EXHIBIT 99.10
EXHIBIT 1.1(k)
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Company" refers only to Pilgrim's Pride Corporation and not to any of its
subsidiaries. In addition, in this description, the term "Holder" refers to the
record holder of any Note.
The Company will issue the Note in payment of a portion of the purchase
price of all of the chicken business of ConAgra Foods, Inc. through the
acquisition of all of the issued and outstanding capital stock of ConAgra
Poultry Company, To-Ricos, Inc., Lovette Company, Inc. and Hester Industries,
Inc. (collectively, the "Acquired Companies"), each a wholly-owned subsidiary of
ConAgra Foods, Inc. (the "Acquisition"). The Notes will be issued under an
Indenture dated as of ________, 2003 (the "Indenture") between the Company and
___________, as trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture and by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The following description is a summary of the material provisions of
the Indenture.
BRIEF DESCRIPTION OF THE NOTES
The Notes:
o will be general unsecured obligations of the Company; and
o are expressly subordinated in right of payment to all
existing and future Senior Indebtedness of the Company.
PRINCIPAL, MATURITY AND INTEREST
At the closing of the Acquisition, the Company will issue a Note with a
principal amount of $____ million based on an estimated combined, consolidated
stockholders' equity of the Acquired Companies. The final determination of the
purchase price for the Acquired Companies will be subject to a post-closing
audit of the final combined, consolidated balance sheet of the Acquired
Companies as of the closing date of the Acquisition. Any reduction or increase
in the purchase price will be made by the Company, paying the amount in cash,
issuing a new Note in exchange for the original Note issued at the closing of
the Acquisition, or a combination thereof. In the event a new Note is issued,
the Holder of the Note will be required to surrender the original Note, and the
new Note will be on the same terms and conditions as the Note issued at the
closing of the Acquisition except that the principal balance will be decreased
or increased by an amount equal to the difference between the final combined,
consolidated stockholders' equity
1
of the Acquired Companies based on the post-closing audit and the estimated
stockholders' equity of the Acquired Companies used to determine the estimated
purchase price.
The Notes will mature on March 4, 2011. Interest on the Notes will
accrue at the rate of 10.50% per annum and will be payable semi-annually in
arrears on December 15 and June 15, commencing on ________. The Company will
make each interest payment, including any Special Interest, to the Holders of
record on the immediately preceding December 1 and June 1.
Interest on the Notes will accrue from the date of original issuance
or, if interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
ADDITIONAL NOTES
Subject to the limitations set forth under "-- Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock," the Company may
incur additional Indebtedness up to an aggregate principal amount of $_____
[one-half of the Notes] which, at its option, may consist of additional Notes,
in one or more series, having identical terms as the Notes issued on the date of
the Indenture (the "Additional Notes"). Holders of such Additional Notes will
have the right to vote together with Holders of Notes issued on the date of the
Indenture as one class.
SUBSIDIARY GUARANTEES
The Indenture will require that each Domestic Restricted Subsidiary
(other than any Securitization Subsidiary that has entered into or established a
Permitted Securitization Program) that incurs any Indebtedness (other than
intercompany Indebtedness between or among such Domestic Restricted Subsidiary
and the Company or any of its Restricted Subsidiaries) which is pari passu with
or subordinate in right of payment to the Notes guarantee the obligations of the
Company under the Notes (including the payment of principal, premium, if any,
and interest on the Notes) by entering into a supplemental indenture with the
Company and the Trustee (each such Domestic Restricted Subsidiary and any other
Restricted Subsidiary that guarantees the Notes in accordance with the Indenture
being referred to herein as a "Guarantor"). The Indenture will provide that any
such Domestic Restricted Subsidiary must become a Guarantor and execute a
supplemental indenture and deliver an opinion of counsel to the Trustee within
10 business days of the date on which it was acquired, created or incurred such
Indebtedness.
Any Guarantors will be jointly and severally liable with respect to the
Company's obligations under the Notes. Each such guarantee of the Notes (a
"Subsidiary Guarantee") will be a general unsecured obligation of the Guarantor
thereunder and will be expressly subordinated in right of payment to all
existing and future Senior Indebtedness of such Guarantor. The obligations of
each Guarantor under its Subsidiary Guarantee will be limited as necessary to
prevent that Subsidiary Guarantee from constituting a fraudulent conveyance
under applicable law.
2
A Guarantor may not sell or otherwise dispose of all or substantially
all of its assets to, or consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another Person, other than the Company
or another Guarantor, unless:
(1) immediately after giving effect to that transaction, no
Default or Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such
sale or disposition, or the Person formed by or surviving any such
consolidation or merger (if such surviving Person is not the
Guarantor), assumes all the obligations of that Guarantor under the
Indenture and its Subsidiary Guarantee pursuant to a supplemental
indenture satisfactory to the Trustee; or
(b) the Net Proceeds of such sale or other
disposition are applied in accordance with the "Asset Sale" provisions
of the Indenture.
The Subsidiary Guarantee of a Guarantor will be released and such
Person shall no longer be deemed a Guarantor for purposes of the Indenture:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor to a Person that is not
(either before or after giving effect to such transaction) a Subsidiary of the
Company, if the Net Proceeds of that sale or other disposition are applied in
accordance with the "Asset Sale" provisions of the Indenture;
(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person (including by way of merger or consolidation) that is not
(either before or after giving effect to such transaction) a Subsidiary of the
Company, if the Net Proceeds of that sale are applied (or the Company certifies
in an Officer's Certificate delivered to the Trustee that such Net Proceeds will
be applied) in accordance with the "Asset Sale" provisions of the Indenture;
(3) if the Company properly designates the Guarantor as an Unrestricted
Subsidiary; or
(4) if all Indebtedness and Guaranteed Indebtedness of such Guarantor
has been paid in full or otherwise discharged.
See "-- Repurchase at the Option of Holders -- Asset Sales."
OPTIONAL REDEMPTION
At any time prior to _________, 2007, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes
issued under the Indenture (including, if issued, any Additional Notes) at a
redemption price of 110.5% of the principal
3
amount thereof, plus accrued and unpaid interest, if any, to the redemption
date, with the net cash proceeds of one or more Public Equity Offerings;
provided, that:
(1) at least 65% of the aggregate principal amount of Notes issued
under the Indenture (including, if issued, any Additional
Notes) remains outstanding immediately after the occurrence of
such redemption (excluding Notes held by the Company and its
Subsidiaries); and
(2) the redemption must occur within 45 days of the date of the
closing of such Public Equity Offering.
Except pursuant to the preceding paragraph and the last paragraph in
this section, the Notes will not be redeemable at the Company's option prior to
_______, 2007.
On or after ______, 2007, the Company may redeem all or a part of the
Notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest, if any, thereon to the applicable redemption date,
if redeemed during the twelve-month period beginning on September 15 of the
years indicated below:
YEAR PERCENTAGE
2007...................................................... 105.250%
2008...................................................... 102.625%
2009 and thereafter....................................... 100.000%
Notwithstanding the foregoing, the Company may, at any time and from
time to time, redeem all or a part of the Notes from any Initial Holder upon not
less than 15 nor more than 60 days' notice, at a redemption price of 100.000% of
the principal amount thereof, plus accrued and unpaid interest, if any. The
Company may not, however, redeem less than all of the Notes from any Initial
Holder if the Initial Holders hold less than, or the redemption would result in
the Initial Holders holding less than, an aggregate of $150 million in principal
amount of the Notes.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking
fund payments with respect to the Note.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of Notes will have the right
to require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's Notes pursuant to a Change of
Control Offer on the terms set forth in the Indenture. In the Change of Control
Offer, the Company will offer a Change of Control Payment in cash equal
4
to (a) in the case of an Initial Holder, 100% of the aggregate principal amount
of Notes repurchased plus accrued and unpaid interest, if any, thereon to the
date of purchase and (b) in the case of all other Holders, 101% of the aggregate
principal amount of Notes repurchased plus accrued and unpaid interest, if any,
thereon to the date of purchase. Within 90 days following any Change of Control,
unless the Company has mailed a redemption notice with respect to all of the
outstanding Notes in accordance with the Optional Redemption provisions of the
Indenture, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the Change of Control Payment Date specified in such
notice which date shall be no earlier than 15 days and no later than 60 days
from the date such notice is mailed, pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Securities Exchange Act of 1934 and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control provisions of
the Indenture, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Change of Control provisions of the Indenture by virtue of such conflict.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided, that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The provisions described above that require the Company to make a
Change of Control Offer following a Change of Control will be applicable
regardless of whether or not any other provisions of the Indenture are
applicable. Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
5
The Company will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ASSET SALES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(2) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors and, if such
fair market value exceeds $50 million, is set forth in an Officers' Certificate
delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash, Cash Equivalents or assets
or Voting Stock of a type referred to in clauses (2), (3) or (4) immediately
below.
