal Year of 1994, 0.65 to 1;
(b) from the last day of Fiscal Year 1994 through the next to
last day of Fiscal Year 1995, 0.65 to 1;
(c) from the last day of Fiscal Year 1995 through the next to
last day of Fiscal Year 1996, 0.625 to 1; and
(d) on the last day of Fiscal Year 1996 and thereafter, 0.60
to 1.
.c2.Section 7.9. Tangible Net Worth;. The Company shall
maintain its Tangible Net Worth at all times during the periods specified
below in an amount not less than the minimum required amount for each
period set forth below:
(a) from the last day of Fiscal Year 1993 through the next to
last day in Fiscal Year 1994, $109,780,000;
(b) from the last day of Fiscal Year 1994 through the next to
last day of Fiscal Year 1995, $109,780,000 plus an amount equal to 75% of
the Company s Net Income (but not less than zero) for Fiscal Year 1994, if
the Company s Leverage Ratio for such Fiscal Year is equal to or greater
than 0.5 to 1, or 50% of the Company s Net Income (but not less than zero)
if the Company s Leverage Ratio for such Fiscal Year is less than 0.5 to 1;
and
(c) from the last day of Fiscal Year 1995 and at all times
during each Fiscal Year thereafter, an amount in any Fiscal Year equal to
the minimum amount required to be maintained during the preceding Fiscal
Year plus an amount equal to 75% of the Company s Net Income (but not less
than zero) during such Fiscal Year 1994, if the Company s Leverage Ratio
for such Fiscal Year is equal to or greater than 0.5 to 1, or 50% of the
Company s Net Income (but not less than zero) if the Company s Leverage
Ratio for such Fiscal Year is less than 0.5 to 1.
1.14. Sections 7.13 and 7.14 of the Credit Agreement shall be
amended to read as follows:
.c2. Section 7.13. Minimum Net Working Capital;. The
Company will maintain Net Working Capital at all times during each period
specified below (measured as of the last day of each monthly fiscal
accounting period) in an amount not less than the amount specified below
for each period:
(a) from the date hereof through the last day in Fiscal Year
1996, $65,000,000; and
(b) from the first day of Fiscal Year 1997 and at all times
thereafter, $70,000,000.
.c2.Section 7.14. Capital Expenditures;. The Company will
not, and will not permit any Subsidiary to, make or commit to make any
capital expenditures (as defined and classified in accordance with
generally accepted accounting principles consistently applied;) provided,
however, that if no Event of Default or Potential Default shall exist
before and after giving effect thereto, the Company and its Subsidiaries
may make capital expenditures (a) during Fiscal Year 1994, in an amount not
to exceed an amount equal to 115% of the Company s depreciation and
amortization charges for Fiscal Year 1993, and (b) during each Fiscal Year
thereafter, in an aggregate amount in each Fiscal Year commencing with
Fiscal Year 1995 not to exceed the sum of (i) an amount equal to 115% of
the Company s depreciation and amortization charges for the preceding
Fiscal Year and (ii) the amount, if any, by which such capital expenditures
made by the Company in the immediately preceding Fiscal Year was less than
the maximum amount of capital expenditures the Company was permitted to
make under this Section 7.14 during such Fiscal Year, determined without
regard to any carryover amount from any prior Fiscal Year, but not to
exceed $5,000,000 in any Fiscal Year.
1.15. Section 7.16 of the Credit Agreement shall be amended by
deleting the word and appearing after the semicolon appearing in the last
line of subsection 7.16(n), by replacing the period at the end of
Subsection 7.16(o) with the phrase ; and , and by adding the following
provision after subsection 7.16(o) as subsection 7.16(p) of the Credit
Agreement:
(p) liens, mortgages and security interests in the Company s real estate,
buildings, machinery and equipment securing indebtedness permitted only by
subsection 7.17(l) of this Agreement.
1.16. Section 7.17 of the Credit Agreement shall be amended by
deleting the word and appearing after the semicolon in the last line of
subsection 7.17(j), by replacing the period at the end of subsection
7.17(k) with a semicolon, and by adding the following provisions after
subsection 7.17(k) as subsections 7.17(l) and (m) of the Credit Agreement.
(l) Funded Debt incurred to finance capital expenditures
permitted by Section 7.14 hereof, provided the aggregate principal amount
of all such Funded Debt incurred during the term of this Agreement does not
exceed an amount equal to 50% of the amount of all such capital
expenditures actually made through any date of determination; and
(m) unsecured indebtedness in an aggregate principal amount
not to exceed $20,000,000 outstanding at any time incurred to finance the
Company s working capital needs.
1.17. Section 7.22 of the Credit Agreement shall be amended by
replacing the phrase to finance its temporary working capital requirements
with the phrase for its general corporate purposes .
1.18. Section 7.29 of the Credit Agreement shall be amended to
read as follows:
Section 7.29. New Subsidiaries. The Company will not, directly or
indirectly, create or acquire any Subsidiary unless (a) after giving effect
to any such creation or acquisition, the total assets (determined in
accordance with generally accepted accounting principles, consistently
applied) of all such Subsidiaries would not exceed 5% of the Total Assets
of the Company and its Subsidiaries, and (b) all Inventory and Receivables
of such Subsidiaries are pledged to the Agent for the benefit of the Banks
pursuant to a security agreement substantially identical to the Security
Agreement.
1.19. Section 7.30 of the Credit Agreement shall be amended by
adding the following sentence after the last sentence thereof:
For purposes of this Section 7.30, any Guaranty Fees paid within 45 days
after the last day of any Fiscal Year shall be deemed to have been paid
during such Fiscal Year.
1.20. Section 7.32(b) of the Credit Agreement shall be amended
by replacing the phrase during the term of this Agreement with the phrase
in any Fiscal Year.
1.21. Section 8.1(g) shall be amended by replacing the figure
$1,000,000 appearing therein with the figure $2,000,000 .
1.22. All reference to the Revolving Notes , Revolving Note ,
Notes and Note contained in the Credit Agreement and the other Loan
Documents shall be deemed to be references to the Secured Revolving Credit
Notes executed and delivered by the Company in satisfaction of Section
2.6(a) of this Amendment.
2. Conditions Precedent.
The effectiveness of the Amendment is subject to the satisfaction
of all of the following conditions precedent:
2.1. The Company and each of the Banks shall have executed this
Amendment (such execution may be in several counterparts and the several
parties hereto may execute on separate counterparts).
2.2. Mr. and Mrs. Lonnie A. Pilgrim shall have executed and
delivered to the Banks the Guarantors Consent in the form set forth below.
2.3. Each of the representations and warranties set forth in
Section 5 of the Credit Agreement shall be true and correct.
2.4. The Company shall be in full compliance with all of the
terms and conditions of the Credit Agreement and no Event of Default or
Potential Default shall have occurred and be continuing thereunder or shall
result after giving effect to this Amendment.
2.5. All legal matters incident to the execution and delivery
hereof and the instruments and documents contemplated hereby shall be
satisfactory to the Banks.
2.6. The Agent shall have received (in sufficient counterparts
for distribution to each of the Banks) all of the following in a form
satisfactory to the Agent, the Banks and their respective counsel:
(a) a Security Revolving Credit Note of the Company payable to
the order of each of the Banks in the principal amount equal to each Banks
Revolving Credit Commitment, in the form attached hereto as Exhibit A;
(b) copies (executed or certified as may be appropriate) of
all legal documents or proceedings taken in connection with the execution
and delivery of this Amendment, and the other instruments and documents
contemplated hereby; and
(c) Opinion of counsel to the Company substantially in a form
as set forth in Exhibit B hereto and satisfactory to the Agent, the Banks
and their respective counsel.
2.7. Harris shall have received a written consent from CoBank
with respect to this Amendment and an amendment to the CoBank Participation
Agreement in form and substance satisfactory to Harris and CoBank.
2.8. The Agent shall have received for the ratable benefit of
the Banks an amendment fee in an amount equal to one-eighth of one percent
(0.125%) of the maximum amount of the Revolving Credit.
Section 3. Representations And Warranties.
Section 3.1. The Company, by its execution of this Amendment,
hereby represents and warrants the following:
(a) each of the representations and warranties set forth in
Section 5 of the Credit Agreement is true and correct as of the date
hereof, except that the representations and warranties made under Section
5.3 shall be deemed to refer to the most recent annual report furnished to
the Banks by the Company; and
(b) the Company is in full compliance with all of the terms
and conditions of the Credit Agreement and no Event of Default or Potential
Default has occurred and is continuing thereunder.
4. Miscellaneous.
4.1. The Company has heretofore executed and delivered to the
Agent that certain Security Agreement Re: Accounts Receivable, Farm
Products and Inventory dated as of May 27, 1993 (the Security Agreement )
and the Company hereby agrees that the Security Agreement shall secure all
of the Company s indebtedness, obligations and liabilities to the Agent and
the Banks under the Credit Agreement as amended by this Amendment, that
notwithstanding the execution and delivery of this Amendment, the Security
Agreement shall be and remain in full force and effect and that any rights
and remedies of the Agent thereunder, obligations of the Company thereunder
and any liens or security interests created or provided for thereunder
shall be and remain in full force and effect and shall not be affected,
impaired or discharged thereby. Nothing herein contained shall in any
manner affect or impair the priority of the liens and security interests
created and provided for by the Security Agreement as to the indebtedness
which would be secured thereby prior to giving effect to this Amendment.
4.2. Except as specifically amended herein the Credit Agreement
and the Notes shall continue in full force and effect in accordance with
their original terms. Reference to this specific Amendment need not be
made in any note, document, letter, certificate, the Credit Agreement
itself, the Notes, or any communication issued or made pursuant to or with
respect to the Credit Agreement or the Notes, any reference to the Credit
Agreement or Notes being sufficient to refer to the Credit Agreement or the
Notes as amended hereby.
4.3. The Company agrees to pay all out-of-pocket costs and
expenses incurred by the Agent and Banks in connection with the
preparation, execution and delivery of this Amendment and the documents and
transactions contemplated hereby, including the fees and expenses of
Messrs. Chapman and Cutler.
4.4. This Amendment may be executed in any number of
counterparts, and by the different parties on different counterparts, all
of which taken together shall constitute one and the same Agreement. Any
of the parties hereto may execute this Amendment by signing any such
counterpart and each of such counterparts shall for all purposes be deemed
to be an original.
4.5. (a) This Amendment and the rights and duties of the
parties hereto, shall be construed and determined in accordance with the
internal laws of the State of Illinois, except to the extent provided in
Section 4.5(b) hereof and to the extent that the Federal laws of the United
States of America may otherwise apply.
(b) Notwithstanding anything in Section 4.5(a) hereof to the
contrary, nothing in this Amendment, the Credit Agreement, the Notes, or
the Other Loan Documents shall be deemed to constitute a waiver of any
rights which the Company, the Agent or any of the Banks may have under the
National Bank Act or other applicable Federal law.
Dated as of December 6, 1994.
Pilgrim s Pride Corporation
By Lonnie A. Pilgrim
Its Chief Executive Officer
Accepted and Agreed to as of the day and year last above written.
Harris Trust And Savings Bank individually and as Agent
By Carl A. Blackham
Its Vice President
FBS Ag Credit, Inc.
By Douglas S. Hoffner
Its Vice President
Internationale Nederlanden (U.S.) Capital Corporation, formerly known as
Internationale Nederlanden Bank N. V.
By /s
Its Vice President
Boatmen s First National Bank of Kansas City
By Randall J. Anderson
Its Vice President
First Interstate Bank of Texas, N.A.
By /s
Its Vice President
Guarantors Consent
The undersigned, Lonnie A. Pilgrim and Patty R. Pilgrim, have
executed and delivered a Guaranty Agreement dated as of May 27, 1993 (the
Guaranty ) to the Banks. As an additional inducement to and in
consideration of the Banks acceptance of the foregoing Amendment, the
undersigned hereby agree with the Banks as follows:
1. Each of the undersigned consents to the execution of the
foregoing Amendment by the Company and acknowledges that this consent is
not required under the terms of the Guaranty and that the execution hereof
by the undersigned shall not be construed to require the Banks to obtain
the undersigneds consent to any future amendment, modification or waiver
of any term of the Credit Agreement except as otherwise provided in said
Guaranty. Each of the undersigned hereby agrees that the Guaranty shall
apply to all indebtedness, obligations and liabilities of the Company to
the Banks, the Agent and under the Credit Agreement, as amended pursuant to
the foregoing Amendment. Each of the undersigned further agrees that the
Guaranty shall be and remain in full force and effect.
2. All terms used herein shall have the same meaning as in
the foregoing Amendment, unless otherwise expressly defined herein.
Dated as of December 6, 1994.
Lonnie A. Pilgrim
Patty R. Pilgrim
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated July 29, 1994,
between
PILGRIM'S PRIDE CORPORATION,
as Borrower,
THE BANKS PARTY HERETO, and
CREDITANSTALT-BANKVEREIN,
as Agent
AGREEMENT
THIS AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (the
"Agreement") is made and entered into the 29th day of July,
1994, by and among PILGRIM'S
PRIDE CORPORATION, a Delaware corporation (hereinafter
referred to as "Borrower"), each
of the Banks signatory hereto (hereinafter referred to individually
as a "Bank" and collectively as
the "Banks"), and CREDITANSTALT-BANKVEREIN, as agent
for the Banks (in such capacity,
together with its successors and assigns in such capacity,
hereinafter referred to as the "Agent");
W I T N E S S E T H:
WHEREAS, Borrower, the Banks and the Agent are parties to
that certain Loan and
Security Agreement, dated as of June 3, 1993 (the "Original Loan
Agreement"), which currently
provides for a term loan (the "Existing Facility") in the original
principal amount of
Twenty-Eight Million Dollars ($28,000,000.00); and
WHEREAS, the Borrower, the Banks and the Agent wish to
amend the Loan Agreement
(a) to continue the Existing Facility at its current outstanding
balance of $21,700,000.00; (b) to
make a standby/term loan to borrower to be utilized on or before
June 20, 1995; and (c) to make
certain other changes as more fully set forth herein;
WHEREAS, for the sake of convenience, Borrower, the Banks
and the Agent desire to
restate in its entirety the Original Loan Agreement;
WHEREAS, this Agreement represents a continuation of the
Existing Facility, as
amended hereby, and not a replacement of the Existing Facility;
NOW, THEREFORE, in consideration of the foregoing
premises, to induce the Banks to
extend the financing provided for herein, and for other good and
valuable consideration, the
sufficiency and receipt of all of which are acknowledged by
Borrower, Borrower, the Banks and
Agent agree as follows:
1. DEFINITIONS, TERMS AND REFERENCES
1.1 Certain Definitions. When used herein, the following
terms shall have the
following meanings:
"Affiliate" shall mean, as to any Person, any other Person
which, directly or
indirectly, owns or controls, on an aggregate basis, including all
beneficial ownership and
ownership or control as a trustee, guardian or other fiduciary, at
least ten percent (10%) of the
outstanding shares of capital stock having ordinary voting power to
elect a majority of the board
of directors (irrespective of whether, at the time, stock of any other
class or classes of such
corporation shall have or might have voting power by reason of the
happening of any
contingency) of such Person; or which controls, is controlled by or
is under common control with
such Person. For the purposes of this definition, "control" means
the possession, directly or
indirectly, of the power to direct or cause the direction of
management and policies, whether
through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Amended and Restated Loan
and Security
Agreement, as amended or supplemented from time to time.
"Applicable Law" shall mean all provisions of statutes, rules,
regulations and
orders of any Federal, state, municipal or other governmental
department, commission, board,
bureau, agency or instrumentality or any court, in each case,
whether of the United States or
foreign, applicable to a Person, and all orders and decrees of all
courts and arbitrators in
proceedings or actions in which the Person in question is a party.
"Assignee" shall mean any bank or other entity to which a
Bank assigns all or any
part of any Loan pursuant to Section 13.4(c) and "Assignees" shall
mean, collectively, all banks
and other entities to which any Bank assigns all or any part of any
Loan pursuant to Section
13.4(c) hereof.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act
of 1978, as may be
amended from time to time.
"Base Rate" shall mean an interest rate per annum,
fluctuating daily, equal to the
higher of (a) the rate announced by Creditanstalt from time to time
at its principal office in New
York, New York, as its prime rate for domestic (United States)
commercial loans in effect on
such day; and (b) the Federal Funds Rate in effect on such day plus
one-half percent (1/2%).
(Such Base Rate is not necessarily intended to be the lowest rate of
interest charged by
Creditanstalt in connection with extensions of credit.) Each
change in the Base Rate shall result
in a corresponding change in the interest rate hereunder with
respect to a Base Rate Loan and
such change shall be effective on the effective date of such change
in the Base Rate.
"Base Rate Loan" shall mean a Loan bearing interest at a
rate based on the Base
Rate.
"Business Day" shall mean any day for dealings by and
between banks in U.S.
dollar deposits in the interbank Eurodollar market in New York
City, New York, and London,
England, other than a Saturday, Sunday or any day which shall be
in London, England or New
York City, New York or Atlanta, Georgia, a legal holiday or a day
on which banking institutions
are authorized by law to close.
"Capital Lease" shall mean, as to any Person, any lease of
(or other agreement
conveying the right to use) real and/or personal property which is
required to be classified and
accounted for as a capital lease on a balance sheet of such Person
under GAAP (including
Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards
Board).
"Closing Date" shall mean the date that this Agreement has
been signed by
Borrower, the Banks and the Agent and has become effective in
accordance with Section 11
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules
and regulations promulgated thereunder from time to time.
"Collateral" shall mean the property of Borrower described
in Section 4.1, or any
part thereof, as the context shall require, in which Agent has, or is
to have, a Lien pursuant
thereto, as security for payment of the Obligations.
"Commitment" shall mean the aggregate obligation of the
Banks to make
Standby/Term Loans to Borrower, subject to the terms and
conditions hereof, up to an aggregate
principal amount at any one time outstanding as to all the Banks
equal to Ten Million Dollars
($10,000,000), subject to reduction as set forth in Section 2.7
hereof.
"Continue", "Continuation" and "Continued" shall refer to
the continuation
pursuant to Section 3.4 hereof as a Eurodollar Loan from one
Interest Period to the next Interest
Period.
"Convert", "Conversion" and "Converted" shall refer to a
conversion pursuant to
Section 3.4 hereof of a Base Rate Loan into a Eurodollar Loan or
of a Eurodollar Loan into a
Base Rate Loan.
"Creditanstalt" shall mean Creditanstalt-Bankverein, an
Austrian banking
corporation, and its successors and assigns.
"Current Assets" of any Person shall mean the aggregate
amount of assets of such
Person which in accordance with GAAP may be property classified
as current assets after
deducting adequate reserves where proper.
"Current Liabilities" shall mean all items (including taxes
accrued as estimated)
which in accordance with GAAP may be properly classified as
current liabilities, including in
any event all amounts outstanding from time to time under this
Agreement, but excluding any
current liability under the Working Capital Credit Agreement.
"Current Ratio" shall mean the ratio of Current Assets to
Current Liabilities of the
Borrower and its Subsidiaries.
"Deed of Trust" shall mean the Deed of Trust, Assignment
of Rents and Security
Agreement dated June __, 1993, filed for record June 3, 1993,
recorded in Volume 775, page 1,
Titus County, Texas Deed Records, executed by Borrower,
conveying the Mortgaged Property to
secure the repayment of the Loans and performance of the
Obligations, and all amendments
thereto, recorded or to be recorded in the Titus County, Texas
Deed Records, including, without
limitation, that certain First Amendment to Deed of Trust,
Assignment of Rents and Security
Agreement dated of even date herewith, recorded or to be recorded
in the Titus County, Texas
Deed Records.
"Default" shall mean the occurrence of any event or
condition which, after
satisfaction of any requirement for the giving of notice or the lapse
of time, or both, would
become an Event of Default.
"Default Rate" shall mean (a) with respect to the unpaid
portion of any Loan, an
interest rate per annum equal to two percent (2%) above the
interest rate set forth for such Loan
in Section 3.1(a) hereof or (b) with respect to any portion of the
Obligations other than Loans,
two percent (2%) above the rate set forth in Section 3.1(a)(ii)
hereof.
"Equipment" shall mean all of Borrower's equipment, as
such term is defined in
Section 9-109(2) of the UCC, now or hereafter located on or based
at the Land, whether now
owned or existing or hereafter acquired or manufactured and
whether or not subsequently
removed from the Land, including, but not limited to, all
equipment described in or covered by
that certain Appraisal of Broiler Processing and Related Facilities
in Mt. Pleasant, Texas, dated
as of April 30, 1993, prepared for Borrower by Bob G. Derryberry,
ARA, ASA, together with
any and all accessories, accessions, parts and appurtenances
thereto, replacements thereof and
substitutions therefor.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as
amended from time to time, and all rules and regulations from time
to time promulgated
thereunder.
"ERISA Affiliate" shall mean each trade or business
(whether or not incorporated)
which, together with Borrower, is treated as a single employer
under Section 414(b), (c), (m) or
(o) of the Code.
"Eurodollar Loan" shall mean a Loan bearing interest at a
rate based on a Quoted
Rate.
"Event of Default" shall mean any of the events or
conditions described in Article
9 hereof.
"Federal Funds Rate" shall mean, for any day, the overnight
federal funds rate in
New York City, as published for such day (or, if such day is not a
Business Day, for the next
preceding Business Day) in the Federal Reserve Statistical Release
H.15 (519) or any successor
publication, 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 overnight federal funds
transactions in New York City received
by Agent from three federal funds brokers of recognized standing
selected by Agent.
"Fiscal Year" shall mean, for any year, the 52 or 53 week
period ending on the
Saturday closest to September 30 of such year, regardless of
whether such Saturday occurs in
September or October of such year.
"Fixed Charge Coverage Ratio" shall mean, for any fiscal
period, the ratio of (a)
the sum of (i) net income before income taxes for such fiscal
period plus (ii) interest expense for
such fiscal period plus (iii) depreciation and amortization for
financial reporting purposes for
such fiscal period plus (iv) the aggregate amount payable during
such fiscal period under
Operating Leases to (b) the sum of (i) interest expense for such
fiscal period plus (ii) current
maturities for long term debt plus (iii) the aggregate amount
payable during such fiscal period
under Operating Leases, in each case calculated for Borrower and
its Subsidiaries on a
consolidated basis in accordance with GAAP.
"Funded Debt" shall mean, collectively, (a) the aggregate
principal amount of
Indebtedness for borrowed money which would, in accordance
with GAAP, be classified as
long-term debt, together with the current maturities thereof; (b) all
Indebtedness outstanding
under any revolving credit, line of credit or similar agreement
providing for borrowings (and any
extensions or renewals thereof), notwithstanding that any such
Indebtedness is created within one
year of the expiration of such agreement; (c) the principal
component of obligations under
Capital Lease; and (d) any other Indebtedness bearing interest or
carrying a similar payment
requirement (including any Indebtedness issued at a discount to its
face amount), calculated in all
case for Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"GAAP" shall mean generally accepted accounting
principles consistently applied
and maintained throughout the period indicated and consistent with
the prior financial practice of
Borrower and any of its predecessors, as reflected in the financial
information referred to in
Section 5.11 hereof.
"Indebtedness" shall mean, as applied to any Person at any
time, (a) all
indebtedness, obligations or other liabilities of such Person (i) for
borrowed money or evidenced
by debt securities, debentures, acceptances, notes or other similar
instruments, and any accrued
interest, fees and charges relating thereto; (ii) under profit payment
agreements or similar
agreement; (iii) with respect to letters of credit issued for such
Person's account; (iv) to pay the
deferred purchase price of property or services, except unsecured
accounts payable and accrued
expenses arising in the ordinary course of business; or (v) in
respect of Capital Leases; (b) all
indebtedness, obligations or other liabilities of such Person or
others secured by a Lien on any
property of such Person, whether or not such indebtedness,
obligations or liabilities are assumed
by such Person, all as of such time; (c) all indebtedness,
obligations or other liabilities of such
Person in respect of any foreign exchange contract, interest rate
protection agreement, interest
rate future, interest rate option, interest rate swap, interest rate cap
or other interest rate hedge
arrangement, net of liabilities owed to such Person by the
counterparties thereon; (d) all preferred
stock subject (upon the occurrence of any contingency or
otherwise) to mandatory redemption;
(e) Indebtedness of others guaranteed by such Person.
"Intangible Assets" shall mean license agreements,
trademarks, trade names,
patents, capitalized research and development, proprietary products
(the results of past research
and development treated as long term assets and excluded from
Inventory) and goodwill (all
determined on a consolidated basis in accordance with GAAP).
"Interest Period" shall mean, in connection with any
Eurodollar Loan, the period
beginning on the date such Eurodollar Loan is made and
continuing for one, two, three or six
months as selected by Borrower in its notice of Conversion or
Continuation. Notwithstanding
the foregoing, however, (a) any applicable Interest Period which
would otherwise end on a day
which is not a Business Day shall be extended to the next
succeeding Business Day unless such
Business Day falls in another calendar month, in which case such
Interest Period shall end on the
immediately preceding Business Day, (b) with respect to
Eurodollar Loans, any applicable
Interest Period which begins on a day for which there is no
numerically corresponding day in the
calendar month during which such Interest Period is to end shall
(subject to clause (a) above) end
on the last day of such calendar month, and (c) no Interest Period
shall extend beyond any date as
would interfere with the repayment obligations of Borrower
hereunder.
"Land" shall mean the real estate or interest therein
described in Exhibit "A"
attached hereto and incorporated herein by this reference, all
fixtures or other improvements
situated thereon and all rights, titles and interests appurtenant
thereto.
"Leases" shall mean any and all leases, subleases, licenses,
concessions or other
agreements (written or oral, now or hereafter in effect), whether an
Operating Lease or a Capital
Lease, which grant a possessory interest in and to, together with
and all security and other
deposits made in connection therewith and all other agreements,
such as architect's contracts,
engineer's contracts, utility contracts, maintenance agreements and
service contracts, which in
any way relate to the design, use, occupancy, operation,
maintenance, enjoyment or ownership of
the Equipment or the Mortgaged Property.
"Leverage Ratio" shall mean, on any date, the ratio of (a)
Funded Debt, as of such
date, to (b) the sum of (i) Net Worth as of such date, and (ii)
Funded Debt, as of such date, in
each case computed for the Borrower and its Subsidiaries on a
consolidated basis in accordance
with GAAP.
"Lien" means any mortgage, deed of trust, deed to secure
debt, pledge,
hypothecation, assignment for security, security interest,
encumbrance, lien or charge of any
kind, whether voluntarily incurred or arising by operation of law,
by statute, by contract, or
otherwise, affecting any property, in cluding any agreement to
grant any of the foregoing, any
conditional sale or other title retention agreement, any lease in the
nature of a security interest,
and/or the filing of or agreement to give any financing statement
(other than a precautionary
financing statement with respect to a lease that is not in the nature
of a security interest) under
the UCC or comparable law of any jurisdiction with respect to any
property.
"Loan" shall mean either a Term Loan or a Standby/Term
Loan, and "Loans" shall
mean, collectively, all Term Loans and Standby/Term Loans.
Loans may be either Eurodollar
Loans or Base Rate Loans, each of which is a "type" of Loan.
"Loan Documents" shall mean this Agreement, the Deed of
Trust, the Second
Deed of Trust, the Notes, any financing statements covering
portions of the Collateral and any
and all other instruments, documents, and agreements now or
hereafter executed and/or delivered
by Borrower or its Subsidiaries in connection herewith, or any one,
more, or all of the foregoing,
as the context shall require, and "Loan Document" shall mean any
one of the Loan Documents.
"Loan Percentage" shall mean, as to each Bank, that amount,
expressed as a
percentage, equal to the ratio of the outstanding principal amount
of such Bank's Loans to the
aggregate outstanding principal amount of the Loans, or, if no
Loans are outstanding, the ratio of
the amount set forth opposite the name of such Bank on the
signature pages hereto under the
heading "Commitment" to the aggregate amount of the
Commitment; provided that the Loan
Percentage of each Bank shall be increased or decreased, as
appropriate, to reflect any
assignments made pursuant to Sections 13.4, 13.4(c) hereof.
"Majority Banks" shall mean, at any time, Banks holding at
least sixty-seven
percent (67%) of the aggregate outstanding principal amount of the
Loans.
"Material Adverse Effect" shall mean any event or condition
which, alone or
when taken with other events or conditions occurring or existing
concurrently therewith (a) has
or is reasonably expected to have a material adverse effect on the
business, operations, condition
(financial or otherwise), assets, liabilities, properties or prospects
of Borrower or any of its
Subsidiaries or of the industry in which Borrower operates; (b) has
or is reasonably expected to
have any material adverse effect whatsoever on the validity or
enforceability of this Agreement,
the Deed of Trust or any other Loan Document; (c) materially
impairs or is reasonably expected
to materially impair either the ability of Borrower to pay and
perform the Obligations; (d)
materially impairs or is reasonably expected to materially impair
the ability of the Banks to
enforce their rights and remedies under this Agreement and the
Loan Documents; or (e) has or is
reasonably expected to have any material adverse effect on the
Collateral, the Liens of the Banks
in the Collateral or the priority of such Liens.
