As filed with the Securities and Exchange Commission on July 11, 1997
Registration No. 333-
=========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUN WORLD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 0100 95-3554353
(State or (Primary Standard (IRS Employer
other jurisdiction of Industrial Classification Identification
incorporation or Code Number Number
organization
16350 Driver Road
Bakersfield, California 93308
(805) 392-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
ADDITIONAL REGISTRANTS
Primary
Standard
Industrial IRS Employer
Name of Jurisdiction of Classification Identification Address and
Registrant Incorporation Code Number Number Telephone Number
Cadiz Land
Company,
Inc. Delaware 0100 77-0313235 100 Wilshire Blvd.,
16th Floor,
Santa Monica, CA
90401-1115,
(310) 899-4700
Coachella
Growers,
Inc. Delaware 0100 95-2223064 Same as for Sun
World International,
Inc. ("Sun World")
Sun Desert,
Inc. Delaware 0100 95-3588618 Same as for Sun World
Sun World
Brands Delaware 0100 95-3373568 Same as for Sun World
Sun World
Management
Corp. Delaware 0100 95-3242011 Same as for Sun World
Sun World/
Rayo Delaware 0100 95-3446110 Same as for Sun World
Timothy J. Shaheen
16350 Driver Road
Bakersfield, California 93308
(805) 392-5000
(Name, address, and telephone number of agent for service)
FOR CADIZ LAND COMPANY, INC. ONLY:
Keith Brackpool
100 Wilshire Boulevard, 16th Floor
Santa Monica, California 90401-1115
(310) 899-4700
(Name, address, and telephone number of agent for service)
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Copies of communications to:
HOWARD J. UNTERBERGER, ESQ.
LISA HAMILTON KLEIN, ESQ.
Miller & Holguin
1801 Century Park East, Seventh Floor
Los Angeles, California 90067
(310) 556-1990
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
Registration Statement and all other conditions to the exchange
offer pursuant to the registration rights agreement described in
the enclosed Prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is
compliance with General Instruction G, please check the following
box. / /
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CALCULATION OF REGISTRATION FEE
Title of each
class of
Securities Amount Proposed Maximum Proposed Maximum Amount of
to be to be Offering Price Aggregate Offering Registration
Registered Registered Per Note Price Fee
- --------------------------------------------------------------------------
11-1/4% $115,000,000 100% (1) $115,000,000 (1) $34,848.48
Series B
First
Mortgage
Notes
due 2004
Guarantees $115,000,000(2)
of the
11-1/4%
Series B
First Mortgage
Notes due 2004
- -------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate
registration fee is payable for the Guarantees
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The Registrants hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrants shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
- ---------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED JULY __, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such state.
PROSPECTUS
SUN WORLD INTERNATIONAL, INC.
Offer to Exchange up to $115,000,000 of 11-1/4% Series B First Mortgage
Notes due 2004, which have been registered under the Securities Act of
1933, for $115,000,000 of outstanding 11-1/4% Series A First Mortgage Notes
due 2004
Fully and unconditionally guaranteed, jointly and severally, by Cadiz
Land Company, Inc. Coachella Growers, Inc., Sun Desert, Inc., Sun World
Brands, Sun World Management Corp., and Sun World/Rayo
The Exchange Offer will expire at 5:00 P.M., New York City time, on_______
_______, 1997, unless extended (the "Expiration Date").
_________________
Sun World International, Inc. ("Sun World") hereby offers to exchange
(the "Exchange Offer") up to $115,000,000 aggregate principal amount of its
11-1/4% Series B First Mortgage Notes due 2004 (the "Exchange Notes") for
$115,000,000 aggregate principal amount of its outstanding 11-1/4% Series
A First Mortgage Notes due 2004 (the "Old Notes"). In this Prospectus, the
term "Notes" shall refer to both Old Notes and Exchange Notes.
The Exchange Notes will evidence the same indebtedness as the Old Notes
for which they may be exchanged pursuant to this offer. The terms of the
Exchange Notes will be identical in all material respects (including
principal amount, interest rate and maturity) to the terms of the Old Notes
for which they may be exchanged, except that the Exchange Notes will be
freely transferable by holders thereof (other than as provided below) and
will be issued without rights for any further registered exchange offer.
Interest on the Exchange Notes will be payable semi-annually on April 15
and October 15 of each year, commencing October 15, 1997. The Exchange
Notes will mature on April 15, 2004.
The Exchange Notes will be unconditionally guaranteed (the "Cadiz
Guarantee") by Cadiz Land Company, Inc., the parent of Sun World ("Cadiz")
and will be unconditionally guaranteed by Coachella Growers, Inc., Sun
Desert, Inc., Sun World Brands, Sun World Management Corp. and Sun
World/Rayo, all of which are subsidiaries of Sun World (the "Subsidiary
Guarantors" and, together with Cadiz, the "Guarantors"). Certain other
subsidiaries of Sun World which had guaranteed the Old Notes at the time
of their issuance have since been merged into Sun World and therefore are
no longer guarantors of the Old Notes and will not be guarantors of the
Exchange Notes.
The Exchange Notes and the Subsidiary Guarantees will be secured by a
first priority lien on certain of the assets of Sun World and the
Subsidiary Guarantors (except Excluded Assets, as defined herein). The
Exchange Notes and the Guarantees will rank pari passu in right of payment
with all existing and future unsubordinated indebtedness of Cadiz, Sun
World and the Subsidiary Guarantors, respectively, except to the extent of
any collateral which may be pledged to secure other indebtedness. As of
March 31, 1997, Cadiz, Sun World and the Subsidiary Guarantors, taken as
a consolidated group, had approximately $4.5 million of unsubordinated
indebtedness (of which approximately $2.4 million was secured by certain
assets of Sun World). See "Description of Other Indebtedness."
The Exchange Notes will be redeemable in cash at the option of Sun
World, in whole or in part, at any time on or after April 15, 2001 at the
redemption prices set forth herein, plus accrued and unpaid interest, if
any, to the redemption date. Subject to certain conditions and
limitations, in the event of a Change of Control (as defined herein), Sun
World will be obligated to make an offer to purchase all of the then
outstanding Exchange Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
purchase date. There can be no assurance that Sun World will have
sufficient funds to purchase all such Exchange Notes upon a Change of
Control. In addition, Sun World will be obligated to make an offer to
purchase Exchange Notes in the event of certain asset sales. See
"Description of Exchange Notes."
The Old Notes were issued and sold on April 16, 1997 in transactions not
registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon the exemption provided in Section 4(2) of the
Securities Act. Accordingly, the Old Notes may not be re-offered, resold
or otherwise pledged, hypothecated or transferred in the United States
unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange
Notes are being offered hereunder in order to satisfy certain of the
obligations of Sun World under a registration rights agreement relating to
the Old Notes. See "The Exchange Offer--Purpose of the Exchange Offer."
Sun World is making the Exchange Offer in reliance upon an interpretation
by the staff of the Securities and Exchange Commission set forth in a
series of no-action letters issued to third parties. See Exxon Capital
Holdings Corp. (available April 13, 1989), Morgan Stanley & Co.
Incorporated (available July 5, 1991) and Shearman & Sterling (available
June 2, 1993). Based on such interpretation, Sun World believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Notes
may be offered for resale, resold and otherwise transferred by any holder
thereof (other than any such holder that is an "affiliate" of Sun World
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act, provided that such Exchange Notes are acquired in the ordinary course
of such holder's business, such holder has no arrangement with any person
to participate in the distribution of such Exchange Notes and neither such
holder nor any such other person is engaging in or intends to engage in a
distribution of such Exchange Notes. However, Sun World has not sought,
and does not intend to seek, its own no-action letter, and there can be no
assurance that the staff of the Securities and Exchange Commission would
make a similar determination with respect to the Exchange Offer. Each
broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of
Transmittal relating to the Exchange Offer states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Each broker-dealer that received Old Notes from Sun World in
the offering of the Old Notes and not as a result of market-making or other
trading activities, in the absence of an exemption, must comply with the
registration requirements of the Securities Act. Sun World will, for a
period of 180 days after the Expiration Date (as defined herein), make
copies of this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
The Old Notes are designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. The
Exchange Notes constitute securities for which there is no established
trading market. Any Old Notes not tendered and accepted in the Exchange
Offer will remain outstanding. Sun World does not currently intend to list
the Exchange Notes on any securities exchange. To the extent that any Old
Notes are tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered Old Notes could be adversely affected. No assurance can
be given as to the liquidity of the trading market for either the Old Notes
or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange. The date of
acceptance and exchange of the Old Notes (the "Exchange Date") will be the
first business day following the Expiration Date. Old Notes tendered
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. Sun World will pay all expenses incident to the Exchange
Offer. Sun World will not receive any proceeds from the Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS IN CONNECTION WITH THE
EXCHANGE OFFER AND AN INVESTMENT IN THE EXCHANGE NOTES.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________________ 1997
AVAILABLE INFORMATION
Sun World and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-4
(together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Exchange Notes being offered hereby. This Prospectus, which forms a part
of the Registration Statement, does not contain all of the information set
forth in the Registration Statement. For further information with respect
to Sun World, the Guarantors, and the Exchange Notes, reference is made to
the Registration Statement. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily
complete, and, where such contract or other document is an exhibit to the
Registration Statement, each such statement is qualified in all respects
by the provisions in such exhibit, to which reference is hereby made.
Copies of the Registration Statement may be examined without charge at the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and the Commission's Regional Offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of all or any portion of the Registration Statement can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of certain fees
prescribed by the Commission. The Registration Statement has been and will
be filed through the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. Electronic registration statements filed through the
EDGAR system are publicly available through the Commission Web Site
(http://www.sec.gov).
Although Sun World is not currently subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), Cadiz is subject to the informational requirements of the
Exchange Act, and, in accordance therewith, will file periodic reports and
other information with the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of any material so filed can be obtained
from the Public Reference Section of the Commission, upon payment of
certain fees prescribed by the Commission.
The Indenture governing the Notes provides that, whether or not required
by the rules and regulations of the Commission, so long as any Exchange
Notes are outstanding, Cadiz will furnish to the Holders of Notes (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if Cadiz
is required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of Cadiz and Cadiz'
consolidated subsidiaries and, with respect to the annual information only,
a report thereon by the certified independent accountants for Cadiz and
(ii) all current reports that would be required to be filed with the
Commission on Form 8-K if Cadiz were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, Cadiz will file a copy of all such information and reports with
the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
The Indenture also provides that, whether or not required by the rules
and regulations of the Commission, so long as any Notes are outstanding,
Sun World will furnish to the Holders of Notes (i) quarterly and annual
financial information including statements of operations, statements of
cash flows and balance sheets of Sun World and its Restricted Subsidiaries
(as defined herein) separate from the financial condition and results of
operations of Cadiz and of the Unrestricted Subsidiaries of Sun World (as
defined herein) and, with respect to the annual information only, a report
thereon by the certified independent accountants for Sun World and (ii) all
current reports that would be required to be filed with the Commission on
Form 8-K if Sun World were required to file such reports.
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UNTIL ________________, 1997 (90 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities and Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Prospectus
including, without limitation, the statements under "Prospectus Summary,"
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business" and located elsewhere herein regarding the
industry prospects and financial position of Sun World and the Guarantors
are forward-looking statements. Although management believes that the
expectations reflected in such forward-looking statements are reasonable,
no assurances can be given that such expectations will prove to have been
correct. Important factors that could cause actual results to differ
materially from management's expectations ("Cautionary Statements") are
disclosed in the Prospectus including, without limitation, in conjunction
with the forward-looking statements included in this Prospectus and under
"Risk Factors." All subsequent written and oral forward-looking statements
attributable to Sun World or the Guarantors, or persons acting on their
behalf, are expressly qualified in their entirety by the Cautionary
Statements.
TABLE OF CONTENTS
Page
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Unaudited Pro Forma Condensed Consolidated Financial Information . . . . 29
Management's Discussion and Analysis
of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 33
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 59
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 63
Certain Relationships and Related Transactions . . . . . . . . . . . . . 65
Description of Exchange Notes. . . . . . . . . . . . . . . . . . . . . . 67
Description of Other Indebtedness. . . . . . . . . . . . . . . . . . . . 100
United States Federal Tax Consequences . . . . . . . . . . . . . . . . . 101
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . F-1
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information and financial statements appearing elsewhere in
this Prospectus. Unless the context otherwise requires, all references to
"Sun World" shall mean, collectively, Sun World International, Inc. and its
subsidiaries on a consolidated basis. The principal executive offices of
Sun World and its Subsidiary Guarantors are located at 16350 Driver Road,
Bakersfield, California 93308, and its telephone number is (805) 392-5000.
Unless the context otherwise requires, all references to "Cadiz" shall
mean, collectively, Cadiz Land Company, Inc. (the parent of Sun World and
a Guarantor of the Exchange Notes) and its subsidiaries on a consolidated
basis. The principal executive offices of Cadiz are located at 100
Wilshire Boulevard, Suite 1620, Santa Monica, California 90401-1115, and
its telephone number is (310) 899-4700. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The
actual results of Sun World and the Guarantors could differ materially from
those anticipated in such forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in
this Prospectus.
SUN WORLD
Sun World is one of the largest vertically integrated agricultural
companies in California with approximately 17,300 acres of owned and
2,100 acres of leased improved land in two of North America's premier
agricultural regions, the Coachella and San Joaquin Valleys of southern and
central California.
Sun World is a leading grower and marketer of table grapes, seedless
watermelons, colored sweet peppers and plums. Sun World also grows and
markets other fruits and vegetables, including peaches, nectarines,
apricots and lemons. Sun World is also one of California's largest
independent marketers of grapefruits, tangerines, mandarin oranges and
dates. Sun World ships approximately 75 varieties of fresh produce to all
50 states and exports fresh fruits and vegetables to over 30 foreign
countries. Sun World's operations include cultivation, packing and
marketing of primarily permanent and, to a lesser extent, annual (or row)
crops. In addition, Sun World operates a large research and development
program that has produced dozens of proprietary fruit varieties in the last
five years. Sun World's marketing operations include selling,
merchandising and promoting Sun World grown products, as well as providing
these services for third party growers. Produce grown or distributed by
Sun World reaches more than 2,000 supermarket retailers, food service
entities, warehouse clubs and international trading companies throughout
North America, Europe and Pacific Rim countries. During 1996, Sun World
had 25 different customers who each accounted for in excess of $1.0 million
in sales volume, including national retailers such as Safeway Stores,
American Stores, Supervalu and Kroger, and club stores including Sam's and
PriceCostco. Approximately 10% of Sun World's products are marketed
outside of the United States in Europe, Australia, Japan, Hong Kong,
Singapore, Malaysia and Taiwan. In addition to product and customer
diversification, Sun World's farming operations extend over 350 miles from
central to southern California, providing substantial geographic
diversification that reduces the potential negative impact of variations
in weather, infestations and other natural occurrences detrimental to a
successful harvest.
SUN WORLD ACQUISITION
On September 13, 1996, Cadiz acquired Sun World following a bankruptcy
related reorganization (the "Sun World Acquisition"). Cadiz is publicly
traded on the Nasdaq National Market under the ticker symbol "CLCI."
Cadiz' business strategy is to create a portfolio of landholdings, water
resources and agricultural operations within central and southern
California which possess sizable assured supplies of water. Cadiz'
management believes that, with both the increasing scarcity of water
supplies in California and the increasing demand for water, Sun World's and
Cadiz' access to water will provide them with a competitive advantage both
as a major agricultural concern and as a supplier of water, which will lead
to continued appreciation in the value of Cadiz' water portfolio. The Sun
World Acquisition provides Cadiz with valuable water rights throughout the
central and southern valleys of California. Excluding Sun World's
properties, Cadiz' portfolio includes more than 39,000 acres of land in
eastern San Bernardino County. The largest property totals approximately
27,400 acres at Cadiz, California. In addition to the Cadiz Water Project
(as defined), approximately 1,600 acres have been developed for cultivation
of citrus orchards, table grape vineyards and row crops. Sun World's
portfolio includes more than 17,300 acres of prime agricultural land in the
San Joaquin and Coachella Valleys, increasing the Company's total
landholdings to approximately 56,300 acres.
INDUSTRY OVERVIEW
The United States agricultural industry annually produces more than 400
types of fruits and vegetables with a retail value exceeding $60 billion.
These products are grown, packed and marketed through one or more
distribution channels including brokers, wholesale jobbers, service
wholesalers, distributors, food service operators and supermarket retailers
before reaching the consumer. Due to the growing cycle of these products,
the supply of fruits and vegetables from a particular region varies
throughout the season producing substantial price fluctuations over
relatively short time periods.
Although these products are seasonal and their prices fluctuate, the
consumer demands fresh produce throughout the year. As a result, retailers
prefer to source from marketers who can supply a consistently high quality
product over a large portion of the year. A grower or marketer who is able
to provide product both early and late in the season gains both a
distribution and a price advantage, which often results in significantly
enhanced profitability. Finally, there is a growing consumer concern
regarding food safety and consequently the environment in which fresh
produce is grown and packed. As a result, retailers are increasingly
choosing to reduce the number of suppliers with whom they contract and to
require these suppliers to track their produce from seed to table. As a
result of these trends, retailers are working more closely with larger,
more established growers and marketers who can provide them with the
quality, timeliness and breadth of products they require.
Most commercial farming operations produce both permanent crops and row
crops. From a commercial perspective there are two important differences
between permanent and row crops: (i) permanent crops require significant
lead time before producing commercially viable yields (e.g. approximately
three years for grapes and five years for stone fruit); and (ii) permanent
crops often last 30 or more years and reach their peak production potential
after 10 years. In addition, in the Coachella and San Joaquin Valleys,
there has been a continuing reduction in developed farming properties due
to urban encroachment. Consequently, a change in the permanent crop mix
in this region would generally require the incurrence of a several year lag
period as new crops reach commercial maturity. These factors result in a
relatively stable permanent crop base over an extended period of time
limiting supply based price volatility. Row crops, on the other hand, are
replanted annually and are subject to wider variations in supply and
consequently, price. As a result, permanent crops tend to produce a more
predictable revenue stream than row crops.
BUSINESS STRATEGY
New management believes that in the past Sun World did not focus on
maximizing profitability and controlling the volatility of its operating
earnings, factors which contributed to Sun World's filing for bankruptcy
in October, 1994. Following the Sun World Acquisition in September 1996,
management implemented the following five-point strategy: (i) producing
more varieties of crops which are available for delivery at peak pricing
windows throughout the year; (ii) expanding third party marketing and
packing businesses to increase Sun World's ability to absorb the primarily
fixed costs of its vertically integrated operations; (iii) improving
administrative efficiency through both headcount reductions and a new
comprehensive management information system; (iv) commercializing Sun
World's extensive proprietary product portfolio consisting of over
600 worldwide patents and trademarks; and (v) reducing leverage to lower
financial risk and improve operating flexibility.
REDUCING EARNINGS VOLATILITY OF FARMING OPERATIONS. Sun World primarily
grows table grapes (35% of 1996 acreage) and stone fruit (plums, peaches,
nectarines and apricots) (26% of 1996 acreage). Subsequent to the Sun
World Acquisition, new management developed a crop plan that provided for
the removal of certain underperforming permanent crops and the continued
development of certain proprietary varieties of grapes and stone fruit.
Given Sun World's current crop allocation plan, it is now redeploying
marginally productive acreage to further reduce the volatility of its
earnings. In addition, new management has significantly increased the
efficiency and market focus of Sun World's research and development
program, which continues to be one of the largest fruit breeding programs
in the world. Through this program, Sun World has developed and holds
patents on several key products that are unique in taste, features and
growing characteristics. For example, Sun World's flagship Superior
Seedless brand grape stays securely on the stem during shipping, thereby
eliminating shrinkage, an attribute important to Sun World's customers.
In addition, a number of Sun World's products are well suited for
harvesting during periods of limited supply, allowing Sun World to sell its
products at attractive price points. Other key specialty products include
Black Diamond plums, Amber Crest peaches, Honeycot apricots, Star Sweet
grapefruits, Sun World sweet colored peppers and Sun World Seedless
watermelons. As a result of these initiatives, Sun World has reduced its
exposure to the price volatility inherent in undifferentiated products,
extended its leadership position in table grapes and stone fruit and
redeployed unprofitable acreage primarily to proprietary permanent crops.
Consequently, Sun World is better able to manage its cost structure and to
provide its unique products to retailers at strong price points during the
year, enhancing the level and predictability of its earnings.
EXPANDING MARKETING AND PACKING BUSINESSES. In addition to produce
grown on its own ranches, Sun World provides marketing and packing services
for both domestic and international growers. On average, Sun World sells
12 to 13 million units annually, with an average wholesale value of
approximately $120 million. As a leading, vertically integrated producer,
packer and marketer of fruits and vegetables, Sun World has developed a
strong brand name and reputation for quality and reliability. Going
forward, Sun World intends to build upon this brand equity to expand the
marketing and distribution of both its own and third party products to
provide a full product line throughout the year, further solidifying its
strong wholesaler relationships. To this end, Sun World has developed
distribution relationships with growers in Chile and Mexico to sell
contra-seasonal products (winter fruits and vegetables) in the United
States and is already distributing such products throughout its retail
customer base. In addition to these programs, Sun World has hired an
executive to recruit qualified new growers, who can benefit from Sun
World's strong brand name and distribution relationships. In addition to
growing its revenue base, Sun World has several initiatives intended to
increase its operating efficiency, such as consolidating its Coachella
packing operations from four to two facilities and retrofitting its
Kimberlina facility to pack citrus contra-seasonal to its existing stone
fruit packing operation. Sun World's existing infrastructure is sufficient
to support its internal operations during the peak season but provides
available capacity in the off season. As a result, Sun World's third party
sales and marketing as well as contra-seasonal packing operations have
significant opportunities to benefit from Sun World's existing operating
leverage.
IMPROVE ADMINISTRATIVE EFFICIENCY. Since the Sun World Acquisition, new
management has implemented a number of organizational changes to provide
more focused farming and financial management. Several key managers were
hired, including a chief executive officer with extensive agricultural and
distribution experience, a chief financial officer who was previously a
partner with Coopers & Lybrand LLP and a highly experienced senior
executive to focus exclusively on enhancing Sun World's third party
marketing and packing businesses. In addition, Sun World has appointed a
new Senior Vice President of Operations. These individuals, along with Sun
World's Senior Vice President Sales and Senior Vice President Corporate
Development and Marketing form Sun World's senior management team. Sun
World closed its former administrative headquarters and consolidated these
operations into existing space at its main packing facility. During 1996,
Sun World reduced its administrative staff by approximately 13%, largely
through the elimination of unnecessary reporting layers. To support these
streamlining changes, Sun World is implementing a new information
management system which should be operational by the end of 1997.
Management believes that these changes will eliminate $1.3 million in
annual overhead costs which would have resulted in a 16% reduction in
sales, general and administrative costs in 1996. With these organizational
changes completed, Sun World is focused on the strategic advantages of
proprietary permanent crops, strong customer relationships and significant
marketing expertise and packing resources.
COMMERCIALIZING PROPRIETARY PRODUCT PORTFOLIO. With over 600 worldwide
patents and trademarks, Sun World has identified select opportunities to
commercialize its proprietary product portfolio without diluting its
strength as the exclusive grower of these products in the United States.
In the last 10 years, Sun World has introduced more than 40 proprietary
fruit varieties. The development of a new product takes many years and
sometimes a decade or more. As a result, Sun World, which annually
produces tens of thousands of new grape and stone fruit seedlings, has a
strong leadership position in the development of innovative products. In
addition, Sun World has recently experienced significant international
success in the protection of its proprietary products. Currently, Sun
World actively exploits its seedless watermelon, which in 1996 generated
a profit of $1.5 million to Sun World through its 50% ownership interest
in American Sunmelon, and is actively exploring various new domestic and
international opportunities to license various grape and stone fruit
varieties.
REDUCING LEVERAGE TO LOWER FINANCIAL RISK AND IMPROVE OPERATING
FLEXIBILITY. When new management took over Sun World in September, 1996,
total debt was $151.8 million. From that time to December 31, 1996,
management lowered debt by $16.4 million, or 11%, through improved
operational cash flows and proceeds from the sale of non-essential assets.
Sun World is continuing to strengthen its balance sheet and improve its
operating structure through asset sales. As of December 31, 1996,
following the Sun World Acquisition, Sun World completed land sales for
$12.4 million, at prices at or above their appraised value. Additionally,
in 1997, Sun World has sold one ranch and one packing facility for $2.9
million.
GUARANTEES
The Exchange Notes will be fully and unconditionally guaranteed, jointly
and severally, by Cadiz and by Sun World's Subsidiary Guarantors. The
Cadiz Guarantee will be secured by a pledge of the stock of Sun World. See
"Description of Exchange Notes Ranking and Security."
The footnotes to the Consolidated Financial Statements of Cadiz for the
three months ended March 31, 1997 and 1996, contained in this Prospectus,
include summarized consolidated financial information for Sun World and
combined summarized financial information for the Subsidiary Guarantors for
the three months ended March 31, 1997. In addition, the footnotes to the
Consolidated Financial Statements of Sun World for the period September 14,
1996 through December 31, 1996, contained in this Prospectus, include
combined summarized financial information for the Subsidiary Guarantors for
(i) the period September 13, 1996 through December 31, 1996, (ii) the
period January 1, 1996 through September 13, 1996, and (iii) for each of
the years ended December 31, 1995 and 1994.
THE EXCHANGE OFFER
The Exchange Offer Sun World is offering to exchange pursuant to the
Exchange Offer up to $115,000,000 aggregate
principal amount of its new 11-1/4% First Mortgage
Notes due 2004 (the "Exchange Notes"), for
$115,000,000 aggregate principal amount of its
outstanding 11-1/4% First Mortgage Notes due 2004
(the "Old Notes"). The Old Notes were issued and
sold on April 16, 1997, in transactions not
registered under the Securities Act, to Smith Barney
Inc. (the "Initial Purchaser"), in reliance upon the
exemption provided in Section 4(2) of the Securities
Act, and the Initial Purchaser subsequently resold
the Old Notes in exempt transactions. The terms of
the Exchange Notes are identical in all material
respects (including principal amount, interest rate
and maturity) to the terms of the Old Notes for
which they may be exchanged pursuant to the Exchange
Offer, except that the Exchange Notes are freely
transferable by holders thereof (other than as
provided herein) and will be issued without rights
for any further registered exchange offer. See "The
Exchange Offer--Terms of the Exchange" and "--Terms
and Conditions of the Letter of Transmittal" and
"Description of Exchange Notes."
Interest Payments Interest on the Exchange Notes shall accrue from the
last Interest Payment Date (April 15 or October 15)
on which interest was paid on the Old Notes so
surrendered or, if no interest has been paid on such
Old Notes, from April 16, 1997.
Minimum Condition The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered for exchange.
Expiration Date The Exchange Offer will expire at 5:00 p.m., New
York City time, on ___________, 1997, unless
extended (the "Expiration Date"). Any Old Note not
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Exchange Date The date of acceptance for exchange of the Old Notes
will be the first business day following the
Expiration Date.
Conditions of the
Exchange Offer Sun World's obligation to consummate the Exchange
Offer will be subject to certain conditions. See
"The Exchange Offer--Conditions to the Exchange
Offer." Sun World reserves the right to terminate
or amend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition.
Withdrawal Rights The tender of Old Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date.
Procedures for
Tendering Notes See "The Exchange Offer--Tender Procedure."
Federal Income Tax
Consequences The exchange of Old Notes for Exchange Notes will
not be a taxable exchange for federal income tax
purposes. See "United States Federal Tax
Consequences."
Effect on Holders
of Notes As a result of the making of, and upon acceptance or
exchange of all validly tendered Old Notes pursuant
to the terms of, this Exchange Offer, Sun World will
have fulfilled a covenant contained in the
Registration Rights Agreement (the "Registration
Rights Agreement") dated as of April 16, 1997
between Sun World and the Initial Purchaser and,
accordingly, there will be no Liquidated Damages. as
defined and provided for in the terms of the
Registration Rights Agreement, and the holders of
the Old Notes will have no further registration or
other rights under the Registration Rights
Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will
continue to hold such Notes and will be entitled to
all the rights and subject to all the limitations
applicable thereto (including the restrictions on
transfer thereof) under the Indenture, dated as of
April 16, 1997, between Sun World and IBJ Schroder
Bank & Trust Company, as Trustee, relating to the
Old Notes and the Exchange Notes (the "Indenture"),
except for any such rights under the Registration
Rights Agreement that by their terms terminate or
cease to have further effectiveness as a result of
the making of, and the acceptance for exchange of
all validly tendered Old Notes pursuant to, the
Exchange Offer. Except for the restrictions on
registrations and transfers, all untendered Old
Notes and the Exchange Notes will be treated as one
class of securities for purposes of the covenants
and the other terms contained in the Indenture.
Use of Proceeds There will be no cash proceeds to Sun World from the
exchange pursuant to the Exchange Offer.
Exchange Agent IBJ Schroder Bank & Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer.
TERMS OF THE EXCHANGE OFFER
Issuer Sun World International, Inc.
Notes Offered $115,000,000 principal amount of 11-1/4% Series B First
Mortgage Notes, due 2004
Maturity Date April 15, 2004
Interest Payment
Dates April 15 and October 15 of each year, commencing October
15, 1997
Guarantees The Exchange Notes will be fully and unconditionally
guaranteed, jointly and severally, by Cadiz and by each
ofthe Subsidiary Guarantors, which consist of the
following: Coachella Growers, Inc., Sun Desert, Inc.,
Sun World Brands, Sun World Management Corp. and Sun
World/Rayo.
Ranking The Exchange Notes and the Guarantees will rank pari
passu in right of payment to all existing and future
unsubordinated indebtedness of Sun World and the
Guarantors, respectively, except to the extent of any
collateral which may be pledged to secure such other
indebtedness. As of March 31, 1997, after giving
effect to the Offering and the net proceeds transactions,
Cadiz, Sun World and the Subsidiary Guarantors, taken
as a consolidated group, had approximately $4.5 million
of unsubordinated indebtedness (of which approximately
$2.4 was secured by certain assets of Sun World) and
Cadiz, Sun World and the Subsidiary Guarantors, taken
as a group, had approximately $9.7 million of
outstanding indebtedness that would be subordinated
to the Exchange Notes and Guarantees.
Collateral The Exchange Notes will be secured by a first priority
lien on the Collateral owned or hereafter acquired by Sun
World. Each of the Subsidiary Guarantees will be secured
by a first priority lien on the Collateral owned or
hereafter acquired by each of the Subsidiary Guarantors.
The Collateral owned by Sun World includes, without
limitation, (i) all of the stock of Sun World's
subsidiaries, (ii) all of its real property, including
additions and improvements, (iii) all of its personal
property, plant, equipment, furnishings and fixtures,
(iv) all of its rights to water, and (v) all crops and
plants, excluding the Excluded Assets (as defined).
The Collateral owned by the Subsidiary
Guarantors includes, without limitation, (i) all of each
Subsidiary Guarantors' real property, including additions
and improvements, (ii) all personal property, plant,
equipment, furnishings and fixtures, (iii) all of each
Subsidiary Guarantors' rights to water, and (iv) all crops
and plants, in each case excluding the Excluded Assets (as
defined). The Cadiz Guarantee will be secured by a pledge
of Sun World's stock. The Excluded Assets include the
Revolving Credit Agreement Collateral of Sun World
(including all of Sun World's cash and cash equivalents,
inventory, receivables and growing crops), the Zenith
Collateral (as defined) and all of the assets of Cadiz
other than the stock of Sun World. See "Description of
Notes--Ranking and Security."
Optional
Redemption The Exchange Notes may be redeemed at the option of Sun
World, in whole or in part, on or after April 15, 2001 at
a premium declining to par in 2003, plus accrued and unpaid
interest through the redemption date.
Change of
Control In the event of a Change of Control (as defined), the
holders of the Exchange Notes will have the right to
require Sun World to purchase their Exchange Notes at a
price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated
Damages to the date of purchase.
Covenants The indenture pursuant to which the Old Notes were and the
Exchange Notes will be issued (the "Indenture") contains
certain covenants that, among other things, limit the
ability of Cadiz, Sun World and Sun World's subsidiaries to
incur additional indebtedness and issue preferred stock,
pay dividends or make other distributions, repurchase
Equity Interests (as defined) or subordinated indebtedness,
engage in sale and leaseback transactions, create certain
liens, enter into certain transactions with affiliates,
sell assets, or enter into certain mergers and
consolidations. In addition, under certain circumstances,
Sun World will be required to offer to purchase Notes at a
price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of
purchase, with the proceeds of certain Asset Sales (as
defined). See "Description of Exchange Notes -Certain
Covenants."
Absence of a
Public Market
for the
Exchange The Exchange Notes are new securities, and there is
currently no established market for the Exchange Notes.
The Exchange Notes will generally be freely transferable
(subject to the restrictions discussed elsewhere herein)
but will be new securities for which there will not
initially be a market. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the Exchange Notes. The Initial Purchaser has
advised Sun World that it currently intends to make a
market in the Exchange Notes. However, the Initial
Purchaser is not obligated to do so, and any market
making with respect to the Exchange Notes may be
discontinued at any time without notice. Sun World does
not intend to apply for a listing of the Exchange Notes
on a securities exchange.
Selected Financial Data
Cadiz Land Company, Inc.
The following table sets forth certain selected historical
consolidated financial data for Cadiz for each of the three month
periods ended March 31, 1997 and 1996, for the nine-month period ended
December 31, 1996 and for each of the years ended March 31, 1996, 1995,
1994 and 1993. The selected financial data has been derived from Cadiz'
consolidated financial statements for (i) the three months ended March
31, 1997 and 1996 which have not been audited; (ii) the nine months
ended December 31, 1996 and the two years ended March 31, 1996, which
have been audited by Price Waterhouse LLP, independent accountants, as
indicated in their report included elsewhere herein; and (iii) the years
ended March 31, 1994 and 1993, which have been also audited by Price
Waterhouse LLP, independent accountants. The unaudited pro forma
statement of operations data gives effect to the following transactions
as if they had occurred on April 1, 1996: (i) the Sun World
Acquisition; and (ii) the offering of the Old Notes ("Offering"), the
Revolving Credit Agreement (as defined) and repayment of secured debt
owed to Rabobank (except for the Offering, collectively the "Related
Transactions") in the amount of approximately $9.1 million and the
application of the proceeds therefrom. The pro forma balance sheet data
as of December 31, 1996 has been prepared as if the Offering and the
Related Transactions occurred on that date. The selected pro forma data
has been derived from: (i) the activity for Sun World for the period
April 1, 1996 through September 13, 1996, which was derived by
subtracting the activity of Sun World for the period January 1, 1996
through March 31, 1996, which period was unaudited, from the
consolidated financial statements of Sun World for the period January 1,
1996 through September 13, 1996 (audited); and (ii) the consolidated
financial statements of Cadiz for the period April 1, 1996 to December
31, 1996 (audited) which includes, on a consolidated basis, the results
of operations for Cadiz for the period April 1, 1996 to December 31,
1996 and those of Sun World for the period September 14, 1996 (the date
of the Sun World Acquisition) to December 31, 1996.
The following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Unaudited Pro Forma Financial Information" and the
Consolidated Financial Statements, including the notes thereto, included
elsewhere in this Prospectus.
Pro
Forma
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
March March December December
31, 31, 31, 31, Year ended March 31,
1997 1996 1996 1996(1) 1996 1995 1994 1993
- -------- ------- ------- ------ -------- ------ ------ ---------
Statement of
Operations Data:
Revenues $ 4,805 $ 321 $ 98,010 $ 23,780 $ 1,441 $ 543 $ 190 $ -0-
Loss from
continuing
operations
before
extra-
ordinary
items (7,396) (3,141) (2,877)(2) (5,997) (8,487) (4,706) (4,239) (4,087)
-------- ------- ------- ------- ------- ------- ------- ------
Gain from
disposal
of
dis-
continued
segment -0- -0- -0- -0- -0- -0- 145 -0-
Extra-
ordinary
items -0- -0- -0- -0- -0- 115 343 -0-
Net loss (7,396) (3,141) (2,877)(2) (5,997) (8,487) (4,591) (3,751) (4,087)
Less:
Preferred
stock
dividends (438) -0- (1,828) (674) -0- -0- -0- -0-
Imputed
dividend
on
preferred
stock -0- -0- (2,723) (2,451) -0- -0- -0- -0-
----- ------ ------- -------- ----- ------ ------ ----
Net loss
applicable
to
common
stock
$(7,834) $(3,141) $(7,428)(2) $(9,122) $(8,487) $(4,591) $ (3,751) $(4,087)
======= ======== ========= ======== ======= ======== ======== =======
Per Share:
Loss from
continuing
operations
before
extra-
ordinary
items $(0.33) $ (0.17) $ (0.34)(2) $(0.44) $ (0.48) $ (0.29) $(0.33) $(0.47)
Income
from
operations
of
discontinued
segment
and
disposal
of
dis-
continued
segment -0- -0- -0- -0- -0- -0- 0.01 -0-
Extra-
ordinary
items -0- -0- -0- -0- -0- 0.01 0.03 -0-
----- ------ ------- ----- ------- ------- ------ -------
Net
loss $(0.33) $(0.17) $(0.34)(2) $(0.44) $ (0.48) $ (0.28) $ (0.29) $(0.47)
======= ======= ========= ======= ======= ======== ================
Pro Forma
March March December December
31, 31, 31, 31, As of March 31,
1997 1996 1996 1996(1) 1996 1995 1994 1993
----- ------ -------- ------- ----- ----- ------- -----
Balance Sheet
and Other
Financial Data:
Total
assets $217,273 $ 38,663 $206,314 $230,790 $ 38,663 $ 34,888 $ 34,058 $ 27,635
Long-
term
obli-
gations
and
re-
deemable
preferred
stock(3) 178,659 17,617 154,817 176,542 68 16,827 13,833 15,979
Weighted-
average
common
shares
and
equiva-
lents 23,800 17,700 21,600 20,500 17,700 16,500 12,800 8,700
Pro
Forma
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
March March December December
31, 31, 31, 31, Year ended March 31,
1997 1996 1996 1996(1) 1996 1995 1994 1993
Defic-
iency
in the
cover-
age
of
fixed
charges
(4) $(7,396) N/A $(3,518) $(6,638) $(8,487) $(4,706) $ (4,239) $(4,087)
- ------------------------------------------
(1) On September 13, 1996, Cadiz acquired all of the outstanding capital
stock of Sun World. Cadiz' acquisition of Sun World is accounted for in
Cadiz' financial statements under the purchase method of accounting.
The selected financial data for the period ended December 31, 1996
include the results of operations for Sun World from the date of
acquisition.
(2) Includes for the nine months ended December 31, 1996, charges incurred
by Sun World totaling $4.8 million which were directly attributable to
the Chapter 11 bankruptcy proceedings and are non-recurring in nature.
Exclusion of the non-recurring charges would have resulted in a pro
forma net loss per share of $0.12 for the nine months ended December 31,
1996.
(3) Long-term obligations are defined as funded debt comprising borrowings
from financial institutions and vendors.
(4) Earnings used in computing the coverage of earnings to fixed charges
consists of loss from continuing operations before provision for income
taxes and extraordinary items plus fixed charges. Fixed charges consist
of interest expense, including amortization of debt issuance costs and a
portion of operating lease rental expense deemed to be representative of
the interest factor. Earnings are inadequate to cover fixed charges for
each period as noted above.
RISK FACTORS
In addition to the other information in this Prospectus, holders of
Old Notes should consider carefully the following factors before
tendering their Old Notes for Exchange Notes offered hereby. The risk
factors set forth below are generally applicable to the Old Notes as
well as the Exchange Notes.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE OUTSTANDING INDEBTEDNESS
Both Sun World and Cadiz are highly leveraged. At March 31, 1997, on
a pro forma basis after giving effect to the Old Note offering and the
application of the net proceeds therefrom, Sun World's total
consolidated indebtedness would have been $119.5 million and Cadiz'
total consolidated indebtedness would have been $129.2 million.
Sun World's ability to make scheduled payments of the principal of,
or to pay the interest on, or to refinance its indebtedness (including
the Notes) will depend on its future operating performance, which to a
certain extent is subject to economic, financial, competitive,
regulatory, and other factors beyond its control. If Sun World is
unable to generate sufficient cash flow to service its debt, it may be
required to refinance all or a portion of its existing debt, including
the Notes, or to obtain additional financing. There can be no assurance
that any such refinancing would be possible or that any additional
financing could be obtained.
The degree to which Sun World is leveraged could have material
adverse effects on Sun World and the holders of Notes including, but not
limited to, the following: (i) Sun World's ability to obtain additional
financing in the future for acquisitions, working capital, capital
expenditures, and general or other corporate purposes may be impaired;
(ii) a substantial portion of Sun World's cash flow from operations will
be dedicated to debt service and will be unavailable for other purposes;
and (iii) both Sun World and Cadiz will be subject to a variety of
restrictive covenants, the failure to comply with which could result in
events of default that, if not cured or waived, could restrict Sun
World's ability to make payments of principal of, and interest on the
Notes. See "Description of Exchange Notes."
RISKS INHERENT IN AGRICULTURAL OPERATIONS
Sun World is subject to risks associated with its agricultural
operations. Numerous factors can affect the price, yield and
marketability of the crops grown on Sun World's properties. Crop prices
may vary greatly from year to year as a result of the relationship
between production and market demand. For example, the production of a
particular crop in excess of demand in any particular year will depress
market prices, and inflationary factors and other unforeseeable economic
changes may also, at the same time, increase operating costs with
respect to such crops. In addition, the agricultural industry in the
United States is highly competitive, and domestic growers and produce
marketers are facing increased competition from abroad, particularly
from Mexico. There are also a number of factors outside of Sun World's
control that could, alone or in combination, materially adversely affect
Sun World's agricultural operations, such as adverse weather conditions,
insects, blight or other diseases, labor problems such as boycotts or
strikes, and shortages of competent laborers. Sun World's operations
may also be adversely affected by changes in governmental policies,
social and economic conditions, and industry production levels. As a
result, there can be no assurance that Sun World's agricultural
operations will be commercially profitable.
CERTAIN LIMITATIONS ON THE COLLATERAL AND THE GUARANTEES
The Exchange Notes will be obligations of Sun World and will be
guaranteed, jointly and severally, by Cadiz and by the Subsidiary
Guarantors. Sun World has secured its obligations under the Exchange
Notes by the pledge of certain of its assets, and each Subsidiary
Guarantor has secured its obligation under its Guarantee by the pledge
of certain of its assets. However, such Collateral will not include,
among other things, any Excluded Assets (as defined). The fact that the
Excluded Assets are not pledged as security for the Notes could have a
material adverse effect on the value of the Collateral. See
"Description of Exchange Notes Certain Definitions" and "Description of
Exchange Notes -Ranking and Security." In addition, the agricultural
real property used by Sun World and its Subsidiaries, including the
Collateral, is subject to numerous easements, gas and mineral agreements
and other encumbrances that are commonly recorded against agricultural
and other undeveloped land in California. Sun World believes, however,
that such encumbrances are not material to its use or the value of the
agricultural real property Collateral, in the aggregate.
The value of the Collateral in the event of a liquidation will depend
upon market and economic conditions, the availability of buyers, and
similar factors. Accordingly, there can be no assurance that the
proceeds of any sale of the Collateral following an Event of Default (as
defined) would be sufficient to satisfy the amounts due on the Exchange
Notes. If the proceeds of any sale of Collateral were not sufficient to
repay all amounts due on the Exchange Notes, the holders of the Exchange
Notes (to the extent not repaid from the proceeds of the sale of the
Collateral) would have only an unsecured claim against the remaining
assets of Sun World and claims under the Guarantees. By its nature,
some or all of the Collateral will be illiquid and may have no readily
ascertainable market value. Likewise, there is no assurance that the
Collateral will be saleable or, if saleable, that there will not be
substantial delays in its liquidation. To the extent that liens, rights
and easements granted to third parties encumber assets of Sun World,
such parties may have or exercise rights or remedies with respect to the
property subject to such liens that could adversely affect the value of
the Collateral and the ability of the Trustee under the Indenture (the
"Trustee") or the holders of Notes to realize or foreclose on such
Collateral. The Collateral includes certain assets of Sun World in
which liens may not be perfected, including certain foreign intellectual
property rights. In addition, the granting or perfecting of liens in
certain leasehold interests and intangible rights (including
intellectual property) may under certain laws require consents of third
parties which cannot be obtained. Sun World believes, however, that the
failure to perfect liens on such Collateral or obtain such consents will
not have a material adverse effect on the value of the Collateral in the
aggregate.
The Collateral includes plants and other perishable goods whose value
could significantly decrease if proper procedures to maintain such goods
are not observed. In the event Sun World were to experience financial
difficulties, Sun World might be forced to limit the maintenance
procedures necessary or desirable for the preservation of such
Collateral's value. Although in a foreclosure the Trustee may be able
to sell a portion of such collateral to finance the maintenance of other
Collateral, it is uncertain how long such a sale might take or whether
such a sale would generate sufficient funds to maintain the remaining
Collateral.
The collateral release provisions of the Indenture permit the release
of Collateral without the substitution of additional collateral under
certain circumstances. See "Description of Exchange Notes Ranking and
Security."
The Collateral includes certain leased real properties. The Liens
upon such leased real property Collateral are subject to the terms of
the applicable leases and the rights of the landlords thereunder,
including the right to terminate the leases in the event of a breach.
If any such lease were terminated, Sun World would lose possession of
the leased properties, and the Liens in favor of the Trustee would be
extinguished. In the event the Trustee receives notice of a default
under any of the leases and has the right and opportunity to cure, the
Trustee has no obligation under the Indenture to cure any such defaults,
unless so instructed by the holders of the outstanding Notes pursuant to
the Indenture. Further, the leases contain restrictions on assignment
which may affect the ability of the Trustee to sell or transfer the
leasehold interests following a foreclosure.
The right of the Trustee to repossess and dispose of the Collateral
upon the occurrence of an Event of Default under the Indenture is likely
to be significantly impaired by bankruptcy law if a bankruptcy case were
to be commenced by or against Cadiz, Sun World or any of Sun World's
subsidiaries prior to the Trustee having repossessed and disposed of the
Collateral and, in the case of Collateral that is real property, could
be impaired by restrictions under state law. See "Risk Factors- Certain
Bankruptcy Limitations" and "Risk Factors- Certain Limitations Under
State Law."
GEOGRAPHIC CONCENTRATION
The Collateral is located in southern and central California. A
local or regional economic downturn, changes in state or local law or
regulation, and similar localized events could have an adverse impact on
the performance or value of the Collateral.
CERTAIN LIMITATIONS UNDER STATE LAW
The Exchange Notes, because they will be secured in part by liens on
real property located in California, may be subject to California's "one
form of action rule" and "anti-deficiency laws," among other laws
applicable to real property collateral. Section 726 of the California
Code of Civil Procedure provides that "there can be but one form of
action for the recovery of any debt or the enforcement of any right
secured by mortgage upon real property." Under judicial decisions
applying such statute, a creditor secured by a mortgage or deed of trust
(i) must first exhaust all of its real property collateral in California
by judicial foreclosure if it wishes to preserve a claim against the
debtor for a deficiency and (ii) may be required to realize upon its
real property collateral before it may exercise other remedies. If the
secured creditor obtains a personal judgment on the debt before
exhausting its real property collateral in California, the secured
creditor may lose its lien on the real property located in California.
Similarly, if the secured creditor seeks to recover any portion of its
debts from property of Sun World which is not collateral, such as
exercising a right of set-off against funds of the debtor that are on
deposit with the secured creditor, the secured creditor may lose both
its lien on the real property located in California and its right to
obtain a judgment for the portion of the obligation remaining unpaid
after such recovery.
Section 580d of the California Code of Civil Procedure provides that
"no judgment shall be rendered for any deficiency upon a note secured by
a deed of trust or mortgage upon real property . . . in any case in
which the real property . . . has been sold by the mortgagee or trustee
under power of sale contained in the mortgage or deed of trust."
Accordingly, if a secured creditor wishes to preserve its claim against
the debtor for any deficiency, it may be required to first proceed by
judicial foreclosure (rather than by a non-judicial foreclosure sale)
against the real property collateral located in California. Under
Section 726 of the California Code of Civil Procedure, the amount of any
deficiency will, in general, be based upon the amount of secured
indebtedness less an amount equal to the greater of (i) the court's
determination of fair value of the real property collateral and (ii) the
amount realized in such foreclosure proceeding.
Under the Indenture, Sun World will generally be prohibited from
creating liens other than Permitted Liens (as defined). See "Description
of Exchange Notes Liens." The Indenture will further provide that, in
the event of a breach of this covenant that is not remedied for 30 days
after written notice of such breach is given to Sun World, the Trustee
or the holders of Notes will be entitled to accelerate the maturity of
the Exchange Notes. See "Description of Exchange Notes Events of
Default." However, under certain decisions of the California Supreme
Court, to accelerate loans secured by commercial real property upon a
breach of covenants prohibiting the creation of certain junior liens or
leasehold estates, the lender must demonstrate that enforcement is
reasonably necessary to protect against impairment of the lender's
security or to protect against an increased risk of default. Although
such decisions may have been preempted in part by certain federal laws,
the scope of such preemption, if any, is uncertain. Accordingly, a
California court could prevent the Trustee or the holders of Notes from
declaring a default and accelerating the Notes by reason of a breach of
this covenant, which could have a material adverse effect on the ability
of holders to enforce such covenant.
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Trustee to repossess and dispose of the Collateral
upon the occurrence of an Event of Default under the Indenture would
likely be significantly impaired by bankruptcy law if a bankruptcy case
were to be commenced by or against Sun World or its subsidiaries prior
to the Trustee having repossessed and disposed of the Collateral. Under
Title 11 of the United States Code (the "Bankruptcy Code"), a secured
creditor such as the Trustee is prohibited from repossessing its
collateral from a debtor in a bankruptcy case, or from disposing of
security repossessed from such debtor, without bankruptcy court
approval. Moreover, the Bankruptcy Code permits the debtor to continue
to retain and use collateral even though the debtor is in default under
the applicable debt instruments, provided that the secured creditor is
given "adequate protection." The meaning of the term "adequate
protection" may vary according to circumstances, but it is intended in
general to protect the value of the secured creditor's interest in the
collateral and may include cash payments or the granting of additional
security, if and at such times as the bankruptcy court in its discretion
determines, for any diminution in the value of the collateral as a
result of the stay of repossession or disposition or any use of the
collateral by the debtor during the pendency of the bankruptcy case, but
not including interest which would accrue on the claim to the extent of
any equity in the collateral. Generally, adequate protection payments
are not required to be paid by a debtor to a secured creditor unless the
bankruptcy court determines that the value of the secured creditor's
interest in the collateral is declining during the pendency of
bankruptcy case. Due to the lack of a precise definition of the term
"adequate protection" and the broad discretionary powers of a bankruptcy
court, it is impossible to predict how long payments under the Exchange
Notes or Guarantees could be delayed following the commencement of a
bankruptcy case, whether or when the Trustee could repossess or dispose
of the Collateral or whether or to what extent holders of the Exchange
Notes would be compensated for any delay in payment or loss of value of
the Collateral through the requirement of "adequate protection."
Under the Bankruptcy Code, a "farmer" cannot be subject to an
involuntary bankruptcy petition. If over 80% of Sun World's gross income
comes from farming operations, Sun World may be deemed to be a "farmer"
under the Bankruptcy Code. To the extent Sun World is deemed to be a
"farmer" under the Bankruptcy Code, the Trustee and the Exchange Note
holders would not be able to commence an involuntary bankruptcy case
naming Sun World as the debtor in the event Sun World defaults on its
obligations under the Notes. The Trustee and the Note holders may
enforce their rights against the Collateral; however, their inability to
commence an involuntary bankruptcy against Sun World prevents the
Trustee and Note holders from obtaining court supervision of Sun World's
ongoing operations. In addition, certain transfers within a statutory
period of time prior to the commencement of a bankruptcy petition
(90 days to one year or more) may be set aside or avoided in a
subsequent bankruptcy. To the extent Sun World delays commencing a
voluntary bankruptcy case, for example to prevent foreclosure by the
Trustee, certain transfers may become unvoidable, to the benefit of
certain third parties and to the detriment of the Note holders.
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws enacted for the protection of
creditors may apply to the issuance of the Guarantees. To the extent
that a court were to find that (x) a Subsidiary Guarantee was incurred
by a Subsidiary Guarantor with intent to hinder, delay or defraud any
present or future creditor or such Subsidiary Guarantor contemplated
insolvency with a design to prefer one or more creditors to the
exclusion in whole or in part of others, or (y) a Subsidiary Guarantor
did not receive fair consideration or reasonably equivalent value for
issuing its Guarantee and such Subsidiary Guarantor (i) was insolvent,
(ii) was rendered insolvent by reason of the issuance of its Guarantee,
(iii) was engaged or about to engage in a business or transaction for
which the remaining assets of such Subsidiary Guarantor constituted
unreasonably small capital to carry on its business or (iv) intended to
incur, or believed that it would incur, debts beyond its ability to pay
such debts as they matured, the court could avoid or subordinate such
Subsidiary Guarantee in favor of other creditors of such Subsidiary
Guarantor. Among other things, a legal challenge of any Subsidiary
Guarantee may focus on the benefits, if any, realized by such Subsidiary
Guarantor as a result of Sun World's issuance of the Notes. The
Indenture contains a savings clause, which generally limits the
obligations of any Guarantor under its Guarantee to the maximum amount
as will, after giving effect to all of the liabilities of such
Subsidiary Guarantor, result in such obligation not constituting a
fraudulent conveyance. To the extent a Subsidiary Guarantee was avoided
or limited as a fraudulent conveyance or held unenforceable for any
other reason, holders of the Notes would cease to have any claim against
such Subsidiary Guarantor and would be creditors solely of Sun World and
Cadiz. In such event, the claims of holders of the Notes against such
Subsidiary Guarantor would be subject to the prior payment of all
liabilities (including trade payables) of such Subsidiary Guarantor.
There can be no assurance that, after providing for all prior claims,
there would be sufficient assets to satisfy the claims of the holders of
the Notes relating to any avoided portion of any Subsidiary Guarantee.
The Cadiz Guarantee may similarly be subject to judicial challenge,
but not to the same extent as the Subsidiary Guarantees.
The measure of insolvency for the purposes of the foregoing
considerations will vary depending upon the law applied in any such
proceeding. Generally, however, a guarantor may be considered insolvent
if the sum of its debts, including contingent liabilities, is greater
than the fair marketable value of all of its assets at a fair valuation
or if the present fair marketable value of its assets is less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature. Based upon financial and other information, Sun
World believes that the Guarantees are being incurred for proper
purposes and in good faith and that the Guarantors are solvent and will
continue to be solvent after issuing the Guarantees, will have
sufficient capital for carrying on their business after such issuance
and will be able to pay their debts as they mature. There can be no
assurance, however, that a court passing on such standards would agree
with such beliefs. See "Description of Exchange Notes -Guarantees."
SECURED LENDERS UNDER ENVIRONMENTAL LAWS
The Notes and the Guarantees will be secured by liens on real
property. Real property pledged as security to a lender may be subject
to known and unknown environmental risks, and these risks may reduce or
eliminate the value of such real property as Collateral. Under the
federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), in certain circumstances a secured
lender may be held to have an obligation to remediate or may be held
liable for the cost of remediating releases or threatened releases at
the mortgaged property. There may be similar risks under various state
laws and common law theories. The costs of environmental remediation
are often substantial. In addition, a secured lender may be liable for
other damages allegedly caused by the contamination under various
federal and state laws, such as natural resource damage under CERCLA.
The state of the law as to whether and under what circumstances the
obligation to remediate or the liability to pay remediation costs or
other damages could be imposed on a secured lender is currently unclear.
Under CERCLA, for example, a lender may be liable as an "owner or
operator" of a mortgaged property for such remediation costs if such
lender or its agents or employees have participated in the management of
the operations of the mortgagor, even if the environmental damage was
caused by a prior owner, current owner or operator other than the
lender. However, CERCLA's definition of "owner or operator" excludes a
person "who without participating in the management of the facility,
holds indicia of ownership primarily to protect his security interest"
(the "secured creditor exemption"). Generally, the secured creditor
exemption protects a holder of a security interest to the extent that
such holder is acting to protect its security interest in the facility
or property. If a lender's activities begin to encroach upon actual
management of such facility or property, the lender faces potential
liability as an "owner or operator" under CERCLA. Similarly, when a
lender forecloses and takes title to a contaminated property, the lender
may incur potential CERCLA liability in certain circumstances, including
when it holds the property as an investment (including leasing the
property to a third party), failing to market the property in a timely
fashion or failing to properly address environmental conditions at the
property.
Under the laws of certain states, including California, failure to
perform certain remediation required or demanded by the state may give
rise to a lien on the property to ensure the reimbursement of the costs
of such remediation. The costs to any purchaser of the property to
remediate environmental conditions could reduce or eliminate the value
of the property as Collateral.
DEPENDENCE ON KEY PERSONNEL
The success of Sun World's business is highly dependent on the
members of the senior management of Sun World. The loss of the services
of one or more of them could have a material adverse effect on Sun
World's business and development. Sun World believes that its ability
to successfully manage its planned growth will depend in large part on
its continued ability to attract and retain highly skilled and qualified
personnel. Although Sun World has established incentive compensation
plans and has entered into employment agreements to retain key
executives, no assurances can be made that key personnel will not
depart, or that their departure would not have adverse consequences to
the operations of Sun World or any of its subsidiaries.
CHANGE OF CONTROL
The Indenture will provide that upon the occurrence of any Change of
Control, Sun World will be required to make an offer to purchase all of
the Notes issued and then outstanding under the Indenture at a purchase
price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest thereon to the date of purchase. Certain future credit
or other borrowing agreements may contain similar restrictions. Sun
World's ability to pay cash to the holders of Notes upon a repurchase
may prohibit Sun World from purchasing any Note prior to its stated
maturity and may provide that certain Change of Control events would
constitute a default thereunder. See "Description of Exchange
Notes Certain Covenants."
If a Change of Control were to occur, it is unlikely that Sun World
would be able to both repurchase all of the Notes and repay all of its
obligations under other indebtedness that would become payable upon the
occurrence of such Change of Control, unless it could obtain alternate
financing. There can be no assurance that Sun World would be able to
obtain any such financing on commercially reasonable terms or at all,
and consequently no assurance can be given that Sun World would be able
to purchase any of the Notes tendered pursuant to a Change of Control
Offer.
RECENT BANKRUPTCY; UNCERTAINTY OF EFFECT OF SUN WORLD ACQUISITION
Prior to its acquisition by Cadiz, Sun World was the debtor in a
bankruptcy case under Chapter 11 of the United States Bankruptcy Code.
Sun World confirmed a Plan of Reorganization under which Cadiz acquired
all of the stock of Sun World. Sun World's recent bankruptcy may limit
the willingness of certain customers, dealers or suppliers to deal with
Sun World and, accordingly, may have a material adverse effect on Sun
World's financial condition and results of operations.
Cadiz has a history of net losses (approximately $8.5 million for the
fiscal year ended March 31, 1996 and approximately $6.0 million for the
nine months ended December 31, 1996) and accumulated deficits
(approximately $54.4 million at March 31, 1996 and approximately
$61.1 million at December 31, 1996). See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." As the results of operations of Sun World prior to
September 14, 1996 have not been consolidated with those of Cadiz, such
prior operating history of Cadiz is not indicative of future trends;
rather, Cadiz' consolidated results of operations will be largely
dependent upon the results of operations of Sun World. See also "Risk
Factors- Risks Inherent in Agricultural Operations."
SEASONALITY
Sun World's agricultural operations are impacted by the general
seasonal trends that are characteristic of the agricultural industry.
Sun World has historically received the majority of its net income
during the second and third calendar quarters following the harvest and
sale of its table grape and stone fruit crops and due to this
concentrated activity, Sun World would therefore expect to incur a loss
in the first and fourth calendar quarters.