For purposes of this provision, each of the following shall be deemed
to be cash:
(a) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company
or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
Subsidiary Guarantee) that are assumed by the transferee of any such
assets pursuant to a novation agreement that releases the Company or
such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations
received by the Company or any such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted
Subsidiary into cash or Cash Equivalents (to the extent of the cash or
Cash Equivalents received in that conversion) within 90 days of the
related Asset Sale.
Within 270 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may, at its option:
(1) apply such Net Proceeds to permanently repay, purchase or retire
unsubordinated Indebtedness of the Company or any Restricted Subsidiary;
6
(2) apply such Net Proceeds to acquire all or substantially all of the
assets of, or a majority of the Voting Stock of, another business reasonably
related to the business of the Company;
(3) apply such Net Proceeds to make a capital expenditure used or
useful in the Company's business;
(4) apply such Net Proceeds to acquire other long-term assets that are
used or useful in the Company's business; or
(5) enter into a binding agreement with respect to the application of
such Net Proceeds described in clauses (2), (3) or (4) above and apply such Net
Proceeds pursuant thereto within 360 days of receipt by the Company of such Net
Proceeds.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $20.0 million, then within 45
business days after the later of the application of Net Proceeds in accordance
with the preceding paragraph and the date that is 270 days following the receipt
of the Net Proceeds, to the extent of the balance of the net Proceeds after
application in accordance with the preceding paragraph, the Company will make an
Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness
that is pari passu with the Notes containing provisions similar to those set
forth in the Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets to purchase the maximum principal amount of Notes
and such other pari passu Indebtedness that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of
principal amount plus accrued and unpaid interest, if any, to the date of
purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and such other pari passu Indebtedness tendered into
such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes and such other pari passu Indebtedness to be purchased on a pro
rata basis based on the principal amount of Notes and such other pari passu
Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934 and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
Asset Sale provisions of the Indenture, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Asset Sale provisions of the Indenture by
virtue of such conflict.
7
FALL-AWAY EVENT
The obligations of the Company and its Restricted Subsidiaries to
comply with the provisions of the Indenture described under the captions
"Repurchase at the Option of the Holders -- Change of Control," "-- Certain
Covenants -- Restricted Payments," "-- Incurrence of Indebtedness and Issuance
of Preferred Stock," "--Liens," "-- Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries," "-- Issuances of Guarantees by Domestic
Restricted Subsidiaries," "-- Limitation on Issuance and Sale of Equity
Interests in Restricted Subsidiaries," and "--the Transactions with Affiliates,"
and the requirement set forth under clause (4) of the first paragraph under "--
Merger, Consolidation, or Sale of Assets," will terminate if and when the Notes
shall achieve Investment Grade Status (a "Fall-Away Event").
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable (a) in Equity Interests (other than
Disqualified Stock) of the Company or (b) to the Company or a Restricted
Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or any Restricted Subsidiary of the Company
(other than any such Equity Interests owned by the Company or any Restricted
Subsidiary of the Company);
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees, except a payment of
interest or principal to a Wholly Owned Restricted Subsidiary of the Company or
at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
8
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable eight-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
below under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after the
date of the Indenture (excluding Restricted Payments permitted by clauses (1),
(2), (3) and (7) of the next succeeding paragraph) is less than the sum, without
duplication, of
(a) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from the beginning of
the fiscal quarter beginning immediately prior to the date of the
Indenture to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received
by the Company since the date of the Indenture as a contribution to its
common equity capital or from the issue or sale of Equity Interests of
the Company (other than Disqualified Stock) or from the issue or sale
of convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of the Company that have been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to a
Restricted Subsidiary of the Company), plus
(c) to the extent that any Restricted Investment that
was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (i) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (ii) the initial amount of such Restricted
Investment, plus (d) if any Unrestricted Subsidiary is redesignated as
a Restricted Subsidiary, the fair market value of such redesignated
Subsidiary (as determined in good faith by the Board of Directors) as
of the date of its redesignation, not to exceed in the case of any
Subsidiary the amount of Restricted Investments previously made by the
Company or any of its Restricted Subsidiaries in such Unrestricted
Subsidiary (subsequent to the date of the Indenture) which were treated
as Restricted Payments (other than any such Restricted Payment that was
made pursuant to the provisions of paragraphs (1) through (6) below).
The preceding provisions will not prohibit the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have
9
complied with the provisions of the Indenture. In addition, so long as no
Default has occurred and is continuing or would be caused thereby, the preceding
provisions will not prohibit:
(1) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any Restricted
Subsidiary or of any Equity Interests of the Company in exchange for, or out of
the net cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, Equity Interests of the Company (other than
Disqualified Stock) or Indebtedness of the Company which is subordinate or
junior in right of payment to the Notes and has a Weighted Average Life to
Maturity no less than that of the Indebtedness being refinanced; provided, that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (3)(b) of the preceding paragraph;
(2) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Restricted Subsidiary with the
net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
provided, that the amount of any such net cash proceeds that are utilized for
any such defeasance, redemption, repurchase or other acquisition shall be
excluded from clause (3)(b) of the preceding paragraph;
(3) Investments made out of the net cash proceeds of a substantially
concurrent issue and sale (other than to a Subsidiary of the Company) of Equity
Interests (other than Disqualified Stock) of the Company; provided, that the
amount of any such net cash proceeds that are utilized for any such Investment
shall be excluded from clause (3)(b) of the preceding paragraph;
(4) the payment of any dividend or distribution by a Restricted
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis so long as the Company or one of its Restricted Subsidiaries receives
at least a pro rata share (and in like form) of the dividend or distribution in
accordance with its common Equity Interests;
(5) the payment by the Company of cash dividends on its common stock in
an aggregate amount up to $10.0 million per year;
(6) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary of the
Company held by any member of the management or the Board of Directors of the
Company or any Restricted Subsidiary pursuant to any equity subscription
agreement, stock option agreement or similar agreement approved by the Board of
Directors of the Company; provided, that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1
million in any twelve-month period; and
(7) other Restricted Payments in an aggregate amount not to exceed
$50.0 million.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted
10
Payment. The fair market value of any assets or securities that are required to
be valued by this covenant shall be determined by the Board of Directors and set
forth in a resolution. The Board of Directors' determination must be based upon
an opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing or appraisal firm acceptable to the Trustee if the
fair market value exceeds $50.0 million. Not later than the date of making any
Restricted Payment with a fair market value in excess of $50.0 million, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this "Restricted Payments" covenant were computed,
together with a description and amounts of all Restricted Payments made by the
Company pursuant to this "Restricted Payments" covenant since the date of the
most recently delivered Officers' Certificate pursuant to this paragraph (or, if
none, the date of the Indenture), together with a copy of any fairness opinion
or appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of Preferred Stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue Disqualified Stock, and the Domestic Restricted Subsidiaries and
any other Guarantors may incur Indebtedness or issue Preferred Stock, if the
Fixed Charge Coverage Ratio for the Company's most recently ended eight full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Preferred Stock or Disqualified Stock is issued would have been at least
2.0 to 1, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been incurred
or the Preferred Stock or Disqualified Stock had been issued, as the case may
be, at the beginning of such eight-quarter period.
The first paragraph of this covenant will not prohibit the incurrence
or issuance of any of the following items of Indebtedness or Preferred Stock
(collectively, "Permitted Debt"):
(1) the incurrence by the Company or any Guarantor of Indebtedness (and
any replacements, renewals, refinancings, extensions or amendments of any
thereof) in an aggregate principal amount at any one time outstanding as of the
date of any such incurrence under this clause (1) not to exceed an amount equal
to the greater of (x) $585.0 million, less the aggregate amount of all Net
Proceeds of Asset Sales (other than a sale of all or a substantial portion of
the assets used in or related to the Turkey Operations) applied by the Company
or any of its Subsidiaries to repay Indebtedness incurred under this clause (1)
pursuant to the covenant described above under the caption "-- Repurchase at the
Option of Holders -- Asset Sales" and (y) 75% of the fair market value of
property, plant, equipment and intangibles (excluding goodwill) of the Company
and its consolidated Restricted Subsidiaries;
11
(2) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness pursuant to a revolving credit facility under the Existing U.S.