"Maturity Date" shall mean June 30, 2000.
"Mortgaged Property" shall mean the Land, Leases,
Equipment and all other
property (real, personal or mixed) which is conveyed by the Deed
of Trust, the Second Deed of
Trust or any other Loan Document in which a Lien is therein
created and all other property (real,
personal or mixed) on which a Lien is placed or granted to secure
the repayment or the
performance of the Obligations.
"MPPAA" shall mean the Multiemployer Pension Plan
Amendments Act of 1980,
amending Title IV of ERISA.
"Multiemployer Plan" shall have the same meaning as set
forth in Section
4001(a)(3) of ERISA.
"Net Worth" shall mean the excess of Borrower's total assets
over Total
Liabilities, excluding, however, from the definition of assets the
amount of (a) any write-up in
the book value of any asset resulting from a revaluation thereof
subsequent to the later to occur
of (i) the Closing Date and (ii) the date Borrower acquired such
asset; (b) treasury stock; (c)
receivables from Affiliates of Borrower; and (d) unamortized
original issue debt discount, all
determined on a consolidated basis for Borrower and its
Subsidiaries in accordance with GAAP.
"Notes" shall mean, collectively, the Term Notes and the
Standby/Term Notes.
"Obligations" shall mean the Loans and any and all other
indebtedness, liabilities
and obligations of Borrower and its Subsidiaries, or any of them, to
any Bank of every kind and
nature (including, without limitation, interest, charges, expenses,
attorneys' fees and other sums
chargeable to Borrower by Agent or any Bank and future advances
made to or for the benefit of
Borrower), arising under this Agreement, the Deed of Trust or the
other Loan Documents,
whether direct or indirect, absolute or contingent, primary or
secondary, due or to become due,
now existing or hereafter acquired.
"Operating Leases" shall mean all leases of (or other
agreements, conveying the
right to use) real and/or personal property (other than short term
leases which are cancellable at
any time by the lessee) which are not required to be classified and
accounted for as capital leases
on a balance sheet under GAAP (including Statement of Financial
Accounting Standards No. 13
of the Financial Accounting Standards Board) and "Operating
Lease" shall mean any one of the
Operating Leases.
"Participant" shall mean any bank or other entity to which a
Bank sells a
participating interest in any Loan or Loans pursuant to Section
13.4(b) hereof and "Participants"
shall mean, collectively, all banks or other entities to which any
Bank sells a participating
interest in any Loan or Loans pursuant to Section 13.4(b) hereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation established under
ERISA.
"Permitted Liens" shall mean: (a) Liens existing on the date
hereof with respect
to the Mortgaged Property and which the Agent and the Banks
permit to be listed on Schedule B
of the Title Insurance; (b) Liens in favor of Agent; (c) the interest
of lessors under Operating
Leases permitted hereunder; (d) Liens for (i) property taxes not
delinquent, (ii) taxes not yet due,
(iii) pledges or deposits made under Workmen's Compensation,
Unemployment Insurance,
Social Security and similar legislation, or in connection with
appeal or surety bonds incident to
litigation, or to secure statutory obligations, and (iv) mechanics'
and materialmen's Liens with
respect to liabilities which are not yet due or which are being
contested in good faith and not
listed on Schedule B of the Title Insurance; and (e) purchase
money Liens on Equipment;
provided, however, that (i) such Lien is created within 120 days of
the acquisition of such
Equipment; (ii) such Lien attaches only to the specific items of
Equipment so acquired; (iii) such
Lien secures only the Indebtedness incurred to acquire such
Equipment; and (iv) the aggregate
principal amount of Indebtedness secured by such Liens does not
exceed $10,000,000 at any one
time outstanding.
"Person" shall mean and include any individual, sole
proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, entity,
party or government (whether national, federal, state, county, city,
municipal, or otherwise,
including, without limitation, any instrumentality, division,
agency, body or department thereof).
"Plan" shall mean any employee benefit plan, program,
arrangement, practice or
contract, maintained by or on behalf of the Borrower or an ERISA
Affiliate, which provides
benefits or compensation to or on behalf of employees or former
employees, whether formal or
informal, whether or not written, including but not limited to the
following types of plans:
(i) Executive Arrangements - any bonus, incentive
compensation, stock
option, deferred compensation, commission, severance, "golden
parachute," "rabbi trust," or
other executive compensation plan, program, contract, arrangement
or practice ("Executive
Arrangements");
(ii) ERISA Plans - any "employee benefit plan", except any
Multiemployer
Plan, as defined in Section 3(3) of ERISA, whether maintained by
or for a single employee or by
or for multiple employees, including, but not limited to, any
defined benefit pension plan, profit
sharing plan, money purchase plan, savings or thrift plan, stock
bonus plan, employee stock
ownership plan, or any plan, fund, program, arrangement or
practice providing for medical
(including post-retirement medical), hospitalization, accident,
sickness, disability, or life
insurance benefits ("ERISA Plans");
(iii) Other Employee Fringe Benefits - any stock purchase,
vacation,
scholarship, day care, prepaid legal services, severance pay or
other fringe benefit plan, program,
arrangement, contract or practice ("Fringe Benefit Plans"); and
(iv) Multiemployer Plan - any Multiemployer Plan.
"Quoted Rate" shall mean, when used with respect to an
Interest Period for a
Eurodollar Loan, the quotient of (i) the offered rate quoted by
Agent in the interbank Eurodollar
market in New York City, New York or London, England on or
about 11:00 a.m. (New York or
London time, as the case may be) two Business Days prior to such
Interest Period for U.S. dollar
deposits of an aggregate amount approximately comparable to the
Eurodollar Loan to which the
quoted rate is to be applicable and for a period comparable to such
Interest Period, divided by (ii)
one minus the Reserve Percentage. For purposes of this definition,
(a) "Reserve Percentage"
shall mean with respect to any Interest Period, the percentage
which is in effect on the first day of
such Interest Period under Regulation D as the maximum reserve
requirement for member banks
of the Federal Reserve System in New York City with deposits
comparable in amount to those of
Agent against Eurocurrency Liabilities. (The Quoted Rate for the
applicable period shall be
adjusted automatically on and as of the effective date of any
change in the applicable Reserve
Percentage); and (b) "Eurocurrency Liabilities" has the meaning
assigned to that term in
Regulation D, as in effect from time to time.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal
Reserve System, as it may be amended from time to time.
"Regulatory Change" shall mean, with respect to any Bank,
the adoption on or
after the date hereof of any applicable federal, state, or foreign law,
rule or regulation or any
change after such date in any such federal, state or foreign law, rule
or regulation (including,
without limitation, Regulation D), or any adoption or change in the
interpretation or
administration thereof by any court, governmental authority,
central bank or comparable agency
or monetary authority charged with the interpretation or
administration thereof, or compliance by
such Bank with any request or directive made after such date
(whether or not having the force of
law) of any such court, authority, central bank or comparable
agency or monetary authority.
"Reportable Event" shall have the meaning set forth in
Section 4043 of ERISA.
"Second Deed of Trust" shall mean the Deed of Trust,
Assignment of Rents and
Security Agreement of even date herewith, executed by Borrower
conveying a second Lien
security interest in the Mortgaged Property to secure repayment of
the Standby/Term Loans and
performance of certain of the Obligations, and all amendments
thereto, recorded or to be
recorded in the Titus County, Texas Deed Records.
"Standby/Term Loans" shall mean, collectively, the loans
made pursuant to
Section 2.1(b) hereof, and "Standby/Term Loan" shall mean any
loan made pursuant to Section
2.1(b) hereof.
"Standby/Term Note" or "Standby/Term Notes" shall have
the meanings given to
such terms in Section 2.1(b) hereof.
"Subordinated Notes" shall mean the $100,000,000 Pilgrim's
Pride Corporation
Senior Subordinated Notes Due 2003, issued under the
Subordinated Notes Indenture.
"Subordinated Notes Indenture" shall mean that certain
Indenture dated as of June
3, 1993, between Borrower, as Issuer, and Ameritrust Texas
National Association, as Trustee
providing for the issuance of Borrower's Senior Subordinated
Notes Due 2003, in an aggregate
principal amount not to exceed $100,000,000.
"Subordination Agreement" shall mean that certain
Subordination Agreement
between the Agent, as agent for the Banks and John Hancock
Mutual Life Insurance Company, a
Massachusetts corporation ("Hancock"), dated June 3, 1993,
recorded in Volume 775, page 42,
Deed Records, Titus County, Texas, subordinating to the Lien of
the Banks (up to $31,700,000)
Hancock's Lien on the Mortgaged Property, evidenced by (i) that
certain promissory note dated
February 1, 1988, executed by the Borrower and payable to
Hancock's order in the original
principal amount of $20,000,000, secured by that certain Deed of
Trust, Mortgage and Security
Agreement dated February 1, 1988, executed by the Borrower for
the benefit of Hancock, and
recorded in Volume 182, Page 315, aforesaid Records, amended by
instruments recorded in
Volume 656, page 163, aforesaid Records and Volume 698, page
77, and (ii) that certain
promissory note dated April 25, 1991, executed by the Borrower
and payable to Hancock's order
in the original principal amount of $5,000,000 (collectively the
"Hancock Indebtedness"),
secured by that certain Deed of Trust, Assignment of Rents and
Security Agreement dated April
25, 1991, executed by the Borrower for the benefit of Hancock,
and recorded in Volume 656,
Page 168, Deed of Trust Records, Titus County, Texas, amended
by instrument recorded in
Volume 698, page 77, aforesaid Records.
"Subsidiary" shall mean, as to any Person, any other Person,
of which more than
fifty percent (50%) of the outstanding shares of capital stock or
other ownership interest having
ordinary voting power to elect a majority of the board of directors
of such corporation or similar
governing body of such other Person (irrespective of whether or
not at the time stock or other
ownership interests of any other class or classes of such other
Person shall have or might have
voting power by reason of the happening of any contingency) is at
the time directly or indirectly
owned or controlled by such Person or by one or more
"Subsidiaries" of such Person.
"Tangible Net Worth" shall mean the Net Worth minus the
amount of all
Intangible Assets of the Borrower and its Subsidiaries, determined
on a consolidated basis in
accordance with GAAP.
"Term Loans" shall mean, collectively, the loans made
pursuant to Section 2.1(a)
hereof and "Term Loan" shall mean any loan made pursuant to
Section 2.1(a) hereof.
"Term Note" and "Term Notes" shall have the meanings
given to such terms in
Section 2.1(a) hereof.
"Title Company" shall mean the issuer of the Title
Insurance.
"Title Insurance" shall mean a mortgagee's policy of title
insurance, all in form
and substance satisfactory to the Agent and Banks and containing
no exceptions (printed or
otherwise) which are unacceptable to the Agent and Banks, issued
by a title company (or, if the
Agent or the Banks so require, by several title companies on a
re-insured or co-insured basis, at
the Agent or the Banks' option) acceptable to the Agent and Banks
in the face amount of the Note
and insuring that the Agent and Banks have a first and prior deed
of trust on the Mortgaged
Property, subject only to the Permitted Liens described in the Deed
of Trust.
"Total Liabilities" shall mean all obligations, indebtedness or
other liabilities of
any kind or nature, fixed or contingent, due or not due, which, in
accordance with GAAP, would
be classified as a liability on the balance sheet of Borrower.
"Transferee" shall mean any Participant or Assignee under
this Agreement and
"Transferees" shall mean all Participants and Assignees under this
Agreement.
"UCC" shall mean the Uniform Commercial Code as in
effect in the State of New
York.
"Working Capital Credit Agreement" shall mean that certain
Secured Credit
Agreement, dated as of May 27, 1993, among the Borrower, Harris
Trust and Savings Bank,
individually and as Agent, and the other banks party thereto, as
hereafter amended, modified or
supplemented from time to time, together with any agreement
governing Indebtedness incurred
to refinance in its entirety the Indebtedness and commitments then
outstanding or permitted to be
outstanding under such Working Capital Credit Agreement.
1.2 Use of Defined Terms. All terms defined in this
Agreement and the
Exhibits hereto shall have the same defined meanings when used in
any other Loan Document,
unless the context shall require otherwise.
1.3 Accounting Terms; Calculations. All accounting terms
not specifically
defined herein shall have the meanings generally attributed to such
terms under GAAP.
Calculations hereunder shall be made and financial data required
hereby shall be prepared, both
as to classification of items and as to amounts, in accordance with
GAAP, consistently applied
(except as otherwise specifically required herein).
1.4 Other Terms. All other terms used in this Agreement
which are not
specifically defined herein but which are defined in the UCC shall
have the meanings set forth
therein.
1.5 Terminology. All personal pronouns used in this
Agreement, whether
used in the masculine, feminine or neuter gender, shall include all
other genders; the singular
shall include the plural, and the plural shall include the singular.
Titles of Articles and Sections
in this Agreement are for convenience only, and neither limit nor
amplify the provisions of this
Agreement, and all references in this Agreement to Articles,
Sections, Subsections, paragraphs,
clauses, subclauses, Exhibits or Schedules shall refer to the
corresponding Article, Section,
Subsection, paragraph, clause, subclause of, Exhibit or Schedule
attached to, this Agreement,
unless specific reference is made to the articles, sections or other
subdivisions of, Exhibits or
Schedules to, another document or instrument.
1.6 Exhibits. All Exhibits and Schedules attached hereto are
by reference
made a part hereof.
2. THE LOANS
2.1 Loans.
(a) Term Loans.
(i) The Banks have heretofore made "Term Loans"
under, and as such
term is defined in, the Original Loan Agreement, to Borrower in
the aggregate original principal
amount of Twenty-Eight Million Dollars ($28,000,000.00).
Borrower acknowledges and agrees
that the Term Loans outstanding on the date hereof under the
Original Loan Agreement shall be
Term Loans under this Agreement and are hereinafter referred to
individually as a "Term Loan"
and collectively as the "Term Loans"). Contemporaneously with
the execution with this
Agreement, Borrower has executed replacement term notes in the
aggregate amount of
$21,700,000.00, the current aggregate outstanding balance of the
Term Loans, substantially in
the form of Exhibit B attached hereto, payable to such Bank in the
principal face amount of such
Bank's Term Loans (together with any and all amendments,
modifications and supplements
thereto, and any renewals, replacements or extensions thereof
(including, but not limited to,
pursuant to Sections 13.4 and 13.4(e) hereof), in whole or in part,
individually a "Term Note"
and, collectively, the "Term Notes").
(ii) The aggregate principal amount of the Term Loans
shall be repaid
in twenty-four (24) quarterly installments of principal, payable on
March 31, June 30, September
30 and December 31 of each year, commencing September 30,
1994, with the first twenty-three
(23) such quarterly installments being in the amount of Seven
Hundred Thousand and No/100
Dollars ($700,000) each and with the twenty-fourth (24th) and
final such quarterly installment
being in an amount equal to the then-outstanding aggregate
principal amount of the Term Loans,
together with all accrued but unpaid interest thereon.
(b) Standby/Term Loans.
(i) Subject to the terms and conditions hereof and
provided there
exists no Default or Event of Default, each Bank severally agrees
to make on the Closing Date
loans (each a "Standby/Term Loan" and collectively the
"Standby/Term Loans"), as requested by
Borrower in accordance with the provisions of Section 2.3 hereof,
to Borrower from time to time
on and after the date hereof and up to, but not including, June 20,
1995, in an aggregate amount
not to exceed such Bank's Loan. The Standby/Term Loans made by
each Bank shall be
evidenced by a promissory note, substantially in the form of
Exhibit C attached hereto, payable
to such Bank in the principal face amount of such Bank's Loan
(together with any and all
amendments, modifications and supplements thereto, and any
renewals, replacements or
extensions thereof (including, but not limited to, pursuant to
Sections 13.4 and 13.4(e) hereof), in
whole or in part, individually a "Standby/Term Note" and
collectively the "Standby/Term
Notes"). Standby/Term Loans, once borrowed and repaid, may not
be reborrowed.
(ii) The aggregate principal amount of the Standby/Term
Loans
outstanding on June 20, 1995 shall be repayable in twenty (20)
quarterly installments of
principal, payable on March 31, June 30, September 30 and
December 31 of each year,
commencing September 30, 1995, with the first nineteen (19) such
installments each being in an
amount equal to one and sixty-seven hundredths percent (1.67%)
of the aggregate principal
amount of Standby/Term Loans outstanding on June 20, 1995 and
the final such quarterly
installment being in an amount equal to the then-outstanding
unpaid aggregate principal amount
of the Standby/Term Loans, together with all accrued but unpaid
interest thereon.
2.2 Borrowing Procedures. Borrower shall give the Agent
notice of
Borrower's request for the funding of the Loans in accordance with
Section 2.8 hereof. Not later
than 11:00 a.m (New York time), on the date specified for each
borrowing hereunder, each Bank
shall make available to the Agent the amount of the Loan to be
made by such Bank, in
immediately available funds at an account with Creditanstalt
designated by the Agent. The
Agent shall, subject to the terms and conditions of this Agreement,
not later than 1:00 p.m. (New
York time) on the Business Day specified for such borrowing,
make such amount available to
Borrower at the Agent's office in New York, New York.
2.3 Loan Account; Statements of Account. The Banks will
maintain one or
more loan accounts for Borrower to which such Bank will charge
all amounts advanced to or for
the benefit of Borrower hereunder or under any of the other Loan
Documents and to which such
Bank will credit all amounts collected under each such credit
facility from or on behalf of such
Borrower. The Banks will account to Borrower periodically with a
statement of charges and
payments made pursuant to this Agreement, and each such account
statement shall be deemed
final, binding and conclusive, absent manifest error, unless such
Bank is notified by Borrower in
writing to the contrary within thirty (30) days of the date of each
account statement. Any such
notice shall only be deemed an objection to those items specifically
objected to therein. The
unpaid principal amount of the Loans, the unpaid interest accrued
thereon, the interest rate or
rates applicable to such unpaid principal amount, and the accrued
and unpaid fees, premiums and
other amounts due hereunder shall at all times be ascertained from
the records of the Banks and
such records shall constitute prima facie evidence of the amounts
so due and payable.
2.4 Use of Proceeds. The proceeds of the Loans shall be
used for (a)
Borrower's general working capital needs; (b) expenditures
incurred under any Capital Leases;
(c) acquisitions permitted by Section 7.3 hereof; and (d) in the case
of any proceeds of the
Standby/Term Loans to repay the Indebtedness under the
Subordinated Notes Indenture. No
portion of the proceeds of any Loan may be used to "purchase" or
"carry" any "margin stock," as
such terms are defined in Regulations G, T, U or X of the Board of
Governors of the Federal
Reserve System, or to extend credit for the purpose of purchasing
or carrying margin stocks.
2.5 Several Obligations of the Banks; Remedies
Independent. The failure of
any Bank to make any Loan to be made by it on the date specified
therefor shall not relieve any
other Bank of its obligation to make its Loan on such date, but
neither any Bank nor the Agent
shall be responsible for the failure of any other Bank to make a
Loan to be made by such other
Bank. The amounts payable by the Borrower at any time
hereunder and under the Notes to each
Bank shall be a separate and independent debt and each Bank shall
be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and
it shall not be necessary for
any other Bank or the Agent to consent to, or be joined as an
additional party in, any proceeding
for such purposes.
2.6 Payments.
(a) Each payment by the Borrower to Agent pursuant to any
of the Notes shall
be made prior to 1:00 p.m. (New York time) on the date due and
shall be made without set-off or
counterclaim to the Agent at the address set forth in Section 13.8
below or at such other place or
places as Agent may designate from time to time in writing to
Borrower and in such amounts as
may be necessary in order that all such payments (after
withholding for or on account of any
present or future taxes, levies, imposts, duties or other similar
charges of whatsoever nature
imposed on any Bank by any government or any political
subdivision or taxing authority thereof,
other than any tax on or measured by the net income of any such
Bank pursuant to the income
tax laws of the jurisdiction where such Bank's principal or lending
office is located) shall not be
less than the amounts otherwise specified to be paid under the
Notes. Each such payment shall
be in lawful currency of the United States of America and in
immediately available funds. If the
due date of any payment hereunder or under any of the Notes
would otherwise fall on a day
which is not a Business Day, then such payment shall be due on
the next succeeding Business
Day and interest shall be payable on the principal amount of such
payment for the period of such
extension.
(b) Except to the extent otherwise provided herein: (i) the
funding of the
Loans by the Banks under Section 2.1 hereof shall be made by the
relevant Banks prorata
according to their respective Loan Percentages; (ii) the Conversion
and Continuation of Loans of
a particular type shall be made prorata among the relevant Banks
according to their Loan
Percentage of the Loans and the then current Interest Period for
each Eurodollar Loan shall be
coterminous; and (iii) each payment or prepayment of principal of
Loans and each payment of
interest by Borrower shall be made for the account of relevant
Banks prorata in accordance with
their Loan Percentage.
2.7 Prepayment; Commitment Reduction.
(a) Upon written notice to the Agent in accordance with
Section 2.8,
Borrower may, at its option, reduce the Commitment or prepay the
Loans, in whole or in part, in
integral multiples of $100,000, on the date specified in such notice,
without premium or penalty.
(b) In no event may Borrower reduce the Commitment
below the aggregate
principal amount of Loans outstanding thereunder.
(c) The Commitment shall be automatically reduced on June
20, 1995 to the
aggregate principal amount of the Standby/Term Loans
outstanding on such date.
(d) The Commitment shall be automatically reduced by the
amount of any
payment or prepayment of the principal amount of the
Standby/Term Loans, effective on the date
of such payment or prepayment.
(e) The Commitment, once terminated or reduced, may not
be reinstated.
(f) All prepayments shall be applied first to the aggregate
outstanding
principal amount of the Term Loans, so long as any Term Loans
are outstanding, and then to the
Standby/Term Loans.
(g) All prepayments of the Loans shall be applied to the
principal installments
thereof in the inverse order of their maturities.
(h) Borrower may not prepay any Loan which is a
Eurodollar Loan prior to
the last day of the Interest Period applicable to such Eurodollar
Loan unless Borrower pays to the
Bank, concurrently with such prepayment, all amounts payable to
the Bank pursuant to Sections
3.6 and 3.7 hereof.
2.8 Certain Notices. All notices given by Borrower to the
Agent of
termination or reduction of the Commitment, or of Conversions,
Continuations or prepayments
of Loans hereunder and the request by Borrower for the funding of
the Loans shall either be oral,
with prompt written confirmation by telecopy, or in writing, with
such written confirmation or
writing, in the case of a Conversion or Continuation, to be
substantially in the form of Exhibit D
attached hereto; shall be irrevocable; shall be effective only if
received by Agent prior to 10:00
a.m. (New York time): (a) at least fifteen (15) days prior to such
termination or reduction of the
Commitment; (b) not later than the date such Loan is to be
Converted or Continued as a Base
Rate Loan; (c) three (3) Business Days prior to the date such Loan
is to be Converted or
Continued as a Eurodollar Loan; or (d) fifteen (15) days prior to
any such prepayment, in the
case of a prepayment of any Loans; or (e) four (4) Business Days
prior to the date any Loans are
to be funded. Each such notice to reduce the Commitment or to
prepay any Loans shall specify
the Commitment or Loans to be reduced or prepaid, the amount of
the Commitment or Loans to
be reduced or prepaid and the date of such reduction or
prepayment. Each such notice of
Conversion or Continuation shall specify: (i) the amount of such
Conversion or Continuation
(which shall be an integral multiple of $100,000 and, if a
Eurodollar Loan, shall be in a
minimum principal amount of $1,000,000); (ii) whether such Loan
will be Converted or
Continued as a Eurodollar Loan or as a Base Rate Loan; (iii) the
date such Loan is to be
Converted or Continued (which shall be a Business Day and, if
such Loan is to Convert or
Continue a Eurodollar Loan then outstanding, shall not be prior to
the then current Interest
Period for such outstanding Loan); and (iv) if such Loan is a
Eurodollar Loan, the duration of the
Interest Period with respect thereto. The request for the funding of
the Loans and each request
for a Conversion or Continuation of a Loan or for any other
financial accommodation by
Borrower pursuant to this Agreement or the other Loan Documents
shall constitute (x) an
automatic warranty and representation by Borrower to each Bank
that there does not then exist a
Default or Event of Default or any event or condition which, with
the making of such Loan,
would constitute a Default or Event of Default and (y) an
affirmation that as of the date of said
request all of the representations and warranties of Borrower
contained in this Agreement and the
other Loan Documents are true and correct in all material respects,
both before and after giving
effect to the application of the proceeds of the Loans. If on the last
day of the Interest Period of
any Eurodollar Loan hereunder, Agent has not received a notice
hereunder to Convert, Continue
or prepay such Loan, Borrower shall be deemed to have submitted
a notice to convert such Loan
to a Base Rate Loan, if such Loan was a Eurodollar Loan, or to
continue such Loan as a Base
Rate Loan, if such Loan was a Base Rate Loan.
3. INTEREST
3.1 Interest. Borrower, the Banks and the Agent agree that,
effective as of
June 20, 1994, the following shall apply:
(a) Subject to modification pursuant to Subsection (b) below
and Section 10.1
hereof, the average daily outstanding principal amount of the
Loans and all other sums payable
by Borrower hereunder shall bear interest from June 20, 1994 until
paid in full at the following
rates:
(i) the outstanding principal amount of each Eurodollar
Loan shall
bear interest at a fixed rate of interest per annum equal to the
Quoted Rate for the then-current
Interest Period for such Loan plus one and eight-tenths percent
(1.8%), calculated daily on the
basis of a 360-day year and actual days elapsed;
(ii) the outstanding principal amount of each Base Rate
Loan and all
other sums payable by Borrower hereunder shall bear interest at a
fluctuating rate per annum
equal to the Base Rate plus one-fourth percent (1/4%), calculated
daily on the basis of a 360-day
year and actual days elapsed; and
(iii) the outstanding principal amount of any payment
on any Loan or
other Obligations which is not paid in full when due, together with
accrued and unpaid interest
thereon (to the extent permitted by law), shall bear interest at the
Default Rate.
(b) Accrued interest shall be payable (i) in the case of Base
Rate Loans,
monthly on the first day of each month hereafter for the previous
month, commencing with the
first such day following the date hereof; (ii) in the case of a
Eurodollar Loan, on the last day of
each Interest Period provided, however, that if any Interest Period
in respect of a Eurodollar Loan
is longer than three (3) months, such interest prior to maturity shall
be paid on the last Business
Day of each three (3) month interval within such Interest Period as
well as on the last day of such
Interest Period; (iii) in the case of any Loan, upon the payment or
prepayment thereof; (iv) in the
case of any other sum payable hereunder as set forth elsewhere in
this Agreement or, if not so set
forth, on demand; and (v) in the case of interest payable at the
Default Rate, on demand.
3.2 Interest Period. The Interest Period for any Eurodollar
Loan shall
commence on the date such Loan is made as specified in the notice
of Conversion or
Continuation applicable thereto and shall continue for a period of
one (1), two (2), three (3) or
six (6) months, in the case of a Eurodollar Loan, as specified in the
notice of Conversion or
Continuation for such Eurodollar Loan. If Borrower fails to
specify the duration of the Interest
Period for any Eurodollar Loan in the notice of Conversion or
Continuation therefor, such Loan
shall instead be Converted to, or Continued as, as the case may be,
a Base Rate Loan.
3.3 Limitations on Interest Periods. Borrower may not
select any Interest
Period which extends beyond the first day of any succeeding
calendar quarter, unless, giving
effect to such Loan, the aggregate outstanding principal amount of
Eurodollar Loans having
Interest Periods extending beyond the first day of each such
calendar quarter is not greater than
the aggregate principal amount of the Loans scheduled to be
outstanding immediately following
such first day of the calendar quarter. Borrower shall not have in
effect at any given time during
the term of this Agreement more than three (3) different interest
rates for Loans (whether Base
Rate Loans or Eurodollar Loans).
3.4 Conversions and Continuations. Borrower shall have
the right, from
time to time, to Convert Loans of one type to Loans of the other
type and to Continue Loans of
one type as Loans of the same type provided that Eurodollar Loans
may not be Converted to
Base Rate Loans prior to the end of the Interest Period applicable
thereto.
3.5 Illegality. Notwithstanding any other provision of this
Agreement to the
contrary, in the event that it shall become unlawful for any Bank to
obtain funds in the London
interbank market or for such Bank to maintain a Eurodollar Loan,
then such Bank shall promptly
notify Borrower whereupon (a) the right of Borrower to request
any Eurodollar Loan shall
thereupon terminate and (b) any Eurodollar Loan then outstanding
shall commence to bear
interest at the rate applicable to Base Rate Loans on the last day of
the then applicable Interest
Period or at such earlier time as may be required by law.