ENVIRONMENTAL MATTERS
In the normal course of its agricultural operations, Sun World
handles, stores, transports and dispenses products identified as
hazardous materials and which could subject Sun World to liability for
the cleanup of such hazardous substances or wastes or may adversely
affect the value of the real estate used as collateral for the Exchange
Notes. Further, no assurances can be given that such matters will not
have a material adverse effect on Sun World.
COMPETITION
The agricultural business is highly competitive. Sun World's
competitors include a limited number of large international food
companies, as well as a large number of smaller independent growers and
grower cooperatives. No single competitor has a dominant market share
in this industry due to the regionalized nature of these businesses.
Sun World utilizes brand recognition, product quality, harvesting in
favorable product windows, competitive pricing, effective customer
service and consumer marketing programs to enhance its position within
the highly competitive fresh food industry. Consumer and institutional
recognition of the Sun World trademark and related brands and the
association of these brands with high quality food products contribute
significantly to Sun World's ability to compete in the market for fresh
fruit and vegetables. See "Business--Narrative Description of Business--
Competition."
REGULATION
Certain areas of Sun World's operations are subject to varying
degrees of federal, state and local laws and regulations. Farm
operations such as those conducted on Sun World's properties are subject
to federal, state and local laws and regulations controlling the
discharge of materials into the environment or otherwise relating to the
protection of the environment. Environmental regulations may have a
materially adverse effect upon Sun World's operations.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend
thereon as a consequence of the issuance of the Old Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
In general, the Old Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state
securities laws. Sun World does not currently anticipate that it will
register the Old Notes under the Securities Act. Exchange Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by Holders thereof (other
than any such holder which is an "affiliate" of Sun World or any
guarantor within the meaning of Rule 405 under the Securities Act and
other than any broker-dealer who purchased Old Notes directly from Sun
World for resale pursuant to Rule 144A under the Securities Act or any
other available exemption under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the
Securities act provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such
Old Notes. Each broker-dealer that acquired Old Notes for its own
account as a result of market making or other trading activities and
that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of
Transmittal states that, by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented form time to time, may
be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other
trading activities. Sun World has agreed that it will make this
Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." However, to comply with the
securities laws of certain jurisdictions, if applicable, the Exchange
Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and is complied with. To the
extent that Old Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Old Notes
will be adversely affected.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are being offered to the holders of the Old Notes.
The Old Notes were offered and sold in April 1997 to a small number of
institutional investors and are eligible for trading in the National
Association of Securities Dealers, Inc.'s PORTAL market.
There is currently no established market for the Exchange Notes and
there can be no assurance that a public market will develop or, if such
a market develops, as to the liquidity of such market, nor can there be
any assurance as to the ability of the holders of the Exchange Notes to
sell their Exchange Notes or the price at which such holders would be
able to sell their Exchange Notes. The Exchange Notes will not be
listed on any securities exchange. If the Exchange Notes are traded
after their initial issuance, they may trade at a discount from their
initial offering price, depending upon prevailing interest rates, the
market for similar securities, the performance of Sun World and other
factors. The Initial Purchaser has advised Sun World that it intends to
make a market in the Exchange Notes after consummation of the Exchange
Offer, as permitted by applicable laws and regulations; however, the
Initial Purchaser is not obligated to do so and any such market-making
activity may be discontinued at any time without notice.
RISKS ASSOCIATED WITH BUSINESS OF CADIZ
ENVIRONMENTAL REGULATION AND RISK
Water leased or sold by Cadiz may be subject to regulation as to
quality by the United States Environmental Protection Agency (the "EPA")
acting pursuant to the Federal Safe Drinking Water Act (the "US Act").
In California, the responsibility for enforcing the US Act is delegated
to the California Department of Health Services (the "Health
Department") and to the Resources Board acting pursuant to the
California Safe Drinking Water Act (the "Cal Act"). The US Act provides
for the establishment of uniform minimum national water quality
standards, as well as governmental authority to specify the type of
treatment processes to be used for public drinking water. Moreover, the
EPA has an ongoing directive to issue regulations under the US Act and
to require disinfection of drinking water, specification of maximum
contaminant levels ("MCLS") and filtration of surface water supplies.
The Cal Act and the mandate of the Health Department are similar to the
US Act and the mandate of the EPA, and in many instances MCLS and other
requirements of the Health Department are more restrictive than those
promulgated by the EPA.
Both the EPA and the Health Department have promulgated regulations
and other pronouncements which require various testing and sampling of
water and inspections by producers which set MCLS for numerous
contaminants. Since Cadiz does not intend to sell water directly to the
consumers, these standards only affect the water agencies that may buy
or lease Cadiz' water. While environmental regulations do not directly
affect Cadiz, the regulations regarding the quality of water distributed
affects Cadiz' intended customers and may, therefore, depending on the
quality of Cadiz' water, impact the price and terms upon which Cadiz may
in future sell its water or water rights.
POTENTIAL ADVERSE EFFECT OF RAIL CYCLE PROJECT ON CADIZ
In November 1995, the San Bernardino County Board of Supervisors
certified the Environmental Impact Report/Environmental Impact Statement
("EIR/EIS") for, and approved a Conditional Use Permit for, the proposed
construction and operation of a landfill adjacent to Cadiz' non-Sun
World properties located near Cadiz, California (the "Rail Cycle
Project"). Cadiz contends that the Rail Cycle Project, as currently
designed, poses environmental risks to both agricultural operations at
Cadiz and to the groundwater basin underlying the Cadiz property. Cadiz
has vigorously opposed the Rail Cycle Project on a number of grounds and
has filed a lawsuit seeking, among other things, to set aside the
County's certification of the EIR/EIS and approval of the proposed
project. There can be no assurances as to the outcome of Cadiz'
lawsuit. Furthermore, the Board of Supervisors decided to require a
business license tax to be levied against the Rail Cycle Project which,
prior to adoption, requires approval by a majority vote in a general
election. Cadiz believes that the Rail Cycle Project, if constructed
and operated as proposed, will have a materially adverse impact upon
Cadiz' business. See "Business -Legal Proceedings." However,
management is unable to predict the magnitude of such impact, if any, at
this time.
DEVELOPMENT STAGE RISKS OF PROPOSED COMMERCIAL PRODUCTION AND TRANSFER
OF WATER
Cadiz anticipates that it will continue to incur operating losses
from its non-Sun World operations until such time as it is able to
receive significant revenues from the development of its water transfer
projects. Additional financing specifically in connection with Cadiz'
water projects will be required. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In addition
to the risk of delays associated with receiving all necessary regulatory
approvals and permits, Cadiz may also encounter unforeseen technical
difficulties which could result in construction delays and cost
increases with respect to Cadiz' water transfer projects. Cadiz is
continuing to negotiate the specific terms of water delivery and/or
storage arrangements with various California water agencies. However,
the outcome of these negotiations cannot be predicted with any degree of
certainty. There can be no assurances as to the amount of water which
will be able to deliver or store under such arrangements, nor as to the
price which Cadiz will be able to obtain. Furthermore, Cadiz has no
experience to date in the commercial production and delivery of water in
large amounts on a long-term basis. There is, therefore, a limited
historical basis on which to evaluate future performance of Cadiz'
proposed operations in this area.
COMPETITION
Cadiz faces competition for the acquisition, development and sale of
its properties from a number of competitors, some of which have
significantly greater resources than Cadiz. Cadiz may also face
competition in the development of water resources associated with its
properties. Since California has scarce water resources and an
increasing demand for available water, Cadiz believes that price and
reliability of delivery are the principal competitive factors affecting
transfers of water in California. In this regard, the ability of Cadiz
to price its water on a competitive basis will depend upon the cost of
constructing and maintaining delivery systems for its surplus water.
See "Business--Competition."
SIGNIFICANT LEVERAGE AND WORKING CAPITAL REQUIREMENTS
As a result of the Sun World Acquisition, Cadiz' capital structure is
significantly leveraged. On April 16, 1997, Cadiz completed a
restructuring of its indebtedness. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity
and Capital Resources." After giving effect to the restructuring, Cadiz
has approximately $10 million of indebtedness outstanding due April 30,
1998 (with provisions for extensions, if required), and Sun World has
$120 million of indebtedness outstanding (including $115,000,000 of Old
Notes) and $30 million of borrowing availability under the Revolving
Credit Agreement (as defined). Cadiz indebtedness is secured by
substantially all of Cadiz' non-Sun World assets. Sun World will depend
on the Revolving Credit Agreement to meet its significant seasonal
working capital needs in 1997. Management anticipates that the credit
available under the Revolving Credit Agreement will be sufficient to
meet Sun World's current seasonal requirements, although no assurances
can be given. See "Risk Factors--Seasonality" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The degree to which Cadiz' capital structure is leveraged could
impair both Cadiz' and Sun World's access to additional financing in the
future for working capital, capital expenditures, acquisitions, and
general or other corporate purposes. The ability of Cadiz and Sun World
to generate sufficient working capital and cash flow needed for ongoing
debt service and working capital needs depends on the future performance
of Cadiz and Sun World.
LIMITATIONS ON ACCESS TO SUN WORLD CASH FLOW AND DIVIDENDS
Cadiz' ability to receive distributions from Sun World's cash flow is
restricted by a series of covenants in the Indenture that allow for the
payment of dividends subject to meeting certain tests and ratios.
REGULATORY APPROVALS
As Cadiz proceeds with the development of its properties, including
related infrastructure, Cadiz will be required to satisfy various
regulatory authorities that it is in compliance with the laws,
regulations and policies enforced by such authorities. Groundwater
development, and the export of surplus groundwater for sale to single
entities such as public water agencies, are not subject to regulation by
existing statutes, other than general environmental statutes applicable
to all development projects. Management cannot predict with certainty
what requirements, if any, may be imposed by regulators upon future
development. In addition, the time and costs associated with obtaining
regulatory approvals for resource development are significant, and there
can be no assurance that Cadiz will receive desired approvals for future
development plans.
USE OF PROCEEDS
There will be no cash proceeds to Sun World resulting from the
Exchange Offer.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were originally issued and sold on April 16, 1997. The
offer and sale of the Old Notes was not required to be registered under
the Securities Act in reliance upon the exemption provided by Section
4(2) of the Securities Act. In connection with the sale of the Old
Notes, Sun World agreed to use its best efforts to cause to be filed
with the Commission a registration statement relating to an exchange
offer pursuant to which a new first mortgage of Sun World covered by
such registration statement and containing terms identical in all
material respects to the terms of the Old Notes would be offered in
exchange for Old Notes tendered at the option of the holders thereof,
or, if applicable interpretations of the staff of the Commission did not
permit Sun World to effect such an Exchange Offer, Sun World agreed to
file a shelf registration statement covering resales of the Old Notes
(the "Shelf Registration Statement") and use its best efforts to have
such Shelf Registration Statement become effective under the Securities
Act and to keep effective the Shelf Registration Statement for at least
two years after April 16, 1997.
The purpose of the Exchange Offer is to fulfill certain of Sun
World's obligations under the Registration Rights Agreement. Except as
otherwise expressly set forth herein, this Prospectus may not be used by
any holder of the Old Notes or any holder of the Exchange Notes to
satisfy the registration and prospectus delivery requirements under the
Securities Act that may apply in connection with any resale of such Old
Notes or Exchange Notes. See "The Exchange Offer--Terms of the
Exchange."
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of
Distribution."
TERMS OF THE EXCHANGE
Sun World hereby offers to exchange, subject to the conditions set
forth herein and in the Letter of Transmittal accompanying this
Prospectus, $1,000 in principal amount of Exchange Notes for each $1,000
in principal amount of Old Notes. The terms of the Exchange Notes are
identical in all material respects to the terms of the Old Notes for
which they may be exchanged pursuant to this Exchange Offer, except that
the Exchange Notes will generally be freely transferable by holders
thereof and will not be subject to any covenant regarding registration.
The Exchange Notes will evidence the same indebtedness as the Old Notes
and will be entitled to the benefits of the Indenture. See "Description
of Exchange Notes." The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes being tendered for
exchange.
Sun World has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether
the Exchange Notes issued pursuant to the Exchange Offer in exchange for
the Old Notes may be offered for sale, resold or otherwise transferred
by any holder without compliance with the registration and prospectus
delivery provisions of the Securities Act. Instead, based on an
interpretation by the staff of the Commission set forth in a series of
no-action letters issued to third parties (see Exxon Capital Holdings
Corp. (available April 13, 1989), Morgan Stanley & Co. Incorporated
(available June 5, 1991) and Shearman & Sterling (available July 2,
1993)), Sun World believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder of such Exchange Notes
(other than any such holder that is an "affiliate" of Sun World within
the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the
distribution of such Exchange Notes and neither such holder nor any
other such person is engaging in or intends to engage in the
distribution of such Exchange Notes. Since the Commission has not
considered the Exchange Offer in the context of a no-action letter,
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer. Any holder
who is an affiliate of Sun World or who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes
cannot rely on such interpretation by the staff of the Commission and
must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction. Each
holder must acknowledge that it has no arrangement or understanding with
any person to participate in the distribution of Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "The Exchange
Offer--Terms and Conditions of the Letter of Transmittal" and "Plan of
Distribution."
Interest on the Exchange Notes shall accrue from the last Interest
Payment Date on which interest was paid on the Old Notes so surrendered
or, if no interest has been paid on such Old Notes, from April 16, 1997.
Tendering holders of the Old Notes shall not be required to pay
brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of
the Old Notes pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENTS
The Exchange Offer shall expire on the Expiration Date. The term
"Expiration Date" means 5:00 p.m., New York City time, on ___________,
1997, unless Sun World in its sole discretion extends the period during
which the Exchange Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Exchange Offer,
as so extended by Sun World, shall expire. Sun World reserves the right
to extend the Exchange Offer at any time and from time to time by giving
oral or written notice to IBJ Schroder Bank & Trust Company (the
"Exchange Agent") and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service. During any extension of the Exchange
Offer, all Old Notes previously tendered and not withdrawn pursuant to
the Exchange Offer will remain subject to the Exchange Offer.
The term "Exchange Date" means the first business day following the
Expiration Date. Sun World expressly reserves the right to (i) terminate
the Exchange Offer and not accept for exchange any Old Notes if any of
the events set forth below under "Conditions to the Exchange Offer"
shall have occurred and shall not have been waived by Sun World and (ii)
amend the terms of the Exchange Offer in any manner which, in its good
faith judgment, is advantageous to the holders of the Old Notes, whether
before or after any tender of the Old Notes. Unless Sun World
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on
the Expiration Date, Sun World will exchange the Exchange Notes for the
Old Notes on the Exchange Date.
TENDER PROCEDURE
The tender to Sun World of Old Notes by a holder thereof pursuant to
one of the procedures set forth below and the acceptance thereof by Sun
World will constitute a binding agreement between such holder and Sun
World in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal. This Prospectus,
together with the Letter of Transmittal, will first be sent out on or
about ____________, 1997, to all holders of Old Notes known to Sun World
and the Exchange Agent.
A holder of Old Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be
deemed to include a facsimile thereof) and delivering the same, together
with the certificate or certificates representing the Old Notes being
tendered and any required signature guarantees and any other documents
required by the Letter of Transmittal, to the Exchange Agent at its
address set forth on the Letter of Transmittal on or prior to the
Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery
procedures described below.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange
therefor are to be issued (and any untendered Old Notes are to be
reissued) in the name of the registered holder (which term, for the
purposes described herein, shall include any participant in The
Depository Trust Company (also referred to as a "book-entry transfer
facility") whose name appears on a security listing as the owner of Old
Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by
written instruments of transfer in form satisfactory to Sun World and
duly executed by the registered holder, and the signature on the
endorsement or instrument of transfer must be guaranteed by a commercial
bank or trust company located or having an office, branch, agency or
correspondent in the United States, or by a member firm of a registered
national securities exchange or of the National Association of
Securities Dealers, Inc. (any of the foregoing hereinafter referred to
as an "Eligible Institution"). If the Exchange Notes and/or Old Notes
not exchanged are to be delivered to an address other than that of the
registered holder appearing on the note register for the Old Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
THE METHOD OF DELIVERY OF NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER
INSURANCE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF
THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR
BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR NOTES SHOULD
BE SENT TO SUN WORLD.
The Exchange Agent will make a request promptly after the date of
this Prospectus to establish accounts with respect to the Old Notes at
the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility
system may make book-entry delivery of Old Notes by causing such
book-entry transfer facility to transfer such Old Notes into the
Exchange Agent's account with respect to the Old Notes in accordance
with the book-entry transfer facility's procedures for such transfer.
Although delivery of Old Notes may be effected through book-entry
transfer into the Exchange Agent's accounts at the book-entry transfer
facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its
address set forth on the Letter of Transmittal on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such
procedures.
If a holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or Old Notes to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer
cannot be completed on a timely basis, a tender may be effected if the
Exchange Agent has received at its office listed on the Letter of
Transmittal on or prior to the Expiration Date a letter, telegram or
facsimile transmission (receipt confirmed by telephone and an original
delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in
which the Old Notes are registered and, if possible, the certificate
numbers of the Old Notes to be tendered, and stating that the tender is
being made thereby and guaranteeing that three New York Stock Exchange
trading days after the date of execution of such letter, telegram or
facsimile transmission by the Eligible Institution, the Old Notes, in
proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the book-entry
facility), will be delivered by such Eligible Institution together with
a properly completed and duly executed Letter of Transmittal (and any
other required documents). Unless Old Notes being tendered by the
above-described method are deposited with the Exchange Agent within the
time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), Sun
World may, at its option, reject the tender. Copies of a notice of
Guaranteed Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the Exchange
Agent.
A tender will be deemed to have been received as of the date when (i)
the tendering holder's properly completed and duly signed Letter of
Transmittal accompanied by the Old Notes (or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account
at the book-entry transfer facility) is received by the Exchange Agent,
or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible
Institution is received by the Exchange Agent. Issuances of Exchange
Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be
made only against deposit of the Letter of Transmittal (and any other
required documents) and the tendered Old Notes.
All questions as to the validity, form, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes will
be determined by Sun World, whose determination will be final and
binding. Sun World reserves the absolute right to reject any Old Notes
not properly tendered or the acceptance for exchange of which may, in
the opinion of Sun World's counsel, be unlawful. Sun World also
reserves the absolute right to waive any of the conditions of the
Exchange Offer or any defect or irregularity in the tender of any Old
Notes. Unless waived, any defects or irregularities in connection with
tenders of Old Notes for exchange must be cured within such reasonable
period of time as Sun World shall determine. None of Sun World, the
Exchange Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of
Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Old Notes to Sun World and
irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause the Old Notes to be
assigned, transferred and exchanged. The Transferor represents and
warrants that it has full power and authority to tender, exchange,
assign and transfer the Old Notes and to acquire Exchange Notes issuable
upon the exchange of such tendered Old Notes, and that, when the same
are accepted for exchange, Sun World will acquire good and unencumbered
title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse
claim. The Transferor also warrants that it will, upon request, execute
and deliver any additional documents deemed by the Exchange Agent or Sun
World to be necessary or desirable to complete the exchange, assignment
and transfer of tendered Old Notes or transfer ownership of such Old
Notes on the account books maintained by a book-entry transfer facility.
The Transferor further agrees that acceptance of any tendered Old Notes
by Sun World and the issuance of Exchange Notes in exchange therefor
shall constitute performance in full by Sun World of certain of its
obligations under the Registration Rights Agreement. All authority
conferred by the Transferor will survive the death or incapacity of the
Transferor and every obligation of the Transferor shall be binding upon
the heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
By tendering, each holder of Old Notes will represent to Sun World
that, among other things, (i) such Holder is not an "affiliate" of Sun
World within the meaning of Rule 405 under the Securities Act, (ii)
Exchange Old Notes to be acquired by such holder of Old Notes in
connection with the Exchange Offer are being acquired by such holder in
the ordinary course of business of such holder and (iii) such holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes. If the holder is a broker-dealer
that will receive Exchange Notes for such holder's own account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, such holder will be required to
acknowledge in the Letter of Transmittal that such holder will deliver a
prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, such holder
will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. See "Plan of Distribution." This
Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other
trading activities. Sun World will, for a period of 180 days after the
Expiration Date, make copies of this Prospectus available to any
broker-dealer for use in connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the
Exchange Agent at its address set forth on the Letter of Transmittal,
and with respect to a facsimile transmission, must be confirmed by
telephone and an original delivered by guaranteed overnight delivery.
Any such notice of withdrawal must specify the person named in the
Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers of Old Notes to be withdrawn, the principal amount
of Old Notes to be withdrawn, a statement that such holder is
withdrawing his election to have such Old Notes exchanged, and the name
of the registered holder of such Old Notes, and must be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to Sun World that the person
withdrawing the tender has succeeded to the beneficial ownership of the
Old Notes being withdrawn. The Exchange Agent will return the properly
withdrawn Old Notes promptly following receipt of notice of withdrawal.
If Old Notes have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of
the account at the book-entry transfer facility to be credited with the
withdrawn Old Notes or otherwise comply with the book-entry transfer
procedure. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by Sun World and such
determination will be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes
which have been tendered for exchange but which are not exchanged for
any reason will be returned to the holder thereof without cost to such
holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the book-entry transfer facility
pursuant to the book-entry transfer procedures described above, such Old
Notes will be credited to an account with such book-entry transfer
facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "The Exchange Offer--Tender Procedure" at any
time on or prior to the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the satisfaction or waiver, prior to the Expiration Date, of all
the terms and conditions of the Exchange Offer, the acceptance for
exchange of Old Notes validly tendered and not withdrawn and issuance of
the Exchange Notes will be made on the Exchange Date. For the purposes
of the Exchange Offer, Sun World shall be deemed to have accepted for
exchange validly tendered Old Notes when, as and if Sun World has given
oral or written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Old
Notes for the purposes of receiving Exchange Notes from Sun World and
causing the Old Notes to be assigned, transferred and exchanged. Upon
the terms and subject to the conditions of the Exchange Offer, delivery
of Exchange Notes to be issued in exchange for accepted Old Notes will
be made by the Exchange Agent promptly after acceptance of the tendered
Old Notes. Tendered Old Notes not accepted for exchange by Sun World
will be returned without expense to the tendering holders promptly
following the Expiration Date or, if Sun World terminated the Exchange
Offer prior to the Expiration Date, promptly after the Exchange Offer is
so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any
extension of the Exchange Offer, Sun World will not be required to issue
Exchange Notes in respect of any properly tendered Old Notes not
previously accepted and may terminate the Exchange Offer (by oral or
written notice to the Exchange Agent and by timely public announcement
communicated, unless otherwise required by applicable law or regulation,
by making a release to the Dow Jones News Service), or, at its option,
modify or otherwise amend the Exchange Offer, if any of the following
events occur:
(a) any law, rule or regulation or applicable interpretations of the
staff of the Commission which, in the good faith determination of Sun
World, do not permit Sun World to effect the Exchange Offer; or
(b) there shall occur a change in the current interpretation by the staff
of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes to be offered for resale,
resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of Sun World within the meaning of Rule
405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that
such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangements with any person to
participate in the distribution of such Exchange Notes; or
(c) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any
limitation by any governmental agency or authority which may adversely
affect the ability of Sun World to complete the transactions
contemplated by the Exchange Offer, (iii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States or any limitation by any governmental agency or authority
which adversely affects the extension of credit or (iv) a commencement
of a war, armed hostilities or other similar international calamity
directly or indirectly involving the United States, or, in the case of
any of the foregoing existing at the time of the commencement of the
Exchange Offer, a material acceleration or worsening thereof; or
(d) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of Sun World that is or may be adverse to Sun World, or Sun
World shall have become aware of facts that have or may have adverse
significance with respect to the value of the Old Notes or the Exchange
Notes; which, in the reasonable judgment of Sun World in any case, and
regardless of the circumstances (including any action by Sun World)
giving rise to any such condition, makes it inadvisable to proceed with
the Exchange Offer and/or with such acceptance for exchange or with such
exchange.
Sun World expressly reserves the right to terminate the Exchange
Offer and not accept for exchange any Old Notes upon the occurrence of
any of the foregoing conditions (which represent all of the material
conditions to the acceptance by Sun World of properly tendered Old
Notes). In addition, Sun World may amend the Exchange Offer at any time
prior to the Expiration Date if any of the conditions set forth above
occur. Moreover, regardless of whether any of such conditions has
occurred, Sun World may amend the Exchange Offer in any manner which, in
its good faith judgment, is advantageous to holders of the Old Notes.
The foregoing conditions are for the sole benefit of Sun World and
may be waived by Sun World, in whole or in part, in the reasonable
judgment of Sun World. Any determination made by Sun World concerning an
event, development or circumstance described or referred to above will
be final and binding on all parties.
Sun World is not aware of the existence of any of the foregoing
events.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed
to the Exchange Agent at its address set forth on the Letter of
Transmittal. IBJ Schroder Bank & Trust Company also acts as Trustee and
Registrar (the "Registrar") under the Indenture.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX
NUMBER OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL
NOT CONSTITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; EXPENSES
Sun World has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to
brokers, dealers or others for soliciting acceptances of the Exchange
Offer. Sun World will, however, pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for reasonable
out-of-pocket expenses in connection therewith. Sun World will also pay
brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies
of this and related documents to the beneficial owners of the Old Notes
and in handling or forwarding tenders for their customers.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by
Sun World. Neither the delivery of this Prospectus nor any exchange
made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of Sun World since the
respective dates as of which information is given herein. The Exchange
Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Old Notes in any jurisdiction in which the making
of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, Sun World may,
at its discretion, take such action as it may deem necessary to make the
Exchange Offer in any such jurisdiction and extend the Exchange Offer to
holders of Old Notes in such jurisdiction. In any jurisdiction in which
the securities laws or blue sky laws of which require the Exchange Offer
to be made by a licensed broker or dealer, the Exchange Offer is being
made on behalf of Sun World by one or more registered brokers or dealers
which are licensed under the laws of such jurisdiction.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders
who instruct Sun World to register Exchange Notes in the name of, or
request that Old Notes not tendered or not accepted in the Exchange
Offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer
tax thereon.
EFFECTS OF TENDERING ON HOLDERS OF OLD NOTES
Participation in the Exchange Offer is voluntary, and holders of Old
Notes should carefully consider whether to participate. Holders of the
Old Notes are urged to consult their financial and tax advisors in
making their own decisions on which action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange
Offer, Sun World will have fulfilled certain covenants contained in the
Registration Rights Agreement. Holders of Old Notes who do not tender
their Old Notes in the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights, and limitations applicable
thereto, under the Indenture, except for such rights under the
Registration Rights Agreement that by their terms terminate or cease to
have further effectiveness as a result of the making of this Exchange
Offer. See "Description of Exchange Notes."
Sun World may in the future seek to acquire untendered Old Notes in
open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. Sun World has no present plan to acquire
any Old Notes which are not tendered in the Exchange Offer.
CONSEQUENCE OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend
thereon as a consequence of the offer or sale of the Old Notes pursuant
to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an
exception from, or in a transaction not subject to, the Securities Act
and applicable states securities laws. Sun World does not currently
anticipate that it will register the Old Notes under the Securities Act.
See "Risk Factors--Consequences of Failure to Exchange."
CAPITALIZATION
The following table sets forth the consolidated capitalization of
Cadiz (i) as of March 31, 1997 and (ii) the capitalization of Cadiz at
that date after giving effect to the Offering and Related Transactions
and the application of the net proceeds therefrom. This table should be
read in conjunction with the Consolidated Financial Statements of Sun
World and Cadiz, including the related notes thereto, and "Unaudited Pro
Forma Condensed Consolidated Financial Statements" included elsewhere in
this Prospectus.
As of March 31, 1997
----------------------
Historical As Adjusted
---------- -----------
($ in millions)
Short-term debt:
Revolving Credit Agreement. . . . . $ 0.0 $ 10.3
Long-term debt:
First Mortgage Notes. . . . . . . . 0.0 115.0
John Hancock Note . . . . . . . . . 75.3 0.0
Credit Agricole Note. . . . . . . . 52.3 0.0
Rabobank Note at Cadiz. . . . . . . 9.1 0.0
Ansbacher Note at Cadiz . . . . . . 9.7 9.7
Other senior debt at Sun World. . . 4.5 4.5
Total debt. . . . . . . . . . . . . . 150.9 $ 139.5
Redeemable preferred stock,
preferred stock, common
stock and other stockholders'
equity . . . . . . . . . . . . . . 48.0 48.0
Total capitalization. . . . . . . . . $ 198.9 $ 187.5
Ratio of debt to total
capitalization . . . . . . . . . . 75.9% 74.4%
CADIZ LAND COMPANY, INC.
Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma statement of operations for the nine
months ended December 31, 1996 gives effect to the following transactions
as if they had occurred on April 1, 1996: (i) the Sun World Acquisition;
and (ii) the Offering and the Related Transactions.
The pro forma adjustments include, among others, decreased interest expense
as a result of the Offering and the Related Transactions and increased
depreciation as a result of the purchase price allocation. The pro forma
adjustments do not reflect the elimination of charges directly attributable
to the Chapter 11 bankruptcy proceedings which are not expected to recur
subsequent to the emergence from bankruptcy effective September 13, 1996.
See footnote (h) for a more detailed explanation of charges directly
attributable to Sun World's emergence from bankruptcy.
The pro forma combined financial information should be read in conjunction
with the historical financial statements of Cadiz, for the nine months
ended December 31, 1996, which are included elsewhere herein, as well as
the historical financial statements of Sun World for the period January 1,
1996 through September 13, 1996 which are included elsewhere herein, from
which the pro forma combined statement of operations has been derived.
The following unaudited pro forma combined Statement of Operations is
presented for informational purposes only and is not necessarily indicative
of the results of operations that would have occurred if the acquisition
had been consummated as of April 1, 1996, nor is it necessarily indicative
of the future operating results of the Company.
CADIZ LAND COMPANY, INC.
Pro Forma Combined Statement of Operations for the nine months ended
December 31, 1996
(In thousands except per share data)
(Unaudited)
Pro
Sun World Forma
Cadiz Interna- Adjust- Pro
Land tional ments Pro Offering Forma
Company Inc. Increase Forma Adjust- as
(a) (b) (Decrease) Combined ments Adjusted
-------- -------- -------- --------- -------- --------
Revenues $ 23,780 $ 74,230 $ -0- $ 98,010 $ -0- $ 98,010
-------- -------- --------- -------- ------- -------
Costs and
expenses:
Cost of
sales 17,725 52,596 (148)(c) 70,173 -0- 70,173
Resource
development 1,133 -0- -0- 1,133 -0- 1,133
Landfill
prevention
activities 394 -0- -0- 394 -0- 394
General and
administra-
tive 4,924 3,358 (504)(c) 7,778 -0- 7,778
Depreciation
and amorti-
zation 1,039 4,082 947 (d) 6,068 -0- 6,068
------- -------- ------- ------ ------- ------
Total costs
and
expenses 25,215 60,036 295 85,546 -0- 85,546
Operating
income
(loss) (1,435) 14,194 (295) 12,464 -0- 12,464
Interest
expense,
net 5,203 7,323 -0- 12,526 (1,340) 11,186
Reorganization
items -0- 4,796 -0- 4,796 -0- 4,796
------- -------- -------- ------- ----- ------
Net income
(loss)
before taxes(6,638) 2,075 (295) (4,858) (1,340) (3,518)
Income tax
benefit (641) -0- -0- (641) -0- (641)
-------- ------- -------- ------- ------ ------
Net income
(loss) (5,997) 2,075 295 (4,217)(h) (1,340) (2,877)(h)
Less:
Preferred
stock
dividends (674) -0- (1,154)(f) (1,828) -0- (1,828)
Imputed
dividend
on
preferred
stock (2,451) -0- (272)(g) (2,723) -0- (2,723)
--------- ------ -------- ------- ------ -------
Net income
(loss)
applicable
to
common
stock $ (9,122) $ 2,075 $ (1,721) $(8,768) $ (1,340) $(7,428)
======== ======= ======== ========= ========= ========
Net loss per
common
share $ (.44) $ (.41) $ (.34)
======= ========= ========
Weighted
average
common
shares
out-
standing 20,500 21,600 21,600
======= ========= ========
The unaudited pro forma combined statement of operations has been adjusted
by the following to reflect the acquisition of Sun World by Cadiz as if it
were effective at April 1, 1996:
(a) Derived from the consolidated financial statements of the Company
for the period April 1, 1996 to December 31, 1996, which
statements have been audited by Price Waterhouse LLP, independent
accountants, as indicated in their report included elsewhere
herein and which include, on a consolidated basis, the results of
operations for Cadiz for the period April 1, 1996 to December 31,
1996 and those of Sun World for the period September 14, 1996
(the date subsequent to the Sun World acquisition) to December
31, 1996.
(b) The activity for Sun World (pre-acquisition) for the period April
1, 1996 through September 13, 1996 was derived by subtracting the
activity of Sun World for the period January 1, 1996 through
March 31, 1996, which period was unaudited, from the consolidated
financial statements of Sun World for the period January 1, 1996
through September 13, 1996 (the date of the Sun World
acquisition), which statements have been audited by Price
Waterhouse LLP, independent accountants, as indicated in their
report included elsewhere herein.
(c) Represents reductions of costs and expenses resulting from a
number of initiatives including elimination of overstaffing and
redundant staffing throughout Sun World and reduction of labor
and rent made possible by the closing of the Sun World
administrative headquarters and consolidating these operations
into the Kimberlina packing facility. Liabilities related to
these employee terminations and the relocation have been accrued
in connection with the Sun World acquisition pursuant to the
Financial Accounting Standards Board Emerging Issues Task Force
Consensus No. 95-3, "Recognition of Liabilities in Connection
with a Business Combination."
(d) Reflects incremental depreciation expense resulting from an
increased basis of property, plant and equipment pursuant to the
purchase method of accounting. The total basis of property,
plant and equipment was increased by approximately $33 million
which will be depreciated over a period of 10 to 45 years for
land improvements and buildings and 3 to 25 years for machinery
and equipment.
(e) Interest expense based on the pro forma capitalization of the
Company is summarized in the table below:
Nine months
December 31,
1996
-----------
(In thousands)
Sun World First Mortgage Notes(1) . . . . . . $ 9,703
Revolving Credit Agreement(2) . . . . . . . . 825
ING Notes(3). . . . . . . . . . . . . . . . . 564
Other secured debt(4) . . . . . . . . . . . . 365
Commitment fees(5). . . . . . . . . . . . . . 75
--------
Total interest expense. . . . . . . . . . . . . 11,532
Less historical interest on debt. . . . . . . . (13,408)
------
Decrease in cash interest expense . . . . . . . (1,876)
Amortization of deferred financing costs(6) . . 536
--------
Total decrease in interest expense. . . . . . . $ (1,340)
========
- ----------------------
(1) Based upon a fixed interest rate of 11.25%.
(2) Assumes an interest rate of 8.25% on drawn balance. The pro
forma average balance drawn-down was $10.0 million. A change
of 0.125% in the interest rate would change interest expense
by $12,500 for the nine months ended December 31, 1996.
(3) Assumes an interest rate of 7.75%. A change of 0.125% in the
interest rate would change interest expense by $9,100 for the
nine months ended December 31, 1996.
(4) Based upon fixed interest rates ranging from 7.50% to 10.00%.
(5) Represents a commitment fee of 0.5% applied to the $20.0
million unused portion of the Revolving Credit Agreement.
(6) Deferred financing costs are amortized over the life of the
related debt, seven years for the First Mortgage Notes.
(f) Represents 6% preferred stock dividends for the nine month period.
(g) Assumes issuances of Series B and Series C Preferred Stock at
April 1, 1996.
(h) Includes for the nine months ended December 31, 1996, charges
incurred by Sun World totaling $4.8 million which were directly
attributable to the Chapter 11 bankruptcy proceedings and are
non-recurring in nature. Exclusion of the non-recurring charges
would have resulted in a pro forma net loss per share of $.12 for
the nine months ended December 31, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
On September 13, 1996, Cadiz acquired all of the outstanding capital
stock of Sun World. The Sun World Acquisition was accounted for on a
consolidated basis using the purchase method of accounting. The Consolidated
Financial Statements of Cadiz include Sun World from the date of acquisition.
In addition, Cadiz has changed its fiscal year end from March 31 to December
31 in order to align its year end with that of Sun World.
RESULTS OF OPERATIONS
The financial statements set forth herein for the first calendar quarter
ending March 31, 1997, reflect the results of operations for both the Company
and Sun World for the period January 1, 1997 through March 31, 1997. Cadiz'
results of operations for the nine months ended December 31, 1996 include the
results of operations for Sun World for the period September 14, 1996 through
December 31, 1996. The results of operations of Sun World prior to the
September 13, 1996 acquisition date have not been consolidated with those of
the Company. As a result of the foregoing and the change of Cadiz' fiscal
year end, direct comparisons of the Company's consolidated results of
operations for (i) the three months ended March 31, 1997 with results for the
three months ended March 31, 1996 and (ii) the nine months ended December
31,1996 with results for the fiscal year ended March 31, 1996 will not, in
the view of management of the Company, prove meaningful. Instead, a summary
of the Sun World elements which management of the Company believes essential
to an analysis of the results of operations for such periods is presented
below. For purposes of this summary, the term Sun World will be used, when
the context so requires, with respect to the operations and activities of the
Company's Sun World subsidiary, and the term Cadiz will be used, when the
context so requires, with respect to those operations and activities of the
Company not involving Sun World.
The Company's net income or loss in future fiscal periods will be
largely reflective of the operations of Sun World. Sun World conducts its
operations through four operating divisions: farming, packing, marketing and
proprietary product development. Net income from farming operations varies
from year to year primarily due to yield and pricing fluctuations which can
be significantly influenced by weather conditions, and are, therefore,
generally subject to greater annual variation than Sun World's other
divisions. However, the geographic distribution of Sun World's farming
operations and the diversity of its crop mix makes it unlikely that adverse
weather conditions would affect all of Sun World's properties or all of its
crops in any single year. Nevertheless, as net profit from Sun World's
packing, market operations and proprietary product development tends to be
more consistent from year to year than net profit from Sun World's farming
operations, Sun World is seeking to expand volume in the packing and
marketing areas by increasing the number of growers with which Sun World
maintains packing and marketing arrangements. Sun World is also actively
exploring various domestic and international opportunities to license
selected proprietary fruit varieties.
The following discussion contains trend analysis and other forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results could differ materially from those projected in the
forward-looking statements throughout this document.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996
Sun World's agricultural operations are impacted by the general seasonal
trends that are characteristic of the agricultural industry. Sun World has
historically received the majority of its net income during the second and
third quarters following the harvest and sale of its table grape and tree
fruit crops. Due to this concentrated activity, Sun World has, therefore,
historically incurred a loss with respect to its agricultural operations in
the first and fourth calendar quarters.
The table below sets forth, for the periods indicated, the results of
operations for Sun World's four main operating divisions (before elimination
of any interdivisional charges) as well as the categories of costs and
expenses incurred by Sun World which are not included within the divisional
results (in thousands):
Three Months Ended
March 31,
----------
1997 1996
----- ------
Divisional net income (loss):
Farming $ 106 $ (542)
Packing (522) -0-
Marketing (203) -0-
Proprietary product development 241 -0-
------- -------
(378) (542)
Resource development expense 75 109
Landfill prevention expense 204 1,248
General and administrative expense 2,451 519
Depreciation expense 475 211
Amortization 58 59
Other (income) expense (82) -0-
Interest expense 3,837 453
------- -------
Net loss $ (7,396) $ (3,141)
The consolidated net loss for the quarter ended March 31, 1997 was
$7.4 million compared to a loss of $3.1 million for the same period last
year. Since farming, packing and marketing operations are highly seasonal
in nature, Sun World does not view the first quarter net loss as indicative
of results to be expected during the remainder of the current year.
FARMING OPERATIONS. Sun World's agricultural properties, which total
approximately 18,900 acres, are primarily dedicated to producing permanent
commercial crops and, to a lesser extent, row crops. Net income from
farming operations, totaling $0.1 million for the quarter ended March 31,
1997, primarily resulted from the harvest of carrots and artichokes under
third party arrangements, lemon operations at the Cadiz ranch, and sub
lease income from the Cadiz vineyard. For the quarter ended March 31,
1996, the $0.5 million loss from farming operations resulted primarily from
the Cadiz citrus operations.
PACKING OPERATIONS. Sun World experienced a net loss of $0.5 million
at Sun World's four packing and handling facilities during the quarter
ended March 31, 1997. During the quarter, Sun World packed 390,000 units
and handled 457,000 units which primarily consisted of citrus products
packed for third party growers in the Coachella Valley. Packing and
handling revenue for these operations of $1.6 million was more than offset
by $2.1 million of expenses largely due to the fixed infrastructure costs
associated with Sun World's four packing facilities. Packing operations
generally reflect a loss during the first quarter of the year as less than
10% of the annual volume is packed or handled during the quarter. As all
of Sun World's packing operations are conducted through Sun World, no such
operations were conducted by Sun World during the 1996 period.
MARKETING OPERATIONS. Sun World's marketing operations include
selling, merchandising and promoting Sun World grown products, as well as
providing these services for third party growers. During the three months
ended March 31, 1997, a total of 872,000 units were sold consisting
primarily of citrus from domestic third party growers, sweet red and yellow
peppers through a Mexican joint venture and Chilean grapes and tree fruit.
These unit sales resulted in marketing revenue of $0.7 million. Marketing
expenses totaled $0.9 million for the quarter ended March 31, 1997
resulting in a net loss from marketing operations of $0.2 million. Similar
to the packing operations, marketing operations generally reflect a loss
during the first quarter of the year as less than 10% of the annual volume
of units are sold occur during the quarter. As all of Sun World's
marketing operations are conducted through Sun World, no such operations
were conducted by Sun World during the 1996 period.
PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a long history of
product innovation, and its research and development center maintains a
fruit breeding program that has introduced dozens of proprietary fruit
varieties during the past five years. In addition, Sun World has a 50%
interest in American Sunmelon, a partnership engaged in proprietary
development, production and marketing of seedless watermelon seed. During
the three months ended March 31, 1997, net income from proprietary product
development was $0.2 million consisting of Sun World's share of partnership
income totaling $0.4 million offset by $0.2 million in research and
development expenses. As proprietary product development is conducted
solely through Sun World, no such activity was conducted by Sun World
during the 1996 period.
RESOURCE DEVELOPMENT. Expenses recorded in this category consist of
costs incurred in the land and water resource development of Cadiz'
landholdings. These costs include the operating costs associated with
Cadiz' continual evaluation of additional potential land acquisition sites,
such as overhead, legal and travel, as well as the costs associated with
the development and transfer of surplus water from the Cadiz and Piute
properties. Resource development expenses totaled $0.1 million for the
three months ended March 31, 1997 and 1996.
LANDFILL PREVENTION ACTIVITIES. Cadiz is engaged in opposition to the
proposed construction and operation of a landfill to be located adjacent to
its Cadiz Valley property, and has filed a lawsuit seeking, among other
things, to set aside regulatory approvals for the landfill project. During
the three months ended March 31, 1997, expenses incurred in connection with
activities in opposition to the project, such as litigation costs and
professional fees and expenses totaled $0.2 million as compared to $1.2
million during the 1996 period. The decrease is due to the fact that the
lawsuit is in the discovery phase; however, management believes expenses in
the future will increase since Cadiz plans to vigorously oppose the
proposed project.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses during both the three months ended March 31, 1997 and the three
months ended March 31, 1996 consisted primarily of corporate operating
expenses, professional fees and salaries. These expenses increased by $2.0
million during the three months ended March 31, 1997 as compared to the
1996 period primarily due to the addition of Sun World administrative costs
in the amount of $1.7 million for the three months ended March 31, 1997.
DEPRECIATION EXPENSE. Depreciation expense for the quarter ended
March 31, 1997 totaled $0.5 million compared to $0.2 million for the same
period in 1996. The increase is attributable to depreciation relating to
the acquired Sun World assets.
INTEREST EXPENSE. Net interest expense totaled $3.8 million during
the three months ended March 31, 1997, compared to $0.5 million during the
same period in 1996. The following table summarizes the components of net
interest expense for the two periods (in thousands):
Three Months Ended
March 31,
---------
1997 1996
-------- ---------
Interest on outstanding
debt - Sun World $ 3,263 $ -0-
Interest on outstanding debt - Cadiz 278 256
Amortization of financing costs 687 224
Interest income (391) (27)
-------- -------
$ 3,837 $ 453
======== =======
The increase in interest on outstanding debt during the 1997 period is
attributable to the long-term debt acquired as part of the Sun World
acquisition and an increased level of borrowing by Cadiz. Financing costs,
which include legal fees and extension fees, are amortized over the life of
the debt agreement.
NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31,
1996
During the nine months ended December 31, 1996, Cadiz incurred a net
loss of $6.0 million compared to a loss of $8.5 million during the fiscal
year ended March 31, 1996. The following table summarizes the net loss for
both periods (dollars in thousands):
Nine Months Fiscal Year
Ended Ended
December 31, March 31,
1996 1996
------ ------
Revenues $ 23,780 $ 1,441
-------- --------
Costs and expenses:
Cost of sales 17,725 1,649
Resource development 1,133 1,680
Landfill prevention activities 394 1,919
General and administrative 4,924 1,826
Depreciation 864 833
Amortization 175 234
Interest expense, net 5,203 1,787
Income tax benefit (641) -0-
-------- --------
Net loss $ (5,997) $ (8,487)
======== ========
The operations of Sun World for the period September 14 through
December 31, 1996 are included above; however, due to the seasonality of
the operations of Sun World, this is not indicative of the results of
operations should a full fiscal year of activity be included.
REVENUES. During the nine months ended December 31, 1996, Cadiz
recorded revenues of $23.8 million, of which $22.5 million resulted from
Sun World operations, all of which were recognized from September 14, 1996
(the date subsequent to the Sun World Acquisition) through December 31,
1996. The balance of Cadiz' revenues were recognized from the development
activities of Cadiz, consisting primarily of gross crop proceeds from the
Cadiz ranch.
COST OF SALES. Cost of sales for the nine months ended December 31,
1996 of $17.7 million consisted of all direct costs and an allocation of
indirect costs related to revenue generated by Cadiz, $16.4 million of
which related to Sun World activities, for the period September 14, 1996
through December 31, 1996, as compared to $1.7 million for Cadiz during the
fiscal year ended March 31, 1996.
RESOURCE DEVELOPMENT. Expenses recorded in this category consist of
costs incurred in the land and water resource development of Cadiz'
landholdings. These costs include the operating costs associated with Sun
World's continual evaluation of additional potential land acquisition
sites, such as overhead, legal and travel, as well as the costs associated
with the development and transfer of surplus water from Cadiz and Piute
properties. See "Business--Narrative Description of Business". In
relation to the Cadiz water transfer project, Cadiz expects completion of
the required EIS/EIR process within 18 months and completion of the
necessary delivery systems within several months thereafter, although no
assurances can be made.
Resource development expenses, which consist of costs incurred in the
land and water development of Cadiz' landholdings, totaled $1.1 million for
the nine months ended December 31, 1996 as compared to $1.7 million for the
fiscal year ending March 31, 1996. The difference is primarily
attributable to the difference in the length of the periods reported (nine
months versus twelve months).
LANDFILL PREVENTION ACTIVITIES. Cadiz is engaged in opposition to the
proposed construction and operation of a landfill proposed to be located
adjacent to its Cadiz Valley property, and has filed a lawsuit seeking,
among other things, to set aside regulatory approvals for the landfill
project. See "Risk Factors--Risks Associated with Business of Cadiz--
Potential Adverse Effect of Rail Cycle Project on Cadiz" and "Legal
Proceedings." During the nine months ended December 31, 1996, expenses
incurred in connection with activities in opposition to the project, such
as litigation costs and professional fees and expenses totaled $0.4 million
as compared to $1.9 million during the fiscal year ending March 31, 1996.
The decrease is due to the fact that the lawsuit is in the discovery phase;
however, management believes expenses in the future will increase since
Cadiz plans to vigorously oppose the proposed project.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
during both the nine months ended December 31, 1996 and the fiscal year
ended March 31, 1996 consisted primarily of corporate operating expenses,
professional fees and salaries. These expenses increased by $3.1 million
during the nine months ended December 31, 1996 as compared to the fiscal
year ending March 31, 1996 primarily as a result of the Sun World
Acquisition and the addition of corporate and administrative costs related
to Sun World in the amount of $2.5 million for the period September 14,
1996 through December 31, 1996. During the period ended December 31, 1996,
Cadiz was awarded and received approximately $0.4 million as final payment
toward full reimbursement of its legal fees and costs incurred in defending
a legal action which was netted against the related legal fees incurred.
DEPRECIATION. Depreciation totaled $0.9 million for the nine months
ended December 31, 1996 as compared to $0.8 million for the fiscal year
ended March 31, 1996. The increase is primarily attributable to
depreciation for the three and one half month period from September 14,
1996 to December 31, 1996 related to the assets of Sun World which were
acquired.
INTEREST EXPENSE. Net interest expense totaled $5.2 million during
the nine months ended December 31, 1996 as compared to $1.8 million during
the fiscal year ended March 31, 1996. The following table summarizes the
components of net interest expense for the nine months ended December 31,
1996 and the fiscal year ended March 31, 1996 (dollars in thousands):
Nine Months Fiscal Year
Ended Ended
December 31, March 31,
1996 1996
------ -------
Interest expense on outstanding debt $ 5,193 $ 1,000
Amortization of financing costs 746 841
Interest income (736) (54)
------- -------
$ 5,203 $ 1,787
======= =======
The increase in interest expense on outstanding debt during the period
ended December 31, 1996 is attributable to the long-term debt acquired as
part of the Sun World Acquisition. Interest income increased due to the
average Sun World cash balance of over $30 million maintained during the
fourth calendar quarter of 1996.
INCOME TAX BENEFIT. An income tax benefit of $0.6 million arose
during the nine months ended December 31, 1996 as a result of utilization
of net operating loss carryforwards.
YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995
During the year ended March 31, 1996, Cadiz incurred a net loss of
$8.5 million as compared to a net loss of $4.6 million during the previous
year. The following table summarizes the net loss for both periods (in
thousands):
March 31, March 31,
1996 1995
------ ------
Revenues $ 1,441 $ 543
------- ------
Costs and expenses:
Cost of sales 1,649 506
Resource development 1,680 1,039
Landfill prevention activities 1,919 -0-
General and administrative 1,826 1,525
Depreciation 833 737
Amortization 234 234
Interest expense, net 1,787 1,208
Gain on debt settlement -0- (115)
------ -------
Net Loss $ 8,487 $ 4,591
======= ========
REVENUES. Revenues were recognized from Cadiz' resource development
as a result of its entering into joint venture or leasing arrangements with
third party growers for the farming of crops on its properties. A
combination of gross crop proceeds from the citrus orchard and both rent
and percentage of gross crop proceeds from the vineyard totaled $0.6
million and $0.5 million for the years ended March 31, 1996 and 1995,
respectively. Gross crop proceeds from the additional acreage developed to
row crops in the latter part of fiscal year 1995 totaled $0.8 million for
the year ended March 31, 1996, primarily from the harvest of honeydew
melons and seedless watermelon. Revenue from the produce brokerage
operation which commenced in May 1995 totaled $82,000 during the 1996
fiscal year.
COST OF SALES. Cost of sales increased by $1.1 million during the
year ended March 31, 1996 from the prior year primarily due to Cadiz' share
of joint venture production costs associated with the development of an
additional 240 acres to row crops at the beginning of the 1996 fiscal year.
RESOURCE DEVELOPMENT. Resource development expenses totaled $1.7
million for the year ended March 31, 1996 as compared to $1.0 million for
the year ended March 31, 1995. As activities were taking place on multiple
water projects during the 1996 fiscal year, costs associated with
development increased as compared to the prior year when Cadiz was involved
in only the Cadiz water transfer project. In addition, Cadiz developed an
additional 240 acres to row crops at the beginning of the 1996 fiscal year
whereby Cadiz was able to attract third party growers. Cadiz incurred an
increase in costs associated with management of the Cadiz ranch with
respect to this additional acreage. Also included in resource development
are costs associated with evaluation of the potential acquisition of
additional sites.
LANDFILL PREVENTION ACTIVITIES. During the year ended March 31,
1996, expenses incurred in connection with activities in opposition to the
Rail Cycle project totaled $1.9 million, including litigation costs,
professional fees and expenses, and contributions in support of a local
coalition which actively opposed the Rail Cycle Project.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
during both periods consisted primarily of corporate operating expenses,
professional fees and salaries. These expenses increased by $0.3 million
during the year ended March 31, 1996 as compared to the prior year.
During the 1996 fiscal year Cadiz was engaged in, among other things,
the Sun World Acquisition; negotiations and/or discussions with prospective
purchasers regarding several of Cadiz' water transfer projects; management
of Cadiz' permanent crops; and production of additional acreage to row
crops in its farming operation. In the prior year, by contrast, activities
pertained to evaluation of only one water transfer project and management
of Cadiz' permanent crops. As a result of this increased level of
activity, Cadiz has incurred a corresponding increase in costs related to
overhead, professional fees, salaries and travel, among others.
DEPRECIATION. Depreciation totaled $0.8 million for the year ended
March 31, 1996 as compared to $0.7 million for the prior year. The
increase of $96,000 was primarily due to a full year of depreciation on
infrastructure improvements at the Cadiz property, including the
development of additional irrigation wells which were completed during the
fourth quarter of fiscal 1995.
INTEREST EXPENSE. Net interest expense totaled $1.8 million during
the year ended March 31, 1996 as compared to $1.2 million during the same
period in 1995. The following table summarizes the components of net
interest expense for the years ended March 31, 1996 and 1995 (in
thousands):
March 31, March 31,
1996 1995
----- -----
Interest expense on outstanding debt $ 1,000 $ 842
Amortization of financing costs 841 479
Interest income (54) (113)
------- -------
Net interest expense $ 1,787 $ 1,208
======= =======
Interest expense on outstanding debt increased during the year as a
result of an increased level of borrowing and due to slightly higher
interest rates. Amortization of financing costs increased as a result of
debt issue costs incurred in connection with Cadiz' March 1995 loan
facility. Such costs are amortized over the life of the debt arrangement,
which matures on January 31, 1997.
GAIN ON DEBT SETTLEMENT. In June 1994, Cadiz retired a note payable
in the amount of $0.3 million to an individual at a discounted amount
resulting in an extraordinary gain on settlement of debt of $0.1 million.
The note, which originated in 1985, was scheduled to be retired with a
balloon payment in December 1996.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES. Pursuant to
its business strategy, Cadiz has utilized its working capital primarily for
development purposes; that is, for purposes designed to increase the long-
term value of its properties. As Cadiz has not received significant
revenues from its development operations to date, Cadiz has been required
to obtain financing to bridge the gap between the time development expenses
are incurred and the time that a revenue stream will commence.
Accordingly, Cadiz has looked to outside funding sources to address its
liquidity and working capital needs. Historically, Cadiz has addressed
these needs primarily through secured debt financing arrangements with its
lenders, private equity placements and the exercise of outstanding stock
options. However, following the completion of an offering by Sun World of
$115.0 million in secured notes as further discussed below, Sun World
believes it will be able to meet its working capital needs without looking
to outside funding sources, although no assurances can be made. See
"Current Financing Arrangements" and "Equity Placements," below.
On September 13, 1996, Cadiz acquired all of the stock of Sun World.
The net purchase price of approximately $178 million consisted of the
following: (i) assumption of $156 million of restructured debt with Sun
World's existing lenders (of which a principal reduction in the amount of
$5.5 million was made by Cadiz concurrent with the acquisition); (ii) $12
million to pay claims of Sun World's unsecured creditors as determined
during the reorganization process; (iii) $7 million in cash and stock
delivered both to previous holders of the stock of Sun World upon transfer
of stock to Cadiz and to existing unsecured creditors in satisfaction of
claims; and (iv) $3 million of acquisition fees and costs.
On April 16, 1997, Sun World completed a private placement of $115
million of Old Notes. The Old Notes were sold through the Initial
Purchaser to "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act")) and a
limited number of institutional "accredited investors" (as defined in the
Securities Act). The proceeds from the issuance of the Old Notes, when
combined with Sun World's existing cash and cash made available under the
$30 million Revolving Credit Agreement entered into by Sun World
concurrently with the issuance of the Old Notes, were used to retire Sun
World's existing indebtedness to John Hancock Mutual Life Insurance Company
("John Hancock") and Caisse Nationale de Credit Agricole, acting through
its Grand Cayman branch ("Credit Agricole"), as well as Cadiz' existing
indebtedness to Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
("Rabobank") (referred to hereinafter as the "Debt Refinancing").
Under Sun World's historical working capital cycle, working capital is
required primarily to finance the costs of growing and harvesting crops,
which occurs from January through August with a peak need in June. Sun
World harvests and sells the majority of its crops during the period from
May through September, when it receives the majority of its revenues. In
order to bridge the gap between incurrence of expenditures and receipt of
revenues, large cash outlays are required each year. Prior to its Debt
Refinancing, Sun World's cash balance was sufficient to provide for these
seasonal working capital requirements without the need for additional
outside funding. However, a substantial portion of Sun World's cash on
hand was used upon issuance of the Notes to fund debt repayments.
Therefore, Sun World will depend upon the Revolving Credit Agreement to
meet its seasonal working capital needs in 1997. See "Risk Factors--
Seasonality" and "Risk Factors--Risks Associated with Business of Cadiz--
Significant Leverage and Working Capital Requirements."
After giving effect to the issuance of the Notes and the application
of the net proceeds therefrom, Sun World has $120 million of indebtedness
outstanding and $30 million of borrowing availability under the Revolving
Credit Agreement. Cadiz has approximately $10 million of indebtedness
outstanding. See "Cadiz Obligations," below. Management believes that
the terms of Sun World's debt facilities following the issuance of the Old
Notes are more favorable to Sun World than the terms of the retired debt
facilities. See "Outlook," below. The terms of the Exchange Notes offered
hereby are nearly identical to the terms of the Old Notes.
CURRENT FINANCING ARRANGEMENTS.
SUN WORLD OBLIGATIONS
The Old Notes, which were issued in the principal amount of $115
million on April 16, 1997 and will mature on April 15, 2004, accrue
interest at the rate of 11-1/4% per annum. Interest only is payable semi-
annually on April 15 and October 15 of each year, commencing October 15,
1997. The Old Notes are secured by a first lien on substantially all of
the assets of Sun World and its subsidiaries, other than growing crops,
crop inventories and accounts receivable and proceeds thereof, which secure
the Revolving Credit Agreement. The Old Notes are also secured by the
guarantee of Cadiz and the pledge by Cadiz of all of the stock of Sun
World. See "Risk Factors--Risks Associated with Business of Cadiz--
Significant Leverage and Working Capital Requirements" and "Risk Factors--
Risks Associated with Business of Cadiz--Limitations on Access to Sun World
Cash Flow and Dividends."
Sun World's $30 million Revolving Credit Agreement matures in one year
and is guaranteed by Cadiz. Amounts borrowed under the Revolving Credit
Agreement will accrue interest at either prime plus 1.50% or LIBOR plus
2.50%, at Sun World's election, with an additional .50% payable for
advances above specified levels.
CADIZ OBLIGATIONS
Cadiz' primary current lender is ING Baring (U.S.) Capital Corporation
("ING"). On March 31, 1997, ING purchased Cadiz' previously outstanding
obligations to Henry Ansbacher & Co., Ltd. ("Ansbacher") of approximately
$9.7 million. Concurrently with such purchase, the maturity date of the
ING obligations was extended to April 30, 1998 (with the interest rate of
such obligations to be adjusted as of May 1, 1997 to LIBOR plus 200 basis
points, payable at LIBOR only semi-annually, with the remaining accrued
interest added to principal), and Cadiz issued to ING Warrants to purchase
75,000 shares of Cadiz Common Stock, exercisable for five years beginning
on April 30, 1997 at an exercise price equal to the average daily closing
price of Sun World's Common Stock over a ten trading day period ending on
April 29, 1997. ING has also granted to Cadiz the right to obtain two
additional one-year extensions. Upon exercise of the first and second
extension, Cadiz would be required to issue certain additional warrants to
ING and the interest rate would be further adjusted. Currently, ING holds
a senior deed of trust on substantially all of Cadiz' non-Sun World related
property.