Credit Facilities (and any replacements, renewals, refinancings, extensions or
amendments of any thereof) in an aggregate principal amount outstanding at any
one time as of the date of any such incurrence under this clause (2) not to
exceed the Domestic Borrowing Base;
(3) the incurrence of Indebtedness by the Foreign Restricted
Subsidiaries pursuant to the Existing Foreign Credit Facility (and any
replacements, renewals, refinancings, extensions or amendments thereof) in an
aggregate principal amount outstanding at any one time as of the date of any
such incurrence under this clause (3) not to exceed the greater of (x) $50.0
million and (y) the Foreign Borrowing Base;
(4) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes to be issued on the date of the Indenture or as
described in the first paragraph under "Principal, Maturity and Interest"
(including, in each case, any Subsidiary Guarantees);
(5) the incurrence by the Company or any of its Restricted Subsidiaries
of purchase money obligations incurred in the ordinary course of business in an
amount outstanding at any one time as of the date of any such incurrence not to
exceed 75% of the purchase price or fair market value of the asset purchased,
acquired or constructed;
(6) the incurrence by the Company or any of its Restricted Subsidiaries
of Capital Lease Obligations incurred in the ordinary course of business in an
amount outstanding at any one time as of the date of any such incurrence not to
exceed 5% of the Company's Consolidated Tangible Net Worth;
(7) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations pursuant to which the Company or the Restricted
Subsidiary has hedged against its actual exposure to fluctuations in interest
rates, currency values or commodity prices;
(8) the incurrence by the Company or any Restricted Subsidiary of up to
$25.0 million aggregate principal amount of Indebtedness to the Camp County
Industrial Development Corporation pursuant to that certain Loan Agreement (the
"Camp County Loan Agreement"), dated as of June 15, 1999, between the Company
and the Camp County Industrial Development Corporation, including the incurrence
by the Company or any Guarantor of Indebtedness to Harris Trust and Savings Bank
pursuant to the Reimbursement Agreement dated June 15, 1999 between the Company
and Harris Trust and Savings Bank, or under any irrevocable letter of credit,
surety bond, insurance policy or other similar instrument issued by any Person
to support the Company's or any Restricted Subsidiary's Obligations pursuant to
the Camp County Loan Agreement or in connection with the related bonds issued by
the Camp County Industrial Development Corporation (and reimbursement and
similar agreements in respect thereof) and any Permitted Refinancing
Indebtedness relating thereto; provided, that such $25.0 million and any
corresponding credit enhancement or reimbursement obligation with respect
thereto shall be reduced by any prepayments or scheduled payments under the Camp
County Loan Agreement;
12
(9) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding under this clause (9) not to exceed $150
million;
(10) the incurrence by the Company or any Restricted Subsidiary of up
to $82.5 million aggregate principal amount of Indebtedness to the issuer of
industrial development bonds and similar Indebtedness outstanding as of the date
of the Indenture, including the incurrence by the Company or any Restricted
Subsidiary of Indebtedness to the issuer of any irrevocable letter of credit,
surety bond, insurance policy or other similar instrument issued by any Person
to support the Company's or any Restricted Subsidiary's Obligations pursuant to
or in connection with such related industrial revenue bonds (and reimbursement
and similar agreements in respect thereof); provided, that such $82.5 million
and any corresponding credit enhancement or reimbursement obligation with
respect thereto shall be reduced by any prepayments or scheduled payments in
respect of such industrial revenue bonds or Indebtedness;
(11) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) under the Senior Notes and the Senior Notes
Indenture or that was permitted by the Indenture to be incurred under the first
paragraph of this covenant or clauses (1), (2), (3), (5), (6), (8), (10) or (14)
of this paragraph;
(12) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness; provided, however, that:
(a) if the Company or any Guarantor is the obligor on
such Indebtedness, such Indebtedness must be expressly subordinated to
the prior payment in full in cash of all Obligations with respect to
the Note, in the case of the Company, or the Subsidiary Guarantee, in
the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person
other than the Company or a Restricted Subsidiary thereof and (ii) any
sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary thereof shall be deemed,
in each case, to constitute an incurrence of such Indebtedness by the
Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (12);
(13) the guarantee by the Company or any of its Restricted Subsidiaries
of Indebtedness of the Company or a Restricted Subsidiary that was permitted to
be incurred by another provision of this covenant and, in the case of a Domestic
Restricted Subsidiary, the provisions of the covenant set forth under the
caption "-- Issuances of Guarantees by Domestic Restricted Subsidiaries";
13
(14) Indebtedness of the Company to the extent the net proceeds thereof
are promptly (a) used to purchase Notes tendered in a Change of Control Offer
made as a result of a Change of Control in accordance with the Indenture or (b)
deposited to defease the Notes;
(15) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant; provided, in each
such case, that the amount thereof is included in Fixed Charges of the Company
as accrued; and
(16) the issuance of Preferred Stock to the Company or a Wholly Owned
Restricted Subsidiary.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, (a) in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (16) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company will be permitted to classify such item of Indebtedness on the date of
its incurrence, or reclassify all or a portion of such item of Indebtedness, in
any manner that complies with this covenant; provided, that (x) Indebtedness
outstanding under the Existing U.S. Credit Facilities on the date of the
Indenture will be deemed to have been incurred on such date in reliance on the
exception provided in clauses (1) and (2), as applicable, of the definition of
Permitted Debt above and (y) Indebtedness outstanding under the Existing Foreign
Credit Facility on the date of the Indenture will be deemed to have been
incurred on such date in reliance on the exception provided in clause (3) of the
definition of Permitted Debt above, and (b) with respect to Indebtedness
denominated in a currency other than United States dollars, the Company or any
of its Restricted Subsidiaries shall not have been deemed to incur Indebtedness
solely as a result of fluctuations in the exchange rates of currencies.
LIENS
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, incur or suffer to exist any Lien (other than
Permitted Liens or Liens securing Senior Indebtedness) upon any of its assets
(including Capital Stock of a Restricted Subsidiary), whether owned at the date
the Notes are first issued or thereafter acquired, or any interest therein or
any income or profits therefrom, unless:
(1) if such Lien secures Senior Subordinated Indebtedness, the Notes or
the Guarantees are secured on an equal and ratable basis with such Indebtedness
for so long as such Senior Subordinated Indebtedness is secured by such Lien;
and
(2) if such Lien secures Subordinated Indebtedness, the Lien securing
such Subordinated Indebtedness will be subordinated and junior to a Lien
securing the Notes or the Guarantees, as the case may be, with the same relative
priority as such Indebtedness has with
14
respect to the Notes or the Guarantees.
LIMITATIONS ON LAYERED DEBT
The Company shall not, and shall not permit any Restricted Subsidiary,
to incur, directly or indirectly, any Indebtedness that is subordinate or junior
in right of payment of any Senior Indebtedness unless such Indebtedness is
Senior Subordinated Debt or is expressly subordinated in right of payment to, or
ranks pari passu with, the Notes or Subsidiary Guarantees, as the case may be.
In addition, no Guarantor shall Guarantee, directly or indirectly, any
Indebtedness of the Company that is subordinate or junior in right of payment to
any Senior Indebtedness unless such Guarantee is expressly subordinated in right
of payment to, or ranks pari passu, with, the Subsidiary Guarantee of such
Guarantor.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Credit Facilities as in effect on the date of the
Indenture and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are not materially more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions
than those contained in such Existing Credit Facilities, as in effect on the
date of the Indenture;
(2) the Indenture, the Subsidiary Guarantee, the Notes and any
additional notes that are issued under the Indenture;
(3) applicable law;
15
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided, that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of the
nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Subsidiary pending its sale or
other disposition;
(8) Permitted Refinancing Indebtedness, provided, that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are not materially more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Liens;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements, stock
sale agreements and other similar agreements entered into in the ordinary course
of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(12) customary restrictions imposed on any Securitization Subsidiary in
connection with a Permitted Securitization Program, including, without
limitation, those imposed on Pilgrim's Pride Funding Corporation on the date of
the Indenture; and
(13) the Senior Notes Indenture, the Senior Guarantee and the Senior
Notes.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not, directly or indirectly: (1) consolidate or merge
with or into another Person (whether or not the Company is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the
16
Company and its Subsidiaries taken as a whole, in one or more related
transactions, to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b) the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than the Company) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and the Indenture pursuant to
agreements reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made will,
on the date of such transaction after giving pro forma effect thereto and any
related financing transactions as if the same had occurred at the beginning of
the applicable eight-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(5) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that such merger,
consolidation or sale of assets and such supplemental indenture, if any, comply
with the Indenture.
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation, or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and any of its Wholly
Owned Restricted Subsidiaries.
TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable
17
transaction by the Company or such Restricted Subsidiary with an unrelated
Person or is approved by a majority of the disinterested members of the Board of
Directors; and
(2) (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0
million, such determination shall be set forth in a resolution adopted by the
Board of Directors stating that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved by a majority of
the disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $25.0 million, the Board of Directors has received an opinion
as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or
investment banking firm of national standing or appraisal firm
acceptable to the Trustee.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(1) any transaction entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
past practices;
(2) any transaction entered into by the Company and any of its
Restricted Subsidiaries or between any of the Restricted Subsidiaries;
(3) transactions with a Person that is an Affiliate of the
Company solely because the Company owns an Equity Interest in such Person;
(4) payment of reasonable directors fees to Persons who are
not otherwise Affiliates of the Company and reasonable indemnification
arrangements;
(5) Restricted Payments that are permitted by the provisions
of the Indenture described above under the caption "-- Restricted Payments;" and
(6) any transaction entered into with ConAgra Foods or its
Subsidiaries by the Company and any of its Restricted Subsidiaries.