3.6 Increased Costs and Reduced Return.
(a) If any Regulatory Change shall:
(i) subject any Bank to any tax, duty or other charge with
respect to
any Eurodollar Loan, or shall change the basis of taxation of
payments to such Bank of the
principal of or interest on any Eurodollar Loan (except for changes
in the rate of tax on the
overall net income of such Bank imposed by the jurisdiction in
which such Bank's principal
office is located); or
(ii) impose, modify or deem applicable any reserve,
special deposit or
similar requirement (including, without limitation, any such
requirement imposed by the Board
of Governors of the Federal Reserve System) against assets of,
deposits with or for the account
of, or credit extended by, any Bank; or
(iii) impose on any Bank or on the London interbank
market any other
condition or expense with respect to this Agreement, the Notes or
their making, issuance or
maintenance of any Eurodollar Loan;
and the result of any such Regulatory Change is, in such Bank's
reasonable judgment, to increase
the costs which such Bank determines are attributable to its making
or maintaining any Loan, or
its obligation to make available any Loan, or to reduce the amount
of any sum received or
receivable by such Bank under this Agreement or the Notes with
respect to any Loan, then,
within ten (10) days after demand by such Bank, Borrower shall
pay to such Bank such
additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) In addition to any amounts payable pursuant to
subsection (a) above, if
any Bank shall have determined that the applicability of any law,
rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the
Basle Committee on Banking
Regulations and Supervisory Practices entitled "International
Convergence of Capital
Measurement and Capital Standards," or the adoption after the date
hereof of any other law, rule,
regulation or guideline regarding capital adequacy, or any change
in any of the foregoing or in
the enforcement or interpretation or administration of any of the
foregoing by any court or any
governmental authority, central bank or comparable agency
charged with the enforcement or
interpretation or administration thereof, or compliance by such
Bank (or any lending office of
such Bank) or such Bank's holding company 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 such Bank's
capital or on the capital of such Bank's holding company, if any, as
a consequence of its making
or maintaining any Loan or its obligations under this Agreement to
a level below that which such
Bank or such Bank's holding company could have achieved but for
such applicability, adoption,
change or compliance (taking into consideration such Bank's
policies and the policies of such
Bank's holding company with respect to capital adequacy) by an
amount deemed by such Bank
to be material, then, upon demand by such Bank, the Borrower
shall pay to such Bank from time
to time such additional amount or amounts as will compensate
such Bank or such Bank's holding
company for any such reduction suffered. Each demand for
compensation pursuant to this
paragraph (b) shall be accompanied by a certificate of such Bank in
reasonable detail setting
forth the computation of such compensation (including the reason
therefor), which certificate
shall be conclusive, absent manifest error.
3.7 Indemnity. Borrower hereby indemnifies and agrees to
hold harmless the
Agent and each Bank from and against any and all losses or
expenses which it may sustain or
incur as a consequence of failure by Borrower to consummate any
notice of funding,
prepayment, Conversion or Continuation made by Borrower,
including, without limitation, any
such loss or expense arising from interest or fees payable by any
Bank to lenders of funds
obtained by it in order to maintain any Eurodollar Loan. Borrower
hereby further indemnifies
and agrees to hold harmless the Agent and each Bank from and
against any and all losses or
expenses which it may sustain or incur as a consequence of
prepayment of any Eurodollar Loan
on other than the last day of the Interest Period for such Loan
(including, without limitation, any
prepayment pursuant to Sections 2.7 and 3.5 hereof). Borrower's
obligations under this Section
shall survive the termination of this Agreement and the repayment
of the Obligations.
3.8 Notice of Amounts Payable to Banks. If any Bank shall
seek payment of
any amounts from Borrower pursuant to Section 3.6 hereof it shall
notify Borrower of the
amount payable by Borrower to such Bank thereunder. A
certificate of such Bank seeking
payment pursuant to Section 3.6 hereof, setting forth in reasonable
detail the factual basis for and
the computation of the amounts specified, shall be conclusive,
absent manifest error, as to the
amounts owed. Borrower's obligations under this Section shall
survive the termination of this
Agreement and the repayment of the Obligations.
3.9 Inability to Determine Quoted Rate. In the event that
Agent determines
(which determination shall be conclusive absent manifest error)
that, by reason of circumstances
affecting the London interbank market, quotation of interest rates
for the relevant deposits
referred to in the definition of the "Quoted Rate" herein are not
being provided in the relevant
amounts or for the relevant maturities for the purpose of
determining rates of interest for a
Eurodollar Loan, Agent will give notice of such determination to
Borrower and at least one day
prior to the date specified in such notice of Conversion or
Continuation for such Loan to be
made. If any such notice is given, no Bank shall have any
obligation to make available,
maintain, Convert or Continue Eurodollar Loans. Until the earlier
of the date any such notice has
been withdrawn by Agent or the date when Agent and Borrower
have mutually agreed upon an
alternate method of determining the rates of interest payable on a
Eurodollar Loan, as the case
may be, Borrower shall not have the right to have or maintain any
Eurodollar Loan.
3.10 Interest Savings Clause. It is expressly stipulated and
agreed to be the
intent of Borrower, the Agent and the Banks at all times to comply
with applicable law
governing the maximum rate or amount of interest payable on the
Indebtedness (or applicable
United States federal law to the extent that it permits any Bank to
contract for, charge, take,
reserve or receive a greater amount of interest). If the applicable
law is ever judicially
interpreted so as to render usurious any amount called for under
this Agreement, the Notes or
under any of the other Loan Documents, or contracted for, charged,
taken, reserved or received
with respect to the Obligations, or if Agent's exercise of the option
to accelerate the maturity of
the Notes or if any prepayment by Borrower results in Borrower
having paid any interest in
excess of that permitted by applicable law, then it is Borrower's,
the Agent's and the Banks'
express intent that all excess amounts theretofore collected by the
Agent and/or the Banks be
credited on the principal balance of the Notes (or, if the Notes and
all other Obligations have
been or would thereby be paid in full, refunded to Borrower), and
the provisions of the Notes and
the other Loan Documents immediately be deemed reformed and
the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity
of the execution of any new
documents, so as to comply with the applicable law, but so as to
permit the recovery of the
fullest amount otherwise called for hereunder or thereunder, not
exceeding the highest lawful
amount of interest on the Obligations. All sums paid or agreed to
be paid to the Agent and/or the
Banks for the use, forbearance or detention of the Obligations
shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread
throughout the full term of the Notes
until payment in full so that the rate or amount of interest on
account of the Obligations does not
exceed the usury ceiling from time to time in effect and applicable
to the Notes for so long as the
Obligations are outstanding. Notwithstanding anything to the
contrary contained herein or in any
of the other Loan Documents, it is not the intention of the Agent or
any Bank to accelerate the
maturity or demand payment of any interest that has not accrued at
the time of such acceleration
or to collect unearned interest at the time of such acceleration.
3.11 Commitment Fee. Borrower shall pay to the Agent for
the account of
each Bank a commitment fee (the "Commitment Fee"), calculated
on the basis of a 360-day year
and actual days elapsed, equal to one-fourth percent (1/4%) per
annum of the sum of the aggregate
average daily unused amount of such Bank's Loan Percentage of
the Commitments, payable in
arrears (commencing on October 1, 1994) on the the first day of
each calendar quarter for the
previous calendar quarter or portion thereof and on Maturity Date.
This Section 3.11 shall be
effective as of June 20, 1994, and on October 1, 1994, Borrower
shall also pay to Agent for the
account of each Bank the prorata portion of the Commitment Fee
due for the period from June
20, 1994 through June 30, 1994.
4. SECURITY INTEREST - COLLATERAL
4.1 Security Interest. As security for the Obligations,
Borrower hereby grants
to Agent, for the benefit of the Banks, a continuing Lien on and
security interest in and to the
following described property, whether now owned or existing or
hereafter acquired or arising or
in which Borrower now has or hereafter acquires any rights
(sometimes herein collectively
referred to as "Collateral"):
(a) Leases;
(b) Equipment;
(c) all books and records (including, without limitation,
computer programs,
print-outs and other computer materials and records) of Borrower
pertaining to any of the
foregoing; and
(d) all accessions to, substitutions for and all replacements,
products and
proceeds of the foregoing, including, without limitation, proceeds
of insurance policies insuring
the Collateral.
4.2 Mortgaged Property. As additional security for the
Obligations, Borrower
has heretofore granted to Agent, for the benefit of the Banks, a first
(except for prior liens
expressly permitted thereby) priority lien on and security interest in
the Mortgaged Property,
evidenced by the Deed of Trust, and Borrower has of even date
herewith granted to Agent, for
the benefit of the Banks, a second (except for prior Liens expressly
permitted thereby) priority
Lien on and security interest in the Mortgaged Property, evidenced
by the Second Deed of Trust,
recorded or to be recorded in the Titus County, Texas Deed
Records.
4.3 Perfection of Liens. Until the payment and satisfaction
in full of all
Obligations, Agent's Liens in the Collateral and all products and
proceeds thereof, shall continue
in full force and effect. Borrower shall perform any and all steps
requested by Agent or the
Majority Banks to perfect, maintain and protect Agent's Liens in
the Collateral including,
without limitation, executing and filing financing or continuation
statements, or amendments
thereof, in form and substance satisfactory to Agent. Agent may
file one or more financing
statements disclosing Agent's Liens under this Agreement without
Borrower's signature
appearing thereon and Borrower shall pay the costs of, or
incidental to, any recording or filing of
any financing statements concerning the Collateral. Borrower
agrees that a carbon,
photographic, photostatic, or other reproduction of this Agreement
or of a financing statement is
sufficient as a financing statement.
4.4 Right to Inspect. Agent and each Bank (or any person
or persons
designated by it), in its sole discretion, shall have the right to call
at the Mortgaged Property or
any place of business or property location of Borrower at any
reasonable time, and, without
hindrance or delay, to inspect the Collateral and to inspect, review,
check and make extracts from
Borrower's books, records, journals, orders, receipts and any
correspondence and other data
relating to the Collateral, to Borrower's business or to any other
transactions between the parties
hereto and to discuss any of the foregoing with any of Borrower's
employees, officers and
directors and with its independent accountants.
5. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement and to
make Loans hereunder,
Borrower hereby makes the following representations and
warranties to the Agent and the Banks
which shall be true and correct on the date hereof and shall
continue to be true and correct at the
time of the making of any Loan and until the Loans have been
repaid in full:
5.1 Corporate Existence and Qualification. Each of
Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws
of its jurisdiction of incorporation. Borrower is duly qualified as a
foreign corporation in good
standing in the State of Texas and in each other state wherein the
conduct of its business or the
ownership of its property requires such qualification and each
Subsidiary is duly qualified as a
foreign corporation in good standing in each state wherein the
conduct of its business or the
ownership of its property requires such qualification.
5.2 Chief Executive Office; Collateral Locations.
Borrower's and each
Subsidiary's principal place of business, chief executive office and
office where it keeps all of its
books and records is located at 110 South Texas Street, Pittsburg,
Texas 75686, and except as set
forth on Schedule 5.2 attached hereto neither Borrower nor any of
its respective predecessors has
had any other chief executive office or principal place of business
outside the State of Texas
during the preceding four (4) months. Schedule 5.2 attached hereto
and incorporated herein by
reference sets forth a true, correct and complete list of all places of
business and all locations at
which Collateral is located.
5.3 Corporate Authority. Borrower has the corporate power
and authority to
execute, deliver and perform under this Agreement and the Loan
Documents to which it is a
party, and to borrow hereunder, and has taken all necessary and
appropriate corporate action to
authorize the execution, delivery and performance of this
Agreement and such Loan Documents.
5.4 No Consents; Validity and Binding Effect. The
execution, delivery and
performance of this Agreement, the Deed of Trust and the other
Loan Documents are not in
contravention of any provisions of law or any agreement or
indenture by which Borrower is
bound or of the Articles of Incorporation or By-laws of Borrower
or any of its Subsidiaries and
do not require the consent or approval of any governmental body,
agency, authority or other
Person which has not been obtained and a copy thereof furnished
to Agent. This Agreement and
the other Loan Documents to which Borrower is a party constitute
the valid and legally binding
obligations of Borrower, enforceable against Borrower in
accordance with their respective terms.
5.5 No Material Litigation. Except as set forth on Schedule
5.5 hereof, there
are no proceedings pending or threatened before any court or
administrative agency which might
have a Material Adverse Effect.
5.6 Corporate Organization. The Articles of Incorporation
and By-laws of
Borrower and each of its Subsidiaries are in full force and effect
under the laws of their
respective states of incorporation and all amendments to said
Articles of Incorporation and
By-laws have been duly and properly made under and in
accordance with all applicable laws.
5.7 Solvency. Giving effect to the execution and delivery of
the Loan
Documents and the consummation of the transactions
contemplated hereby, including, but not
limited to, the making of the Loans hereunder, the issuance of the
Subordinated Notes and the
making of the initial loans under the Working Capital Credit
Agreement, Borrower (a) has
capital sufficient to carry on its business and transactions and all
business and transactions in
which it is about to engage, (b) is able to pay its debts as they
mature and (c) owns property
whose fair saleable value is greater than the amount required to pay
its debts.
5.8 Adequacy of Intangible Assets. Borrower and its
Subsidiaries possess all
Intangible Assets reasonably necessary to continue to conduct their
respective businesses as
heretofore conducted by them.
5.9 Taxes. Borrower and each of its Subsidiaries has filed
all federal, state,
local and foreign tax returns, reports and estimates which are
required to be filed, and all taxes
(including penalties and interest, if any) shown on such returns,
reports and estimates which are
due and not yet delinquent or which are otherwise due and payable
have been fully paid. Such
tax returns properly and correctly reflect the income and taxes of
Borrower and its Subsidiaries
for the periods covered thereby except for such amounts which in
the aggregate are immaterial.
5.10 ERISA. Except as disclosed on Schedule 5.10 attached
hereto and
incorporated herein by reference:
(a) Identification of Plans. Neither the Borrower, any of its
Subsidiaries nor
any ERISA Affiliate maintains or contributes to, or has maintained
or contributed to, any Plan or
Multiemployer Plan that is subject to regulation by Title IV of
ERISA;
(b) Compliance. Each Plan has at all times been
maintained, by its terms and
in operation, in accordance with all applicable laws, except for
such noncompliance (when taken
as a whole) that will not have a Material Adverse Effect on
Borrower or any of its Subsidiaries;
(c) Liabilities. Neither the Borrower, any of its Subsidiaries
nor any ERISA
Affiliate is currently or to the best knowledge of Borrower or any
ERISA Affiliate will become
subject to any liability (including withdrawal liability), tax or
penalty whatsoever to any person
whomsoever with respect to any Plan including, but not limited to,
any tax, penalty or liability
arising under Title I or Title IV of ERISA or Chapter 43 of the
Code;
(d) Funding. The Borrower, its Subsidiaries and each
ERISA Affiliate have
made full and timely payment of (i) all amounts required to be
contributed under the terms of
each Plan and applicable law and (ii) all material amounts required
to be paid as expenses of each
Plan. No Plan has any "amount of unfunded benefit liabilities" (as
defined in Section
4001(a)(18) of ERISA); and
(e) Insolvency; Reorganization. No Plan is insolvent
(within the meaning of
Section 4245 of ERISA) or in reorganization (within the meaning
of Section 4241 of ERISA).
5.11 Financial Information.
(a) The consolidated financial statements of Borrower and
its Subsidiaries for
fiscal year ended October 2, 1993 disclosed in the Borrower's Form
10-K certified by Ernst &
Young, and the consolidated interim financial statements of
Borrower and its Subsidiaries for the
six-month period ended April 2, 1994, each consisting of a
consolidated balance sheet,
consolidated statement of income (loss), consolidated statement of
changes in stockholders
equity and consolidated statement of cash flows, copies of which
have been delivered by
Borrower to each Bank, are true and correct in all material respects
and contain no material
misstatement or omission, and fairly present the consolidated
financial position, assets and
liabilities of Borrower and its Subsidiaries as of the date thereof
and the consolidated results of
operations of Borrower and its Subsidiaries for the period then
ended, and as of the date thereof
there are no liabilities of Borrower or any of its Subsidiaries, fixed
or contingent, which are
material that are not reflected in such financial statements.
(b) Since the date of the financial statements referred to in
subsection (a), there
has been no material adverse change in the assets, liabilities,
financial position or results of
operations of Borrower or any of its Subsidiaries, and neither
Borrower nor any of its
Subsidiaries has (i) incurred any obligation or liability, fixed or
contingent, which would have a
Material Adverse Effect, (ii) incurred any Indebtedness or
obligations under Capital Leases,
other than the Obligations, and trade payables and other liabilities
arising in the ordinary course
of the Borrower's or such Subsidiary's business, or (iii) guaranteed
the obligations of any other
Person.
5.12 Title to Assets. Borrower has good and marketable title
to and ownership
of the Collateral, including, but not limited to, the Mortgaged
Property, and Borrower and its
Subsidiaries have good and marketable title to and ownership of all
of their other assets, free and
clear of all Liens except for Permitted Liens or as otherwise
expressly permitted by this
Agreement.
5.13 Violations of Law. Neither Borrower nor any of its
Subsidiaries is in
violation of any applicable statute, regulation or ordinance of any
governmental entity, or of any
agency thereof, which violation could have a Material Adverse
Effect.
5.14 No Default. Neither Borrower nor any of its
Subsidiaries is in default with
respect to (a) any note, indenture, loan agreement, mortgage, lease,
deed or other similar
agreement relating to Indebtedness to which Borrower or such
Subsidiary is a party or by which
Borrower or such Subsidiary is bound or (b) any other instrument,
document or agreement to
which Borrower or such Subsidiary is a party or by which
Borrower or such Subsidiary or any of
their respective properties are bound, which other instrument,
document or agreement is material
to the operations or condition, financial or otherwise, of Borrower
or such Subsidiary.
5.15 Corporate and Trade or Fictitious Names. During the
five (5) years
immediately preceding the date of this Agreement, neither
Borrower nor any of its Subsidiaries
nor any of their respective predecessors has been known as or used
any corporate, trade or
fictitious name other than its current corporate name and except as
disclosed on Schedule 5.15
hereto.
5.16 Equipment. The Equipment is and shall remain in good
condition, normal
wear and tear excepted, meets all standards imposed by any
governmental agency, or department
or division thereof having regulatory authority over such material
and its use and is currently
usable in the normal course of Borrower's business.
5.17 Investments. Except as set forth in Schedule 5.17
hereof, Borrower has no
Subsidiaries and has no interest in any partnership or joint venture
with, or any investment in,
any Person.
5.18 Trade Relations. There exists no actual or, to the best
of Borrower's
knowledge, threatened termination, cancellation or limitation of, or
any modification or change
in, the business relationship of Borrower with any material supplier
or with any company whose
contracts with Borrower individually or in the aggregate are
material to the operations of
Borrower; after the consummation of the transactions contemplated
by this Agreement, the
Subordinated Notes Indenture and the Working Capital Credit
Agreement, to the best knowledge
of Borrower, all such companies and suppliers will continue a
business relationship with
Borrower on a basis materially no less favorable to Borrower than
that heretofore conducted; and
there exists no condition or state of facts or circumstances which
would have a Material Adverse
Effect on Borrower or prevent Borrower from conducting its
business after the consummation of
the transactions contemplated by this Agreement in essentially the
same manner in which it has
heretofore been conducted by Borrower.
5.19 Broker's or Finder's Fees. No broker's or finder's fees
or commissions
have been incurred or will be payable by Borrower or any of its
Subsidiaries, or any of its
predecessors, to any Person in connection with the transactions
contemplated by this Agreement.
Notwithstanding the foregoing, Borrower acknowledges that
MONY Capital Markets, Inc. has
been paid that certain broker's commission contemplated in the
Original Loan Agreement.
5.20 Security Interest. This Agreement creates a valid
security interest in the
Collateral securing payment of the Obligations, subject only to
Permitted Liens, and all filings
and other actions necessary or desirable to perfect and protect such
security interest have been
taken, and, Agent has a valid and perfected first priority security
interest in the Collateral, subject
only to Permitted Liens.
5.21 Regulatory Matters. Borrower is not subject to
regulation under the
Investment Company Act of 1940, as amended, the Public Utility
Holding Company Act of
1935, as amended, the Federal Power Act, the Interstate Commerce
Act or any other federal or
state statue or regulation which materially limits its ability to incur
indebtedness or its ability to
consummate the transactions contemplated hereby.
5.22 Disclosure. Neither this Agreement nor any other
instrument, document,
agreement, financial statement or certificate furnished to the Agent
or any of the Banks by or on
behalf of Borrower in connection with this Agreement or the
Working Capital Credit Agreement
contains an untrue statement of a material fact or omits to state any
material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not
misleading or omits to state any fact which, insofar as Borrower
can now foresee, may in the
future materially and adversely affect the condition (financial or
otherwise), business, operations
or properties of Borrower and its Subsidiaries which has not been
set forth in this Agreement or
in an instrument, document, agreement, financial statement or
certificate furnished to the Agent
and the Banks in connection herewith.
(a) Registration Statement. Borrower has heretofore
furnished to the Agent
and each Bank a true, correct and complete copy, including all
amendments thereto, of the
Registration Statement, on Form S-1, in respect to the
Subordinated Notes and all other materials
filed with the Securities and Exchange Commission in connection
with the issuance of the
Subordinated Notes. No portion of the Registration Statement, the
prospectus relating thereto,
nor any other written material filed with the Securities and
Exchange Commission with respect
thereto, relating to the Borrower or its Subsidiaries or their
respective businesses, does or will
contain any statement which is false or misleading with respect to
any material fact, or does or
will omit to state a material fact necessary in order to make the
statements therein not false or
misleading, or otherwise violate any state or federal securities
laws.
6. AFFIRMATIVE COVENANTS
Borrower covenants to the Agent and the Banks that from and
after the date hereof, and
until the satisfaction in full of the Obligations, it will and it shall
cause each of its Subsidiaries to,
unless the Majority Banks otherwise consent in writing:
6.1 Records Respecting Collateral. Keep all records with
respect to the
Collateral at its office set forth in Section 5.2 hereof and not
remove such records from such
address without the prior written consent of the Majority Banks.
6.2 Reporting Requirements. Furnish or cause to be
furnished to the Agent
and each Bank:
(a) As soon as practicable, and in any event within 45 days
after the end of
each fiscal quarter, consolidated interim unaudited financial
statements, including a balance
sheet, income statement and statement of cash flow, for the quarter
and year-to-date period then
ended, prepared in accordance with GAAP, consistent with the past
practice or Borrower and its
Subsidiaries, and certified as to truth and accuracy thereof by the
chief financial officer of
Borrower;
(b) As soon as available, and in any event within 90 days
after the end of each
fiscal year, consolidated audited annual financial statements,
including a consolidated balance
sheet, consolidated statement of income, consolidated statement of
shareholders' equity and
consolidated statement of cash flow for the fiscal year then ended,
prepared in accordance with
GAAP, in comparative form and accompanied by the unqualified
opinion of a nationally
recognized firm of independent certified public accountants
regularly retained by Borrower and
its Subsidiaries and acceptable to the Majority Banks;
(c) Together with the annual financial statements referred to
in clause (b)
above, a statement from such independent certified public
accountants that, in making their
examination of such financial statements, they obtained no
knowledge of any Default or Event of
Default or, in lieu thereof, a statement specifying the nature and
period of existence of any such
Default or Event of Default disclosed by their examination;
(d) Together with the annual or interim financial statements
referred to in
clauses (a) and (b) above, a certificate of the chief financial officer
of Borrower certifying that, to
the best of his knowledge, no Default or Event of Default has
occurred and is continuing or, if a
Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof
and the action which is proposed to be taken with respect thereto;
(e) Promptly after the sending or filing thereof, as the case
may be, copies of
any definitive proxy statements, financial statements or reports
which Borrower or any
Subsidiary sends to its shareholders and copies of any regular
periodic and special reports or
registration statements which Borrower or any Subsidiary files
with the Securities and Exchange
Commission (or any governmental agency substituted therefor),
including, but not limited to, all
Form 10-K and Form 10-Q reports, or any report or registration
statement which Borrower or
any Subsidiary files with any national securities exchange;
(f) At least fifteen (15) Business Days prior to the time any
consent by the
Majority Banks will be necessary, Borrower and any Subsidiary
shall furnish to the Agent and
the Banks all pertinent information regarding any proposed
acquisition by Borrower or any
Subsidiary to which the consent of the Majority Banks is required
hereunder which is reasonably
necessary or appropriate to permit the Banks to evaluate such
acquisitions in a manner consistent
with prudent banking standards;
(g) Together with the annual and, if requested by the Agent,
interim financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer of
Borrower certifying as to (i) the items of Equipment subject to
purchase money Liens permitted
by clause (e) of the definition of "Permitted Liens" and (ii) the
principal amount of Indebtedness
secured by each such Lien; and
(h) Such other information respecting the condition or
operations, financial or
otherwise, of Borrower and its Subsidiaries as the Agent or the
Banks may from time to time
reasonably request.
6.3 Tax Returns. File all federal, state and local tax returns
and other reports
that Borrower and its Subsidiaries are required by law to file,
maintain adequate reserves for the
payment of all taxes, assessments, governmental charges and levies
imposed upon them, their
respective incomes, or their respective profits, or upon any
property belonging to them, and pay
and discharge all such taxes, assessments, governmental charges
and levies prior to the date on
which penalties attach thereto.
6.4 Compliance With Laws. Comply with all laws, statutes,
rules, regulations
and ordinances of any governmental entity, or of any agency
thereof, applicable to Borrower or
any Subsidiary, a violation of which, in any respect, might have a
Material Adverse Effect,
including, without limitation, any such laws, statutes, rules,
regulations or ordinances regarding
the collection, payment, and deposit of employees' income,
unemployment, and Social Security
taxes and with respect to pension liabilities.
6.5 ERISA.
(a) At all times make prompt payment of contributions
required to meet the
minimum funding standards set forth in Section 302 and 305 of
ERISA with respect to each Plan
and otherwise comply with ERISA and all rules and regulations
promulgated thereunder in all
material respects;
(b) Promptly after the occurrence thereof with respect to any
Plan, or any trust
established thereunder, notify the Agent and the Banks of (i) a
"reportable event" described in
Section 4043 of ERISA and the regulations issued from time to
time thereunder (other than a
"reportable event" not subject to the provisions for 30-day notice to
the PBGC under such
regulations), or (ii) any other event which could subject the
Borrower, any of its Subsidiaries or
any ERISA Affiliate to any tax, penalty or liability under Title I or
Title IV of ERISA or Chapter
43 of the Code which, in the aggregate, would have a Material
Adverse Effect on the Borrower,
any of its Subsidiaries or upon their respective financial condition,
assets, business operations,
liabilities or property;
(c) At the same time and in the same manner as such notice
must be provided
to the PBGC, or to a Plan participant, beneficiary or alternative
payee, give the Agent and the
Banks any notice required under Section 101(d), 302(f)(4), 303,
307, 4041(b)(1)(A) or
4041(c)(1)(A) or ERISA or under Section 401(a)(29) or 412 of the
Code with respect to any
Plan;
(d) Furnish to the Agent or any Bank, promptly upon the
request of the Agent
or such Bank, (i) true and complete copies of any and all
documents, government reports and
determination or opinion letters for any Plan; and (ii) a current
statement of withdrawal liability,
if any, for each Multiemployer Plan; and
(e) Furnish to the Agent or any Bank, promptly upon the
request of the Agent
or such Bank therefor, such additional information concerning any
Plan that relates to the ability
of Borrower to make any payments hereunder, as may be
reasonably requested.
6.6 Books and Records. Keep adequate records and books
of account with
respect to its business activities in which proper entries are made in
accordance with GAAP
reflecting all its financial transactions.
6.7 Notifications to the Agent and the Banks. Notify the
Agent and the Banks
by telephone within one (1) Business Day (with each such notice to
be confirmed in writing
within two (2) Business Days following such telephone notice):
(a) upon Borrower's learning
thereof, of any litigation affecting Borrower or any of its
Subsidiaries claiming damages of
$1,000,000 or more, individually or when aggregated with other
litigation pending against
Borrower or any of its Subsidiaries, whether or not covered by
insurance, and of the threat or
institution of any suit or administrative proceeding against
Borrower or any of its Subsidiaries
which may have a Material Adverse Effect on Borrower or any of
its Subsidiaries, or Agent's
Lien in the Collateral or the Mortgaged Property, and establish
such reasonable reserves with
respect thereto as the Majority Banks may request; (b) upon
learning thereof, of any Default or
Event of Default hereunder; (c) upon occurrence thereof, of any
change to the operations,
financial condition or business of Borrower or any of its
Subsidiaries which would have a
Material Adverse Effect; (d) upon the occurrence thereof, of any
amendment or modification of
the Working Capital Credit Agreement; and (e) upon the
occurrence thereof, of Borrower's or
any Subsidiary's default under (i) any note, indenture, loan
agreement, mortgage, lease, deed or
other similar agreement relating to any indebtedness of Borrower
or any of its Subsidiaries or (ii)
any other instrument, document or agreement material to the
operations or condition, financial or
otherwise, of Borrower or any of its Subsidiaries to which
Borrower or any of its Subsidiaries is
a party or by which Borrower or any of its Subsidiaries or any of
their respective property is
bound.