As Cadiz continues to aggressively pursue its business strategy,
additional financing specifically in connection with Cadiz' water projects
will be required. The nature of such additional financing for the water
transfer and/or storage projects will depend upon how the development and
ownership of each project is ultimately structured, and how much of each
project's funding will be Cadiz' responsibility. Should Cadiz determine
that it will be able to maximize its profit potential through construction
and ownership of the water delivery and/or storage systems used in the
project, Cadiz will be required to obtain long-term project financing.
Based upon the results of analysis performed by an investment banking firm
retained by Cadiz, management believes that several alternative long-term
financing arrangements are available to Cadiz which will be further
evaluated once funding responsibility and ownership alternatives are
determined.
EQUITY PLACEMENTS. During the nine months ended December 31, 1996,
Cadiz utilized equity placements to fund its Sun World Acquisition. The
total cash requirements of Cadiz related to the Sun World Acquisition were
funded from: (i) the issuance by Cadiz of $27.6 million of newly authorized
Series A Preferred Stock ("Series A Preferred"); (ii) the issuance by Cadiz
of $7.6 million of newly authorized Series B Preferred Stock ("Series B
Preferred"); (iii) the issuance by Cadiz of $2.6 million of newly
authorized Series C Preferred Stock ("Series C Preferred"); and (iv) $1
million previously deposited by Cadiz from its working capital in trust
with the Official Committee Holding Unsecured Claims in the Sun World
bankruptcy case. Of such funds, approximately $35 million was applied to
cash disbursements required at closing under the Sun World Plan of
Reorganization, including the $15 million capital contribution and
approximately $5.5 million of principal reduction to secured lenders. The
remainder has been utilized by Cadiz substantially for the payment of
expenses relating to the Sun World Acquisition, as well as for the capital
and operating requirements of Cadiz.
Under the terms of the Plan of Reorganization in the Cadiz bankruptcy
case, as originally approved, the total cash requirements of Cadiz in order
to close the Cadiz Acquisition would have been approximately $39 million,
with $15 million of this amount to be deposited by Cadiz at closing into
the trusteed unsecured claims reserve account. However, in order to
protect against stockholder dilution, shortly before completion of the
Cadiz Acquisition Cadiz was able to successfully negotiate a reduction in
this required initial cash deposit to $11 million, thereby effectively
reducing cash requirements at closing to $35 million. As a condition to
this reduction in the amount of the initial deposit, Cadiz agreed to
deposit an additional amount into the unsecured claims reserve account
subsequent to the closing, when the final claims amounts could more readily
be determined. In order to fund the remaining amounts necessary to
complete its requirements in this regard, on November 26, 1996, Cadiz
issued 240 shares of its Series B Preferred and 40 shares of its Series C
Preferred for total aggregate consideration of $2.8 million, or $10,000 per
share. The amount of shares so issued by Cadiz was less than the
additional amount which Cadiz would otherwise have needed to issue prior to
the Cadiz Acquisition if the amount of the initial cash deposit had not
been reduced.
During the nine months ended December 31, 1996, Cadiz received gross
proceeds of $942,000 through the exercise of previously outstanding stock
options.
The Series A Preferred was not convertible when issued, but became
convertible into shares of Common Stock at the option of the holder, on
November 12, 1996 upon the filing by Cadiz of an Amendment to its
Certificate of Incorporation ("Amendment") increasing Cadiz' authorized
Common Stock from 24,000,000 to 45,000,000 shares, thereby allowing Cadiz
to reserve sufficient shares of Common Stock for issuance upon conversion.
Concurrently with the filing of the Amendment, the conversion price
("Series A Conversion Price") was $3.75. Holders are entitled to
cumulative dividends payable semi-annually in cash or Common Stock at a
rate of 6% per annum. The Series A Preferred is also mandatorily
convertible in full at the option of Cadiz at any time prior to six months
following the filing of the Amendment at the Series A Conversion Price
provided that, as a condition to such conversion, Cadiz shall pay to
holders one full year's worth of dividends (less the amount of any
dividends theretofore paid). Cadiz exercised this conversion right
effective May 7, 1997, and no shares of Series A Preferred currently remain
outstanding. The Series A Preferred ranks senior and prior to Cadiz'
Common Stock and on a parity with any other class or series of Preferred
Stock. Except as provided by law, holders are not entitled to vote upon
any matter submitted to a vote of Cadiz' stockholders.
The Series B and C Preferred were immediately convertible upon
issuance into shares of Common Stock, at the option of the holder, at a
price equal to the lower of (a) $5.8125 per share or (b) 85% of the average
closing bid price over the ten-trading day period ending on the day prior
to the submission of any conversion notice ("Series B/C Conversion Price").
Holders are entitled to cumulative dividends payable upon conversion or
maturity in cash or Common Stock at a rate of 6% per annum. Cadiz reserves
the right to redeem any shares of Series B or Series C Preferred for
$11,765 per share in cash by giving holders five days notice. Any Series B
or Series C Preferred shares outstanding one year following issuance are
mandatorily converted into Common Stock at the Series B/C Conversion Price.
Holders are entitled to a liquidation preference equal to the initial
purchase price of $10,000 per share. As of May 7, 1997, 90 shares of
Series B Preferred and no shares of Series C Preferred remain outstanding.
The Series B and C Preferred rank senior and prior to Cadiz' Common Stock
and on a parity with any other class or series of Preferred Stock. Except
as provided by law, holders are not entitled to vote upon any matter
submitted to a vote of Cadiz' stockholders.
The following table summarizes Cadiz' cash position for the periods
indicated (amounts in thousands):
Three Months Three months
Ended Ended
March 31, March 31,
1997 1996
----- ------
Net cash used for
continuing operating activities $ (12,137) $ (1,473)
Net cash provided by (used for)
investing activities 673 (1,181)
Net cash provided by (used for)
financing activities (2,680) 5,207
---------- ---------
Net increase (decrease) in cash (14,144) 2,553
Cash and cash equivalents,
beginning of period 33,307 2,600
--------- ---------
Cash and cash equivalents,
end of period $ 19,163 $ 5,153
========= =========
CASH USED FOR OPERATING ACTIVITIES. Cash used for operating activities
totaled $12.1 million for the three months ended March 31, 1997 as compared
to cash used for continuing operating activities of $1.5 million for the
same period in 1996. The increase in cash used for operating activities
primarily resulted from the inclusion of Sun World's operations and seasonal
working capital requirements in the 1997 period. Significant working
capital changes included a decrease in accounts payable of $1.9 million and
the increase in inventories of $5.4 million attributable to the seasonality
of Sun World's agricultural operations offset by the decrease in accounts
receivable of $3.7 million.
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES. Cash provided by
investing activities totaled $0.7 million during the three months ended
March 31, 1997 as compared to cash used for investing activities of $1.2
million during the prior year's period. Although the Company invested $1.4
million in developing crops and $0.6 million in the purchase of land,
property, plant and equipment and in furtherance of its water transfer and
storage projects, the Company received proceeds of $1.8 million from the
disposal of underproducing Sun World assets through an asset disposal
program. In addition, partnership distributions received by Sun World
totaled $0.8 million.
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES. Cash used for
financing activities totaled $2.7 million for the three months ended March
31, 1997 as compared to cash provided by financing activities of $5.2
million during the quarter ended March 31, 1996. Principal payments on
long-term debt totaled $3.3 million for the three months ended March 31,
1997. Net proceeds from the exercise of previously outstanding stock
options totaled $.5 million during the three months ended March 31, 1997.
OUTLOOK
With the issuance of the Notes, Sun World believes that, based upon
current levels of operations and anticipated growth, Sun World can
adequately service its indebtedness and meet its seasonal working capital
needs utilizing available internal cash and the Revolving Credit Agreement.
The Indenture and agreements between Cadiz and its principal current lender
restrict the amount of cash that can flow from Sun World to Cadiz and vice
versa. In the short-term, Cadiz expects to meet its ordinary working
capital needs through a combination of quarterly management fee payments
from Sun World, payments from Cadiz under an agricultural lease whereby
Cadiz now operates Cadiz' 1,600 acres of developed agricultural property at
Cadiz, California, and the possible exercise of outstanding stock options.
In addition, there are provisions in the Indenture allowing for certain
additional payments to be made from Sun World to Cadiz, subject to Sun World
meeting specific tests and ratios.
As Cadiz is actively pursuing the development of its water resources,
it is seeking the finalization of the regulatory approvals needed to
commence construction of a water delivery and/or storage project at Cadiz.
Once the lengthy regulatory review process is finalized and construction of
the necessary delivery and/or storage system has commenced, Cadiz
anticipates generating a revenue stream within less than a year thereafter
which will be sufficient to meet the then existing operating requirements of
Cadiz, although no assurances can be given. Concurrently with the
regulatory review process, Cadiz is also negotiating the terms of water
delivery and/or storage arrangements with various California water agencies,
which include issues such as financing, pricing concepts and formulas and
ownership of the pipeline and the delivery and/or storage system.
In addition to the development of its water resources, Cadiz is
actively involved in further agricultural development and reinvestment in
its landholdings. Such development will be systematic and in furtherance of
Cadiz' business strategy to provide for maximization of the value of its
assets.
With the issuance of the Notes on April 16, 1997, annual maturities of
long-term debt outstanding are as follows: 1997 - $1,397,000; 1998 -
$10,125,000; 1999 - $386,000; 2000 - $433,000; 2001 - $445,000, and 2002 and
thereafter - $116,602,000. At December 31, 1996, prior to the issuance of
the Notes, annual maturities of long-term debt outstanding excluding
$124,000 representing the unamortized portion of warrants were as follows:
1997 $4,877,000; 1998 $24,253,000; 1999 - $9,374,000; 2000 -
$11,398,000; 2001 - $11,410,000, and 2002 and thereafter - $92,676,000.
Since Cadiz' inception, inflation has not had a material impact either
on the costs of materials required in the development of property and/or in
labor costs. Similarly, the value of Cadiz' real property has not been
materially impacted by inflation. In the event the rate of inflation should
accelerate in the future, Cadiz believes the increase in the value of its
real property will exceed any increases in costs attributable to inflation.
BUSINESS
Sun World is one of the largest vertically integrated agricultural
companies in California with approximately 17,300 acres of owned and
2,100 acres of leased improved land in two of North America's premier
agricultural regions, the Coachella and San Joaquin Valleys of southern and
central California. For the twelve months ended December 31, 1996, Sun
World had revenues of $100.4 million.
Sun World is a leading grower and marketer of table grapes, seedless
watermelons, colored sweet peppers and plums. Sun World also grows and
markets other fruits and vegetables, including peaches, nectarines, apricots
and lemons. Sun World is also one of California's largest independent
marketers of grapefruits, tangerines, mandarin oranges and dates. Sun World
ships approximately 75 varieties of fresh produce to all 50 states and
exports fresh fruits and vegetables to over 30 foreign countries. Sun
World's operations include cultivation, packing and marketing of primarily
permanent and, to a lesser extent, annual (or row) crops. In addition, Sun
World operates a large research and development program that has produced
dozens of proprietary fruit varieties in the last five years. Sun World's
marketing operations include selling, merchandising and promoting Sun World
grown products, as well as providing these services for third party growers.
Produce grown or distributed by Sun World reaches more than 2,000
supermarket retailers, food service entities, warehouse clubs and
international trading companies throughout North America, Europe and Pacific
Rim countries. During 1996, Sun World had 25 different customers who each
accounted for in excess of $1.0 million in sales volume, including national
retailers such as Safeway Stores, American Stores, Supervalu and Kroger, and
club stores including Sam's and PriceCostco. Approximately 10% of Sun
World's products are marketed outside of the United States in Europe,
Australia, Japan, Hong Kong, Singapore, Malaysia and Taiwan. In addition to
product and customer diversification, Sun World's farming operations extend
over 350 miles from central to southern California, providing substantial
geographic diversification that reduces the potential negative impact of
variations in weather, infestations and other natural occurrences
detrimental to a successful harvest.
INDUSTRY OVERVIEW
The United States agricultural industry annually produces more than 400
types of fruits and vegetables with a retail value exceeding $60 billion.
These products are grown, packed and marketed and then travel through one or
more distribution channels including brokers, wholesale jobbers, service
wholesalers, distributors, food service operators and supermarket retailers
before reaching the consumer. Due to the growing cycle of these products,
the supply of fruits and vegetables from a particular region varies
throughout the season producing substantial price fluctuation over
relatively short time periods.
Although these products are seasonal and their prices fluctuate, the
consumer demands fresh produce throughout the year. As a result, retailers
prefer to source from marketers who can supply a consistently high quality
product over a large portion of the year. A grower or marketer who is able
to provide product both early and late in the season gains both a
distribution and a price advantage, which often results in significantly
enhanced profitability. Finally, there is a growing consumer concern
regarding food safety and consequently the environment in which fresh
produce is grown and packed. As a result, retailers are increasingly
choosing to reduce the number of suppliers with whom they contract and to
require these suppliers to track their produce from seed to table. As a
result of these trends, retailers are working more closely with larger, more
established growers and marketers who can provide them with the quality,
timeliness and breadth of products they require.
Most commercial farming operations produce both permanent crops and row
crops. From a commercial perspective there are two important differences
between permanent and row crops: (i) permanent crops require significant
lead time before producing commercially viable yields (e.g. approximately
three years for grapes and five years for stone fruit); and (ii) permanent
crops often last 30 or more years and reach their peak production potential
after 10 years. In the Coachella and San Joaquin Valleys, there has been a
continuing reduction in developed farming properties. A change in the
permanent crop mix in this region would generally require the incurrence of
a several year lag period as new crops reach commercial maturity. These
factors result in a relatively stable permanent crop base over an extended
period of time limiting supply based price volatility. Row crops, on the
other hand, are replanted annually and are subject to wider variations in
supply and consequently, price. As a result, permanent crops tend to
produce a more predictable revenue stream than row crops.
BUSINESS STRATEGY
New management believes that in the past Sun World did not focus on
maximizing profitability and controlling the volatility of its operating
earnings, factors which contributed to Sun World's filing for bankruptcy in
October, 1994. Following the Sun World Acquisition in September 1996,
management implemented the following five-point strategy: (i) producing
more varieties of crops which are available for delivery at peak pricing
windows throughout the year; (ii) expanding third party marketing and
packing businesses to increase Sun World's ability to absorb the primarily
fixed costs of its vertically integrated operations; (iii) improving
administrative efficiency through both headcount reductions and a new
comprehensive management information system; (iv) commercializing Sun
World's extensive proprietary product portfolio consisting of over 600
worldwide patents and trademarks; and (v) selling non-strategic properties
to rapidly reduce leverage. As a result, Sun World is poised to achieve
significant cost savings and to reduce annual revenue volatility, while
continuing to grow its core businesses.
REDUCING EARNINGS VOLATILITY OF FARMING OPERATIONS. Sun World
primarily grows table grapes (35% of 1996 acreage) and stone fruit (plums,
peaches, nectarines and apricots) (26% of 1996 acreage). Subsequent to the
Sun World Acquisition, new management developed a crop plan that provided
for the removal of certain under performing permanent crops and the
continued development of certain proprietary varieties of grapes and stone
fruit. Given Sun World's current crop allocation plan, it is now redeploying
marginally productive acreage to further reduce the volatility of its
earnings. In addition, new management has significantly increased the
efficiency and market focus of Sun World's research and development program,
which continues to be one of the largest fruit breeding programs in the
world. Through this program, Sun World has developed and holds patents on
several key products that are unique in taste, features and growing
characteristics. For example, Sun World's flagship Superior Seedless brand
grape stays securely on the stem during shipping, thereby eliminating
shrinkage, an attribute important to Sun World's customers. In addition, a
number of Sun World's products are well suited for harvesting during periods
of limited supply, allowing Sun World to sell its products at attractive
price points. Other key specialty products include Black Diamond plums,
Amber Crest peaches, Honeycot apricots, Star Sweet grapefruits, Sun World
sweet colored peppers and Sun World Seedless watermelons. As a result of
these and other streamlining initiatives, Sun World has reduced its exposure
to the price volatility inherent in undifferentiated products, extended its
leadership position in table grapes and stone fruit and redeployed
unprofitable acreage primarily to proprietary permanent crops.
Consequently, Sun World is better able to manage its cost structure and to
provide its unique products to retailers at strong price points during the
year, enhancing the level and predictability of its earnings.
EXPANDING MARKETING AND PACKING BUSINESSES. In addition to produce
grown on its own ranches, Sun World provides marketing and packing services
for both domestic and international growers. On average, Sun World handles
12 to 13 million units annually, with an average wholesale value of
approximately $120 million. As a leading, vertically integrated producer,
packer and marketer of fruits and vegetables, Sun World has developed a
strong brand name and reputation for quality and reliability. Going
forward, Sun World intends to build upon this brand equity to expand the
marketing and distribution of both its own and third party products to
provide a full product line throughout the year, further solidifying its
strong wholesaler relationships. To this end, Sun World has developed
distribution relationships with growers in Chile and Mexico to sell
contra-seasonal products (winter fruits and vegetables) in the United States
and is already distributing such products throughout its retail customer
base. In addition to these programs, Sun World has hired an executive to
recruit qualified new growers, who can benefit from Sun World's strong brand
name and distribution relationships. In addition to growing its revenue
base, Sun World has several initiatives intended to increase its operating
efficiency, such as consolidating its Coachella packing operations from four
to two facilities and retrofitting its Kimberlina facility to pack citrus
contra-seasonal to its existing stone fruit packing operation. Sun World's
existing infrastructure is sufficient to support its internal operations
during the peak season but provides available capacity in the off season.
As a result, Sun World's third party sales and marketing as well as
contra-seasonal packing operations have significant opportunities to benefit
from Sun World's existing operating leverage.
IMPROVE ADMINISTRATIVE EFFICIENCY. Since the Sun World Acquisition,
new management has implemented a number of organizational changes to provide
more focused farming and financial management. Several key managers were
hired, including a chief executive officer with extensive agricultural and
distribution experience, a chief financial officer who was previously a
partner with Coopers & Lybrand LLP and a highly experienced senior executive
to focus exclusively on enhancing Sun World's third party marketing and
packing businesses. In addition, Sun World has appointed a new senior vice
president of operations. These individuals, along with Sun World's Senior
Vice President Sales and Senior Vice President Corporate Development and
Marketing form Sun World's senior management team. Sun World closed its
former administrative headquarters and consolidated these operations into
existing space at its main packing facility. During 1996, Sun World reduced
its administrative staff by approximately 13%, largely through the
elimination of unnecessary reporting layers. To support these streamlining
changes, Sun World is implementing a new information management system which
should be operational by the end of 1997. Management believes that these
changes will eliminate $1.3 million in annual overhead costs which would
have resulted in a 16% reduction in sales, general and administrative costs
in 1996. With these organizational changes completed, Sun World is focused
on the strategic advantages of proprietary permanent crops, strong customer
relationships and significant marketing expertise and packing resources.
COMMERCIALIZING PROPRIETARY PRODUCT PORTFOLIO. With over 600 worldwide
patents and trademarks, Sun World has identified select opportunities to
commercialize its proprietary product portfolio without diluting its
strength as the exclusive grower of these products in the United States. In
the last 10 years, Sun World has introduced more than 40 proprietary fruit
varieties. The development of a new product takes many years and sometimes
a decade or more. As a result, Sun World, which annually produces tens of
thousands of new grape and stone fruit seedlings, has a strong leadership
position in the development of innovative products. Currently, Sun World
actively exploits its seedless watermelon, which in 1996 generated a profit
of $1.5 million to Sun World through its 50% ownership interest in American
Sunmelon, and is actively exploring various new domestic and international
opportunities to license various grape and stone fruit varieties.
REDUCING LEVERAGE TO LOWER FINANCIAL RISK AND IMPROVE OPERATING
FLEXIBILITY. When new management took over Sun World in September, 1996,
total debt was $151.8 million. From that time to December 31, 1996,
management lowered debt by $16.4 million, or 11%, through improved
operational cash flows and proceeds from the sale of non-essential assets.
Sun World is continuing to strengthen its balance sheet and improve its
operating structure through asset sales. As of December 31, 1996, following
the Sun World Acquisition, Sun World completed land sales for $12.4 million,
at prices at or above their appraised value. Additionally, in 1997, Sun
World has sold one ranch and one packing facility for $2.9 million.
CADIZ
On September 13, 1996, Cadiz acquired Sun World following a bankruptcy
related reorganization. Today, Sun World is a wholly owned subsidiary of
Cadiz. Cadiz is publicly traded on the Nasdaq National Market under the
ticker symbol "CLCI." Cadiz' business strategy is to create a portfolio of
landholdings, water resources and agricultural operations within central and
southern California which possess sizable assured supplies of water. Cadiz'
management believes that, with both the increasing scarcity of water
supplies in California and the increasing demand for water, Sun World's and
Cadiz' access to water will provide it with a competitive advantage both as
a major agricultural concern and as a supplier of water, which will lead to
continued appreciation in the value of Cadiz' water portfolio. The Sun
World Acquisition provides Cadiz with senior water rights throughout the
central and southern valleys of California. Excluding Sun World's
properties, Cadiz' portfolio also includes 39,000 acres of land in eastern
San Bernardino County. The largest property totals approximately
27,400 acres at Cadiz, California, approximately 1,600 acres of which have
been developed for cultivation of citrus orchards, table grape vineyards and
row crops. Sun World adds to Cadiz' portfolio more than 17,300 acres of
prime agricultural land in the San Joaquin and Coachella Valleys, increasing
Cadiz' total landholdings to approximately 56,300 acres.
Pursuant to an Environmental Impact Report and land use approvals by
San Bernardino County, Cadiz is authorized to pump approximately 30,000
acre-feet of groundwater per year for irrigation of its land in Cadiz
Valley. An acre-foot is 326,000 gallons, or enough for approximately two
families for one year. Cadiz currently uses approximately 6,000 acre-feet
per year to irrigate its Cadiz Valley agricultural development and planned
near-term development will likely require no more than 10,000 acre-feet per
year. As a result, Cadiz has the ability to transfer groundwater--surplus
to its present and near-term needs--to public agencies which require
supplemental sources of water. Cadiz intends to develop a water banking and
transfer program which will involve importing water from the Colorado River
Aqueduct to Cadiz Valley property during periods of excess supply. This
imported water and local groundwater, stored in aquifers underlying Cadiz'
landholdings, would be extracted by wells and returned to the aqueduct
during periods of drought or reduced allocations from the Colorado River.
Cadiz is currently involved in discussions with several regional water
agencies regarding pricing formulas, financing, and ownership of the
proposed facilities.
In addition, Cadiz owns 7,300 acres in the Piute Valley of eastern San
Bernardino County, which is also underlain by groundwater of excellent
quality. Additional technical and environmental investigations are
currently underway for a water development project anticipated to transfer
approximately 10,000 to 15,000 acre-feet per year. Exploratory drilling is
scheduled during 1997 to test the potential for groundwater development,
transfer, and underground storage at other properties held by Cadiz in
southeastern California. Recent transactions by third parties have
confirmed Cadiz' belief that comparable water transfer net prices are no
less than $225 per acre-foot. Consequently, with groundwater reserves in
storage estimated at 12 to 22 million acre-feet, Cadiz believes that its
water rights have the potential to generate significant on-going free cash
flow.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
During its last three fiscal years, Cadiz has operated in one industry
segment: resource development. See Consolidated Financial Statements.
Also, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
NARRATIVE DESCRIPTION OF BUSINESS
Pursuant to its business strategy, Cadiz continually seeks to develop
and manage its portfolio of land, water and agricultural resources for their
highest and best use. The development and management activities of Cadiz
are currently focused on agricultural operations (primarily through its
wholly-owned Sun World subsidiary) and water resource development.
Agricultural development will enable Cadiz to maximize the use of its
landholdings while generating cash flow. Cadiz will continue to pursue
opportunities for the use of its water resources, both for internal
operations and to relieve water shortages in other portions of southern
California.
As a fully integrated producer, packer and marketer of specialty fruits
and vegetables, Sun World strives to maximize the year round productivity of
its significant asset base.
AGRICULTURAL OPERATIONS
Sun World is a vertically integrated agricultural operation which
combines an extensive research and development program, year round sourcing,
farming and packing activities and strong marketing capabilities.
PRODUCT LINE. Sun World ships 75 different varieties of fresh fruits
and vegetables to all 50 states and to more than 30 foreign countries. Sun
World is a leading grower and marketer of table grapes, seedless
watermelons, colored sweet peppers, plums, peaches, nectarines, apricots and
lemons. It is also one of California's largest independent marketers of
grapefruit, tangerines, mandarins, and dates.
The breadth and diversity of the product line helps to minimize the
impact of individual crop earnings fluctuations. In addition, work can be
spread more evenly over the course of a year because the growing cycles vary
from crop to crop allowing Sun World to utilize its human and capital
resources more efficiently than would be the case if Sun World's sales were
limited to only a few products. Further, the breadth and diversity of its
product offering provides Sun World with greater presence and influence with
its grocery and food service customers.
Although many fruits and vegetables are fungible commodities, Sun World
has adopted a strategy of developing or acquiring specialty produce
varieties with unique characteristics which differentiate them from
commodity produce varieties. Most of these varieties are harvested during
favorable marketing windows when available supply from competitors is
limited. These specialty varieties typically command a price premium and
are subject to less price volatility than the commodity varieties. They
also provide Sun World with a dominant position in a number of product
categories. Examples of the branded produce grown and marketed by Sun World
include Sun World sweet colored peppers, Superior Seedless table grapes,
Black Diamond plums, Sun World Seedless watermelons, Honeycot apricots
and Amber Crest peaches. These products were obtained through a
combination of internal development and acquisition. Sun World's Research
and Development Center is dedicated to developing additional high value
proprietary varieties. See "- Research and Development."
FARMING OPERATIONS
Sun World's farming operations produce approximately 7 million units of
fruits and vegetables annually. Its principal agricultural lands are
located in the San Joaquin and Coachella Valleys of California. See
"Business Properties."
Sun World properties are primarily dedicated to producing permanent
commercial crops and, to a lesser extent, row crops. Additionally, over
1,300 acres are currently utilized for developing crops (i.e., vines and
trees that have not yet reached commercial maturity).
The primary crop categories and approximate commercial and developing
acres for each are as follows:
As of December 31, 1996
--------------------------------------------
Percent
of
Total
Percent Commercial
of &
Commercial CommercialDeveloping Developing
Acres Acres Acres Acres
------ ------- ------- --------
Table grapes . . . . . . . 4,095 35.9% 430 35.3%
Raisin and wine grapes . . 2,160 18.9 0 16.9
Plums . . . . . . . .. . . 1,625 14.3 400 15.8
Lemons. . . . . . . . . . 800 7.0 80 6.9
Peppers. . . . . . . . . . 775 6.8 0 6.0
Nectarines . . . . . . . . 490 4.3 260 5.9
Watermelons. . . . . . . . 650 5.7 0 5.1
Peaches. . . . . . . . . . 235 2.1 165 3.1
Apricots . . . . . . . . . 73 0.6 62 1.1
Other row crops. . . . . 500 4.4 0 3.9
. . . . . . . . . ------- ------- -------- --------
Total . . . . . . . . . 11,403 100.0% 1,397 100.0%
======= ====== ======== ========
Under an agricultural lease entered into concurrently with the Sun
World Acquisition, Sun World operates approximately 1,600 acres of developed
agricultural property at Cadiz. Sun World believes that it will benefit
from the Cadiz Valley agricultural operations by virtue of its ability to
grow and market Cadiz produce under the Sun World label to Sun World's
worldwide customer base.
PACKING AND MARKETING OPERATIONS
In addition to merchandising its own products, Sun World provides
marketing and packing services to third party growers. For third party
growers, Sun World provides three key benefits: (i) Sun World's brand name,
proprietary products and reputation with wholesalers resulting in a
significant pull through effect; (ii) a full complement of services that
include packing, marketing and sales; and (iii) a dedicated sales force of
23 people covering over 600 customers throughout the world.
Sun World's packing facilities handle approximately 10 million units of
produce annually. These facilities provide harvesting, packing, cooling and
shipping services for its own product production, as well as for other
commercial clients. Sun World owns five facilities, four of which are
located in the Coachella Valley and one of which is located in the San
Joaquin Valley. See "Business Properties."
Sun World's vertically integrated operations enable it to offer the
market a continuous stream of new, specialty products which receive a market
premium coupled with a large basket of other produce staples. As a
significant grower, Sun World is able to manage the quality of its own
product line, and as a significant packer/marketer, Sun World works with
other growers to ensure product quality through packing and distribution.
Sun World's sourcing, both external and internal, is diversified
geographically. Sun World's owned and leased farming operations are located
throughout California from the Coachella Valley in the south to central
California's San Joaquin Valley as well as operations near the coast. Sun
World sources externally produced product from throughout California, from
other areas of the United States, and from international sources. This
geographic diversification reduces the impact that unfavorable weather
conditions and infestations could have on Sun World's packing and marketing
operations. The geographic diversification also provides Sun World with a
longer selling season for many crops since the harvests occur at different
times.
Sun World's customer base includes more than 2,000 supermarket
retailers, food service entities, warehouse clubs, and international trading
companies located in approximately 30 countries. Domestic customers include
national retailers such as Safeway Stores and Albertson's; club stores,
including PriceCostco and Sam's; and food service distributors, including
Sysco and Alliant. Approximately 10% of Sun World's products are marketed
outside of the United States in Europe, Australia, Japan, Hong Kong,
Singapore, Malaysia and Taiwan. Only one national retailer (representing
approximately 15% of 1996 gross sales made by Sun World) accounts for more
than 10% of Sun World's consolidated revenues.
RESEARCH AND DEVELOPMENT
Sun World has a long history of product innovation, and its Research
and Development Center maintains a fruit breeding program that has
introduced dozens of proprietary fruit varieties in the last five years.
Recent product successes include the Black Diamond plum, the Amber Crest
peach and the Honeycot apricot. There are several other promising grape
and stone fruit varieties which are scheduled for commercial planting and
production in the near future.
Sun World utilizes approximately 235 acres for its Research and
Development Center and crop experimentation. The Research and Development
Center facility houses tissue culture rooms, growth rooms, four greenhouses,
and over 200 acres of experimental growing crops. In 1996, Sun World
expended a net $416,000 on research and development and expects to maintain
at least this level of expenditures in the future.
As a result of over 20 years of research and development, Sun World
holds rights to more than 600 patents and trademarks around the world. The
patent registrations exist in most major fruit producing countries and the
trademarks are held in both fruit producing and consuming regions. Sun
World's patents have varying expiration dates; however, the expiration of
any individual patent will not have a material effect upon Sun World's
operations.
WATER RESOURCE DEVELOPMENT
The increasing scarcity of water supplies in California will lead to
increasing dependence on water transfer and storage projects within the
state. Cadiz' portfolio of water resources, located in close proximity to
the major aqueduct systems of central and southern California such as the
State Water Project, the Colorado River Aqueduct, and the Colorado River,
provides Cadiz with the opportunity to participate in a variety of water
banking, exchange and transfer and storage projects in partnership with
regional public water agencies.
CADIZ WATER TRANSFER AND STORAGE PROJECT. Cadiz' 27,400 acres in the
Cadiz and Fenner Valleys of eastern California (the "Cadiz Property") are
underlain by a substantial high quality groundwater basin. This groundwater
is recharged by rain and snowfall within a catchment area of nearly 1,300
square miles. Average annual recharge is estimated by Cadiz to be in the
range of 20,000 to 30,000 acre-feet. See "Properties - The Cadiz Property."
Pursuant to an Environmental Impact Report ("EIR") and land use
approvals by San Bernardino County, Cadiz is authorized to pump
approximately 30,000 acre-feet of groundwater per year for irrigation of its
Cadiz Valley property. An acre-foot is 326,000 gallons, or enough for
approximately two families for one year. The Company currently uses
approximately 6,000 acre-feet per year to irrigate its Cadiz Valley
agricultural development and planned near-term development will likely
require no more than 10,000 acre-feet per year. As a result, Cadiz has the
ability to transfer groundwater - surplus to its present and near-term needs
- - to public agencies which require supplemental sources of water.
The Cadiz Water Transfer and Storage Project will require further
regulatory approval. Cadiz began technical and environmental investigations
in 1994, and is pleased with the progress made to date. Cadiz is in
discussions regarding transfer and storage agreements with several public
water agencies. These agreements, when complete, will determine pricing
formulas, financing and ownership of the facilities constructed to deliver
and store the water.
PIUTE AND OTHER TRANSFER AND STORAGE PROJECTS. Cadiz has also commenced
water development operations at its 7,300 acre Piute property, which is
located in eastern San Bernardino County approximately 15 miles from the
resort community of Laughlin, Nevada and about 12 miles from the Colorado
River town of Needles, California. This landholding is underlain by
groundwater of excellent quality. Cadiz estimates that average annual
recharge is in the range of 10,000 to 20,000 acre-feet. See "Properties -
The Piute Property."
Additional technical and environmental investigations are currently
underway for a water development project (the "Piute Project") anticipated
to transfer approximately 10,000 to 15,000 acre-feet per year. The Company
is currently undertaking discussions with prospective purchasers of water
from the Piute Project, although no formal agreements have been executed.
Exploratory drilling is scheduled during 1997 to test the potential for
groundwater development, transfer, and underground storage at other
properties held by the Company in southeastern California.
SUN WORLD WATER RESOURCES. The Sun World Acquisition brought to Cadiz
valuable water rights in various parts of central and southern California.
Cadiz believes with increasing water shortages in California, land with
prime water rights will increase substantially in value.
As irrigation technology continues to improve, Sun World's water
resources may be in excess of actual demands. Such excess supplies may be
available for further agricultural development, or for possible water
transfers, exchanges or banking.
Sun World's landholdings and associated water resources are located
adjacent to the major aqueduct systems of central and southern California,
and in close proximity to the Colorado River. These holdings complement
Cadiz' other groundwater resources, and will enhance Cadiz' opportunities to
participate in a broad variety of water transfer, storage exchange or
banking projects.
SEASONALITY
Sun World's agricultural operations are impacted by the general
seasonal trends that are characteristic of the agricultural industry. Sun
World has historically received the majority of its net income during the
second and third calendar quarters following the harvest and sale of its
table grape and tree fruit crops. Due to this concentrated activity, Sun
World has, therefore, historically incurred a loss with respect to its
agricultural operations in the first and fourth calendar quarters. See
"Risk Factors - Seasonality" and "Risk Factors--Risks Associated with
Business of Cadiz--Significant Leverage and Working Capital Requirements."
In connection with the water resource development activities of Cadiz,
revenues are not expected to be seasonal in nature. Cadiz does not expect
that contracts entered into for the transfer or storage of water will
provide for revenue payments varying significantly from season to season.
COMPETITION
The agricultural business is highly competitive. Sun World's
competitors include a limited number of large international food companies,
as well as a large number of smaller independent growers and grower
cooperatives. No single competitor has a dominant market share in this
industry due to the regionalized nature of these businesses. Sun World
utilizes brand recognition, product quality, harvesting in favorable product
windows, effective customer service and consumer marketing programs to
enhance its position within the highly competitive fresh food industry.
Consumer and institutional recognition of the Sun World trademark and
related brands and the association of these brands with high quality food
products contribute significantly to Sun World's ability to compete in the
market for fresh fruit and vegetables.
Sun World faces competition for the acquisition, development and sale
of its properties from a number of competitors, some of which have
significantly greater resources than Cadiz. Cadiz may also face competition
in the development of water resources associated with its properties. Since
California has scarce water resources and an increasing demand for available
water, Cadiz believes that price and reliability of delivery are the
principal competitive factors affecting transfers of water in California.
EMPLOYEES
As of December 31, 1996, Sun World and Cadiz employed a total of 985
full-time employees. Sun World from time to time engages various part time
and seasonal employees, with a seasonal high of approximately 2,500 part
time employees. Approximately 119 of Sun World's employees are represented
by a labor union pursuant to a contract that expires in 1999. Generally,
Sun World and Cadiz believe that its employee relations are good.
REGULATION
Certain areas of Sun World's operations are subject to varying degrees
of federal, state and local laws and regulations. Sun World's agricultural
operations are subject to a broad range of evolving environmental laws and
regulations. These laws and regulations include the Clean Air Act, the
Clean Water Act, the Resource Conservation and Recovery Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Comprehensive
Environmental Response, Compensation and Liability Act. Compliance with
these foreign and domestic laws and related regulations is an ongoing
process which is not currently expected to have a material effect on Sun
World's capital expenditures, earnings or competitive position.
Environmental concerns are, however, inherent in most major agricultural
operations, including those conducted by Sun World, and there can be no
assurance that the cost of compliance with environmental laws and
regulations in the future will not be material.
Sun World's food operations are also subject to regulations enforced
by, among others, the U.S. Food and Drug Administration and state, local
and foreign equivalents and to inspection by the U.S. Department of
Agriculture and other federal, state, local and foreign environmental and
health authorities. Among other things, the U.S. Food and Drug
Administration enforces statutory standards regarding the safety of food
products, establishes ingredients and manufacturing procedures for certain
foods, establishes standards of identity for foods and determines the safety
of food substances in the United States. Similar functions are performed by
state, local and foreign governmental entities with respect to food products
produced or distributed in their respective jurisdictions. Further, there
can be no assurances as to the effect of any environmental regulations which
may be adopted in the future. See "Risk Factors-- Environmental Matters"
and "Risk Factors--Regulation."
As Cadiz proceeds with the development of its properties, including
related infrastructure, Cadiz will be required to satisfy various regulatory
authorities that it is in compliance with the laws, regulations and policies
enforced by such authorities. Groundwater development, and the export of
surplus groundwater for sale to single entities such as public water
agencies, are not subject to regulation by existing statutes, other than
general environmental statutes applicable to all development projects.
Although applicable laws, regulations and policies have not had a materially
adverse effect upon the ability of Cadiz to develop its Cadiz or other
properties to date, management cannot predict with certainty what
requirements, if any, may be imposed by regulators upon future development.
In addition, the time and costs associated with obtaining regulatory
approvals for resource development are significant, and there can be no
assurance that Cadiz will receive desired approvals for future development
plans. See "Risk Factors--Risks Associated with Business of Cadiz--
Regulatory Approvals."
PROPERTIES
Cadiz currently leases its executive offices in Santa Monica. Cadiz
also maintains a development office in San Bernardino, California. Sun
World owns its main packing facilities and administrative offices in
Bakersfield, California and owns three packing facilities and leases its
sales offices in Coachella, California. Sun World and each of its
subsidiaries believe that their property and equipment are generally well
maintained, in good operating condition and adequate for their present
needs.
The following is a description of significant properties of Cadiz and
Sun World.
THE CADIZ PROPERTY
In 1984, Cadiz conducted an investigation of the feasibility of the
agricultural development of land located in the Mojave desert near Cadiz,
California, and confirmed the availability of prime quality water in
commercial quantities appropriate for agricultural development. Since 1985,
Cadiz has acquired over 27,000 acres in the Cadiz vicinity.
Cadiz has determined that the groundwater basin which underlies the
Cadiz property contains more water than is needed for both the present and
projected agricultural development requirements of the property. Cadiz
therefore intends to develop a water banking and transfer program in
connection with this property. See "Business--Narrative Description of
Business-- Water Resource Development."
In November 1993, the San Bernardino County Board of Supervisors
unanimously approved a General Plan Amendment establishing an agricultural
land use designation for 9,600 acres at Cadiz for which 1,600 acres have
been developed and are leased to Sun World. This Board action represented
the largest land use approval on behalf of a single property holder in the
County's known history. This action also approved permits to construct
infrastructure and facilities to house as many as 1,150 seasonal workers and
170 permanent residents (employees and their families) and allows for the
withdrawal of more than 1,000,000 acre-feet of groundwater from Cadiz'
underground water basin.
Substantially all Cadiz acreage is held in fee directly by Cadiz.
SUN WORLD PROPERTIES
FARM PROPERTIES. Sun World owns approximately 17,300 acres and leases
approximately 2,100 acres of improved land in central and southern
California. The majority of this land is used for the cultivation of
permanent and annual crops and support activities, including packing
facilities.
Sun World owned farming property is divided between five distinct
geographic regions: Madera, Bakersfield and Arvin (located within the San
Joaquin Valley), Coachella (located in the state's southeastern corner near
Palm Springs) and Blythe (located approximately 100 miles east of the
Coachella Valley adjoining the Colorado River).
PACKING AND HANDLING FACILITIES. Sun World owns four packing and
handling facilities, three of which are located in the Coachella Valley and
one of which is located in the San Joaquin Valley at Kimberlina, near
Bakersfield.
The Kimberlina facility, located on an 83 acre parcel owned by Sun
World, consists of 95,000 square feet of cold storage areas and 50,000
square feet for tree fruit packing (including two highly automated tree
fruit production lines). An additional 14,300 square feet is devoted to
office space.
Sun World's primary Coachella Valley facility consists of two
independent buildings located on 22 acres of industrial commercial zoned
land in Coachella, California, two miles south of Indio. The 22 acres
consists of 5 acres of buildings and improvements, 6 acres of packing, and
11 acres of open land. One building is used primarily for the packing of
citrus, for receiving table grapes, for cold storage and for office space.
The other building is used primarily for receiving, cooling and storing
table grapes.
Sun World's other operating facility in Coachella consists of one
building on 4 acres of land and is used primarily for packing watermelons
and citrus and for storage. Currently, the third Coachella facility is not
being used for operations and is held for sale.
All of the Sun World properties are subject to encumbrances for the
benefit of the holders of the Notes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Current Financing Arrangements."
THE PIUTE PROPERTY
The Piute property consists of approximately 7,300 acres and is located
approximately 60 miles east of Cadiz and approximately 15 miles west of the
Colorado River and Laughlin, Nevada, a small, fast growing town with hotels,
casinos and water recreation facilities. The Piute property was identified
for acquisition by Cadiz by a combination of the satellite imaging and
geological techniques which were used by Cadiz to identify water at Cadiz.
The Piute acreage adjoins Highway 95, which is a direct route to Las
Vegas, approximately 60 miles north. The Santa Fe Railroad passes through
the land and Interstate 40 is approximately 12 miles to the south. The
property is held by Cadiz in fee title as to approximately 3,600 acres, with
the remaining acreage under option.
Cadiz has commenced the development of the water resources of this
property.
OTHER PROPERTIES
In addition to the Cadiz and Piute properties, Cadiz owns approximately
4,200 additional acres in the Mojave Desert as to which development has not
yet commenced. Cadiz will continue to seek to acquire additional properties
both in southern California desert regions and elsewhere which are believed
to be suitable for development.
All of Cadiz' non-Sun World fee property is subject to encumbrances in
favor of its current primary lender as security for a loan with an
outstanding balance of approximately $9.7 million as of March 31, 1997. .
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources--Current Financing
Arrangements."
LEGAL PROCEEDINGS
In November 1995, the San Bernardino County Board of Supervisors
certified an Environmental Impact Report/Environmental Impact Statement
("EIR/EIS"), and approved a Conditional Use Permit for the proposed
construction and operation of a substantial landfill on the shore of Bristol
Lake near Amboy, California (the "Rail Cycle" Project). The general partner
of Rail Cycle is controlled by WMX Technologies, Inc. (formerly Waste
Management, Inc.). The Rail Cycle Project would be located within a few
miles of land owned by Cadiz at Cadiz, California, which the County of San
Bernardino has designated for agricultural use in its General Plan.
Cadiz has vigorously opposed the Rail Cycle Project on a number of
grounds. In December 1995, an action styled Cadiz Land Company, Inc. vs.
County of San Bernardino, et al. Case No. BCV 02341 was filed by Cadiz in
Superior Court in San Bernardino County. The action challenges the various
decisions by the County of San Bernardino relative to the Rail Cycle
Project. Named in this action, in addition to the County of San Bernardino,
were the Board of Supervisors of the County of San Bernardino, three
individual members of the Board of Supervisors, an employee of the County,
and Rail Cycle. On February 1, 1996, Rail Cycle and the County removed the
case to Federal District Court for the Central District of California (Case
No. CV-96-740-JGD [BQRS]). However, the case has subsequently been remanded
back to the San Bernardino Superior Court. Cadiz alleges that the actions
of the County of San Bernardino did not comply with the guidelines
prescribed by the California Environmental Quality Act and violated state
planning and zoning laws. The action seeks to set aside the county
certification of the EIR/EIS and approval of the proposed Rail Cycle
Project. Cadiz continues to believe the proposed Rail Cycle Project, if
constructed and operated as currently designed, poses environmental risks
both to Cadiz' agricultural operations at Cadiz and to the groundwater basin
underlying the Cadiz property. Accordingly, Cadiz intends to pursue a claim
for damages against the County of San Bernardino and Rail Cycle and the
action seeks compensatory damages in excess of $75 million. The action is
currently in the discovery phase. The court intends to commence a hearing
on Cadiz' land use and regulatory claims in July 1997. A trial on the issue
of Cadiz' monetary damages will be scheduled at a later date. Cadiz intends
to continue vigorously prosecuting its claims. See "Risk Factors--Risks
Associated with Business of Cadiz--Potential Adverse Effect of Rail-Cycle
Project on Cadiz."
Sun World and Cadiz each are involved in other legal and administrative
proceedings and claims. In the opinion of management, the ultimate outcome
of each proceeding or all such proceedings combined will not have a material
adverse impact on their financial positions.
MANAGEMENT
SUN WORLD DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following sets forth certain biographical information, the present
occupation and business experience for the past five years of each
director, executive officer and significant employee of Sun World:
NAME AGE POSITION
----- ----- ---------
Keith Brackpool 39 Chairman of the Board
Timothy J. Shaheen 37 Chief Executive Officer and Director
Stanley E. Speer 36 Senior Vice President, Chief Financial
Officer and Secretary
Michael J. Aiton 49 Senior Vice President of Sales
Kevin S. Andrew 41 Senior Vice President of Operations
David O. Marguleas 36 Senior Vice President of Marketing and
Corporate Development
David J. Peterson 43 Senior Vice President of Agricultural
Development
Barton Beek 73 Director
Dwight W. Makins 45 Director
Mitt Parker 46 Director
Keith Brackpool is Chairman of the Board of Directors of Sun World.
He is a founder of Cadiz, and has served as a member of Cadiz' Board of
Directors since September 1986, and served as Chairman of the Board from
1989 through December 1991, when he was reappointed as Chief Executive
Officer of Cadiz. From October 1989 until May 1991, Mr. Brackpool was
employed as the President of Albert Fisher, Inc., a wholly-owned subsidiary
of The Albert Fisher Group PLC, a U.K. corporation and was a director of
The Albert Fisher Group PLC until May 31, 1991. Since 1988, Mr. Brackpool
has served as an officer and principal of the general partner of 1334
Partners, Ltd., a California limited partnership which holds commercial
real estate in Southern California. Mr. Brackpool is a member of the
Compensation Committee of the Board of Directors of Sun World.
Timothy J. Shaheen was appointed Chief Executive Officer and Director
of Sun World in September 1996. Since that time, Mr. Shaheen has also
served as Chief Executive Officer and Director of each of Sun World's
Subsidiary Guarantors. Mr. Shaheen has seven years of experience in the
produce industry, most recently serving as a senior executive with Albert
Fisher North America. While with Albert Fisher, Mr. Shaheen also served as
Director of its Canadian Produce Operations and as a Director of Fresh
Western Marketing, one of the largest growers/shippers of fresh vegetables
in the Salinas Valley of California. Mr Shaheen has also served as a past
director of the Los Angeles Association of Produce Wholesalers and Dealers.
Prior to his employment with Albert Fisher, Mr. Shaheen was a senior
manager with the accounting firm of Ernst & Young LLP. Mr. Shaheen is a
Certified Public Accountant.
Stanley E. Speer joined Sun World as Senior Vice President, Chief
Financial Officer and Secretary following completion of the Sun World
acquisition. Since that time, Mr. Speer has also served as Chief Financial
Officer and Secretary of each of Sun World's Subsidiary Guarantors.
Mr. Speer has fifteen years of experience in public accounting with the
accounting firm of Coopers & Lybrand LLP. Since 1992, Mr. Speer has served
as a partner in their financial advisory services group specializing in
business reorganizations and mergers and acquisitions consulting.
Mr. Speer is a Certified Public Accountant and a Certified Insolvency and
Reorganization Accountant.
Michael J. Aiton was appointed Senior Vice President of Sales for Sun
World in September 1995. He joined Sun World as Director of Marketing in
1991 and was promoted to Vice President of Marketing in September 1992 and
to Vice President of Sales and Marketing North America in April 1993.
Mr. Aiton is a former member of the Produce Marketing Association's board
of directors and was chairman of that organization's nutrition marketing
task force. Additionally, he served as the chairman of the Always Buy
Colorado Promotion Association.
Kevin S. Andrew was appointed Senior Vice President of Operations for
Sun World in September 1996. He directs Sun World's farming and packing
operations. Prior to such time, he managed Superior Farming Company's
grape production. He was employed by Superior Farming Company from 1984
until it was acquired by Sun World. Mr. Andrew is chairman of the board of
the North Kern Water Storage District, a founding member of the South San
Joaquin Grape Growers Association, past chairman of the Wine Grape
Inspection Advisory Committee, a governor-appointed position, and a member
of the executive committee of the Agricultural Energy Consumers
Association.
David O. Marguleas was appointed Senior Vice President of Marketing
and Corporate Development for Sun World in November 1994. He is
responsible for all corporate communications and marketing activities as
well as Sun World's research and development program, proprietary product
portfolio and American Sunmelon partnership. Previously he served as
Senior Vice President of Marketing, Vice President of Merchandising and
Marketing Services and from 1986 to 1990 was Manager of Merchandising and
Corporate Relations. He was instrumental in launching several proprietary
products for Sun World, including the Le Rouge Royale sweet red pepper,
Le Jaune Royale sweet yellow pepper, Sun World Seedless watermelon and
DiVine Ripe tomato. He chairs the management committee of American
Sunmelon, an Oklahoma-based joint venture responsible for seedless
watermelon varietal research and production.
David J. Peterson was appointed Senior Vice President of Agricultural
Development for Sun World in September 1996 and is responsible for sourcing
new product sales opportunities by expanding Sun World's worldwide grower
base. Previously he was Vice President of Agricultural Development for
Cadiz, where he oversaw farming operations and worked extensively with
joint venture grower partners. From 1990 to 1994, Mr. Peterson served as
Chief Operating Officer of Fisher Procurement, Inc., a centralized
marketing and purchasing division of Albert Fisher North America. Prior to
1990, he managed all produce purchasing for Sysco Corp., the largest United
States food distributor. He served on the Produce Marketing Association's
board of directors and has chaired several industry committees.
Barton Beek is an attorney who has practiced law for 40 years, and is
currently with the firm of O'Melveny & Myers. He has experience in
corporate financing transactions, organization of corporate, joint venture
and limited partnership enterprises, equity offerings, private and public
debt offerings and other corporate transactions. Mr. Beek is Chairman of
the Audit Committee of the Board of Directors of Sun World.
Dwight W. Makins was elected as Chairman of the Board of Cadiz in
December 1991, and was elected a Director of Sun World and of each of Sun
World's Subsidiary Guarantors in September 1996. Mr. Makins currently
serves as Chairman of Greenway Holdings plc, a British waste oil recycling
company and as a director of several other British companies. Prior to a
change in ownership which occurred in January 1997, Mr. Makins was a
director of King and Shaxson (Holdings) plc, a British bank and discount
house. Prior to July 1988, he was managing director of John Govett & Co.
Ltd. Mr. Makins is a member of the Compensation Committee of the Board of
Directors of Sun World
Mitt Parker is a Director of Sun World and has been working in the
produce industry for 25 years. Since 1994 he has been the South Atlantic
Regional Vice President of Albert Fisher Group, PLC. In 1989 he sold the
Mitt Parker Company, which he had founded in 1975, and its food service
distribution division, Atlanta's Finest Foods, to Albert Fisher Group, PLC.
He continued to manage that company until 1994. He also owns Parker
Holdings Limited, which has various other produce holding investments,
mainly in the service area of the business. Mr. Parker serves as Chairman
of the Compensation Committee and as a member of the Audit Committee of the
Board of Directors of Sun World.
CADIZ DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information, the present
occupation and business experience for the past five years of each director
and executive officer of Cadiz:
NAME AGE POSITION
----- ----- ---------
Dwight W. Makins 45 Chairman of the Board
Keith Brackpool 39 Chief Executive Officer and Director
Susan K. Chapman 43 Chief Financial Officer and Secretary
Russ Hammond 54 Director
Stephen D. Weinress 55 Director
Murray H. Hutchison 58 Director
Dwight W. Makins was elected as Chairman of the Board of Cadiz in
December 1991. Mr. Makins currently serves as Chairman of Greenway
Holdings plc, a British waste oil recycling company and as a director of
several other British companies. Prior to a change in ownership which
occurred in January 1997, Mr. Makins was a director of King and Shaxson
(Holdings) plc, a British bank and discount house. Prior to July 1988, he
was managing director of John Govett & Co. Ltd. Mr. Makins is a member of
the Audit Committee and Compensation Committee of the Board of Directors of
Cadiz.
Keith Brackpool is a founder of Cadiz, and has served as a member of
Cadiz Board of Directors since September 1986, and served as Chairman of
the Board from 1989 through December 1991, when he was reappointed as Chief
Executive Officer of Cadiz. From October 1989 until May 1991,
Mr. Brackpool was employed as the President of Albert Fisher, Inc., a
wholly-owned subsidiary of The Albert Fisher Group PLC, a U.K. corporation
and was a director of The Albert Fisher Group PLC until May 31, 1991.
Since 1988, Mr. Brackpool has served as an officer and principal of the
general partner of 1334 Partners, Ltd., a California limited partnership
which holds commercial real estate in Southern California.
Susan K. Chapman became Chief Financial Officer and Secretary of Cadiz
in November 1993. From 1985 until she joined Cadiz, Ms. Chapman served as
Vice President of Operations and Controller of Agora Development, Inc., a
private real estate development company, where she supervised all financial
and operational aspects of such company. Prior thereto, she served for
five years as Senior Accountant with the accounting firm of Price
Waterhouse LLP, following which she served as a senior financial executive
of a privately held manufacturing company. Ms. Chapman is a Certified
Public Accountant.
Russ Hammond was named to Cadiz Board of Directors in December 1991.
Since March 1987 Mr. Hammond has been self-employed, and his business
activities primarily involve private investments in various companies.
Mr. Hammond also serves as Chairman of a Canadian oil and gas company
traded on the Alberta exchange. Prior to March 1987, Mr. Hammond was
managing director of Greenwell-Montagu Securities, a British brokerage
firm. Mr. Hammond serves as the Chairman of the Audit Committee of the
Board of Directors of Cadiz.
Stephen D. Weinress was appointed a director of Cadiz in
September 1993. Since 1984 he has been the Managing Director of
L.H. Friend, Weinress, Frankson & Presson, Inc., an investment banking firm
based in Irvine, California. Mr. Weinress is a member of the Audit
Committee and Compensation Committee of the Board of Directors of Cadiz.
Murray H. Hutchison was appointed a director of Cadiz in June 1997.
Since his retirement in 1994 from International Technology Corporation
("ITC"), Mr. Hutchison has been self-employed with his business activities
involving primarily the management of an investment portfolio. From 1976
to 1994, Mr. Hutchison served as Chief Executive Officer and Chairman of
ITC, a diversified environmental management company traded on the New York
Stock Exchange. Mr. Hutchison also serves as a director of several other
U.S. companies. Mr. Hutchison serves as Chairman of the Compensation
Committee of the Board of Directors of Cadiz.
Directors of Cadiz and Sun World hold office until the next annual
meeting of stockholders or until their successors are elected and
qualified. There are no family relationships between any directors or
current officers of Sun World. Officers serve at the discretion of the
Board of Directors.
EXECUTIVE COMPENSATION
The tables and discussion below set forth information about the
compensation awarded to, earned by, or paid to the following executive
officers of Cadiz (which include certain officers of Sun World) during the
nine months ended December 31, 1996 and the fiscal years ended
March 31, 1995 and 1996.
SUMMARY COMPENSATION TABLE
Long-Term Compensatin Awards
--------------------------
Name and Annual Restricted
Principal Fiscal Compensation Stock Stock
Position Year End(1) Salary Bonus Awards Options
- --------------- --------------- -------- --------- ---------- ---------
Keith Brackpool December 31, 1996 $306,250 $ 625,000 $ 656,250(3) $250,000(4)
Chief Executive March 31, 1996 350,000 175,000 -0- -0-
Officer March 31, 1995 280,000 -0- -0- 750,000
Susan K.
Chapman December 31, 1996 95,000 25,000 -0- -0-
Chief Financial
Officer March 31, 1996 130,000 -0- -0- -0-
and Secretary March 31, 1995 110,000 -0- -0- 25,000(5)
Timothy J.
Shaheen(6) December 31, 1996 181,891 125,000 -0- 400,000(7)
Chief Executive
Officer - March 31, 1996 44 551 -0- -0- -0-
Sun World
Stanley E.
Speer(8) December 31,1996 79,607 56,250 -0- 200,000(9)
Chief Financial
Officer
and Secretary
- Sun World
- ----------------
(1) In December 1996 Cadiz changed its fiscal year end from March 31 to
December 31. Consequently, information is presented in this table
for the nine months ended December 31, 1996 and the fiscal years
ended March 31, 1996 and 1995. The executive officers for whom
compensation has been disclosed for the nine months ended December
31, 1996 constituted all of Cadiz' executive officers as of
December 31, 1996. The total annual salary and bonus of each such
officer, on an annualized basis, exceeds $100,000.
(2) No column for "Other Annual Compensation" has been included to show
compensation not properly categorized as salary or bonus, which
consisted entirely during each fiscal year of perquisites and other
personal benefits, the aggregate amount of which did not exceed
the lesser of either $50,000 or ten percent of the total of annual
salary and bonus reported for each of the above named executive
officers for each fiscal year. See "Employment Arrangements."
(3) On March 24, 1997, with a retroactive grant date of September 13,
1996, Cadiz awarded Mr. Brackpool a total of 125,000 shares of
restricted stock, at no cost, in consideration of extraordinary
services performed during 1996 in connection with Cadiz'
acquisition of Sun World, subject to the satisfaction of certain
conditions, namely, that (i) 50,000 of the shares would vest and be
issued upon completion of a refinancing of Sun World's secured debt
(which refinancing was completed on April 16, 1997), and (ii)
25,000 of the shares would vest and be issued each year on
September 12, 1997, 1998 and 1999, if Mr. Brackpool is then
employed by Cadiz as its Chief Executive Officer. If Mr.
Brackpool's employment is terminated without cause prior to the
vesting or issuance of any of these shares, all of such shares will
immediately vest and be issued. None of the 125,000 shares were
issued at December 31, 1996. Dividends will be paid on such shares
(when issued and outstanding) only to the same extent, if any, that
dividends are paid on all other outstanding shares of Common Stock.
(4) The 250,000 options granted to Mr. Brackpool during the fiscal year
ended December 31, 1996 were conditional options, of which 125,000
of such options have since vested.
(5) The 25,000 options granted to Ms. Chapman during the fiscal year
ended March 31, 1995 were conditional options, all of which have
since vested.
(6) Mr. Shaheen joined Cadiz in January 1996 and on September 14, 1996
was appointed Chief Executive Officer of Sun World. Salary
reported for the fiscal year ended March 31, 1996 represents
compensation for the period January 1996 through March 31, 1996.