ISSUANCES OF GUARANTEES BY DOMESTIC RESTRICTED SUBSIDIARIES
The Company will not permit any Domestic Restricted Subsidiary,
directly or indirectly, to guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company which is pari passu with
or subordinate in right of payment to the Notes ("Guaranteed Indebtedness"),
unless (i) such Domestic Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Subsidiary
Guarantee by such Domestic Restricted Subsidiary and (ii) such Domestic
Restricted Subsidiary waives and will not in any manner whatsoever claim, or
take the benefit or advantage of, any
18
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Restricted Subsidiary as a result of any payment by
such Domestic Restricted Subsidiary under its Subsidiary Guarantee until the
Notes have been paid in full. If the Guaranteed Indebtedness is (A) pari passu
with the Notes, then the guarantee of such Guaranteed Indebtedness shall be pari
passu with, or subordinated to, the Subsidiary Guarantee, or (B) subordinated to
the Notes, then the guarantee of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guarantee at least to the extent that the
Guaranteed Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any such Subsidiary Guarantee by a
Domestic Restricted Subsidiary of the Notes shall provide by its terms that it
shall be automatically and unconditionally released and discharged if such
Guarantor sells or otherwise disposes of all or substantially all of its assets
to, or consolidates with or merges with or into (whether or not such Guarantor
is the surviving Person), another Person, other than the Company or another
Guarantor, in compliance with the terms described above in the fourth paragraph
under the caption "-- Subsidiary Guarantees."
LIMITATION ON THE ISSUANCE AND SALE OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
The Company will not sell, and will not permit any Restricted
Subsidiaries, directly or indirectly, to issue or sell any Equity Interests of a
Restricted Subsidiary except:
(1) to the Company or a Wholly Owned Restricted Subsidiary;
(2) issuances of director's qualifying shares or sales to foreign
nationals of shares of Capital Stock of Foreign Restricted Subsidiaries, to the
extent required by applicable law;
(3) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such Person remaining after giving effect to such issuance or sale
would have been permitted to be made under the "-- Restricted Payments" covenant
if made on the date of such issuance or sale; or
(4) sales of Common Stock (including options, warrants or other rights
to purchase shares of such Common Stock) of a Restricted Subsidiary by the
Company or a Restricted Subsidiary, provided that the Company or such Restricted
Subsidiary applies the Net Proceeds of any such sale in accordance with
"Repurchase at the Option of Holders -- Asset Sales" above.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated an Unrestricted Subsidiary, all outstanding
Investments owned by the Company and its Restricted Subsidiaries in the
Subsidiary so designated will be deemed to be an Investment made as of the time
of such designation and either will reduce the amount available for Restricted
Payments under the first paragraph of the covenant described above under the
caption "--
19
Restricted Payments" or will at the time of such designation qualify as a
Permitted Investment, as the Company shall determine. All such outstanding
Investments will be valued at their fair market value at the time of such
designation. That designation will only be permitted if such Investment would be
permitted at that time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. The Board of Directors may redesignate
any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation
would not cause a Default and such redesignation will increase the amount
available for Restricted Payments under the first paragraph of the covenant
described under the caption "-- Restricted Payments" as provided therein or
Permitted Investments, as applicable.
PAYMENTS FOR CONSENT
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes unless
such consideration is offered to be paid and is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) the Company defaults in the payment when due of interest on the
Notes and such default continues for a period of 30 days;
(2) the Company defaults in the payment when due of principal of, or
premium, if any, on the Notes;
(3) failure by the Company or any of the Guarantors to comply with the
provisions described under the caption "-- Repurchase at the Option of Holders
- -- Change of Control" or "Certain Covenants -- Merger, Consolidation or Sale of
Assets;"
(4) failure by the Company or any of its Restricted Subsidiaries to
comply with the provisions described under the captions "-- Repurchase at the
Option of Holders -- Asset Sales," -- Certain Covenants -- Restricted Payments"
and "-- Certain Covenants -- Issuance of Indebtedness and Issuance of Preferred
Stock" for 30 days after the date on which the Company has received written
notice from the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes specifying such failure and stating that such notice
is a "Notice of Default" under the Indenture;
(5) failure by the Company or any of its Restricted Subsidiaries to
comply with any of the other agreements in the Indenture for 60 days after the
date on which the Company has received written notice from the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes
specifying such failure and stating that such notice is a "Notice of
20
Default" under the Indenture;
(6) the Company or any Restricted Subsidiary defaults under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to
its express maturity,
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$20.0 million or more;
(7) a final nonappealable judgment or final nonappealable judgments for
the payment of money are entered by a court or courts of competent jurisdiction
against the Company or any of its Restricted Subsidiaries and such judgment or
judgments are not paid, discharged or stayed for a period (during which
execution shall not be effectively stayed) of 60 days, provided that the
aggregate of all such undischarged judgments exceeds $20.0 million;
(8) except as permitted by the Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee; and
(9) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding Notes
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately.
Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may
21
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest, if any) if it determines that withholding notice is in
their interest.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest or premium, if any, on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
SUBORDINATION
The Company may not pay (except from the trust as provided in the Legal
Defeasance and Covenant Defeasance provisions) principal of, or premium, if any,
or interest on, the Notes, or make any deposit pursuant to the Legal Defeasance
and Covenant Defeasance provisions, and may not repurchase, redeem or otherwise
retire any Notes until all principal and other Obligations with respect to
Senior Indebtedness is paid in full (collectively, "Pay The Notes") if (a) any
principal, premium, interest or any other amount payable in respect of any
Senior Indebtedness is not paid within any applicable grace period (including at
maturity) or (b) any other default on Senior Indebtedness occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (1) the default has been cured or waived and any such
acceleration has been rescinded or (2) such Senior Indebtedness has been paid in
full in cash or otherwise satisfied in accordance with the terms thereof;
provided, however, that the Company may pay the Notes without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from the Representative of the holders of such Senior Indebtedness or,
if there is no Representative, from the holders of such Senior Indebtedness.
During the continuance of any default (other than a default described
in clause (a) or a default and acceleration described in clause (b) of the
preceding paragraph) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except any notice required to effect the acceleration) or the expiration
of any applicable grace period, the Company may not pay the Notes for a period
(a "Payment Blockage Period") commencing upon the receipt by the Company and the
Trustee of written notice of such default from the Representative of the holders
of such Designated Senior Indebtedness or, if there is no Representative, from
the holders of such Designated Senior Indebtedness, specifying an election to
effect a Payment Blockage Period (a "Payment Blockage Notice") and ending 179
days thereafter (unless such Payment Blockage Period is earlier terminated (a)
by written notice to the Trustee and the Company from the Representative of the
holders of such Designated Senior Indebtedness or, if there is no
Representative, from the holders of such Designated Senior Indebtedness that
gave such Payment Blockage Notice, (b)
22
because such default is no longer continuing or (c) because such Designated
Senior Indebtedness has been repaid in full in cash or otherwise satisfied in
accordance with the terms thereof). Not more than one Payment Blockage Notice
with respect to all issues of Designated Senior Indebtedness may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to one or more issues of Designated Senior Indebtedness during such period. No
non-payment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be the basis for a subsequent
Payment Blockage Notice. Following the expiration of any period during which the
Company is prohibited from making payments on the Notes pursuant to a Payment
Blockage Notice, the Company shall (unless otherwise prohibited as described in
the first two sentences of this paragraph) resume making any and all required
payments in respect of the Notes, including, without limitation, any missed
payments, unless the maturity of any Designated Senior Indebtedness has been
accelerated, and such acceleration remains in full force and effect.
The Company shall give prompt written notice to the Trustee of any
default in the payment of any Senior Indebtedness or any acceleration under any
Senior Indebtedness or under any agreement pursuant to which Senior Indebtedness
may have been issued. Failure to give such notice shall not affect the
subordination of the Notes to the Senior Indebtedness or the application of the
other provisions provided in the above paragraphs.
If payment of the Notes is accelerated when Designated Senior
Indebtedness is outstanding, the Company may not pay the Notes until three
business days after the Representative of the holders of such Designated Senior
Indebtedness or, if there is no Representative, the holders of such Designated
Senior Indebtedness receive notice of such acceleration and, thereafter, may pay
the Notes only if the Indenture otherwise permits payment at that time.
The Obligations of each Guarantor are subordinated in right of payment
to the payment when due of all Senior Indebtedness of such Guarantor. This
subordination is for the benefit of and enforceable by the holders of such
Senior Indebtedness to the extent and in the manner provided for the Notes and
the Indenture.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture.