6.8 Insurance.
(a) Keep all of the Collateral, whether now owned or
hereafter acquired,
insured by insurance companies (i) reasonably acceptable to the
Majority Banks or having an A
or better rating according to Best's Insurance Reports;
Property-Casualty and (ii) licensed to do
business in the State of Texas against loss or damage by fire or
other risk usually insured against
under extended coverage endorsement and theft, burglary, and
pilferage, together with such other
hazards as the Majority Banks may from time to time reasonably
request, in amounts reasonably
satisfactory to the Majority Banks and naming Agent as loss payee
thereon pursuant to a lender's
loss payee clause satisfactory to the Majority Banks;
(b) Keep all of its property other than the Collateral and the
Mortgaged
Property, whether now owned or hereafter acquired, insured by
insurance companies (i)
reasonably acceptable to the Majority Banks or having an A or
better rating according to Best's
Insurance Reports; Property-Casualty and (ii) licensed to do
business in the State of Texas and in
all jurisdictions in which such Borrower does business against such
risks and in such amounts as
are customarily maintained by others in similar businesses;
(c) Maintain at all times liability insurance coverage against
such risks and in
such amounts as are customarily maintained by others in similar
businesses, such insurance to be
carried by insurance companies (i) reasonably acceptable to the
Majority Banks or having an A
or better rating according to Best's Insurance Reports;
Property-Casualty and (ii) licensed to do
business in the State of Texas and in all jurisdictions in which such
Borrower does business; and
(d) Deliver certificates of insurance for such policy or
policies to Agent,
containing endorsements, in form satisfactory to the Majority
Banks, providing that the insurance
shall not be cancellable, except upon thirty (30) days' prior written
notice to Agent.
6.9 Preservation of Corporate Existence. Except as
permitted by Section 7.4
hereof, preserve and maintain its corporate existence, rights,
franchises and privileges in the
jurisdiction of its incorporation.
6.10 Equipment. Keep and maintain the Equipment in good
operating
condition, reasonable wear and tear excepted, shall repair and make
all necessary replacements
thereof so that the operating efficiency thereof shall at all times be
maintained and preserved and,
shall not permit any item of Equipment to become a fixture to real
estate or accession to other
personal property unless Agent has a first priority Lien on or in
such real estate or other personal
property. Borrower shall, immediately on demand therefor by
Agent, deliver to Agent any and
all evidence of ownership of any of the Equipment (including,
without limitation, certificates of
title and applications for title, together with any necessary
applications to have Agent's lien noted
thereon, in the case of vehicles).
6.11 Additional Collateral. Intentionally deleted.
7. NEGATIVE COVENANTS
Borrower covenants with the Agent and the Banks that from
and after the date hereof and
until the termination of this Agreement and the payment and
satisfaction in full of the
Obligations, it will not, and it will not permit its Subsidiaries to,
without the prior written consent
of the Majority Banks:
7.1 No Encumbrances. Create, assume, or suffer to exist
any Lien of any kind
in any of the Collateral or the Mortgaged Property except for (a)
Permitted Liens and (b) a Lien
on the Equipment and the Mortgaged Property, expressly
subordinated to the Lien in favor of the
Agent, in favor of the agent under the Working Capital Credit
Agreement (the "Working Capital
Agent"), as security for the Obligations under the Working Capital
Credit Agreement; provided,
however, that concurrently with the granting of such Lien in favor
of the Working Capital Agent,
Borrower grants to the Agent, as security for the Obligations, a
Lien, subordinate only to the
Lien of the Working Capital Agent, in the current assets of
Borrower as provided for in Section
6.11 hereof.
7.2 Asset Sales.
(a) Sell, lease or dispose of any of the Collateral or any
interest therein except
for the sale of Equipment no longer used or useful in the business
of Borrower or any Subsidiary
having (i) an aggregate value not in excess of $1,000,000 during
any Fiscal Year or (ii) an
aggregate value not in excess of $5,000,000 during any Fiscal
Year; provided that any
Equipment sold, leased or otherwise disposed of pursuant to this
clause (ii) is replaced within 90
days after such sale, trade-in or other disposition by replacement
Equipment which is in good
operating condition and which has a value and utility at least equal
to that of the Equipment sold,
traded in or disposed of and the Agent receives, for the benefit of
the Banks, a valid perfected
first Lien with respect to such replacement Equipment, subject
only to Permitted Liens; or
(b) Sell, lease or otherwise transfer any of its assets other
than the Collateral
except: (i) in the ordinary course of business; (ii) as permitted by
Section 7.9; (iii) transfers to
the Borrower or a Subsidiary; (iv) worn or obsolete property; or (v)
any other sale or transfer of
assets, which, together with all other assets sold or transferred
during the preceding 12 month
period (other than in accordance with the preceding clauses (i), (ii),
(iii) or (iv)), does not exceed
15% of the Borrower's total consolidated tangible assets as
computed at the time of such sale or
transfer.
7.3 Loans and Investments. Make or retain any loan or
investment (whether
through the purchase of stock, obligations or otherwise) in or make
any loan or advance to, any
other Person, whether by acquisition of stock indebtedness, other
obligations or security or by
loan, advance, capital contribution, or otherwise ("Restricted
Investments") other than:
(a) investments in certificates of deposit having a maturity
of one year or less
issued by any United States commercial bank having capital and
surplus of not less than
$50,000,000;
(b) investments in an aggregate amount of up to $8,000,000
in deposits
maintained with the First State Bank of Pittsburg, Texas;
(c) investments in commercial paper rated P1 by Moody's
Investors Service,
Inc. or A1 by Standard & Poor's Corporation maturing within 180
days of the date of issuance
thereof;
(d) investments in mutual funds composed of either money
market securities
or marketable obligations of the United States or guaranteed by or
insured by the United States,
or those for which the full faith and credit of the United States is
pledged for the repayment or
principal and interest thereof; provided that such obligations have a
final maturity of no more
than three years from the date acquired by the Borrower;
(e) investments existing prior to the Closing Date; and
(f) investments in a corporate Subsidiary of the Borrower
provided that such
Subsidiary is consolidated with Borrower for financial reporting
purposes;
unless, immediately after giving effect thereto, the aggregate
Restricted Investments of the
Borrower and its Subsidiaries made since the Closing Date does
not exceed 5% of the Borrower's
total assets.
7.4 Corporate Structure. Dissolve or otherwise terminate its
corporate status;
enter into any merger, reorganization or consolidation; issue any
shares of any class of capital
stock of any Subsidiary or any securities or other instruments for or
which are convertible into
any shares of any class of capital stock of any Subsidiary; or make
any substantial change in the
basic type of business conducted by Borrower or any Subsidiary as
of the date hereof, provided
that (a) the Borrower may merge with another corporation, if the
surviving corporation is the
Borrower and (b) a Subsidiary may merge or consolidate with or
sell, lease or otherwise transfer
all or substantially all of its assets to: (i) the Borrower or another
Subsidiary; or, (ii) another
Person if immediately after giving effect to the transaction no
Default or Event of Default would
exist.
7.5 Fiscal Year. Change its fiscal year.
7.6 ERISA. Take, or fail to take, or permit any ERISA
Affiliate to take, or fail
to take, any action with respect to a Plan including, but not limited
to, (i) establishing any Plan,
(ii) amending any Plan, (iii) terminating or withdrawing from any
Plan, or (iv) incurring an
amount of unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA, where such
action or failure could have a material adverse effect on the
Borrower or any Subsidiary, result in
a lien on the property of the Borrower or any Subsidiary, or require
the Borrower or any
Subsidiary to provide any security.
7.7 Relocations; Use of Name. Relocate its executive
office; maintain any
Collateral at any location other than the Mortgaged Property or
maintain records with respect to
Collateral at any locations other than the Mortgaged Property or at
the location of its chief
executive office set forth in Section 5.2 hereto; or use any
corporate name (other than its own) or
any fictitious name except upon thirty (30) days prior written
notice to Agent and after the
delivery to Agent of financing statements, if required by Agent, in
form satisfactory to Agent.
7.8 Arm's-Length Transactions. The Borrower will not, and
will not permit
any Subsidiary to, enter into any transaction, including without
limitation, the purchase, sale,
lease or exchange of any Collateral, or the rendering of any service,
with any Affiliate of the
Borrower or such Subsidiary or any Person except in the ordinary
course of and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's
business and upon fair and
reasonable terms not materially less favorable to the Borrower than
would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate
of the Company or such
Subsidiary and which would be subject to approval by the
Borrower's Audit Committee of the
Board of Directors.
7.9 Dividends. Declare or pay any dividends on, or make
any distribution
with respect to, its shares of any class of capital stock, redeem or
retire any capital stock, or take
any action having an effect equivalent to the foregoing (in any
fiscal year of Borrower or any
Subsidiary) except for (a) the declaration and payment of cash
dividends by a Subsidiary and
payable to Borrower and (b) the declaration and payment of cash
dividends on the capital stock
of the Borrower not in excess of $0.08 per share of the issued and
authorized common stock plus
twenty-five percent (25%) of the net income of Borrower, as set
forth in the audited financial
statements for the fiscal year of Borrower immediately preceding
the year during which such
declaration and payment of dividends is made; provided, however,
that at the time such dividend
is paid there does not exist any Default or Event of Default
hereunder or any event or condition
which, with the payment of such dividend would constitute a
Default or Event of Default.
7.10 Subordinated Notes. Neither the Borrower or any of its
Subsidiaries shall,
directly or indirectly:
(a) purchase, redeem, retire or otherwise acquire for value,
set apart any money
for a sinking, defeasance or other analogous fund for, the purchase,
redemption, retirement or
other acquisition of, or make any voluntary payment or
prepayment of the principal of or interest
on, where any other amount owing in respect of, the Subordinated
Notes other than regularly
scheduled payments of interest thereon; or
(b) agree to any amendment, modification or waiver of any
of the provisions
of the Subordinated Notes Indenture.
7.11 Guaranty Fees. The Borrower will not, and will not
permit any Subsidiary
to, directly or indirectly, pay to Mr. and/or Mrs. Lonnie A. Pilgrim
or any other guarantor of any
of the Borrower's Indebtedness, obligations and liabilities, any fee
or other compensation, but
excluding salary, bonus and other compensation for services
rendered as an employee
(collectively the "Guaranty Fees") except that, so long as there is
not Default or Event of Default
nor any event or condition which, with the payment of such fee
would constitute a Default or
Event of Default, Borrower may pay Guarantee Fees not to exceed
$2,000,000 in the aggregate
during any fiscal year of the Borrower.
8. FINANCIAL COVENANTS
Borrower covenants with the Agent and the Banks that from
and after the date hereof and
until the termination of this Agreement and the payment and
satisfaction in full of the
Obligations, unless the Majority Banks otherwise consent in
writing:
8.1 Leverage Ratio. The Borrower will not permit the ratio
of its Leverage
Ratio at any time during each period specified below to exceed the
ratio specified below for such
period:
PERIOD MAXIMUM RATIO
Closing Date through the penultimate
day of Fiscal Year 1995 0.675:1.000
At all times thereafter 0.650:1.000
8.2 Tangible Net Worth. The Borrower shall maintain a
Tangible Net Worth
at all times during each period specified below of not less than the
amount specified below for
such period:
(a) Closing Date through the penultimate day of Fiscal Year
1995,
$100,000,000, plus 25% of Borrower's consolidated net income
(but not less than zero) for
Borrower's Fiscal Year 1995; and
(b) For the successive periods commencing on the last day
of each Fiscal Year
thereafter and ending on the penultimate day of next succeeding
Fiscal Year, with the first such
period commencing on the last day of Fiscal Year 1996, an amount
equal to the minimum
required Tangible Net Worth in effect under this Section 8.2 during
the immediately preceding
period plus 25% of Borrower's consolidated net income (but not
less than zero) for Borrower's
Fiscal Year ending on the date the applicable period commences.
8.3 Current Ratio. The Borrower will maintain at all times
and measured as of
the last day of each fiscal year a Current Ratio of not less than 1.35
to 1.00.
8.4 Fixed Charge Coverage Ratio. The Borrower will not
permit its Fixed
Charge Coverage Ratio to be less than 1.35 to 1.00 as of the last
day of each fiscal period
specified below:
(a) the seven fiscal quarters of Borrower ending July 2,
1994; and
(b) the eight fiscal quarters of Borrower ending on the last
day of each fiscal
quarter thereafter commencing with the fiscal quarter ending
October 1, 1994.
9. EVENTS OF DEFAULT
The occurrence of any of the following events or conditions
shall constitute an Event of
Default hereunder:
9.1 Obligations. Borrower shall fail to make any payments
of principal or
interest of the Obligations when due;
9.2 Misrepresentations. Borrower shall make any
representations or
warranties in any of the Loan Documents or in any certificate or
statement furnished at any time
hereunder or in connection with any of the Loan Documents which
proves to have been untrue or
misleading in any material respect when made or furnished and
which continues to be untrue or
misleading in any material respect.
9.3 Certain Covenants. Borrower shall default in the
observance or
performance of any covenant or agreement contained in Sections 6
(other than Sections 6.7 or
6.11), 7 or 8 of this Agreement and such default continues for more
than thirty (30) days after the
earlier of (a) the date of notice thereof to such Borrower by the
Agent or (b) the date Borrower
knew or should have known of such default.
9.4 Other Covenants. Either Borrower shall default in the
observance or
performance of any other covenant or agreement contained in this
Agreement or under any of the
other Loan Documents.
9.5 Other Debts. Either Borrower or any Subsidiary shall
default in the
payment when due of any Indebtedness under any guaranty, note,
indenture or other agreement
relating to or evidencing Indebtedness having a principal balance
of $1,000,000 or more,
including, but not limited to, the Subordinated Notes and the
Indebtedness under the Working
Capital Credit Agreement, or any event specified in any guaranty,
note, indenture or other
agreement relating to or evidencing any such Indebtedness shall
occur if the effect of such event
is to cause or to permit (giving effect to any grace or cure period
applicable thereto) the holder or
holders of such Indebtedness to cause such Indebtedness to become
due, or to be prepaid in full
(whether by redemption, purchase or otherwise), prior to its stated
maturity.
9.6 Tax Lien. A notice of Lien, levy or assessment is filed
of record with
respect to all or any of any Borrower's or any Subsidiary's assets by
the United States, or any
department, agency or instrumentality thereof, or by any state,
county, municipal or other
governmental agency, including, without limitation, the PBGC,
which in the opinion of the
Majority Banks, adversely affects the priority of the Liens granted
to Agent hereunder under the
Deed of Trust or under the other Loan Documents.
9.7 ERISA. The occurrence of any of the following events:
(i) the happening
of a Reportable Event with respect to any Plan which Reportable
Event could result in a material
liability for Borrower, any of its Subsidiaries or an ERISA Affiliate
or which otherwise could
have a material adverse effect on the financial condition, assets,
business, operations, liabilities
or property of Borrower, any of its Subsidiaries or such ERISA
Affiliate; (ii) the disqualification
or involuntary termination of a Plan for any reason which could
result in a material liability for
Borrower, any of its Subsidiaries or an ERISA Affiliate or which
otherwise could have a material
adverse effect on the financial condition, assets, business,
operations, liabilities or property of
Borrower, any of its Subsidiaries or such ERISA Affiliate; (iii) the
voluntary termination of any
Plan while such Plan has a funding deficiency (as determined
under Section 412 of the Code)
which could result in a material liability for Borrower, any of its
Subsidiaries or an ERISA
Affiliate or which otherwise could have a material adverse effect
on the financial condition,
assets, business, operations, liabilities or property of Borrower, any
of its Subsidiaries or such
ERISA Affiliate; (iv) the appointment of a trustee by an
appropriate United States district court
to administer any such Plan; (v) the institution of any proceedings
by the PBGC to terminate any
such Plan or to appoint a trustee to administer any such Plan; (vi)
the failure of Borrower to
notify the Agent and the Banks promptly upon receipt by Borrower
or any of its Subsidiaries of
any notice of the institution of any proceeding or other actions
which may result in the
termination of any such Plan.
9.8 Voluntary Bankruptcy. Borrower or any of its
Subsidiaries shall: (a) file a
voluntary petition or assignment in bankruptcy or a voluntary
petition or assignment or answer
seeking liquidation, reorganization, arrangement, readjustment of
its debts, or any other relief
under the Bankruptcy Code, or under any other act or law
pertaining to insolvency or debtor
relief, whether State, Federal, or foreign, now or hereafter existing;
(b) enter into any agreement
indicating consent to, approval of, or acquiescence in, any such
petition or proceeding; (c) apply
for or permit the appointment, by consent or acquiescence, of a
receiver, custodian or trustee of
Borrower or any of its Subsidiaries or for all or a substantial part of
its property; (d) make a
general assignment for the benefit of creditors; or (e) be unable or
shall fail to pay its debts
generally as such debts become due, admit in writing its inability
or failure to pay its debts
generally as such debts become due, or otherwise become
insolvent.
9.9 Involuntary Bankruptcy. There shall have been filed
against Borrower or
any of its Subsidiaries an involuntary petition in bankruptcy or
seeking liquidation,
reorganization, arrangement, readjustment of its debts or any other
relief under the Bankruptcy
Code, or under any other act or law pertaining to insolvency or
debtor relief, whether State,
Federal or foreign, now or hereafter existing; Borrower or any of
its Subsidiaries shall suffer or
permit the involuntary appointment of a receiver, custodian or
trustee of Borrower or any of its
Subsidiaries or for all or a substantial part of its property; or
Borrower or any of its Subsidiaries
shall suffer or permit the issuance of a warrant of attachment,
execution or similar process
against all or any substantial part of the property of Borrower or
any of its Subsidiaries.
9.10 Suspension of Business. The suspension of the
transaction of the usual
business of the Borrower or of the usual business of any of its
Subsidiaries or the involuntary
dissolution of the Borrower or the involuntary dissolution of any of
its Subsidiaries.
9.11 Judgments. Any judgment, decree or order for the
payment of money
which, when aggregated with all other judgments, decrees or
orders for the payment of money
pending against Borrower or any of its Subsidiaries, exceeds the
sum of $1,000,000, shall be
rendered against Borrower or any of its Subsidiaries and remain
unsatisfied and in effect for a
period of sixty (60) consecutive days without being vacated,
discharged, satisfied or stayed or
bonded pending appeal.
9.12 Change in Control. There occurs a "Change in Control"
as such term is
defined on the date hereof in the Subordinated Notes Indenture.
9.13 Event of Default under Deed of Trust or Second Deed
of Trust. There
occurs an "Event of Default" under the Deed of Trust or the
Second Deed of Trust.
10. REMEDIES
Upon the occurrence or existence of any Event of Default, and
during the continuation
thereof, without prejudice to the rights of the Agent and the Banks
to enforce their claims against
Borrower for damages for failure by Borrower to fulfill any of the
obligations hereunder, the
Agent and the Banks shall have the following rights and remedies,
in addition to any other rights
and remedies available to the Agent and the Banks at law, in equity
or otherwise:
10.1 Default Rate. At the election of the Majority Banks,
evidenced by written
notice to the Borrower, the outstanding principal balance of the
Obligations and, to the extent
permitted by applicable law, accrued and unpaid interest thereon,
shall bear interest at the
Default Rate until paid in full.
10.2 Acceleration of the Obligations. In the event of the
occurrence of (a) an
Event of Default set forth in Sections 9.8 or 9.9 hereof, the
Obligations shall automatically and
immediately become due and payable; and (b) any other Event of
Default, the Majority Banks, at
their option, may declare all of the Obligations to be immediately
due and payable, whereupon
all of the Obligations shall become immediately due and payable,
in either case without
presentment, demand, protest, notice of non-payment or any other
notice required by law relative
thereto, all of which are hereby expressly waived by Borrower,
anything contained herein to the
contrary notwithstanding.
10.3 Set-Off. The right of each Bank to set-off, without
notice to Borrower,
any and all deposits at any time credited by or due from such Bank
to Borrower, whether in a
general or special, time or demand, final or provisional account or
any other account or
represented by a certificate of deposit and whether or not
unmatured or contingent.
10.4 Rights and Remedies of a Secured Party. All of the
rights and remedies of
a secured party under the UCC or under other applicable law, all of
which rights and remedies
shall be cumulative, and none of which shall be exclusive, to the
extent permitted by law, in
addition to any other rights and remedies contained in this
Agreement, and in any of the other
Loan Documents.
10.5 Take Possession of Collateral. The right of the Agent
to (a) enter upon the
Land, or any other place or places where the Collateral is located
and kept, through self-help and
without judicial process, without first obtaining a final judgment or
giving Borrower notice and
opportunity for a hearing on the validity of the Agent's or the
Banks' claim and without any
obligation to pay rent to Borrower, and remove the Collateral
therefrom to the premises of Agent
or any agent of Agent, for such time as Agent may desire, in order
to effectively collect or
liquidate the Collateral, and/or (b) require Borrower to assemble
the Collateral and make it
available to Agent at a place to be designated by Agent which is
reasonably convenient to both
Borrower and Agent.
10.6 Sale of Collateral. The right of the Agent to sell or to
otherwise dispose of
all or any of the Collateral, at public or private sale or sales, with
such notice as may be required
by law, in lots or in bulk, for cash or on credit, all as Agent, in its
sole discretion, may deem
advisable; such sales may be adjourned from time to time with or
without notice. Agent shall
have the right to conduct such sales on Borrower's premises or
elsewhere and shall have the right
to use Borrower's premises without charge for such sales for such
time or times as Agent may see
fit. Agent is hereby granted a license or other right to use, without
charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service
marks and advertising matter, or any property of a similar nature,
whether owned by Borrower or
with respect to which Borrower has rights under license, sublicense
or other agreements, as it
pertains to the Collateral, in preparing for sale, advertising for sale
and selling any Collateral and
Borrower's rights under all licenses and all franchise agreements
shall inure to the benefit of the
Agent and the Banks. Agent shall have the right to sell, lease or
otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination
thereof, and the Agent or any
Bank may purchase all or any part of the Collateral at public or, if
permitted by law, private sale
and, in lieu of actual payment of such purchase price, may set off
the amount of such price
against the Obligations. The proceeds realized from the sale of any
Collateral shall be applied
first to the costs, expenses and reasonable attorneys' fees and
expenses incurred by Agent for
collection and for acquisition, completion, protection, removal,
storage, sale and delivery of the
Collateral; second to interest due upon any of the Obligations; and
third to the principal of the
Obligations. If any deficiency shall arise, Borrower shall remain
liable to the Banks therefor.
10.7 Remedies Under Deed of Trust and Second Deed of
Trust. The right of
the Agent to sell or otherwise dispose of all or any of the
Mortgaged Property, in the manner
provided for in the Deed of Trust and the Second Deed of Trust
and all other rights and remedies
available to the Agent under the Deed of Trust and the Second
Deed of Trust.
10.8 Notice. Any notice required to be given by Agent of a
sale, lease, other
disposition of the Collateral or any other intended action by Agent,
given to Borrower in the
manner set forth in Section 13.8 below, ten (10) days prior to such
proposed action, shall
constitute commercially reasonable and fair notice thereof to
Borrower.
10.9 Appointment of Agent as Borrower's Lawful Attorney.
Borrower
irrevocably designates, makes, constitutes and appoints Agent (and
all persons designated by
Agent) as Borrower's true and lawful attorney, and Agent or
Agent's agent, may, without notice
to Borrower, and at such time or times thereafter as Agent or said
agent, in its sole discretion,
may determine, in Borrower's or Agent's name do all acts and
things necessary, in Agent's sole
discretion, to fulfill Borrower's obligations under this Agreement.
11. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement, it is
understood and agreed that
the Banks shall have no obligation to make any Loan unless and
until the following conditions
have been met, to the sole and complete satisfaction of the Banks,
the Agent and their respective
counsel:
11.1 No Injunction. No action, proceeding, investigation,
regulation or
legislation shall have been instituted, threatened or proposed before
any court, governmental
agency or legislative body to enjoin, restrain, or prohibit, or to
obtain substantial damages in
respect of, or which is related to or arises out of this Agreement or
the making of such Loan, or
which in the Banks' sole discretion, would make it inadvisable to
make such Loan.
11.2 No Material Adverse Change. Since October 2, 1993
there shall not have
occurred any material adverse change in Borrower's or any
Subsidiary's business, or any event,
condition, or state of facts which would be expected materially and
adversely to affect the
prospects of Borrower or any of its Subsidiaries subsequent to
consummation of the transactions
contemplated by this Agreement as determined by the Majority
Banks in their sole discretion.
11.3 No Default or Event of Default. There shall exist no
Default or Event of
Default or any event or condition which, with the making of the
Loans would constitute a
Default or Event of Default.
11.4 Regulatory Restrictions. Neither Borrower nor any of
its Subsidiaries
shall be subject to any applicable statute, rule, regulation, order,
writ or injunction of any court or
governmental authority or agency which would materially restrict
or hinder the conduct of
Borrower's or such Subsidiary's business as conducted on the date
hereof or which would have a
material adverse affect on the business, property, assets, operations
or condition, financial or
otherwise of Borrower or such Subsidiary.
11.5 Compliance with Law. The Agent shall have received
such evidence as it
may reasonably request that the Land and the Mortgaged Property
and the uses thereof comply in
all material respects with all applicable laws, regulations, codes,
orders, ordinances, rules and
statutes, including, without limitation, those relating to zoning and
environmental protection.
11.6 Documentation. The Agent and the Banks shall have
received the
following, each duly executed and delivered to the Agent and the
Banks, and each to be
satisfactory in form and substance to Agent and its counsel:
(a) the Notes;
(b) the Deed of Trust;
(c) the Second Deed of Trust;
(d) an amendment to that certain Environmental Indemnity
Agreement dated
June 3, 1993, reaffirming the warranties and representations made
by Borrower thereunder;
(e) a certificate signed by the chief executive officer and
chief financial
officer of Borrower dated as of the Closing Date, stating that the
representations and warranties
set forth in Article 5 hereof are true and correct in all material
respects on and as of such date
with the same effect as though made on and as of such date, stating
that Borrower is on such date
in compliance with all the terms and conditions set forth in this
Agreement on its part to be
observed and performed, and stating that on such date, and after
giving effect to the making of
any initial Loan no Default or Event of Default has occurred or is
continuing;
(f) a certificate executed by the chief financial officer of
Borrower dated as of
the Closing Date with respect to the Equipment owned by
Borrower;
(g) a certificate of the Secretary of Borrower dated as of the
Closing Date
certifying (i) that attached thereto is a true and correct copy of the
By-Laws of Borrower, as in
effect on the date of such certification, (ii) that attached thereto is a
true and complete copy of
Resolutions adopted by the Board of Directors of Borrower,
authorizing the execution, delivery
and performance of this Agreement and the other Loan
Documents; and (iii) as to the
incumbency and genuineness of the signatures of the officers of
Borrower executing this
Agreement or any of the other Loan Documents;
(h) a copy of the Articles of Incorporation of the Borrower,
and all
amendments thereto, certified by the Secretary of State of the State
of Delaware dated as of a
date close to the Closing Date;
(i) copies of all filing receipts or acknowledgements issued
by any
governmental authority to evidence any filing or recordation
necessary to perfect the Liens of
Agent in the Collateral and evidence in a form acceptable to the
Majority Banks that such Liens
constitute valid and perfected first priority Liens;
(j) a Good Standing Certificate for Borrower, issued by the
Secretary of State
of Texas, dated as of a date close to the Closing Date;
(k) certified copies of Borrower's casualty and liability
insurance policies with
evidence of the payment of the premium therefor, together, in the
case of such casualty policies,
with loss payable and mortgagee endorsements on Agent's standard
form naming Agent as loss
payee;
(l) the written opinion of Godwin & Carlton, counsel to
Borrower, dated as of
the Closing Date, in the form attached hereto as Exhibit E hereto,
as to the transactions
contemplated by this Agreement;
(m) assurance from a title insurance company satisfactory to
the Agent and the
Banks that such title insurance company is committed to cause the
Second Deed of Trust to be
recorded and, upon re cordation of the Second Deed of Trust, to
issue its ALTA lender's title
insurance policies in a form acceptable to the Agent and in
amounts satisfactory to the Agent,
showing the Second Deed of Trust as the "insured mortgage" and
insuring the validity and
priority of the Second Deed of Trust as a Lien upon the specified
Owned Real Property, subject
only to the First Deed of Trust, subordinated Lien in favor of John
Hancock Mutual Life
Insurance Company and to the Permitted Liens described in
clauses (b) - (d) of the definition
thereof;
(n) an amendment to the Subordination Agreement; and
(o) such other documents, instruments and agreements with
respect to the
transactions contemplated by this Agreement, in each case in such
form and containing such
additional terms and conditions as may be reasonably satisfactory
to the Majority Banks, and
containing, without limitation, representations and warranties
which are customary and usual in
such documents.