(7) The 400,000 options granted to Mr. Shaheen during the fiscal year
ended December 31, 1996 were conditional options, of which 150,000
such options have since vested.
(8) Mr. Speer joined Cadiz in August 1996 and on September 14, 1996 was
appointed Chief Financial Officer and Secretary of Sun World.
(9) The 200,000 options granted to Mr. Speer during the fiscal year
ended December 31, 1996 were conditional options, of which 150,000
such options have since vested.
Option Grants in Last Fiscal Year
Percent Potential
of Realizable Value
Total Exer- at Assumed
Options cise Annual Rates
Granted to Price of Stock Price
Employees Per Appreciation
in Share Expira- for
Options Fiscal ($/Sh) tion option term (5)
Name Granted(1) Year(2) (3) Date(4) 5% 10%
- --------------- ------------ -------- ------ -------- -------------------
Keith Brackpool 250,000(6) 13.89% $4.50 9-13-01 $310,817 $703,295
Timothy J. Shaheen 400,000(7) 22.22% $4.50 9-13-01 $497,307 $1,125,272
Stanley E. Speer 200,000(8) 11.11% $4.50 9-13-01 $248,653 $ 562,636
- ---------------
(1) All options granted to the named officer were incentive options.
(2) Also includes options granted to consultants during the fiscal year.
(3) All options were granted at market value (average of closing bid and
asked prices for Cadiz' Common Stock as reported by Nasdaq) at date of
grant.
(4) All options have a fixed term of five years.
(5) Potential gains are reported net of the option exercise price, but
before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual gains on stock option
exercises are dependent on the future performance of the Common Stock and
overall stock market conditions. The amounts reflected in this table may
not necessarily be achieved.
(6) Of this total, 125,000 options have vested and 125,000 options are to
vest at such time as the stock of Cadiz is traded at $9.00 per share.
(7) Of this total, 150,000 options have vested, 100,000 options vest
within one year following the date of the grant, 50,000 options are
conditioned upon certain performance criteria associated with Cadiz, and
100,000 options are conditioned upon certain criteria to be established
by the Board of Directors.
(8) Of this total, 150,000 options have vested, 25,000 options are
conditioned upon certain performance criteria associated with Cadiz, and
25,000 options are conditioned upon certain criteria to be established by
the Board of Directors.
Fiscal Year-End Option Values - Cadiz
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable (1)
----------------- ------------------ ------------------
Keith Brackpool 750,000/250,000(2) $281,250/$93,750
Susan K. Chapman 125,000/0(3) $196,875/0
Timothy J. Shaheen 0/400,000(4) $0/150,000
Stanley E. Speer 0/200,000(5) $0/75,000
(1) Based upon the Nasdaq National Market closing sales price
per share at fiscal year end. No options were exercised by
the named executive officers during the last fiscal year.
(2) Includes 750,000 shares underlying presently exercisable
options. Does not include 250,000 shares underlying
conditional options, the conditions to the vesting of which
had not been met as of December 31, 1996.
(3) Includes 125,000 shares underlying presently exercisable
options.
(4) Does not include 400,000 shares underlying conditional
options, the conditions to the vesting of which had not been
met as of December 31, 1996.
(5) Does not include 200,000 shares underlying conditional
options, the conditions to the vesting of which had not been
met as of December 31, 1996.
Employment Arrangements
Mr. Brackpool is compensated by Cadiz pursuant to a Compensation
Agreement effective as of April 2, 1993. Under the terms of this
Agreement, Mr. Brackpool receives compensation of $41,667 per month of
which $12,500 is paid by Sun World. Mr. Brackpool also receives the use of
an automobile leased by Sun World.
Ms. Chapman is compensated by Cadiz pursuant to a letter agreement
effective November 5, 1993 which provides for base compensation of $130,000
per annum. Ms. Chapman also receives the use of an automobile owned by
Cadiz.
Timothy J. Shaheen has been engaged as Chief Executive Officer of Sun
World. In this capacity, Mr. Shaheen receives compensation from Sun World
at an annual rate of $250,000 and the Board of Directors has approved the
grant to Mr. Shaheen of an aggregate of 400,000 incentive stock options for
the purchase of Common Stock of Cadiz at an exercise price of $4.50 per
share. The vesting of 250,000 of these options is subject to the
satisfaction of certain performance criteria which are either tied to the
performance of Sun World or are subject to the discretion of Sun World's
Board of Directors. Mr. Shaheen also receives the use of an automobile
leased by Sun World.
Stanley E. Speer has been engaged as Senior Vice President, Chief
Financial Officer and Secretary of Sun World. In this capacity, Mr. Speer
receives compensation from Sun World at an annual rate of $225,000 and the
Board of Directors has approved the grant to Mr. Speer of an aggregate of
200,000 incentive stock options for the purchase of Common Stock of Cadiz
at an exercise price of $4.50 per share. The vesting of 50,000 of these
options is subject to the satisfaction of certain performance criteria
which are either tied to the performance of Sun World or are subject to the
discretion of Sun World's Board of Directors. Mr. Speer also receives the
use of an automobile leased by Sun World.
Compensation of Directors
Mr. Brackpool does not receive any additional compensation for serving
as a director of either Sun World or Cadiz.
Mr. Makins receives cash compensation for his services as Chairman of
Cadiz pursuant to a Compensation Agreement effective April 2, 1993, which
provides for base compensation of $75,000 per year, payable quarterly in
advance, plus payment for certain additional services performed on behalf
of Cadiz, at the rate of $1,000 per day. During Cadiz' 1996 fiscal year,
Mr. Makins received total cash compensation of $77,750 pursuant to this
Compensation Agreement. Mr. Makins receives cash compensation for his
services as a director of Sun World in the amount of $25,000 per year,
payable quarterly in advance.
Mr. Hammond receives cash compensation for his services as a Director
of Cadiz pursuant to a Compensation Agreement effective April 2, 1993,
which provides for compensation of $25,000 per year, payable quarterly in
advance. During Cadiz' 1996 fiscal year, Mr. Hammond received total cash
compensation of $25,000 pursuant to this arrangement.
Mr. Weinress receives cash compensation for his services as a Director
of Cadiz in the amount of $25,000 per year, payable quarterly in advance.
During Cadiz' 1996 fiscal year, Mr. Weinress received total cash
compensation of $25,000 pursuant to this arrangement.
Mr. Hutchison receives cash compensation for his services as a
Director of Cadiz in the amount of $25,000 per year, payable quarterly in
advance.
As a Director of Sun World, Mr. Beek receives cash compensation in the
amount of $25,000 per year, payable quarterly in advance.
Mr. Parker receives cash compensation for his services as a Director
of Sun World in the amount of $25,000 per year, payable quarterly in
advance.
PRINCIPAL STOCKHOLDERS
All of the outstanding shares of common stock of Sun World are held by
Cadiz, and all of the outstanding shares of the Subsidiary Guarantors are
held by Sun World.
The following table sets forth, as of July 9, 1997, the ownership of
Common Stock of Cadiz by each stockholder who is known by Cadiz to own
beneficially more than 5 percent of the outstanding Common Stock, by each
director, by each executive officer listed in the Summary Compensation
Table (see "Executive Compensation"), and by all directors and officers as
a group.
Amount and Nature of Percent
Name and Address Beneficial Ownership of Class
Morgan Stanley Group, Inc., et al. 2,528,276(1) 7.81%
1251 Avenue of the Americas
New York, NY 10020
Fidelity International Limited, et al. 2,434,067(2) 7.52%
Pembroke Hall
42 Crow Lane
Hamilton, Bermuda
The Capital Group Companies, Inc. 1,715,000(3) 5.30%
333 South Hope Street
Los Angeles, CA 90071
Dwight W. Makins 425,000(4) 1.30%
Beaurepaire House
Bramley, Tadley
Hampshire RG26 5EH
United Kingdom
Keith Brackpool 1,113,893(5) 3.35%
100 Wilshire Boulevard
Sixteenth Floor
Santa Monica, CA 90401-1115
Russ Hammond 930,617(6) 2.86%
10 Compton Terrace
London N1 2UN
United Kingdom
Stephen D. Weinress 201,158(7) *
3333 Michelson Drive
Irvine, CA 92715
Murray H. Hutchison -0- (8) *
17134 El Vuelo
Rancho Santa Fe, CA 92067
Susan K. Chapman 127,700(9) *
100 Wilshire Boulevard
Sixteenth Floor
Santa Monica, CA 90401-1115
Timothy J. Shaheen 155,000(10) *
P.O. Box 80298
Bakersfield, CA 93380
Stanley E. Speer 150,000(11) *
P.O. Box 80298
Bakersfield, CA 93380
All Directors
and Officers
as a Group 3,103,368(3)(4)(5)
(8 individuals) (6)(7)(8)(9)
(10)(11) 9.07%
- -------------------------
* Less than 1%
(1) Morgan Stanley Group, Inc. ("MS Group") filed a Schedule 13G with
the Securities and Exchange Commission indicating that they are the
indirect beneficial owner of 2,528,276 shares of Common Stock, arising from
the indirect beneficial ownership of such shares by Morgan Stanley Asset
Management Limited ("MSAM"), a subsidiary of MS Group. The address of MSAM
is 25 Cabot Square, Canary Wharf, London E14 4QA, England. All such shares
are held by MSAM in its capacity as an Investment Adviser, and MS Group and
MSAM share voting and investment power with respect to the shares which
they may be deemed to beneficially own. MS Group and MSAM each disclaim
beneficial ownership of such shares pursuant to Rule 13d-4 under the
Securities Exchange Act of 1934.
(2) Fidelity International Limited ("FIL") and FMR Corp. ("FMR") have
each filed Schedule 13Ds and amendments thereto with the Securities and
Exchange Commission indicating that, although they do not consider
themselves to be acting as a "group," they hold, directly or indirectly, a
total of 2,434,067 shares of Common Stock. The Schedule 13Ds state that
FIL beneficially owns, as investment adviser or the parent of the
investment adviser to certain international funds and international pension
accounts, 2,426,667 shares of Common Stock and that such funds and accounts
and FIL, as investment adviser to the funds and accounts, have sole voting
and investment power as to all such shares. A partnership controlled by
Mr. Edward C. Johnson 3d and members of his family own shares of FIL with
the right to cast approximately 47.22 percent of the total votes which may
be cast by shareholders of FIL. According to the Schedule 13Ds, FMR
beneficially owns, through Fidelity Management Trust Company, 7,400 shares
of Cadiz' Common Stock. Mr. Johnson, who is Chairman of FIL and FMR, and
certain family members, are the predominant owners of FMR's Class B shares
of common stock representing approximately 49 percent of the voting power
of FMR. Mr. Johnson and Abigail Johnson together own 36.5 percent of the
outstanding voting stock of FMR. The Johnson family group and all other
Class B shareholders have entered into a shareholders' voting agreement
under which all Class B shares will be voted in accordance with the
majority vote of Class B shares. The Schedule 13Ds indicate that FIL was a
subsidiary of Fidelity Management & Research Company ("Fidelity") prior to
June 30, 1980, at which time the shares of FIL held by Fidelity were
distributed as a dividend to the shareholders of FMR, and that FIL
currently operates as an entity independent of FMR and Fidelity. The
principal offices of FMR, Fidelity and Mr. Johnson are located at 82
Devonshire Street, Boston, Massachusetts 02109.
(3) According to information provided to Cadiz, the Capital Group
Companies, Inc. may be deemed to be the indirect beneficial owner of
1,715,000 shares of Common Stock as Discretionary Manager by virtue of its
affiliates acting as investment manager to a number of institutional
investors.
(4) Includes 300,000 shares underlying presently exercisable options.
(5) Includes 875,000 shares underlying presently exercisable options.
Does not include 75,000 shares issuable upon the satisfaction of certain
conditions established by the Board of Directors, none of which have been
met.
(6) Includes 285,017 shares held by a corporation of which Mr. Hammond
is an affiliate. Also includes 125,000 shares underlying presently
exercisable options and 440,000 Conversion Shares and 21,995 Dividend
Shares held by Mr. Hammond and members of his family.
(7) Includes 125,000 shares underlying presently exercisable options.
Also includes 19,200 Conversion Shares and 958 Dividend Shares.
(8) Does not include 25,000 options subject to vesting not earlier than
December 12, 1997.
(9) Includes 125,000 shares underlying presently exercisable options.
(10) Includes 150,000 shares underlying presently exercisable options.
Does not include 250,000 shares underlying conditional options held by Mr.
Shaheen, the conditions to the vesting of which have not yet been met.
(11) Includes 150,000 shares underlying presently exercisable options.
Does not include 50,000 shares underlying conditional options held by Mr.
Speer, the conditions to the vesting of which have not yet been met.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SUN WORLD
On September 13, 1996, concurrently with the Sun World Acquisition,
Cadiz and Sun World entered into a ten year Services Agreement whereby
Cadiz agreed to provide Sun World with management and administrative
services and facilities. As consideration for services to be performed by
Cadiz under the Services Agreement, Sun World agreed to pay Cadiz the sum
of $1.5 million annually and to reimburse Cadiz for any direct costs
incurred by Cadiz in providing services and facilities to Sun World under
the Services Agreement.
Pursuant to the Services Agreement, Cadiz and Sun World have entered
into a Tax Sharing Agreement whereby Cadiz has agreed to prepare and file
all tax returns required to be prepared and filed on a consolidated basis.
Under the Tax Sharing Agreement, Sun World has agreed to pay to Cadiz an
amount equal to the federal and state income taxes which Sun World would
have paid if it were filing separate returns, and Cadiz will pay to Sun
World an amount equal to any savings obtained by Cadiz from the use of
Company tax losses or credits.
Also pursuant to the Services Agreement, Cadiz has leased to Sun World
approximately 1,600 acres currently developed to agricultural use at Cadiz,
California (the "Cadiz Ranch") pursuant to a ten year Agricultural Lease.
Annual rental under the Agricultural Lease is $250 per acre.
CADIZ
Since April 1, 1995, Cadiz has issued in private placements a total of
190,000 shares of Common Stock ranging in price from $4.00 per share to
$5.75 per share to Fidelity Investment Services, whose affiliates have
filed a Schedule 13D with the Securities and Exchange Commission indicating
that they hold in excess of five percent of Cadiz' outstanding Common Stock
in their capacity as discretionary manager for a number of investment
funds. See "Principal Stockholders."
Since April 1, 1995, Cadiz has issued in private placements a total of
90,000 shares of common stock at a price of $5.75 per share to Morgan
Stanley Asset Management, Inc. ("MSAM"), an affiliate of Morgan Stanley
Group, Inc., who filed a Schedule 13G with the Securities and Exchange
Commission indicating that it may be deemed to be the indirect beneficial
owner of in excess of five percent of Cadiz' outstanding Common Stock in
its capacity as an Investment Advisor. In addition, on September 13, 1996,
Cadiz issued 2,700 shares of Series A Preferred Stock ("Series A
Preferred") for $1,000 per share to MSAM in an institutional private
placement which provided financing to Cadiz for the Sun World Acquisition.
The Series A Preferred was converted on May 7, 1997 into 720,000 shares of
Common Stock at a conversion price of $3.75 per share. See "Principal
Stockholders."
In connection with a private placement in October 1995, Cadiz issued
82,317 shares of Common Stock at a price of $4.10 per share to a
corporation of which Mr. J. F. R. Hammond, a director of Cadiz, is an
affiliate. In addition, on September 13, 1996, Cadiz issued 1,650 shares
of Series A Preferred at a price of $1,000 per share to Mr. Hammond and
members of his family. These shares of Series A Preferred were converted on
May 7, 1997 into 440,000 shares of Common Stock at a conversion price of
$3.75 per share. See "Principal Stockholders."
In February 1995, L.H. Friend, Weinress, Frankson & Presson, Inc.
("L.H. Friend"), an investment banking firm which is an affiliate of Mr.
Stephen D. Weinress, a director of Cadiz, entered into an agreement with
Cadiz pursuant to which L.H. Friend provided investment banking services
with respect to the development by Cadiz of its water resources at its
Piute property. As compensation for these services, Cadiz agreed to pay to
L.H. Friend a retainer fee of $2,000 per month through July 31, 1995.
Cadiz has also paid the Weinress Group, a consulting firm which is an
affiliate of Mr. Weinress, consulting fees totaling $55,950 since April 1,
1995. Cadiz believes that the terms of these transactions were at least as
favorable to Cadiz as those which could have been negotiated in arm's
length transactions with unaffiliated third parties. In addition, for
services rendered in connection with the placement of the Series A
Preferred in September 1996, Cadiz paid a fee to L.H. Friend in the amount
of $145,500 and issued 72 shares of Series A Preferred with a value of
$1,000 per share, which were converted on May 7, 1997 into 19,200
Conversion Shares at a conversion price of $3.75 per share. See "Principal
Stockholders."
DESCRIPTION OF EXCHANGE NOTES
General
The Old Notes were and the Exchange Notes will be issued
pursuant to an Indenture (the "Indenture") between Sun World,
Cadiz and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"). The terms of the Exchange Notes include those
stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The Exchange Notes are subject to all such
terms, and Holders of Exchange Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the
Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. Copies of the
proposed form of Indenture, the Collateral Documents and
Registration Rights Agreement are available as set forth above
under "- Available Information." The definitions of certain
terms used in the following summary are set forth below under
"- Certain Definitions." For purposes of this summary, the term
"Cadiz" refers only to Cadiz Land Company, Inc. and not to any
of its Subsidiaries; and the term the "Issuer" refers only to
Sun World International, Inc. and not to any of its
Subsidiaries.
Except as otherwise indicated below, the following summary
applies to both the Old Notes and the Exchange Notes. As used
herein, the term "Notes" shall mean the Old Notes and the
Exchange Notes, unless otherwise indicated.
The form and terms of the Exchange Notes are substantially
identical to the form and terms of the Old Notes, except that
the Exchange Notes (i) will be registered under the Securities
Act, (ii) will not provide for Liquidated Damages, and (iii)
will not bear any legends restricting transfer thereof. The
Exchange Notes will be issued solely in exchange for an equal
principal amount of Old Notes. As of the date hereof, $115
million aggregate principal amount of Old Notes is outstanding.
See "The Exchange Offer."
As of the date of the Indenture, all of Sun World's
Subsidiaries will be Restricted Subsidiaries. However, under
certain circumstances, Sun World will be able to designate
current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to
$115.0 million and will mature on April 15, 2004. Interest on
the Notes will accrue at the rate of 11-1/4% per annum and will
be payable semi-annually in arrears on April 15 and October 15,
commencing on October 15, 1997, to Holders of record on the
immediately preceding April 1 and October 1. Interest on the
Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Principal,
premium, if any, on the Notes will be payable at the office or
agency of Sun World maintained for such purpose within the City
and State of New York or, at the option of Sun World, payment of
interest may be made by check mailed to the Holders of the Notes
at their respective addresses set forth in the register of
Holders of Notes; provided that all payments of principal,
premium and interest with respect to Notes the Holders of which
have given wire transfer instructions to Sun World will be
required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Until
otherwise designated by Sun World, Sun World's office or agency
in New York will be the office of the Trustee maintained for
such purpose. The Notes will be issued in denominations of
$1,000 and integral multiples thereof.
Ranking and Security
The Notes rank pari passu with all Indebtedness of Sun
World that is not subordinated to the Notes, including
borrowings under the Revolving Credit Agreement. The Notes will
rank senior to any Indebtedness of Sun World that is
subordinated to the Notes.
The Notes are unconditionally guaranteed on a senior basis
by Cadiz and by each of the Subsidiary Guarantors (collectively,
the "Guarantors"). See " -Guarantees." The Guarantees (as
defined) will rank pari passu with all Indebtedness of Cadiz or
the Subsidiaries Guarantors, as the case may be, that is not
subordinated to such Guarantees and senior to any Indebtedness
of Cadiz or the Subsidiary Guarantors, as the case may be, that
is subordinated to such Guarantees.
The Notes are secured by a first priority Lien on the
Collateral owned or hereafter acquired by Sun World and the
Cadiz Guarantee will be secured by a pledge of the stock of Sun
World. Each of the Subsidiary Guarantees will be secured by a
first priority Lien on the Collateral owned or hereafter
acquired by each of the Subsidiary Guarantors. The Collateral
owned by Sun World includes, without limitation, (i) all of the
stock of Sun World's Subsidiaries, (ii) all of its real
property, including additions and improvements, (iii) all of its
personal property, plant, equipment, furnishings and fixtures,
(iv) all of its rights to water and (v) all crops and plants, in
each case excluding the Excluded Assets. The Collateral owned
by the Subsidiary Guarantors includes, without limitation,
(i) all real property, including additions and improvements,
(ii) all personal property, plant, equipment, furnishings and
fixtures, and (iii) all crops and plants, in each case excluding
the Excluded Assets.
The Notes are effectively subordinated to existing and
future secured Indebtedness to the extent of any Excluded Assets
serving as collateral for such Indebtedness, and each Guarantee
likewise will be effectively subordinated to existing and future
secured Indebtedness of the respective Guarantors to the extent
of any Excluded Assets serving as collateral for such
Indebtedness. In that regard, borrowings under the proposed
Revolving Credit Agreement will be secured by a first priority
Lien on the Revolving Credit Agreement Collateral owned by Sun
World and by certain of Sun World's Subsidiaries (which will
include all of their respective cash and cash equivalents,
accounts receivable, growing crops and inventory) and borrowings
under a potential future Cadiz Credit Agreement permitted under
the Indenture, Non-Recourse Debt used to finance a Qualified
Project, Existing Indebtedness of Cadiz or Permitted Refinancing
Indebtedness of Cadiz may be secured by a first priority Lien on
the assets owned by Cadiz, other than the stock of Sun World or
Cadiz' Equity Interests or partnership interests in its
Subsidiaries. In addition, the Indenture will permit Cadiz, Sun
World and the Subsidiary Guarantors to create Liens on certain
of their assets, including Liens securing Purchase Money
Indebtedness, and the Exchange Notes and the Guarantees will
also be effectively subordinated to such Purchase Money
Indebtedness and other obligations secured by such Liens to the
extent of any assets serving as collateral for such
Indebtedness. See the definition of "Permitted Liens" under
" -Certain Definitions."
So long as no Default or Event of Default shall have
occurred and be continuing, and subject to certain terms and
conditions in the Indenture and the Collateral Documents, Cadiz,
Sun World and its Subsidiaries will be entitled to receive and
retain all cash dividends, interests and other payments made
upon or with respect to the Collateral pledged by them and to
exercise any voting and other consensual rights pertaining to
the Collateral pledged by them. Upon the occurrence and during
the continuance of a Default or Event of Default, (a) all rights
of Cadiz, Sun World and its Subsidiaries to exercise such voting
or other consensual rights shall cease, and all such rights
shall become vested in the Trustee which, to the extent
permitted by law, shall have the sole right to exercise such
voting and other consensual rights and (b) all rights of Cadiz,
Sun World and its Subsidiaries to receive all cash dividends,
interest and other payments made upon or with respect to the
pledged Collateral will cease and such cash dividends, interest
and other payments will be paid to the Trustee, and (c) the
Trustee may sell the pledged Collateral or any part thereof in
accordance with the terms of the Collateral Documents. All
funds distributed under the Collateral Documents and received by
the Trustee for the benefit of the Holders of the Notes will be
distributed by the Trustee in accordance with the provisions of
the Indenture.
Under the terms of the Collateral Documents and the
Indenture, the Trustee may foreclose on the pledged Collateral
following an Event of Default. The right of the Trustee to
repossess and dispose of the Collateral upon the occurrence of
an Event of Default under the Indenture and the Collateral
Documents is likely to be significantly impaired by applicable
bankruptcy law if a bankruptcy case is commenced by or against
Cadiz, Sun World or any of Sun World's Subsidiaries prior to the
Trustee having repossessed and disposed of the Collateral, and,
in the case of real property Collateral, could also be
significantly impaired by restrictions under state law. See
"Risk Factors -Certain Bankruptcy Limitations" and "Risk
Factors- Certain Limitations under State Law."
The Collateral release provisions of the Indenture permit
the release of Collateral without the substitution of additional
Collateral under certain circumstances, including in connection
with certain Asset Sales. See "- Possession, Use and Release of
Collateral." As described under "- Certain Covenants Asset
Sales," the Net Proceeds of Asset Sales may be required to be
utilized to make an Asset Sale Offer (as defined). To the
extent an Asset Sale Offer is not accepted by Holders, the
unutilized Net Proceeds will be retained by Sun World or the
applicable Subsidiary Guarantor, free and clear of the Lien of
the Indenture and the Collateral Documents. In addition, the
term "Asset Sale," as defined in the Indenture, will exclude
certain sales or other dispositions of assets, including,
subject to limited exceptions, sales of Revolving Credit
Agreement Collateral. See " -Certain Definitions." As a
result, Sun World and its Subsidiaries will be permitted to sell
certain assets without compliance with the foregoing provisions.
The Collateral will also be released as security for the Notes
and the Guarantees upon a legal defeasance or covenant
defeasance of the Notes (see " -Legal Defeasance and Covenant
Defeasance") and, upon the release of any Subsidiary Guarantor
as described in the last paragraph under " -Guarantees" below,
the Collateral pledged by such Subsidiary Guarantor will be
released as security for its Subsidiary Guarantee.
The consolidated book value of the Collateral at
December 31, 1996 was $135 million. The value of the Collateral
in the event of a liquidation will depend upon market and
economic conditions, the availability of buyers and similar
factors. In that regard, the Excluded Assets (which include
cash and cash equivalents, accounts receivable and inventory of
Sun World and Sun World's Subsidiaries) are material to Cadiz,
Issuer and Sun World's Subsidiaries and are necessary to operate
their businesses. The fact that the Excluded Assets are not
pledged as security for the Notes could have a material adverse
effect on the value of the Collateral. Accordingly, there can
be no assurance that proceeds of any sale of the Collateral
pursuant to the Indenture and the related Collateral Documents
following an Event of Default would be sufficient to satisfy, or
would not be substantially less than, amounts due under the
Notes. See "Risk Factors -Certain Limitations on the Collateral
and the Guarantees." If the proceeds of any of the Collateral
were not sufficient to repay all amounts due on the Notes, the
holders of the Notes (to the extent not repaid from the proceeds
of the sale of the Collateral) would have only an unsecured
claim against the remaining assets of Cadiz, Sun World and the
Subsidiary Guarantors. By its nature, some or all of the
Collateral will be illiquid and may have no readily
ascertainable market value. Likewise, there can be no assurance
that the Collateral will be saleable, or, if saleable, that
there will not be substantial delays in its liquidation. To the
extent that Liens, rights or easements granted to third parties
encumber assets located on property owned by Cadiz, Sun World or
the Subsidiary Guarantors, including the Excluded Assets, such
third parties have or may exercise rights and remedies with
respect to the property subject to such Liens that could
adversely affect the value of the Collateral and the ability of
the Trustee or the holders of the Notes to realize or foreclose
on Collateral.
Guarantees
Sun World's obligations under the Notes are fully and
unconditionally guaranteed, jointly and severally, on a senior
secured basis by Cadiz (the "Cadiz Guarantee"), secured by a
pledge of Sun World's stock, and on a senior secured basis by
each of Sun World's Subsidiary Guarantors (the "Subsidiary
Guarantees" and, together with the Cadiz Guarantee, the
"Guarantees"). The obligation of each Guarantor under its
Guarantee, and the grant by each Guarantor of a Lien on certain
of its assets to secure its obligations under its Guarantee, may
be subject to review under various laws for the protection of
creditors, including, without limitation, laws governing
fraudulent conveyances and transfers. To the extent that the
obligations of any Guarantor under its Guarantee, or the Lien on
Collateral granted by any Guarantor, were held to be
unenforceable as a fraudulent conveyance or transfer or for any
other reasons, the holders of Notes would cease to have any
direct claim against such Guarantor and would also cease to have
any Lien on the assets of such Guarantor. In an attempt to avoid
this result, the Guarantees will provide that the obligations of
each Guarantor thereunder are limited to the maximum amount as
will not constitute a fraudulent conveyance or fraudulent
transfer under applicable law, and such amount could be
substantially less than the obligations on the Notes. In
addition, any limitation on the amounts payable by a Guarantor
under its Guarantee pursuant to such provision will result in a
corresponding limitation on the ability of the Trustee to
realize upon the Collateral pledged by such Guarantor. See
"Risk Factors -Fraudulent Conveyance."
The Indenture provides that neither Cadiz nor any
Subsidiary Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with
such Guarantor unless (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes
all the obligations of such Guarantor pursuant to a supplemental
indenture and appropriate Collateral Documents in form and
substance reasonably satisfactory to the Trustee;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; (iii) such Guarantor, or any
Person formed by or surviving any such consolidation or merger,
would have Consolidated Net Worth (immediately after giving
effect to such transaction), equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding
the transaction; (iv) Sun World would be permitted by virtue of
Sun World's pro forma Fixed Charge Coverage Ratio, immediately
after giving effect to such transaction, to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the covenant described above under the
caption "--Certain Covenants -Incurrence of Indebtedness and
Issuance of Preferred Stock;" (v) the Collateral owned by such
Guarantor (in the case of a merger or consolidation) or the
Collateral transferred to the surviving Person (in the case of
a transfer of assets) (A) shall continue to constitute
Collateral under the Indenture and the Collateral Documents,
(B) shall be subject to a Lien in favor of the Trustee for the
benefit of the holders of the Exchange Notes and (C) shall not
be subject to any Lien other than Liens expressly permitted by
the Indenture and the Collateral Documents; (vi) the property
and assets of the Person which is merged or consolidated with or
into such Guarantor or to which the properties and assets of
such Guarantor are transferred, to the extent that they are
property and assets of the types which would constitute
Collateral under the Collateral Documents shall be treated as
After-Acquired Property and such Guarantor or the Surviving
Person, as the case may be, shall take such actions as may be
necessary to cause such property and assets to be made subject
to the Lien of the Collateral Documents in the manner and to the
extent required by the Indenture and (vii) in the case of any
consolidation, merger, transfer, assignment or other disposition
involving Cadiz, Cadiz and Sun World have complied with the
provisions of the covenant described in "Certain
Covenants Change of Control."
Except as provided in the immediately preceding paragraph
and under "- Certain Covenants" below, Sun World is not
restricted from selling or otherwise disposing of any Subsidiary
Guarantor. The Indenture provides that, in the event of a sale
or other disposition of all of the assets of any Subsidiary
Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor (or its parent) owned by Sun World and its
Subsidiaries, in each case to a Person which is not Sun World or
a Subsidiary or Affiliate of Sun World and which is otherwise
made in compliance with the Indenture, such Subsidiary Guarantor
will be released from all of its obligations under its
Subsidiary Guarantee, the Indenture and the Collateral Documents
to which it is a party; provided that (i) such transaction is
made in accordance with the provisions described below under
"--Certain Covenants -Asset Sales;" and (ii) any such release shall
occur only if (a) all Indebtedness owing by such Subsidiary
Guarantor to Sun World or any of its Restricted Subsidiaries or
Unrestricted Subsidiaries shall have been paid in full and
(b) all obligations of such Subsidiary Guarantor under all of
its guarantees of, and under all of its pledges of assets or
other Liens which secure, Indebtedness of Sun World or any of
its Restricted Subsidiaries or Unrestricted Subsidiaries shall
also terminate.
Optional Redemption
The Notes will not be redeemable at Sun World's option
prior to April 15, 2001. Thereafter, the Notes will be subject
to redemption at any time at the option of Sun World, in whole
or in part, 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 and any
Liquidated Damages thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 15 of
the years indicated below:
Year Percentage
2001 . . . . . . . . . . . . . . . 105.625%
2002 . . . . . . . . . . . . . . . 102.813%
2003 and thereafter. . . . . . . . 100.000%
If less than all of the Notes are to be redeemed at any
time, selection of Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are
listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and
appropriate; provided that no Notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by
first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at
its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption
become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions
of them called for redemption.
Mandatory Redemption
Sun World is not required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Certain Covenants
Change of Control
The Indenture provides that upon the occurrence of a Change
of Control, each Holder of Notes will have the right to require
Sun World to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon to the
date of purchase (the "Change of Control Payment").
Within 10 days following any Change of Control, Sun World
will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering
to repurchase Notes pursuant to the procedures required by the
Indenture and described in such notice. Sun World will comply
with the requirements of Rule 14e-1 under the Act 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.
The Change of Control Offer will remain open for a period
of 20 Business Days following its commencement and no longer,
except to the extent that a longer period is required by
applicable law (the "Change of Control Offer Period"). No later
than five Business Days after the termination of the Change of
Control Offer Period (the "Change of Control Purchase Date"),
Sun World will purchase all Notes tendered in response to the
Change of Control Offer. Payment for any Notes so purchased
will be made in the same manner as interest payments are made.
If the Change of Control Purchase Date is on or after an
interest record date and on or before the related interest
payment date, any accrued and unpaid interest will be paid to
the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest will be
payable to Holders who tender Notes pursuant to the Change of
Control Offer.
On the Change of Control Payment Date, Sun World will, to
the extent lawful, (a) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control
Offer, (b) 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 (c) 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 Sun World. 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. Sun World will
publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment
Date.
Except as described above with respect to a Change of
Control, the Indenture does not contain provisions that permit
the Holders of Notes to require that Sun World repurchase or
redeem the Notes in the event of a takeover, recapitalization or
other restructuring.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, 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 assets of Cadiz, Sun World and Sun World's
Subsidiaries taken as a whole to any "person" (as such term is
used in Section 13(d)(3) of the Act), (ii) the adoption of a
plan relating to the liquidation or dissolution of Cadiz or Sun
World, (iii) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of
which is that any "person" (as defined above), becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Act, except that a person shall be deemed
to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a
subsequent condition), directly or indirectly, of more than 35%
of the Voting Stock of Cadiz (measured by voting power rather
than number of shares), (iv) the first day on which a majority
of the members of the Board of Directors of Sun World are not
Continuing Directors, (v) the first day on which Cadiz ceases to
own 100% of the outstanding Equity Interests of Sun World, or
(vi) Cadiz consolidates with, or merges with or into, any Person
or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any
Person, or any Person consolidates with, or merges with or into,
Cadiz, in any such event pursuant to a transaction in which any
of the outstanding Voting Stock of Cadiz is converted into or
exchanged for cash, securities or other property, other than any
such transaction where the Voting Stock of Cadiz outstanding
immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of
the outstanding shares of such Voting Stock of such surviving or
transferee Person (immediately after giving effect to such
issuance).
Asset Sales
The Indenture provides that Cadiz and Sun World will not,
and will not permit any of their Restricted Subsidiaries to,
consummate an Asset Sale unless (i) Cadiz, Sun World 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 (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of, (ii) at least 85% of the consideration
therefor received by Cadiz, Sun World or such Restricted
Subsidiary is in the form of cash; provided that the amount of
(x) any liabilities (as shown on the most recent balance sheet
of Cadiz, Sun World or any Restricted Subsidiary), of Cadiz, Sun
World or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated
to the Notes or any guarantee thereof) that are assumed by the
transferee of any such assets pursuant to a customary novation
agreement that releases Cadiz, Sun World, or such Restricted
Subsidiary from further liability and (y) any securities, notes
or other obligations received by Cadiz, Sun World or any such
Restricted Subsidiary from such transferee that are immediately
converted by Cadiz, Sun World or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision, (iii) if such Asset Sale
involves the disposition of Collateral, Sun World, Cadiz or such
Restricted Subsidiary has complied with the provisions described
under " -Possession, Use and Release of Collateral," and (iv)
Cadiz, Sun World or the Restricted Subsidiary, as the case may
be, applies the Net Proceeds as provided in the following
paragraph.
Any such Net Proceeds shall be applied within 180 days of
the related Asset Sale as follows:
(i) to the extent that such Net Proceeds are derived from
property or assets of Sun World which do not constitute
Collateral or are not deemed (pursuant to the provisions
described below) to constitute Collateral Proceeds
("Non-Collateral Proceeds"), such Non-Collateral Proceeds
may, at the option of Sun World, be applied to repay
Indebtedness outstanding under the Revolving Credit
Agreement or Existing Indebtedness;
(ii) to the extent that such Net Proceeds are derived from
property or assets of Cadiz which do not constitute
Collateral or are Non-Collateral Proceeds, such
Non-Collateral Proceeds may, at the option of Cadiz, be
applied to repay outstanding Indebtedness of Cadiz; and
(iii) with respect to any Net Proceeds derived from property
or assets which constitute Collateral ("Collateral
Proceeds") or derived from a transaction as a result of
which a Subsidiary Guarantor is released from its
Subsidiary Guarantee as provided in the last paragraph
under " -Guarantees" and which (pursuant to the provisions
described below) are deemed to be Collateral Proceeds, and
with respect to any Non-Collateral Proceeds remaining after
application as described in subparagraphs (i) or (ii) above
(all such Collateral Proceeds and amounts deemed to be
Collateral Proceeds, together with any such remaining
Non-Collateral Proceeds being hereinafter called,
collectively, the "Available Amount"), such Available
Amount shall, if Sun World so elects (or if Cadiz so elects
in the case of Net Proceeds derived from property or assets
of Cadiz) be applied to make an investment in properties
and assets constituting Permitted Businesses that replace
the properties and assets that were the subject of such
Asset Sale or in properties and assets that will constitute
Permitted Businesses ("Replacement Assets"); provided that
any Replacement Assets acquired with any such Collateral
Proceeds or amounts deemed to constitute Collateral
Proceeds (A) shall be owned by Cadiz, Sun World or the
Subsidiary Guarantor that made the Asset Sale and shall not
be subject to any Liens except as expressly permitted by
the Indenture and the Collateral Documents (and Cadiz, Sun
World or such Subsidiary Guarantor, as the case may be,
shall execute and deliver to the Trustee such Collateral
Documents or other instruments as shall be necessary to
cause such Replacement Assets to become subject to a Lien
in favor of the Trustee, for the benefit of the holders of
the Exchange Notes, securing its obligations under the
Exchange Notes or its Guarantee, as the case may be, and
otherwise shall comply with the provisions of the Indenture
applicable to After-Acquired Property); and (B) shall not
include any Excluded Assets.
Any portion of the Available Amount that is not used as
described in subparagraph (i), (ii) or (iii) above within such
180-day period shall constitute "Excess Proceeds" subject to
disposition as provided below. When the aggregate amount of
Excess Proceeds exceeds $5.0 million, Sun World will be required
to make an offer to all Holders of Exchange Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of
Exchange 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 and
Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To
the extent that the aggregate amount of Exchange Notes tendered
pursuant to an Asset Sale Offer is less than the Excess
Proceeds, Sun World (or Cadiz, to the extent that Excess
Proceeds are derived from the sale of property or assets of
Cadiz,) may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of
Exchange Notes surrendered by Holders thereof exceeds the amount
of Excess Proceeds, the Trustee shall select the Exchange Notes
to be purchased on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset
at zero.
All Collateral Proceeds and amounts which, pursuant to the
provisions described below, are deemed to be Collateral Proceeds
shall, pending their application in accordance with this
covenant or the release thereof in accordance with the
provisions described under "- Possession, Use and Release of
Collateral" and "- Use of Trust Monies," be deposited in the
Collateral Account under the Indenture.
The term "Asset Sale," as defined in the Indenture,
excludes certain sales and other dispositions of assets,
including, subject to limited exceptions, sales of Revolving
Credit Agreement Collateral. See "- Certain Definitions." As
a result, Cadiz, Sun World and the Restricted Subsidiaries will
be permitted to sell certain assets without compliance with the
foregoing covenant.
An Asset Sale Offer will remain open for a period of 20
Business Days following its commencement and no longer, except
to the extent that a longer period is required by applicable law
(the "Asset Sale Offer Period"). No later than five Business
Days after the termination of the Asset Sale Offer Period (the
"Asset Sale Purchase Date"), Sun World will purchase the
principal amount of Exchange Notes required to be purchased
pursuant to this covenant (the "Asset Sale Offer Amount") or, if
less than the Asset Sale Offer Amount has been tendered, all
Exchange Notes tendered in response to the Asset Sale Offer.
Payment for any Exchange Notes so purchased will be made in the
same manner as interest payments are made.
If the Asset Sale Purchase Date is on or after an interest
record date and on or before the related interest payment date,
any accrued and unpaid interest will be paid to the Person in
whose name a Note is registered at the close of business on such
record date, and no additional interest will be payable to
Holders who tender Exchange Notes pursuant to the Asset Sale
Offer.
On or before the Asset Sale Purchase Date, Sun World will,
to the extent lawful, accept for payment, on a pro rata basis to
the extent necessary, the Asset Sale Offer Amount of Exchange
Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Asset Sale Offer Amount has been
tendered, all Exchange Notes tendered, and will deliver to the
Trustee an Officers' Certificate stating that such Exchange
Notes or portions thereof were accepted for payment by Sun World
in accordance with the terms of this covenant. Sun World, the
Depository or the Paying Agent, as the case may be, will
promptly (but in any case not later than five days after the
Asset Sale Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Exchange
Notes tendered by such Holder and accepted by Sun World for
purchase, and Sun World will promptly issue a new Note, and the
Trustee, upon written request from Sun World will authenticate
and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered.
Any Note not so accepted will be promptly mailed or delivered by
Sun World to the Holder thereof. Sun World will publicly
announce the results of the Asset Sale Offer on the Asset Sale
Purchase Date.
Limitation on Restricted Payments
The Indenture provides that Cadiz and Sun World will not,
and will not permit any of the Restricted Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Equity
Interests of Cadiz, Sun World or any of the Restricted
Subsidiaries (including, without limitation, any payment in
connection with any merger or consolidation involving Cadiz, Sun
World or any of the Restricted Subsidiaries) or to the direct or
indirect holders of Equity Interests in Cadiz, Sun World or any
of the Restricted Subsidiaries in their capacity as such (other
than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of Sun World); (ii) purchase,
redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or
consolidation involving Cadiz, Sun World or any of the
Restricted Subsidiaries) any Equity Interests of Cadiz, Sun
World or any of the Restricted Subsidiaries; (iii) make any
payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of Sun
World that is subordinated to the Exchange Notes (other than
Exchange Notes), any Indebtedness of Cadiz that is subordinated
to the Cadiz Guarantee or any Indebtedness of a Subsidiary
Guarantor that is subordinated to a Subsidiary Guarantee except
a payment of interest or principal at Stated Maturity; provided,
however, that Sun World or Cadiz may make any such payment,
purchase, redemption, defeasance or retirement for value using
the proceeds of Permitted Refinancing Indebtedness; or (iv) make
any Restricted Investment (all such payments and other actions
set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments").
Parent Restricted Payments. Notwithstanding the foregoing,
Cadiz will be permitted to make Restricted Payments if, at the
time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) Cadiz 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 four-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
second paragraph of the covenant described below under the
caption " -Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by Cadiz after
the date of the Indenture, is less than the sum of (i) the
lesser of (x) 50% of the Net Income of Cadiz (not including
any Net Income of Sun World or any of its or Cadiz'
Subsidiaries) for the period (taken as one accounting
period) from and after the last day of the first fiscal
quarter immediately following the date of the Indenture to
the end of Cadiz' most recently ended fiscal quarter for
which internal financial statements are available at the
time of such Restricted Payment (or, if such Net Income for
such period is a deficit, less 100% of such deficit) or
(y) 50% of Cadiz' Consolidated Net Income for the period
(taken as one accounting period) from and after the last
day of the first fiscal quarter immediately following the
date of the Indenture to the end of Cadiz' 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
(ii) 100% of the aggregate net cash proceeds received by
Cadiz from the issue or sale since the date of the
Indenture of Equity Interests of Cadiz (other than
Disqualified Stock) or of Disqualified Stock or debt
securities of Cadiz that have been converted into such
Equity Interests (other than Equity Interests or
Disqualified Stock or convertible debt securities sold to
a Subsidiary of Cadiz), plus (iii) to the extent that any
Restricted Investment that was made by Cadiz after the date
of the Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less
the cost of disposition, if any) and (B) the initial amount
of such Restricted Investment, plus (iv) $5.0 million.
Issuer Restricted Payments. Notwithstanding the foregoing,
Sun World will be permitted to make Restricted Payments if, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) Sun World 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 four-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
second paragraph of the covenant described above under
caption "- Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(c) (i) in the case of a Restricted Payment made to a
Person other than Cadiz, such Restricted Payment, together
with the aggregate amount of all other Restricted Payments
made by Sun World after the date of the Indenture, is less
than the sum of (A) the lesser of (x) 50% of the
Consolidated Net Income of Sun World (not including any Net
Income of Cadiz) for the period (taken as one accounting
period) from and after the last day of the first fiscal
quarter immediately following the date of the Indenture to
the end of Sun World'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) or (y) 50% of Cadiz' Consolidated Net
Income for the period (taken as one accounting period) from
and after the last day of the first fiscal quarter
immediately following the date of the Indenture to the end
of Cadiz' 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 Sun World from the issue or sale since the date
of the Indenture of Equity Interests of Sun World (other
than Disqualified Stock) or of Disqualified Stock or debt
securities of Sun World that have been converted into such
Equity Interests (other than Equity Interests or
Disqualified Stock or convertible debt securities sold to
a Subsidiary of Sun World), plus (C) to the extent that any
Restricted Investment that was made by Sun World or any of
its Restricted Subsidiaries after the date of the Indenture
is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such
Restricted Investment, less (D) the aggregate amount of all
Restricted Payments made to Cadiz after the date of the
Indenture under subparagraph (ii) of this paragraph (c);
(ii) in the case of a Restricted Payment made to
Cadiz, such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by Sun World
and its Restricted Subsidiaries after the date of the
Indenture, is less than the sum of (A) 50% of the
Consolidated Net Income of Sun World (not including any Net
Income of Cadiz) for the period (taken as one accounting
period) from and after the last day of the first fiscal
quarter immediately following the date of the Indenture to
the end of Sun World'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 Sun World from the issue or sale
since the date of the Indenture of Equity Interests of Sun
World (other than Disqualified Stock) or of Disqualified
Stock or debt securities of Sun World that have been
converted into such Equity Interests (other than Equity
Interests or Disqualified Stock or convertible debt
securities sold to a Subsidiary of Sun World) plus (C) to
the extent that any Restricted Investment that was made by
Sun World or any of its Restricted Subsidiaries after the
date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and
(B) the initial amount of such Restricted Investment, less
(D) the aggregate amount of all Restricted Payments made to
Persons other than Cadiz after the date of the Indenture
under subparagraph (i) of this paragraph (c).
The foregoing provisions will not prohibit (i) the payment of
any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture; (ii) the
redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests
of Sun World in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a Restricted
Subsidiary of Sun World) of, other Equity Interests of Cadiz or
Sun World (other than any Disqualified Stock); 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 (c)(i)(B)
and (c)(ii)(B) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the repurchase,
redemption or other acquisition or retirement for value of any
Equity Interests of Cadiz, Sun World or any Restricted
Subsidiary held by any member of the management of Cadiz, Sun
World or any Restricted Subsidiary upon such member's death,
disability or termination pursuant to any management equity
subscription agreement or stock option agreement in effect as of
the date of the Indenture; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.0 million in any
twelve-month period or $2.0 million in the aggregate for all
periods following the date of the Indenture and no Default or
Event of Default shall have occurred and be continuing
immediately after such transaction; (v) the payment of dividends
by Sun World to Cadiz that are used within 30 days of the date
paid solely to pay accounting, legal charges incurred in
connection with Cadiz' Securities and Exchange Commission
reporting requirements and other administrative expenses;
provided that no Event of Default shall have occurred and be
continuing; and provided further, that the aggregate amount of
such dividends may not exceed $1.5 million in any fiscal year;
(vi) the payment of up to $2.0 million by Sun World to Cadiz in
any fiscal year; provided that (A) Sun World 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 four-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 second paragraph of the covenant described above under the
caption "- Incurrence of Indebtedness and Issuance of Preferred
Stock" and (B) within 30 days of the receipt of such funds,
Cadiz applies such funds to the costs of a Qualified Project;
provided further, that no Event of Default shall have occurred
and be continuing; and (vii) the payment by Cadiz within
12 months of the Issue Date of dividends on its Series A
Preferred Stock in an aggregate amount not to exceed $800,000
upon the mandatory conversion of such stock.
The Board of Directors of each Sun World and Cadiz may
designate any Restricted Subsidiary to be an Unrestricted
Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding
Investments by Sun World and its Restricted Subsidiaries or by
Cadiz (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time
of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant.
All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the greatest of (x) the net
book value of such Investments at the time of such designation,
(y) the fair market value of such Investments at the time of
such designation and (z) the original fair market value of such
Investments at the time they were made. Such designation will
only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets
the definition of an Unrestricted Subsidiary.
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 by Cadiz, Sun World or such Restricted Subsidiary, as
the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be
determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $1.0 million. Not
later than the date of making any Restricted Payment, Sun World
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 the covenant
"Restricted Payments" were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that neither Cadiz nor Sun World
will, and neither Cadiz nor Sun World will permit any of its
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), that neither Cadiz nor Sun World will issue any
Disqualified Stock and that Issuer will not permit any of its
Subsidiaries to issue any shares of preferred stock.
Notwithstanding the foregoing, Cadiz and Sun World may
incur Indebtedness (including Acquired Debt) if the Fixed Charge
Coverage Ratio of Cadiz or Sun World, as the case may be, for
its most recently ended four full fiscal quarters for which
internal financial statements are available immediately
preceding the date on which such additional Indebtedness is
incurred 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 at the beginning of such four-quarter period.
Parent Permitted Debt. The provisions of the first
paragraph of this covenant will not apply to the incurrence by
Cadiz of any of the following items of Indebtedness:
(i) the incurrence by Cadiz of Existing Indebtedness;
(ii) the incurrence by Cadiz of Permitted Refinancing
Indebtedness;
(iii) the incurrence by Cadiz of Indebtedness
represented by the Cadiz Guarantee or the Guarantee of the
Revolving Credit Agreement;
(iv) the incurrence by Cadiz of Indebtedness under the
Cadiz Credit Agreement; provided that the aggregate
principal amount of all such Indebtedness, including all
Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred
pursuant to this clause, does not exceed $50.0 million;
(v) the incurrence by Cadiz of Capital Lease
Obligations incurred for the purpose of financing all or
any part of the cost of construction or improvement of
property, plant or equipment used in the Permitted
Businesses of Cadiz in an aggregate principal amount not to
exceed $2.5 million at any time outstanding;
(vi) the incurrence by Cadiz of Non-Recourse Debt to
finance a Qualified Project;
(vii) the incurrence by Cadiz of Purchase Money
Indebtedness in connection with the purchase of assets to
be used in Permitted Businesses of Cadiz; and
(viii) the incurrence by Cadiz of up to $5.0 million
aggregate amount of Indebtedness for any purpose.
Issuer Permitted Debt. The provisions of the first
paragraph of this covenant will not apply to the incurrence of
any of the following items of Indebtedness:
(i) the incurrence by Sun World and its Subsidiaries
of Existing Indebtedness;
(ii) the incurrence by Sun World of Permitted
Refinancing Indebtedness;
(iii) the incurrence by Sun World of Indebtedness
represented by the Exchange Notes and the incurrence by the
Subsidiary Guarantors of the Subsidiary Guarantees;
(iv) the incurrence by Sun World or any of Sun World's
Wholly Owned Restricted Subsidiaries of intercompany
Indebtedness between or among Sun World and any of its
Wholly Owned Restricted Subsidiaries; provided, however,
that (A) such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with
respect to the Exchange Notes and the Subsidiary Guarantees
and (B)(1) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held
by a Person other than Sun World or a Wholly Owned
Restricted Subsidiary and (2) any sale or other transfer of
any such Indebtedness to a Person that is not either Sun
World or a Wholly Owned Restricted Subsidiary shall be
deemed, in each case, to constitute an incurrence of such
Indebtedness by Sun World or such Restricted Subsidiary, as
the case may be;
(v) the incurrence by Sun World's Unrestricted
Subsidiaries of Non-Recourse Debt; provided, however, that
if any such Indebtedness ceases to be Non-Recourse Debt of
an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted
Subsidiary of Sun World;
(vi) the incurrence by Sun World of Revolving
Indebtedness; provided that the aggregate principal amount
of all such Indebtedness, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred pursuant to this
clause, does not exceed $30.0 million; and, provided
further, that for a period of 30 consecutive days during
the 12 months preceding such incurrence, Sun World had
outstanding no Revolving Indebtedness;
(vii) the incurrence by Sun World or any of its
Restricted Subsidiaries of Capital Lease Obligations
incurred for the purpose of financing all or any part of
the cost of construction or improvement of property, plant
or equipment used in a Permitted Business of Sun World or
such Restricted Subsidiary, in an aggregate principal
amount not to exceed $2.5 million at any time outstanding;
(viii) the incurrence by Sun World or any of its
Restricted Subsidiaries of Purchase Money Indebtedness to
acquire land or agricultural equipment from a Person who is
not an Affiliate of Sun World of up to $10.0 million each
fiscal year, not to exceed $30.0 million in the aggregate;
or
(ix) the incurrence by Sun World or any of its
Restricted Subsidiaries of up to $5.0 million aggregate
amount of Indebtedness to finance the development,
maintenance or expansion of activities or properties
related to Permitted Businesses existing as of the date of
the Indenture.
For purposes of determining compliance with this covenant,
in the event that an item of Indebtedness meets the criteria of
more than one of the categories set forth in the two immediately
preceding paragraphs or is entitled to be incurred pursuant to
the second paragraph of this covenant, Sun World shall, in its
sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to
only one of such clauses or pursuant to the second paragraph
hereof. Accrual of interest and the accretion of accreted value
will not be deemed to be an incurrence of Indebtedness for
purposes of this covenant.
Liens
The Indenture provides that Cadiz and Issuer will not, and
neither Cadiz nor Sun World will permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey
any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that Sun World will not, and will
not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability
of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to Sun World or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits,
or (b) pay any indebtedness owed to Sun World or any of its
Restricted Subsidiaries, (ii) make loans or advances to Sun
World or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to Sun World or any of its
Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) Existing
Indebtedness 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, replacement or
refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in
the Revolving Credit Agreement as in effect on the date of the
Indenture, (b) the Indenture and the Exchange Notes,
(c) applicable law, (d) any instrument governing Indebtedness or
Capital Stock of a Person acquired by Sun World 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, (e) by reason of customary non-assignment provisions
in leases entered into in the ordinary course of business and
consistent with past practices, (f) purchase money obligations
for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii)
above on the property so acquired, or (g) Permitted Refinancing
Indebtedness; provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are
no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced.
Transactions with Affiliates
The Indenture provides that neither Cadiz nor Sun World
will and neither will 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 of
the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to
Cadiz, Sun World or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction
by Cadiz, Sun World or such Restricted Subsidiary with an
unrelated Person and (ii) Cadiz or Sun World as applicable,
delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies
with clause (i) above 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 $5.0 million, 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; provided that (w) any employment agreement entered
into by Cadiz, Sun World or any of their Restricted Subsidiaries
in the ordinary course of business and consistent with the past
practice of Cadiz, Sun World or such Restricted Subsidiary,
(x) transactions between or among Sun World and/or its
Restricted Subsidiaries, (y) Restricted Payments that are
permitted by the provisions of the Indenture described above
under the caption " -Restricted Payments," shall not be deemed
Affiliate Transactions.
Additional Subsidiary Guarantees
The Indenture provides that Cadiz will not create any
Subsidiaries or own Capital Stock in any corporation other than
Sun World, PSWR I, Southwest Fruit Growers, L.P., Pacific
Packing, Inc., Pacific Real Estate, Inc. and Rancho Cadiz Mutual
Water Company. After the date of the Indenture, Cadiz will take
all necessary action to dissolve PSWR I, Pacific Packing, Inc.
and Pacific Real Estate, Inc. In addition, Sun World will not,
and will not permit any of the Subsidiary Guarantors to, acquire
or otherwise make any Investment in any Subsidiary that is not
a Subsidiary Guarantor unless either (i) such Investment is
permitted by the covenant entitled "Restricted Payments," or
(ii) such Subsidiary executes a Subsidiary Guarantee, enters
into the Collateral Documents and delivers an opinion of counsel
in accordance with the provisions of the Indenture.
Merger, Consolidation, or Sale of Assets
The Indenture provides that Sun World may not consolidate
or merge with or into (whether or not Sun World is the surviving
corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions, to another
corporation, Person or entity unless: (i) Sun World is the
surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than Sun
World) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (such
surviving corporation or transferee Person, the "Surviving
Entity") is a corporation organized or existing under the laws
of the United States, any state thereof or the District of
Columbia; (ii) the Surviving Entity assumes all the obligations
of Sun World under the Exchange Notes, the Indenture and the
Collateral Documents pursuant to a supplemental indenture and
other documents in form reasonably satisfactory to the Trustee;
(iii) the Surviving Entity causes such amendments, supplements
or other instruments to be filed and recorded in such
jurisdictions as may be required by applicable law to preserve
and protect the Lien of the Collateral Documents on the
Collateral owned by or transferred to the Surviving Entity,
together with such financing statements as may be required to
perfect any security interests in such Collateral which may be
perfected by the filing of a financing statement under the
Uniform Commercial Code of the relevant states); (iv) the
Collateral owned by or transferred to the Surviving Entity shall
(1) continue to constitute Collateral under the Indenture and
the Collateral Documents, (2) shall be subject to the Lien in
favor of the Trustee for the benefit of the holders of the
Exchange Notes and (3) shall not be subject to any Lien other
than Liens expressly permitted by the Indenture and the
Collateral Documents; (v) the property and assets of the person
which is merged or consolidated with or into such company, to
the extent that they are property or assets of the types which
would constitute Collateral under the Collateral Documents shall
be treated as After-Acquired Property and the Surviving Entity
shall take such action as may be necessary to cause such
property and assets to be made subject to the Lien of the
Collateral Documents in the manner and to the extent required by
the Indenture; (vi) immediately after such transaction no
Default or Event of Default exists; and (vii) except in the case
of a merger of Sun World with or into a Wholly Owned Subsidiary
of Sun World, the Surviving Entity (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of Sun World immediately
preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable
four-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 second paragraph of the covenant
described above under the caption "- Incurrence of Indebtedness
and Issuance of Preferred Stock."
Sale and Leaseback Transactions
The Indenture provides that Cadiz and Sun World will not,
and neither Cadiz nor Sun World will permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that Cadiz or Sun World may enter into a
sale and leaseback transaction if (i) Cadiz or Sun World could
have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback
transaction pursuant to the Fixed Charge Coverage Ratio test set
forth in the second paragraph of the covenant described above
under the caption " -Incurrence of Additional Indebtedness and
Issuance of Preferred Stock" and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under
the caption " -Liens," (ii) the gross cash proceeds of such sale
and leaseback transaction are at least equal to the fair market
value (as determined in good faith by the Board of Directors and
set forth in an Officers' Certificate delivered to the Trustee)
of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and Cadiz or Sun World
applies the proceeds of such transaction in compliance with, the
covenant described above under the caption " -Asset Sales."
Limitation on Issuances and Sales of Capital Stock of Wholly
Owned Subsidiaries
The Indenture provides that Cadiz and Sun World (i) will
not, and will not permit any Wholly Owned Subsidiary to,
transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary to any Person
(other than Cadiz, Sun World or a Wholly Owned Subsidiary of
Cadiz or Sun World), unless (a) such transfer, conveyance, sale,
lease or other disposition is of all the Capital Stock of such
Wholly Owned Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are
applied in accordance with the covenant described above under
the caption " -Asset Sales," and (ii) will not permit any Wholly
Owned Subsidiary to issue any of its Equity Interests (other
than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to Cadiz,
Sun World or a Wholly Owned Subsidiary of Cadiz or Sun World.
Business Activities
Cadiz and Sun World will not, and will not permit any
Restricted Subsidiary to, engage in any business other than
Permitted Businesses, except to such extent as would not be
material to Sun World and its Subsidiaries taken as a whole.