"ACQUIRED DEBT" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such
other Person is merged with or into, or became a Subsidiary of, such
specified Person, whether or not such Indebtedness is incurred in
connection with, or in contemplation of, such other Person merging with
or into, or becoming a Subsidiary of, such specified Person; and
(ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
23
"ADDITIONAL SENIOR NOTES" means any Senior Notes (other than Initial
Senior Notes) issued under the Senior Notes Indenture in accordance with Section
3.01 of the First Supplemental Indenture dated August 9, 2011 between the
Company and the Chase Manhattan Bank, as trustee, as part of the same series as
the Initial Senior Notes or as an additional series.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided, that beneficial ownership of 10% or more of
the total voting power of the Voting Stock of a Person shall be deemed to be
control. For purposes of this definition, the terms "controlling," "controlled
by" and "under common control with" shall have correlative meanings.
"ASSET SALE" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of business;
provided, that the sale, conveyance or other disposition of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole will be governed by the provisions of the Indenture described above under
the caption "-- Repurchase at the Option of Holders -- Change of Control" and/or
the provisions described above under the caption "-- Certain Covenants --
Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset
Sale covenant; and
(2) the issuance of Equity Interests by any of the Company's Restricted
Subsidiaries or the sale of Equity Interests in any of its Restricted
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed
to be Asset Sales:
(i) any single transaction or series of related transactions
that involves assets having a fair market value of less than $2.0
million;
(ii) a transfer of assets between or among the Company and its
Restricted Subsidiaries;
(iii) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to another Restricted Subsidiary;
(iv) the sale or lease of equipment, inventory, accounts
receivable (or interests therein) or other assets in the ordinary
course of business or pursuant to a Permitted Securitization Program;
24
(v) the sale or other disposition of cash or Cash Equivalents;
and
(vi) the sale, lease or other disposition of any assets or
rights to the extent constituting a Restricted Payment or Permitted
Investment that is permitted by the covenant described above under the
caption "--Certain Covenants -- Restricted Payments."
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such sale and leaseback transaction including any period for which such lease
has been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.
"BOARD OF DIRECTORS" means either the board of directors of the Company
or any duly authorized committee of that board.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK," means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person, but in any event excluding interests in pools of
accounts receivable or inventory sold by a Securitization Subsidiary pursuant to
a Permitted Securitization Program.
"CASH EQUIVALENTS" means:
25
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof (provided,
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or
better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications specified
in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each case
maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets
of the Company and its Subsidiaries taken as a whole to any "person" or "group"
(as such terms are used in Section 13(d)(3) of the Exchange Act) other than a
Wholly Owned Restricted Subsidiary;
(2) any "person" or "group" (as such terms are used in Section 13(d)(3)
of the Exchange Act), other than the Pilgrim Family, becomes the ultimate
"beneficial owner," as defined in Rule 13d-3 under the Exchange Act, of more
than 50% of the total voting power of the Voting Stock of the Company on a
fully-diluted basis;
(3) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(4) the consummation of any transaction (including, without limitation,
any merger, consolidation or recapitalization) to which the Company is a party
the result of which is that, immediately after such transaction, the holders of
all of the outstanding Voting Stock of the Company immediately prior to such
transaction hold less than 50.1% of the Voting Stock of the Person surviving
such transaction, measured by voting power rather than number of shares; or
26
(5) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"CONSOLIDATED CASH FLOW" means, with respect to any specified Person
for any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized by such Person or any of its Restricted Subsidiaries in connection with
an Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the extent that
any such expense was deducted in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income; minus
(5) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of business, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the
income or profits of, and the depreciation and amortization and other non-cash
expenses of, a Restricted Subsidiary of the Company, unless such Restricted
Subsidiary is a Guarantor and its Subsidiary Guarantee remains in full force and
effect, shall be added to Consolidated Net Income to compute Consolidated Cash
Flow of the Company only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended or distributed to the
Company or a Restricted Subsidiary by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its
27
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Restricted Subsidiary or
its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any specified Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided, that:
(1) the Net Income of any Person that is not a Restricted Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
specified Person or a Wholly Owned Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary, unless such Restricted
Subsidiary is a Guarantor and its Subsidiary Guarantee remains in full force and
effect, shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, provided that the aggregate amount of
such Net Income that could be paid to the Company or a Restricted Subsidiary by
loans or advances or repayments of loans or advances, intercompany transfer or
otherwise will be included in Consolidated Net Income;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(4) the cumulative effect of a change in accounting principles shall be
excluded.
"CONSOLIDATED TANGIBLE NET WORTH" of any Person means, at any time, for
such Person and its Restricted Subsidiaries on a consolidated basis, an amount
computed equal to (a) the consolidated stockholders' equity of the Person and
its Restricted Subsidiaries, minus, (b) all Intangible Assets of the Person and
its Restricted Subsidiaries, in each case as of such time. For the purposes
hereof, "Intangible Assets" means intellectual property, goodwill and other
intangible assets, in each case determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who, during any period of two
consecutive years:
(1) was a member of such Board of Directors on the date of the
Indenture; or
(2) was nominated for election or elected or appointed to such Board of
Directors with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination, election or appointment.
"DEBT RATING" means the rating assigned to the Notes by Moody's or S&P,
as the case
28
may be.
"DEFAULT" means any event, act or condition that is, or after notice or
with the passage of time or both would be, an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means:
(1) any Senior Indebtedness of the Company or a Guarantor that has, at
the time of determination, an aggregate principal amount outstanding of at least
$25.0 million (including the amount of all undrawn commitments and matured and
contingent reimbursement obligations pursuant to letters of credit thereunder)
that is specifically designated in the instrument evidencing such Senior
Indebtedness and in an Officers' Certificate delivered to the Trustee as
"Designated Senior Indebtedness" of the Company for purposes of the Indenture;
and
(2) any Senior Indebtedness of the Company or a Guarantor outstanding
under the Existing Credit Facilities, the Senior Notes Indenture or otherwise
under clause (1) of the second paragraph of "Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," as the same may be amended,
supplemented or otherwise modified from time to time, including amendments,
supplements or modifications and any renewal, extension, refunding,
restructuring, replacement or refinancing thereof (whether with the original
agent and lenders or another administrative agent or agents or one or more other
lenders and whether provided under the original Existing Credit Facilities or
one or more other credit or other agreements or indentures).
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments."
"DOMESTIC BORROWING BASE" means, as of a date of determination, the sum
of (i) 85% of the book value of the outstanding accounts receivable of the
Company and its Domestic Restricted Subsidiaries (as such accounts receivable
would be shown on a consolidated balance sheet of the Company and its Domestic
Restricted Subsidiaries prepared in accordance with GAAP), less allowance for
doubtful accounts, plus (ii) 80% of the inventory of the Company and its
Domestic Restricted Subsidiaries (as such inventory would be shown on a
consolidated balance sheet of the Company and its Domestic Restricted
Subsidiaries prepared in accordance with GAAP); provided, that for purposes of
determining the Domestic Borrowing Base as of a date of determination, any
accounts receivable or inventory that has been sold or otherwise
29
transferred to a Securitization Subsidiary pursuant to a Permitted
Securitization Program shall not be included in the Domestic Borrowing Base for
purposes of the calculation thereof.
"DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that
was formed under the laws of the United States or any state thereof or the
District of Columbia.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING CREDIT FACILITIES" means, collectively, the Existing U.S.
Credit Facilities and the Existing Foreign Credit Facility.
"EXISTING FOREIGN CREDIT FACILITY" means the facility evidenced by the
Revolving Credit Agreement, by and among Grupo Pilgrim's Pride Funding, S. de
R.L. de C.V., Comerica Bank Mexico, S.A. and Comerica Bank, dated September 7,
2001, and the related notes, collateral documents, guarantees and agreements,
each as amended through the date of the Indenture.
"EXISTING U.S. CREDIT FACILITIES" means:
(1) the facility evidenced by the Third Amended and Restated Note
Purchase Agreement by and between the Company and John Hancock Life Insurance
Company, dated August 30, 2002, and the related notes, collateral documents,
guarantees and agreements, each as amended through the date of the Indenture;
(2) the facility evidenced by the Amended and Restated Credit Agreement
by and among CoBank, ACB, individually and as Agent, Farm Credit Services of
America, FLCA, and other Banks thereunder, dated November 16, 2000, and the
related notes, collateral documents, guarantees and agreements, each as amended
through the date of the Indenture; and
(3) the facility evidenced by the Second Amended and Restated Secured
Credit Agreement, by and among the Company and Harris Trust and Savings Bank,
individually and as Agent, and other Banks thereunder, dated November 5, 1999,
and the related notes, collateral documents, guarantees and agreements, each as
amended through the date of the Indenture.