12. THE AGENT
12.1 Appointment, Powers and Immunities. Each Bank
hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder with
such powers as are
specifically delegated to the Agent by the terms of this Agreement,
together with such other
powers as are reasonably incidental thereto. The Agent (which
term as used in this sentence and
in Section 12.5 and the first sentence of Section 12.6 hereof shall
include reference to its
Affiliates and its own and its Affiliates' officers, directors,
employees and agents): (a) shall have
no duties or responsibilities except those expressly set forth in this
Agreement, and shall not by
reason of this Agreement be a trustee for any Bank; (b) shall not be
responsible to the Banks for
any recitals, statements, representations or warranties contained in
this Agreement or any of the
other Loan Documents, or in any certificate or other instrument,
document or agreement referred
to or provided for in, or received by any of them under, this
Agreement or any of the other Loan
Documents, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of
this Agreement, any Note or any of the other Loan Documents or
for any failure by any
Borrower or any other Person to perform any of its obligations
hereunder or thereunder; (c)
subject to Section 12.3 hereof, shall not be required to initiate or
conduct any litigation or
collection proceedings hereunder; and (d) shall not be responsible
for any action taken or omitted
to be taken by it hereunder or under any other agreement,
document or instrument referred to or
provided for herein or in connection herewith, except for its own
gross negligence or willful
misconduct. The Agent may employ agents and attorneys-in-fact
and shall not be responsible for
the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
The Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof
unless and until a written notice of the assignment or transfer.
12.2 Reliance by Agent. The Agent shall be entitled to rely
upon any
certification, notice or other communication (including any thereof
by telephone, telex, facsimile,
telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel,
independent accountants and other experts selected by the Agent.
As to any matters not
expressly provided for by this Agreement, the Agent shall in all
cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with
instructions signed by the
Majority Banks, and such instructions of the Majority Banks and
any action taken or failure to
act pursuant thereto shall be binding on all of the Banks.
12.3 Defaults. The Agent shall not be deemed to have
knowledge or notice of
the occurrence of a Default or Event of Default (other than the
non-payment of principal of or
interest on Loans) unless the Agent has received notice from a
Bank or the Borrower specifying
such Default or Event of Default and stating that such notice is a
"Notice of Default". In the
event that the Agent receives such a notice of the occurrence of a
Default or Event of Default, the
Agent shall give prompt notice thereof to the Banks (and shall give
each Bank prompt notice of
each such non-payment). The Agent shall (subject to Section 12.7
hereof) take such action with
respect to such Default or Event of Default as shall be directed by
the Majority Banks, provided
that, unless and until the Agent shall have received such directions,
the Agent may (but shall not
be obligated to) take such action, or refrain from taking such
action, with respect to such Default
or Event of Default as it shall deem advisable in the best interest of
the Banks.
12.4 Rights as a Bank. With respect to its Loan Percentage
and the Loans made
by it, Creditanstalt (and any successor acting as Agent) in its
capacity as a Bank hereunder shall
have the same rights and powers hereunder as any other Bank and
may exercise the same as
though it were not acting as the Agent, and the term "Bank" or
"Banks" shall, unless the context
otherwise indicates, include the Agent in its individual capacity.
Creditanstalt (and any
successor acting as Agent) and its Affiliates may (without having
to account therefor to any
Bank) accept deposits from, lend money to and generally engage in
any kind of banking, trust or
other business with Borrower (and any of its Affiliates) as if it
were not acting as the Agent, and
Creditanstalt and its Affiliates may accept fees and other
consideration from Borrower for
services in connection with this Agreement or otherwise without
having to account for the same
to the Banks.
12.5 Indemnification. The Banks agree to indemnify the
Agent (to the extent
not reimbursed under Sections 13.6 or 13.14 hereof, but without
limiting the obligations of
Borrower under said Sections 13.6 and 13.14), for their Loan
Percentage of any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or
disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of
this Agreement or any other
instruments, documents or agreements contemplated by or referred
to herein or the transactions
contemplated hereby (including, without limitation, the costs and
expenses which Borrower is
obligated to pay under Section 13.6 hereof but excluding, unless an
Event of Default has
occurred and is continuing, normal administrative costs expenses
incident to the performance of
its agency duties hereunder) or the enforcement of any of the terms
hereof or of any such other
instruments, documents or agreements, provided that no Bank shall
be liable for any of the
foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to
be indemnified.
12.6 Non-Reliance on Agent and other Banks. Each Bank
agrees that it has,
independently and without reliance on the Agent or any other
Bank, and based on such
documents and information as it has deemed appropriate, made its
own credit analysis of the
Borrower and its own decision to enter into this Agreement and
that it will, independently and
without reliance upon the Agent or any other Bank, and based on
such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and
decisions in taking or not taking action under this Agreement. The
Agent shall not be required to
keep itself informed as to the performance or observance by the
Borrower of this Agreement or
any other instrument, document or agreement referred to or
provided for herein or to inspect the
properties or books of the Borrower. Except for notice, reports and
other documents and
information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent
shall not have any duty or responsibility to provide any Bank with
any credit or other
information concerning the affairs, financial condition or business
of the Borrower (or any of its
Affiliates) which may come into the possession of the Agent or any
of its Affiliates.
12.7 Failure to Act. Except for action expressly required of
the Agent
hereunder, the Agent shall in all cases be fully justified in failing or
refusing to act hereunder
unless it shall receive further assurances to its satisfaction from the
Banks of their
indemnification obligations under Section 12.5 hereof against any
and all liability and expense
which may be incurred by it by reason of taking or continuing to
take any such action.
12.8 Resignation or Removal of Agent; Co-Agent.
(a) Subject to the appointment and acceptance of a successor
Agent as provided
below, the Agent may resign at any time by giving notice thereof
to the Banks and the Borrower
and the Agent may be removed at any time with cause by the
Majority Banks. Upon any such
resignation or removal, the Majority Banks shall have the right to
appoint a successor Agent. If
no successor Agent shall have been so appointed by the Majority
Banks and shall have accepted
such appointment with 30 days after the retiring Agent's giving of
notice of resignation or the
Majority Bank's removal of the retiring Agent, the retiring Agent
may, on behalf of the Banks,
appoint a successor Agent, which shall be a bank which has a
combined capital and surplus of at
least Five Hundred Million Dollars ($500,000,000). Upon the
acceptance of any appointment as
Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged
from its duties and obligations hereunder. After any retiring
Agent's resignation or removal
hereunder as Agent, the provisions of this Section 12 shall continue
in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it
was acting as the Agent.
(b) In the event that applicable law imposes any restrictions on
the identity of an
agent such as the Agent or requires the appointment of any
co-agent in connection therewith, the
Agent may, in its discretion, for the purpose of complying with
such restrictions, appoint one or
more co-agents hereunder. Any such Co- Agent(s) shall have the
same rights, powers, privileges
and obligations as the Agent and shall be subject to and entitled to
the benefits of all provisions
of this Agreement and the Loan Documents relative to the Agent.
In addition to any rights of the
Majority Banks set forth in subsection (a) above, any such
Co-Agent may be removed at any
time by the Agent.
13. MISCELLANEOUS
13.1 Intellectual Property License. Agent is hereby granted
a non-exclusive,
assignable license or other right to use, without charge, Borrower's
copyrights, patents, patent
applications, designs, rights of use, or any property of a similar
nature, whether owned by
Borrower or with respect to which Borrower has rights under
license, sublicense or other
agreements (collectively, the "Intellectual Property Rights"), to the
extent such Intellectual
Property Rights are necessary for the proper operation of, or are
used by Borrower in the
operation of, the Collateral or the Mortgaged Property. Such
license (a) may only be used in
connection with the operation of the Collateral and the Mortgaged
Property, (b) shall terminate
upon the payment in full of the Obligations at any time when there
does not exist an Event of
Default, and (c) shall become perpetual (and shall survive the
termination of this Agreement)
upon the transfer of any of the Collateral or the Mortgaged
Property in foreclosure of the Agent's
Liens in such Collateral or Mortgaged Property, whether such
foreclosure is by right of private
sale, judicial sale, deed in lieu, retention in satisfaction of the
Obligations or otherwise.
Borrower agrees, at the request of the Agent or the Majority Banks,
to take any and all actions
and to execute, deliver and/or record any and all instruments,
documents, licenses or agreements,
as may be necessary or appropriate to confirm the foregoing
license and/or evidence such license
in any public record.
13.2 Waiver. Each and every right and remedy granted to
the Agent and the
Banks under this Agreement, or any other document delivered
hereunder or in connection
herewith or allowed it by law or in equity, shall be cumulative and
may be exercised from time
to time. No failure on the part of the Agent or any Bank to
exercise, and no delay in exercising,
any right or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by
the Agent or any Bank of any right or remedy preclude any other
or future exercise thereof or the
exercise of any other right or remedy. No waiver by the Agent or
the Banks of any Default or
Event of Default shall constitute a waiver of any subsequent
Default or Event of Default.
13.3 Survival. All representations, warranties and covenants
made herein shall
survive the execution and delivery of all of the Loan Documents.
The terms and provisions of
this Agreement shall continue in full force and effect until all of
the Obligations have been
indefeasibly paid in full; provided, further, that Borrower's
obligations under Sections 3.6, 3.7,
13.6 and 13.14 shall survive the termination of this Agreement.
13.4 Assignments; Successors and Assigns.
(a) This Agreement is a continuing obligation and binds,
and the benefits
hereof shall inure to, Borrower, Agent and each Bank and their
respective successors and assigns
provided, that Borrower may not transfer or assign any or all of its
rights or obligations
hereunder without the prior written consent of all of the Banks.
(b) Any Bank may, in the ordinary course of its commercial
banking business
and in accordance with the applicable law, at any time sell to one
or more banks or other entities
("Participants") participating interests in any Loans owing to such
Bank, any of the Notes held by
such Bank, or any other interests of such Bank hereunder.
Borrower agrees that each Participant
shall be entitled to the benefits of Section 3.7 and 13.14 with
respect to its participation; provided
that no Participant shall be entitled to receive any greater amount
pursuant to such Section than
such Bank would have been entitled to receive in respect of the
amount of the participation
transferred by such Bank to such Participant had no such transfer
occurred.
(c) Each Bank may, in the ordinary course of its commercial
banking business
and in accordance with applicable law, at any time assign, pursuant
to an assignment
substantially in the form of Exhibit F attached hereto and
incorporated herein by reference,
without the Borrower's consent, to one or more banks having
unimpaired capital and surplus of
$250,000,000 or more or may assign with the Borrower's consent
(which shall not be
unreasonably withheld) to any other entities (in either case,
"Assignees") all or any part of any
Loans owing to such Bank, any of the Notes held by such Bank, or
any other interest of such
Bank hereunder; provided, however, that any such assignment
shall be in a minimum principal
amount of Two Million Dollars ($2,000,000). Borrower and the
Banks agree that to the extent of
any assignment the Assignee shall be deemed to have the same
rights and benefits with respect to
Borrower under this Agreement and any of the Notes as it would
have had if it were a Bank
hereunder on the date hereof and the assigning Bank shall be
released from its obligations
hereunder, to the extent of such assignment.
(d) Borrower authorizes each Bank to disclose to any
Participant or Assignee
("Transferee") and any prospective Transferee any and all financial
information in such Bank's
possession concerning Borrower which has been delivered to such
Bank by Borrower pursuant to
this Agreement or which has been delivered to such Bank by
Borrower in connection with such
Bank's credit evaluation of Borrower prior to entering into this
Agreement.
(e) Any Bank shall be entitled to have any Note held by it
subdivided in
connection with a permitted assignment of all or any portion of
such Note and the respective
Loans evidenced thereby pursuant to Section 13.4(c) above. In the
case of any such subdivision,
the new Note (the "New Note") issued in exchange for a Note (the
"Old Note") previously issued
hereunder (i) shall be substantially in the form of Exhibit B hereto,
(ii) shall be dated the date of
such assignment, (iii) shall be otherwise duly completed and (iv)
shall bear a legend, to the effect
that such New Note is issued in exchange for such Old Note and
that the indebtedness
represented by such Old Note shall not have been extinguished by
reason of such exchange.
Without limiting the obligations of Borrower under Section 13.6
hereof, the Banks shall use
reasonable best efforts to ensure that any such assignment does not
result in the imposition of
any intangibles, documentary stamp and other taxes, if any, which
may be payable in connection
with the execution and delivery of any such New Note.
(f) If, pursuant to this subsection, any interest in this
Agreement or any of the
Notes is transferred to any Transferee which is organized under the
laws of any jurisdiction other
than the United States or any State thereof, the Bank making such
transfer shall cause such
Transferee, concurrently with the effectiveness of such transfer, (i)
to represent to such Bank (for
the benefit of such Bank and Borrower) that under applicable law
and treaties no taxes will be
required to be withheld by such Bank or Borrower with respect to
any payments to be made to
such Transferee hereunder or in respect of the Loans, (ii) to furnish
to such Bank and Borrower
either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001
(wherein such Transferee claims entitlement to complete
exemption from U.S. federal
withholding tax on all payments hereunder) and (iii) to agree (for
the benefit of such Bank and
Borrower) to provide such Bank and Borrower a new Form 4224
or Form 1001 upon the
obsolescence of any previously delivered form and comparable
statements in accordance with
applicable U.S. laws and regulations and amendments duly
executed and completed by such
Transferee, and to comply from time to time with all applicable
U.S. laws and regulations with
regard to such withholding tax exemption.
13.5 Counterparts. This Agreement may be executed in two
or more
counterparts, each of which when fully executed shall be an
original, and all of said counterparts
taken together shall be deemed to constitute one and the same
agreement. Any signature page to
this Agreement may be witnessed by a telecopy or other facsimile
of any original signature page
and any signature page of any counterpart hereof may be appended
to any other counterpart
hereof to form a completely executed counterpart hereof.
13.6 Expense Reimbursement. Borrower agrees to
reimburse the Agent for all
of the Agent's expenses incurred in connection with the
development, preparation, execution,
delivery, modification, regular review and administration of this
Agreement, the Notes and the
other Loan Documents, including audit costs, appraisal costs, the
cost of searches, filings and
filing fees, taxes and the fees and disbursements of Agent's
attorneys, Messrs. Troutman Sanders,
and any counsel retained by them, and all costs and expenses
incurred by the Agent and the
Banks (including attorney's fees and disbursements) to: (i)
commence, defend or intervene in
any court proceeding; (ii) file a petition, complaint, answer,
motion or other pleading, or to take
any other action in or with respect to any suit or proceeding
(bankruptcy or otherwise) relating to
the Collateral, the Mortgaged Property or this Agreement, the Deed
of Trust, the Notes or any of
the other Loan Documents; (iii) protect, collect, lease, sell, take
possession of, or liquidate any of
the Collateral or the Mortgaged Property; (iv) attempt to enforce
any Lien in any of the Collateral
or the Mortgaged Property or to seek any advice with respect to
such enforcement; and (v)
enforce any of the Agent's and the Banks' rights to collect any of
the Obligations. Borrower also
agrees to pay, and to save harmless the Agent and the Banks from
any delay in paying, any
intangibles, mortgage, documentary stamp and other taxes, if any,
which may be payable in
connection with the execution and delivery of this Agreement, the
Notes or any of the other Loan
Documents, or the recording of any thereof, or in any modification
hereof or thereof.
Additionally, Borrower shall pay to the Agent and each Bank on
demand any and all fees, costs
and expenses which the Agent or such Bank pays to a bank or
other similar institution arising out
of or in connection with (a) the forwarding to Borrower or any
other Person on Borrower's
behalf, by the Agent or such Bank of proceeds of any Loan and (b)
the depositing for collection
by of any check or item of payment received by or delivered to the
Agent or such Bank on
account of the Obligations. Borrower's obligations under this
Section shall survive the
termination of this Agreement and the repayment of the
Obligations.
13.7 Severability. If any provision of this Agreement or any
of the Loan
Documents or the application thereof to any party thereto or
circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement or
such Loan Documents and the
application of such provisions to any other party thereto or
circumstance shall not be affected
thereby and shall be enforced to the greatest extent permitted by
law.
13.8 Notices. All notices, requests, demands and other
communications under
this Agreement shall be in writing and shall be deemed to have
been given or made when (a)
delivered by hand, (b) sent by telex or telecopier (with receipt
confirmed), provided that a copy is
mailed by certified mail, return receipt requested, or (c) except as
otherwise provided herein,
deposited in the mail, registered or certified mail, postage prepaid,
addressed to such party at the
"Address for Notices" specified below its name on the signature
pages hereto or to such other
address as may be designated hereafter in writing by the respective
parties hereto.
13.9 Entire Agreement - Amendment. This Agreement and
the Loan
Documents constitute the entire agreement between the parties
hereto with respect to the subject
matter hereof and supersede all prior negotiations, understandings
and agreements between such
parties in respect of such subject matter, including, without
limitation, as set forth in that certain
commitment letter dated June 17, 1994 from Creditanstalt to
Borrower, accepted by Borrower
June 20, 1994. Neither this Agreement nor any provision hereof
may be changed, waived,
discharged, modified or terminated except pursuant to a written
instrument signed by Borrower,
the Agent and the Majority Banks or by the Borrower and the
Agent acting with the consent of
the Majority Banks; provided, however, that no such amendment,
waiver, discharge,
modification or termination shall, except pursuant to an instrument
signed by Borrower, the
Agent and all of the Banks or by the Borrower and the Agent
acting with the consent of all of the
Banks, (a) extend the date fixed for the payment of principal of, or
interest on, any Loan; (b)
reduce the amount of any payment of principal of, or the rate of
interest on, any Loan (except for
changes in interest rates pursuant to Section 3.1(b) hereof); (c)
reduce any fee payable hereunder;
(d) alter the terms of this Section 13.9; (e) release any collateral
securing the Loans, or any
portion thereof; (f) change the Loan Percentage of any Bank; or (g)
amend the definitions of the
term "Majority Banks" set forth in Section 1.1 hereof; provided,
further, that any amendment,
waiver, discharge modification or termination of any provision of
Section 12 hereof, or which
increases the obligations of the Agent hereunder, shall require the
written consent of the Agent.
13.10 Time of the Essence. Time is of the essence in this
Agreement and the
other Loan Documents.
13.11 Interpretation. No provision of this Agreement
shall be construed against
or interpreted to the disadvantage of any party hereto by any court
or other governmental or
judicial authority by reason of such party having or being deemed
to have structured or dictated
such provision.
13.12 Banks Not a Joint Venturer. Neither this
Agreement nor any agreements,
instruments, documents or transactions contemplated hereby
(including the Loan Documents)
shall in any respect be interpreted, deemed or construed as making
the Agent or the Banks a
partner or joint venturer with Borrower or as creating any similar
relationship or entity, and
Borrower agrees that it will not make any assertion, contention,
claim or counterclaim to the
contrary in any action, suit or other legal proceeding involving the
Agent or the Banks and
Borrower.
13.13 Cure of Defaults by Banks. If, hereafter, Borrower
defaults in the
performance of any duty or obligation to the Agent and the Banks
hereunder, the Agent or any
Bank may, at its option, but without obligation, cure such default
and any costs, fees and
expenses incurred by the Agent or such Bank in connection
therewith including, without
limitation, for payment on mortgage or note obligations, for the
purchase of insurance, the
payment of taxes and the removal or settlement of Liens and
claims, shall be included in the
Obligations and be secured by the Collateral and the Mortgaged
Property.
13.14 Indemnity. In addition to any other indemnity
provided for herein, or in
the other Loan Documents, Borrower hereby indemnifies the
Agent and each Bank from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever
(including, without limitation,
fees and disbursements of counsel) which may be imposed on,
incurred by, or asserted against
the Agent or such Bank in any litigation, proceeding or
investigation instituted or conducted by
any governmental agency or instrumentality or any other Person
(other than Borrower) with
respect to any aspect of, or any transaction contemplated by, or
referred to in, or any matter
related to, this Agreement or the other Loan Documents, or the
other transactions contemplated
hereby, whether or not Agent or such Bank is a party thereto,
except to the extent that any of the
foregoing arises out of gross negligence or willful misconduct of
Agent or such Bank, as the case
may be. Borrower's obligations under this Section shall survive
the termination of this
Agreement and the repayment of the Obligations.
13.15 Attorney-in-Fact. Borrower hereby designates,
appoints and empowers
Agent irrevocably as its attorney-in-fact, at Borrower's cost and
expense, to do in the name of
Borrower any and all actions which Agent may deem necessary or
advisable to carry out the
terms hereof upon the failure, refusal or inability of Borrower to do
so, and Borrower hereby
agrees to indemnify and hold Agent harmless from any costs,
damages, expenses or liabilities
arising against or incurred by the Agent in connection therewith
except to the extent that any of
such costs, damages, expenses or liabilities arise out of Agent's
gross negligence or willful
misconduct.
13.16 Sole Benefit. The rights and benefits set forth in
this Agreement and in
the other Loan Documents are for the sole and exclusive benefit of
the parties thereto and may be
relied upon only by them.
13.17 Termination Statements. Borrower acknowledges
and agrees that it is
Borrower's intent that all financing statements filed hereunder shall
remain in full force and
effect until this Agreement shall have been terminated in
accordance with the provisions hereof,
even if, at any time or times prior to such termination, no loans or
Loans shall be outstanding
hereunder. Accordingly, Borrower waives any right which it may
have under Section 9-404(1)
of the UCC to demand the filing of termination statements with
respect to the Collateral, and
agrees that the Agent shall not be required to send such termination
statements to Borrower, or to
file them with any filing office, unless and until this Agreement
shall have been terminated in
accordance with its terms and all Obligations paid in full in
immediately available funds. Upon
such termination and payment in full, Agent shall execute
appropriate termination statements and
deliver the same to Borrower.
13.18 Governing Law; Jurisdiction. THIS AGREEMENT
AND THE OTHER
LOAN DOCUMENTS, AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER, SHALL BE GOVERNED
BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK (WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
BORROWER HEREBY (A)
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK AND OF ANY NEW
YORK STATE COURT SITTING IN NEW YORK CITY FOR
THE PURPOSES OF ALL
LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND
(B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF THE
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT OR ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. NOTWITHSTANDING
ANYTHING HEREIN TO THE
CONTRARY, NOTHING HEREIN SHALL LIMIT THE RIGHT
OF THE AGENT OR THE
BANKS TO BRING PROCEEDINGS AGAINST BORROWER
IN THE COURTS OF ANY
OTHER JURISDICTION.
13.19 Waiver of Jury Trial. BORROWER, AGENT AND
EACH BANK EACH
HEREBY KNOWINGLY, INTELLIGENTLY AND
INTENTIONALLY WAIVES ANY AND
ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LEGAL
PROCEEDING BASED ON OR ARISING OUT OF, UNDER, IN
CONNECTION WITH, OR
RELATING TO THIS AGREEMENT, ANY OF THE NOTES,
ANY OF THE OTHER LOAN
DOCUMENTS, THE TRANSACTIONS CONTEMPLATED
HEREBY, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR
WRITTEN), OR ACTIONS OF BORROWER, AGENT OR ANY
BANK. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE BANKS MAKING
THE LOANS TO
BORROWER.
IN WITNESS WHEREOF, each of Borrower, the Agent and the
Banks has set its hand
and seal as of the day and year first above written.
"BORROWER"
PILGRIM'S PRIDE CORPORATION
By: Lonnie A. Pilgrim
Chief Executive Officer
Attest: Clifford E. Butler
Chief Financial Officer
[CORPORATE SEAL]
Address for Notices:
Pilgrim's Pride Corporation
110 South Texas
P.O. Box 93
Pittsburg, Texas 75686
Attn: Mr. Clifford E. Butler
Telecopy Number: (903) 856-7505
with a copy to:
Godwin & Carlton
901 Main Street
Dallas, Texas 75202
Attn: James R. Vetter, Esq.
Telecopy Number: (214) 760-7332
[Signatures continued on following page] [Signatures continued from
previous page]
"AGENT"
CREDITANSTALT-BANKVEREIN
By: Robert M. Biringer
Senior Vice President
By: Gregory F. Mathis
Vice President
Address for Notices:
Creditanstalt-Bankverein
245 Park Avenue
New York, New York 10167
Attn: Dennis O'Dowd
Telecopy Number: (212) 851-1234
with copies to:
Creditanstalt-Bankverein
Two Ravinia Drive
Suite 1680
Atlanta, Georgia 30346
Attn: Robert M. Biringer/Joseph P. Longosz
Telecopy Number: (404) 390-1851
and
Troutman Sanders
NationsBank Plaza, Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Hazen H. Dempster, Esq.
Telecopy Number: (404) 885-3900
Commitment
"BANKS"
CREDITANSTALT-BANKVEREIN
$10,000,000
By: Robert M. Biringer
Senior Vice President
By: Gregory F. Mathis
Vice President
Address for Notices:
Creditanstalt-Bankverein
245 Park Avenue
New York, New York 10167
Attn: Dennis O'Dowd
Telecopy Number: (212) 851-1234
with copies to:
Creditanstalt-Bankverein
Two Ravinia Drive
Suite 1680
Atlanta, Georgia 30346
Attn: Robert M. Biringer/Joseph P. Longosz
Telecopy Number: (404) 390-1851
and
Troutman Sanders
NationsBank Plaza, Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Hazen H. Dempster, Esq.
Telecopy Number: (404) 885-3900
EXHIBIT "E"
Form of Opinion of Godwin & Carlton
SECOND AMENDMENT TO GUARANTEE AGREEMENT
SECOND AMENDMENT TO GUARANTEE AGREEMENT (this "Second Amendment"),
dated as of October 2, 1994, by and among LONNIE A. PILGRIM, an individual
residing in the State of Texas ("L. Pilgrim") and PATTY R. PILGRIM, an
individual residing in the State of Texas ("P. Pilgrim") (L. Pilgrim and P.
Pilgrim being hereinafter referred to, individually, as a "Guarantor" and,
collectively, as the "Guarantors") and STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, N.A., as Security Trustee under an Amended and Restated
Collateral Trust Indenture, dated as of September 21, 1990 (as amended to
and including the date hereof, the "Indenture"), between Pilgrim's Pride
Corporation, a Delaware corporation, and State Street Bank and Trust
Company of Connecticut, N.A., as Security Trustee (referred to herein as
the "Security Trustee", which term shall also include its successors and
assigns, including, without limitation, any successor security trustee
under said Indenture).
W I T N E S S E T H:
WHEREAS, the Guarantors have guaranteed the payment and
performance of all obligations of Pilgrim's Pride Corporation arising
under, or in respect of (i) all Notes at any time issued or delivered
pursuant to the Indenture or delivered in substitution and exchange
therefor, (ii) the Indenture, and (iii) certain other obligations, pursuant
to a certain Guarantee Agreement dated as of October 1, 1986 (as amended by
a First Amendment dated as of September 21, 1990, the "Existing
Guarantee"), and
WHEREAS, the Guarantors currently own sixty-five percent (65%) of
the issued and outstanding common stock of Pilgrim's Pride Corporation; and
WHEREAS, the Guarantors have requested certain modifications to
the Existing Guarantee which modifications are acceptable to the holders of
the Notes; and
WHEREAS, the holders of the Notes have instructed the Security
Trustee to execute and deliver this Second Amendment to Guarantee
Agreement.
NOW THEREFORE, the Security Trustee and the Guarantors hereby
agree as follows:
Section 1. Deletion of Certain Sections of Existing
Guarantee. Sections 1A, 1B and Schedule A of the Existing Guarantee are
hereby deleted.
Section 2. Stock Ownership. Section 2.1(i) of the Existing
Guarantee is hereby deleted, and a new Section 2.1(g) is hereby added to
the Existing Guarantee, as follows:
(g) Ownership -- the Guarantors or their respective executors
or administrators shall at any time fail to own, in the aggregate, at least
51% of the Common Stock outstanding at such time, or any Common Stock owned
by either or both of the Guarantors shall be subject to any pledge or other
encumbrance whatsoever.
Section 3. Amendments to Defined Terms. Section 3.1 of
the Existing Guarantee is hereby amended by redefining the following terms
as follows:
Agreement -- the eighth recital to this Agreement.
Existing Note Purchase Agreement -- the sixth recital to this
Agreement.
Guarantee Agreement -- the eighth recital to this Agreement.
Indenture -- that certain amended and restated Collateral Trust
Indenture dated as of September 21, 1990, between Pilgrim's Pride
Corporation and State Street Bank and Trust Company of Connecticut, N.A.,
as Security Trustee, as the same may be amended or supplemented from time
to time.
1990 Note Purchase Agreement -- the sixth recital to this
Agreement.
Series C Notes -- the fourth recital to this agreement.