Advances
The Indenture will provide that all advances to Restricted
Subsidiaries made by Cadiz or Sun World from time to time after
the date of the Indenture will be evidenced by unsecured
Subsidiary Intercompany Exchange Notes in favor of Cadiz or Sun
World, respectively, that will be pledged to the Trustee
pursuant to the applicable Collateral Documents as Collateral to
secure the Exchange Notes. The Indenture will also provide that
all advances by Sun World to any Restricted Subsidiary
outstanding on the date of the Indenture will be evidenced by an
unsecured Subsidiary Intercompany Note that will be pledged to
the Trustee pursuant to the applicable Collateral Documents as
Collateral for the Exchange Notes. Each Subsidiary Intercompany
Note will be payable upon demand and will bear interest at the
same rate as the Exchange Notes.
Impairment of Security Interests
The Indenture provides that Cadiz and Sun World will not,
and neither Cadiz nor Sun World will permit any of its
Restricted Subsidiaries to, take or omit to take any action
which action or omission could reasonably be expected to have
the result of adversely affecting or impairing the Lien in favor
of the Trustee for the benefit of the holders of the Notes, in
the Collateral. The Indenture will further provide that Cadiz
and Sun World will not, and neither Cadiz nor Sun World will
permit any of its Restricted Subsidiaries to, grant to any
person (other than the Trustee for the benefit of the holders of
the Notes) any interest whatsoever in the Collateral except as
expressly permitted by the Indenture and the Collateral
Documents.
Payments for Consent
The Indenture provides that neither Cadiz, Sun World nor
any of the Subsidiaries will, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest,
fee or otherwise, to any Holder of any 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 or 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.
Reports
The Indenture provides that, whether or not required by the
rules and regulations of the Securities and Exchange Commission
(the "Commission"), so long as any Exchange Notes are
outstanding, Cadiz will furnish to the Holders of Notes (i) all
quarterly and annual financial information that would be
required to be contained in a filing with the Commission on
Forms 10-Q and 10-K if Cadiz is required to file such Forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the
financial condition and results of operations of Cadiz and
Cadiz' consolidated Subsidiaries and, with respect to the annual
information only, a report thereon by the certified independent
accountants for Cadiz and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if Cadiz
were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, Cadiz
will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will
not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
In addition, Cadiz and Sun World have agreed that, for so
long as any Notes remain outstanding, they will furnish to the
Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
The Indenture provides that, whether or not required by the
rules and regulations of the Commission, so long as any Notes
are outstanding, Sun World will furnish to the Holders of Notes
(i) quarterly and annual financial information including
statements of operations, statements of cash flows and balance
sheets of Sun World and its Restricted Subsidiaries separate
from the financial condition and results of operations of Cadiz
and of the Unrestricted Subsidiaries of Sun World and, with
respect to the annual information only, a report thereon by the
certified independent accountants for Sun World and (ii) all
current reports that would be required to be filed with the
Commission on Form 8-K if Sun World were required to file such
reports.
Events of Default and Remedies
The Indenture provides that each of the following
constitutes an Event of Default: (i) default for 30 days in the
payment when due of interest on, the Notes; (ii) default in
payment when due of the principal of or premium, if any, on the
Notes; (iii) failure by Cadiz or Sun World to comply with the
provisions described under the captions "- Change of Control,"
"- Asset Sales," " -Limitation on Restricted Payments,"
"- Incurrence of Indebtedness and Issuance of Preferred Stock" and
" -Merger, Consolidation, or Sale of Assets;" (iv) failure by
Cadiz, Sun World or any Subsidiary Guarantor for 30 days after
notice to comply with any of its other agreements in the
Indenture, the Notes, the Guarantees or in any of the Collateral
Documents; (v) default 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
Sun World or any of its Subsidiaries (or the payment of which is
guaranteed by Sun World or any of its Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the
date of the Indenture, which default 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 or the
maturity of which has been so accelerated, aggregates
$5.0 million or more; (vi) failure by Cadiz, Sun World or any of
the Subsidiaries to pay final judgments aggregating in excess of
$5.0 million, which judgments are not paid, discharged or stayed
for a period of 60 days; (vii) except as permitted by the
Indenture, the Cadiz Guarantee or a Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and
effect or Cadiz or any Subsidiary Guarantor, or any Person
acting on behalf of Cadiz or any such Subsidiary Guarantor,
shall deny or disaffirm its obligations under its Guarantee;
(viii) any of the Collateral Documents shall be 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
Person which is a party to any of the Collateral Documents, or
any Person acting on behalf of such Person, shall deny or
disaffirm its obligations under any of such Collateral
Documents; (ix) Cadiz or Sun World shall breach any material
representation, warranty or agreement set forth in the
Collateral Documents or any Collateral Document shall be held in
any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect; and
(x) certain events of bankruptcy or insolvency with respect to
Cadiz, Sun World or any Significant Subsidiary or any group of
Subsidiaries that, taken together, would constitute a
Significant Subsidiary.
If any 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. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Cadiz, Sun World, any
Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all
outstanding Notes will become due and payable without further
action or notice. 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 it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of
any willful action (or inaction) taken (or not taken) by or on
behalf of Sun World with the intention of avoiding payment of
the premium that Sun World would have had to pay if Sun World
then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If
an Event of Default occurs prior to April 15, 2001 by reason of
any willful action (or inaction) taken (or not taken) by or on
behalf of Sun World with the intention of avoiding the
prohibition on redemption of the Notes prior to April 15, 2001,
then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon
the acceleration of the Notes.
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, the Notes, the Guarantees and the Collateral
Documents except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
Sun World is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and Sun World
is required upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such
Default or Event of Default.
Possession, Use and Release of Collateral
Subject to and in accordance with the provisions of the
Collateral Documents and the Indenture, so long as no Event of
Default shall have occurred and be continuing, Sun World and the
Guarantors will have the right to remain in possession and
retain exclusive control of the Collateral, to operate the
Collateral, to alter or repair the Collateral and to collect,
invest and dispose of any income thereon.
Release of Collateral. Upon compliance by Sun World with
the conditions set forth below in respect of any Asset Sale, the
Trustee will release the Released Interests (as defined below)
from the Lien of the relevant Collateral Document and reconvey
the Released Interests to Sun World or the relevant Guarantor,
as the case may be. Cadiz, Sun World and the Subsidiary
Guarantors, as the case may be, will have the right to obtain a
release of items of Collateral (the "Released Interests")
subject to an Asset Sale upon compliance with the condition that
Sun World deliver to the Trustee the following:
(a) A notice from Sun World requesting the release of
Released Interests, (i) specifically describing the
proposed Released Interests, (ii) specifying the Fair
Market Value of such Released Interests on a date within 60
days of such notice (the "Valuation Date"), (iii) stating
that the consideration to be received is at least equal to
the Fair Market Value of the Released Interests,
(iv) stating that the release of such Released Interests
will not impair the value of the remaining Collateral or
interfere with the Trustee's ability to realize such value
and will not impair the maintenance and operation of the
remaining Collateral, (v) confirming the sale of, or an
agreement to sell, such Released Interests in a bona fide
sale to a person that is not an Affiliate of Sun World or,
in the event that such sale is to a person that is an
Affiliate, confirming that such sale is made in compliance
with the provisions set forth in " -Certain
Covenants Affiliate Transactions," (vi) certifying that
such Asset Sale complies with the terms and conditions of
the Indenture with respect thereto, including, without
limitation, the provisions set forth in " -Certain
Covenants -Asset Sales," and (vii) in the event there is to
be a substitution of property for the Collateral subject to
the Asset Sale, specifying the property intended to be
substituted for the Collateral to be disposed of;
(b) An officers' certificate of Sun World stating
that (i) such sale covers only the Released Interests (or
other property which is not Collateral) and complies with
the terms and conditions of the Indenture with respect to
Asset Sales, (ii) all Collateral Proceeds (including
amounts deemed to be Collateral Proceeds) from the sale of
any of the Released Interests will be deposited in the
Collateral Account, and all Net Proceeds from the sale of
any of the Released Interests (and any other property which
is not Collateral) will be applied pursuant to the
provision of the Indenture in respect of Asset Sales,
(iii) there is no Default or Event of Default in effect or
continuing on the date thereof, the Valuation Date or the
date of such Asset Sale, (iv) the release of the Collateral
will not result in a Default or Event of Default under the
Indenture, and (v) all conditions precedent in the
Indenture relating to the release in question have been
complied with; and
<PAGE>
(c) All documentation required by the Trustee
Indenture Act of 1939, as amended, if any, prior to the
release of Collateral by the Trustee and, in the event that
there is to be a substitution of property for the
Collateral subject to the Asset Sale, all documentation
necessary to effect the substitution of such new Collateral
and to subject such new Collateral to the Lien of the
relevant Collateral Documents.
The Indenture provides that Sun World also shall be
entitled, subject to compliance with the conditions set forth
therein, to obtain the release of Collateral which has been
taken by eminent domain, condemnation or in similar
circumstances.
The Indenture provides that Sun World shall be entitled to
obtain a full release of all of the Collateral following legal
defeasance or covenant defeasance of the Indenture as described
above under "- Legal Defeasance and Covenant Defeasance."
The Indenture provides that, upon the release of any
Subsidiary Guarantor from its obligations under the Indenture
and its Subsidiary Guarantee as described in the last paragraph
under the heading "- Guarantees," such Subsidiary Guarantor
shall be entitled to obtain the release of all of its
Collateral.
Disposition of Collateral Without Release. Notwithstanding
the provisions of " -Release of Collateral" above, so long as no
Default or Event of Default shall have occurred and be
continuing or would result therefrom, Cadiz, Sun World and the
Subsidiary Guarantors may, among other things, without any
release or consent by the Trustee, conduct ordinary course
activities with respect to Collateral, including selling or
otherwise disposing of, in any transaction or series of related
transactions, any property subject to the Lien of the Collateral
Documents which has become worn out, obsolete or which is no
longer necessary for the conduct of the business of such Person
and which either has an aggregate Fair Market Value of $100,000
or less, or which is replaced by property of substantially
equivalent or greater value which becomes subject to the Lien of
the Collateral Documents as After-Acquired Property; abandoning,
terminating, canceling, releasing or making alterations in or
substitutions of any leases or contracts subject to the Lien of
the Indenture or any of the Collateral Documents; surrendering
or modifying any franchise, license or permit subject to the
Lien of the Indenture or any of the Collateral Documents which
it may own or under which it may be operating; altering,
repairing, replacing, changing the location or position of and
adding to its structures, machinery, systems, equipment,
fixtures and appurtenances; demolishing, dismantling, tearing
down, scrapping or abandoning any Collateral if, in the good
faith opinion of the Board of Directors of Sun World, such
demolition, dismantling, tearing down, scrapping or abandonment
is in the best interest of Sun World; granting a nonexclusive
license of any proprietary product; and abandoning any
proprietary product which has become obsolete and not used in
the business.
Use of Trust Monies
All Trust Monies (including, without limitation, all
Collateral Proceeds and Net Insurance Proceeds required to be
deposited with the Trustee) shall be held by the Trustee as a
part of the Collateral securing the Notes and, so long as no
Event of Default shall have occurred and be continuing, may
either (i) be released as contemplated by " -Certain Covenants
- -Asset Sales" if such Trust Monies represent Collateral Proceeds
in respect of an Asset Sale or (ii) at the direction of Sun
World be applied by the Trustee from time to time to the payment
of the principal of, premium, if any, and interest on any Notes
at Stated Maturity or upon redemption or retirement, or to the
purchase of Notes upon tender or in the open market or
otherwise, in each case in compliance with the Indenture. The
Sun World may also withdraw Trust Monies constituting Net
Insurance Proceeds to repair or replace the relevant Collateral,
subject to certain conditions set forth in the Indenture.
The Trustee shall be entitled to apply any Trust Monies to
cure any Event of Default. Trust Monies deposited with the
Trustee shall be invested in Cash Equivalents pursuant to the
direction of Sun World and, so long as no Default or Event of
Default shall have occurred and be continuing, Sun World shall
be entitled to any interest or dividends accrued, earned or paid
on such Cash Equivalents.
No Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder
of Sun World, as such, shall have any liability for any
obligations of Sun World under the Notes, the Indenture, or for
any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by
accepting a Exchange Note waives and releases all such
liability. The waiver and release are part of the consideration
for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public
policy.
Legal Defeasance and Covenant Defeasance
Sun World may, at its option and at any time, elect to have
all of its obligations discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (i) the rights
of Holders of outstanding Notes to receive payments in respect
of the principal of, premium, if any, and interest and
Liquidated Damages on such Notes when such payments are due from
the trust referred to below, (ii) Sun World's obligations with
respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and Sun
World's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, Sun World
may, at its option and at any time, elect to have the
obligations of Sun World released with respect to certain
covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default
with respect to the Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described
under " -Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance, (i) Sun World must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders of the Notes,
cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any,
and interest and Liquidated Damages on the outstanding Notes on
the stated maturity or on the applicable redemption date, as the
case may be, and Sun World must specify whether the Notes are
being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, Sun World shall have
delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that
(A) Sun World has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the date of
the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, Sun World shall have
delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at
any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance will
not result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the
Indenture) to which Sun World or any of its Subsidiaries is a
party or by which Sun World or any of its Subsidiaries is bound;
(vi) Sun World must have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) Sun World must
deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by Sun World with the intent of preferring
the Holders of Notes over the other creditors of Sun World with
the intent of defeating, hindering, delaying or defrauding
creditors of Sun World or others; and (viii) Sun World must
deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided
for relating to the Legal Defeasance or the Covenant Defeasance
have been complied with.
Transfer and Exchange
A Holder may transfer Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and
transfer documents and Sun World may require a Holder to pay any
taxes and fees required by law or permitted by the Indenture.
The Sun World is not required to transfer or exchange any Note
selected for redemption. Also, Sun World is not required to
transfer or exchange any Note for a period of 15 days before a
selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the
owner of it for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs,
the Indenture, the Notes, the Guarantees and the Collateral
Documents may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or
exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture, the Notes, the
Guarantees and the Collateral Documents may be waived with the
consent of the Holders of a majority in principal amount of the
then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment
or waiver may not (with respect to any Notes held by a
non-consenting Holder): (i) reduce the principal amount of
Notes whose Holders must consent to an amendment, supplement or
waiver of the Indenture, Notes, Guarantees or Collateral
Documents, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the
redemption of the Notes (which redemption provisions do not
include the provisions described under "Certain Covenants
- -Change of Control" or "Certain Covenants Asset Sales"),
(iii) reduce the rate of or change the time for payment of
interest on any Note, (iv) waive a Default or Event of Default
in the payment of principal of or premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes
by the Holders of at least a majority in aggregate principal
amount of the Notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Note payable in
money other than that stated in the Notes, (vi) make any change
in the provisions of the Indenture, the Notes, the Guarantees or
the Collateral Documents relating to waivers of past Defaults or
the rights of Holders of Notes to receive payments of principal
of or premium, if any, or interest on the Notes, (vii) waive a
redemption payment with respect to any Note (other than a
payment required by the provisions described under "Certain
Covenants Change of Control" or "Certain Covenants -Asset
Sales") or (viii) make any change in the foregoing amendment and
waiver provisions.
Notwithstanding the foregoing, without the consent of any
Holder of Notes, Sun World and the Trustee may amend or
supplement the Indenture or the Notes 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 Sun World's obligations to Holders of Notes in
the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the Holders
of Notes or that does not adversely affect the legal rights
under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture
Act.
The Trustee
The Indenture contains certain limitations on the rights of
the Trustee, should it become a creditor of Sun World, to obtain
payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the
Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then
outstanding Notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy
available to the Trustee, subject to certain exceptions. The
Indenture provides that in case an Event of Default shall occur
(which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request
of any Holder of Exchange Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
Book-Entry, Delivery and Form
Except as set forth in the next paragraph, the Exchange
Notes to be resold as set forth herein will initially be issued
in the form of one Global Note (the "Global Note"). The Global
Note will be deposited on the date of the closing of the sale of
the Exchange Notes offered hereby (the "Closing Date") with, or
on behalf of, The Depository Trust Company (the "Depositary")
and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global
Note Holder").
Exchange Notes that are issued as described below under
"- Certificated Securities" will be issued in the form of
registered definitive certificates (the "Certificated
Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless the Global Note has
previously been exchanged for Certificated Securities, be
exchanged for an interest in the Global Note representing the
principal amount of Exchange Notes being transferred.
The Depositary is a limited-purpose trust company that was
created to hold securities for its participating organizations
(collectively, the "Participants" or the "Depositary's
Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants.
The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust
companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also
available to other entities such as banks, brokers, dealers and
trust companies (collectively, the "Indirect Participants" or
the "Depositary's Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either
directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the
Depositary only thorough the Depositary's Participants or the
Depositary's Indirect Participants.
The Sun World expects that pursuant to procedures
established by the Depositary (i) upon deposit of the Global
Note, the Depositary will credit the accounts of Participants
designated by the Initial Purchasers with portions of the
principal amount of the Global Note and (ii) ownership of the
Exchange Notes evidenced by the Global Note will be shown on,
and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to
the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect
Participants. Prospective purchasers are advised that the laws
of some states require that certain persons take physical
delivery in definitive form of securities that they own.
Consequently, the ability to transfer Exchange Notes evidenced
by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner
of any Exchange Notes, the Global Note Holder will be considered
the sole Holder under the Indenture of any Exchange Notes
evidenced by the Global Note. Beneficial owners of Exchange
Notes evidenced by the Global Note will not be considered the
owners or Holders thereof under the Indenture for any purpose,
including with respect to the giving of any directions,
instructions or approvals to the Trustee thereunder. Neither
Sun World nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for
maintaining, supervising or reviewing any records of the
Depositary relating to the Exchange Notes.
Payments in respect of the principal of, premium, if any
and interest if any, on any Exchange Notes registered in the
name of the Global Note Holder on the applicable record date
will be payable by the Trustee to or at the direction of the
Global Note Holder in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, Sun World
and the Trustee may treat the persons in whose names Exchange
Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments.
Consequently, neither Sun World nor the Trustee has or will have
any responsibility or liability for the payment of such amounts
to beneficial owners of Exchange Notes. Sun World believes,
however, that it is currently the policy of the Depositary to
immediately credit the accounts of the relevant Participants
with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as
shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect
Participants to the beneficial owners of Exchange Notes will be
governed by standing instructions and customary practice and
will be the responsibility of the Depositary's Participants or
the Depositary's Indirect Participants.
Certificated Securities
Subject to certain conditions, any person having a
beneficial interest in the Global Note may, upon request to the
Trustee, exchange such beneficial interest for Exchange Notes in
the form of Certificated Securities. Upon any such issuance,
the Trustee is required to register such Certificated Securities
in the name of, and cause the same to be delivered to, such
person or persons (or the nominee of any thereof). All such
certificated Exchange Notes would be subject to the legend
requirements described herein under "Notice to Investors." In
addition, if (i) Sun World notifies the Trustee in writing that
the Depositary is no longer willing or able to act as a
depositary and Sun World is unable to locate a qualified
successor within 90 days or (ii) Sun World, at its option,
notifies the Trustee in writing that it elects to cause the
issuance of Exchange Notes in the form of Certificated
Securities under the Indenture, then, upon surrender by the
Global Note Holder of its Global Note, Exchange Notes in such
form will be issued to each person that the Global Note Holder
and the Depositary identify as being the beneficial owner of the
related Exchange Notes.
Neither Sun World nor the Trustee will be liable for any
delay by the Global Note Holder or the Depositary in identifying
the beneficial owners of Exchange Notes and Sun World and the
Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the
Exchange Notes represented by the Global Note (including
principal, premium, if any and interest) be made by wire
transfer of immediately available same day funds to the accounts
specified by the Global Note Holder. With respect to
Certificated Securities, Sun World will make all payments of
principal, premium, if any, interest by wire transfer of
immediately available same day funds to the accounts specified
by the Holders thereof or, if no such account is specified, by
mailing a check to each such Holder's registered address. The
Sun World expects that secondary trading in the Certificated
Securities will also be settled in immediately available funds.
Registration Rights; Liquidated Damages
In connection with the issuance of the Old Notes, Sun
World, the Guarantors and the Initial Purchaser entered into a,
Registration Rights Agreement. Pursuant to the Registration
Rights Agreement, Sun World agreed to file with the Commission
the Exchange Offer Registration Statement on the appropriate
form under the Securities Act with respect to the Exchange
Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, Sun World will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer
who are able to make certain representations the opportunity to
exchange their Transfer Restricted Securities for Exchange
Notes. If (i) Sun World is not required to file the Exchange
Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of
Transfer Restricted Securities notifies Sun World prior to the
20th day following consummation of the Exchange Offer that
(A) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) that it may not
resell the Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a
broker-dealer and owns Exchange Notes acquired directly from Sun
World or an affiliate of Sun World, Sun World will file with the
Commission a Shelf Registration Statement to cover resales of
the Exchange Notes by the Holders thereof who satisfy certain
conditions relating to the provision of information in
connection with the Shelf Registration Statement. The Sun World
will use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by
the Commission. For purposes of the foregoing, "Transfer
Restricted Securities" means each Note until (i) the date on
which such Note has been exchanged by a person other than a
broker-dealer for an Exchange Note in the Exchange Offer,
(ii) following the exchange by a broker-dealer in the Exchange
Offer of a Note for an Exchange Note, the date on which such
Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Note has been
effectively registered under the Securities Act and disposed of
in accordance with the Shelf Registration Statement or (iv) the
date on which such Note is distributed to the public pursuant to
Rule 144 under the Act.
The Registration Statement of which this Prospectus is a
part constitutes the Exchange Offer Registration Statement for
the Exchange Offer.
The Registration Rights Agreement provides that (i) Sun
World will file an Exchange Offer Registration Statement with
the Commission on or prior to 90 days after the Closing Date,
(ii) Sun World will use its best efforts to have the Exchange
Offer Registration Statement declared effective by the
Commission on or prior to 180 days after the Closing Date,
(iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, Sun World will commence the
Exchange Offer and use its best efforts to issue on or prior to
30 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission,
Exchange Notes in exchange for all Old Notes tendered prior
thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, Sun World will use its best
efforts to file the Shelf Registration Statement with the
Commission on or prior to 30 days after such filing obligation
arises and to cause the Shelf Registration to be declared
effective by the Commission on or prior to 90 days after such
obligation arises. If (a) Sun World fails to file any of the
Registration Statements required by the Registration Rights
Agreement on or before the date specified for such filing,
(b) any of such Registration Statements is not declared
effective by the Commission on or prior to the date specified
for such effectiveness (the "Effectiveness Target Date"), or
(c) Sun World fails to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement, or (d) the Shelf
Registration Statement or the Exchange Offer Registration
Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then
Sun World will pay Liquidated Damages to each Holder of Notes,
with respect to the first 90-day period immediately following
the occurrence of the first Registration Default in an amount
equal to $.05 per week per $1,000 principal amount of Notes held
by such Holder. The amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal
amount of Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $.50 per week per $1,000
principal amount of Notes. All accrued Liquidated Damages will
be paid by Sun World on each Damages Payment Date to the Global
Note Holder by wire transfer of immediately available funds or
by federal funds check and to Holders of Certificated Securities
by wire transfer to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have
been specified. Following the cure of all Registration Defaults,
the accrual of Liquidated Damages will cease.
Holders of Exchange Notes will be required to make certain
representations to Sun World (as described in the Registration
Rights Agreement) in order to participate in the Exchange Offer
and will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order
to have their Exchange Notes included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated
Damages set forth above.
Certain Definitions
Set forth below are certain defined terms used in the
Indenture. Reference is made to the Indenture for a full
disclosure of all such terms, as well as any other capitalized
terms used herein for which no definition is provided.
"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, including, without
limitation, Indebtedness 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.
"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" (including, with
correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), 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 voting securities of a Person
shall be deemed to be control.
"After-Acquired Property" means assets or property acquired
after the date of the Indenture as such term is defined in the
Indenture.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without
limitation, by way of a sale and leaseback) other than sales of
inventory in the ordinary course of business consistent with
past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of
Cadiz, Sun World and Sun World's Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described
above under the caption "Certain Covenants -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 (ii) the issue
or sale by Cadiz, Sun World or any of its Subsidiaries of Equity
Interests of Sun World or any of Sun World's Subsidiaries, in
the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a
fair market value in excess of $1.0 million or (b) for net
proceeds in excess of $1.0 million. Notwithstanding the
foregoing, none of the following will constitute Asset Sales:
(i) a transfer of assets by Cadiz or Sun World to a Wholly Owned
Restricted Subsidiary of Sun World or by a Wholly Owned
Restricted Subsidiary of Sun World to Sun World or to another
Wholly Owned Restricted Subsidiary of Sun World, (ii) an
issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary of Sun World to Sun World or to another Wholly Owned
Restricted Subsidiary of Sun World, (iii) a Restricted Payment
that is permitted by the covenant described above under the
caption "Certain Covenants--Parent Restricted Payments" and
"Certain Covenants--Issuer Restricted Payments," and (iv) a
transfer of Revolving Credit Agreement Collateral.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present
value (discounted at the rate of interest implicit in such
transaction, determined in accordance with GAAP) 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).
"Cadiz" means Cadiz Land Company, Inc., a Delaware
corporation.
"Cadiz Credit Agreement" means a credit agreement to be
entered into between Cadiz and a lending institution providing
for revolving credit borrowings, including any related notes,
guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to
time; provided, however, that neither Sun World nor any
Subsidiary of Sun World may provide any Guaranty of such
Indebtedness.
"Cadiz Water Project" means the development of the system
for groundwater transfer by Cadiz of the water underlying Cadiz'
properties in the Cadiz and Fenner valleys of eastern California
to certain public agencies, such as the Metropolitan Water
District, including the construction of a pipeline between
Cadiz' properties and the Colorado River Aqueduct.
"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 such time be
required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock,
(iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited)
and (iv) 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.
"Cash Equivalents" means (i) United States dollars,
(ii) any evidence of Indebtedness with a maturity of 365 days or
less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof);
(iii) certificates of deposit or acceptances with a maturity of
365 days or less of any financial institution that is a member
of the Federal Reserve System having a combined capital and
surplus and undivided profits of not less than $500,000,000;
(iv) certificates of deposit with a maturity of 365 days or less
of any financial institution that is organized under the laws of
the United States, or any state thereof or the District of
Columbia that are rated at least A-2 by Standard & Poor's
Corporation or at least P-2 by Moody's Investors Service, Inc.
or at least an equivalent rating category of another nationally
recognized securities rating agency; (v) repurchase agreements
and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the
government of the United States of America or issued by any
agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within 365 days
from the date of acquisition; provided that the terms of such
agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the
Currency on October 31, 1985; and (vi) commercial paper having
a rating of at least A-2 by Standard & Poor's Corporation or at
least P-2 by Moody's Investors Service, Inc. or at least an
equivalent rating category of another nationally recognized
securities rating agency and in each case maturing within six
months after the date of acquisition.
"Collateral" means interests of Cadiz, Sun World or any
Subsidiary of Sun World in all of their Assets, other than the
Excluded Assets.
"Collateral Account" means the collateral account
established pursuant to the Indenture.
"Collateral Documents" mean, collectively, the Security
Agreement, the Deeds of Trust, Sun World Pledge Agreement, the
Cadiz Pledge Agreement, the Intercreditor Agreement and any
other pledges, agreements, instruments, financing statements,
filing or other documents that evidence, set forth or limit the
Lien in favor of the Trustee in the Collateral.
"Consolidated Cash Flow" means, with respect to any Person
for any period, the Consolidated Net Income of such Person for
such period plus (i) an amount equal to any extraordinary loss
plus any net loss realized in connection with an Asset Sale (to
the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such
period, to the extent that such provision for taxes was included
in computing such Consolidated Net Income, plus (iii)
consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation,
amortization of debt issuance costs and 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
payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) 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 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 (v) non-cash non-recurring items whether or
not considered extraordinary under GAAP, in each case, on a
consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Subsidiary of a Person shall be
added to Consolidated Net Income to compute Consolidated Cash
Flow only to the extent (and in the same proportion) that the
Net Income of such Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of
determination to be dividended to Cadiz or to Sun World without
prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations
applicable to Sun World, the Subsidiary or its stockholders.
"Consolidated Lease Expense" means, with respect to any
Person for any period, the aggregate rental obligations of such
Person and its consolidated Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP payable in
respect of such period under leases of real property (net of
income from subleases thereof, but including taxes, insurance,
maintenance and similar expenses that the lessee is obligated to
pay under the terms of such leases), whether or not such
obligations are reflected as liabilities or commitments on a
consolidated balance sheet of such Person and its Restricted
Subsidiaries or in the notes thereto.
"Consolidated Net Income" means, with respect to any
Person for any period, the aggregate of the Net Income of such
Person and its Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided that (i) the
Net Income (but not loss) of any Person that is not a 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 referent Person or a Wholly
Owned Subsidiary thereof, (ii) the Net Income of any Subsidiary
shall be excluded to the extent that the declaration or payment
of dividends or similar distributions by that 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 Subsidiary or
its stockholders, (iii) 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, (iv) the cumulative
effect of a change in accounting principles shall be excluded,
and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to Sun World or one of its
Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person
as of any date, the sum of (i) the consolidated equity of the
common stockholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock,
less (x) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets
of a going concern business made within 12 months after the
acquisition of such business) subsequent to the date of the
Indenture in the book value of any asset owned by such Person or
a consolidated Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense
and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of the date of
determination, any member of the Board of Directors of a Person
who (i) was a member of such Board of Directors on the Issue
Date or (ii) was nominated for election or elected to such Board
of Directors with the affirmative vote of at least a majority of
the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Default" means any event that is or with the passage of
time or the giving of notice or both would be an Event of
Default.
"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), 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 Exchange Notes mature.
"Excluded Assets" means (i) all of the assets of Cadiz
other than the stock of Sun World, (ii) the Revolving Credit
Agreement Collateral, (iii) the Zenith Collateral, and
(iv) certain other assets of Sun World and its Subsidiaries, the
value of which is immaterial in the aggregate.
"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 Indebtedness" means up to $16.8 million in
aggregate principal amount of Indebtedness of Cadiz, Sun World
and its Restricted Subsidiaries (other than Indebtedness under
the Cadiz Credit Agreement and the Revolving Credit Agreement)
in existence on the date of the Indenture, until such amounts
are repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated
interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and 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 payments (if any) pursuant to Hedging Obligations) and
(ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period,
and (iii) any interest expense on Indebtedness of another Person
that is Guarantied 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 Guaranty
or Lien is called upon) and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries,
other than dividend payments on Equity Interests payable solely
in Equity Interests of Cadiz or Sun World, as the case may be,
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; provided, however, that the
denominator in clause (b) shall be one if such dividend or other
distribution is a tax deductible expense for federal income tax
purposes under the Internal Revenue Code of 1986, as amended.
"Fixed Charge Coverage Ratio" means with respect to any
Person and its Restricted Subsidiaries for any period, the ratio
of the Consolidated Cash Flow of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person
and its Restricted Subsidiaries for such period. In the event
that Cadiz, Sun World or any of Sun World's Restricted
Subsidiaries incurs, assumes, Guaranties or redeems any
Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated but
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, Guaranty
or redemption of Indebtedness, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above,
(i) acquisitions that have been made by Sun World or any of its
Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall
be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference
period shall be calculated without giving effect to clause
(iii) of the proviso set forth in the definition of Consolidated
Net Income, and (ii) 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 (iii) 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 will not be obligations of the referent Person or any of
its Restricted Subsidiaries following the Calculation Date.
"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 from time to
time.
"Guaranty" 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, letters of credit and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person,
the obligations of such Person under (i) interest rate swap
agreements, interest rate cap agreements and interest rate
collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any
such balance that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness
(other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guaranty by such Person of
any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest, and (ii) the
principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other
Indebtedness.
<PAGE>
"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 of Indebtedness 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 Sun World
or any Subsidiary of Sun World sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of Sun
World such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of Sun World,
Sun World 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 Subsidiary not sold or disposed
of in an amount determined as provided in the final paragraph of
the covenant described above under the caption " -Restricted
Payments."
"Issue Date" means the date on which the Notes were
originally issued.
"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).
"Net Income" means, with respect to any 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, (i) any gain (but not loss),
together with any related provision for taxes on such gain (but
not loss), realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale
and leaseback transactions) 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 (ii) any extraordinary or
nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain
(but not loss).
"Net Insurance Proceeds" means the insurance proceeds
(excluding liability insurance payable to the Trustee for any
loss, liability or expense incurred by it) paid as a result of
damage to, or the loss, destruction or condemnation of, all of
any portion of the Collateral, less collection costs.
"Net Proceeds" means the aggregate cash proceeds received
by Cadiz, Sun World 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), 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 (after
taking into account any available tax credits or deductions and
any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in
accordance with GAAP.
"Non-Recourse Debt" means Indebtedness: (i) as to which
neither Cadiz, Sun World nor any of Sun World's 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; (ii) no
default with respect to which (including any rights that the
holders thereof may have to take enforcement action against any
Subsidiary) would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness (other than the Notes) of
Cadiz, Sun World or any of their 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; and (iii) as to which the lenders have been notified
in writing that they will not have any recourse to the stock or
assets of Cadiz, Sun World or any of their Restricted
Subsidiaries; provided, however, that in the case of
Indebtedness incurred to finance a Qualified Project, such
Indebtedness shall be considered Non-Recourse Debt if such
Indebtedness meets the above criteria, other than credit support
or recourse of such Indebtedness provided by Cadiz' water rights
or assets directly involved in the construction or operation of
such Qualified Project.
"Obligations" means any principal, interest, penalties,
fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any
Indebtedness.
"PACA" means the Perishable Agricultural Commodities Act,
7 U.S.C 499 et seq.
"Permitted Businesses" means: (i) in the case of Sun
World, the growing, harvesting, marketing, distribution,
processing or packing of produce, the development and licensing
of proprietary strains of produce, the investment in Sun Date
and American Sunmelon, and the Rayo water project, and (ii) in
the case of Cadiz, the Permitted Business of Sun World, together
with the development of groundwater transfer and storage
projects and investment in agricultural real property.
"Permitted Investments" means (a) any Investment in Sun
World or in a Wholly Owned Restricted Subsidiary of Sun World
that is evidenced by Capital Stock or Subsidiary Intercompany
Notes and that is engaged in a Permitted Business; (b) any
Investment in Cash Equivalents; (c) any Investment by Sun World
or any Restricted Subsidiary of Sun World in a Person that is
evidenced by Capital Stock or Subsidiary Intercompany Notes, if
as a result of such Investment (i) such Person becomes a Wholly
Owned Restricted Subsidiary of Sun World and a Guarantor that is
engaged in the same or a similar line of business as Sun World
and its Restricted Subsidiaries were engaged in on the date of
the Indenture or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, Sun World or a
Wholly Owned Restricted Subsidiary of Sun World; (d) any
Restricted 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 "- Asset Sales;" (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than
Disqualified Stock) of Sun World; and (f) other Investments 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 (f) that are at
the time outstanding, not to exceed $3.0 million.
"Permitted Liens" means (i) Liens securing obligations
under the Indenture, the Notes, the Guarantees and the
Collateral Documents; (ii) Liens on Revolving Credit Agreement
Collateral that were permitted by the terms of the Indenture to
be incurred; (iii) Liens in favor of Sun World or any of Sun
World's Restricted Subsidiaries; (iv) Liens on property of a
Person existing at the time such Person is merged into or
consolidated with Sun World or any Subsidiary of Sun World;
provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend
to any assets other than those of the Person merged into or
consolidated with Sun World; (v) Liens on property existing at
the time of acquisition thereof by Sun World or any Subsidiary
of Sun World, provided that such Liens were in existence prior
to the contemplation of such acquisition; (vi) 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; (vii) Liens to
secure Purchase Money Indebtedness permitted by clauses (vi) of
the third paragraph and clause (vii) of the fourth paragraph of
the covenant entitled "Incurrence of Indebtedness and Issuance
of Preferred Stock" covering only the assets acquired with such
Indebtedness; (viii) Liens existing on the date of the
Indenture; (ix) 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; (x) Liens
incurred in the ordinary course of business of Sun World or any
Subsidiary of Sun World with respect to obligations that do not
exceed $2.0 million in the aggregate at any one time outstanding
and that (a) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not
in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation
of business by Sun World or such Subsidiary; (xi) Liens on
Excluded Assets of Cadiz to (a) secure borrowings under the
Cadiz Credit Agreement and (b) finance Qualified Projects; (xii)
Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; (xiii) Liens on
Excluded Assets of Cadiz to secure Permitted Refinancing
Indebtedness; and (xiv) Liens or claims arising under PACA or
any successor statute thereto, to the extent that (A) such Liens
cannot be asserted against the Collateral or (B) the total
amount of such outstanding Liens does not exceed $7.0 million.
"Permitted Refinancing Indebtedness" means any
Indebtedness of Cadiz, Sun World or any of Sun World's
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 Cadiz, Sun World or any
of Sun World's Restricted Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith) outstanding as of the
date of such extension, refinancing, renewal, replacement,
defeasance or refunding; (ii) 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; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Exchange 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 Exchange Notes on terms at least as
favorable to the Holders of Exchange Notes as those contained in
the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(iv) such Indebtedness is incurred either by Cadiz, Sun World or
by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Purchase Money Indebtedness" of any Person means any
obligations of such Person to any seller or any other Person
incurred or assumed to finance the purchase, or the cost of
construction or improvement, of real or personal property to be
used in the business of such Person or any of its Subsidiaries
in an amount that is not more than 100% of the cost, or fair
market value, as appropriate, of such property, and incurred to
finance such acquisition (excluding accounts payable to trade
creditors incurred in the ordinary course of business).
"Qualified Project" means a project by Cadiz (i) to
develop its rights to water that is financed solely through the
issuance of Non-Recourse Debt and Equity Interests of Cadiz
(other than Disqualified Stock), including the Cadiz Water
Project or (ii) an investment in agricultural real property.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary
of the referent Person that is not an Unrestricted Subsidiary.
"Revolving Credit Agreement" means that certain Credit
Agreement entered into by and among Sun World and Rabobank,
providing for revolving credit borrowings, including any related
notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced
from time to time.
"Revolving Credit Agreement Collateral" means all of Sun
World's cash and cash equivalents (other than funds which are or
are to become Trust Monies), accounts receivable, growing crops,
farm products and inventory and all of the cash and cash
equivalents (other than funds which are or are to become Trust
Monies), accounts receivable, growing crops, farm products and
inventory of Sun World's Subsidiaries.
"Revolving Indebtedness" means Indebtedness under the
Revolving Credit Agreement.
"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 Act, as such
Regulation is in effect on the date hereof.
"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.
"Subsidiary" means, with respect to any Person, (i) 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 (ii)
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 of one or more Subsidiaries of such Person (or any
combination thereof).
"Subsidiary Intercompany Notes" means the intercompany
notes issued by Subsidiaries of Sun World in favor of Sun World
to evidence advances by Sun World, in each case, in the form
attached as Annex B to the Indenture.
"Trust Monies" means all cash and Cash Equivalents
received by the Trustee: (i) upon the release of Collateral from
the Lien of the Indenture and/or the Collateral Documents,
including all Collateral Proceeds (and amounts deemed, pursuant
to the Indenture, to constitute Collateral Proceeds) and all
moneys received in respect of the principal of all purchase
money, governmental and other obligations; (ii) as Net Insurance
Proceeds (other than any liability insurance proceeds payable to
the Trustee for any loss, liability or expense incurred by it);
(iii) pursuant to the Collateral Documents; (iv) as proceeds of
any sale or other disposition of all or any part of the
Collateral by or on behalf of the Trustee or any collection,
recovery, receipt, appropriation or other realization of or from
all or any part of the Collateral pursuant to the Indenture or
any of the Collateral Documents or otherwise; (v) which
constitute Collateral Proceeds or are deemed pursuant to the
Indenture to constitute Collateral Proceeds from any transaction
which results in a Subsidiary Guarantor being released from its
Subsidiary Guarantee pursuant to the Indenture; or (vi) for
application as provided in the relevant provisions of the
Indenture or any Collateral Document or which disposition is not
otherwise specifically provided for in the Indenture or in any
Collateral Document; provided, however, that Trust Monies shall
in no event include any property deposited with the Trustee for
any redemption, legal defeasance or covenant defeasance of
Notes, for the satisfaction and discharge of the Indenture or to
pay the purchase price of Notes pursuant to a Change of Control
Offer.
"Unrestricted Subsidiary" means (i) any Subsidiary or any
successor to any of them, 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: (a) has
no Indebtedness other than Non-Recourse Debt; (b) is not party
to any agreement, contract, arrangement or understanding with
Cadiz, Sun World or any Restricted Subsidiary unless the terms
of any such agreement, contract, arrangement or understanding
are no less favorable to Cadiz, Sun World or such Restricted
Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of Cadiz or Sun World; (c) is a
Person with respect to which none of Cadiz, Sun World or any
Restricted Subsidiary has any direct or indirect obligation (x)
to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results;
(d) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of Cadiz, Sun World
or any Restricted Subsidiary; and (e) has at least one director
on its board of directors that is not a director or executive
officer of Cadiz, Sun World or any Restricted Subsidiary and has
at least one executive officer that is not a director or
executive officer of Cadiz, Sun World or any Restricted
Subsidiary. Any such designation by the Board of Directors 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 foregoing 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 foregoing
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 Cadiz or Sun
World as applicable, 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," Cadiz or Sun World shall be in
default of such covenant). The Board of Directors of Cadiz or
Sun World 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 Cadiz or Sun World of any outstanding
Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) 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 four-quarter
reference period, and (ii) no Default or Event of Default would
be in existence following such designation.
"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 (i) 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,
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 (ii) the then outstanding principal amount of such
Indebtedness.
"Wholly Owned Restricted Subsidiary" of any 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) 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.
"Zenith Collateral" means an undivided one-half interest
in 4,222 acres of farm property located near Blythe, California
in which a senior security interest has been granted by Sun
World to Zenith Insurance Company as security for certain
Existing Indebtedness.
DESCRIPTION OF OTHER INDEBTEDNESS
Revolving Credit Agreement
The summary of the Revolving Credit Agreement set forth
below does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the credit
agreement governing the Revolving Credit Agreement.
Rabobank and the Initial Purchaser were the original
lenders under the Revolving Credit Agreement, each having a
$15.0 million price. On May 29, 1997, the Initial Purchaser's
interest was assigned to Harris Bank. Rabobank serves as agent
for such lenders. The Revolving Credit Agreement is used to
finance Sun World's seasonal working capital needs. The
Revolving Credit Agreement is secured by a first priority
security interest in cash, cash equivalents, growing crops, crop
inventories, accounts receivable and proceeds thereof. The
Revolving Credit Agreement provides for advances to Sun World of
up to (i) 80% of eligible U.S. accounts receivable not more than
70 days past due with concentration and default provisions; plus
a percentage (ranging from 30% to 45% depending on the time of
year) of eligible U.S. growing crops and crop inventories up to
a maximum of $9 million from July 16 through April 15 and
$12 million from April 16 through July 15. In addition,
obligations under the Revolving Credit Agreement are
unconditionally guaranteed by Cadiz and by the Subsidiary
Guarantors.
The Revolving Credit Agreement bears interest at prime plus
1.5% or LIBOR plus 2.5%, subject in each case to a 50 basis
point increase based upon borrowing base levels. Sun World will
pay commitment fees at a rate of 0.50% per annum on unused
commitments.
The Revolving Credit Agreement contains customary
covenants, including financial covenants relating to, among
other things, minimum net income and EBITDA, minimum net worth,
total liabilities to tangible net worth ratios and capital
expenditure limitations.
Intercreditor Agreement
The agent under the Revolving Credit Agreement (the "Agent
Bank"), on behalf of the lenders, and the Trustee, on behalf of
the holders of Exchange Notes, has entered into an intercreditor
agreement (the "Intercreditor Agreement") setting forth certain
agreements with respect to the Collateral and the Revolving
Credit Agreement Collateral.
Pursuant to the terms of the Intercreditor Agreement, among
other things, the Trustee shall grant to the Agent Bank a
license (the "License") for a period of up to one year following
delivery of a notice of default under the Exchange Notes or
related documents. The License shall permit access to, and the
right to make use of, certain Collateral, to the extent
necessary to farm, cultivate, harvest and sell crops and other
farm products constituting the Revolving Credit Agreement
Collateral. In addition, the Trustee shall waive certain rights
it may acquire with respect to Revolving Credit Agreement
Collateral by virtue of the Trustee's interest in the Collateral
or otherwise.
The provisions of the Intercreditor Agreement, including
the License, could affect the ability of the Trustee to enforce
certain remedies under the Collateral Documents and the timing
of any such enforcement.
UNITED STATED FEDERAL TAX CONSEQUENCES
The following discussion is a summary of the federal income
tax consequences expected to result to holders from the exchange
of Old Notes for Exchange Notes. The summary is based upon the
Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations, judicial authorities and
published rulings of the Internal Revenue Service (the
"Service"), all as currently in effect. There can be no
assurance that the Service will not take a contrary view, and no
ruling from the Service or opinion of counsel has been or will
be sought. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify
the statements and conclusions set forth herein. Any such
changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders.
The following summary is for general information only and
does not cover all aspects of federal taxation that may be
relevant to, or the actual tax effect that any of the matters
described herein will have on, particular purchasers, and does
not address state, local, foreign or other tax laws. The tax
treatment of a holder of Exchange Notes or Old Notes may vary
depending upon such holder's particular situation.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT HIS OR HER TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE EXCHANGE OF
OLD NOTES FOR EXCHANGE NOTES.
The Exchange
An exchange of Old Notes for Exchange Notes should be
treated as a "non-event" for federal income tax purposes because
the Old Notes should not be considered to differ materially in
kind or extent from the Exchange Nots. As a result, holder who
exchange their Old Notes for Exchange Notes should not recognize
any income, gain or loss for federal income tax purposes and the
Exchange Notes should be treated as if they had been issued on
the date the Old Notes were issued.
There should be no federal income tax consequences of the
Exchange Offer to non-exchanging holders.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities.
Sun World has agreed that it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until
, 1997, all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.
Sun World will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions
or concessions from any such broker-dealer or the purchasers of
any such Exchange Notes. Any broker-dealer that resells
Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
After the Exchange Date, Sun World will promptly send
additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. Sun World has
agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers and
will indemnify the holders of the Old Notes (including any
broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the issuance of
the securities offered hereby will be passed upon for Sun World
and the Guarantors by Miller & Holguin, attorneys at law, Los
Angeles, California.
EXPERTS
The consolidated financial statements of Cadiz as of
December 31, 1996 and March 31, 1996 and for the nine month
period ended December 31, 1996 and for each of the two years in
the period ended March 31, 1996 and the consolidated financial
statements of Sun World as of December 31, 1996 and September
13, 1996 and for the period January 1, 1996 through
September 13, 1996 and September 14, 1996 through December 31,
1996 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Sun World as of
December 31, 1995 and 1994 and for the years then ended which
are included in this Prospectus have been so included in
reliance on the report (which report expresses an unqualified
opinion and includes an explanatory paragraph referring to Sun
World's bankruptcy and reorganization) of Deloitte & Touche LLP,
independent auditors, given upon their authority as experts in
accounting and auditing.
INDEX TO FINANCIAL STATEMENTS
Index to Unaudited Financial Statements of Cadiz Land Company, Inc. for
the three months ended March 31, 1997 and 1996:
Consolidated Statement of Operations..............................F-3
Consolidated Balance Sheet........................................F-4
Consolidated Statement of Cash Flows..............................F-6
Consolidated Statement of Redeemable Preferred Stock,
Preferred Stock, Common Stock and Other Stockholders' Equity....F-7
Notes to the Consolidated Financial Statements....................F-8
Index to Audited Financial Statements of Cadiz Land Company, Inc.
for the nine months ended December 31, 1996 and the years ended
March 31, 1996 and 1995:
Report of Independent Accountants...................................F-12
Consolidated Balance Sheet..........................................F-13
Consolidated Statement of Cash Flows................................F-15
Consolidated Statement of Operations................................F-16
Consolidated Statement of Redeemable Preferred Stock,
Preferred Stock, Common Stock and Other Stockholders' Equity.......F-17
Notes to the Consolidated Financial Statements......................F-19
Index to Audited Financial Statements of Sun World International, Inc.
for the period September 14, 1996 through December 31, 1996.
Report of Independent Accountants...................................F-42
Consolidated Balance Sheet..........................................F-43
Consolidated Statement of Operations and Accumulated Deficit........F-44
Consolidated Statement of Cash Flows................................F-45
Notes to Consolidated Financial Statements..........................F-46
Index to Audited Financial Statements of Sun World International, Inc.
for the period January 1, 1996 through September 13, 1996:
Report of Independent Accountants....................................F-57
Consolidated Balance Sheet...........................................F-58
Consolidated Statement of Operations & Accumulated Deficit...........F-59
Consolidated Statement of Cash Flows.................................F-60
Notes to the Consolidated Financial Statements.......................F-61
Index to Audited Financial Statements of Sun World International, Inc.
for the years ended December 31, 1995 and 1994:
Independent Auditors' Report.........................................F-78
Consolidated Balance Sheets..........................................F-79
Consolidated Statements of Operations and Accumulated Deficit........F-80
Consolidated Statements of Cash Flows................................F-81
Notes to Consolidated Financial Statements...........................F-82
CONSOLIDATED FINANCIAL STATEMENTS
OF
CADIZ LAND COMPANY, INC.
For the Three Months Ended March 31, 1997 and March 31, 1996
Unaudited
CADIZ LAND COMPANY, INC.
Condensed Consolidated Statement of Operations (Unaudited)
For the Three Months Ended March 31, 1997 1996
-------- -------
($ in thousands except per share data)
Revenues $ 4,805 $ 321
-------- --------
Costs and expenses:
Cost of sales 5,018 863
Resource development 75 109
Landfill prevention activities 204 1,248
General and administrative 2,616 519
Depreciation 475 211
Amortization 58 59
-------- --------
Total costs and expenses 8,446 3,009
-------- --------
Operating loss (3,641) (2,688)
Other (income) expense (82) -0-
Interest expense, net 3,837 453
-------- --------
Net loss (7,396) (3,141)
Less: Preferred stock dividends (438) -0-
-------- --------
Net loss applicable to common stock (7,834) (3,141)
======== ========
Net loss per common share $ (.33) $ (.17)
========= ========
Weighted average shares outstanding 23,800 18,500
========= ========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Condensed Consolidated Balance Sheet
(Unaudited)
March 31, December 31,
1997 1996
---------- ---------
(Assets ($ in thousands):
Current assets:
Cash and cash equivalents $ 19,163 $ 33,307
Accounts receivable, net 3,838 7,533
Assets held for sale 4,771 6,534
Inventories 21,006 14,121
Prepaid expenses and other 960 1,225
-------- -----------
Total current assets 49,738 62,720
Investment in partnerships 5,731 6,122
Property, plant and equipment, net 137,603 137,897
Land held for development 12,680 12,671
Water rights and transfer and
storage projects 4,964 4,705
Other assets 1,635 1,695
Excess purchase price over net
assets acquired, net 4,922 4,980
-------- ---------
$ 217,273 $ 230,790
========== ===========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Condensed Consolidated Balance Sheet
(Unaudited)
March 31, December 31,
1997 1996
--------- ----------
Liabilities and Other Stockholders' Equity
($ in thousands)
Current liabilities:
Accounts payable $ 5,513 $ 7,435
Accrued liabilities 4,032 5,172
Long-term debt, current portion 4,810 4,753
Other current liabilities 153 591
--------- ---------
Total current liabilities 14,508 17,951
Long-term debt 146,118 149,111
Deferred income taxes 4,347 4,347
Other liabilities 4,284 4,209
Commitments and contingencies
Series A redeemable preferred
stock - $.01 par value
($1,000 liquidation value);
60,000 shares authorized;
27,431 shares issued and
outstanding at March 31, 1997
and December 31, 1996 27,431 27,431
Preferred stock - $.01 par value;
40,000 shares authorized,
shares issued and outstanding -
100 at March 31, 1997 and
340 shares at December 31, 1996
Common stock - $.01 par value;
45,000,000 shares
authorized; shares issued and
outstanding - 24,191,300 at
March 31, 1997 and 23,445,868
at December 31, 1996 242 234
Additional paid-in capital 89,244 88,574
Accumulated deficit (68,901) (61,067)
--------- ---------
$ 217,273 $ 230,790
========= ==========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Condensed Consolidated Statement of Cash Flows - (Unaudited)
For the Three Months Ended March 31, 1997 1996
--------- ---------
($ in thousands)
Cash flows from operating activities:
Net loss from operations $ (7,396) $ (3,141)
Adjustments to reconcile net loss
from operations to cash
used for operating activities:
Depreciation and amortization 731 482
Issuance of shares for refinancing 140 -0-
Interest capitalized to debt 250 94
Share of partnership operations (398) -0-
Changes in operating assets and
liabilities, net of acquisition of
Sun World:
Decrease (increase) in
accounts receivable 3,695 (117)
Increase in inventories (5,393) -0-
(Increase) decrease in prepaid
expenses and other 67 265
(Decrease) increase in accounts
payable (1,922) 944
(Decrease) in accrued liabilities (1,548) -0-
(Decrease) in other current
liabilities (438) -0-
Increase in other liabilities 75 -0-
-------- --------
Net cash used for operating
activities (12,137) (1,473)
--------- --------
Cash flows from investing activities:
Additions to property, plant and
equipment (291) (141)
Proceeds from disposal of property,
plant and equipment 1,764 -0-
Land purchase and development (27) (243)
Water transfer and storage projects (259) (104)
Additions to developing crops (1,363) -0-
Partnership distributions 790 -0-
Decrease in other assets 59 -0-
Acquisition of Sun World, net of
cash acquired -0- (693)
-------- --------
Net cash provided by (used for)
investing activities 673 (1,181)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of stock 505 5,058
Principal payments on long-term debt (3,260) (152)
Proceeds from short-term debt 75 301
-------- --------
Net cash provided by (used for)
financing activities (2,680) 5,207
-------- --------
Net increase (decrease) in cash
and cash equivalents (14,144) 2,553
Cash and cash equivalents, beginning
of period 33,307 2,600
-------- --------
Cash and cash equivalents, end of period $ 19,163 $ 5,153
========= ==========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Condensed Consolidated Statement of Redeemable Preferred Stock,
Preferred Stock, Common Stock and Other Stockholders' Equity
For the Three Months Ended March 31, 1997
($ in thousands)
Redeemable Preferred Additional
Preferred Stock Stock Common Stock Paid-in Accumulated
---------------- ----------- --------------- -------- -----------
Shares Amount Shares Amount Shares Amount Capital Deficit
Balance as
of
December
31, 1996 27,431 $ 27,431 340 $ - 23,445,868 $ 234 $ 88,574 $ (61,067)
Exercise
of stock
options
and
warrants 131,000 2 503
Issuance of
stock for
refinancing 30,000 140
Dividends
paid in
common
stock on
conversion
of
preferred
stock 9,392 33
Accrued
dividends
on preferred
stock (438)
Conversion of
preferred
stock to
common stock (240) 575,040 6 (6)
Net loss (7,396)
------ ------- ----- ---- --------- ------ -------- ----------
As of
March 31,
1997 27,431 $ 27,431 100 $ - 24,191,300 $ 242 $ 89,244 $ (68,901)
======= ======== ==== ===== ========== ===== ======== ==========
See accompanying notes to the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The Condensed Consolidated Financial Statements have been prepared by
the Company without audit and should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
latest Form 10-K for the nine month period ended December 31, 1996. The
foregoing Consolidated Financial Statements include all adjustments,
consisting only of normal recurring adjustments which the Company considers
necessary for a fair presentation. The results of operations for the three
months ended March 31, 1997 are not necessarily indicative of the results to
be expected for the full fiscal year.
See Note 2 to the Condensed Consolidated Financial Statements included
in the Company's latest Form 10-K for a discussion of the Company's accounting
policies.
NOTE 2 - LONG-TERM DEBT
- -----------------------
On April 16, 1997 Sun World completed a private placement of $115.0
million in secured notes (the "Sun World Notes"). The Sun World Notes were
sold through Smith Barney Inc., as initial purchaser, to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act of
1933, as amended (the "Securities Act")) and a limited number of institutional
"accredited investors" (as defined in the Securities Act). The proceeds from
the issuance of the Sun World Notes, when combined with Sun World's existing
cash and cash made available under a $30 million Revolving Credit Facility
entered into by Sun World concurrently with the issuance of the Sun World
Notes, were used to retire Sun World's existing indebtedness to John Hancock
Mutual Life Insurance Company ("John Hancock") and Caisse Nationale de Credit
Agricole, acting through its Grand Cayman branch ("Credit Agricole") as well
as the Company's existing indebtedness to Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A. ("Rabobank").
SUN WORLD OBLIGATIONS
Sun World's $30 million Revolving Credit Facility matures in one year
and is guaranteed by the Company. Amounts borrowed under the Revolving Credit
Facility will accrue interest at either prime plus 1.50% or LIBOR plus 2.50%,
at Sun World's election, with an additional .50% payable for advances on
eligible inventory above specified levels.
The Sun World Notes, which were issued in the principal amount of $115.0
million on April 16, 1997 and will mature on April 15, 2004, accrue interest at
the rate of 11 1/4% per annum. Interest only is payable semi-annually on
April 15 and October 15 of each year, commencing October 15, 1997. The Sun
World Notes are secured by a first lien on substantially all of the assets
of Sun World and its subsidiaries, other than growing crops, crop inventories
and accounts receivable and proceeds thereof, which secure the Revolving
Credit Facility.
The Sun World Notes are also secured by the guarantees of Coachella Growers,
Inc., Sun Desert, Inc., Sun World Brands, Sun World Management Corporation and
Sun World/Rayo (collectively, the "Sun World Subsidiary Guarantors") and by
the Company. The Company also pledged all of the stock of Sun World. Sun
World and the Sun World Subsidiary Guarantors are all direct and indirect
wholly-owned subsidiaries of the Company. The guarantees by the Sun World
Subsidiary Guarantors are full, unconditional, and joint and several.
Additionally, management believes that the direct and indirect non-guarantor
subsidiaries of Cadiz are inconsequential, both individually and in the
aggregate, to the financial statements of the Company for all periods
presented.
SUMMARIZED FINANCIAL INFORMATION
Summarized consolidated financial information for Sun World is as follows
(in thousands):
March 31, 1997
--------------
Current assets $ 49,808
Noncurrent assets 135,001
Current liabilities 11,532
Noncurrent liabilities 136,437
For the Three
Months Ended
March 31, 1997
----------------
Revenues $ 4,756
Cost of sales (4,989)
Operating loss (2,733)
Net loss (5,619)
Combined summarized financial information for the Sun World Subsidiary
Guarantors is as follows (in thousands):
March 31, 1997
--------------
Current assets $ -0-
Noncurrent assets 8
Current liabilities -0-
Non current liabilities -0-
For the Three
Months Ended
March 31, 1997
---------------
Share of net loss of equity investee $ (398)
Separate financial statements for Sun World and each of the Sun World
Subsidiary Guarantors are not presented as management has determined they
would not be material to investors.
NOTE 3 - PREFERRED AND COMMON STOCK
- ----------------------------------
During the three months ended March 31, 1997, 140 shares of Series B
Preferred Stock ("Series B Preferred") and 100 shares of Series C Preferred
Stock ("Series C Preferred") were converted into 333,529 and 241,511 shares
of common stock, respectively. Dividends paid in common stock on conversion
of the Series B Preferred and Series C Preferred totalled 9,392 shares of
common stock.
In addition, the Company delivered notice of exercise of its conversion
right to mandatorily convert all of the outstanding shares of the Series A
Redeemable Preferred Stock ("Series A Preferred"). Accordingly, on May 7,
1997, the 27,431 shares of Series A Preferred were converted into 7,314,917
shares of common stock. In addition, as a condition to such conversion, the
Company paid holders of the Series A Preferred one full year's worth of
dividends (less the amount of any dividends theretofore paid). Such dividends
were paid in the form of 166,312 shares of common stock.