"FIXED CHARGES" means, with respect to any specified Person for any
period, the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including, without
limitation, amortization of original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received pursuant to
Hedging Obligations; plus
30
(2) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries, whether or
not such Guarantee or Lien is called upon; plus
(3) the product of (a) all dividends, whether paid or accrued, whether
or not in cash, on any series of Preferred Stock of such Person or any of its
Restricted Subsidiaries, other than dividends on Equity Interests payable solely
in Equity Interests of such Person (other than Disqualified Stock) or to such
Person or a Restricted Subsidiary of such Person, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any specified
Person for any period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Fixed Charges of such Person for such period. In the
event that the specified Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than
ordinary working capital borrowings) or issues, repurchases or redeems Preferred
Stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of Preferred Stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable eight-quarter reference
period.
In addition, for purposes of calculating the Fixed Charge Coverage
Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the eight-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be given pro forma effect as if they had occurred on the first day of
the eight-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated on a pro forma basis in accordance with Regulation
S-X under the Securities Act, but without giving effect to clause (3) of the
proviso set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges
31
will not be obligations of the specified Person or any of its Restricted
Subsidiaries following the Calculation Date.
"FOREIGN BORROWING BASE" means, as of a date of determination, the sum
of (i) 85% of the book value of the outstanding accounts receivable of the
Company's Foreign Restricted Subsidiaries (as such accounts receivable would be
shown on a combined balance sheet of the Company's Foreign Restricted
Subsidiaries prepared in accordance with GAAP), less allowance for doubtful
accounts, plus (ii) 80% of the inventory of the Company's Foreign Restricted
Subsidiaries (as such inventory would be shown on a combined balance sheet of
the Company's Foreign Restricted Subsidiaries prepared in accordance with GAAP);
provided, that for purposes of determining the Foreign Borrowing Base as of a
date of determination, any accounts receivable or inventory that has been sold
or otherwise transferred to a Securitization Subsidiary pursuant to a Permitted
Securitization Program shall not be included in the Foreign Borrowing Base for
purposes of the calculation thereof.
"FOREIGN RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that is
not a Domestic Restricted Subsidiary and with respect to which more than 80% of
its assets (determined on a consolidated basis in accordance with GAAP) are
located in territories and jurisdictions outside of the United States of
America.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"GUARANTEE" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"GUARANTORS" means any Restricted Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of the Indenture and its respective
successors and assigns.
"HEDGING OBLIGATIONS" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements and other agreements or arrangements designed to
protect such Person against fluctuations in interest rates;
(2) any foreign exchange contract, currency swap agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency values; and
32
(3) any commodity futures or option contract or other similar commodity
hedging contract designed to protect such person against fluctuations in
commodity prices.
"INDEBTEDNESS" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clause (1), (2) and (4) of this definition) entered
into in the ordinary course of business of such Person to the extent that such
letters of credit are not drawn upon);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable incurred in the ordinary course of business; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters
of credit and Hedging Obligations) would appear as a liability upon a balance
sheet of the specified Person prepared in accordance with GAAP. In addition, the
term "Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"INITIAL HOLDERS" means ConAgra Foods, its Affiliates and each of their
respective principals, employees, partners, officers, members and directors.
"INITIAL SENIOR NOTES" means the 9 5/8% Senior Notes due 2011 of the
Company issued under the Senior Notes Indenture.
33
"INVESTMENT GRADE STATUS" exists as of a date if at such date (i) the
Debt Rating of Moody's is at least Baa3 (or the equivalent) or higher and (ii)
the Debt Rating of S&P is at least BBB- (or the equivalent) or higher.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Restricted Subsidiary not sold
or disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "-- Certain Covenants -- Restricted
Payments." The acquisition by the Company or any Restricted Subsidiary of the
Company of a Person that holds an Investment in a third Person shall be deemed
to be an Investment by the Company or such Restricted Subsidiary in such third
Person in an amount equal to the fair market value of the Investment held by the
acquired Person in such third Person in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants -- Restricted Payments." In addition, the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary shall be deemed to be an "Investment"
made by the Company in such Unrestricted Subsidiary.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"NET INCOME" means, with respect to any specified Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of Preferred Stock dividends, excluding, however:
(1) any gain (or loss), together with any related provision for taxes
on such gain (or loss), realized in connection with: (a) any Asset Sale; or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries; and
34
(2) any extraordinary gain (or loss), together with any related
provision for taxes on such extraordinary gain (or loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), in net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements; and amounts required to
be applied to the repayment of Indebtedness.
"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise or (c) constitutes the lender; and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any
other Indebtedness (other than the Notes) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED INVESTMENTS" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company;
(2) any Investment of receivables owing to the Company or any of its
Restricted Subsidiaries, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms
(provided, that nothing in this clause (2) shall prevent the Company or any
Restricted Subsidiary from offering such concessionary trade terms as management
deems reasonable in the circumstances);
(3) any Investment in Cash Equivalents;
(4) any Investment of Capital Stock, Obligations or other securities of
any Person received by the Company or any of its Restricted Subsidiaries in
settlement of Obligations
35
created in the ordinary course of business and owing to the Company or such
Restricted Subsidiary;
(5) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the
Company; or
(b) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company;
(6) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "-- Repurchase at the Option
of Holders -- Asset Sales";
(7) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company;
(8) Hedging Obligations, provided, that such Hedging Obligations
constitute Permitted Debt permitted by clause (7) of the second paragraph under
the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock;"
(9) Investments in a Person arising from the sale or transfer of assets
primarily used in or related to, or Equity Interests of a Subsidiary of the
Company whose assets primarily consist of those used in or related to, the
Turkey Operations in connection with a joint venture including such Turkey
Operations with a third party;
(10) Investments made in bonds, debentures and notes issued by any
corporation organized under the laws of any State of the United States having
Investment Grade Status from the aggregate proceeds of insurance premiums paid
by the Company or a Restricted Subsidiary under a captive insurance arrangement
and any earnings on such Investments; and
(11) other Investments made after the date of the Indenture in any
Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (11)
that are at the time outstanding, not to exceed $70 million.
"PERMITTED LIENS" means:
(1) Liens on the assets of the Company and its Restricted Subsidiaries
securing Indebtedness and other Obligations (in addition to those referred to in
clauses (2) through (12) of this definition) to the extent that such
Indebtedness (a) was outstanding on the date of the Indenture or was permitted
to be incurred by the covenant entitled "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock" at the time of such incurrence and
36
(b) at the time of such incurrence did not exceed an aggregate principal amount
outstanding at any one time of the greater of (x) $585.0 million less the
aggregate amount of all Net Proceeds of Asset Sales (other than a sale of all or
a substantial portion of the assets used in the Turkey Operations), applied by
the Company or any of its Subsidiaries to repay Indebtedness incurred pursuant
to clause (1) of the second paragraph of the covenant entitled "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"
pursuant to the covenant described under the caption "-- Repurchase at the
Option of Holders -- Asset Sales" and (y) 75% of the fair market value of
property, plant, equipment and intangibles (excluding goodwill) of the Company
and its consolidated Restricted Subsidiaries;
(2) Liens on the assets of the Company and any Restricted Subsidiary
securing Indebtedness and other Obligations to the extent that such Indebtedness
is permitted to be incurred by clauses (2), (3) and (14)(b) of the second
paragraph of the covenant entitled "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock;"
(3) Liens on the assets of the Company and any Restricted Subsidiary
securing Permitted Refinancing Indebtedness to the extent that (a) such
Permitted Refinancing Indebtedness is permitted to be incurred by clause (11) of
the second paragraph of the covenant entitled "-- Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock," and (b) such
Permitted Refinancing Indebtedness was incurred to refinance Indebtedness
outstanding under clauses (1), (2), (3) or (14)(b) of such paragraph;
(4) Liens in favor of the Company or its Restricted Subsidiaries;
(5) Liens on property of a Person existing at the time such Person is
acquired by, merged with or into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided, that such Liens were in
existence prior to the contemplation of such acquisition, merger or
consolidation and do not extend to any assets other than those of the Person
acquired by, merged into or consolidated with the Company or the Restricted
Subsidiary;
(6) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company; provided, that such
Liens were in existence prior to the contemplation of such acquisition;
(7) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
(8) Liens to secure Indebtedness permitted by clauses (5), (6), (8) and
(10) of the second paragraph of the covenant entitled "-- Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock" (or Permitted
Refinancing Indebtedness relating thereto, provided that the principal amount of
the Indebtedness secured does not increase and the Liens do not extend to other
property or assets) covering only the assets acquired with such Indebtedness;
37
(9) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided, that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor;
(10) Liens on accounts receivable or inventory of a Securitization
Subsidiary or rights with respect thereto in connection with a Permitted
Securitization Program;
(11) Liens encumbering customary initial deposits and margin deposits,
and other Liens that are within the general parameters customary in the industry
and incurred in the ordinary course of business, in each case, securing
Indebtedness under Hedging Obligations designed solely to protect the Company or
any of its Restricted Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities;
(12) Liens on the property of Foreign Restricted Subsidiaries and on
intercompany Indebtedness to the Company to secure Indebtedness permitted by
clause (13) of the second paragraph of the covenant entitled "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(13) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations that do
not exceed $20.0 million at any one time outstanding.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided, that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable), of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest thereon and
the amount of all customary expenses and premiums incurred in connection
therewith); provided, however, that with respect to Indebtedness denominated in
currency other than United States dollars, if the principal amount of such
Indebtedness is extended, refinanced, renewed, replaced, defeased or refunded
with Indebtedness denominated in the same foreign currency and not exceeding the
principal amount (or accreted value, if applicable) thereof in such denomination
of foreign currency, then it shall not be deemed to have exceeded the principal
amount (or accreted value, if applicable) of the refinanced Indebtedness solely
as a result of fluctuations in the exchange rate of such foreign currency;
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
38
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or a Guarantor
or by the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERMITTED SECURITIZATION PROGRAM" means a transaction or series of
transactions (including amendments, supplements, extensions, renewals,
replacements, refinancings or modifications thereof) pursuant to which a
Securitization Subsidiary purchases accounts receivable or inventory from the
Company or any Restricted Subsidiary and finances or sells such accounts
receivables or inventory or fractional interests therein; provided, that (i) the
Board of Directors shall have determined in good faith that such Permitted
Securitization Program is economically fair and reasonable to the Company and
the Securitization Subsidiary, (ii) all sales of accounts receivable or
inventory by the Securitization Subsidiary are made at fair market value (as
determined in good faith by the Board of Directors), (iii) the financing terms,
covenants, termination events and other provisions thereof shall be market terms
(as determined in good faith by the Board of Directors), (iv) no portion of the
Indebtedness of a Securitization Subsidiary shall be Guaranteed Indebtedness or
is recourse to the Company or any Restricted Subsidiary (other than to such
Securitization Subsidiary and other than recourse for customary representations,
warranties, covenants and indemnities) and (v) neither the Company nor any
Subsidiary (other than the Securitization Subsidiary) has any obligation to
maintain or preserve the Securitization Subsidiary's financial condition.