Series D Notes -- the fourth recital to this agreement.
Section 4. Financing Documents. Each of the Financing
Documents is hereby amended and modified to the extent that all references
therein to, and descriptions therein of, the Existing Guarantee shall be
deemed to refer to and describe the Existing Guarantee as amended and
modified by this Second Amendment.
Section 5. Modification: Full Force and Effect. The parties
hereto hereby acknowledge and agree that, except as provided in this Second
Amendment, the Existing Guarantee remains in full force and effect.
Section 6. Counterparts. This Second Amendment may be
executed in two or more counterparts, each of which shall be deemed an
original, and all of which, taken together, shall constitute and be taken
as one and the same instrument.
IN WITNESS THEREOF, the parties hereto have executed this Second
Amendment as of the date first hereinabove mentioned.
LONNIE A. PILGRIM
PATTY R. PILGRIM
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, N.A.,
as Security Trustee
By: Michael J. D'Angelico
Its Vice President
SUPPLEMENTAL INDENTURE
RE: PILGRIM'S PRIDE CORPORATION
THIS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of October 2, 1994, between PILGRIM'S PRIDE CORPORATION (the "Company"),
a Delaware corporation, and STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, N.A., as trustee (together with any successor security
trustee, herein referred to as the "Security Trustee") for the trust
created by the Amended and Restated Collateral Trust Indenture (as amended
and in effect immediately prior to the effectiveness of this Supplemental
Indenture, the "Existing Indenture," and as amended and/or supplemented
from time to time, the "Trust Indenture"), dated as of September 21, 1990,
between the Security Trustee and the Company.
RECITALS:
WHEREAS, the Company heretofore duly executed and delivered under
the Existing Indenture (a) a Series of Notes limited, except as otherwise
provided in the Existing Indenture, in aggregate principal amount to Twelve
Million Dollars ($12,000,000), to be known as its 9.55% Senior Secured
Notes, Series A, due October 1, 1998 (hereinafter sometimes called, and as
more particularly defined in Section 2.1 of the Existing Indenture, the
"Series A Notes"), (b) a Series of Notes limited, except as otherwise
provided in the Existing Indenture, in aggregate principal amount to Eight
Million Dollars ($8,000,000), to be known as its Variable Rate Senior
Secured Notes, Series B, due October 1, 1992 (hereinafter sometimes called,
and as more particularly defined in Section 2.1 of the Existing Indenture,
the "Series B Notes"), (c) a Series of Notes limited, except as otherwise
provided in the Existing Indenture, in aggregate principal amount to
$22,000,000, to be known as its 10.49% Senior Secured Notes, Series C, due
September 21, 2002 (hereinafter sometimes called, and as more particularly
defined in Section 2.1 of the Existing Indenture, the "Series C Notes"),
and (d) a Series of Notes limited, except as otherwise provided in the
Existing Indenture, in aggregate principal amount to $18,000,000, to be
known as its Variable Rate Senior Secured Notes, Series D, due December 31,
1996 (hereinafter sometimes called, and as more particularly defined in
Section 2.1 of the Existing Indenture, the "Series D Notes"); and
WHEREAS, the Series B Notes were exchanged for Series D Notes on
October 5, 1990 and additional Series D Notes were issued in conjunction
therewith; and
WHEREAS, the Series D Notes have been prepaid in full; and
WHEREAS, the Series A Notes and the Series C Notes are the only
Notes still outstanding as of the date on which this Supplemental Indenture
becomes effective; and
WHEREAS, the Company has requested that certain financial
covenants in the Existing Indenture be modified; and
WHEREAS, the Company and all the holders of Notes wish to cancel
the effect of the Supplemental Indentures dated as of December 9, 1991 and
as of March 28, 1992, respectively, and to otherwise supplement the
Existing Indenture pursuant to this Supplemental Indenture; and
WHEREAS, in accordance with Section 9.2 of the Existing Indenture,
all holders of Notes, as of the date hereof, have consented to the terms,
provisions and conditions of, and have directed the Security Trustee to
enter into, this Supplemental Indenture; and
WHEREAS, for purposes of this Supplemental Indenture, the
capitalized terms used herein and not defined herein shall have the
respective meanings given to such terms in the Existing Indenture; and
WHEREAS, all acts and proceedings required by law and by the
Certificate of Incorporation and By-laws of the Company necessary to
constitute this Supplemental Indenture a valid and binding agreement for
the uses and purposes herein set forth, in accordance with its terms, have
been done and taken, and the execution and delivery of this Supplemental
Indenture have been in all respects duly authorized;
AGREEMENT:
NOW THEREFORE, THIS AGREEMENT AND SUPPLEMENTAL INDENTURE
WITNESSETH, that to set forth the terms and conditions with respect to all
of the Notes now and hereafter issued and delivered and outstanding under
the Existing Indenture, and in consideration of the premises and of the
covenants herein contained, the consent of the holders of Notes to the
provisions of this Supplemental Indenture and the sum of $1.00 paid to the
Security Trustee by the Company at or before the delivery hereof, the
receipt and sufficiency of which are hereby acknowledged, it is hereby
covenanted and agreed by and between the parties hereto that all of the
Notes issued under the Existing Indenture are to be issued, delivered and
outstanding subject to the further covenants, conditions, uses and trusts
hereinafter set forth and set forth in the Trust Indenture; and the
Company, for itself and its successors, does hereby covenant and agree to
and with the Security Trustee with respect to said trust, for the benefit
of all present and future holders of the Notes as follows:
ARTICLE 1 DEFINITIONS.
Article 1 of the Existing Indenture is hereby amended and restated
to read in its entirety as follows:
Section 1.1 Certain Definitions. For purposes of this
Indenture, the following terms shall have the respective meanings set forth
below or provided for in the section of this Indenture referred to
immediately following such term (such definitions, unless otherwise
expressly provided, to be equally applicable to both the singular and
plural forms of the terms defined):
Acceptable Bank -- a commercial bank organized under the
laws of the United States or any state thereof, having deposits of not less
than One Hundred Million Dollars ($100,000,000).
Acceptable Repurchase Securities -- means United States
Government Securities, Bankers Acceptances and certificates of deposit from
an Acceptable Bank.
Acceptable Transferor -- means any corporate entity not an
Affiliate which is organized under the laws of the United States of America
or any State thereof, which has capital, surplus and undivided profits
aggregating at least One Hundred Million Dollars ($100,000,000) and in
which the Company and its Subsidiaries shall not have, at any one time,
made Investments having an aggregate value in excess of Five Million
Dollars ($5,000,000).
Adjusted Funded Debt -- with respect to any Person, means
without duplication
(1) its liabilities for borrowed money, other
than Current Debt;
(2) liabilities secured by any Lien existing
on Property owned by such Person (whether or not such liabilities have been
assumed) other than Current Debt;
(3) the present value of all payments due
under any lease or under any other arrangement for retention of title
(discounted at the implicit rate if known or 8% per annum otherwise) if
such lease or other arrangement is in substance (a) a financing or capital
lease (including any lease (i) under which the lessee has or will have an
option to purchase the Property subject thereto at a nominal amount or an
amount less than a reasonable estimate of the Fair Market Value of such
Property at the date of such purchase, (ii) with respect to which the
lessor has filed a financing statement other than for information purposes
with respect to an operating lease, (iii) with respect to which the present
value of all rental and other fixed payments due under such lease is equal
to or exceeds ninety percent (90%) of the remainder of (x) the fair value
of the Property subject thereto minus (y) the amount of any related
investment tax credit retained by the lessor under such lease, or (iv) the
term of which approximates or exceeds seventy- five percent (75%) of the
reasonably estimated economic life of the Property subject thereto), (b) an
arrangement for the retention of title for security purposes, or (c) an
installment purchase;
(4) its liabilities under Guaranties; and
(5) any other obligations (other than
deferred taxes) which are required by generally accepted accounting
principles to be shown as liabilities on its balance sheet and which are
payable or remain unpaid more than one (1) year from the creation thereof.
Adjusted Tangible Assets -- means at any time, with
respect to any Person, all assets of such Person (including, without
duplication, the capitalized value of any leasehold interest under any
financing lease constituting Adjusted Funded Debt) except:
(a) deferred assets, other than prepaid
insurance and prepaid taxes;
(b) patents, copyrights, trademarks, trade
names, franchises, goodwill, experimental expense and other similar
intangibles;
(c) Restricted Investments;
(d) unamortized debt discount and expense;
and
(e) assets reflecting the capitalized value
of leased property (or reflecting any improvement thereto), to the extent
that the leases of such property are not reflected in, or do not
constitute, Adjusted Funded Debt.
Advance Closing Date -- means any date on or prior to
October 31, 1990 on which Series D Notes are sold by the Company to a
purchaser thereof in accordance with the provisions of the Note Purchase
Agreement in respect thereof.
Affiliate -- a Person (other than a Subsidiary) (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with any one or more of the
Company and its Subsidiaries, (b) which beneficially owns or holds five
percent (5%) or more of any class of the Voting Stock of any one or more of
the Company and its Subsidiaries or (c) five percent (5%) or more of the
Voting Stock (or in the case of a Person which is not a corporation, five
percent (5%) or more of the equity interest) of which is beneficially owned
or held by any one or more of the Company and its Subsidiaries. The term
"control" means the possession, directly or indirectly, 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.
Amended and Restated Collateral Trust Indenture, this
Trust Indenture, this Agreement or this Indenture -- this Amended and
Restated Collateral Trust Indenture, as the same may from time to time be
amended.
Applicable Premium Amount -- means, at any time and with
respect to the outstanding principal amount of Notes of any Series of Notes
then required to be paid or prepaid, the following percentage of such
outstanding principal amount of Notes of such Series then required to be
paid or prepaid:
(i) with respect to any Series of Notes if at
such time the Company is not permitted to optionally prepay such
outstanding principal of Notes of such Series pursuant to the provisions of
this Indenture, a percentage equal to the greater of (a) the rate of
interest per annum stated in the Notes of such Series to be in effect on
the date immediately preceding such payment or (b) the Make Whole Amount
with respect to such payment; and
(ii) with respect to any Series of Notes if at
such time the Company is permitted to optionally prepay such outstanding
principal of Notes of such Series pursuant to the provisions of this
Indenture, a percentage equal to the premium which would have been payable
if the Company then had elected to optionally prepay such Notes pursuant to
the provisions of this Indenture.
Applicable Series B Interest Period -- shall mean:
(i) with respect to any Series B Portion to
which the Company has elected to have the Eurodollar Series B Rate
applicable, shall be any period of one (1), three (3) or six (6) months
commencing on (x) the Closing Date for the Series B Notes if such rate is
to be then applicable to such Series B Portion, and (y) thereafter, the
next Applicable Series B Rate Adjustment Date, as shall be selected by the
Company not less than two (2) Business Days prior to such Applicable Series
B Rate Adjustment Date for such Series B Portion (or, with respect to such
Series B Portion of Series B Notes issued on the Closing Date for such
Series, if any, two (2) Business Days prior to such Closing Date) and
ending on the last day of such period which is immediately followed by a
Business Day;
(ii) with respect to any Series B Portion to
which the Company has elected to have the Fixed Series B Rate applicable,
shall be any period of thirty (30), sixty (60), ninety (90), one hundred
twenty (120), one hundred fifty (150) or one hundred eighty (180) days
commencing on (x) the Closing Date for the Series B Notes if such rate is
to be then applicable to such Series B Portion, and (y) thereafter, the
next Applicable Series B Rate Adjustment Date, as shall be selected by the
Company not less than one (1) Business Day prior to such Applicable Series
B Rate Adjustment Date for such Series B Portion (or, with respect to such
Series B Portion of Series B Notes issued on the Closing Date for such
Series, if any, one (1) Business Day prior to such Closing Date) and ending
on the last day of such period which is immediately followed by a Business
Day; and
(iii) with respect to any Series B Portion to
which the Company has elected to have the Reference Series B Rate
applicable, shall be any period of days not exceeding one hundred eighty
(180) days commencing on (x) the Closing Date for the Series B Notes if
such rate is to be then applicable to such Series B Portion and (y)
thereafter, the next Applicable Series B Rate Adjustment Date, as shall be
selected by the Company not less than one (1) Business Day prior to such
Applicable Series B Rate Adjustment Date for such Series B Portion (or,
with respect to such Series B Portion of Series B Notes issued on the
Closing Date for such Series, if any, one (1) Business Day prior to such
Closing Date), and ending on the day prior to the following Applicable
Series B Rate Adjustment Date.
Applicable Series B Interest Rate -- shall mean the
interest rate in effect for each Series B Portion of Series B Notes, as
determined by Section 2.1 of this Indenture, which shall be either (x) the
Reference Series B Rate plus one-quarter percent (.25%), computed on the
basis of a 360-day year and actual days elapsed, (y) the Eurodollar Series
B Rate plus one and one-half percent (1-1/2%), computed on the basis of a
360-day year of twelve 30-day months, or (z) the Fixed Series B Rate plus
one and one-half percent (1-1/2%), computed on the basis of a 360-day year
of twelve 30-day months.
Applicable Series B Rate Adjustment Date -- with respect
to any Series B Portion, shall mean (x) the first (1st) Business Day of any
Applicable Series B Interest Period as shall have been selected by the
Company for the Applicable Series B Interest Rate applicable to such Series
B Portion or (y) if no selection shall have been made by the Company on any
Series B Determination Date for such Series B Portion, such Series B
Determination Date.
Applicable Series D Interest Period -- shall mean:
(i) with respect to any Series D Portion to which the
Company has elected to have the Eurodollar Series D Rate applicable, shall
be any period of one (1), three (3) or six (6) months commencing on (x) in
the case of such Series D Portion to be advanced on any Advance Closing
Date, such Advance Closing Date, and (y) thereafter, the next Applicable
Series D Rate Adjustment Date, as shall be selected by the Company not less
than two (2) Business Days (or such shorter period of time as the holders
of Series D Notes may agree to) prior to such Applicable Series D Rate
Adjustment Date for such Series D Portion (or, with respect to such Series
D Portion to be advanced on an Advance Closing Date, two (2) Business Days
prior to such Advance Closing Date) and ending on the last day of such
period;
(ii) with respect to any Series D Portion to which the
Company has elected to have the Fixed Series D Rate applicable, shall be
any period of thirty (30), sixty (60), ninety (90), one hundred twenty
(120), one hundred fifty (150) or one hundred eighty (180) days commencing
on (x) in the case of such Series D Portion to be advanced on any Advance
Closing Date, such Advance Closing Date and (y) thereafter, the next
Applicable Series D Rate Adjustment Date, as shall be selected by the
Company not less than one (1) Business Day (or such shorter period of time
as the holders of Series D Notes may agree to) prior to such Applicable
Series D Rate Adjustment Date for such Series D Portion (or, with respect
to such Series D Portion advanced on an Advance Closing Date, one (1)
Business Day prior to such Advance Closing Date) and ending on the last day
of such period; and
(iii) with respect to any Series D Portion to which the
Company has elected to have the Reference Series D Rate appli cable, shall
be any period of days not exceeding one hundred eighty (180) days
commencing on (x) in the case of such Series D Portion to be advanced on
any Advance Closing Date, such Advance Closing Date and (y) thereafter, the
next Applicable Series D Rate Adjustment Date, as shall be selected by the
Company not less than one (1) Business Day (or such shorter period of time
as the holders of Series D Notes may agree to) prior to such Applicable
Series D Rate Adjustment Date for such Series D Portion (or, with respect
to such Series D Portion to be advanced on any Advance Closing Date, one
(1) Business Day prior to such Advance Closing Date) or as deemed selected
pursuant to Section 2.1(d) hereof, and ending on the last day of such
period or as provided in said Section 2.1(d);
provided, however, that:
(A) if any Applicable Series D Interest
Period would end on a day not a Business Day, it shall end on the next
succeeding Business Day except that with respect to any Applicable Series D
Interest Period in respect of which the Eurodollar Series D Rate is
applicable, if the next succeeding Business Day would fall in the next
calendar month, such Applicable Series D Interest Period shall end on the
Business Day immediately preceding the last day of such Applicable Series D
Interest Period but for such change;
(B) any Applicable Series D Interest Period which
would otherwise extend beyond December 31, 1996 shall end on December 31,
1996; and
(C) interest shall accrue in respect of any
Applicable Series D Interest Period from and including the first day
thereof to (but excluding) the last day thereof and each Applicable Series
D Interest Period that succeeds any then expiring Applicable Series D
Interest Period shall be deemed to commence on the last day of such
expiring Applicable Series D Interest Period.
Applicable Series D Interest Rate -- shall mean the
interest rate in effect for each Series D Portion of Series D Notes, as
determined by Section 2.1(d) hereof, which shall be either (x) the
Reference Series D Rate plus one-quarter percent (.25%), computed on the
basis of a 360-day year and actual days elapsed, (y) the Eurodollar Series
D Rate plus one and one-half percent (1-1/2%), computed on the basis of a
360-day year of twelve 30-day months, or (z) the Fixed Series D Rate plus
one and one-half percent (1-1/2%), computed on the basis of a 360-day year
of twelve 30-day months.
Applicable Series D Rate Adjustment Date -- with respect
to any Series D Portion, shall mean (x) the first (1st) Business Day of any
Applicable Series D Interest Period as shall have been selected by the
Company in accordance with the terms of Section 2.1(d) hereof for the
Applicable Series D Interest Rate also selected by the Company in
accordance with the terms of said Section 2.1(d) applicable to such Series
D Portion or (y) if no such selection of either an Applicable Series D
Interest Period or an Applicable Series D Interest Rate in accordance with
the terms of Section 2.1(d) of this Indenture shall have been made by the
Company, the last day of the then Applicable Series D Interest Period in
respect of such Series D Portion.
Bankers Acceptance -- any draft drawn on an Acceptable
Bank and accepted by such Acceptable Bank which is due and payable not more
than one hundred eighty (180) days from the original date thereof.
Board of Directors -- the board of directors of the
Company or any committee thereof which, in the instance, has the lawful
power to exercise the power and authority of such board of directors.
Business Day -- a day other than a Saturday, a Sunday or a
day on which banks are required by law (other than a general banking
moratorium or holiday for a period exceeding four consecutive days) to be
closed in the State of Texas, the State of New York, the State of
Connecticut or the State of California, and, with respect to all notices
and determinations in connection with, and payments of principal of, and
interest on, any Series B Portion to which the Eurodollar Series B Rate is
applicable or any Series D Portion to which the Eurodollar Series D Rate is
applicable, any day which is a "Business Day," as described above, and is
also a day on which banks are open for business and quoting interest rates
for dollar deposits in Grand Cayman, British West Indies.
Closing Date -- Section 1.2 of the Note Purchase
Agreements in respect of the Series A Notes and the Series B Notes.
Code -- Uniform Commercial Code as in effect from time to
time in the State of Connecticut.
Collateral -- Paragraph C of the Granting Clauses hereof.
Company -- first paragraph of this Indenture.
Consolidated Adjusted Current Liabilities -- at any time
means the amount at which the current liabilities of the Company and all
Subsidiaries (specifically including, without limitation, the current
portion of any obligation constituting Adjusted Funded Debt) would be shown
on a consolidated balance sheet at such time, but excluding from such
current liabilities any amount constituting the current portion of any
deferred income taxes arising as the result of differences between the
Company's method of reporting and determining income under the Internal
Revenue Code, as amended, and its method of reporting and determining
income pursuant to generally accepted accounting principles (including,
without limitation, the use, for Internal Revenue Code purposes, of the
so-called farm price method of accounting), but including in such current
liabilities any income tax liability of the Company and its Subsidiaries
payable within 12 months of such time, whether presented as a part of the
aforesaid current portion of deferred income taxes or as a separate line
item in current liabilities pursuant to generally accepted accounting
principles.
Consolidated Adjusted Funded Debt -- means Adjusted Funded
Debt of the Company and its Subsidiaries, determined on a consolidated
basis.
Consolidated Adjusted Net Income -- for any fiscal period
means net earnings (or loss) after income taxes of the Company and its
Subsidiaries determined on a consolidated basis for each period, but
excluding:
(1) any gain or loss arising from the sale of
capital assets;
(2) any gain arising from any write-up of
assets;
(3) earnings of any Subsidiary accrued prior
to the date it became a Subsidiary;
(4) earnings of any Person, substantially all
the assets of which have been acquired in any manner, realized by such
other Person prior to the date of such acquisition;
(5) net earnings of any Person (other than a
Subsidiary) in which the Company or any Subsidiary has an ownership
interest unless such net earnings shall have actually been received by the
Company or such Subsidiary in the form of cash distributions;
(6) any portion of the net earnings of any
Subsidiary which for any reason is unavailable for payment of dividends to
the Company or any other Subsidiary;
(7) the earnings of any Person to which
assets of the Company shall have been sold, transferred or disposed of, or
into which the Company or any Subsidiary shall have merged, prior to the
date of such transaction;
(8) any gain arising from the acquisition of
any Securities by the Company or any Subsidiary; and
(9) any portion of the net earnings of the
Company or any Subsidiary which cannot be freely converted into United
States dollars.
Consolidated Adjusted Working Capital -- at any time means
the difference between Consolidated Current Assets at such time minus
Consolidated Adjusted Current Liabilities at such time.
Consolidated Current Assets -- at any time means the
amount at which the current assets of the Company and all Subsidiaries
would be shown on a consolidated balance sheet at such time, but excluding
any amount on account of any assets which do not constitute Adjusted
Tangible Assets.
Consolidated Current Liabilities -- at any time means the
amount at which the current liabilities of the Company and all Subsidiaries
would be shown on a consolidated balance sheet at such time.
Consolidated Net Tangible Assets -- at any time means the
result of:
(a) the net book value (after deducting
related depreciation, obsolescence, amortization, valuation and other
proper reserves) at which the Adjusted Tangible Assets of the Company and
all Subsidiaries would be shown on a consolidated balance sheet at such
time, but excluding any amount on account of write-ups of assets after
September 30, 1985,
minus
(b) Consolidated Adjusted Current Liabilities
outstanding at such time.
Consolidated Tangible Net Worth -- at any time means:
(1) the net book value (after deducting
related depreciation, obsolescence, amortization, valuation and other
proper reserves) at which the Adjusted Tangible Assets of the Company and
all Subsidiaries would be shown on a consolidated balance sheet at such
time, but excluding any amount on account of write-ups of assets after
September 30, 1985,
minus
(2) the amount (such amount from time to time
herein referred to as "Consolidated Total Liabilities") at which their
liabilities (other than capital stock and surplus) would be shown on such
balance sheet, and includ ing as liabilities all deferred taxes and
reserves for contingencies and other potential liabilities (specifically
including therein, without limitation, actuarially determined unfunded
vested pension liabilities) and all minority interests in Subsidiaries.
Consolidated Total Liabilities -- clause (2) of the
definition of Consolidated Tangible Net Worth.
Current Debt -- with respect to any Person, means, without
duplication, all liabilities for borrowed money and all liabilities secured
by any Lien existing on Property owned by such Person whether or not such
liabilities have been assumed, which, in either case are payable on demand
or within one (1) year from the creation thereof, except:
(1) any such liabilities which are renewable
or extendible (whether or not renewed or extended) at the option of such
Person to a date more than one (1) year from the date of creation thereof
or renewable or extendible under, or payable from the proceeds of other
indebtedness incurred pursuant to the provisions of, any revolving credit
agreement or similar agreement, and
(2) any such liabilities which, although
payable within one (1) year, constitute payments required to be made on
account of principal of indebtedness expressed to mature more than one (1)
year from the date of creation thereof.
Current Expenses -- with respect to any Person for any
fiscal period, means the sum of interest expense accrued for such Person
for such period, plus principal amounts payable during such period on or
with respect to Adjusted Funded Debt of such Person.
Debt -- with respect to any Person means all Current Debt
and Adjusted Funded Debt for or on account of which such Person is liable.
Default -- an event or condition the occurrence of which
would, with the lapse of time or giving of notice or both, become an Event
of Default.
Designated Officers -- Lonnie A. Pilgrim, Clifford E.
Butler, or such other Persons as may be agreed to by the holders of the
Series B Notes.
ERISA -- the Employee Retirement Income Security Act of
1974, as amended from time to time.
Eurodollar Series B Rate -- with respect to any
determination on any Series B Determination Date, shall mean the rate of
interest at which deposits in United States dollars in the amount to be
outstanding would be offered by the Grand Cayman Branch of the Bank of
America National Trust and Savings Association, Grand Cayman, British West
Indies, to major banks in the offshore United States dollar interbank
markets upon request of such banks at approximately 11:00 a.m., New York
time, two (2) Business Days prior to the Applicable Series B Rate
Adjustment Date. For each Series B Portion, to which the Company has
elected to have the Eurodollar Series B Rate applicable, such offered rate
of interest shall be effective for the entire Applicable Series B Interest
Period selected by the Company for such Series B Portion.
Eurodollar Series D Rate -- with respect to any
determination on any Series D Determination Date, shall mean the rate of
interest at which deposits in United States dollars in the amount to be
outstanding would be offered by the Grand Cayman Branch of the Bank of
America National Trust and Savings Association, Grand Cayman, British West
Indies, to major banks in the offshore United States dollar interbank
markets upon request of such banks at approximately 11:00 a.m., New York
time, on such Series D Determination Date. For each Series D Portion, to
which the Company has elected to have the Eurodollar Series D Rate be
applicable, such offered rate of interest shall be effective for the entire
Applicable Series D Interest Period selected by the Company for such Series
D Portion.
Event -- Section 4.4(a)(vii) hereof.
Event of Default -- Section 6.1 hereof.
Exchange Act -- means the Securities and Exchange Act of
1934, as amended.
Existing Indenture -- first recital hereof.
Existing Promissory Note -- Section 2.1(d) hereof.
Fair Market Value -- means, with respect to any assets,
the sale value of such assets that would be realized in an arm's- length
sale between an informed and willing buyer and an informed and willing
seller, under no compulsion to buy or sell, respectively.
Financing Documents -- this Indenture, the Note Purchase
Agreements, the Notes, the Guarantee Agreement, all documents (in the
respective forms thereof as executed) the forms of which are appended to
the Note Purchase Agreements as exhibits or schedules, and all other
documents or instruments contemplated hereby and by the Note Purchase
Agreements or this Indenture, in each case as the same may be amended from
time to time, and excluding in each case any opinion of counsel.
Fixed Charge Ratio -- at any time means with respect to
any fiscal period the quotient of (a) the sum of (i) Consolidated Adjusted
Net Income for such period plus (ii) the aggregate amount of depreciation,
amortization, income taxes, Rentals and interest expense accrued for such
period by the Company and its Subsidiaries to the extent, but only to the
extent, such aggregate amount was reflected in the computation of
Consolidated Adjusted Net Income for such period, divided by (b) the sum of
(i) the aggregate amount of Rentals accrued for such period by the Company
and its Subsidiaries plus (ii) the aggregate amount of Current Expenses
accrued for such fiscal period, by the Company and its Subsidiaries.
Fixed Series B Rate -- with respect to any determination
on any Series B Determination Date, shall mean the interest rate quoted to
the Company on such date by Bank of America National Trust and Savings
Association in San Francisco, California. For each Series B Portion, to
which the Company has elected to have the Fixed Series B Rate applicable,
such quoted interest rate shall be effective for the entire Applicable
Series B Interest Period selected by the Company for such Series B Portion.
Fixed Series D Rate -- with respect to any determination
on any Series D Determination Date, shall mean the interest rate quoted to
the Company on such date by Bank of America National Trust and Savings
Association in San Francisco, California. For each Series D Portion, to
which the Company has elected to have the Fixed Series D Rate applicable,
such quoted interest rate shall be effective for the entire Applicable
Series D Interest Period selected by the Company for such Series D Portion.
Guarantee Agreement -- means that certain Guarantee
Agreement, dated as of October 1, 1986, among The Connecticut Bank and
Trust Company, N.A., as the predecessor security trustee to the Security
Trustee, Lonnie A Pilgrim and Patty R. Pilgrim, as amended and modified,
from time to time.
Guarantors -- means any one or more Persons which shall
have guarantied the payment of the Notes and the performance of the Company
of its obligations hereunder.
Guaranty -- with respect to any Person shall mean any
obligation (except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guarantying or in effect guarantying any indebtedness, dividend or other
obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(1) to purchase such indebtedness or
obligation or any Property or assets constituting security therefor;
(2) to advance or supply funds
(i) for the purpose or payment of
such indebtedness or obligation, or
(ii) to maintain working capital or
other balance sheet condition or any income statement condition or
otherwise to advance or make available funds for the purchase or payment of
such indebtedness or obligation;
(3) to lease Property or to purchase
Securities or other Property or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of the ability of the
primary obligor to make payment of the indebtedness or obligation; or
(4) otherwise to assure the owner of the
indebtedness or obligation of the primary obligor against loss in respect
thereof.
Indenture -- the first paragraph hereof.
Indenture Estate -- Paragraph C of the Granting Clauses
hereof.