CONSOLIDATED FINANCIAL STATEMENTS
OF
CADIZ LAND COMPANY, INC.
For the Nine Months Ended December 31, 1996
and Each of the
Two Years Ended March 31, 1996
With Report of Independent Accountants
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Cadiz Land Company, Inc.
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations, of redeemable preferred stock, preferred stock,
common stock and other stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Cadiz Land
Company, Inc. and its subsidiaries at December 31, 1996 and March 31, 1996,
and the results of their operations and their cash flows for the nine
months ended December 31, 1996 and for each of the two years in
the period ended March 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------------
PRICE WATERHOUSE LLP
Los Angeles, California
March 7, 1997, except for
Notes 7 and 13, which are
as of April 16, 1997
CADIZ LAND COMPANY INC.
Consolidated Balance Sheet
($ in thousands)
December 31 March 31
1996 1996
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 33,307 $ 5,153
Accounts receivable, net 7,533 443
Assets held for sale 6,534 -0-
Inventories 14,121 266
Prepaid expenses and other 1,225 190
---------- --------
Total current assets 62,720 6,052
Investment in partnerships 6,122 -0-
Property, plant and equipment, net 137,897 11,681
Land held for development 12,671 12,236
Water rights and transfer and
storage projects 4,705 2,496
Other assets 1,695 1,043
Excess purchase price over
net assets acquired, net 4,980 5,155
------------ ------------
$ 230,790 $ 38,663
=========== ==========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Liabilities, Stock and Other Stockholders' Equity
($ in thousands)
December 31 March 31
1996 1996
------- ---------
Current liabilities:
Accounts payable $ 7,435 $ 1,772
Accrued liabilities 5,172 521
Long-term debt, current portion 4,753 17,617
Other current liabilities 591 -0-
-------- --------
Total current liabilities 17,951 19,910
Long-term debt 149,111 -0-
Deferred income taxes 4,347 -0-
Other liabilities 4,209 -0-
Commitments and contingencies
Series A redeemable preferred stock -
$.01 par value ($1,000 liquidation
value); 60,000 shares authorized;
27,431 shares issued and outstanding
at December 31, 1996 27,431 -0-
Preferred stock - $.01 par value
40,000 shares authorized; 340
shares issued and outstanding at
December 31, 1996 - -0-
Common stock - $.01 par value; 45,000,000
shares authorized; shares issued and
outstanding - 23,445,868 at December 31,
1996 and 19,247,611 at March 31, 1996 234 192
Additional paid-in capital 88,574 72,957
Accumulated deficit (61,067) (54,396)
---------- ---------
$ 230,790 $ 38,663
========= =========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Consolidated Statement of Cash Flows
($ in thousands)
Nine Months Ended Year Ended
December 31, March 31,
1996 1996 1995
------ ------ ------
Cash flows from operating activities:
Net loss from continuing
operations $ (5,997) $ (8,487) $ (4,591)
Adjustments to reconcile net
loss from continuing operations
to cash used for continuing
operating activities:
Depreciation and amortization 1,654 1,909 1,450
Extraordinary gain on debt
settlement -0- -0- (115)
Interest capitalized to debt 481 474 734
Share of partnership operations (838) -0- -0-
Changes in operating assets and
liabilities, net of acquisition
of Sun World:
Decrease (increase) in accounts
receivable 11,367 (379) (198)
Decrease in inventories 1,000 -0- -0-
(Increase) decrease in prepaid
expenses and other (428) 13 (158)
(Decrease) increase in accounts
payable (7,208) 734 (12)
Increase in accrued liabilities 577 -0- -0-
(Decrease) in other liabilities (674) -0- -0-
------- ------- --------
Net cash used for continuing
operating activities (66) (5,736) (2,890)
Net cash provided by discontinued
operating activities -0- -0- 57
------- ------- -------
Net cash used for operating
activities (66) (5,736) (2,833)
------- -------- --------
Cash flows from investing activities:
Additions to property, plant
and equipment (405) (358) (1,506)
Proceeds from disposal of property,
plant and equipment 12,415 -0- -0-
Land purchase and development (490) (574) (315)
Water transfer and storage projects (343) (732) (1,547)
Additions to developing crops (187) -0- -0-
Partnership distributions 140 -0- -0-
Acquisition of Sun World, net
of cash acquired (4,474) (693) -0-
-------- -------- --------
Net cash provided by (used for)
investing activities 6,656 (2,357) (3,368)
--------- -------- --------
Cash flows from financing
activities:
Net proceeds from issuance
of stock 37,761 10,292 2,307
Principal payments on long-term
debt (16,428) (177) (530)
Proceeds from short-term debt 347 677 2,470
Principal payments on short-term
debt (17) -0- -0-
Dividends paid on conversion of
preferred stock (99) -0- -0-
---------- ---------- -----------
Net cash provided by financing
activities 21,564 10,792 4,247
Net increase (decrease) in cash and
cash equivalents 28,154 2,699 (1,954)
Cash and cash equivalents,
beginning of period 5,153 2,454 4,408
---------- ---------- ---------
Cash and cash equivalents,
end of period $ 33,307 $ 5,153 $ 2,454
========= ========= ========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Consolidated Statement of Operations
(In thousands except per share data)
Nine Months Ended Year Ended
December 31, March 31,
1996 1996 1995
------ ------ ------
Revenues $ 23,780 $ 1,441 $ 543
-------- -------- -------
Costs and expenses:
Cost of sales 17,725 1,649 506
Resource development 1,133 1,680 1,039
Landfill prevention activities 394 1,919 -0-
General and administrative 4,924 1,826 1,525
Depreciation 864 833 737
Amortization 175 234 234
-------- -------- --------
Total costs and expenses 25,215 8,141 4,041
-------- -------- --------
Operating loss (1,435) (6,700) (3,498)
Interest expense, net 5,203 1,787 1,208
-------- -------- -------
Loss before income taxes and
extraordinary item (6,638) (8,487) (4,706)
Income tax benefit (641) -0- -0-
--------- -------- --------
Loss before extraordinary item (5,997) (8,487) (4,706)
Extraordinary item - gain on
debt settlement -0- -0- 115
--------- --------- --------
Net loss (5,997) (8,487) (4,591)
Less: Preferred stock dividends (674) -0- -0-
Imputed dividend on
preferred stock (2,451) -0- -0-
----------- --------- --------
Net loss applicable to
common stock $ (9,122) $ (8,487) $ (4,591)
======== ======== ========
Net loss per common share:
Loss before
extraordinary item $ (.44) $ (.48) $ (.29)
Extraordinary item -0- -0- .01
----------- ----------- ----------
Net loss per common share $ (.44) $ (.48) $ (.28)
========== ========= ========
Weighted average shares
outstanding 20,500 17,700 16,500
========== ========= ========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Consolidated Statement of Redeemable Preferred Stock,
Preferred Stock, Common Stock and Other Stockholders' Equity
For the Nine Months Ended December 31, 1996 and the Two Years Ended
March 31, 1996
($ in thousands)
Redeemable Addi-
Preferred Preferred Common tional Accumu-
Stock Stock Stock Paid-in lated
Shares Amount Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ---------- ------- ------- -------
Balance
as of
March 31,
1994 -0- $ -0- -0- $ -0- 15,430,864 $ 154 $ 59,890 $(41,318)
Issuance
of shares
for
professional
services 110,000 1 384
Issuance
of stock
warrants
for
services 121
Exercise
of stock
options
and
warrants 1,447,590 15 2,292
Net loss ( 4,591)
------ ----- ----- ------ ---------- ----- ------- -------
Balance
as of
March 31,
1995 -0- -0- -0- -0- 16,988,454 170 62,687 (45,909)
Issuance
of shares
in
connection
with
private
placements 2,114,157 21 9,911
Exercise
of stock
options 145,000 1 359
Net loss (8,487)
----- ------ ----- ------ ---------- ---- ------- ------
Balance
as of
March 31,
1996 -0- -0- -0- -0- 19,247,611 192 72,957 (54,396)
Exercise
of stock
options and
warrants 335,000 3 939
Common stock
issued for
acquisition
of Sun World 1,153,908 12 3,576
Gross proceeds
from private
placement of
redeemable
preferred
stock 26,131 26,131
Preferred
shares
issued for
acquisition
fees 1,500 1,500
Net proceeds
from
private
placements
of preferred
stock 1,300 10,688
Cash
dividends
paid on
conversion
of preferred
stock (99)
Dividends
paid in
common
stock
on
conversion
of
preferred
stock 28,777 127 (127)
Accrued
dividends
on
preferred
stock (448)
Conversion
of
redeemable
preferred
to common
stock (200) (200) 53,332 1 199
Conversion
of
preferred
stock
to common
stock (960) 2,672,240 26 (26)
Issuance
of stock
warrants
for
services 114
Net loss (5,997)
------ ------- ------ ------- -------- ----- -------- --------
Balance
as of
December
31,
1996 27,431 $27,431 340 $ - 23,445,868 $ 234 $88,574 $ (61,067)
======= ======= ====== ==== ========== ===== ======= =========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
NOTES TO THE CONSOIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
- ---------------------------------
The long-term strategy of Cadiz Land Company, Inc. (the
"Company") is to acquire and develop water-related land and
agricultural assets. The Company has created an integrated
and complimentary portfolio of landholdings, water resources,
and agricultural operations located within central and
southern California which either possess sizable assured
supplies of water or can, in future years, utilize water
supplied from other Company properties. Management believes
that, with both the increasing scarcity of water supplies in
California and the increasing demand for water, the Company's
access to water will provide it with a competitive advantage
both as a major agricultural concern and as a supplier of
water which will lead to continued appreciation in the value
of the Company's portfolio.
On September 13, 1996, the Company acquired all of the
stock of a reorganized Sun World International, Inc. ("Sun
World") pursuant to a consensual plan of reorganization
(Debtors' Modified Fourth Amended Consolidated Plan of
Reorganization dated June 3, 1996 (Modified)) which was
confirmed by the U.S. Bankruptcy Court at a hearing on July
12, 1996. Sun World and certain subsidiaries of Sun World had
filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code on October 3, 1994 after debt restructuring
negotiations with Sun World's existing lenders failed.
With its acquisition of Sun World, the Company has become
a vertically integrated agricultural company. Sun World owns
and farms approximately 17,300 acres in two major growing
areas of California, the Southern San Joaquin Valley and the
Coachella Valley. Fresh produce, including table grapes, tree
fruit, peppers and watermelon are marketed, packed and shipped
to food wholesalers and retailers located throughout the
United States and to over 30 foreign countries. As of
December 31, 1996, Sun World owned and operated five cold
storage and/or packing facilities located in California.
In addition, the acquisition of Sun World provided the
Company valuable water rights throughout the central and
southern valleys of California. The Company's landholdings,
which now total approximately 56,300 acres, are located
adjacent to the major aqueduct systems of central and southern
California, and in close proximity to the Colorado River. The
Company expects to utilize these resources to participate in
a broad variety of water transfer and storage projects,
including the storage and transfer of surplus water for public
agencies which require supplemental sources of water.
Although the development and management activities of the
Company are currently focused on agricultural operations
(primarily through its wholly-owned subsidiary, Sun World) and
water resource development, the Company will continue to seek
to develop and manage its land, water and agricultural
resources for their best use.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries,
Sun World (since September 14, 1996), Cadiz Valley Development
Corporation, Inc., and Southwest Fruit Growers Limited
Partnership, a limited partnership ("SWFG") in which the
Company is the general partner and has an approximate 66.3
percent partnership interest. SWFG owns a total of 680 acres
of table grape vineyards and 2,560 acres of undeveloped land
at Cadiz, California. Allocable losses incurred through the
year ended March 31, 1991 served to eliminate the minority
interest in SWFG for accounting purposes. All material
intercompany balances and activity have been eliminated from
the consolidated financial statements.
CHANGE IN YEAR END AND RECLASSIFICATIONS
As a result of the Company's acquisition of Sun World,
the Company changed its fiscal year end from March 31 to
December 31 in order to align the Company's year end with that
of Sun World. Prior to the acquisition of Sun World, the
Company had utilized an unclassified balance sheet
(eliminating the distinction between current assets and long-term
assets and current liabilities and long-term
liabilities). The financial statements set forth herein
utilize a classified balance sheet, thus requiring certain
reclassifications to be made to the prior period balances to
conform with the December 31, 1996 presentation.
The following unaudited information for the nine months
ended December 31, 1995, which does not include the operations
of Sun World, is presented for informational purposes only
(dollars in thousands):
Nine months
ended
December 31, 1995
---------------
Revenues $ 1,120
Net loss $ (5,346)
Net loss per common share $ (0.31)
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost.
The Company capitalizes direct and certain indirect costs
of planting and developing orchards and vineyards during the
development period, which varies by crop and ranges from three
to seven years. Depreciation commences in the year commercial
production is achieved.
Permanent land development costs, such as acquisition
costs, clearing, initial leveling costs and other costs
required to bring the land into a suitable condition for
general agricultural use, are capitalized and not depreciated
since, by definition, these costs have an indeterminate useful
life.
Depreciation is provided using the straight-line method
over the estimated useful lives of the assets, generally ten
to forty-five years for land improvements and buildings, three
to twenty-five years for machinery and equipment, and ten to
thirty years for permanent crops.
LAND HELD FOR DEVELOPMENT
Land held for development consists of approximately
37,000 acres of undeveloped land in Cadiz, Piute and other
desert regions of California. Land held for development is
stated at cost. Cost includes those that are directly related
to the acquisition of the acreage, such as the cost to
purchase, commissions, real estate taxes and legal and other
professional fees.
INVESTMENT IN PARTNERSHIPS
Sun World has investments in various partnerships which
are accounted for using the equity method. Sun World's two
principal partnerships are American Sunmelon and Sun Date,
both of which are 50% owned. American Sunmelon is engaged in
proprietary development, production, and marketing of seedless
watermelon seed. Sun Date is engaged in the processing of
dates. In September 1996, Sun Date and Sun World entered into a
marketing agreement whereby Sun World agreed to sell the dates
produced by Sun Date. During the period September 14, 1996
through December 31, 1996, Sun World made payments to Sun Date
totaling $869,000, primarily related to date crop proceeds.
ASSETS HELD FOR SALE
Certain Sun World assets were identified as either idle
facilities, fallow land, or farming operations which have
experienced consistently low returns on investment. As of
December 31, 1996, assets totaling $6,534,000 have been
identified and are included in the accompanying consolidated
balance sheet at the lower of cost or fair value less
estimated costs to sell. The Company reasonably believes
these assets can be sold within one year.
SUPPLEMENTAL CASH FLOW INFORMATION
The Company considers all short-term deposits with an
original maturity of three months or less to be cash
equivalents. The Company invests its excess cash in deposits
with major international banks and, therefore, bears minimal
risk. Such investments are stated at cost, which approximates
fair value, and are considered cash equivalents for purposes
of reporting cash flows. At December 31, 1996, cash and cash
equivalents totalled $33,307,000, of which $453,000
represented the balance remaining in the trust account for the
payment of unsecured creditors' claims as determined during
the reorganization of Sun World.
Cash paid for interest during the nine months ended
December 31, 1996 and the fiscal years ending March 31, 1996,
and 1995 was $3,892,000, $455,000 and $6,000, respectively.
WATER RIGHTS AND TRANSFER AND STORAGE PROJECTS
All water rights and transfer and storage projects are
stated at cost. All costs directly attributable to the
development of the water transfer projects are being
capitalized by the Company. These costs, which are expected
to be recovered through future revenues, consist of drilling
costs, hydrological costs, consulting fees for various
engineering, environmental and feasibility studies, and other
professional and legal fees.
INVENTORIES
Growing crops, pepper seed, and materials and supplies
are stated at the lower of cost, on a first-in, first-out
(FIFO) basis, or market. Growing crops inventory includes
direct costs and an allocation of indirect costs.
REVENUE RECOGNITION
The Company recognizes crop sale revenue after harvest
and delivery to customers. Packing revenues are recognized as
units are packed. Marketing commission revenues are
recognized at the time of product shipment.
RESEARCH AND DEVELOPMENT
Sun World incurs costs to research and develop new
varieties of proprietary products. Research and development
costs are expensed as incurred. Such costs were approximately
$120,000 during the period September 14, 1996 through December
31, 1996.
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED
As a result of a merger in May 1988 between two companies
which eventually became known as Cadiz Land Company, Inc.,
excess of purchase price over net assets acquired in the
amount of $7,006,000 was recorded. This amount is being
amortized at the rate of $234,000 annually on a straight-line
basis over thirty years. Accumulated amortization was
$2,026,000 and $1,851,000 at December 31, 1996 and March 31,
1996, respectively.
IMPAIRMENT
The Company annually evaluates its long-lived assets,
including intangibles, for potential impairment. When
circumstances indicate that the carrying amount of the asset
may not be recoverable, as demonstrated by estimated future
cash flows, an impairment loss would be recorded based on fair
value.
INCOME TAXES
Income taxes are provided for using an asset and
liability approach which requires the recognition of deferred
tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial
statement and tax bases of assets and liabilities at the
applicable enacted tax rates. A valuation allowance is
provided when it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
NET LOSS PER COMMON SHARE
Net loss per common share is computed by dividing the net
loss, after deduction for preferred dividends either accrued
or imputed, if any, by the weighted average shares
outstanding. As described in Note 10, the terms for
conversion of the Series B and C preferred stock issued during
the nine months ended December 31, 1996 afforded the holders
a conversion price lower than the market price of the common
stock at the time of issuance, in order to recognize the sales
and other market restrictions of the unregistered common stock
to be issued upon conversion. The difference between the
conversion price and market price has been reported as an
imputed dividend for purposes of calculating net loss per
common share although no assets of the Company will ever be
expended. The imputed dividend of $2,451,000 had the effect
of increasing the loss per share for the nine months ended
December 31, 1996 by $0.11. It should be noted that the
imputed dividend has been given no other accounting
recognition in the financial statements of the Company for
that period and there will be no recognition given in the
future.
NOTE 3 - ACQUISITION OF SUN WORLD INTERNATIONAL, INC.
- -----------------------------------------------------
On September 13, 1996, the Company acquired all of the
stock of a reorganized Sun World. The acquisition of Sun
World was accounted for under the purchase method of
accounting. Accordingly, the results of operations of Sun
World have been included in the consolidated financial
statements since the date of acquisition. The total purchase
price consisted of the following: (i) $179 million of assumed
bankruptcy related obligations including $156 million of
restructured secured debt with Sun World's existing lenders
(of which $5.5 million was paid by Cadiz concurrent with the
acquisition), (ii) $11 million of ongoing trade and other
accrued liabilities which were assumed by Cadiz, (iii) $3.2
million of direct acquisition costs, including 1,500 shares of
Redeemable Series A Preferred Stock valued at $1,000 per
share; and (iv) cash and stock of approximately $40 million,
including a $15 million capital contribution to Sun World
which was made with the intent of eliminating the requirement
for Sun World to have any additional debt facilities beyond
those owed to its existing secured creditors. The effect of
allocating the total purchase price to the net assets acquired
based on their estimated fair values is summarized as follows
(dollars in thousands):
Cash $ 32,113
Assets held for sale 18,049
Other current assets 45,225
Investments in partnerships 5,424
Property, plant and equipment 129,050
Other assets 3,409
-------
Total assets 233,270
-------
Prepetition bankruptcy
claims payable (13,164)
Other current liabilities (15,870)
Long-term debt (151,783)
Other liabilities (9,170)
-------
Total liabilities 189,987
-------
Net assets acquired $ 43,283
=======
No goodwill was recognized as a result of the acquisition.
The unaudited pro forma summary for the nine months ended
December 31, 1996 and the year ended March 31, 1996 reflect
combined results of operations of the Company and Sun World as
if the acquisition had occurred as of April 1, 1995. Since
prior to the current fiscal period, the fiscal year ends of
the Company and Sun World differed, for pro forma purposes,
the Sun World results of operations have been adjusted to
conform to the Cadiz reporting periods. The pro forma
adjustments include, among others, decreased interest expense
as a result of the refinancing of Sun World's existing secured
lenders and increased depreciation as a result of the purchase
price allocation. The pro forma adjustments do not reflect the
elimination of charges directly attributable to the Chapter 11
bankruptcy proceedings which are not expected to recur
subsequent to the emergence from bankruptcy effective
September 13, 1996. See footnote (a) for a more detailed
explanation of charges directly attributable to Sun World's
emergence from bankruptcy. The following pro forma financial
information is presented for informational purposes only and
is not necessarily indicative of the results of operations
that would have occurred if the acquisition had been
consummated as of the beginning of the periods presented, nor
is it necessarily indicative of the future operating results
of the Company.
The unaudited pro forma financial information is as
follows (in thousands except per share data):
Nine months ended Year ended
December 31, 1996 March 31, 1996
------------------ ------------
Actual Pro Forma Actual Pro Forma
-------- -------- -------- -----------
Revenue $ 23,780 $ 98,010 $ 1,441 $ 118,292
Net loss $(5,997) $ (2,158)(a) $ (8,487) $ (13,811)(a)
Less: Preferred
stock dividends $ (674) $ (1,828) $ -0- $ (2,438)
Imputed dividend
on preferred
stock $ (2,451) $ -0- $ -0- $ (1,959)
--------- --------- --------- ---------
Net loss
applicable to
common stock $ (9,122) $ (3,986) $ (8,487) $(18,208)
========== ========= ========== =========
Net loss per
common share $ (.44) $ (.18)(a) $ (.48) $ (.97)(a)
=========== ========== ========== ==========
Weighted-average
shares
outstanding 20,500 21,600 17,700 18,800
========= ========= ========== ==========
- -----------------------
(a) Includes for the nine months ended December 31, 1996 and the
year ended March 31, 1996, charges incurred by Sun World
totaling $4.8 million and $11.3 million, respectively, which
were directly attributable to the Chapter 11 bankruptcy
proceedings and are non-recurring in nature. Exclusion of
the non-recurring charges would have resulted in a pro forma
net income (loss) per share of $.04 and ($.37) for the nine
months ended December 31, 1996 and the year ended March 31,
1996, respectively.
NOTE 4 - ACCOUNTS RECEIVABLE
- ----------------------------
Accounts receivable consisted of the following (dollars in
thousands):
December 31, March 31,
1996 1996
-------- -------
Trade receivables $ 3,632 $ 443
Due from unaffiliated
growers 1,153 -0-
Other 3,228 -0-
------ --------
8,013 443
Less allowance
for doubtful accounts 480 -0-
------ ------
$ 7,533 $ 443
======= ========
Substantially all domestic receivables are from large
national and regional supermarket chain stores and produce
brokers and are unsecured. Amounts due from unaffiliated
growers represent receivables for services (harvest, haul
and pack) provided on behalf of growers under agreement with
Sun World and are recovered from proceeds of product sales.
Other receivables primarily include lemon crop sales,
by-product sales and accounts receivable from joint venture
partners.
Approximately $3.8 million of sales made by Sun World
from September 14, 1996 through December 31,1996 are
attributable to one national retailer.
NOTE 5 - INVENTORIES
- --------------------
Inventories consisted of the following (dollars in
thousands):
December 31, March 31,
1996 1996
------- --------
Growing crops $ 10,299 $ -0-
Pepper seed, net 2,018 -0-
Harvested product 267 -0-
Materials and
supplies 1,537 266
------- -------
$ 14,121 $ 266
======== ======
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
- ---------------------------------------
Property, plant and equipment consisted of the
following (dollars in thousands):
December 31, March 31,
1996 1996
---------- ----------
Land $ 41,358 $ 2,364
Permanent crops 71,966 8,498
Land improvements 1,839 1,851
Buildings 19,148 852
Machinery and
equipment 9,013 1,064
-------- --------
143,324 14,629
Less accumulated
depreciation (5,427) (2,948)
-------- -------
$137,897 $ 11,681
======== ========
NOTE 7 - LONG-TERM DEBT
- ------------------------
Management estimates that the fair value of its
long-term debt approximates the carrying value as the
preponderance of the obligations contain variable interest
rates or were recently issued at market rates as part of the
acquisition of Sun World. At December 31, 1996 and March
31, 1996, the carrying amount of the Company's outstanding
debt is summarized as follows (dollars in thousands):
December 31, March 31,
1996 1996
------- -------
Cadiz obligations:
Senior term bank loan, interest
payable monthly, variable
interest rate based upon LIBOR
plus 1% (6.34% at
December 31, 1996) $ 9,446 $ 8,630
Subordinated term bank loan,
interest payable
monthly, interest at 4.81% 9,100 9,100
Other 88 105
Debt discount (124) (218)
-------- --------
18,510 17,617
Sun World obligations:
Term insurance company
loan due in variable
installments through
September 13, 2006,
interest at 10.60% 77,092 -0-
Term bank loan, interest
payable monthly with
principal due in variable
installments through
September 13, 2006,
variable interest rate
based upon prime or LIBOR
(8.60% at December 31, 1996) 53,284 -0-
Note payable to insurance
company, quarterly
installments of $93
(including interest),
due September 13, 2006,
interest at 7.75% 2,531 -0-
Note payable to supplier,
monthly installments of
$104 (including interest),
due March 1, 1998,
interest at 10.00% 1,458 -0-
Note payable to finance
company, monthly
installments of $18
(including interest),
due July 1, 2002,
interest at 7.50% 989 -0-
-------- --------
153,864 17,617
Less current portion (4,753) (17,617)
--------- ---------
$ 149,111 $ -0-
=========== ===========
Annual maturities of long-term debt outstanding, excluding
$124,000 representing the unamortized portion of warrants,
on December 31, 1996 are as follows: 1997 - $4,877,000;
1998 - $24,253,000; 1999 - $9,374,000; 2000 - $11,398,000;
2001 - $11,410,000, 2002 and thereafter - $92,676,000.
CADIZ OBLIGATIONS
As of December 31, 1996, the Company's obligations to
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
("Rabobank") and Henry Ansbacher & Co. Limited ("Ansbacher")
were approximately $9.1 million and $9.4 million,
respectively, both of which were to mature on January 31,
1997.
The Company reached an agreement with Rabobank which
extended the maturity date of the Company's debt facilities
with Rabobank to April 30, 1997. Additionally, the Company
reached an agreement with Rabobank which extended the
period, to April 30, 1997, in which the Company has the
ability to exercise its right to obtain two one-year
extensions. The Company has also reached an agreement with
Ansbacher whereby the maturity date of the Company's debt
facilities with Ansbacher has been extended to April 30,
1997. ING Baring (U.S.) Capital Corporation ("ING") has
purchased the $9.4 million Ansbacher debt obligation
effective March 31, 1997. The maturity date of such
obligation has been extended to April 30, 1998 with interest
at a rate of LIBOR plus 200 basis points payable at LIBOR
only semi-annually, with the remaining accrued interest
added to principal. ING granted to Cadiz the right to
obtain two one-year extensions. In connection with this
transaction, ING received warrants to purchase 75,000 shares
of Cadiz' common stock at an exercise price equal to the
market price at May 1, 1997, the time such warrants become
exercisable. Upon the exercise of the first and second
extension, the interest rate will be further adjusted and
Cadiz will be required to issue additional warrants to ING.
The Company continues to evaluate possible alternative
means of repayment and/or refinancing of the Rabobank
facility. The determination of which funding mechanism (or
combination) the Company will utilize will be evaluated on
an ongoing basis by the Company in consultation with an
investment banking firm which has been retained by the
Company. Based upon the Company's intent and ability to
refinance the Rabobank and Ansbacher debt facilities, as
evidenced by the agreements reached with Rabobank and ING,
as discussed above, the debt facilities have been classified
as long-term as of December 31, 1996. In addition to
repayment of the Rabobank facility, the Company is
considering a financing during 1997 which would be used to
refinance the existing primary debt facilities of Sun World
with terms which management would view as more favorable to
the Company and Sun World.
The terms of the Company's two one-year extension options
for the Rabobank debt are essentially the same as those
agreed upon by the parties in September 1996, except the
date required to exercise the first extension has been
changed from January 31, 1997 to April 30, 1997. As before,
it is a condition to such extension that the total
outstanding debt to Rabobank does not exceed $8,500,000 at
the time such extension becomes effective. Upon exercise of
each of the first and second extensions, the Company would
be required to pay to Rabobank certain fees. The interest
rate to be in effect during each extension period will be at
Rabobank's cost of funds plus one and one quarter percent
(1-1/4%). In September 1996, when Rabobank agreed to extend
the maturity date of this debt to April 30,1997, the
interest rate was adjusted to Rabobank's cost of funds plus
one and one quarter percent (1-1/4%) beginning February 1,
1997. As part of the September 1996 extension, the Company
paid an initial commitment fee of $150,000 and issued 30,000
new warrants to purchase the Company's common stock at $0.05
per share exercisable for five years following the date of
issuance and extended the expiration date of the outstanding
Rabobank warrants to December 31, 2000. The total value of
the warrants issued in September 1996, $114,000, has been
recorded as debt discount which is being amortized over the
remaining term of the debt. Currently, ING and Rabobank
hold senior and subordinated deeds of trust, respectively,
on substantially all of the Company's non-Sun World related
property.
Prior to the extensions discussed above, on March 15,
1995, the Company entered into an agreement whereby
Ansbacher provided a loan facility aggregating $3,000,000.
Additionally, Ansbacher agreed to accrue and capitalize
interest on the outstanding principal amount of these
advances through January 1997. In consideration for this
agreement, Ansbacher received 110,000 shares of common stock
valued at $3.50 per share. The Company also issued to
Rabobank 35,000 warrants to purchase the Company's common
stock at $.05 per share exercisable for three years
following the date of issuance. The total value of these
warrants, $121,000, has been recorded as a debt discount and
is being amortized over the remaining term of the debt. In
addition, Rabobank agreed to subordinate to Ansbacher's
senior security interests.
Prior to the extensions and the March 1995 arrangement
discussed above, the Company's outstanding obligations to
Rabobank and Ansbacher (collectively, the "Banks") were
governed by the January 1994 financing arrangements whereby
interest rates on outstanding debt to the Banks were fixed
until January 1997. Interest on the Ansbacher portion was
accrued and capitalized through January 31, 1997. Rabobank
interest was paid quarterly subsequent to December 1994,
through draw downs against a letter of credit provided by
Ansbacher for that purpose. The amount drawn under the line
of credit totalled $816,015 at December 31, 1996. In
addition, as a result of the January 1994 financing
arrangements, Rabobank returned and canceled 533,000
outstanding warrants in exchange for 175,000 new warrants to
purchase the Company's common stock at $0.05 per share
exercisable for three years following the date of issuance.
The total value of these warrants, $604,000, has been
recorded as a debt discount and was amortized over the
remaining term of the debt. In addition, Ansbacher received
100,000 shares of common stock as an arrangement fee and
50,000 shares of common stock as an advisory fee valued at
$3.50 per share. The Company also agreed to convert
$770,000 of debt to Ansbacher into 220,000 shares of common
stock.
In June 1994, the Company retired a note payable in the
amount of $249,000 to an individual at a discounted amount,
resulting in an extraordinary gain of $115,000. The note,
which originated in 1985, was scheduled to be retired with a
balloon payment in December 1996.
SUN WORLD OBLIGATIONS
Sun World's financing agreements are collateralized by
substantially all of Sun World's assets. The term
insurance company loan and term bank loan (collectively the
"Term Loans") provide for principal payments in variable
amounts at the end of March, August and December of each
year. Additionally, the Term Loans provide for interest
deferral, at the Company's option, for the Company's peak
seasonal need for working capital during the months of April
to July, which are payable at the end of August and
September.
The Company's financing arrangements require, among other
terms, minimum amounts, as defined, of working capital and
tangible net worth and minimum ratios of current assets to
current liabilities and indebtedness to net worth.
Additionally, the financing arrangements with Sun World's
secured lenders include covenants which restrict the
Company's ability to receive distributions from Sun World,
whose net assets totaled approximately $42,000,000 at
December 31, 1996.
NOTE 8 - INCOME TAXES
- ---------------------
As of December 31, 1996, the Company has a net operating
loss (NOL) carryforward of approximately $60,808,000 for
federal and $35,534,000 for state income tax purposes. Such
carryforwards expire in varying amounts through the year
2012. For financial reporting purposes, the tax benefit
resulting from utilization of such NOL carryforward will be
applied to reduce the excess of purchase price over net
assets acquired.
In accordance with the Tax Reform Act of 1986, NOL
utilization may be subject to an annual limitation. When
there is a change in ownership of more than 50 percent (as
defined) of a corporation, the use of any NOL existing at
the date of the change of ownership is limited annually to
an amount defined by law. Based upon such formula, use of
approximately $25,268,000 of the federal NOL is limited to
approximately $720,000 per year. An additional $20,153,000
of federal NOL is limited to approximately $4,508,000 per
year for an ownership change that occurred in September
1993. The remaining $15,387,000 of federal NOL is currently
available to offset federal taxable income in any future
years. No annual limitations apply to the state NOL
carryforwards which expire in various amounts through the
year 2000.
A reconciliation of the provision (benefit) for income
taxes to the statutory federal income tax rate is as follows
(dollars in thousands):
Nine Months
Ended Year Ended
December 31, March 31,
------------ ----------
1996 1996 1995
----- ---- -----
Expected federal income
tax benefit at 34% $ (1,660) $ (2,886) $ (1,561)
Net operating loss
carryforward for
financial reporting
purposes 1,790 2,405 1,468
Amortization 60 80 79
Utilization of net
operating losses (696) -0- -0-
Other nondeductible
expenses (135) 401 14
--------- -------- ---------
$ (641) $ -0- $ -0-
========== ========= ==========
Deferred taxes are recorded based upon differences between
the financial statement and tax basis of assets and
liabilities and available carryforwards. Temporary
differences and carryforwards which gave rise to a
significant portion of deferred tax assets and liabilities
as of December 31, 1996 and March 31, 1996 were as follows
(in thousands):
December 31, March 31,
1996 1996
---- -----
Deferred tax liabilities:
Net fixed asset
basis difference $ 5,786 $ -0-
Purchase accounting adjustment 440 -0-
State taxes 336 -0-
Other 4 -0-
-------- ---------
Total deferred tax liablities 6,566 -0-
-------- ---------
Deferred tax assets:
Net operating losses 23,943 21,136
Reserve for notes receivable 1,239 -0-
Capitalized legal fees 892 -0-
Basis difference in water rights 99 -0-
Net basis difference in
partnership investments (4,734) (4,337)
State taxes 1,478 (407)
Other 237 283
------- ---------
Total deferred tax assets 23,154 16,675
Valuation allowance
for deferred tax asset (20,935) (16,675)
-------- ---------
Total deferred tax assets, net 2,219 -0-
-------- ---------
Net deferred tax liability $ 4,347 $ -0-
========= =========
NOTE 9 - EMPLOYEE BENEFIT PLANS
- -------------------------------
In December 1994, the Company established a 401(k) Plan
for all employees of Cadiz. This plan contains no
eligibility requirements and contributions by the Company
are at the option of the Company on a year-to-year basis.
No contributions by the Company to this plan have been made
to-date.
Sun World established a 401(k) Plan for its salaried
employees on January 1, 1996. Employees must work 1,000
hours and have completed one year of service to be eligible
to participate in this plan.
In addition, Sun World maintains a defined contribution
pension plan covering substantially all of its employees not
covered by a collective bargaining agreement, with at least
one year of service and who have worked at least 1,000
hours. Contributions are 2% of each covered employee's
salary. There were no contributions made for the period
from September 14, 1996 to December 31, 1996. For those
hourly employees covered under a collective bargaining
agreement, contributions are made to a multi employer
pension plan in accordance with negotiated labor contracts
and are generally based on the number of hours worked.
NOTE 10 - PREFERRED AND COMMON STOCK
- ------------------------------------
During the fiscal year ended March 31, 1996, the
Company completed private placements of 2,114,157 shares of
its common stock, resulting in gross proceeds of
$10,199,000. During the nine months ended December 31,
1996, the Company issued (i) $27.6 million of newly
authorized Convertible Series A Redeemable Preferred Stock
("Series A Redeemable Preferred"); (ii) $10.0 million of
newly authorized 6% Convertible Series B Preferred Stock
("Series B Preferred"); and (iii) $3.0 million of newly
authorized 6% Convertible Series C Preferred Stock ("Series
C Preferred").
A description of each series of preferred stock
follows:
SERIES A REDEEMABLE PREFERRED
Shares of Series A Redeemable Preferred were not
convertible when issued, but became convertible into shares
of common stock, at the option of the holder, on November 12
1996 upon the filing by the Company of an Amendment to its
Certificate of Incorporation ("Amendment") increasing the
Company's authorized common stock from 24,000,000 to
45,000,000, thereby allowing the Company to reserve
sufficient shares of common stock for issuance upon
conversion. Concurrently with the filing of the Amendment,
the conversion price ("Series A Conversion Price") was set
at $3.75. Holders are entitled to cumulative dividends
payable semi-annually in cash or common stock at a rate of
six percent (6%) per annum. During the nine months ended
December 31, 1996, 200 shares of Series A Redeemable
Preferred were converted at the Series A Conversion Price
resulting in the issuance of 53,332 common shares. The
Series A Redeemable Preferred is also mandatorily
convertible in full at the option of the Company at any time
prior to six months following the filing of the Amendment at
the Series A Conversion Price provided that, as a condition
to such conversion, the Company pay to holders one full
year's worth of dividends (less the amount of any dividends
theretofore paid). Holders are entitled to a mandatory
liquidation preference equal to the initial purchase price
of $1,000 per share if conversion has not occurred prior to
September 2001. The Company will exercise its mandatory
conversion right during April 1997 which will result in the
issuance of 7,314,920 shares of common stock in May 1997 in
replacement of all Series A Redeemable Preferred. The
Series A Redeemable Preferred ranks senior and prior to the
Company's common stock and on a parity with any other class
or series of preferred stock. Except as provided by law,
holders are not entitled to vote upon any matter submitted
to a vote of the Company's stockholders.
SERIES B AND C PREFERRED
Shares of Series B and C Preferred were immediately
convertible upon issuance into shares of common stock, at
the option of the holder, at a price equal to the lower of
(a) $5.8125 per share or (b) eighty-five percent (85%) of
the average closing bid price over the ten-trading day
period ending on the day prior to the submission of any
conversion notice ("Series B/C Conversion Price"). Holders
are entitled to cumulative dividends payable upon conversion
or maturity in cash or common stock at a rate of six percent
(6%) per annum. The Company reserves the right to redeem
any shares of Series B or Series C Preferred for $11,765 per
share in cash by giving holders five days notice. Any
Series B or Series C Preferred shares outstanding one year
following issuance are mandatorily converted into common
stock at the Series B/C Conversion Price. Holders are
entitled to a liquidation preference equal to the initial
purchase price of $10,000 per share. During the nine months
ended December 31, 1996, 760 shares of Series B Preferred
and 200 shares of Series C Preferred were converted at the
Series B/C Conversion Price, resulting in the issuance of
2,627,240 common shares. The Series B and C Preferred rank
senior and prior to the Company's common stock and on a
parity with any other class or series of preferred stock.
Except as provided by law, holders are not entitled to vote
upon any matter submitted to a vote of the Company's
stockholders.
NOTE 11- STOCK-BASED COMPENSATION PLANS AND WARRANTS
- ----------------------------------------------------
STOCK OPTIONS AND WARRANTS
The Company issues options pursuant to a newly adopted
1996 Stock Option Plan (the "Plan") as well as options which
are not pursuant to a plan. The Plan provides for the
granting of up to 3,000,000 shares. All options, whether
under the Plan or not, are granted at a price not less than
100% of the fair market value at the date of option, have
vesting periods ranging from issuance date to three years,
have maximum terms ranging from three to five years and are
issued to directors, officers, consultants and employees of
the Company. During the nine months ended December 31,
1996, the Board of Directors of the Company granted options
to purchase 1,800,000 shares of the Company's common stock
at a weighted average fair value of $4.62 per share of which
1,350,000 options are conditional based upon terms of
employment and certain performance criteria.
Compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee
must pay to acquire the stock. Had compensation cost for
these plans been determined using fair value, as explained
below, rather than the quoted market price, the Company's
net loss and loss per common share would have been reduced
to the following pro forma amounts (dollars in thousands):
Nine Months Year
Ended Ended
December 31, March 31,
1996 1996
----- -----
Net loss: As reported $ (5,997) $ (8,487)
Pro forma $ (6,655) $ (8,665)
Net loss
per common
share: As reported $ (.44)(a) $ (.48)
Pro forma $ (.48)(a) $ (.49)
- ------------------------------------
(a) After adjustment for accrued and imputed preferred
dividends during the nine months ended December 31,
1996 of $674 and $2,451, respectively.
The fair value of each option granted during the periods
reported was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-
average assumptions used for the grants for the nine months
ended December 31, 1996 and the fiscal year ended March 31,
1996, respectively: risk free interest rate of 6.58% and
6.15%; expected life of expiration date less one year for
both periods; expected volatility of 52.68% and 53.87% and
no dividend yield.
The following table summarizes stock option activity for
the periods noted. All options listed below were issued to
officers, directors, employees and consultants.
Options Weighted-
Outstanding Average
Number Exercise Price
----------- --------------
Outstanding at March 31, 1994 1,801,890 $ 1.57
Granted 1,872,000 $ 4.48
Expired or cancelled (4,500) $ 4.63
Exercised (1,333,890) $ 1.49
------------
Outstanding at March 31, 1995 2,335,500 $ 3.95
Granted 607,500 $ 5.19
Expired or cancelled (7,000) $ 4.89
Exercised (145,000) $ 2.50
----------
Outstanding at March 31, 1996 2,791,000 $ 4.29
Granted 1,800,000 $ 4.62
Expired or cancelled (400,000) $ 5.50
Exercised (325,000) $ 2.79
---------
Outstanding at December 31, 1996 3,866,000(a) $ 4.44
========= =======
Options exercisable at
March 31, 1995 1,935,500 $ 4.07
========= =======
Options exercisable at
March 31, 1996 2,116,000 $ 4.34
========= =======
Options exercisable at
December 31, 1996 1,966,000 $ 4.30
========= =======
Weighted-average fair
value of options granted
during the nine-month
period ended
December 31, 1996 $ 4.62
=========
Weighted-average remaining
contractual life of options
outstanding at
December 31, 1996 3.2 years
==========
- -----------------------------
(a) Exercise prices vary from $1.25 to $5.50 and expiration
dates vary from January 1997 to September 2001.
Approximately 84% of the options outstanding at December 31,
1996 had an exercise price between $4.50 and $5.50 with a
weighted-average remaining contractual life of 3.6 years.
During the nine months ended December 31, 1996 and the
years ended March 31, 1996 and 1995, the Company issued
warrants of 30,000, 10,000 and 35,000 with weighted-average
exercise prices of $0.05, $3.55 and $0.05, respectively.
During the nine months ended December 31, 1996 and the year
ended March 31, 1995, 10,000 warrants with a weighted-average
exercise price of $3.55 and 113,700 warrants with a
weighted-average exercise price of $2.50 were exercised,
respectively. No warrants expired or were cancelled during
any of the three periods discussed. At December 31, 1996
there were 240,000 warrants outstanding all of which are
issued to Rabobank at an exercise price of $0.05 per share
and expire December 31, 2000. See Note 7 for further
discussion of these warrants.
RESTRICTED STOCK AWARD
Following the Sun World acquisition in 1996, the
Company's Chief Executive Officer was awarded a stock bonus
of 125,000 shares of restricted common stock at no cost.
The issuance of these shares is dependent, with respect to
50,000 shares, upon the achievement of certain performance
criteria. The remaining 75,000 shares are issuable in equal
annual installments over a three year period based upon the
continued employment of the officer. Compensation expense,
representing the market value at the date of grant, will be
recognized as earned over the period of service.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
In 1995, Sun World entered into an agreement with its
major corrugated container supplier in connection with a
prepetition liability settlement. The settlement stipulated
that the original agreement to purchase containers from the
supplier would remain in effect until March 21, 1998 and
required the Company to issue a secured note payable to the
supplier (see Note 7). Thereafter, the original agreement
will automatically renew unless either party gives written
notice ninety days prior to the end of the renewal period.
In December 1995, the Company filed an action relative
to the proposed construction and operation of a landfill to
be located adjacent to the Company's Cadiz property (the
"Rail-Cycle Project"), with the Superior Court in San
Bernardino County, California. The action challenges the
various decisions by the County of San Bernardino relative
to the Rail-Cycle Project. Named in this action, in
addition to the County of San Bernardino, were the Board of
Supervisors of the County of San Bernardino, three
individual members of the Board of Supervisors, an employee
of the County and Rail-Cycle, L.P. whose general partner is
controlled by WMX Technologies, Inc. (formerly Waste
Management, Inc.). The Company alleges that the actions of
the County of San Bernardino did not comply with the
guidelines prescribed by the California Environmental
Quality Act and violated state planning and zoning laws.
The action seeks to set aside the county certification of
the EIR/EIS and approval of the proposed Rail-Cycle project.
The Company continues to believe the proposed Rail-Cycle
project, if constructed and operated as currently designed,
poses environmental risks both to the Company's agricultural
operations at Cadiz and to the groundwater basin underlying
the Cadiz property. Accordingly, the Company intends to
pursue a claim for damages against the County of San
Bernardino and Rail-Cycle and, therefore, the action also
seeks compensatory damages in excess of $75 million. The
action is currently in the discovery phase. The court has
set July 11, 1997 to commence a hearing on the Company's
land use and regulatory claims. A trial on the issue of the
Company's monetary damages will be scheduled at a later
date. The Company intends to continue vigorously prosecuting
its claims. The Company incurred $394,000 and $1,919,000
during the nine months ended December 31, 1996 and the year
ended March 31, 1996, respectively, in connection with this
matter.
In the normal course of its agricultural operations,
the Company handles, stores, transports and dispenses
products identified as hazardous materials. Regulatory
agencies periodically conduct inspections and, currently,
there are no pending claims with respect to hazardous
materials.
The Company is involved in other legal and
administrative proceedings and claims. In the opinion of
management, the ultimate outcome of each proceeding or all
such proceedings combined will not have a material adverse
impact on the Company's financial statements.
NOTE 13 - SUBSEQUENT EVENTS - DEBT ISSUANCE
- -------------------------------------------
On April 16, 1997 Sun World completed a private placement of $115.0
million in secured notes (the "Sun World Notes"). The Sun World Notes were
sold through Smith Barney Inc., as initial purchaser, to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act of
1933, as amended (the "Securities Act")) and a limited number of insititutional
"accredited investors" (as defined in the Securities Act). The proceeds from
the issuance of the Sun World Notes, when combined with Sun World's existing
cash and cash made available under a $30.0 million Revolving Credit Facility
entered into by Sun World concurrently with the issuance of the Sun World
Notes, were used to retire Sun World's existing indebtedness to John Hancock
Mutual Life Insurance Company ("John Hancock") and Caisse Nationale
de Credit Agricole, acting through its Grand Cayman branch ("Credit Agricole")
as well as the Company's existing indebtedness to Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A. ("Rabobank").
Sun World's $30.00 million Revolving Credit Facility matures in one year
and is guaranteed by the Company. Amounts borrowed under the Revolving Credit
Facility will accrue interest at either prime plus 1.5% or LIBOR plus 2.50%,
at Sun World's election, with an additional.50% payable for advances on
eligible inventory above specified levels.
The Sun World Notes, which were issued in the principal amount of $115.0
million on April 16, 1997 and will mature on April 15, 2004, accrue interest
at the rate of $11-1/4% per annum. Interest only is payable semi-annually on
April 15 and October 15 of each year, commencing October 15, 1997. The Sun
World Notes are secure by a first lien on substantially all of the assets of
Sun World and its subsidiaries, other than growing crops, crop inventories
and accounts receivable and proceeds thereof, which secure the Revolving
Credit Facility. The Sun World Notes are also secured by the guarantees,
which are full, unconditional, and joint and several, of Coachella Growers,
Inc., Sun Desert, Inc., Sun World Brands, Sun World Management Corporation
and Sun World/Rayo (collectively, the "Sun World Subsidiary Guarantors") and
by the Company. The Company also pledged all of the stock of Sun World.
Sun World and the Sun World Subsidiary Guarantors are all direct and indirect
wholly-owned subsidiaries of the Company. Management believes the direct and
indirect non-guarantor subsidiaries of Cadiz are inconsequential, both
individually and in the aggregate, to the financial statements of the Company.
Further, separate financial statements of each of the Sun World Subsidiary
Guarantors are not presented as management has determined that they
would not be material to investors.
* * *
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
OF
SUN WORLD INTERNATIONAL, INC.
(A WHOLLY-OWNED SUBSIDIARY)
For the Period from September 14, 1996
to
December 31, 1996
With Report of Independent Accountants
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholder of Sun World International, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and accumulated deficit and of cash
flows present fairly, in all material respects, the financial position of Sun
World International, Inc., a wholly-owned subsidiary of Cadiz Land Company,
Inc., and its subsidiaries (the Company), at December 31, 1996, and the
results of their operations and their cash flows for the period September 14,
1996 through December 31, 1996 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audit. We conducted our audit of
these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
- ---------------------------
PRICE WATERHOUSE LLP
Los Angeles, California
February 28, 1997, except
for Note 12, which is as of
April 16, 1997
SUN WORLD INTERNATIONAL, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CADIZ LAND
COMPANY, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
December 31,
1996
-----
ASSETS
Current assets:
Cash and cash equivalents $31,175
Accounts receivable, net 7,502
Inventories 14,114
Assets held for sale 6,534
Prepaid expenses and other 1,326
--------
Total current assets 60,651
Investment in partnerships 6,122
Property, plant and equipment, net 126,656
Other assets 3,566
--------
Total assets $196,995
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 6,103
Accrued liabilities 3,659
Due to parent 332
Long term debt due in one year 4,235
Pre-petition bankruptcy claims payable 591
-------
Total current liabilities 14,920
Long term debt 131,119
Other liabilities 4,149
Deferred income taxes 4,347
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, 300,000 shares authorized;
42,000 shares issued and outstanding
Additional paid-in capital 43,283
Accumulated deficit (823)
--------
Total stockholder's equity 42,460
Total liabilities and stockholder's equity $196,995
See accompanying notes to the consolidated financial statements.
SUN WORLD INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF CADIZ LAND
COMPANY, INC.)
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Dollars in thousands)
September 14 to
December 31,
1996
---------
Revenues $ 22,502
Costs and expenses:
Cost of sales 16,396
General and administrative 2,929
Depreciation and amortization 266
--------
19,591
--------
Operating income 2,911
Other income (78)
Interest expense, net 3,812
-------
Loss before income taxes (823)
Income tax expense 0
-------
Net loss (823)
Accumulated deficit at September 14, 1996 0
---------
Accumulated deficit at December 31, 1996 $ (823)
=========
See accompanying notes to the consolidated financial statements.
SUN WORLD INTERNATIONAL, INC. (A WHOLLY-OWNED SUBSIDIARY OF CADIZ LAND
COMPANY, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
September 14 to
December 31,
1996
Cash flows from operating activities:
Net loss $ (823)
Adjustments to reconcile net loss to cash provided
from operating activities:
Depreciation and amortization 266
Share of partnership operations (838)
Changes in operating assets and liabilities:
Decrease in accounts receivable, net 10,956
Decrease in due from parent 12,822
Decrease in inventories 741
Increase in prepaid expenses and other (111)
Decrease in accounts payable (6,093)
Decrease in accrued liabilities (17)
Decrease in other liabilities (33)
Decrease in deferred income taxes (641)
--------
16,229
--------
Decrease in pre-petition bankruptcy claims payable (12,573)
--------
Net cash provided from operating activities 3,656
--------
Cash flows from investing activities:
Additions to property, plant and equipment (378)
Additions to developing crops (187)
Partnership distributions 140
Increase in other assets (156)
Proceeds from disposal of property, plant and equipment 12,415
-------
Net cash provided from investing activities 11,834
-------
Cash flows from financing activities:
Payments of long-term debt (16,428)
-------
Net cash used in financing activities (16,428)
-------
Net decrease in cash and cash equivalents (938)
-------
Cash and cash equivalents at September 14, 1996 32,113
-------
Cash and cash equivalents at December 31, 1996 $31,175
=======
See accompanying notes to the consolidated financial statements.
SUN WORLD INTERNATIONAL, INC.
(A WHOLLY-OWNED SUBSIDIARY OF CADIZ LAND COMPANY, INC.)
Notes to Consolidated Financial Statements
Period From September 14, 1996 to December 31, 1996
1. NATURE OF OPERATIONS
Sun World International, Inc. ("SWII") and its subsidiaries (collectively
the "Company") own and farm approximately 18,000 acres in two major
growing areas of California, the Southern San Joaquin Valley and Coachella
Valley. Fresh produce, including table grapes, tree fruit, peppers and
watermelon are marketed, packed and shipped to food wholesalers and
retailers located throughout the United States and in certain foreign
countries. The Company has been an operating entity since 1975. However,
on September 13, 1996, a change in control resulted in the establishment
of a new basis of accounting, as described in Note 2. Accordingly, only
the period subsequent to the change in control is presented in these
financial statements.
Export sales accounted for approximately 21.7% of the Company's sales for
the period ended September 14, 1996 to December 31, 1996. As of December
31, 1996, the Company owned and operated five cold storage and/or packing
facilities located in California.
2. CHANGE IN CONTROL
On October 3, 1994, SWII and certain of its subsidiaries filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code. Since that
date, the companies had been operating under bankruptcy protection and had
been negotiating with all parties to the bankruptcy proceedings in an
effort to develop a Plan of Reorganization (the "Plan"). On July 12,
1996, the Bankruptcy Court confirmed the Plan, which became effective on
September 13, 1996 (the "Effective Date"). Pursuant to the Plan, SWII,
Sun World, Inc., Coachella Growers and Sun Desert, Inc. (all wholly owned
subsidiaries of SWII) emerged from the Chapter 11 Bankruptcy proceedings
and 100% of SWII's stock (both preferred and common) was acquired by Cadiz
Land Company, Inc. ("Cadiz"). The Plan also provided for, among other
things, the cancellation of certain indebtedness in exchange for cash,
elimination of all intercompany debts, new indebtedness, issuance of new
equity securities, the discharge of other prepetition claims, the
cancellation of all prepetition ownership interests in the Company, the
settlement of certain claims and mutual releases of certain claims of the
Company and other persons or entities (including certain affiliated
persons of entities), the assumption or rejection of executory contracts
and unexpired leases to which the Company was a party, and the
establishment of procedures for the selection of a Board of Directors for
the Company. The Plan did not provide for the reorganization of the
estate or the resolution of outstanding third party claims and equity
interests for AAI Services, Inc., a wholly-owned subsidiary of SWII.
The Plan provided for a consolidation of the assets and liabilities of
SWII and its subsidiaries and pursuant to the Plan, SWII was merged into
Sun World, Inc. with the surviving corporation retaining the name of Sun
World International, Inc. All payments and distributions required by the
Plan to be made by SWII or any of its subsidiaries in respect of
prepetition claims have been made or provided for, and SWII and its
subsidiaries expect to have no further obligation with respect to any
prepetition claims. As of December 31, 1996, the Company has accrued
approximately $591,000 of remaining pre-petition bankruptcy claims payable
for the Class 8 unsecured creditors. Pursuant to the Plan, these amounts
are payable by Cadiz and are included in the Due to Parent amount on the
Balance Sheet.
Cadiz accounted for this acquisition using the purchase method of
accounting, with the effects therefrom pushed down to the Company.
Accordingly, with the commencement of business on September 14, 1996 the
Company adopted a new basis of accounting, with the assets and liabilities
recorded at their estimated fair values. The total purchase price
consisted of the following: (i) $179 million of assumed bankruptcy related
obligations including $156 million of restructured secured debt with Sun
World's existing lenders (of which $5.5 million was paid by Cadiz
concurrent with the acquisition), (ii) $11 million of ongoing trade and
other accrued liabilities which were assumed by Cadiz, (iii) $3.2 million
of direct acquisition costs and (iv) cash and stock of approximately $40
million, including a $15 million capital contribution to Sun World, with
the intent of eliminating the requirement for Sun World to have any
additional debt facilities beyond those owed to its existing secured
creditors. The effect of allocating the total purchase price to the net
assets acquired based on their estimated fair values is summarized as
follows (dollars in thousands):
Cash $32,113
Assets held for sale 18,949
Other current assets 45,225
Investment in partnerships 5,424
Property, plant & equipment 128,150
Other assets 3,409
--------
Total assets 233,270
--------
Prepetition bankruptcy claims payable (13,164)
Other current liabilities (15,870)
Long term debt (151,783)
Other liabilities (9,170)
-------
Total liabilities (189,987)
--------
Net assets acquired $ 43,283
========
No goodwill was recorded as a result of the acquisition.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The consolidated financial statements include the
accounts of SWII and its subsidiaries, substantially all of which are
wholly-owned. All significant intercompany transactions have been
eliminated.
INVENTORIES - Growing crops, pepper seed, and materials and supplies are
stated at the lower of cost, on a first-in, first-out (FIFO) basis, or
market. Growing crops inventory includes direct costs and an allocation
of indirect costs.
INVESTMENT IN PARTNERSHIPS - Wholly-owned subsidiaries of the Company
have investments in various partnerships. The Company's two principal
partnerships are American Sunmelon and Sun Date, both of which are 50%
owned. American Sunmelon is engaged in proprietary seed development,
production, and marketing of seedless watermelons. Sun Date is engaged
in the marketing, processing, and farming of dates. These partnership
investments are accounted for using the equity method.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated
at cost for all acquisitions subsequent to September 13, 1996. As part
of the Company's acquisition, property, plant and equipment as of
September 13, 1996, were adjusted to fair value primarily based upon
third party appraisals.
The Company capitalizes the direct and certain indirect costs of
planting and developing orchards and vineyards until they reach
maturity, which varies by crop and ranges from three to seven years.
Depreciation on trees and vines commences in the year commercial
production is achieved.
The Company computes depreciation applicable to property, plant and
equipment on the straight-line method using the following estimated
useful lives:
Buildings and improvements 10-45 years
Machinery and equipment 3-25 years
Permanent crops 10-20 years
Upon the sale, retirement or abandonment of property, plant and equipment,
applicable gains or losses are recognized in income.
Assets Held for Sale - In conjunction with the Company's acquisition,
certain assets were identified as either idle facilities, fallow land or
farming operations which have experienced consistently low returns on
investment. These assets are valued at the lower of cost or fair value
less estimated costs to sell. The Company reasonably believes these assets
can be sold within one year and accordingly has included the assets as
current assets. The Company sold approximately 3,200 acres of primarily
fallow land located in the San Joaquin Valley in December 1996.
REVENUE RECOGNITION - The Company recognizes crop sale revenue after
harvest and delivery to customers. Packing revenues are recognized as
units are packed. Marketing commission revenues are recognized at the time
of product shipment.
INCOME TAXES - The Company is included in the consolidated federal and
combined state tax returns of Cadiz. Effective September 13, 1996, the
Company and Cadiz entered into a tax sharing agreement which provides that
the Company's current tax liability is determined as though the Company
filed its own returns. Income taxes are accounted for using an asset and
liability approach which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities at the applicable enacted tax rates.
SUPPLEMENTAL CASH FLOW INFORMATION - The Company considers all short-term
deposits with an original maturity of three months or less to be cash
equivalents. Such investments are stated as cost, which approximates fair
value, and are considered cash equivalents for purposes of reporting cash
flows. Cash payments for interest for the period ended September 14, 1996
to December 31, 1996 were $3,553,000.
RESEARCH AND DEVELOPMENT - The Company incurs costs to research and develop
new varieties of proprietary products. Research and development costs are
expensed as incurred. Such costs were approximately $120,000 for the
period ended September 14, 1996 to December 31, 1996.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS - The preparation
of consolidated financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and related
notes. Actual results could differ from these estimates.
4. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (dollars in thousands):
December 31,
1996
-----------
Trade receivables $ 3,632
Due from growers 1,332
Other 2,911
-------
7,875
Less allowance for doubtful accounts 373
-------
$ 7,502
=======
Substantially all domestic trade receivables are from large national and
regional supermarket chain stores and produce brokers and are unsecured.
The amounts due from growers represent receivables for services (harvest,
haul and pack) provided on behalf of growers under agreement with the
Company and are recovered from proceeds of product sales. Other
receivables primarily include lemon crop sales, by-product sales, and
amounts receivable from joint venture partners.
5. INVENTORIES
Inventories consisted of the following (dollars in thousands):
December 31,
1996
-----------
Growing crops $ 10,299
Product 267
Pepper seed, net 2,018
Materials and supplies 1,530
----------
$ 14,114
==========
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (dollars in
thousands):
December 31,
1996
----------
Land $ 38,994
Permanent crops 63,468
Buildings and improvements 18,291
Machinery and equipment 7,962
--------
128,715
Less accumulated depreciation 2,059
--------
$126,656
========
7. INCOME TAXES
Significant components of the Company's deferred income tax assets and
liabilities as of December 31, 1996, are as follows (dollars in
thousands):
Deferred tax liabilities:
Net fixed assets basis difference $ 6,014
Basis difference in partnership
investments 307
Purchase accounting adjustment 440
Other 4
-------
Total deferred tax liabilities 6,765
Deferred tax assets:
Net operating losses 1,388
Reserve for notes receivable 1,239
Capitalized legal fees 892
Basis difference in water rights 99
State taxes 1,478
Other 115
-------
Total deferred tax assets 5,211
Valuation allowance for deferred tax assets (2,793)
-------
Total deferred tax assets net 2,418
--------
Net deferred tax liability $ 4,347
========
The Company has provided a valuation allowance for the tax benefits of
deferred tax assets which may not be realizable.
At December 31, 1996, the Company had net operating loss carryforwards
state income tax purposes of approximately $14,929,000 which expire at
various dates from 1997 through 1999.
8. LONG-TERM DEBT
The carrying amount of the Company's outstanding long-term debt, which
approximates fair value, at December 31, 1996 is as follows:
(in thousands)
Term insurance company loan, interest payable
monthly with principal due in variable installments
through September 13, 2006, interest at 10.6% $ 77,092
Term bank loan, interest payable monthly with
principal due in variable installments through
September 13, 2006, variable interest rate based
upon prime or LIBOR (8.60% at December 31, 1996) 53,284
Note payable to insurance company, quarterly
installments of $93,000 (including interest), due
September 13, 2006, interest at 7.75% 2,531
Note payable to supplier, monthly installments of
$104,000 (including interest), due March 1, 1998,
interest at 10.00% 1,458
Note payable to finance company, monthly installments
of $18,000 (including interest), due July 1, 2002,
interest at 7.50% 989
--------
135,354
Less: current portion 4,235
--------
$131,119
========
The above financing agreements are collateralized by substantially all of
the Company's assets. The term insurance company loan and term bank loan
(collectively the "Term Loans") provide for principal payments in variable
amounts at the end of March, August and December of each year.
Additionally, the Term Loans provide for interest deferral, at the
Company's option, for the Company's peak seasonal need for working capital
during the months of April to July, which are payable at the end of August
and September.
The Company's financing arrangements require, among other terms, minimum
amounts, as defined, of working capital and tangible net worth and minimum
ratios of current assets to current liabilities and indebtedness to net
worth. Annual maturities of the long-term debt outstanding on December
31, 1996 is as follows: 1997-$4,235,000; 1998-$6,287,000; 1999-$9,369,000;
2000-$11,377,000; 2001-$11,410,000; 2002 and thereafter - $92,676,000.
9. RETIREMENT PLANS
The Company established on January 1, 1996 a 401(k) Plan for salaried
employees. Employees must work 1,000 hours and have completed one year
service to be eligible to participate in this plan.
The Company has a defined contribution pension plan covering substantially
all of its employees not covered by a collective bargaining agreement, with
at least one year of service and who have worked at least 1,000 hours.
Contributions are 2% of each covered employee's salary. For those hourly
employees covered under a collective bargaining agreement, contributions
are made to a multiemployer pension plan in accordance with negotiated
labor contracts and are generally based on the number of hours worked.
10. RELATED PARTY TRANSACTIONS
Cadiz owns approximately 1,600 acres of irrigated farmland in San
Bernardino County consisting primarily of citrus and grapes. Pursuant to
a ten year lease entered into as of the acquisition date, the Company is
responsible for the production, packing and handling, and marketing of the
products on the Cadiz property. The Company has entered into a sublease
arrangement related to the farming of the Cadiz grape vineyards. Cadiz is
to receive an annual payment equal to 33% of the net profit derived from
the Cadiz property, as defined in the loan agreement. In addition, the
Company entered into a "services agreement" with Cadiz in which Cadiz
provides management and financial services to the Company. The term of the
agreement is ten years with an annual fee of $1,500,000, which is paid
quarterly as well as reimbursement of expenses incurred on behalf of the
Company. For the period September 14, 1996 to December 31, 1996, the
Company made payments to Cadiz of $888,000. These payments primarily
represent payment of the "services agreement" fees mentioned above.
Included in prepaid expenses and other is $375,000 related to the payment
of these fees. In addition, at December 31, 1996, the Company has a net
payable due to Cadiz of $322,000 primarily due approximately $641,000 due
under the tax sharing agreement with Cadiz offset by Cadiz obligations to
pay certain prepetition bankruptcy claims pursuant to the Plan.
AMERICAN SUNMELON - The Company's share of partnership income for the
period from September 14, 1996 to December 31, 1996 from American Sunmelon
was $820,000.
SUN DATE - In September 1996, the Company and Sun Date entered into a five-
year marketing agreement for the Company to sell the dates produced by Sun
Date. During the period September 14, 1996 to December 31, 1996, the
Company made payments to Sun Date totalling $869,000, primarily related to
date crop proceeds.
11. COMMITMENTS AND CONTINGENCIES
In 1995, the Company entered into an agreement with its major corrugated
container supplier in connection with a prepetition liability settlement.
The settlement stipulated that the original agreement to purchase
containers from the supplier would remain in effect until March 21, 1998
and required the Company to issue a secured note payable to the supplier
(see Note 8). Thereafter, the original agreement will automatically renew
unless either party gives written notice ninety days prior to the end of
the renewal period.
In the normal course of agricultural operations, the Company handles,
stores, transports and dispenses products identified as hazardous
materials. The Company has had regulatory agencies conduct inspections and
there has been a claim asserted relating to these materials. Although the
Company does not believe remedial action, if any, will require the
expenditure of funds material to the Company's financial condition, no
assurance can be given regarding the outcome of environmental claims,
investigations or remedial actions in the future.
The Company is involved in other legal and administrative proceedings and
claims. In the opinion of management, the ultimate outcome of each
proceeding or all such proceedings combined will not have a material
adverse impact on the Company's financial statements.
12. SUBSEQUENT EVENTS - DEBT ISSUANCE
On April 16, 1997 the Company completed a private placement of $115.0
million in secured notes (the "Sun World Notes"). The Sun World Notes were
sold through Smith Barney Inc., as initial purchaser, to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act of
1933, as amended (the "Securities Act")) and a limited number of
institutional "accredited investors" (as defined in the Securities Act). The
proceeds from the issuance of the Sun World Notes, when combined with the
Company's existing cash and cash made available under a $30.0 million
Revolving Credit Facility entered into by the Company concurrently with the
issuance of the Sun World Notes, were used to retire the Company's existing
indebtedness under the Term Loans as well as Cadiz' existing indebtedness to
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. ("Rabobank").
The Company's $30.0 million Revolving Credit Facility matures in one year
and is guaranteed by Cadiz. Amounts borrowed under the Revolving Credit
Facility will accrue interest at either prime plus 1.50% or LIBOR plus 2.50%,
at the Company's election, with an additional .50% payable for advances on
eligible inventory above specified levels.
The Sun World Notes, which were issued in the principal amount of $115.0
million on April 16, 1997 and will mature on April 15, 2004, accrue interest
at the rate of 11 1/4% per annum. Interest only is payable semi-annually on
April 15 and October 15 of each year, commencing October 15, 1997. The Sun
World Notes are secured by a first lien on substantially all of the assets of
the Company and its subsidiaries, other than growing crops, crop inventories
and accounts receivable and proceeds thereof, which secure the Revolving
Credit Facility. The Sun World Notes are also secured by the guarantees of
Coachella Growers, Inc., Sun Desert, Inc., Sun World Brands, Sun World
Management Corporation and Sun World/Rayo (collectively, the "Sun World
Subsidiary Guarantors"), which are all wholly-owned subsidiaries of Cadiz,
and by Cadiz (the "Parent Guarantor"). The Parent Guarantor also pledged all
of the stock of the Company. Management believes that the direct and
indirect non-guarantor subsidiaries of Sun World are inconsequential,
individually and in the aggregate, to the financial statements of the
Company. The guarantees by the Sun World Subsidiary Guarantors are full,
unconditional, and joint and several.
SUMMARIZED FINANCIAL INFORMATION
Combined summarized financial information for the Sun World Subsidiary
Guarantors is as follows: (in thousands):
December 31, September 13, December 31, December 31,
1996 1996 1995 1994
----------- ------------ ----------- ------------
Current assets $ -0- $ -0- $ -0- $ -0-
Noncurrent assets 8 11 10 10
Current liabilities -0- -0- -0- -0-
Noncurrent liabilities -0- -0- -0- -0-
September 14, January 1, For the year For the year
through through ended ended
December 31, September 13, December 31, December 31,
1996 1996 1995 1994
----------- ------------ ------------ -------------
Share of net income
(loss) of equity
investee $ 825 $ 624 $ 418 $ (830)
Separate financial statements for each of the Sun World Subsidiary
Guarantors are not presented as management has determined that they would
not be material to investors.
* * * *
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
OF
SUN WORLD INTERNATIONAL, INC.
AND
SUBSIDIARIES
For the Period January 1, 1996 through September 13, 1996
With Report of Independent Accountants
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Sun World International, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and accumulated deficit and of cash
flows present fairly, in all material respects, the financial position of Sun
World International, Inc. and its subsidiaries (the Company) at September
13, 1996, and the results of their operations and their cash flows for the
period January 1, 1996 through September 13, 1996 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion
expressed above.
As discussed in Note 1, the Company and certain of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on
October 3, 1994. On July 12, 1996, the Bankruptcy Court confirmed the
Plan of Reorganization (the Plan) which became effective on September 13,
1996. Concurrent with the approval of the Plan, the Company was acquired
by Cadiz Land Company, Inc. The accompanying consolidated financial
statements do not include any adjustments for the forgiveness of
indebtedness or for the adjustment of assets and other liabilities which will
result from the Plan nor do they give effect to any adjustments which may
be necessary as a consequence of the acquisition.
/s/ Price Waterhouse LLP
-----------------------
Price Waterhouse LLP
Los Angeles, California
November 22, 1996
<TABLE>
SUN WORLD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<CAPTION>
September 13,
1996
ASSETS ------------------
<S> <C>
Current assets:
Cash $ 17,113
Accounts receivable, net 18,347
Inventories 12,991
Assets held for sale 15,074
Prepaid expenses and other 1,241
--------------
Total current assets 64,766
Investment in partnerships 1,752
Property, plant and equipment, net 80,723
Other assets 5,425
---------------
$ 152,666
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 11,710
Accrued liabilities 1,878
Long term debt due within one year 1,269
---------------
Total current liabilities 14,857
Long term debt 1,484
Deferred revenue and other 59
Liabilities subject to compromise
under reorganization proceedings 180,249
Deferred income taxes 7,500
Commitments and contingencies
Stockholders' deficit:
Convertible 10% preferred stock,
75,000 shares authorized;
38,501 shares issued and
outstanding (liquidation
preference $11,550,000) 11,550
Common stock, $1 par value,
300,000 shares authorized;
42,000 shares issued and outstanding 42
Additional paid in capital 29,350
Accumulated deficit (92,425)
---------
Total stockholders' deficit (51,483)
---------
$ 152,666
=========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SUN WORLD INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED
DEFICIT
(Dollars in thousands)
<CAPTION> January 1 to
September 13,
1996
--------------
<S> <C>
Revenues $77,938
---------
Costs and expenses:
Cost of sales 60,300
General and administrative 5,934
---------
66,234
--------
Operating income 11,704
Other income (242)
Interest expense 10,806
------------
Net income before reorganization items 1,140
------------
Reorganization items:
Professional fees 4,085
Adequate protection fees 3,007
Interest income (500)
------------
Total reorganization items 6,592
------------
Net loss (5,452)
Accumulated deficit beginning of year (86,973)
-------------
Accumulated deficit at September 13, 1996 $(92,425)
========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SUN WORLD INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<CAPTION> January 1 to
September 13,
1996
---------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (5,452)
Adjustments to reconcile
net loss to cash used in
operating activities:
Depreciation and amortization 4,085
Gain on sale of property,
plant and equipment (10)
Share of partnership operations (628)
Changes in operating assets
and liabilities:
Increase in accounts receivable,
net (4,468)
Increase in inventories (340)
Decrease in prepaid expenses
and other 112
Decrease in accounts payable (2,216)
Decrease in accrued liabilities (196)
Decrease in deferred revenue
and other (20)
-------------
(9,133)
-------------
Increase in liabilities subject to
compromise under
reorganized proceedings 2,794
------------
Net cash used in
operating activities (6,339)
-------------
Cash flows from investing activities:
Additions to property,
plant and equipment (2,321)
Additions to developing crops (462)
Partnership distributions 825
Increase in other assets (1,146)
Proceeds from disposal of
property, plant & equipment 2,991
------------
Net cash used in investing
activities (113)
-------------
Cash flows from financing activities:
Increase in long term debt 1,050
Payments of long term debt (818)
Proceeds from short term borrowings 46,711
Payments on short term borrowings (46,711)
------------
Net cash provided by
financing activities 232
------------
Net decrease in cash (6,220)
-------------
Cash at beginning of year 23,333
------------
Cash at September 13, 1996 $17,113
========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
SUN WORLD INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
1. NATURE OF OPERATIONS AND REORGANIZATION UNDER CHAPTER 11
Sun World International, Inc. ("SWII") and its subsidiaries
(collectively the "Company") own and farm approximately 21,000
acres in two major growing areas of California, the Southern San
Joaquin Valley and Coachella Valley. Fresh produce, including
table grapes, tree fruit, peppers and watermelon are marketed,
packed and shipped to food wholesalers and retailers located
throughout the United States and in certain foreign countries. Export
sales accounted for approximately 7.5% of the Company's sales for
the period ended January 1, 1996 to September 13, 1996. As of
September 13, 1996, the Company owned and operated five cold
storage and/or packing facilities located in California.
On October 3, 1994, SWII and certain of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. Since that date, the companies had been operating under
bankruptcy protection and had been negotiating with all parties to
the bankruptcy proceedings in an effort to develop a Plan of
Reorganization (the "Plan"). On July 12, 1996, the Bankruptcy
Court confirmed the Plan, which became effective on September 13,
1996 (the"Effective Date"). Pursuant to the Plan, SWII, Sun World,
Inc., Coachella Growers and Sun Desert, Inc. (all wholly owned
subsidiaries of SWII) emerged from the Chapter 11 Bankruptcy
proceedings and 100% of SWII's stock (both preferred and common)
was acquired by Cadiz Land Company, Inc. ("Cadiz"). The Plan
also provided for, among other things, the cancellation of certain
indebtedness in exchange for cash, elimination of all intercompany
debts, new indebtedness, issuance of new equity securities, the
discharge of other prepetition claims, the cancellation of all
prepetition ownership interests in the Company, the settlement of
certain claims and mutual releases of certain claims of the Company
and other persons or entities (including certain affiliated persons or
entities), the assumption or rejection of executory contracts and
unexpired leases to which the Company was a party, and the
establishment of procedures for the selection of a Board of Directors
for the Company. The Plan did not provide for the reorganization of
the estate or the resolution of outstanding third party claims and
equity interests for AAI Services, Inc., a wholly owned subsidiary of
SWII.
Cadiz acquired all of the capital stock of the Company for total
consideration of approximately $179 million including
approximately $150 million which will be owed to the Company's
existing secured lenders through issuance of new notes. In addition,
Cadiz made a cash capital contribution of $15 million to the
Company to provide additional operating capital.
The following table summarizes the recoveries to the prepetition
creditors and equity holders pursuant to the Plan based upon the
Company's estimate of total claims to be allowed as of September
13, 1996 (dollars in thousands) (unaudited):
Recovery
-----------------------------------------------------
Estimated Cadiz
Allowed Claims Long term Common Total
Claims/Interest Amount (1) Cash Debt Stock Recovery
- ----------------------------------------------------------------------------
Administrative,
Tax and Priority $ 5,000 $ 5,000 $ 0 $ 0 $ 5,000
Credit Agricole
Secured Debt 58,621 3,500 55,121 0 58,621
John Hancock
Secured Debt 93,084 2,000 91,084 0 93,084
Zenith Secured
Debt 3,065 250 2,575 240 3,065
Other Secured
Debt 1,050 0 1,050 0 1,050
General Unsecured
Claims 20,800 12,500 0 0 12,500
Convertible
Preferred Stock
and Common Stock 11,592 3,000 0 2,487 5,487
-------- -------- --------- ---------- --------
$193,212 $ 26,250 $ 149,830 $ 2,727 $178,807
======== ======= ======== ======== ========
(1) Excludes any recovery to the Internal Revenue Service for claims as further
discussed by Note 14.
Management believes that the aggregate fair value of the Company's
long term debt issued pursuant to the Plan approximates the
aggregate book value.
The Plan provided for a consolidation of the assets and liabilities of
SWII and its subsidiaries and pursuant to the Plan, SWII was merged
into Sun World, Inc. with the surviving corporation retaining the
name of Sun World International, Inc. All payments and
distributions required by the Plan to be made by SWII or any of its
subsidiaries in respect of prepetition claims have been made or
provided for, and SWII and its subsidiaries expect to have no further
obligation with respect to any prepetition claims.
Cadiz intends to account for this acquisition using the purchase
method which will materially change the amounts reported in the
accompanying consolidated balance sheet as of September 13, 1996.
The consolidated financial statements do not give effect to
adjustments of assets or liabilities, or classifications of such
amounts, which may be necessary as a consequence of the Cadiz
acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The consolidated financial statements
include the accounts of SWII and its subsidiaries, substantially all of
which are wholly owned. All significant intercompany transactions
have been eliminated.
The Company has accounted for all transactions related to the
Chapter 11 proceedings in accordance with Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," issued by the American Institute of Certified
Public Accountants. Accordingly, liabilities subject to compromise
under reorganization proceedings have been segregated on the
consolidated balance sheet and are recorded at the amounts that have
been or are expected to be allowed based upon known claims. The
accompanying financial statements do not include any adjustments
for the forgiveness of indebtedness or for the adjustment of assets or
other liabilities which will result from the Plan.
INVENTORIES Growing crops, pepper seed, and materials and
supplies are stated at the lower of cost, on a first in, first out (FIFO)
basis, or net realizable value. Growing crops inventory includes
direct costs and an allocation of indirect costs.
INVESTMENT IN PARTNERSHIPS Wholly owned subsidiaries
of the Company have investments in various partnerships. The
Company's two principal partnerships are Sun Date and American
Sunmelon, both of which are 50% owned. American Sunmelon is
engaged in proprietary seed development, production, and marketing
of seedless watermelons. Sun Date is engaged in the marketing,
processing, and farming of dates. These partnership investments are
accounted for using the equity method.
PROPERTY, PLANT AND EQUIPMENT Property, plant and
equipment is stated at cost for all acquisitions subsequent to
September 30, 1983. All property, plant and equipment acquired
prior to September 30, 1983 was restated to estimated fair value at
that date in connection with the Company's quasi-reorganization.
The Company capitalizes the direct and certain indirect costs of
planting and developing orchards and vineyards until they reach
maturity, which varies by crop and ranges from three to seven years.
Depreciation on trees and vines commences in the year commercial
production is achieved.
The Company computes depreciation applicable to property, plant
and equipment on the straight line method using the following
estimated useful lives:
Buildings and improvements 10-45 years
Machinery and equipment 3-25 years
Permanent crops 10-20 years
Upon the sale, retirement or abandonment of property, plant and
equipment, applicable gains or losses are recognized in income.
ASSETS HELD FOR SALE In conjunction with the Company's
1996 Business Plan, specific properties were identified to be sold.
These properties, which are included in the accompanying
consolidated balance sheet at the lower of cost or fair value less
estimated costs to sell, consist of both farmland and facilities that
were determined not vital to the Company's on going operations. It
is expected that the assets will be sold within twelve months from
the balance sheet date.
OTHER ASSETS Other assets include professional fees and other
costs to establish and defend trademark and patent rights. These
assets are amortized over a 10 year period on a straight line basis.
Also included in other assets are water rights that were obtained in
connection with a 1988 divestiture of the Company's interest in a
partnership. The Company is amortizing these water rights over 97
years using the straight line method.
REVENUE RECOGNITION The Company recognizes crop sale
revenue after harvest and delivery to customers. Packing revenues
are recognized as units are packed. Marketing commission revenues
are recognized at the time of product shipment.
REORGANIZATION ITEMS The net expenses incurred as a
result of the Chapter 11 filing and subsequent reorganization
proceedings have been segregated from recurring operations in the
consolidated statement of operations.
INCOME TAXES Income taxes are accounted for using an asset
and liability approach which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the financial statement and tax bases
of assets and liabilities at the applicable enacted tax rates.
SUPPLEMENTAL CASH FLOW INFORMATION Cash
payments for interest were $9,308,000 for the period ended January
1, 1996 to September 13, 1996. In 1996 the Company paid income
tax, net of refunds, of $11,000.
RESEARCH AND DEVELOPMENT The Company incurs costs
to research and develop new varieties of proprietary products.
Research and development costs are expensed as incurred. Such
costs were approximately $296,000 for the period ended January 1,
1996 to September 13, 1996.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL
STATEMENTS The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and related notes.
Actual results could differ from these estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS In March
1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long Lived Assets and for Long
Lived Assets to be Disposed of ("SFAS 121") was issued. SFAS
No. 121 establishes new guidelines in accounting for the impairment
of long lived assets, including identifiable intangibles. When
circumstances indicate that the carrying amount of an asset may not
be recoverable as demonstrated by estimated future cash inflows, an
impairment loss shall be recorded based on fair value. The adoption
of SFAS No. 121 in 1996 resulted in no adjustments to the financial
statements.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (dollars in
thousands):
September 13
1996
----------------
Trade receivables $14,178
Due from unaffiliated growers 709
Other 3,642
-------
18,529
Less allowance for doubtful
accounts 182
-----------
$18,347
=========
Substantially all domestic trade receivables are from large
national and regional supermarket chain stores and produce
brokers and are unsecured. The amounts due from growers
represent receivables for services (harvest, haul and pack)
provided on behalf of growers under agreement with the
Company and are recovered from proceeds of product sales.
Other receivables primarily include lemon crop sales, by product
sales, and amounts receivable from joint venture partners.
4. INVENTORIES
Inventories consisted of the following (dollars in thousands):
September 13,
1996
------------
Growing crops $ 6,732
Harvested product 1,912
Pepper seed 2,206
Materials and supplies 2,141
-----------
$12,991
=========
Pepper seed is net of a valuation allowance of $395,000 at
September 13, 1996, to reduce such inventories to their net
realizable value.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following
(dollars in thousands):
September 13,
1996
------------------
Land $ 27,446
Permanent crops 43,764
Buildings and improvements 27,236
Machinery and equipment 20,250
-------------
118,696
Less accumulated depreciation 37,973
-------------
$ 80,723
============
6. INCOME TAXES
Significant components of the Company's deferred income tax
assets and liabilities as of September 13, 1996, are as follows
(dollars in thousands):
Deferred tax liabilities:
Net fixed asset basis difference $23,078
State taxes 181
--------
Total deferred tax liabilities 23,259
Deferred tax assets:
Net operating losses 29,779
Tax credit carryforwards 1,549
Reserve for notes receivable 5,769
Capitalized legal fees 4,447
Basis difference in water rights 1,198
Allowance for doubtful accounts 79
Basis difference in partnership investments 290
Revolving funds reserve 114
State taxes 353
-------
Total deferred tax assets 43,578
Valuation allowance for deferred tax assets (27,819)
Total deferred tax assets, net 15,759
-----------
Net deferred tax liability $ 7,500
=======
The Company has provided a valuation allowance for the tax
benefits of deferred tax assets which may not be realizable.
Income tax expense (benefit) varies from the amount
computed by applying the statutory federal income tax rate to
the income (loss) before income taxes. The reasons for this
difference are as follows:
September 13,
1996
---------------
Statutory federal rate (34.0%)
State taxes, less federal benefit (6.2%)
Valuation allowance 40.2%
-----------
Effective rate 0.0%
========
At September 13, 1996, the Company had net operating loss
carryforwards for federal and state income tax purposes of
approximately $40,439,000 and $8,032,000, respectively,
which expire at various dates from 1997 through 2011. In
addition, a wholly owned subsidiary acquired in 1989 has net
operating loss carryforwards of approximately $44,950,000 for
federal tax purposes, which are subject to an annual limitation
for a fifteen year period. The federal loss carryforwards expire
at various dates from 2001 through 2004.
The Company had investment and research and experimental
tax credit carryforwards of approximately $692,000 which
expire from 1997 to 2007. The Company also had alternative
minimum tax carryforwards of approximately $857,000.
The utilization of the net operating loss and credit
carryforwards could be limited or eliminated by a reduction in
liabilities as a result of the Plan and/or by changes in the
Company's stock ownership resulting from the Cadiz
acquisition.
7. FINANCING
Pursuant to the Plan, the Company issued new debt (along
with Cadiz common stock) to settle prepetition long term debt.
The following is a discussion of the Company's financing
arrangements prior to and as of the Effective Date.
Prepetition Financing:
Debt and other financing arrangements of the Company at
September 13, 1996 were as follows, based on the original
contractual maturities:
September 13,
1996
--------------
(in thousands)
Secured Debt:
Revolving credit facility $ 34,277
Note payable to an insurance
company, monthly installments
of $824,000 (includes
interest), due on November
1, 2000, interest
at 10.6% (default interest
at 12.6%) 77,234
Note payable to bank, semi
annual installments
of $750,000, due November
30, 1999, interest
at prime plus 1.25%
(9.75% at December 31,
1995), payable quarterly
(default interest at
prime plus 3.25%) 5,793
Note payable to bank,
annual installments of
$1,500,000 due November 30,
1996, interest
at prime plus 1.25%
(9.75% at December 31,
1995), payable quarterly
(default interest at prime
plus 3.25%) 10,500
Note payable to insurance
company, monthly
installments of $60,000
(includes interest), interest
at 12.9% 2,838
Unsecured Debt:
Note payable to bank,
due July 1, 1995, interest
only at 10.0%, payable
quarterly 1,500
Note payable to partnership,
due September 1, 1994,
interest at 13.25% 1,150
--------
$ 133,292
==========
All of this prepetition debt has been classified in the
accompanying consolidated balance sheet as "Liabilities subject
to compromise under reorganization proceedings." As a result
of the bankruptcy, all required principal payments on prepetition
debt were suspended. For the period subsequent to the Petition
Date, interest on the unsecured prepetition debt was not paid or
accrued. Interest on secured prepetition debt continued to be
accrued in the period subsequent to the Petition Date at the
default interest rates. Pursuant to Bankruptcy Court order,
adequate protection payments (including $3,417,000 in asset sale
proceeds) were made on the secured debt amounting to
$11,650,000 for the period from January 1, 1996 to September
13, 1996. "Liabilities subject to compromise under
reorganization proceedings" included $18,486,000 related to
unpaid interest accrued on secured debt and $5,642,000 of
unpaid professional fees incurred by the secured lenders as of
September 13, 1996. Pursuant to the Plan, this accrued but
unpaid interest and unpaid professional fees have been included
as part of the principal balance of the respective new financing
agreements.
These credit facilities described above were collateralized by
substantially all of the assets of the Company. The Company
was in default on substantially all of the covenants under these
credit facilities as of September 13, 1996.
Debtor In Possession Financing:
The Bankruptcy Court entered an order on January 20, 1995
approving a debtor in possession (DIP) financing agreement for
the Company in an aggregate amount of $30,000,000. The DIP
facility was amended and restated as of February 28, 1996 to
extend the facility through the 1996 operating season in an
aggregate amount of $20,000,000. The DIP financing granted to
the DIP lender security interests in all the real and personal
property of the Company including all contract accounts,
contract rights, fixtures, copyrights, patents and trademarks.
Under the terms of the loan and the Bankruptcy Code, the
security interest of the DIP lender had priority over virtually all
prepetition claims and Chapter 11 administrative expense claims.
The DIP financing also contained a clause to provide adequate
protection to certain prepetition secured lenders in the form of (a)
replacement liens and (b) payment of specified amounts on the
prepetition secured debt to cover interest and professional fees
incurred by the lenders.
Interest on the DIP borrowings was prime plus 1.25%. During
1996, the Company borrowed and repaid up to $6,790,000 under
this facility and had no balance outstanding at September 13,
1996. Total interest and fees paid during 1996 related to the DIP
facility was $106,000.
The DIP facility expired when the Company emerged from
bankruptcy on September 13, 1996.
Postpetition Financing:
On or about October 27, 1995, the Bankruptcy Court issued the
Weyerhaeuser Order pursuant to which the Company assumed
certain agreements with Weyerhaeuser for corrugated shipping
containers and related financing. Pursuant to the Weyerhaeuser
Order, the Company was required to make certain adequate
protection payments and entered into a secured note. In addition,
during 1996, the Company, with Bankruptcy Court approval,
agreed to purchase certain equipment which had been under lease
and entered in a secured note. The outstanding balances at
September 13, 1996 for these notes were as follows:
(in thousands)
Note payable to supplier,
monthly installments of $ 1,728
$104,000 (includes interest),
due March 1, 1998,
interest at 10.00%.
Note payable to financing company,
monthly installments
of $18,155 (includes interest),
due July 1, 2002,
interest at 7.50% 1,025
----------
2,753
Less: current portion 1,269
-----------
$ 1,484
==========
Plan Financing:
Pursuant to the Plan, the Company entered into new financing
agreements totaling approximately $150 million with its
existing secured lenders which are collateralized by
substantially all of the assets of the Company. These
financing agreements require, among other terms, minimum
amounts, as defined, of working capital and tangible net worth
and minimum ratios of current assets to current liabilities and
indebtedness to net worth. Annual maturities of the debt
outstanding upon emergence from bankruptcy on September
13, 1996 is as follows: remainder of 1996-$3,705,000; 1997-$8,789,000;
1998-$7,970,000; 1999-$9,369,000; 2000-$11,377,000; 2001 and thereafter
- $110,322,000.
8. PREFERRED STOCK
In May 1985, the Board of Directors of the Company
designated 40,000 shares of Preferred Stock as Series I
Preferred Stock. Each share of Series I Preferred Stock was
convertible into one share of Common Stock and was entitled
to receive cash dividends of $30 per share for each of the fiscal
years ending on or after September 30, 1987. Such dividends
were cumulative under certain circumstances and included
other rights such as a liquidation preference per share equal to
the sum of $300, plus all accrued but unpaid dividends.
Pursuant to the Plan, all prepetition ownership interests of the
Company, including the Series I Preferred Stock, as of the
Effective Date were sold to Cadiz. At that time, accumulated
undeclared dividends on the preferred stock of $10,395,000 at
September 13, 1996 were released.
9. LEASING ARRANGEMENTS
The Company leases certain parcels of land, facilities,
machinery, and equipment under non cancelable operating
leases which expire in various years through 2000.
At September 13, 1996, future minimum lease commitments
under noncancellable leases (exclusive of property taxes and
insurance) consist of the following for each fiscal year ended
December 31 (dollars in thousands):
Facilities &
Land Equipment Total
------ ---------- -------
1996 $ 61 $ 344 $ 405
1997 117 351 468
1998 102 51 153
1999 3 0 3
2000 3 0 3
--------- --------- --------
$ 286 $ 746 $ 1,032
======= ======= =======
Total operating lease rental expense for the period ended
January 1, 1996 to September 13, 1996 was $862,000.
10. LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS
Liabilities subject to compromise under reorganization
proceedings consisted of the following as of September 13,
1996 (dollars in thousands):
Accounts payable $ 24,348
Interest payable 18,486
Other accrued liabilities 4,123
Long term debt (see Note 7) 133,292
-------------
$ 180,249
========
11. COMMITMENTS
DEBT GUARANTEE The Company was co guarantor with
its partner on a bank loan to the Sun Date partnership (see
Note 13). The loan totaled $1,150,000 at September 13, 1996.
In connection with the Sun Date settlement during the
bankruptcy proceeding, the Company will be released from
this bank guarantee and Cadiz has agreed to guarantee the
bank loan up to a maximum of $350,000.
PURCHASE AGREEMENT In 1995, the Company entered
into an agreement with its major corrugated container supplier
in connection with a prepetition liability settlement. The
settlement stipulated that the original agreement to purchase
containers from the supplier would remain in effect until
March 21, 1998 and required the Company to issue a secured
note payable to the supplier (see Note 7). Thereafter, the
original agreement will automatically renew unless either
party gives written notice ninety days prior to the end of the
renewal period.
12. RETIREMENT PLANS
The Company established on January 1, 1996 a 401(k) Plan
for salaried employees. Employees must work 1,000 hours
and have completed one year service to be eligible to
participate in this plan. The Company contributed $105,000 to
the plan for the period from January 1, 1996 to September 13,
1996.
The Company has a defined contribution pension plan
covering substantially all of its employees not covered by a
collective bargaining agreement, with at least one year of
service and who have worked at least 1,000 hours.
Contributions are 2% of each covered employee's salary.
There were no contributions made for the period from January
1, 1996 to September 13, 1996. For those hourly employees
covered under a collective bargaining agreement, contributions
are made to a multiemployer pension plan in accordance with
negotiated labor contracts and are generally based on the
number of hours worked. There were no contributions made
to these plans for the period from January 1, 1996 to
September 13, 1996.
13. RELATED PARTY TRANSACTIONS
AG ACCOUNTING, INC. The Company has entered into
agreements to market products obtained from growers in
which a former major stockholder/director of the Company
has financial interests and/or farm management contracts. Ag
Accounting, Inc. ("Ag Accounting"), which is wholly owned
by this former stockholder/director, provides accounting
services to these affiliated growers. The Company recognized
marketing commission revenues from these affiliated growers
of $151,000 for the period January 1, 1996 to September 13,
1996. The Company makes crop advances and charges for
some or all of harvesting, hauling, packing and marketing
services provided to these growers. These charges are
deducted from crop proceeds paid to growers. Amounts due
the Company from Ag Accounting totalled $84,000 as of
September 13, 1996. The Company bills the affiliated
growers monthly for services and remits net proceeds to each
grower for the crops marketed by the Company. In certain
instances, the Company has also obtained financing for these
affiliated growers. Costs related to a product incentive
program of $115,000 were incurred on behalf of Ag
Accounting for the period from January 1, 1996 to September
13, 1996.
ANTHONY VINEYARDS, INC. Anthony Vineyards, Inc. is
a farming entity owned by a former officer and director of the
Company. During 1996, the Company entered into marketing
agreements and provided packing and marketing services to
this grower. The Company makes grower advances for
harvesting, hauling, and packing materials which are
recovered from the grower at the time the Company receives
the crop proceeds. At September 13, 1996, the Company
owed Anthony Vineyards, Inc. $706,000 for net crop proceeds
received. The Company recognized marketing commission
revenues from Anthony Vineyards of $717,000 for the period
from January 1, 1996 to September 13, 1996.
LSL BIOTECHNOLOGIES, INC. LSL Biotechnologies,
Inc. (LSL) is an entity that develops, produces and markets
seed varieties in which former officers and/or directors of the
Company have or had ownership interests. The Company and
LSL entered into growing agreements and seed purchase
contracts related to peppers and tomatoes. During the
bankruptcy proceeding, LSL made claims for prepetition and
postpetition amounts owed by the Company under the
agreements which the Company disputed. On September 9,
1996, an agreement between the Company and LSL was
reached that settled all LSL pre and postpetition claims against
the Company. The settlement included the allowance of a
prepetition unsecured claim in the amount of $900,000 and a
postpetition administrative claim of $650,000 for postpetition
royalties owed to LSL for pepper and tomato sales. The
prepetition allowed claim of $900,000 is included in
"Liabilities subject to compromise under reorganization
proceedings" in the accompanying balance sheet. The
postpetition allowed claim of $650,000 is included in accounts
payable in the accompanying balance sheet. In addition, the
Company agreed to convey the trade name and trademark Le
Rouge Royale to LSL and obtained a license to utilize the
trademark until December 31, 1997 for an additional royalty
of $100,000.
THE IRVINE COMPANY In prior years, the Company had
orchard and row crop farming, packing and marketing
agreements with The Irvine Company. A former major
stockholder/director of the Company owned stock in and was
a director of The Irvine Company, a large land owner and
developer in Southern California. In 1993, the orchard
agreement was terminated and in 1994 the row crop agreement
was terminated. As of September 13, 1996, the Company had
liabilities owed to The Irvine Company, primarily for land rent
and crop proceeds, of $5,000,000, which will be settled for
sixty percent of the total amount pursuant to the Plan.
AMERICAN SUNMELON For the period from January 1,
1996 through September 13, 1996, the Company made
payments to American Sunmelon of $461,000 primarily for
royalty payments and seed purchases. As of September 13,
1996, the Company had liabilities owed to American
Sunmelon of $188,000.
SUN DATE Prior to September 13, 1996, a former major
stockholder/director of the Company had ownership interests
in various date farming partnerships that provided unprocessed
dates to Sun Date. For the period January 1, 1996 through
September 13, 1996, the Company recognized marketing
commissions from date sales of $37,000. In addition, as of
September 13, 1996, the Company had liabilities payable to
Sun Date of $1,163,00, including a $1,150,000 prepetition
note payable which will be settled for sixty percent of the total
outstanding balance pursuant to the Plan.
14. CONTINGENCIES
The Internal Revenue Service (IRS) has filed claims against
the Company, and certain subsidiaries, for taxes refunded to
the Company for certain workers that the IRS claims were
employees. The Company contends that the workers are
excluded from the definition of employment under the Internal
Revenue Code. A complaint has been filed by the Company
in the Bankruptcy Court seeking refunds of taxes paid on
account of agricultural workers for other years. The Company
intends to object to the claims asserted by the IRS. The total
amount of claims filed against the Company are approximately
$4,300,000 including tax deficiency, interest and penalties. At
September 13, 1996, the Company has recorded a reserve for
these claims representing management's best estimate of the
ultimate amount that will be paid.
On January 3, 1996, the Company brought an action against
Corona College Heights Orange & Lemon Association (CCH)
alleging breach of contract, intentional interference with
economic advantage and unfair competition. On April 17,
1996, CCH counterclaimed against the Company, alleging
breach of contract, breach of fiduciary duty, negligence, fraud
and deceit, negligent misrepresentation, constructive fraud,
intentional interference with prospective economic advantage,
unjust enrichment and constructive trust and accounting. This
matter is in the early stages of discovery.
In the normal course of agricultural operations, the Company
handles, stores, transports and dispenses products identified as
hazardous materials. The Company has had regulatory
agencies conduct inspections and there has been a claim
asserted relating to these materials. Although the Company
does not believe remedial action, if any, will require the
expenditure of funds material to the Company's financial
position, no assurance can be given regarding the outcome of
environmental claims, investigations or remedial actions in the
future.
The Company is involved in other legal and administrative
proceedings and claims. In the opinion of management, the
ultimate outcome of each proceeding or all such proceedings
combined will not have a material adverse impact on the
Company's financial statements.
******
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
OF
SUN WORLD INTERNATIONAL, INC.
AND
SUBSIDIARIES
For the Years Ended December 31, 1995 and 1994
With Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Sun World International, Inc.
We have audited the accompanying consolidated balance sheets of Sun
World International, Inc. and subsidiaries (the "Company") as of December
31, 1995 and 1994, and the related consolidated statements of operations and
accumulated deficit and of cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly in all
material respects the financial position of the Company as of December 31,
1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting
priciples.
As discussed in Note 1 to the consolidated financial statements, the Company
and certain of its subsidiaries filed voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code on October 3, 1994. Since that date, the
companies had been operating under Bankruptcy protection and had been
negotiating with all parties to the Bankruptcy proceedings in an effort to
develop a Plan of Reorganization (the "Plan"). On July 12, 1996, the
Bankruptcy Court confirmed the Plan, which became effective on September
13, 1996. Under the Plan, the Company is required to comply with certain
terms and conditions as more fully described in Note 1.
/s/ Deloitte & /Touche LLP
- --------------------------
Fresno, California
September 20, 1996
<TABLE>
SUN WORLD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31.
------------------------------
1995 1994
ASSETS -------- ---------
<S> <C> <C>
Current assets:
Cash $ 23,333 $ 11,836
Accounts receivable, net 13,879 11,386
Inventories 12,710 13,875
Prepaid expenses and other 1,353 1,521
--------- -------
Total current assets 51,275 38,618
Investment in partnerships 1,948 2,220
Property, plant and equipment, net 81,680 112,088
Assets held for sale 17,969 -0-
Other assets 4,652 4,762
--------- -------
Total assets $ 157,524 $157,688
========= =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 13,926 $ 10,566
Accrued liabilities 2,074 2,588
Long-term debt due in one year 1,063 -0-
--------- --------
Total current liabilities 17,063 13,154
Long-term debt 1,458 -0-
Deferred revenue and other 79 292
Deferred income taxes 7,500 7,500
Liabilities subject to compromise under
reorganization proceedings 177,455 174,036
Commitments and contingencies
Stockholders' deficit:
Convertible 10% preferred stock,
75,000 shares authorized;
38,501 shares issued and
outstanding (liquidation
preference $11,550,000) 11,550 11,550
Common stock, $1 par value,
300,000 shares authorized;
42,000 shares issued and outstanding 42 42
Additional paid-in capital 29,350 29,350
Accumulated deficit (86,973) (78,236)
--------- ---------
Total stockholders' deficit (46,031) (37,294)
---------- --------
Total liabilities and
stockholders' deficit $ 157,524 $157,688
========= ========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SUN WORLD INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Dollars in thousands)
<CAPTION>
Years ended December 31,
-------------------------
1995 1994
----------- ---------
<S> <C> <C>
Revenues $117,623 $127,169
-------- --------
Costs and expenses:
Cost of sales 85,546 112,661
General and administrative 6,287 11,368
Permanent crop abandonments 1,560 1,312
-------- -------
Total operating costs 93,393 125,341
-------- --------
Operating profit 24,230 1,828
Provision for loss on asset disposals 4,868 2,136
Other expense/(income) 686 (178)
Interest expense 16,756 15,442
-------- --------
Income (loss) before reorganization
items 1,920 (15,572)
-------- --------
Reorganization items:
Professional fees 7,976 4,693
Adequate protection fees 3,214 2,259
Debt issuance costs 0 1,487
Interest income (533) (107)
-------- ----------
Total reorganization items 10,657 8,332
-------- ------------
Net loss (8,737) (23,904)
Accumulated deficit beginning of year (78,236) (54,332)
--------- -----------
Accumulated deficit end of year $(86,973) $(78,236)
========= =========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SUN WORLD INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Years Ended December 31,
1995 1994
-----------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,737) $ (23,904)
Adjustments to reconcile net
loss to cash provided
by operating activities:
Depreciation and amortization 6,705 7,037
Loss on sale of property,
plant and equipment 605 162
Writeoff of debt issuance costs 0 1,487
Provision for loss on disposal
of assets 4,868 2,136
Permanent crop abandonments 1,560 1,312
Share of partnership operations (400) 738
Changes in operating assets and
liabilities:
(Increase)/decrease in
accounts receivable (2,493) 9,954
Decrease in inventories 1,165 7,588
Decrease in prepaid expenses
and other 168 104
Increase in accounts payable 3,360 10,565
(Decrease)/increase in accrued
liabilities (514) 2,588
(Decrease) in deferred revenue
and other (213) (62)
-------- --------
6,074 19,705
-------- --------
Increase/(decrease) in liabilities
subject to compromise under
reorganization proceedings 6,038 (2)
-------- --------
Net cash provided by operating
activities 12,112 19,703
-------- --------
Cash flows from investing activities:
Additions to property, plant
and equipment (929) (2,623)
Additions to developing crops (1,355) (2,341)
Partnership distributions 672 379
(Increase)/decrease in other assets (436) 13
Proceeds from disposal of property,
plant and equipment 1,530 75
-------- --------
Net cash used in
investing activities (518) (4,497)
-------- ---------
Cash flows from financing activities:
Payments of long-term debt
subject to compromise (97) (696)
Proceeds from short-term borrowings 91,303 16,431
Payments on short-term borrowings (91,303) (20,594)
-------- ---------
Net cash used in financing
activities (97) (4,859)
-------- ----------
Net increase in cash 11,497 10,347
-------- ----------
Cash at beginning of year 11,836 1,489
-------- -----------
Cash at end of year $ 23,333 $ 11,836
======== ==========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
SUN WORLD INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND REORGANIZATION UNDER CHAPTER 11
Sun World International, Inc. ("SWII") and its subsidiaries
(collectively the "Company") own and farm approximately 21,000
acres in two major growing areas of California, the Southern San
Joaquin Valley and Coachella Valley. Fresh produce, including
table grapes, tree fruit, peppers and watermelon are marketed,
packed and shipped to food wholesalers and retailers located
throughout the United States and in certain foreign countries. Export
sales accounted for approximately 7% of the Company's sales for the
years ended December 31, 1995 and 1994. As of December 31,
1995, the Company owned and operated eight cold storage and/or
packing facilities located in California. In 1996, three of those
facilities were sold.
On October 3,1994, SWII and certain of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. Since that date, the companies had been operating under
Bankruptcy protection and had been negotiating with all parties to
the bankruptcy proceedings in an effort to develop a Plan of
Reorganization (the "Plan"). On July 12, 1996, the Bankruptcy
Court confirmed the Plan, which became effective on September 13,
1996 (the"Effective Date"). Pursuant to the Plan, SWII, Sun World,
Inc., Coachella Growers and Sun Desert, Inc. (all wholly-owned
subsidiaries of SWII) emerged from the Chapter 11 Bankruptcy
proceedings and 100% of SWII's stock (both preferred and common)
was acquired by Cadiz Land Company, Inc. ("Cadiz"). The Plan
also provided for, among other things, the cancellation of certain
indebtedness in exchange for cash, elimination of all intercompany
debts, new indebtedness, issuance of new equity securities, the
discharge of other prepetition claims, the cancellation of all
prepetition ownership interests in the Company, the settlement of
certain claims and mutual releases of certain claims of the Company
and other persons or entities (including certain affiliated persons or
entities), the assumption or rejection of executory contracts and
unexpired leases to which the Company was a party, and the
establishment of procedures for the selection of a Board of Directors
for the Company. The Plan did not provide for the reorganization of
the estate or the resolution of outstanding third-party claims and
equity interests for AAI Services, Inc., a wholly-owned subsidiary of
SWII.
Cadiz acquired all of the capital stock of the Company for total
consideration of approximately $179 million including
approximately $150 million which will be owed to the Company's
existing secured lenders through issuance of new notes. In addition,
Cadiz made a cash capital contribution of $15 million to the
Company to provide additional operating capital.
The following table summarizes the recoveries to the prepetition
creditors and equity holders pursuant to the Plan based upon the
Company's estimate of total claims to be allowed as of September
13, 1996 (dollars in thousands) (unaudited):
Recovery
-----------------------------------------------------
Estimated Cadiz
Allowed Claims Long-Term Common Total
Claims/Interest Amount (1) Cash Debt Stock Recovery
- --------------------------------------------------------------------------
Administrative,
Tax and Priority $ 5,000 $ 5,000 $ 0 $ 0 $ 5,000
Credit Agricole
Secured Debt 58,621 3,500 55,121 0 58,621
John Hancock
Secured Debt 93,084 2,000 91,084 0 93,084
Zenith Secured
Debt 3,065 250 2,575 240 3,065
Other Secured
Debt 1,050 0 1,050 0 1,050
General Unsecured
Claims 20,800 12,500 0 0 12,500
Convertible
Preferred Stock
and Common Stock 11,592 3,000 0 2,487 5,487
-------- --------- -------- ------- --------
$ 193,212 $ 26,250 $149,830 $ 2,727 $178,807
======= ========= ======== ======= ========
(1) Excludes any recovery to the Internal Revenue Service for claims
as further discussed by Note 14.
Management believes that the aggregate fair value of the Company's
long-term debt issued pursuant to the Plan approximates the
aggregate book value.
The Plan provided for a consolidation of the assets and liabilities of
SWII and its subsidiaries and pursuant to the Plan, SWII was merged
into Sun World, Inc. with the surviving corporation retaining the
name of Sun World International, Inc. All payments and
distributions required by the Plan to be made by SWII or any of its
subsidiaries in respect of prepetition claims have been made or
provided for, and SWII and its subsidiaries expect to have no further
obligation with respect to any prepetition claims.
Cadiz intends to account for this acquisition using the purchase
method which will materially change the amounts reported in the
accompanying consolidated balance sheet as of December 31, 1995.
The consolidated financial statements do not give effect to
adjustments of assets or liabilities, or classifications of such
amounts, which may be necessary as a consequence of the Cadiz
acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The consolidated financial statements
include the accounts of SWII and its subsidiaries, substantially all of
which are wholly owned. All significant intercompany transactions
have been eliminated.
The Company has accounted for all transactions related to the
Chapter 11 proceedings in accordance with Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," issued by the American Institute of Certified
Public Accountants. Accordingly, liabilities subject to compromise
under reorganization proceedings have been segregated on the
consolidated balance sheets and are recorded at the amounts that
have been or are expected to be allowed based upon known claims.
INVENTORIES Growing crops, pepper seed, and materials and
supplies are stated at the lower of cost, on a first-in, first-out (FIFO)
basis, or market. Growing crops inventory includes direct costs and
an allocation of indirect costs.
INVESTMENT IN PARTNERSHIPS Wholly-owned subsidiaries
of the Company have investments in various partnerships. The
Company's two principal partnerships are Sun Date and American
Sunmelon, both of which are 50% owned. American Sunmelon is
engaged in proprietary seed development, production, and marketing
of seedless watermelons. Sun Date is engaged in the marketing,
processing, and farming of dates. These partnership investments are
accounted for using the equity method.
PROPERTY, PLANT AND EQUIPMENT Property, plant and
equipment is stated at cost for all acquisitions subsequent to
September 30, 1983. All property, plant and equipment acquired
prior to September 30, 1983 was restated to estimated fair value at
that date in connection with the Company's quasi-reorganization.
The Company capitalizes the direct and certain indirect costs of
planting and developing orchards and vineyards until they reach
maturity, which varies by crop and ranges from three to seven years.
Depreciation on trees and vines commences in the year commercial
production is achieved.
The Company computes depreciation applicable to property, plant
and equipment on the straight-line method using the following
estimated useful lives:
Buildings and improvements 10-45 years
Machinery and equipment 3-25 years
Permanent crops 10-20 years
Upon the sale, retirement or abandonment of property, plant and
equipment, applicable gains or losses are recognized in income.
ASSETS HELD FOR SALE In conjunction with the Company's
1996 Business Plan, specific properties were identified to be sold.
These properties, which are included in the accompanying
consolidated balance sheet at the lower of cost or net realizable
value, consist of both farmland and facilities that were determined
not vital to the Company's ongoing operations. The Company
has sold certain facilities in 1996 including facilities located in
Reedley, Arvin and Thermal.
OTHER ASSETS Other assets include professional fees and
other costs to establish and defend trademark and patent rights.
These assets are amortized over a 10-year period on a straight-line
basis. Also included in other assets are water rights that were
obtained in connection with a 1988 divestiture of the Company's
interest in a partnership. The Company is amortizing these water
rights over 97 years using the straight-line method.
PROVISION FOR LOSS ON ASSET DISPOSALS In 1995 and
1994, the Company recorded provisions for loss on disposal of
assets totaling $4,868,000 and $2,136,000, respectively. Such
write-downs represented amounts necessary to reduce the assets to
their expected net realizable value.
REVENUE RECOGNITION The Company recognizes crop
sale revenue after harvest and delivery to customers. Packing
revenues are recognized as units are packed. Marketing
commission revenues are recognized at the time of product
shipment.
REORGANIZATION ITEMS The net expenses incurred as a
result of the Chapter 11 filing and subsequent reorganization
proceedings have been segregated from recurring operations in the
consolidated statements of operations.
INCOME TAXES Deferred income taxes on the difference
between financial statement basis and tax basis of assets and
liabilities are provided for at the statutory rates.
SUPPLEMENTAL CASH FLOW INFORMATION Cash
payments for interest were $6,258,000 and $6,673,000 in the years
ended December 31, 1995 and 1994, respectively. In 1995 and
1994 the Company paid income tax, net of refunds, of $13,000
and $633,000, respectively.
RESEARCH AND DEVELOPMENT The Company incurs
costs to research and develop new varieties of proprietary
products. Research and development costs are expensed as
incurred. Such costs were approximately $393,000 and
$1,127,000 for the years ended December 31, 1995 and 1994,
respectively.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL
STATEMENTS The preparation of consolidated financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and related notes. Actual results could differ from
these estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS In March
1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121") was issued.
SFAS No. 121 establishes new guidelines in accounting for the
impairment of long-lived assets, including identifiable intangibles.
When circumstances indicate that the carrying amount of an asset
may not be recoverable as demonstrated by estimated future cash
inflows, an impairment loss shall be recorded based on fair value.
The Company has not yet adopted SFAS No. 121 but believes that
its impact when adopted will not be material.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (dollars
in thousands):
December 31,
1995 1994
---------- ---------
Trade receivables $ 6,791 $ 4,107
Due from unaffiliated
growers 1,962 903
Due from affiliated
growers 257 840
Other 5,051 5,904
--------- ---------
14,061 11,754
Less allowance for
doubtful accounts 182 368
--------- ---------
$13,879 $ 11,386
====== ==========
Substantially all domestic trade receivables are from large
national and regional supermarket chain stores and produce
brokers and are unsecured. The amounts due from growers
represent receivables for services (harvest, haul and pack)
provided on behalf of growers under agreement with the
Company and are recovered from proceeds of product sales.
Other receivables primarily include lemon crop sales, by-product
sales, and amounts receivable from joint venture partners.
4. INVENTORIES
Inventories consisted of the following (dollars in thousands):
December 31,
-------------------
1995 1994
---------- --------
Growing crops $ 8,337 $ 9,103
Pepper seed 2,328 2,950
Materials and supplies 2,045 1,822
-------- -----------
$ 12,710 $ 13,875
======= ======
Pepper seed is net of valuation allowance of $395,000
and $375,000 at December 31, 1995 and 1994,
respectively, to reduce such inventories to their net
realizable value.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following
(dollars in thousands):
December 31,
----------------
1995 1994
----------- -----------
Land $ 27,446 $ 39,194
Permanent crops 42,837 49,217
Buildings and improvements 27,860 38,607
Machinery and equipment 19,485 29,562
----------- ----------
117,628 156,580
Less accumulated
depreciation 35,948 44,492
----------- ----------
$ 81,680 $ 112,088
======== ============
6. INCOME TAXES
Significant components of the Company's deferred income tax
assets and liabilities as of December 31, 1995 and 1994 are as
follows (dollars in thousands):
1995 1994
---------- -------------
Deferred tax liabilities:
Net fixed asset basis
difference $ 23,630 $ 22,122
State taxes 181 181
-------- --------
Total deferred tax
liabilities 23,811 22,303
-------- --------
Deferred tax assets:
Net operating losses 29,779 28,655
Tax credit carryforwards 1,604 1,760
Reserve for notes
receivable 5,769 5,769
Capitalized legal fees 2,789 2,789
Basis difference in
water rights 1,198 1,198
Deferred crop costs 484 1,685
Allowance for doubtful
accounts 79 159
Basis difference in
partnership investments 40 12
State taxes 353 353
-------- --------
Total deferred tax
assets 42,095 42,380
Valuation allowance for
deferred
tax assets (25,784) (27,577)
Total deferred tax
assets, net 16,311 14,803
-------- --------
Net deferred
tax liability $ 7,500 $ 7,500
========= =========
The Company has provided a valuation allowance for the tax
benefits of deferred tax assets which may not be realizable.
Income tax expense (benefit) varies from the amount
computed by applying the statutory federal income tax rate to
the income (loss) before income taxes. The reasons for this
difference are as follows:
December 31,
-----------------
1995 1994
-------- ----------
Statutory federal rate (34.0)% (34.0)%
State taxes, less
federal benefit (6.2)% (6.2)%
Valuation allowance 40.2 % 40.2 %
----------- ----------
Effective rate 0.0 % 0.0 %
========== ==========
At December 31, 1995, the Company had net operating loss
carryforwards for federal and state income tax purposes of
approximately $40,439,000 and $8,032,000, respectively, which
expires at various dates from 1997 through 2010. In addition, a
wholly-owned subsidiary acquired in 1989 has net operating loss
carryforwards of approximately $44,950,000 for federal tax
purposes, which are subject to an annual limitation for a fifteen-
year period. The federal loss carryforwards expire at various
dates from 2001 through 2004.
The Company had investment and research and experimental tax
credit carryforwards of approximately $747,000 which expire
from 1996 to 2007. The Company also had alternative minimum
tax carryforwards of approximately $857,000.
The utilization of the net operating loss and credit carryforwards
could be limited or eliminated by a reduction in liabilities as a
result of the Plan and/or by changes in the Company's stock
ownership resulting from the Cadiz acquisition.
7. FINANCING
Pursuant to the Plan, the Company issued new debt (along with
Cadiz common stock) to settle prepetition long-term debt. The
following is a discussion of the Company's financing
arrangements prior to and as of the Effective Date.
Prepetition Financing:
Debt and other financing arrangements of the Company at
December 31, 1995 and 1994 were as follows, based on the
original contractual maturities:
December 31,
------------------
(in thousands)
1995 1994
------------ -------------
Secured Debt:
Revolving credit facility $ 34,277 $ 34,277
Note payable to an insurance
company, monthly
installments of $824,000
(includes interest), due
on November 1, 2000,
interest at 10.6%
(default interest at
12.6%) 77,234 77,234
Note payable to bank,
semi-annual installments
of $750,000, due November
30, 1999, interest
at prime plus 1.25%
(9.75% at December 31,
1995), payable quarterly
(default interest at
prime plus 3.25%) 5,793 5,793
Note payable to bank,
annual installments of
$1,500,000 due November
30, 1996, interest
at prime plus 1.25%
(9.75% at December 31,
1995), payable quarterly
(default interest at
prime plus 3.25%) 10,500 10,500
Note payable to insurance
company, monthly
installments of $60,000
(includes interest),
interest at 12.9% 2,838 2,694
Unsecured Debt
Note payable to bank,
due July 1, 1995, interest
only at 10.0%, payable
quarterly 1,500 1,500
Note payable to partnership,
due September 1, 1994,
interest at 13.25% 1,150 1,150
------- -------
$133,292 $133,148
========= ========
All of this prepetition debt has been classified in the
accompanying consolidated balance sheets as "Liabilities
subject to compromise under reorganization proceedings." As
a result of the bankruptcy, all required principal payments on
prepetition debt were suspended. For the period subsequent to
the Petition Date, interest on the unsecured prepetition debt
was not paid or accrued. Interest on secured prepetition debt
continued to be accrued in the period subsequent to the
Petition Date at the default interest rates. Pursuant to
Bankruptcy Court order, adequate protection payments were
made on the secured debt amounting to $3,214,000 and
$2,259,000 for the years ended December 31, 1995 and 1994,
respectively. "Liabilities subject to compromise under
reorganization proceedings" included $19,248,000 and
$9,098,000 related to unpaid interest accrued on secured debt
for the years ended December 31, 1995 and 1994,
respectively.