"PILGRIM FAMILY" means Lonnie A. "Bo" Pilgrim, his spouse, his issue,
his estate and any trust, partnership or other entity primarily for the benefit
of him, his spouse and/or issue.
"PREFERRED STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non- voting) of such Person's preferred or preference stock,
whether now outstanding or hereafter issued, including, without limitation, all
series and classes of such preferred or preference stock.
"PUBLIC EQUITY OFFERING" means a public offering and sale of Capital
Stock (other than Disqualified Stock) for cash made on a primary basis by the
Company after the date of the Indenture.
"REPRESENTATIVE" means the trustee, agent or representative expressly
authorized to act in such capacity, if any, for an issue of Senior Indebtedness.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
39
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
or any successor to the rating agency business thereof.
"SECURITIZATION SUBSIDIARY" means a Restricted Subsidiary or an
Unrestricted Subsidiary of the Company which is established for the limited
purpose of acquiring and financing or selling (including, without limitation,
interests therein) accounts receivable or inventory and engaging in activities
ancillary thereto.
"SENIOR INDEBTEDNESS" of the Company means all of its Obligations with
respect to Indebtedness, whether outstanding on the date the Notes are first
issued or thereafter incurred, and shall include (i) all obligations for
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not such post-filing interest
is allowed in such proceeding, (ii) all fees, expenses and indemnities and all
other amounts payable with respect to Indebtedness and (iii) all Obligations in
respect of the Existing Credit Facilities; provided, however, that Senior
Indebtedness shall not include: (i) any obligation of the Company to any
Subsidiary of the Company; (ii) any obligation in respect of the Notes or other
Indebtedness of the Company that is by its terms is expressly subordinate,
junior subordinate or pari passu in right of payment to the Notes; or (iii) any
obligations with respect to any Capital Stock. To the extent that any payment of
Senior Indebtedness (whether by or on behalf of the Company as proceeds of
security or enforcement or any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to a trustee,
receiver or other similar party under any Bankruptcy Law, then if such payment
is recovered by, or paid over to, such trustee, receiver or other similar party,
the Senior Indebtedness or part thereof originally intended to be satisfied
shall be deemed to be reinstated and outstanding as if such payment had not
occurred. "Senior Indebtedness" of any Guarantor has a correlative meaning and
shall not include any obligation of such Guarantor to the Company or any other
Subsidiary of the Company.
"SENIOR GUARANTEE" means a Guarantor's guarantee of the Senior Notes.
"SENIOR NOTES" means the Initial Senior Notes and any Additional Senior
Notes.
"SENIOR NOTES INDENTURE" means the Indenture, dated as of the date
August 9, 2001, by and between the Company and The Chase Manhattan Bank, as
trustee, governing the Senior Notes.
"SENIOR SUBORDINATED INDEBTEDNESS" of the Company means the Notes and
any other subordinated Indebtedness of the Company that specifically provides
that such Indebtedness is to rank pari passu with the Notes and is not
subordinated by its terms to any other subordinated Indebtedness or other
obligation of the Company which is not Senior Indebtedness. "Senior Subordinated
Indebtedness" of any Guarantor has a correlative meaning.
40
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such regulation is in effect on
the date hereof.
"SPECIAL INTEREST" means the additional interest, if any, to be paid on
the Notes pursuant to the 10.50% Senior Subordinated Notes due March 4, 2011
Registration Rights Agreement dated ______, 2003, at a rate from 0.25% per annum
up to a maximum of 1.00% per annum on the principal amount of the Notes in the
event of a registration default under such agreement until such registration
default has been cured.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or a
Guarantor if the instrument creating or evidencing such Indebtedness or pursuant
to which such Indebtedness is outstanding expressly provides that such
Indebtedness is subordinated in right of payment to the Notes or the Guarantee
of such Guarantor, as the case may be.
"SUBSIDIARY" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"TURKEY OPERATIONS" means the Company's and/or its Restricted
Subsidiaries' turkey operations as substantially constituted on the date of the
Indenture.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted
41
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such covenant.
The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (1) such Indebtedness is permitted under
the covenant described under the caption "--Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the eight-quarter
reference period, and (2) no Default or Event of Default would be in existence
following such designation.
"U.S. GOVERNMENT OBLIGATIONS" means direct noncallable obligations of,
or noncallable obligations the payment of principal of and interest on which is
guaranteed by, the United States of America, or to the payment of which
obligations or guarantees the full faith and credit of the United States of
America is pledged, or beneficial interests in a trust the corpus of which
consists exclusively of money or such obligations or a combination thereof.
"VOTING STOCK" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payments of principal,
42
including payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any specified Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares and
shares issued to other Persons to comply with local law that collectively do not
constitute more than 5% of all of the Capital Stock ordinarily having the power
to vote for the election of directors of such Restricted Subsidiary) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
43
(Face of Note)
10.50% SENIOR SUBORDINATED NOTES DUE MARCH 4, 2011
CUSIP NO._________
_________ $ __________
PILGRIM'S PRIDE CORPORATION
promises to pay to [ ](1) or registered assigns, the principal sum
of ________________ Dollars ($______________) on March 4, 2011.
Interest Payment Dates: December 15 and June 15, commencing [ ], 20[ ].
Record Dates: December 1 and June 1.
Dated: ____________________, 2003.
- ------------------
(1) Insert [CEDE & CO., INC.] if the Note is to be issued in Global Form
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
PILGRIM'S PRIDE CORPORATION
By: __________________________
Name: Richard A. Cogdill
Title: Executive Vice President,
Chief Financial Officer, Secretary and Treasurer
This is one of the [Global] Notes referred to in the within-mentioned Indenture:
____________________________________________________,
as Trustee
By:
______________________
Authorized Signatory
Dated ______________,2003
44
(Back of Note)
10.50% SENIOR SUBORDINATED NOTES DUE MARCH 4, 2011
[Insert the Global Note Legend, if applicable pursuant to the terms of
the Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the terms
of the Indenture]
[Insert the Regulation S Temporary Global Note Placement Legend, if applicable
pursuant to the terms of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Pilgrim's Pride Corporation, a Delaware corporation (the
"Issuer"), promises to pay interest on the principal amount of this Note at
10.50% per annum from ___________ until maturity and shall pay Special Interest,
if any, as provided in Section 5 of the Registration Rights Agreement. The
Issuer shall pay interest semi-annually on December 15 and June 15 of each year,
or if any such day is not a Business Day, on the next succeeding Business Day
(each an "Interest Payment Date"). Interest on the Notes shall accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided, however, that if there is no existing
Default in the payment of interest, and if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be the first
of December 15 or June 15 to occur after the date of issuance, unless such
December 15 or June 15 occurs within one calendar month of such date of
issuance, in which case the first Interest Payment Date shall be the second of
December 15 and June 15 to occur after the date of issuance. The Issuer shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time at a
rate that is 1% per annum in excess of the interest rate then in effect under
the Indenture and this Note; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Special Interest, if any (without regard to any applicable grace
periods), from time to time at the same rate to the extent lawful. Interest
shall be computed on the basis of a 360-day year of twelve 30-day months.
[Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.]2
2. METHOD OF PAYMENT. The Issuer shall pay interest on the Notes
(except defaulted interest) to the Persons in whose name this Note (or one or
more Predecessor Notes) is registered at the close of business on the December 1
or June 1 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment
- ------------------
2 [To be used for Temporary Regulation S Global Note only.]
45
Date, except as provided in Section 2.12 of the Indenture with respect to
defaulted interest. The Notes shall be payable as to principal, premium, if any,
and interest and Special Interest, if any, at the office or agency of the Issuer
maintained for such purpose, or, at the option of the Issuer, payment of
interest may be made by check mailed to the Holders at their addresses set forth
in the Security Register; provided, however, that payment by wire transfer of
immediately available funds shall be required with respect to principal of and
interest and Special Interest, if any, and premium, if any, on, all Global Notes
and all other Notes the Holders of which shall have provided wire transfer
instructions to the Issuer or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, ___________________________,
the Trustee under the Indenture, shall act as Paying Agent and Registrar. The
Issuer may change any Paying Agent or Registrar without notice to any Holder.
The Issuer or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture dated as
of ______________, 2003 ("Indenture") between the Issuer and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Issuer unlimited in aggregate
principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraphs (b) and (c) of this Paragraph
5, the Issuer shall not have the option to redeem the Notes prior to
______________, 2007. On or after ______________, 2007, the Issuer may redeem
all or a part of the Notes upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
[SEPTEMBER 15] of the years indicated below:
Year Percentage
---- ----------
2007 105.250%
2008 102.625%
2009 and thereafter 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to ______________, 2007, the Issuer may on any
one or more occasions redeem up to 35% of the aggregate principal amount of
Notes issued under the Indenture (including, if issued,
46
any Additional Notes) at a redemption price of 110.5% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the redemption date, with
the net cash proceeds of one or more Public Equity Offerings; provided, that:
(i) at least 65% of the aggregate principal amount of Notes
issued under the Indenture (including, if issued, any Additional Notes)
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and
(ii) the redemption must occur within 45 days of the date of
the closing of such Public Equity Offering.
(c) Subject to Section 3.07(c) of the Indenture, notwithstanding the
provisions of subparagraphs (a) and (b) of this Paragraph 5, the Issuer may, at
any time and from time to time, redeem all or part of the Notes from Initial
Holder upon not less than 15 nor more than 60 days' notice, at a redemption
price of 100% of the principal amount thereof, plus accrued and unpaid interest,
if any.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the
Issuer shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If a Change of Control occurs, the Issuer shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to (a) in the case of an Initial Holder, 100% of the aggregate
principal amount of the Notes repurchased plus accrued and unpaid interest, if
any, thereon to the date of purchase and (b) in the case of all other holders,
101% of the aggregate principal amount thereof plus accrued and unpaid interest,
if any, thereon to the date of purchase (the "Change of Control Payment").
Within ninety (90) days following any Change of Control, unless the Issuer has
mailed a redemption notice with respect to all of the outstanding Notes in
accordance with optional redemption provision of the Indenture, the Issuer shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) If the Issuer or a Restricted Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $20.0 million, then
within 45 Business Days after the later of the application of Net Proceeds and
the date that is 270 days following the receipt of the Net Proceeds, to the
extent of the balance of Net Proceeds after application in accordance with
Section 4.12(b) of the Indenture, the Issuer shall commence an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, thereon to the date of purchase, in
accordance with the procedures set forth in the Indenture. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Issuer may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of Notes and such
47
other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes and such other
pari passu Indebtedness to be purchased on a pro rata basis based on the
principal amount of Notes and such other pari passu Indebtedness tendered. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Issuer prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Subject to paragraph 5(c) above, notice of
redemption shall be mailed at least 30 days but not more than 60 days before the
redemption date to each Holder whose Notes are to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
This Note shall represent the aggregate principal amount of outstanding Notes
from time to time endorsed hereon and the aggregate principal amount of Notes
represented hereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. The transfer of Notes may be
registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Issuer may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Issuer need not exchange or register the transfer of any Note or portion of
a Note selected for redemption, except for the unredeemed portion of any Note
being redeemed in part. Also, the Issuer need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of Notes to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.
[This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
Distribution Compliance Period and (ii) upon presentation of certificates
(accompanied by an Opinion of Counsel, if applicable) required by Article 2 of
the Indenture. Upon exchange of this Regulation S Temporary Global Note for one
or more Global Notes, the Trustee shall cancel this Regulation S Temporary
Global Note.]3
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes voting as a single class, and any existing
default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of a majority in aggregate principal
- ------------------
3 [To be used for Temporary Regulation S Global Note only.]
48
amount of the then outstanding Notes voting as a single class. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Issuer's obligations to Holders of the Notes
in case of a merger or consolidation or sale of all or substantially all of the
Issuer's assets, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the TIA.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on the Notes; (ii) default in
payment when due of principal of, or premium, if any, on the Notes, (iii)
failure by the Issuer or any of the Guarantors to comply (A) with the provisions
of Sections 4.17 or 5.01 of the Indenture or (B) 30 days after notice to the
Issuer by the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding voting as a single class, with the
provisions of Sections 4.09, 4.11 or 4.12 of the Indenture; (iv) failure by the
Issuer for 60 days after notice to the Issuer by the Trustee or the Holders of
at least 25% in principal amount of the Notes then outstanding voting as a
single class to comply with any other agreements in the Indenture or the Notes;
(v) default under certain other agreements relating to Indebtedness of the
Issuer which default results in the acceleration of such Indebtedness prior to
its express maturity; (vi) certain final judgments for the payment of money that
remain undischarged for a period of 60 days, (vii) certain circumstances when a
Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or
invalid, ceases to exist or is disaffirmed by any Guarantor, and (viii) certain
events of bankruptcy or insolvency with respect to the Issuer or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary. In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuer or any Restricted
Subsidiary, all outstanding Notes will become due and payable immediately
without further action or notice. If any other Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest, if any) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest or premium, if any, on, or the principal of, the Notes. The Issuer is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture. Upon becoming aware of any Default or Event of Default, the
Issuer is required to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH ISSUER. Subject to certain limitations, the
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise
49
deal with the Issuer or any Affiliate of the Issuer with the same rights it
would have if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Issuer or of any
Guarantor, as such, shall have any liability for any obligations of the Issuer
or any Guarantor under the Indenture, the Notes, the Subsidiary Guarantees or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP OR ISIN NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Issuer has
caused CUSIP or ISIN numbers to be printed on the Notes and has directed the
Trustee to use CUSIP or ISIN numbers in notices of redemption as a convenience
to Holders. No representation is made as to the accuracy of such numbers either
as printed on the Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Issuer shall furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Pilgrim's Pride Corporation
110 South Texas Street
Pittsburg, Texas 75686-0093
Attention: Corporate Secretary
18. GOVERNING LAW. The internal law of the State of New York shall
govern and be used to construe this Note without giving effect to applicable
principals of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
50
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer pursuant
to Section 4.12 or 4.17 of the Indenture, check the box below:
[ ] Section 4.12
[ ] Section 4.17
If you want to elect to have only part of the Note purchased by the Issuer
pursuant to Section 4.12 or Section 4.17 of the Indenture, state the amount you
elect to have purchased: $____________________
Date:______________ Your Signature:_______________________
(Sign exactly as your name appears on the
Note) Tax Identification No.:
------------------------------------
SIGNATURE GUARANTEE:
------------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
51
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
- ------------------------------------------------------------------------
(Insert assignee's social security or other tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________________________________ as
agent to transfer this Note on the books of the Issuer. The agent may substitute
another to act for him.
- ------------------------------------------------------------------------
Date:______________ Your Signature:_______________________
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee: __________________
52
SCHEDULE OF INCREASES OR DECREASES IN THE GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
Principal
Amount of Amount of Amount of this Signature of
decrease in increase in Global Note authorized
Principal Principal following such signatory of
Date of Amount of this Amount of this decrease (or Trustee or Note
Exchange Global Note Global Note increase) Custodian
- ------------------------- ---------------------- ---------------------- ----------------------- ----------------------
53