Intangible Assets -- license agreements, trademarks, trade
names, patents, capitalized research and development costs, proprietary
products (the results of past research and development treated as long term
assets and excluded from Inventory) and goodwill, all determined on a
consolidated basis in accordance with generally accepted accounting
principles consistently applied.
Investment -- Article 1 (in the definition of Restricted
Investment).
Lien -- any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on the common law, statute or contract, and
including, but not limited to, the security interest lien arising from a
mortgage, security agreement, encumbrance, pledge, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes.
The term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and
other title exceptions and encumbrances (including, with respect to stock,
stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting Property. For the purposes of this
Indenture, the Company or a Subsidiary shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional sale
agreement, financing lease or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person for
security purposes, and such retention or vesting shall constitute a Lien.
Macaulay Formula -- at any time with respect to any
borrowing means the number produced by dividing
(a) the Present Value of the Outstanding Dollar-
Years of such borrowing at such time, by
(b) the present value of the required payments of
interest and principal in respect of such borrowing remaining immediately
prior to such time.
The discount rate for purposes of determining the present value of
such remaining principal and interest payments shall be the original yield
to maturity of such borrowing.
Majority Noteholders -- at any time means holder or
holders of more than fifty percent (50%) in aggregate principal amount of
all Notes then Outstanding.
Make-Whole Amount -- with respect to any payment of
Notes, to the extent the Treasury Rate at such time is lower than the
original yield to maturity of the Notes, means an amount equal to the
excess of (a) the then remaining scheduled payments of interest and
principal on such Notes, discounted to present value at an annual rate
equal to the Treasury Rate, minus (b) the aggregate principal amount of the
Notes so paid. To the extent that the Treasury Rate at such time is equal
to or above the original yield to maturity of the Notes, the Make-Whole
Amount is zero (0).
Margin Security -- Section 7.20 hereof.
Maximum Rate -- Section 2.1(e) hereof.
Mexican Subsidiary -- shall mean any Subsidiary of the
Company which is organized under the laws of Mexico (or any State or
Province thereof) and/or has manufacturing operations located in Mexico (or
any State or Province thereof).
Money Market -- Section 4.5 hereof.
Money Market Rate -- Section 4.5 hereof.
Net Future Capital Stock Proceeds -- the cash proceeds
received by the Company after the Second Closing Date upon issuance of any
new capital stock of the Company, and any contributions (valued at Fair
Market Value for any noncash contributions) to capital received by the
Company after the Second Closing Date, minus any and all commissions and
expenses incurred in connection with the issuance of such capital stock.
Net Tangible Assets -- at any time means the excess of
Total Assets over Intangible Assets of the Company and its subsidiaries at
such time.
Note Purchase Agreements -- means (a) the Note Purchase
Agreements dated as of October 1, 1986, between the Company and each of The
Aetna Casualty and Surety Company, the Aetna Life Insurance Company and
Bank of America National Trust and Savings Association in respect of the
Series A Notes and the Series B Notes, (b) the Note Purchase Agreements
dated as of September 21, 1990, between the Company and Aetna Life
Insurance Company and Bank of America National Trust and Savings
Association in respect of the Series C Notes and the Series D Notes and (c)
any other note purchase agreement between the Company and a Purchaser in
respect of the initial purchase and sale of any other Series of Notes.
Notes -- the Series A Notes, the Series B Notes, the
Series C Notes, the Series D Notes and all other additional notes issued
pursuant to the provisions of Section 2.12 hereof.
Officer's Certificate -- a certificate signed by the
President or a principal financial officer of the Company.
Opinion of Counsel -- an opinion of independent counsel
(which may from time to time serve as counsel for the Company, for the
Security Trustee or for the holder of any Note) acceptable to the Security
Trustee which opinion is in form, scope and content satisfactory to the
Security Trustee and (if not rendered by counsel for the Security Trustee)
counsel for the Security Trustee.
Order Notes -- in respect of Series A Notes shall have the
meaning set forth in Section 2.1 hereof; in respect of Series C Notes shall
have the meaning set forth in Section 2.1 hereof; and any other Note which
is not a Registered Note.
Original Payment Date -- Section 4.5 hereof.
Outstanding -- with respect to the Notes at any time,
means all Notes which have been duly authorized, authenticated (with
respect to Notes of each Series of Notes), issued and delivered (except for
Notes which have been replaced by new Notes which have been issued pursuant
to Section 2.4, Section 2.5 or Section 2.9 hereof) exclusive of, and under
no circumstances including, any Notes then owned by any one or more of the
Company, its Subsidiaries or any Affiliates.
Pension Plans -- all employee pension benefit plans (as
such term is defined in ERISA) from time to time maintained by, or for the
benefit of the employees of, any one or more of the Company and its
Subsidiaries or with respect to which any of such Persons may be liable to
the Pension Benefit Guaranty Corporation (or its successor entity).
Permitted Liens -- Section 3.3 hereof.
Person -- an individual, partnership, corporation, trust,
unincorporated organization, government, governmental agency or
governmental subdivision.
Plan -- an employee benefit plan (as such term is defined
in ERISA) from time to time maintained by, or for the benefit of the
employees of, any one or more of the Company and its Subsidiaries or with
respect to which any of such Persons may be liable to the Pension Benefit
Guaranty Corporation (or its successor entity).
Prepayment Date -- Section 4.4(a)(vii) hereof.
Present Value of the Outstanding Dollar-Years -- at any
time with respect to any borrowing shall mean the product obtained by
(a) multiplying
(i) the present value of each required
principal and interest payment (including repayment of principal at final
maturity) of such borrowing unpaid immediately prior to such time, by
(ii) the number of years (calculated to
the nearest one-twelfth) that will elapse between such time and the date
each such required principal or interest payment is due, and
(b) calculating the sum of the products obtained
in the preceding subsection (a).
The discount rate for purposes of determining the present value of
such remaining principal and interest payments is the original yield to
maturity of such borrowing.
Property -- any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
Purchase Money Lien -- (a) any Lien held by any Person
(whether or not the seller of such assets) on assets (other than assets
acquired to replace or repair assets owned by the Company or any Subsidiary
on the date of the initial issuance of the Series A Notes and the Series B
Notes) acquired, or constructed or improved, by the Company or any
Subsidiary after the date of the initial issuance of the Series A Notes,
which Lien secures all or a portion of the related purchase price, or
construction or improvement cost, of such assets and is created at the time
of, or within twelve (12) months after, such acquisition or the completion
of such construction or improvement, (b) any Lien existing on any Property
of any corporation at the time it becomes a Subsidiary, provided that in
each such case such Lien (i) does not extend to any other asset or secure
any other obligations of the Company or any other Subsidiary and (ii) the
obligations secured thereby are not increased in aggregate amount of
liability after the date such corporation becomes a Subsidiary or (c) any
Lien on the assets or Voting Stock of any Subsidiary which was created on
the date such Voting Stock was acquired by the Company or any other
Subsidiary and which secures the payment by the Company or such other
Subsidiary of all or part of the purchase price of such Voting Stock.
Purchaser -- in respect of (a) the Series A Notes, means
each of The Aetna Casualty and Surety Company and Aetna Life Insurance
Company, (b) the Series B Notes, means Bank of America National Trust and
Savings Association, (c) the Series C Notes, means Aetna Life Insurance
Company, (d) the Series D Notes, means Bank of America National Trust and
Savings Association, and (e) any other Series of Notes, means the initial
purchaser thereof pursuant to a Note Purchase Agreement entered into by and
between such purchaser and the Company.
Reference Series B Rate -- with respect to any
determination on any Series B Rate Adjustment Date, shall mean the rate of
interest publicly announced from time to time by Bank of America, National
Trust and Savings Association, in San Francisco, California, as its
"reference rate," which "reference rate is based upon various factors
including such bank's costs and desired return, general economic
conditions, and other factors, and is used as a reference point for pricing
some loans, which may be price at, above or below such reference rate.
Each change in the reference rate shall be effective as to any Series B
Portion, to which the Company has elected to have the Reference Series B
Rate applicable, at the opening of business on the day specified in the
public announcement of such change.
Reference Series D Rate -- with respect to any
determination on any Series D Rate Adjustment Date, shall mean the rate of
interest publicly announced from time to time by Bank of America, National
Trust and Savings Association, in San Francisco, California, as its
"reference rate," which "reference rate is based upon various factors
including such bank's costs and desired return, general economic
conditions, and other factors, and is used as a reference point for pricing
some loans, which may be priced at, above or below such reference rate.
Each change in the reference rate shall be effective as to any Series D
Portion, to which the Company has elected to have the Reference Series D
Rate applicable, at the opening of business on the day specified in the
public announcement of such change.
Registered Notes -- in respect of Series A Notes shall
have the meaning set forth in Section 2.1 hereof; in respect of Series C
Notes shall have the meaning set forth in Section 2.1 hereof; and any other
Note which is registered in accordance with Section 2.3 hereof and which
contains language substantially to the effect that such Note is a
registered Note and is transferable only by surrender thereof at the
principal office of the Company where a register therefor is maintained,
duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or his attorney duly
authorized in writing.
Remaining Dollar-Years -- of any indebtedness for borrowed
money at any time means the amount obtained by (a) (i) multiplying the
amount of each then remaining sinking fund, serial maturity or other
required repayment, (including repayment at final maturity of such
indebtedness), of such indebtedness by (ii) the number of years (calculated
at the nearest one-twelfth) which will elapse between such time and the
date of that required repayment, and (b) totaling all the products obtained
in (a).
Remaining Duration of the Series C Notes -- at any time
with respect to any Series C Notes being prepaid means the number produced
by
(a) dividing the Present Value of the Outstanding
Dollar-Years of such Series C Notes at such time, by
(b) the present value of the remaining required
payments of principal and interest on such Series C Notes immediately prior
to such time.
The discount rate for purposes of determining the present value of
such remaining principal and interest payments is ten and forty- nine
one-hundredths percent (10.49%). The number produced by the foregoing
calculation shall be rounded to one decimal point, with rounding up if the
tail is 0.05 or higher, and rounding down otherwise.
Rentals -- as of the date of determination, means all non-
cancelable, fixed payments which the lessee is required to make by the
terms of any operating lease (including any renewal terms exercisable at
the option of the lessor) of one year or more, but shall not include
amounts required to be paid in respect of maintenance, repairs, income
taxes, insurance, assessments or other similar charges or additional
rentals (in excess of fixed minimums) based upon a percentage of gross
receipts.
Repurchase Agreement -- means any written agreement (a)
which provides for (i) the transfer of one or more Acceptable Repurchase
Securities to the Company or a Subsidiary from an Acceptable Transferor
against a transfer of funds (the "Transfer Price") by the Company or such
Subsidiary to such Acceptable Transferor and (ii) a simultaneous agreement
by the Company or such Subsidiary, in connection with such transfer of
funds, to transfer to such Acceptable Transferor the same or substantially
similar Acceptable Repurchase Securities for a price not less than the
Transfer Price plus a reasonable return thereon at a date certain not later
than thirty (30) days after such transfer of funds, (b) in respect of which
the Company or such Subsidiary shall have the contractual right to
liquidate such repurchase agreement in accordance with 11 U.S.C. Section 559 (or
any successor provision thereto) and (c) in connection with which the
Company or such Subsidiary, or an agent thereof (other than the Acceptable
Transferor or any agent thereof), shall take physical possession of the
Acceptable Repurchase Securities so transferred to the Company or such
Subsidiary, or in the case of any uncertified Acceptable Repurchase
Securities so transferred, shall have taken all action required by any
applicable law or regulations to perfect its Lien therein.
Responsible Officer -- any vice president, trust officer
or corporate trust officer, in each case employed in the Corporate Trust
Services Department of the Security Trustee.
Restricted Investments -- all investments, made in cash or
by delivery of Property, by any one or more of the Company and its
Subsidiaries (a) in any Person (other than the Company or a Subsidiary),
whether by acquisition of stock, indebtedness or other obligation or
Security, or by loan, advance or capital contribution, or otherwise, or (b)
in any Property (items (a) and (b) herein called "Investments"), except the
following:
(i) Property to be used in the ordinary
course of the business as described in Section 2.3 of the Note Purchase
Agreements;
(ii) current assets arising from the sale of
goods and services in the ordinary course of business of the Company and
its Subsidiaries;
(iii) Investments in the Company or any
Subsidiary;
(iv) loans to Affiliates in an aggregate
amount at any time not exceeding One Million Dollars ($1,000,000);
(v) Investments in any Person (other than the
Company, a Wholly-Owned Subsidiary or an Affiliate) engaged in the same
line of business as the Company, if after giving effect to such Investments
and all contemporaneous transactions, the aggregate outstanding amount of
such Investments made by the Company and all Subsidiaries in the then
current fiscal year of the Company will not exceed fifteen percent (15%) of
Consolidated Tangible Net Worth as of the end of the fiscal year of the
Company then most recently ended;
(vi) Bankers Acceptances or interest bearing
obligations, having an original maturity of one (1) year or less, in each
case issued by an Acceptable Bank;
(vii) Investments in interest bearing direct
obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided that such
obligations mature within one (1) year from the date of acquisition
thereof;
(viii) Repurchase Agreements, having an original
maturity of ninety (90) days or less, with Acceptable Banks or with
recognized securities brokers; and
(ix) Investments in commercial paper of
corporations organized under the laws of the United States or any state
thereof, given one of the two highest ratings by Standard and Poor's Bond
Rating Index or by NCO Moody's Investor Service and maturing not more than
two hundred seventy (270) days from the date of creation thereof.
Investments shall be valued at cost less any net return of
capital through the sale or liquidation thereof or other return of capital
thereon.
Second Closing Date -- (a) in respect of the Series C
Notes, the date provided for in Section 1.2 of the Note Purchase Agreements
and (b) in respect of the first purchase of Series D Notes, the date
provided for in Section 1.2 of the Note Purchase Agreements.
Securities Act -- the Securities Act of 1933, as amended.
Security -- shall have the same meaning as in Section 2(1)
of the Securities Act.
Security Trustee -- State Street Bank and Trust Company of
Connecticut, N.A., as security trustee under this Indenture and any
successor security trustee named in accordance with the provisions hereof.
Series, Series of Notes -- the Series A Notes, the Series
B Notes, the Series C Notes, the Series D Notes or any other series of
Notes issued pursuant to the provisions of Section 2.12 hereof.
Series A Notes -- Section 2.1 hereof.
Series A Order Notes -- Section 2.1 hereof.
Series A Registered Notes -- Section 2.1 hereof.
Series B Deferred Amount -- Section 2.1 hereof.
Series B Determination Date -- shall mean (i) with respect
to any Series B Portion to which the Eurodollar Series B Rate shall be
applicable, the day which is two (2) Business Days prior to the next
Applicable Series B Rate Adjustment Date for such Series B Portion, (ii)
with respect to any Series B Portion to which the Fixed Series B Rate shall
be applicable, the day which is one (1) Business Day prior to the next
Applicable Series B Rate Adjustment Date for such Series B Portion and
(iii) with respect to any Series B Portion to which the Reference Series B
Rate shall be applicable, the Applicable Series B Rate Adjustment Date.
Series B Noteholders -- each and every holder of Series B
Notes.
Series B Notes -- Section 2.1 hereof.
Series B Portion -- a portion of the outstanding principal
amount of the Series B Notes with respect to which a particular Applicable
Series B Interest Rate is applicable.
Series C Make-Whole Amount -- at any time with respect to
any Series C Notes being prepaid shall mean, to the extent that (a) the
Treasury Constant Yield at such time in respect of such Series C Notes plus
(b) twenty-five one-hundredths of one percent (0.25%), is lower than ten
and forty-nine one-hundredths percent (10.49%) per annum, the excess of
(a) the present value of the principal and
interest payments due on such Series C Notes then being paid, discounted at
a rate that is equal to (i) such Treasury Constant Yield plus (ii)
twenty-five one- hundredths percent (0.25%) per annum, minus
(b) the principal amount of such Series C Notes
then being prepaid, at par.
If (A) such Treasury Constant Yield at the time of such payment
plus (2) twenty-five one-hundredths percent (0.25%) per annum is equal to
or higher than ten and forty-nine one-hundredths percent (10.49%) per
annum, then the Series C Make-Whole Amount is Zero Dollars ($0).
Series C Notes -- Section 2.1 hereof.
Series C Order Notes -- Section 2.1 hereof.
Series C Registered Notes -- Section 2.1 hereof.
Series D Deferred Amount -- Section 2.1 hereof.
Series D Designated Officers -- Lonnie A. Pilgrim,
Clifford E. Butler, or such other Persons as may be agreed to by the
holders of the Series D Notes.
Series D Determination Date -- shall mean (i) with respect
to any Series D Portion to which the Eurodollar Series D Rate shall be
applicable, the day which is two (2) Business Days (or such shorter period
of time as the holders of Series D Notes may agree to) prior to the next
Applicable Series D Rate Adjustment Date for such Series D Portion, (ii)
with respect to any Series D Portion to which the Fixed Series D Rate shall
be applicable, the day which is one (1) Business Day (or such shorter
period of time as the holders of Series D Notes may agree to) prior to the
next Applicable Series D Rate Adjustment Date for such Series D Portion and
(iii) with respect to any Series D Portion to which the Reference Series D
Rate shall be applicable, the Applicable Series D Rate Adjustment Date.
Series D Notes -- Section 2.1 hereof.
Series D Noteholders -- each and every holder of Series D
Notes.
Series D Prepaid Installment -- Section 4.5 hereof.
Series D Portion -- a portion of the outstanding principal
amount of the Series D Notes with respect to which a particular Applicable
Series D Interest Rate is applicable.
Special Majority Noteholders -- at any time means all of
the following holders of Notes: (w) holder or holders of more than fifty
percent (50%) in aggregate principal amount of the Series A Notes then
Outstanding, (x) holder or holders of more than fifty percent (50%) in
aggregate principal amount of the Series C Notes then Outstanding, (y)
holder or holders of more than fifty percent (50%) in aggregate principal
amount of the Series D Notes then Outstanding, and (z) the holder or holder
of more than fifty percent (50%) in aggregate principal amount of all other
Notes then Outstanding.
Subsidiary -- a corporation of which the Company owns,
directly or indirectly, more than fifty percent (50%) of the Voting Stock.
Subsidiary Stock -- Section 7.4 hereof.
Super-Majority Noteholders -- at any time means holder or
holders of more than sixty-six and two-thirds percent (66-2/3%) in
aggregate principal amount of all Notes then Outstanding.
This Indenture -- this instrument as originally executed
or as it may from time to time be supplemented or amended in accordance
with the provisions hereof.
Total Assets -- at any time means the aggregate amount of
assets of the Company and its Subsidiaries determined on a consolidated
basis in accordance with generally accepted accounting principles
consistently applied.
Treasury Constant Yield -- at any time with respect to any
prepayment of Series C Notes means the yield on a hypothetical United
States Treasury security with a duration matching the Remaining Duration of
the Series C Notes at such time with respect to such Series C Notes. The
Hypothetical Treasury security is derived by referring to the United States
Federal Reserve Statistical Release designated H.15(519) or its successor
publication published immediately prior to such prepayment of the Series C
Notes (the "Applicable H-15"). The duration of all such Treasury
securities with maturities listed in the Applicable H-15 shall be
calculated by using the Macaulay Formula and assuming that the coupon on
each such Treasury security equals the weekly average yield on such
Treasury security. The Remaining Duration of the Series C Notes shall be
determined using a maturity date of September 21, 2002. If there is a
Treasury security with a constant maturity listed in Applicable H-15 with a
duration equal to such Remaining Duration of the Series C Notes, then the
yield on such Treasury security shall be the Treasury Constant Yield. If
no such security with a constant maturity exists, then the security with a
duration closest to and greater than such Remaining Duration of the Series
C Notes shall be used, along with the Treasury security with a duration
closest to and less than such Remaining Duration of the Series C Notes, in
the following formula, in order to calculate the Treasury Constant Yield:
TCY=(YA+((RDN-DA)X((YB-YA)/(DB-DA)))
TCY = Treasury Constant Yield
RDN = Remaining Duration of the Series C Notes
Security A = Constant maturity Treasury security with
a duration closest to and less than RDN
Security B = Constant maturity Treasury security with
a duration closest to and greater than RDN
YA = Yield to Maturity of security A
YB = Yield to Maturity of security B
DA = Duration of security A
DB = Duration of security B
The Treasury Constant Yield will be rounded to two decimal points
with rounding up if the tail is 0.005 or higher, and rounding down
otherwise.
Treasury Rate -- at any time with respect to any Notes
being paid at such time means the yield to maturity at such time of United
States Treasury obligations with a constant maturity (as compiled by and
published in the most recently published issue of The Wall Street Journal
or any successor publication) most nearly equal to the Weighted Average
Life to Maturity of the Notes then being paid.
Unfriendly Investment -- any purchase or offer to purchase
all or any portion of the Voting Stock of any corporation which is opposed
or objected to by the board of directors of such corporation or any other
proposed acquisition of Securities of any Person of the type normally
referred to as a "hostile tender offer."
Voting Stock -- capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
Weighted Average Life to Maturity --with respect to any
indebtedness for borrowed money means as at the date of the determination
thereof the number of years obtained by dividing the then Remaining
Dollar-Years of such indebtedness as of the date of determination by the
then outstanding principal amount of such indebtedness.
Wholly-Owned Subsidiary -- any Subsidiary, 100% of the
equity Securities and voting Securities of which are owned by one or more
of the Company and the Company's other Wholly-Owned Subsidiaries.
Written Request -- with respect to any Person a written
order or request signed in the name of such Person by the President or a
Vice-President of such Person (if a corporation other than one of the
holders of Notes) or a general or managing partner (if a partnership) or
the Person (if an individual) or any officer of such Person (if such Person
is a corporation and a holder of a Note).
ARTICLE 2 COMPANY BUSINESS COVENANTS.
Article 7 of the Existing Indenture is hereby amended and restated
to read in its entirety as follows:
The Company covenants that on and after the date of initial issue
of the Notes, so long as any one or more of the Notes or any other
obligation secured hereby is outstanding:
Section 7.1. Payment of Taxes and Claims. The Company, and
each Subsidiary, will pay, before they become delinquent:
(a) all taxes, assessments and governmental charges or
levies imposed upon it or its Property;
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons which, if unpaid,
might result in the creation of a Lien upon its Property; and
(c) all claims, assessments and levies required to be
paid by the Company or any Subsidiary pursuant to any agreement, contract,
law, ordinance, or governmental rule or regulation governing any Plan of
the Company or any Subsidiary;
provided that items of the foregoing description need not be paid while
being contested in good faith and by appropriate proceedings and provided
further that adequate book reserves have been established with respect
thereto and provided further that the owning Person's title to, and its
right to use, its Property is not materially and adversely affected
thereby. In the case of any item of the foregoing description involving in
excess of Two Hundred Fifty Thousand Dollars ($250,000), the
appropriateness of the proceedings shall be supported by an opinion of the
independent counsel responsible for such proceedings and the adequacy of
such reserves shall be supported by the opinion of the independent
accountants of the contesting company.
Section 7.2. Maintenance of Properties and Existence. The
Company and each Subsidiary will:
(a) Property -- maintain its Property in good
condition and make all necessary renewals, replacements, additions,
betterments and improvements thereto;
(b) Insurance -- maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and business
against such casualties and contingencies, of such types (including,
without limitation, in each case, if available, loss or damage, public
liability, business interruption, war risk, larceny, embezzlement or other
criminal misappropriation insurance) and in such amounts as is customary in
the case of corporations engaged in the same or a similar business and
similarly situated;
(c) Financial Records -- (i) keep true books of
records and accounts in which full and correct entries will be made of all
its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with
generally accepted accounting principles, practices and procedures at the
time in effect and consistently applied except for changes in application
in which its independent certified public accountants concur, and (ii) do
or cause to be done all things necessary to ensure that the Company and
each Subsidiary maintains the same fiscal year;
(d) Corporate Existence and Rights -- do or cause to
be done all things necessary (i) subject to the provisions of Section 7.5
hereof, to preserve and keep in full force and effect its corporate
existence, rights and franchises; and
(e) Compliance with Law -- not be in violation of any
law, ordinance or governmental rule or regulation to which it is subject
and will not fail to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of its Properties or
to the conduct of its business, which violation or failure to obtain might
materially adversely affect the business, prospects, profits, Properties or
condition (financial or otherwise) of the Company and its Subsidiaries,
taken as a whole.
Section 7.3. Payment of Notes and Maintenance of Office. The
Company will punctually pay or cause to be paid the principal and interest
(and premium, if any) to become due in respect of the Notes according to
the terms thereof and will maintain an office in the State of Texas where
notices, presentations and demands in respect of this Indenture or the
Notes may be made upon it. The address of such office shall be 110 South
Texas Street, P.O. Box 93, Pittsburg, Texas 75686, until such time as the
Company shall notify the holders of the Notes of any change of location of
such office within such State.
Section 7.4. Disposal of Shares of a Subsidiary. The Company
will not, nor will it permit any Subsidiary to, sell or otherwise dispose
of any shares of the stock (or any options or warrants to purchase stock or
other Securities exchangeable for or convertible into stock) of a
Subsidiary (said stock, options, warrants and other Securities herein
called "Subsidiary Stock") except to the Company or another Subsidiary, nor
will any Subsidiary issue, sell or otherwise dispose of any shares of its
own Subsidiary Stock except to the Company or another Subsidiary.
Section 7.5. Sale of Assets, Merger and Consolidation.
The Company will not, nor will it permit any Subsidiary to,
consolidate with or merge into any other Person or permit any other Person
to consolidate with or merge into it (except that a Subsidiary may
consolidate with or merge into another Subsidiary) or sell or otherwise
transfer all or substantially all of its Property to any other Person
(except that a Subsidiary may sell or otherwise transfer all or
substantially all of its Property to another Subsidiary), unless such
consolidation, merger or sale is consented to in writing by the Special
Majority Noteholders; provided that the foregoing restriction does not
apply to the merger of another corporation with the Company, if:
(a) the corporation which results from such merger or
consolidation (the "surviving corporation") is organized under the laws of
the United States or a jurisdiction thereof;
(b) the due and punctual payment of the principal of,
and premium, if any, and interest on, all of the Notes, according to their
respective tenor, and the due and punctual performance and observance of
all of the covenants in the Notes, this Indenture and the documents
evidencing or creating any other obligations secured hereby to be performed
or observed by the Company, are expressly assumed in writing by the
surviving corporation;
(c) after giving effect to the proposed merger or
consolidation, the surviving corporation will be engaged in substantially
the same lines of business as referred to in Section 2.3 of the Note
Purchase Agreements in respect of the Series A Notes, the Series B Notes,
the Series C Notes and the Series D Notes; and
(d) immediately after the consummation of the
transaction, and after giving effect thereto, (i) no Default or Event of
Default would exist and (ii) the surviving corporation would be permitted
by the provisions of Section 7.9 hereof to incur at least one dollar
($1.00) of additional Adjusted Funded Debt.
Section 7.6. Lease Payments; Sale Leasebacks.
(a) Limitation on Leases. Neither the Company nor any
Subsidiary will become liable as lessee under any lease (other than a
financing lease which constitutes Adjusted Funded Debt, a lease of rolling
stock or a lease under which the Company or a Subsidiary is lessor) of
Property if the aggregate annual Rentals payable during any current or
future fiscal year under the lease in question and all other such leases
under which the Company or a Subsidiary is then lessee would exceed four
percent (4%) of the remainder of Net Tangible Assets less Consolidated
Current Liabilities.
(b) Subsidiary Leases. Any corporation which becomes a
Subsidiary after September 1, 1994 shall be deemed to have become liable as
lessee, at the time it becomes a Subsidiary, under all leases (under which
it is liable as lessee) of such corporation existing immediately after it
becomes a Subsidiary.
(c) Sale Leasebacks. Neither the Company nor any Subsidiary
shall sell or otherwise transfer, in one or more related transactions, any
of its Property to any Person (other than the Company or a Subsidiary) and
thereafter rent or lease such Property, or substantially identical
Property, provided that the Company or a Subsidiary may sell Property
(other than Collateral) to any Person (other than the Company or a
Subsidiary) and thereafter rent or lease such Property if (i) such sale and
such rental and/or leasing is consummated within 365 days of the
acquisition of such Property by the Company or such Subsidiary or, if such
Property shall have been constructed by the Company or such Subsidiary,
within 365 days of the completion of such construction, or (ii) after
giving effect to such transaction, the aggregate book value of the Property
so sold in any fiscal year of the Company would not exceed Ten Million
Dollars ($10,000,000).
Section 7.7. Liens and Encumbrances.
(a) Negative Pledge. Neither the Company nor any Subsidiary
will (i) cause or permit or (ii) agree or consent to cause or permit in the
future (upon the happening of a contingency or otherwise) any of the
Indenture Estate, whether now owned or hereafter acquired, to be subject to
a Lien except:
(1) Liens securing taxes, assessments or governmental
charges or levies or the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons; provided that the
payment thereof is not at the time required by Section 7.1 hereof;
(2) Liens incurred or deposits made (i) in the
ordinary course of business in connection with workmen's compensation,
unemployment insurance, social security and other like laws, (ii) in the
ordinary course of business to secure the performance of letters of credit,
bids, tenders, sales contracts, leases, statutory obligations, surety
(other than of the type referred to in clause (iii) of this Section
7.7(a)(2)), and performance bonds and other similar obligations not
incurred in connection with the borrowing of money, the obtaining of
advances or the payment of the deferred purchase price of Property or (iii)
to secure appeal bonds, supersedeas bonds and other similar bonds provided
the aggregate amount of such bonds shall not at any time exceed Five
Hundred Thousand Dollars ($500,000);
(3) attachments, judgments and other similar Liens
arising in connection with court proceedings; provided, that the execution
or other enforcement of such Liens is effectively stayed and the claims
secured thereby are being actively contested in good faith and by
appropriate proceedings and provided further, that the aggregate amount of
such attachments, judgments and other similar Liens shall not at any time
exceed Five Hundred Thousand Dollars ($500,000);
(4) Liens on Property of a Subsidiary; provided that
such Liens secure only obligations owing to the Company or a Wholly-Owned
Subsidiary;
(5) reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and
other similar title exceptions or encumbrances affecting real Property;
provided, that they do not in the aggregate materially detract from the
value of said Properties as used in owner's business or materially
interfere with their use in the ordinary conduct of the owner's business;
(6) (y) Liens in existence on the date of this
Indenture and disclosed on the Exhibits to the Note Purchase Agreements in
respect of the Series A Notes, the Series B Notes, the Series C Notes and
the Series D Notes and (z) Liens securing those certain 14.25% Senior Notes
Due 1995 of the Company issued under that certain Indenture, dated as of
May 1, 1988, between MTrust Corp, National Association, and the Company, as
amended up to and including the Second Closing Date provided that such
subordination shall be satisfactory in form and substance to the holders of
Series A Notes, Series C Notes and Series D Notes and the principal amount
of such Senior Notes shall not exceed at any time the remainder of fifty
million dollars ($50,000,000) minus the aggregate principal amount of such
Senior Notes repaid by the Company at or prior to such time;
(7) Liens in favor of the Security Trustee with
respect to the Indenture Estate;
(8) Purchase Money Liens, if after giving effect
thereto and any concurrent transactions (A) no Default or Event of Default
would exist and (B) the Company would be permitted by the provisions of
Section 7.9(a) hereof to incur the indebtedness secured thereby; and
(9) extensions and renewals of Liens described in Sec
tion 7.7(a)(6)(y) hereof which secure indebtedness for money borrowed in
connection with the extension, renewal or refunding of the indebtedness
secured thereby, provided (A) the amount of such indebtedness is not
increased at any time and (B) such Liens are not extended to Property not
encumbered thereby on the date hereof, and provided further that this
clause (9) shall not apply to any of the Company's 14.25% Senior Notes due
1995 referred to in Section 7.7(a)(6)(z).
(b) Equal and Ratable Lien; Equitable Lien. In any case
wherein Property is subjected to a Lien in violation of this Section 7.7,
the Company will make or cause to be made provision whereby the Notes and
the other obligations secured hereby will be secured equally and ratably
with all other obligations secured thereby, and in any case the Notes and
such obligations shall have (in addition to the benefits of the Lien in
favor of the Security Trustee with respect to the Indenture Estate) the
benefit, to the full extent that, and with such priority as, the holders
may be entitled thereto under applicable law, of an equitable Lien on such
Property securing the Notes and such obligations. Such violation of
Section 7.7 shall constitute an Event of Default hereunder, whether or not
any such provision is made pursuant to this Section 7.7(b).
(c) Financing Statements. The Company will not, nor will it
permit any Subsidiary to, sign or file any financing statement under the
Uniform Commercial Code of any jurisdiction which names the Company or such
Subsidiary as debtor, or sign any security agreement authorizing any
secured party thereunder to file any such financing statement, except, in
any such case, a financing statement filed or to be filed to perfect or
protect a security interest which the Company or such Subsidiary is
entitled to create, assume or incur, or permit to exist, under the
foregoing provisions of this Section 7.7.
(d) Opinions. The Company will cause this Indenture, any and
all supplemental indentures, mortgages, security agreements, instruments of
further assignment and financing statements and continuation statements at
all times to be kept recorded and filed in such manner and in such places
as may be required by law to fully preserve and protect the rights of the
holders of the obligations secured hereby and the Security Trustee
hereunder and under all other documents and instruments evidencing or
securing the obligations secured hereby (including, without limitation,
documents and instruments granting Liens to the Security Trustee with
respect to the Indenture Estate), and it will furnish to the Security
Trustee between April 1 and June 1 of each year beginning with the year
1987, an Opinion of Counsel stating that in the opinion of such counsel
such action (if any be required) has been taken with respect to the
recording, filing, registering, pre-recording, refiling and reregistering
of this Indenture, any and all supplemental indentures, mortgages, security
agreements, instruments of further assurance and financing and continuation
statements as is necessary for such purposes, and reciting the details of
such action (if any), and stating that in the opinion of such counsel no
additional action is, or will become during the twelve (12) months
following the date of such opinion, necessary for such purpose.
Section 7.8. Current Liabilities. The Company will not, nor
will it permit any Subsidiary to, have any material current liabilities
which are more than thirty (30) days overdue unless contested in good
faith.
Section 7.9. Debt; Total Liabilities.
(a) Adjusted Funded Debt. Neither the Company nor any
Subsidiary will permit at any time Consolidated Net Tangible Assets to be
less than one hundred seventy-five percent (175%) of the aggregate
principal amount of Adjusted Funded Debt of the Company and the
Subsidiaries outstanding at such time (after eliminating therefrom (i) the
current portion of any obligation constituting such Adjusted Funded Debt
and (ii) any Adjusted Funded Debt owing from the Company to a Subsidiary,
from a Subsidiary to the Company or from a Subsidiary to another
Subsidiary).
(b) Subsidiary Debt. Intentionally deleted.
(c) Total Liabilities. On the last day of each fiscal quarter
of the Company, Consolidated Total Liabilities will not exceed three
hundred fifty percent (350%) of Consolidated Tangible Net Worth.
(d) Guaranties. Neither the Company nor any Subsidiary will
permit at any time the aggregate obligations (whether contingent or
matured) in respect of all of the Guaranties issued by the Company or any
Subsidiary to exceed One Million Dollars ($1,000,000); provided, however,
that the foregoing restriction shall not include Guaranties (i) issued by
the Company and payable to a Subsidiary, (ii) issued by a Subsidiary and
payable to the Company, (iii) issued by a Subsidiary and payable to another
Subsidiary, and (iv) of the obligations of one or more Mexican Subsidiaries
not to exceed $25,000,000 in the aggregate. The obligations of the Company
or any Subsidiary under any Guaranty which, by the terms thereof, are
unliquidated or contingent shall be the amount which the Board of Directors
shall, in good faith, reasonably estimate.
Section 7.10. Consolidated Tangible Net Worth. The Company and
its Subsidiaries will, at all times, maintain Consolidated Tangible Net
Worth of not less than the sum of (x) One Hundred Million Dollars
($100,000,000) plus (y) an amount equal to the sum of (i) sixty percent
(60%) of Consolidated Adjusted Net Income earned since October 3, 1994
through and including the last day of the then most recently ended fiscal
year (excluding any fiscal year in which Consolidated Adjusted Net Income
was less than $0), plus (ii) one hundred percent (100%) of Net Future
Capital Stock Proceeds.
Section 7.11. Restricted Investments.
(a) Limit on Restricted Investments. The Company will not,
nor will it permit any Subsidiary to, make or incur any liability to make
any Restricted Investment or any Unfriendly Investment.
Any corporation which becomes a Subsidiary after the date of the
initial issuance of the Series A Notes and the Series B Notes, shall be
deemed to have made, at the time it becomes a Subsidiary, all Restricted
Investments of such corporation existing immediately after it becomes a
Subsidiary.
(b) No Defaults. Anything herein contained to the contrary
notwithstanding, neither the Company nor any Subsidiary will authorize or
make any Investment if, after giving effect to the proposed Investment a
Default or an Event of Default would exist.
(c) Restricted Payments. The Company will not and will not
permit any Subsidiary to:
(i) declare or pay any dividends, either in cash or
Property, on any shares of capital stock of any class (except dividends or
other distributions payable solely in shares of common stock of the Company
and dividends paid by any Subsidiary to the Company or to any other
Subsidiary); or
(ii) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of capital stock of any class of the
Company or any Subsidiary or any warrants, rights or options to purchase or
acquire any shares of such capital stock (other than shares of capital
stock of the Company acquired by the Company in exchange for other shares
of common stock of the Company or shares of capital stock of such
Subsidiary acquired by such Subsidiary in exchange for other shares of
common stock of such Subsidiary); or
(iii) make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in respect of its capital
stock (other than to the Company or a Subsidiary),
unless, after giving effect thereto, the aggregate of all such payments,
purchases or distributions in respect of the then current fiscal year of
the Company shall not exceed Two Million Three Hundred Thousand Dollars
($2,300,000). For the purposes of this subsection, the amount of any of
the aforesaid payments which is payable or distributable in Property other
than cash or shares of capital stock of the Company shall be deemed to be
the greater of the book value or Fair Market Value (as determined in good
faith by the Board of Directors of the Company) of such Property as of the
date of the declaration of such payment. The Company shall not authorize
any dividend, payment or distribution in respect of its capital stock which
is not payable within sixty (60) days of authorization.
Section 7.12. Current Ratio; Consolidated Working Capital.
(a) Current Ratio. At all times, Consolidated Current Assets
as of the end of the fiscal quarter of the Company then most recently ended
shall be not less than one hundred forty percent (140%) of Consolidated
Adjusted Current Liabilities as at the end of such fiscal quarter.
(b) Maintenance of Consolidated Adjusted Working Capital. At
all times, Consolidated Adjusted Working Capital will be not less than
Fifty Million Dollars ($50,000,000).
Section 7.13. Fixed Charge Ratio. At all times, the Fixed
Charge Ratio for the period of eight (8) consecutive fiscal quarters then
most recently ended shall be not less than 1.40.
Section 7.14. ERISA Compliance.
(a) Relationship of Vested Benefits to Pension Plan Assets.
The Company will not at any time permit the present value of all employee
benefits vested under all Pension Plans to exceed a sum equal to the
present value of the assets allocable to such vested benefits.
(b) Valuations. All assumptions and methods used to determine
the actuarial valuation of vested employee benefits under Pension Plans and
the present value of assets of such Pension Plans shall be reasonable in
the good faith judgment of the Company and shall comply with all
requirements of law.
(c) Prohibited Actions. Neither the Company nor any
Subsidiary nor any Plan at any time maintained by any one or more of the
Company and its Subsidiaries will
(1) engage in any "prohibited transaction" (as such
term is defined in Section 406 or Section 2003(a) of ERISA;
(2) incur any "accumulated funding deficiency" (as
such term is defined in Section 302 of ERISA) whether or not waived; or
(3) terminate any such Plan in a manner which could
result in the imposition of a Lien on the Property of the Company or any
Subsidiary pursuant to Section 4068 of ERISA.
Section 7.15. Transactions with Affiliates. Neither the Company
nor any Subsidiary will enter into any transaction, including, without
limitation, the purchase, sale or exchange of Property or the rendering of
any service, with any Affiliate except in the ordinary course of and
pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would obtain in a comparable arm's-
length transaction with a Person not an Affiliate.
Section 7.16. Tax Consolidation. The Company will not file or
consent to the filing of any consolidated income tax return with any Person
other than a Subsidiary.
Section 7.17. Sale or Discount of Receivables. The Company will
not, nor will it permit any Subsidiary to, discount or sell with recourse,
or sell for less than the greater of the face value or market value
thereof, any of its notes receivable or accounts receivable.
Section 7.18. Acquisition of Notes. Neither the Company, any
Subsidiary nor any Affiliate will, directly or indirectly, acquire or make
any offer to acquire any Notes unless the Company or such Subsidiary or
Affiliate has offered to acquire Notes, pro rata, from all holders of the
Notes and upon the same terms. In case the Company acquires any Notes,
such Notes shall thereafter be cancelled and no Notes shall be issued in
substitution therefor.
Section 7.19. Line of Business. Neither the Company nor any
Subsidiary will engage, directly or indirectly, in any business if, as a
result thereof, the business of the Company and the Subsidiaries, taken as
a whole, would not be substantially the same as on the date of this
Indenture.
Section 7.20. Margin Securities. Neither the Company nor any
Subsidiary will own, purchase or acquire or enter into any contract to
purchase or acquire, any "margin security" (a "Margin Security") as such
term is presently defined in Part 207 of Title 12 of the Code of Federal
Regulations or as such term may in the future be defined in the
substantially similar applicable rules and regulations of the Federal
Reserve Board or its successor agency.
Section 7.21. Financial and Business Information. The Company
will deliver to the Security Trustee and each institutional holder of the
then outstanding Notes:
(a) Quarterly Statements -- as soon as practicable after
the end of each quarterly fiscal period in each fiscal year of the Company,
and in any event within forty-five (45) days thereafter, two (2) copies of:
(1) a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such quarter, and
(2) consolidated statements of income,
surplus and cash flows of the Company and its Subsidiaries for such quarter
and (in the case of the second and third quarters) for the portion of the
fiscal year ending with such 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 as complete and correct, subject to changes resulting from
year-end adjustments, by a principal financial officer of the Company;
(b) Annual Statements -- as soon as practicable after
the end of each fiscal year of the Company, and in any event within ninety
(90) days thereafter, two (2) copies of:
(1) a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year, and
(2) consolidated statements of income,
surplus and cash flows of the Company and its Subsidiaries for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and accompanied by (y) an
opinion thereon of independent certified public accountants of recognized
national standing selected by the Company and acceptable to the Special
Majority Noteholders, which opinion shall state that such consolidated
financial statements fairly present the financial condition of the
companies being reported upon and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application which were required as a condition to obtain such
opinion from such accountants) and that the examination of such accountants
in connection with such financial statements has been made in accordance
with generally accepted auditing standards, and accordingly included such
tests of the accounting records and such other auditing procedures as were
considered necessary in the circumstances and (z) a certification by a
principal financial officer of the Company that such consolidated financial
statements are complete and correct;
(c) Opinions of Independent Accountants and Counsel --
as soon as practicable after the end of each fiscal year of the Company,
and in any event within ninety (90) days thereafter, duplicate copies of
all opinions of independent accountants and counsel required pursuant to
Section 7.1 hereof;
(d) Audit Reports -- promptly upon receipt thereof,
one (1) copy of each other report submitted to the Company or any
Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Company or any
Subsidiary;
(e) SEC and Other Reports -- promptly upon their
becoming available one (1) copy of each financial statement, report, notice
or proxy statement sent by the Company or any Subsidiary to stockholders
generally, and of each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters) in respect thereof filed by the Company or any Subsidiary with, or
received by such Person in connection therewith from, any securities
exchange or the Securities and Exchange Commission or any successor agency;
(f) ERISA -- immediately upon becoming aware 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 406 or Section 2003(a) of ERISA) in connection with any
Plan or any trust created thereunder, a written notice specifying the
nature thereof, what action the Company is taking or proposes to take with
respect thereto, and, when known, any action taken by the Internal Revenue
Service or the Department of Labor, as the case may be, with respect
thereto;
(g) Notice of Default or Event of Default --
immediately upon becoming aware of the existence of any condition or event
which constitutes a Default or an Event of Default a written notice
specifying the nature and period of existence thereof and what action the
Company is taking or proposes to take with respect thereto;
(h) Notice of Claimed Default -- immediately upon
becoming aware that the holder of any note or of any evidence of
indebtedness or other Security of the Company or any Subsidiary has given
notice or taken any other action with respect to a claimed default or event
of default, a written notice specifying the notice given or action taken by
such holder and the nature of the claimed default or event of default and
what action the Company is taking or proposes to take with respect thereto;
(i) Other Information; Rule 144A -- promptly upon
request such financial or other information as any holder of Notes may
reasonably determine is required to permit such holder to comply with the
requirements of Rule 144A promulgated under the Securities Act in
connection with the resale by it of such Notes; and
(j) Requested Information -- with reasonable
promptness, such other data and information as from time to time may be
reasonably requested.
Section 7.22. Officers' Certificates. Each set of financial
statements delivered to the Security Trustee or any institutional holder of
the Notes pursuant to Section 7.21(a) or Section 7.21(b) hereof will be
accompanied by a certificate signed by a principal financial officer of the
Company setting forth:
(a) Covenant Compliance -- the information
(including detailed calculations, and, where required by the appropriate
covenant, information and calculations presented on a consolidated basis)
required in order to establish whether the Company and the Subsidiaries
were in compliance with the requirements of Section 7.4 through Section
7.20 hereof during the period covered by the income statement then being
furnished.
(b) Event of Default -- that the signers have reviewed
the relevant terms of this Indenture and have made, or caused to be made,
under their supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the accounting period
covered by the income statements being delivered therewith to the date of
the certificate and that such review has not disclosed the existence during
such period of any condition or event which constitutes a Default or an
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 and each Subsidiary has taken or proposes to take with respect
thereto.
Section 7.23. Accountants' Certificates. Each set of annual
financial statements delivered pursuant to Section 7.21(b) hereof will be
accompanied by a certificate of the accountants who certify such financial
statements, stating that they have reviewed this Indenture and stating
further, whether, in making their audit, such accountants have become aware
of any condition or event which then constitutes a Default or an Event of
Default, and, if any such condition or event then exists, specifying the
nature and period of existence thereof.
Section 7.24. Inspection. The Company will, and will cause each
Subsidiary to, permit representatives of the Security Trustee or the
representatives of any institutional holder of any Note, at the Security
Trustee's or such holder's expense, to visit and inspect any of the
Properties of the Company or any Subsidiary, to examine all their books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts
with their respective officers, employees and independent public
accountants (and by this provision the Company authorizes said accountants
to discuss the finances and affairs of the Company and its Subsidiaries)
all at such reasonable times and as often as may be reasonably requested.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES.
3.1 Corporate Organization and Authority. The Company (a) is
a corporation duly organized and validly in good standing under the laws of
the State of Delaware, (b) has all requisite power and authority and all
necessary licenses and permits to own and operate its Properties and to
carry on its business as now conducted and presently proposed to be
conducted, (c) is duly qualified and is authorized to do business and is in
good standing as a foreign corporation in each jurisdiction where the
character of its Properties or the nature of its activities makes such
qualification necessary and (d) has the corporate power and authority to
(i) enter into this Supplemental Indenture and (ii) perform its obligations
under this Supplemental Indenture, the Trust Indenture and the other
Financing Documents.
3.2 Lien Priority. The Liens in and to the Collateral have
been duly granted, are in full force and effect, are perfected and are
senior to all other Liens except as provided for in Section 7.7(a) of the
Existing Indenture.
3.3 Authorization. This Supplemental Indenture has been duly
authorized, executed and delivered by the Company and the obligations of
the Company hereunder and under the other Financing Documents constitute
the legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except that the enforceability of
this Supplemental Indenture, the Trust Indenture and the other Financing
Documents, as amended hereby may be (a) limited by bankruptcy, insolvency
or other similar laws affecting the enforceability of creditors' rights
generally and (b) subject to the availability of equitable remedies. The
execution and delivery by the Company of this Supplemental Indenture are
not, and the performance by the Company of its obligations hereunder will
not be, inconsistent with its certificate of incorporation or by-laws, do
not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which the Company is a party or
by which any of its Property is bound.
3.4 Consent. No consent or approval of, giving of notice to,
registration with, or taking of any other action in respect of or by, any
federal, state or local governmental authority or agency, or other Person
is required with respect to (a) the execution and delivery by the Company
of this Supplemental Indenture and (b) the performance by the Company of
any of its obligations hereunder or thereunder or under the Trust
Indenture.
3.5 Default. After giving effect to this Supplemental
Indenture, no Default or Event of Default will exist. There are no
defaults or events of default under any other agreement or instrument of
the Company relating to or evidencing Debt.
3.6 Mexican Advances. The aggregate inter-company advances
owed to the Company or its U.S. Subsidiaries by its Mexican Subsidiaries as
of August 27, 1994 is $24,755,375 and the net equity investment (exclusive
of retained earnings) made by the Company in its Mexican Subsidiaries as of
August 27, 1994 is $51,285,344.
ARTICLE 4 CONDITIONS TO EFFECTIVENESS.
This Supplemental Indenture shall become effective only upon the
satisfaction in all respects of the conditions set forth below. The first
date upon which all such conditions shall have been satisfied shall be the
date that this Supplemental Indenture becomes effective. The aforesaid
conditions are as follows:
4.1 Holder Instructions to Security Trustee. Each of the
holders of Notes shall have executed the addendum hereto instructing the
Security Trustee to execute and deliver this Supplemental Indenture.
4.2 Execution of this Supplemental Indenture. The Security
Trustee and the Company shall have executed this Supplemental Indenture.
4.3 Security Trustee Fees. All fees of the Security Trustee
due and payable upon the execution and delivery of this Supplemental
Indenture shall have been paid by the Company.
4.4 Representations and Warranties. The representations and
warranties set forth in Article 3 hereof shall be true and correct as of
the date hereof and as of the date this Supplemental Indenture becomes
effective.
4.5 Guarantee Agreement Confirmation. Each of the Guarantors
shall have executed the addendum hereto, and the Guarantors and the
Security Trustee shall have entered into an amendment to the Guaranty
Agreement in form and substance satisfactory to the holders of the Notes.
4.6 Proceedings; Expenses. All proceedings taken in
connection with the closing of this Supplemental Indenture and all
documents and papers relating thereto shall be satisfactory to each of the
holders of Notes and their respective counsel. All costs and expenses of
the holders of Notes and the Security Trustee required to be paid by
Section 5.9 hereof shall have been paid in full.
ARTICLE 5 MISCELLANEOUS.
Section 5.1 Benefit of Existing Indenture. The Security Trustee
shall be entitled to, may exercise, and shall be protected by, where and to
the full extent the same shall be applicable, all the rights, powers,
privileges, immunities and exemptions provided in the Existing Indenture as
if the provisions concerning the same, as amended (if at all) hereby, were
incorporated herein at length. The recitals and statements in this
Supplemental Indenture shall be taken as statements by the Company alone,
and shall not be considered as made by or imposing any obligation or
liability upon the Security Trustee, nor shall the Security Trustee be held
responsible for the legality or validity of this Supplemental Indenture,
and the Security Trustee makes no covenant or representation, and shall not
be responsible, as to and for the effect, authorization, execution,
delivery or recording of this Supplemental Indenture. As provided in the
Existing Indenture, this Supplemental Indenture shall hereafter form a part
of the Trust Indenture.
Section 5.2 Successors and Assigns. Whenever any of the parties
hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, and all the covenants, promises and
agreements in this Supplemental Indenture contained by or on behalf of the
Company or by or on behalf of the Security Trustee shall bind and inure to
the benefit of the respective successors and assigns of such parties
whether so expressed or not.
Section 5.3 Partial Invalidity. The unenforceability or
invalidity of any provision or provisions of this Supplemental Indenture
shall not render any other provision or provisions herein or otherwise
within the Trust Indenture contained unenforceable or invalid.
Section 5.4 Governing Law. THE TRUST INDENTURE, INCLUDING THIS
SUPPLEMENTAL INDENTURE, AND THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CONNECTICUT (WITHOUT
REGARD TO ANY CONFLICTS-OF-LAW PRINCIPLES)
Section 5.5 Counterparts. This Supplemental Indenture may be
executed and delivered in any number of counterparts, each of such
counterparts constituting an original but altogether only one Supplemental
Indenture; provided, however, that this Supplemental Indenture shall not be
deemed to be delivered until at least one counterpart shall have been
executed by the Company and the Security Trustee.
Section 5.6 Headings, etc. Any headings or captions preceding
the text of the several articles and sections hereof are intended solely
for convenience of reference and shall not constitute a part of this
Supplemental Indenture nor shall they affect its or the Trust Indenture's
meaning, construction or effect. Each covenant contained in this
Supplemental Indenture shall be construed (absent an express contrary
provision therein) as being independent of each and every other covenant
herein and in the Trust Indenture contained and compliance with any one
covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any and all other covenants.
Section 5.7 Amendments. This Supplemental Indenture may, subject
to the provisions of Article 9 of the Trust Indenture, from time to time
and at any time, be amended or supplemented by, and only by, an instrument
or instruments in writing executed by the parties hereto.
Section 5.8 Benefits of Indenture Restricted to Parties and Note
Holders. Nothing in this Supplemental Indenture expressed or implied is
intended or shall be construed to give to any Person other than the
Company, the Security Trustee, the holders of the Notes issued under the
Trust Indenture and other obligations secured thereby any legal or
equitable right, remedy or claim under or in respect of the Trust Indenture
or any covenant, condition or provision therein or herein contained; and
all such covenants, conditions and provisions are and shall be held to be
for the sole and exclusive benefit of the Company, the Security Trustee,
the holders of the Notes issued under the Trust Indenture and other
obligations secured hereby.
Section 5.9 Expenses. The Company agrees to pay, and save the
Security Trustee and all holders of Notes harmless against liability for
the payment of, all attorney's fees and other out-of-pocket expenses
arising in connection with the transactions contemplated by this
Supplemental Indenture, including all document production and duplication
charges and the fees and expenses of any special counsel engaged by the
Security Trustee or any holder of Notes in connection with this
Supplemental Indenture and/or such transactions.
Section 5.10 Directly or Indirectly. Where any provision in this
Supplemental Indenture refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.
Section 5.11 Existing Indenture Not Otherwise Affected. Except
as modified, amended or supplemented hereby, and except as modified,
amended or supplemented hereafter, the Existing Indenture and the Notes
issued in respect thereof and all other Financing Documents shall remain
unchanged and in full force and effect and the Company hereby ratifies and
reaffirms all of its obligations thereunder.
[REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE
PAGE]
IN WITNESS WHEREOF, the Company has caused this Supplemental
Indenture to be executed and its seal hereunto affixed and said seal and
this Supplemental Indenture to be attested by its Assistant Secretary, and
State Street Bank and Trust Company of Connecticut, N.A., in evidence of
its acceptance of the trusts hereby created, has caused this Supplemental
Indenture to be executed on its behalf by one of its authorized trust
officers all as of the day and year first above written.
Attest: PILGRIM'S PRIDE CORPORATION
Name: C.E. Butler Name: Lonnie A. Pilgrim
Title: Secretary Title: Chief Executive Officer
[CORPORATE SEAL]
STATE STREET BANK AND TRUST COMPANY
OF CONNECTI CUT, N.A., as Security Trustee
Name: Michael J. D'Angelico
Title: Vice President
[Signature Page of the SUPPLEMENTAL INDENTURE, dated as of October 2, 1994,
between PILGRIM'S PRIDE CORPORATION and STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, N.A., as Security Trustee]
CONSENT AND DIRECTION TO THE
SECURITY TRUSTEE:
The undersigned, The Aetna Casualty and Surety Company, and Aetna
Life Insurance Company (collectively, the "Noteholders") in the aggregate
own one hundred percent (100%) in principal amount of the Series A Notes
and the Series C Notes, being all of the outstanding Notes issued under the
Existing Indenture. Pursuant to Section 9.2 of the Existing Indenture and
this paragraph, the Security Trustee is hereby directed to execute and
deliver this Supplemental Indenture, the Second Amendment to Guarantee
Agreement and such other related documents and instruments as are
contemplated by the provisions of the foregoing. Each of the Noteholders
hereby consents to the terms, provisions and conditions of this
Supplemental Indenture.
THE AETNA CASUALTY AND SURETY COMPANY
Name: Drew M. Thomas
Title: Assistant Vice President
AETNA LIFE INSURANCE COMPANY
Name: Drew M. Thomas
Title: Assistant Vice President
[Consent and Direction Signature Page of the SUPPLEMENTAL INDENTURE, dated
as of October 2, 1994, between PILGRIM'S PRIDE CORPORATION and STATE STREET
BANK AND TRUST COMPANY OF CONNECTICUT, N.A., as Security Trustee]
CONSENT OF GUARANTORS:
Each of the undersigned, Lonnie A. Pilgrim and Patty R. Pilgrim,
hereby consents to all of the transactions and modifications in and to the
Financing Documents provided for, or contemplated by, this Supplemental
Indenture.
LONNIE A. PILGRIM
PATTY R. PILGRIM
[Consent of Guarantors Signature Page of the SUPPLEMENTAL INDENTURE, dated
as of October 2, 1994, between PILGRIM'S PRIDE CORPORATION and STATE STREET
BANK AND TRUST COMPANY OF CONNECTICUT, N.A., as Security Trustee]