These credit facilities described above were collateralized by
substantially all of the assets of the Company. The Company
was in default on substantially all of the covenants under these
credit facilities as of December 31, 1995 and 1994.
Debtor In Possession Financing:
The Bankruptcy Court entered an order on January 20, 1995
approving a debtor in possession (DIP) financing agreement
for the Company in an aggregate amount of $30,000,000. The
DIP financing granted to the DIP lender security interests in
all the real and personal property of the Company including all
contract accounts, contract rights, fixtures, copyrights, patents
and trademarks. Under the terms of the loan and the
Bankruptcy Code, the security interest of the DIP lender had
priority over virtually all prepetition claims and Chapter 11
administrative expense claims. The DIP financing also
contained a clause to provide adequate protection to certain
prepetition secured lenders in the form of (a) replacement liens
and (b) payment of specified amounts on the prepetition
secured debt to cover interest and professional fees incurred by
the lenders.
Interest on the DIP borrowings was prime plus 1.25%. During
1995, the Company borrowed and repaid up to $21,181,000
under this facility and had no balance outstanding at December
31, 1995. Total interest and fees paid during 1995 related to
the DIP facility was $681,000.
The DIP facility was amended and restated as of February 28,
1996 to extend the facility through the 1996 operating season
in an aggregate amount of $20,000,000. The DIP facility
expired when the Company emerged from bankruptcy on
September 13, 1996.
Postpetition Financing:
On or about October 27, 1995, the Bankruptcy Court issued
the Weyerhaeuser Order pursuant to which the Company
assumed certain agreements with Weyerhaeuser for corrugated
shipping containers and related financing. Pursuant to the
Weyerhaeuser Order, the Company was required to make
certain adequate protection payments and entered into a
secured note which had an outstanding balance at December
31, 1995 as follows:
(in thousands)
Note payable to supplier,
monthly installments of $ 2,521
$104,000 (includes interest),
due March 1, 1998,
interest at 10.00%.
Less: current portion 1,063
----------
$ 1,458
===========
Plan Financing:
Pursuant to the Plan, the Company entered into new financing
agreements totaling approximately $150 million with its
existing secured lenders which are collateralized by
substantially all of the assets of the Company. Annual
maturities of the debt outstanding upon emergence from
bankruptcy on September 13, 1996 (including the postpetition
financing) is as follows: 1996-$4,502,000; 1997-$8,789,000;
1998-$7,970,000; 1999-$9,369,000; 2000-$11,377,000; 2001
and thereafter - $110,322,000.
8. PREFERRED STOCK
In May 1985, the Board of Directors of the Company
designated 40,000 shares of Preferred Stock as Series I
Preferred Stock. Each share of Series I Preferred Stock was
convertible into one share of Common Stock and was entitled
to receive cash dividends of $30 per share for each of the fiscal
years ending on or after September 30, 1987. Such dividends
were cumulative under certain circumstances and included
other rights such as a liquidation preference per share equal to
the sum of $300, plus all accrued but unpaid dividends.
Pursuant to the Plan, all prepetition ownership interests of the
Company, including the Series I Preferred Stock, as of the
Effective Date were sold to Cadiz. At that time, accumulated
undeclared dividends on the preferred stock of $10,395,000
and $9,240,000 at December 31, 1995 and 1994 were released.
9. LEASING ARRANGEMENTS
The Company leases certain parcels of land, facilities,
machinery, and equipment under noncancelable operating
leases which expire in various years through 2000.
At December 31, 1995, future minimum lease commitments
under noncancellable leases (exclusive of property taxes and
insurance) consist of the following (dollars in thousands):
Facilities &
Land Equipment Total
-------- ----------- ---------
1996 $ 119 $ 1,543 $ 1,662
1997 114 348 462
1998 114 60 174
1999 0 9 9
2000 0 9 9
--------- ------ -------
$ 347 $ 1,969 $ 2,316
======== ======= ========
Operating lease payments for the years ended December 31,
1995 and 1994 were $2,554,000 and $4,595,000, respectively.
10. LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS
Liabilities subject to compromise under reorganization
proceedings consisted of the following as of December 31
(dollars in thousands):
1995 1994
------------ -----------
Accounts payable $ 20,792 $ 27,667
Interest payable 19,248 9,098
Other accrued liabilities 4,123 4,123
Long-term debt (see
Note 7) 133,292 133,148
----------- -----------
$ 177,455 $ 174,036
========= ==========
11. COMMITMENTS
DEBT GUARANTEE The Company was co-guarantor with
its partner on a bank loan to the Sun Date partnership (see
Note 13). The loan totaled $1,150,000 at December 31, 1995
and 1994. In connection with the Sun Date settlement during
the bankruptcy proceeding, the Company will be released from
this bank guarantee and Cadiz has agreed to guarantee the
bank loan up to a maximum of $350,000.
PURCHASE AGREEMENT In 1995, the Company entered
into an agreement with its major corrugated container supplier
in connection with a prepetition liability settlement. The
settlement stipulated that the original agreement to purchase
containers from the supplier would remain in effect until
March 21, 1998 and required the Company to issue a secured
note payable to the supplier (see Note 7). Thereafter, the
original agreement will automatically renew unless either
party gives written notice ninety days prior to the end of the
renewal period.
12. RETIREMENT PLANS
The Company has a defined contribution pension plan
covering substantially all of its employees not covered by a
collective bargaining agreement, with at least one year of
service and who have worked at least 1,000 hours.
Contributions are 2% of each covered employee's salary and
totaled approximately $207,000 and $300,000 for the years
ended December 31, 1995 and 1994, respectively. For those
hourly employees covered under a collective bargaining
agreement, contributions are made to a multiemployer pension
plan in accordance with negotiated labor contracts, are
generally based on the number of hours worked, and totaled
approximately $11,000 and $25,000 for the years ended
December 31, 1995 and 1994, respectively.
13. RELATED PARTY TRANSACTIONS
AG-ACCOUNTING, INC. The Company has entered into
agreements to market products obtained from growers in
which a former major stockholder/director of the Company
has financial interests and/or farm management contracts.
Ag-Accounting, Inc. ("Ag-Accounting"), which is wholly owned
by this former stockholder/director, provides accounting
services to these affiliated growers. The Company recognized
marketing commission revenues from these affiliated growers
of $104,000 and $436,000 for the years ended December 31,
1995 and 1994, respectively. The Company makes crop
advances and charges for some or all of harvesting, hauling,
packing and marketing services provided to these growers.
These charges are deducted from crop proceeds paid to
growers. As of December 31, 1994, the amount due Ag-Accounting
from the Company was $404,000 (none in 1995). Amounts due the
Company from Ag-Accounting totaled $233,000 and $634,000 as
of December 31, 1995 and 1994, respectively. The Company bills
the affiliated growers monthly for services and remits net
proceeds to each grower for the crops marketed by the Company.
In certain instances, the Company has also obtained financing for
these affiliated growers.
Costs related to a product incentive program and certain
payroll and office expenses of $395,000 and $503,000 were
incurred on behalf of Ag-Accounting for the years ended
December 31, 1995 and 1994, respectively.
In 1993, the Company determined that receivables due from
Ag-Accounting and growers affiliated with Ag-Accounting in
the amount of $8,652,000 were uncollectible. These amounts
which were written off represent advances made by the
Company to Ag-Accounting for operating expenses and to Ag-
Accounting ranches for growing and harvesting costs. Under
the Plan, Ag-Accounting, the majority stockholder/director,
and the affiliated growers have been released from all claims
and liabilities related to the Company.
ANTHONY VINEYARDS, INC. Anthony Vineyards, Inc. is
a farming entity owned by a former officer and director of the
Company. The Company entered into marketing agreements
and provided packing and marketing services to this grower.
The Company makes grower advances for harvesting, hauling,
and packing materials which are recovered from the grower at
the time the Company receives the crop proceeds. The
Company recognized marketing commission revenues from
Anthony Vineyards of $1,277,000 and $980,000 for the years
ended December 31, 1995 and 1994, respectively. In addition,
at December 31, 1994, the Company had liabilities owed to
Anthony Vineyards, Inc. of $841,000 (none in 1995). The
amounts due the Company from Anthony Vineyards as of
December 31, 1995 and 1994 were $26,000 and $125,000,
respectively.
STOCKHOLDERS In 1993, the Company determined that
$3,771,000 in receivables due from stockholders were
uncollectible and were written off. As part of the Plan, all
liabilities and claims between the former stockholders and the
Company have been released.
LSL BIOTECHNOLOGIES, INC. LSL Biotechnologies,
Inc. (LSL) is an entity that develops, produces and markets
seed varieties in which former officers and/or directors of the
Company have or had ownership interests. The Company and
LSL entered into growing agreements and seed purchase
contracts related to peppers and tomatoes. For the year ended
December 31, 1994, the Company made royalty payments to
LSL of $1,339,000 (none in 1995). During the bankruptcy
proceeding, LSL made significant claims for prepetition and
postpetition amounts owed by the Company under the
agreements which the Company disputed. On September 9,
1996, an agreement between the Company and LSL was
reached that settled all LSL pre and postpetition claims against
the Company. The settlement included the allowance of the
prepetition unsecured claim for $900,000, and postpetition
administrative claim of $650,000 for postpetition royalties
owed to LSL for pepper and tomato sales. In addition, the
Company agreed to convey the trade name and trademark Le
Rouge Royale(R) to LSL and obtained a license to utilize the
trademark until December 31, 1997 for an additional royalty
of $100,000.
THE IRVINE COMPANY The Company had orchard and
row crop farming, packing and marketing agreements with
The Irvine Company. A former major stockholder/director of
the Company owned stock in and was a director of The Irvine
Company, a large land owner and developer in Southern
California. In 1993, the orchard agreement was terminated
and in 1994 the row crop agreement was terminated. As of
December 31, 1995 and 1994, the Company had liabilities
owed to The Irvine Company, primarily for land rent and crop
proceeds, of $4,946,000 and $5,400,000, respectively. In
connection with the Plan, the Company agreed to allow a
claim of $5,000,000 in settlement of Irvine's prepetition
liability and claim against the Company.
AMERICAN SUNMELON For the years ended December
31, 1995 and 1994, the Company made payments to American
Sunmelon of $849,000 and $1,101,000, respectively, primarily
for royalty payments and seed purchases. As of December 31,
1995 and 1994, the Company had liabilities owed to American
Sunmelon of $128,000 and $210,000, respectively. The
Company's share of partnership income from American
Sunmelon was $1,111,000 and $480,000 for the years ended
December 31, 1995 and 1994, respectively.
SUN DATE On September 9, 1996, the Company and Sun
Date entered into an agreement that included a release or
settlement of all prepetition claims between Sun Date and the
Company, and included provisions for the Company to sell the
dates produced by Sun Date. A former major
stockholder/director of the Company, prior to September 13,
1996, had ownership interests in various date farming
partnerships that provided unprocessed dates to Sun Date. For
the years ended December 31, 1995 and 1994, the Company
recognized marketing commissions from date sales of
$116,000 and $68,000, respectively. In addition, as of
December 31, 1995 and 1994, the Company had liabilities
payable to Sun Date of $1,175,000 and $1,546,000,
respectively, including a $1,150,000 prepetition note payable
which was settled as described above. The Company's share
of the partnership loss from Sun Date was $677,000 and
$669,000 for the years ended December 31, 1995 and 1994,
respectively.
14. CONTINGENCIES
The Internal Revenue Service (IRS) has filed claims against
the Company, and certain subsidiaries, for taxes refunded to
the Company for certain workers that the IRS claims were
employees. The Company contends that the workers are
excluded from the definition of employment under the Internal
Revenue Code. A complaint has been filed by the Company
in the Bankruptcy Court seeking refunds of taxes paid on
account of agricultural workers for other years. The Company
intends to object to the claims asserted by the IRS. The total
amount of claims filed against the Company are approximately
$4,300,000 including tax deficiency, interest and penalties. At
December 31, 1995 and 1994, the Company has recorded a
reserve for these claims representing management's best
estimate of the ultimate amount that will be paid.
On January 3, 1996, the Company brought an action against
Corona College Heights Orange & Lemon Association (CCH)
alleging breach of contract, intentional interference with
economic advantage and unfair competition. On April 17,
1996, CCH counterclaimed against the Company, alleging
breach of contract, breach of fiduciary duty, negligence, fraud
and deceit, negligent misrepresentation, constructive fraud,
intentional interference with prospective economic advantage,
unjust enrichment and constructive trust and accounting. This
matter is in the early stages of discovery.
In the normal course of agricultural operations, the Company
handles, stores, transports and dispenses products identified as
hazardous materials. The Company has had regulatory
agencies conduct inspections and there has been a claim
asserted relating to these materials. Although the Company
does not believe remedial action, if any, will require the
expenditure of funds material to the Company's financial
condition, no assurance can be given regarding the outcome of
environmental claims, investigations or remedial actions in the
future.
The Company is involved in other legal and administrative
proceedings and claims. In the opinion of management, the
ultimate outcome of each proceeding or all such proceedings
combined will not have a material adverse impact on the
Company's financial statements.
* * * * * *
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits Sun
World's and Cadiz' Board of Directors to indemnify any person against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit or
proceeding in which such person is made a party by reason of his being
or having been a director, officer, employee or agent of the
Registrant, in terms sufficiently broad to permit such indemnification
under certain circumstances for liabilities (including reimbursement
for expenses incurred) arising under the Securities Act of 1933, as
amended (the "Act"). The statute provides that indemnification
pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors, or
otherwise.
Cadiz' and Sun World's Bylaws (Exhibit 3.3 hereto and Exhibit 3.7
respectively) provide for mandatory indemnification of directors and
officers, and those serving at the request of each as directors,
officers, employees, or agents of other entities (collectively,
"Agents"), to the maximum extent permitted by law. Each of the Bylaws
provide that such indemnification shall be a contract right between
each Agent and each of Cadiz and Sun World.
In 1990, Cadiz entered into an Indemnity Agreement with each of
the individuals then serving as an executive officer or director of
Cadiz including Keith Brackpool, the current Chief Executive Officer
of Cadiz. The Indemnity Agreement as to Mr. Brackpool remains in
effect; all of the other executive officers and directors who executed
an Indemnity Agreement with Cadiz have since resigned from their
positions with Cadiz. The Indemnity Agreement provides for the
indemnification of the indemnified party with respect to his
activities as a director or officer of Cadiz or an affiliate of Cadiz
against expenses and liabilities, of whatever nature, incurred in
connection with any claim made against him by reason of facts which
include his affiliation with Cadiz. Such indemnification is provided
to the maximum extent permitted by Cadiz' charter documents, insurance
policies and/or any applicable law.
The Registration Rights Agreement between Sun World, Cadiz and
the Initial Purchaser provide that Sun World shall indemnify each
holder of Old Notes under certain circumstances and the holders of Old
Notes shall indemnify Sun World and the controlling persons of Sun
World under certain circumstances, including indemnification for
liabilities arising under the Act.
Each of Sun World's and Cadiz' Certificate of Incorporation
provide that a director shall not be personally liable to Sun World
or Cadiz respectively, or their stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal
benefit. Cadiz also has purchased a liability insurance policy which
insures its directors and officers against certain liabilities,
including liabilities under the Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
The following exhibits are filed or incorporated by reference as part
of this Registration Statement:
2.1 Debtors' Modified Fourth Amended Consolidated Plan of
Reorganization dated June 3, 1996 (as modified)(1)
2.2 Plan Implementation Agreement dated July 12, 1996(1)
2.3 Supplement to Plan Support Agreement dated June 3, 1996(1)
2.4 Stock Purchase Agreement with Howard Marguleas dated
September 13, 1996(2)
2.5 Form of Stock Purchase Agreement with Minority Stockholders
of Sun World dated September 13, 1996(2)
3.1 Certificate of Incorporation of Cadiz as amended(3)
3.2 Amendment to Certificate of Incorporation of Cadiz dated
November 8, 1996(4)
3.3 Bylaws of Cadiz, as amended to date(5)
3.4 Amended and Restated Certificate of Incorporation of Sun
World, Inc.
3.5 Certificate of Merger of Sun World International, Inc. into
Sun World, Inc.
3.6 Agreement and Plan of Merger of Sun World, Inc. and Sun
World International, Inc.
3.7 Amended and Restated Bylaws of Sun World, International, Inc.
4.1 Indenture dated as of April 16, 1997 among Sun World as
issuer, Sun World and certain subsidiaries of Sun World as
guarantors, and IBJ Schroder Bank & Trust Company as
Trustee, for the benefit of holders of 11-1/4% First
Mortgage Notes due 2004 (including, as Exhibit A to the
Indenture, the form of the Global Note and the form of each
Guarantee)(15)
5.1 Opinion of Miller & Holguin as to certain corporate law
matters(17)
10.1 Cadiz 1984 Incentive Stock Option Plan(7)
10.2 Cadiz 1988 Nonstatutory Stock Option Plan(8)
10.3 Cadiz 1996 Stock Option Plan(13)
10.4 Stock Purchase and Fee Agreement dated March 22, 1989
between Cadiz and Mark A. Liggett(7)
10.5 Form of Limited Partnership Agreement of Southwest Fruit
Growers, L.P.(9)
10.6 Farm Management Agreement dated as of March 28, 1990
between Cadiz and Southwest Fruit Growers, L.P.(9)
10.7 Promissory Note in the amount of $3,486,868 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P. in
favor of Cadiz (Hyder Note)(9)
10.8 Promissory Note in the amount of $4,934,922 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P. in
favor of Cadiz (Cadiz Note)(9)
10.9 Promissory Note in the amount of $3,141,344 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P. in
favor of Cadiz (Farming Note)(9)
10.10 Second Amendment and Supplement to Stock Purchase and Fee
Agreement, dated December 23, 1992 between Cadiz and Mark
Liggett(10)
10.11 Loan Agreement dated March 15, 1995 between Cadiz, CVDC and
Ansbacher(11)
10.12 Fourth Loan Modification Agreement dated March 15, 1995
between Cadiz, CVDC and Rabobank(11)
10.13 Form of Option Agreement dated April 20, 1995 between Cadiz
and David Peterson(11)
10.14 Plan Support Agreement dated December 11, 1995(12)
10.15 Waiver of Certain Provisions of Plan Support Agreement
dated January 12, 1996(12)
10.16 Amended and Restated Credit Agreement between Sun World
International, Inc. and Caisse Nationale de Credit Agricole
dated September 13, 1996(4)
10.17 Promissory Note between Sun World International, Inc. and
Caisse Nationale de Credit Agricole dated September 13,
1996(4)
10.18 New Hancock Credit Agreement between Sun World
International, Inc. and John Hancock Mutual Life Insurance
Company dated September 13, 1996(4)
10.19 Secured Promissory Note between Sun World International,
Inc. and John Hancock Mutual Life Insurance Company dated
September 13, 1996(4)
10.20 Form of Employment Agreement dated September 13, 1996
between Sun World, Cadiz and Timothy J. Shaheen(14)
10.21 Form of Employment Agreement dated September 13, 1996
between Sun World, Cadiz and Stanley E. Speer(14)
12.1 Statement of Computation of Ratios
21.1 Subsidiaries of the Registrant(15)
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Miller & Holguin (included in Exhibit 5.1)
25.1 Statement of Eligibility on Form T-1 of IBJ Schroder Bank
& Trust Company (bound separately from other exhibits)
27.1 Financial Data Schedule(16)
99.1 Registration Rights Agreement dated April 16, 1997 between
Sun World, Guarantors, Cadiz and Smith Barney, Inc.
99.2 Form of Letter of Transmittal
99.3 Form of Notice of Guaranteed Delivery
99.4 Form of Exchange Agent Agreement
(1) Previously filed as Exhibit to Cadiz' Report on Form 10-Q for
the quarter ended June 30, 1996
(2) Previously filed as Exhibit to Cadiz' Report on Form 8-K dated
September 13, 1996
(3) Previously filed as Exhibit to Cadiz' Registration Statement on
Form S-1 (Registration No. 33-75642) declared effective May 16,
1994
(4) Previously filed as Exhibit to Cadiz' Report on Form 10-Q for
the quarter ended September 30, 1996
(5) Previously filed as Exhibit to Cadiz' Report on Form 8-K dated
May 6, 1992
(6) Previously filed as Exhibit to Cadiz' Annual Report on Form 10-K
for the fiscal year ended March 31, 1996
(7) Previously filed as Exhibit to Cadiz' Annual Report on Form 10-K
for the fiscal year ended March 31, 1989
(8) Previously filed as Exhibit to Cadiz' Annual Report on Form 10-K
for the fiscal year ended March 31, 1988
(9) Previously filed as Exhibit to Cadiz' Annual Report on Form 10-K
for the fiscal year ended March 31, 1990
(10) Previously filed as Exhibit to Cadiz' Annual Report on Form 10-K
for the fiscal year ended March 31, 1993
(11) Previously filed as Exhibit to Cadiz' Annual Report on Form 10-K
for the fiscal year ended March 31, 1995
(12) Previously filed as Exhibit to Cadiz' Report on Form 10-Q for
the quarter ended December 31, 1995
(13) Previously filed as Exhibit A to Cadiz' Proxy Statement relating
to the Annual Meeting of Stockholders held on November 8, 1996
(14) Previously filed as Exhibit to Cadiz' Transition Report on Form
10-K for the nine months ended December 31, 1996
(15) Previously filed as Exhibit to Amendment No. 1 to Cadiz' Form S-1
Registration Statement No. 333-19109
(16) Previously filed as Exhibit to Cadiz' Report on Form 10-Q for
the quarter ended March 31, 1997
(17) To be filed by amendment
(B) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules are filed as part of
this Registration Statement and should be read in conjunction with the
consolidated financial statements of Cadiz.
SCHEDULE PAGE
SCHEDULE I: Condensed Financial Information of Registrant S-2
SCHEDULE II: Valuation and Qualifying Accounts S-5
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the Cadiz' Consolidated Financial
Statements or the Notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually
or in the aggregate, represent a fundamental
change in the information set forth in the
registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business
day of receipt of such request, and to send the
incorporated documents by first class mail or other
equally prompt means. This includes information
contained in documents filed subsequent to the effective
date of the Registration Statement through the date of
responding to the request; and
(5) To supply by means of a post-effective amendment all
information concerning the Exchange Offer that was not
the subject of and included in the Registration Statement
when it became effective.
(g) (1) The undersigned registrants hereby undertake as follows:
That prior to any public re-offering of the securities
registered hereunder through use of a prospectus which is
a part of this registration statement, by any person or
party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such
re-offering prospectus will contain the information
called for by the applicable registration form with
respect to re-offerings by persons who may be deemed
underwriters, in addition to the information called for
by the other Items of the applicable form.
(2) The registrants undertake that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding,
or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the
registration statement and will not be used until such
amendment is effective, and that, for purposes of
determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrants pursuant to the
foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of
expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the Registrants will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on July 11, 1997.
SUN WORLD INTERNATIONAL, INC.
By:/s/ Timothy J. Shaheen
-------------------------
Timothy J. Shaheen
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name and Position Date
/s/ Keith Brackpool July 11, 1997
- --------------------------
Keith Brackpool
Chairman of the Board
/s/ Timothy J. Shaheen July 11, 1997
- ----------------------------
Timothy J. Shaheen
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Stanley E, Speer July 11, 1997
- ----------------------------
Stanley E. Speer
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ Dwight W. Makins July 11, 1997
- -------------------------------------
Dwight W. Makins, Director
/s/ Barton Beek July 11, 1997
- ------------------------------------
Barton Beek, Director
/s/ Mitt Parker July 11, 1997
- -------------------------------------
Mitt Parker, Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California,on July 11, 1997.
CADIZ LAND COMPANY, INC.
By:/s/ Keith Brackpool
------------------------------
Keith Brackpool
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name and Position Date
----------------- ------------------
/s/ Dwight W. Makins July 11, 1997
- --------------------------------
Dwight W. Makins
Chairman of the Board
/s/ Keith Brackpool July 11, 1997
- ---------------------------------
Keith Brackpool
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Russ Hammond July 11, 1997
- -----------------------------------
Russ Hammond, Director
/s/ Stephen D. Weinress July 11, 1997
- -----------------------------------
Stephen D. Weinress, Director
/s/ Murray H. Hutchison July 11, 1997
- -----------------------------------
Murray H. Hutchison, Director
/s/ Susan K. Chapman July 11, 1997
- -------------------------------------
Susan K. Chapman
Chief Financial Officer and Secretary
(Principal Financial Accounting Officer)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California,on July 11, 1997.
COACHELLA GROWERS, INC.
By:/s/ Timothy J. Shaheen
-------------------------
Timothy J. Shaheen
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name and Position Date
-------------------- ------------------
/s/ Timothy J. Shaheen July 11, 1997
- -----------------------------------
Timothy J. Shaheen
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Stanley E. Speer July 11, 1997
- -----------------------------------
Stanley E. Speer
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ Keith Brackpool July 11, 1997
- -----------------------------------
Keith Brackpool, Chairman
/s/ Dwight W. Makins July 11, 1997
- -----------------------------------
Dwight W. Makins, Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California,on July 11, 1997.
SUN WORLD BRANDS
By:/s/ Timothy J. Shaheen
-------------------------
Timothy J. Shaheen
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name and Position Date
----------------------- ----------------------
/s/ Timothy J. Shaheen July 11, 1997
- -----------------------------------
Timothy J. Shaheen
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Stanley E. Speer July 11, 1997
- -----------------------------------
Stanley E. Speer
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ Keith Brackpool July 11, 1997
- -----------------------------------
Keith Brackpool, Chairman
/s/ Dwight W. Makins July 11, 1997
- -----------------------------------
Dwight W. Makins, Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California,on July 11, 1997.
SUN WORLD MANAGEMENT CORPORATION
By:/s/ Timothy J. Shaheen
-------------------------
Timothy J. Shaheen
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name and Position Date
------------------- --------------------
/s/ Timothy J. Shaheen July 11, 1997
- -----------------------------------
Timothy J. Shaheen
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Stanley E. Speer July 11, 1997
- -----------------------------------
Stanley E. Speer
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ Keith Brackpool July 11, 1997
- -----------------------------------
Keith Brackpool, Chairman
/s/ Dwight W. Makins July 11, 1997
- -----------------------------------
Dwight W. Makins, Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California,on July 11, 1997.
SUN WORLD/RAYO
By:/s/ Timothy J. Shaheen
-------------------------
Timothy J. Shaheen
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name and Position Date
-------------------- ---------------------
/s/ Timothy J. Shaheen July 11, 1997
- -----------------------------------
Timothy J. Shaheen
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Stanley E. Speer July 11, 1997
- -----------------------------------
Stanley E. Speer
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ Keith Brackpool July 11, 1997
- -----------------------------------
Keith Brackpool, Chairman
/s/ Dwight W. Makins July 11, 1997
- -----------------------------------
Dwight W. Makins, Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California,on July 11, 1997.
SUN DESERT, INC.
By:/s/ Timothy J. Shaheen
-------------------------
Timothy J. Shaheen
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name and Position Date
-------------------- ---------------------
/s/ Timothy J. Shaheen July 11, 1997
- -----------------------------------
Timothy J. Shaheen
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Stanley E. Speer July 11, 1997
- -----------------------------------
Stanley E. Speer
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ Keith Brackpool July 11, 1997
- -----------------------------------
Keith Brackpool, Chairman
/s/ Dwight W. Makins July 11, 1997
- -----------------------------------
Dwight W. Makins, Director
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule I: Condensed Financial Information of Registrant.....S-2
Scheudle II: Valuation and Qualify Accounts....................S-5
SCHEDULE I - CONDENSED FINANCIAL INFORMATION of REGISTRANT
Consolidated Balance Sheet
December 31, 1996
($ in thousands)
Assets
------
Current assets:
Cash and cash equivalents $ 2,132
Accounts receivable, net 31
Inventories 7
Due from subsidiary 332
Prepaid expenses and other 274
----------
Total current assets 2,776
Investment in subsidiary 42,460
Property, plant and equipment, net 11,241
Land held for development 12,671
Water rights and transfer and
storage projects 2,683
Other assets 150
Excess purchase price over net
assets acquired, net 4,981
----------
$ 76,962
==========
Liabilities, Redeemable Preferred Stock, Preferred Stock,
Common Stock & Other Stockholders' Equity
--------------------------------------------------------
Current liabilities:
Accounts payable $ 1,332
Accrued liabilities 1,513
Deferred revenue 375
Long-term debt, current portion 518
----------
Total current liabilities 3,738
Long-term debt 17,992
Other Liabilities 60
Commitments and contingencies
Series A redeemable preferred stock -
$.01 par value; ($1,000 liquidation value);
60,000 shares authorized;
27,431 shares issued and outstanding at
December 31, 1996 27,431
Preferred stock - $.01 par value;
40,000 shares authorized,
340 shares issued and outstanding at
December 31, 1996 -
Common stock - $.01 par value; 45,000,000
shares authorized; shares issued and
outstanding - 23,445,868 at
December 31, 1996 and 19,247,611 at
March 31, 1996 234
Additional paid-in capital 88,574
Accumulated deficit (61,067)
--------
$ 76,962
==========
See accompanying notes to the consolidated financial statements.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION of REGRISTRANT (Continued)
Consolidated Statement of Cash Flows
($ in thousands)
For the Nine Months
Ended
December 31, 1996
-------------------
Cash flows from operating activities:
Net loss $ (5,174)
Adjustments to reconcile net
loss to cash used for
operating activities:
Depreciation and amortization 1,388
Interest capitalized to debt 481
Changes in operating assets
and liabilities:
Decrease in accounts receivable 411
Decrease in inventories 259
Increase in due from subsidiary (923)
Increase in prepaid expenses and other (317)
Decrease in accounts payable (441)
Increase in accrued liabilities 219
Increase in deferred revenue 375
---------
Net cash used for operating
activities (3,722)
---------
Cash flows from investing activities:
Additions to property, plant
and equipment (27)
Land purchase and development (490)
Water transfer and storage projects (187)
Acquisition of Sun World (36,587)
--------
Net cash used for investing
activities (37,291)
--------
Cash flows from financing activities:
Net proceeds from issuance of stock 37,761
Proceeds from short-term debt 347
Principal payments on short-term debt (17)
Dividends paid on conversion of
preferred stock (99)
--------
Net cash provided by
financing activities 37,992
Net decrease in cash and cash equivalents (3,021)
Cash and cash equivalents, beginning of period 5,153
--------
Cash and cash equivalents, end of period $ 2,132
=========
See accompanying notes to the consolidated financial statements.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION of REGISTRANT (Continued)
Consolidated Statement of Operations
(In thousands except per share data)
For the Nine Months
Ended
December 31, 1996
-----------------
Revenues $ 1,278
--------
Costs and expenses:
Cost of sales 1,329
Resource development 1,133
Landfill prevention activities 394
General and administrative 2,073
Depreciation 598
Amortization 175
--------
Total costs and expenses 5,702
--------
Operating loss (4,424)
Interest expense, net 1,391
--------
Net loss before income taxes (5,815)
Income tax benefit 641
--------
Net Loss (5,174)
Less: Preferred stock dividends (674)
Imputed dividend on preferred stock (2,451)
---------
Net loss applicable to common stock $ (8,299)
=========
Net loss per common share $ (.41)
=========
Weighted average shares outstanding 20,500
=========
See accompanying notes to the consolidated financial statements.
SCHEDULE II - VALUATION & QUALIFYING ACCOUNTS
For the nine ended December 31, 1996 and the years ended
March 31, 1996 and 1995
($ in thousands)
Additions
Balance Charge -----------------
at to Charge Balance
Beginning Costs to at
of and Other Deduc- End of
Period Expenses Accounts tions Period
----------- -------- -------- ----- --------
Nine months ended
December 31, 1996
Allowance for
doubtful accounts $ -0- $ 107 $ 373 $ -0- $ 480
Amortization of excess
of purchase price over
net assets acquired 1,851 175 -0- -0- 2,026
-------- ------ ------ ------ ------
$ 1,851 $ 282 $ 373 $ -0- $ 2,506
======== ====== ====== ====== =======
Fiscal year ended
March 31, 1996
Allowance for
doubtful accounts $ -0- $ -0- $ -0- $ -0- $ -0-
Amortization of excess
of purchase price over
net assets acquired 1,617 234 -0- -0- 1,851
-------- ------- ------ ------ ------
$ 1,617 $ 234 $ -0- $ -0- $ 1,851
======== ======= ====== ====== =======
Fiscal year ended
March 31, 1995
Allowance for
doubtful accounts $ -0- $ -0- $ -0- $ -0- $ -0-
Amortization of excess
of purchase price over
net assets acquired 1,383 234 -0- -0- 1,617
-------- ------- ------- ------- -------
$ 1,383 $ 234 $ -0- $ -0- $ 1,617
======== ======= ======= ======= =======
EXHIBIT 3.4
-----------
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SUN WORLD, INC.
Sun World, Inc. (the "Corporation") was originally incorporated on
April 23, 1980 under the name Nu World Corporation. This Amended and
Restated Certificate of Incorporation amends and restates the Corporation's
Certificate of Incorporation to read as follows:
FIRST: The name of the Corporation is Sun World, Inc. (hereinafter
sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, 19801,
County of New Castle. The name of the registered agent at that address is
The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH:
a. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is three hundred seventy five
thousand (375,000), consisting of:
(1) seventy five thousand (75,000) shares of Preferred Stock, par
value three hundred dollars ($300.00) per share (the "Preferred
Stock"); and
(2) three hundred thousand (300,000) shares of Common Stock, par
value one cent ($.01) per share (the "Common Stock").
b. The rights, preferences, privileges and restrictions of 40,000
shares of series I preferred stock created hereby ("Series I Preferred
Stock") are designated as follows:
i. LIQUIDATION PREFERENCES. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets available for distribution to stockholders of the
Corporation shall be distributed as follows:
(1) Holders of Series I Preferred Stock shall be entitled
to receive, prior and in preference to any distribution with respect to
shares of Common Stock, an amount per share (equitably adjusted to reflect
stock splits, reverse splits, stock dividends and other recapitalizations)
equal to the sum of $300.00. If the Corporation has insufficient funds to
pay the full amount payable upon liquidation, then the remaining assets
shall be distributed ratably to the holders of the Series I Preferred Stock
in proportion to the amounts they would otherwise be entitled to receive.
(2) A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale, conveyance or
disposition of all or substantially all of the assets of the Corporation,
shall not be deemed to be a liquidation, dissolution or winding up within
the meaning of this Section (i).
ii. CONVERSION. The holders of Series I Preferred Stock shall have
the right to convert such stock into fully paid and nonassessable shares of
Common Stock of the Corporation on the following terms and conditions
(herein "Conversion Rights").
(1) RIGHT TO CONVERT. Each share of Series I Preferred
Stock shall be convertible, at the option of the holder thereof, at any
time and from time to time after the date of issuance thereof into one
share of Common Stock, subject to equitable adjustment pursuant to
subparagraph (ii)(3), below.
(2) MECHANICS OF VOLUNTARY CONVERSION. In order to convert
shares of Series I Preferred Stock into Common Stock under Section (ii)(1),
the holder thereof shall surrender to the Corporation or any transfer agent
appointed for the Series I Preferred Stock the certificate or certificates
therefor, duly endorsed to the Corporation or in blank, and give written
notice of conversion, stating in such notice the name or names in which the
certificates for Common Stock are to be issued. Shares of Series I
Preferred Stock shall be deemed converted as of the close of business on
the date of the surrender of the shares for conversion as provided above,
and the person or persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the record holder of
such Common Stock on such date. The Corporation shall deliver the
certificate or certificates for the full number of shares of Common Stock
issuable upon such conversion (plus cash in lieu of fractional shares) to
the persons entitled to receive the same as soon as practical.
(3) ADJUSTMENTS FOR CERTAIN EVENTS. In the event that at
any time or from time to time after the date of issuance of any shares of
Series I Preferred Stock (the "Original Determination Date"), the
Corporation shall (i) pay a dividend in shares of its Common Stock or
otherwise make a distribution in shares of its Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares or
combine its outstanding shares of Common Stock into a smaller number of
shares, (iii) issue by reclassification of its outstanding shares of Common
Stock other securities of the Corporation or (iv) effect an exchange of
outstanding shares of its Common Stock for securities of another issuer by
way of merger, consolidation, reorganization, change in corporate structure
or otherwise, then, and in each such case, the number of shares of Common
Stock issuable upon exercise of the Conversion Rights immediately prior
thereto shall be equitably adjusted so that the holders of Series I
Preferred Stock shall be entitled to receive the kind and number of shares
of Common Stock or other securities of the Corporation or other issuer, as
the case may be, which the holders of Series I Preferred Stock would have
been entitled to receive after the occurrence of any of the events
described above had the Conversion Rights been exercised immediately prior
to the occurrence of such event or any record date with respect thereto.
An adjustment made pursuant to this subparagraph (ii)(3) shall become
effective immediately after the effective date of such event retroactive to
the record date, if any, for such event.
(4) NOTICE OF RECORD DATES. In the event of the occurrence
of any of the events described in subparagraph (ii)(3), above (other than
a subdivision or combination of its outstanding shares of Common Stock), or
of the voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, the Corporation shall cause to be mailed to any transfer
agent or agents for the Series I Preferred Stock and to the holders of
record of the outstanding shares of the Series I Preferred Stock, at least
20 days prior to the applicable record date hereinafter specified, a notice
stating (1) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or right are to be determined, or (2) the
date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and
the date as of which it is expected that holders of Common Stock or record
shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up.
(5) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, solely
for the purpose of effecting the conversion of the shares of the Series I
Preferred Stock, the full number of shares of Common Stock then deliverable
upon the conversion of all shares of the Series I Preferred Stock then
outstanding. If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series I Preferred Stock, the Corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient to such purpose.
(6) NO FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of Series I Preferred Stock, and the
number of shares of Common Stock to be issued shall be reduced to the
nearest whole share. Whether or not fractional shares are issuable upon
such conversion shall be determined on the basis of the total number of
shares of Series I Preferred Stock the holder is at the time converting
into Common Stock and the total number of shares of Common Stock issuable
upon such aggregate conversion. If, after such aggregation, the conversion
would result in the issuance of a fractional share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay a cash
adjustment in respect of such fraction in an amount equal to the same
fraction of the market price per share of Common Stock (as determined by
the Board) at the close of business on the day of conversion.
(7) PAYMENT OF TAXES. The Corporation shall pay all taxes
and other governmental charges that may be imposed in respect of the issue
or delivery of shares of Common Stock upon conversion of shares of the
Series I Preferred Stock.
(8) NO IMPAIRMENT. The Corporation shall not, by
amendment of its Certificate of Incorporation or through any
reorganization, sale or transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to
be observed or performed under its Certificate of Incorporation by the
Corporation, but shall at all times in good faith assist in the carrying
out of all of the provisions of its Certificate of Incorporation and in the
taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series I Preferred
Stock against dilution or other impairment.
(9) NOTICES. Any notice required by the provisions of
Section (ii) to be given to the holders of shares of Series I Preferred
Stock shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at the address appearing on
the books of the Corporation.
iii. VOTING RIGHTS OF SERIES I PREFERRED STOCK. The holder of
each share of Series I Preferred Stock shall have the right to one vote for
each share of Common Stock into which such Series I Preferred Stock could
then be converted, and shall be entitled to vote, together with the holders
of Common Stock as a single class, with respect to any matters upon which
holders of Common Stock have the right to vote. The holders of Series I
Preferred Stock shall be entitled to notice of any stockholders' meeting in
accordance with the By-laws of the Corporation. The voting rights provided
hereby shall be in addition to any other rights of the holders of Series I
Preferred Stock to vote separately as a class as required herein or by law.
iv. VOTING RIGHTS OF COMMON STOCK. The holder of each share of
Common Stock shall have the right to one vote for each share of Common
Stock, and shall be entitled to vote on all matters which are the proper
subjects of action by the stockholders. The holders of Common Stock shall
be entitled to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation.
v. STATUS OF SERIES I PREFERRED STOCK ACQUIRED BY THE CORPORATION.
If any shares of Series I Preferred Stock are acquired by the Corporation,
whether by purchase, conversion or otherwise, such shares shall be canceled
and returned to the Corporation as authorized but unissued shares.
c. NO ISSUANCE OF NONVOTING EQUITY SECURITIES. Notwithstanding any
other provision of this amended and restated certificate of incorporation,
pursuant to Section 1123(a)(6) of title 11 of the United States Code, the
Corporation shall not issue any series or class of nonvoting equity
securities.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and
of its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers
and authority expressly conferred upon them by Statute or by this
Certificate of Incorporation or the Bylaws of the Corporation, the
directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
SIXTH: The number of directors shall be five (5) and, thereafter, shall be
fixed by, or in the manner provided in, the Bylaws.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend
or repeal bylaws of the Corporation from time to time, including after the
corporation has received any payment for any of its stock.
EIGHTH: A director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
If the Delaware General Corporation Law is hereafter amended to
authorize the further elimination or limitation of the liability of a
director, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing provisions of this Article
EIGHTH by the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
NINTH: The Corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation in the manner prescribed by
the laws of the State of Delaware and all rights conferred upon
stockholders are granted subject to this reservation, provided, however,
that, notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any vote of the holders of any class or
series of the stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of at
least a majority of the voting power of all of the then-outstanding shares
of the capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required
to amend or repeal Article FIFTH, Article SIXTH, Article SEVENTH, Article
EIGHTH or this Article NINTH of this Certificate of Incorporation.
The foregoing Amended and Restated Certificate of Incorporation of Sun
World, Inc. has been approved, adopted, certified, executed and
acknowledged by the undersigned officers acting in lieu of the directors
and stockholders of the corporation in accordance with Section 303 of the
Delaware General Corporation Law and pursuant to an approved plan of
reorganization under title 11 of the United States Code as described more
fully on the attached Exhibit A.
IN WITNESS WHEREOF, Sun World, Inc. has caused this Certificate to be
executed by its officers thereunto duly authorized this 13th day of
September, 1996.
SUN WORLD, INC.
By: /s/ Richard Nevins
__________________________________
Richard Nevins
Its: Chief Restructuring Officer
________________________________
ATTEST:
/s/ Paul W. Knupp
______________________________
Paul W. Knupp, Secretary
EXHIBIT A
INFORMATION RELATING TO SECTION 303
On October 3, 1994, Sun World International, Inc. and Sun World, Inc.
filed voluntary petitions for relief under Title 11 of the United States
Code, as amended, with the United States Bankruptcy Court for the Central
District of California (the "Bankruptcy Court").
Sun World International, Inc. and Sun World, Inc. prepared a plan to
reorganize pursuant to the Fourth Amended Consolidated Plan of
Reorganization dated June 3, 1996 (As Amended), which was confirmed by
order dated August 13, 1996 in the jointly administered bankruptcy
proceedings (administered under Case No. SB94-23212 DN, in the Bankruptcy
Court).
EXHIBIT 3.5
-----------
CERTIFICATE OF MERGER
OF
SUN WORLD INTERNATIONAL, INC.
INTO
SUN WORLD, INC.
The undersigned corporations, Sun World International, Inc. and Sun
World, Inc. hereby certify that:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
Name Sun World International, Inc.
Sun World, Inc.
State of Incorporation: Delaware
Delaware
SECOND: An Agreement and Plan of Merger, dated as of September 13,
1996, between the constituent corporations has been approved, adopted,
certified, executed and acknowledged by each of the constituent
corporations in accordance with Sections 251 and 303 of the Delaware
General Corporation Law and pursuant to an approved plan of reorganization
under title 11 of the United States Code as described more fully on the
attached Exhibit A.
THIRD: The name of the surviving corporation of the merger is Sun World,
Inc., which name shall herewith be changed to Sun World International, Inc.
FOURTH: The Amended and Restated Certificate of Incorporation of Sun
World, Inc. shall be the certificate of incorporation except that Article
First shall be amended to read as follows:
FIRST: The name of the Corporation shall be Sun World International,
Inc.
FIFTH: The names of the persons who shall become the directors of the
surviving corporation at the effective time of the merger are as follows:
Dwight Makins
Keith Brackpool
Timothy J. Shaheen
Barton Beek
Mitt Parker
The names of the persons who shall become the officers of the surviving
corporation at the effective time of the merger, together with the office
in which each such person shall serve from the effective time until such
person's successor shall have been duly elected and qualified, are as
follows:
Keith Brackpool - Chairman
Timothy J. Shaheen - Chief Executive Officer
Stanley E. Speer - Chief Financial Officer/Secretary
Thomas F. McCutcheon - Assistant Secretary
SIXTH: The executed Agreement and Plan of Merger is on file at the
principal place of business of the surviving corporation, the address of
which is 5544 California Avenue, Suite 280, Bakersfield, California 93309.
SEVENTH: A copy of the Agreement and Plan of Merger will be furnished
by the surviving corporation, on request and without charge, to any
stockholder of either of the constituent corporations.
EIGHTH: The merger shall be effective immediately upon filing of this
certificate of merger.
IN WITNESS WHEREOF, the undersigned have caused this Certificate to be
executed by their officers thereunto duly authorized this 13th day of
September, 1996.
SUN WORLD INTERNATIONAL, INC.
By: /s/ Richard Nevins
____________________________
Richard Nevins
Its: Chief Restructuring Officer
ATTEST:
/s/ Paul W. Knupp
- ------------------------------
Paul W. Knupp, Secretary
SUN WORLD, INC.
By: /s/ Richard Nevins
______________________________
Richard Nevins
Its: Restructuring Officer
ATTEST:
/s/ Paul W. Knupp
______________________________
Paul W. Knupp, Secretary
EXHIBIT A
INFORMATION RELATING TO SECTION 303
On October 3, 1994, Sun World International, Inc. and Sun World, Inc.
filed voluntary petitions for relief under Title 11 of the United States
Code, as amended, with the United States Bankruptcy Court for the Central
District of California (the "Bankruptcy Court").
Sun World International, Inc. and Sun World, Inc. prepared a plan to
reorganize pursuant to the Fourth Amended Consolidated Plan of
Reorganization dated June 3, 1996 (As Amended), which was confirmed by
order dated August 13, 1996 in the jointly administered bankruptcy
proceedings (administered under Case No. SB94-23212 DN, in the Bankruptcy
Court).
EXHIBIT 3.6
___________
AGREEMENT AND PLAN OF MERGER OF SUN WORLD, INC.
A DELAWARE CORPORATION,
AND
SUN WORLD INTERNATIONAL, INC., A DELAWARE CORPORATION
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of
September 13, 1996 by and between Sun World International, Inc., a Delaware
corporation ("SWI"), and Sun World, Inc., a Delaware corporation and a
wholly-owned subsidiary of SWI ("Sun World"). Sun World and SWI are
sometimes referred to herein as the "Constituent Corporations."
RECITALS
A. SWI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has an authorized
capital of Three Hundred Seventy Five Thousand (375,000) shares, consisting
of (i) Three Hundred Thousand (300,000) shares of common stock, $1.00 par
value ("SWI Common Stock"), and (ii) Seventy Five Thousand (75,000) shares
of preferred stock, $300.00 par value ("SWI Preferred Stock"). As of the
date hereof, Forty Two Thousand (42,000) shares of SWI Common Stock and
Thirty Eight Thousand Five Hundred One (38,501) shares of SWI Preferred
Stock are issued and outstanding.
B.. Sun World is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has an
authorized capital of One Thousand (1,000) shares of common stock, $1.00
par value ("Sun World Common Stock" or "Surviving Corporation Common
Stock"). As of the date hereof, One Thousand (1,000) shares of Sun World
Common Stock are issued and outstanding.
C. SWI and Sun World, among other entities, have filed a plan of
reorganization, Case No. SB94-23212 DN ("Plan") under title 11 of the
United States Code ("Bankruptcy Code");
D. To comply with the terms of the Plan (i) the Board of Directors of
SWI has determined that it is advisable and in the best interests of SWI
that SWI merge with and into Sun World upon the terms and conditions herein
provided, and (i) the Board of Directors of Sun World has determined that
it is advisable and in the best intereests of Sun World that SWI merge with
and into Sun World upon the terms and conditions herein provided. Terms
used herein and not otherwise defined shall have the meanings assigned to
them in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, Sun World and SWI hereby agree, subject to the
terms and conditions set forth, as follows:
I.
EFFECTUATION OF MERGER
1.1 MERGER. In accordance with the provisions of this Agreement,
the Delaware General Corporation Law and applicable bankruptcy law, upon
the Effective Date of Merger, as defined below, SWI shall be merged with
and into Sun World (the "Merger"), the separate existence of SWI shall
cease, and Sun World shall be, and is herein sometimes referred to as, the
"Surviving Corporation", and the name of the Surviving Corporation shall
become Sun World International, Inc.
1.2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SUN WORLD.
Prior to or concurrent with the Effective Date of Merger, as hereinafter
defined, the Amended and Restated Certificate of Incorporation of Sun
World, a copy of which is attached hereto as Exhibit A ("Amended and
Restated Sun World Certificate"), shall be filed with the Delaware
Secretary of State. The Amended and Restated Sun World Certificate shall,
among other things, (i) increase the number of authorized shares of Sun
World Common Stock from One Thousand (1,000) to Three Hundred Thousand
(300,000) and establish a par value of $0.01 for each such share, (ii)
create a class of Sun World preferred stock, $300 par value ("Sun World
Preferred Stock"), and (iii) authorize the issuance of up to Seventy Five
Thousand (75,000) shares of such Sun World Preferred Stock. The parties
agree that the Amended and Restated Sun World Certificate shall, among
other things, prohibit the issuance of nonvoting securities to the extent
required by section 1123(a)(6) of the Bankruptcy Code.
1.3 FILING AND OTHER REQUIREMENTS FOR EFFECTIVENESS. The Merger
shall become effective when the following actions shall have been
completed:
(a) The occurrence of the Effective Date;
(b) All of the conditions precedent to the consummation of the
Merger specified in this Agreement shall have been satisfied or duly
waived by the party entitled to satisfaction thereof; and
(c) The executed certificate of merger, a copy of which is attached
hereto as Exhibit B ("Certificate of Merger") and the Amended and
Restated Sun World Certificate shall have been filed with the Secretary
of State of the State of Delaware.
The date and time when the Merger shall become effective, as aforesaid,
is herein called the "Effective Date of Merger."
1.4 SUCCESSION. Upon the Effective Date of Merger, the separate
existence of SWI shall cease and Sun World, as the Surviving Corporation,
(i) shall continue to possess all of its assets, rights, privileges, powers
and property as constituted immediately prior to the Effective Date of
Merger, (ii) shall be subject to all actions previously taken by SWI and
SWI's Board of Directors, (iii) shall succeed, without other transfer, to
all of the assets, rights, powers and property of SWI in the manner of and
as more fully set forth in Section 259 of the Delaware General Corporation
Law, (iv) shall continue to be subject to all of its debts, liabilities and
obligations as constituted immediately prior to the Effective Date of
Merger and (v) shall succeed, without other transfer, to all of the debts,
liabilities and obligations of SWI in the same manner as if Sun World had
itself incurred them, all as more fully provided under the applicable
provisions of the Delaware General Corporation Law.
II.
MANNER OF CONVERSION OF STOCK
2.1 SWI CAPITAL STOCK. Upon the Effective Date of Merger, each
share of SWI Common Stock issued and outstanding immediately prior thereto
and each share of SWI Preferred Stock issued and outstanding immediately
prior thereto, shall, by virtue of the Merger and without any further
action by the Constituent Corporations, their stockholders, or any other
person, be converted into and exchanged for fully paid and nonassessable
shares of the Surviving Corporation, on the basis of one share of Sun World
Common Stock or Sun World Preferred Stock, as the case may be, for every
share of SWI Common Stock or SWI Preferred Stock.
2.2 OPTION AND WARRANTS. Upon the Effective Date, pursuant to the
terms of the Plan, all of SWI's outstanding options or warrants to purchase
shares of either SWI Common Stock or SWI Preferred Stock shall be canceled.
2.3 SUN WORLD COMMON STOCK. Upon the Effective Date of Merger,
each share of Sun World Common Stock issued and outstanding immediately
prior thereto shall, by virtue of the Merger and without any action by the
holder of such shares or any other person, be canceled and returned to the
status of authorized but unissued shares.
2.4 NO EXCHANGE OF CERTIFICATES. After the Effective Date of
Merger, Holders of certificates representing either SWI Common Stock or SWI
Preferred Stock will not be instructed to present such certificate or
certificates to the Surviving Corporation or its transfer agent for
exchange for certificates of the Surviving Corporation. Each certificate
or certificates representing shares of either SWI Common Stock or SWI
Preferred Stock shall be honored as if such certificate or certificates
were for the same number of shares of the Surviving Corporation's Common
Stock or Preferred Stock into which the surrendered shares were converted
as herein provided, and shall be deemed for all purposes to evidence
ownership of and to represent the number of whole shares of the Surviving
Corporation's Common Stock or Preferred Stock.
The registered owner on the books and records of the Surviving
Corporation or the Surviving Corporation's transfer agent of any such
outstanding certificate shall have and be entitled to exercise any voting
and other rights with respect to, and to receive dividends and other
distributions upon, the shares of the Surviving Corporation represented by
such outstanding certificate as provided above.
III.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
3.1 AMENDED AND RESTATED CERTIFICATE. The Amended and Restated Sun
World Certificate shall become the certificate of incorporation of the
Surviving Corporation in accordance with the provisions hereof and thereof
and applicable law.
3.2 AMENDED AND RESTATED BYLAWS. The amended and restated bylaws
of Sun World, a copy of which are attached hereto as Exhibit C ("Amended
and Restated Sun World Bylaws") shall become the bylaws of the Surviving
Corporation until duly amended in accordance with the provisions hereof and
thereof and applicable law.
3.3 DIRECTORS AND OFFICERS. The directors and officers of the
Surviving Corporation at the Effective Date of Merger shall be as listed in
the Certificate of Merger.
IV.
MISCELLANEOUS
4.1 COVENANTS OF SUN WORLD. Sun World covenants and agrees that it
will, on or before the Effective Date of Merger:
(a) File any and all documents with the Delaware Franchise Tax
Board necessary for the assumption by Sun World of all of the franchise
tax liabilities of SWI.
(b) Take such other actions as may be required by the Delaware
General Corporation Law in order to effectuate the Merger and to carry
out the purpose and intent of this Agreement.
4.2. FURTHER ASSURANCES. From time to time, as and when required by
Sun World or by its successors or assigns, there shall be executed and
delivered on behalf of SWI such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other action,
as shall be appropriate or necessary in order to vest or perfect in or
conform of record or otherwise by Sun World the title to and possession of
all the property, interest, assets, rights, privileges, immunities, powers,
franchises and authority of SWI and otherwise to carry out the purpose of
this Agreement, and the officers and directors of Sun World are fully
authorized in the name and on behalf of SWI or otherwise to take any and
all such action and to execute and deliver any and all such deeds and other
instruments.
4.3 REGISTERED OFFICE. The registered office of the Surviving
Corporation in the State of Delaware is located at 1209 Orange Street, in
the City of Wilmington, 19801, County of New Castle, and The Corporation
Trust Company is the registered agent of the Surviving Corporation at such
address.
4.4 AGREEMENT. Executed copies of this Agreement will be on file
at the principal place of business of the Surviving Corporation at Sun
World International, Inc., 5544 California Avenue, Suite 280, Bakersfield,
California 93309, and copies thereof will be furnished to any stockholder
of either Constituent Corporation, upon request and without cost.
4.5 GOVERNING LAW. This Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the
laws of the State of Delaware.
4.6 COUNTERPARTS. In order to facilitate the filing and recording
of this Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement is hereby executed on behalf of
each of such two corporations and attested by their respective officers
thereunto duly authorized.
SUN WORLD INTERNATIONAL, INC.
ATTEST: a Delaware corporation
By: /s/ Paul W. Knupp By: /s/ Richard Nevins
__________________________ -----------------------
Paul W. Knupp Richard Nevins
Title: Secretary Title: Chief Restructuring Officer
SUN WORLD, INC.
ATTEST: a Delaware corporation
By: /s/ Paul W. Knupp By: /s/ Richard Nevins
- ---------------------- -----------------------------
Paul W. Knupp Richard Nevins
Title: Secretary Title: Chief Restructuring Officer
EXHIBIT 3.7
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AMENDED AND RESTATED BYLAWS OF SUN WORLD INTERNATIONAL, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The registered office of the corporation shall be The Corporation Trust
Company, 1209 Orange Street, City of Wilmington, County of New Castle, State
of Delaware 19801. The name of the registered agent of the corporation at
such location shall be The Corporation Trust Company.
1.2 PRINCIPAL OFFICES.
The Board of Directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
Delaware. If the principal executive office is located outside this State
and the corporation has one or more business offices in this State, the Board
of Directors shall likewise fix and designate a principal business office in
the State of Delaware.
1.3 OTHER OFFICES.
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware as designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.
2.2 ANNUAL MEETING.
The Annual Meeting of Stockholders shall be held each year on a date and
at a time designated by the Board of Directors. At the meeting, directors
shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING.
A special meeting of the stockholders may be called at any time only by
a majority of the Board of Directors then in office or by a committee of the
Board of Directors authorized by the Board of Directors to do so, the
Chairman of the Board or the Chief Executive Officer/President. Special
meetings may not be called by any other person or persons. Business
transacted at each special meeting shall be confined to the purpose or
purposes stated in the notice of such meetings.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.
Notices of meeting with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these Bylaws not
less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice
shall specify the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation,
unless he shall have filed with the Secretary of the corporation a written
request that notices be mailed to some other address, in which case it shall
be directed to the stockholder at such other address. An affidavit of the
Secretary or an assistant secretary or of the transfer agent of the
corporation that the notice has been given shall be, in the absence of fraud,
prima facie evidence of the facts stated therein.
2.6 QUORUM.
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction
of business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either the chairman of the meeting or the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the
question is one upon which, by provision of the statutes or of the
Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of the
questions.
2.7 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the corporation may transact
any business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.8 CONDUCT OF BUSINESS.
At each meeting of stockholders, the Chairman of the Board, the Chief
Executive Officer/President and Chief Operating Officer or a Vice President,
as determined by the Board of Directors or, if not so determined, in the
order referred to and by seniority if there be more than one officer of any
rank so referred to, or in the absence of any such officer, a chairman chosen
by the vote of the stockholders present in person or represented by proxy at
the meeting and entitled to cast a majority of the votes which might be cast
at such meeting for the election of directors or, if in the case of a special
meeting at which directors are not to be elected, the other matter(s) to be
voted on at the meeting, shall act as chairman. The Secretary, or in his or
her absence an Assistant Secretary, or in the absence of the Secretary and
all Assistant Secretaries, a person whom the Chairman of the meeting shall
appoint, shall act as Secretary of the meeting and keep a record of the
proceedings thereof. The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject
to such rules and regulations of the Board of Directors, if any, the Chairman
of the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of
such Chairman, are necessary, appropriate or convenient to the proper conduct
of the meeting, including without limitation, establishing an agenda or order
for business for the meeting, rules and procedures for maintaining order at
the meeting and the safety of those present, limitations on participation in
such meeting to stockholders of record of the corporation and their duly
authorized and constituted proxies and such other persons as the Chairman
shall permit, restrictions on entry to the meeting after the time fixed for
the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the
polls for balloting on matters which are to be voted on by ballot. Unless,
and except to the extent determined by the Board of Directors or the Chairman
of the meeting, meetings of stockholders shall not be required to be held in
accordance with rules of parliamentary procedure.
2.9 VOTING.
A stockholder may vote in person or by proxy. Except as otherwise
provided by law, the Certificate of Incorporation or these Bylaws, any
corporate action to be taken by a vote of the stockholders shall be
authorized by the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote thereon.
Except as may be otherwise provided in the Certificate of Incorporation,
each stockholder shall be entitled to one vote for each share of capital
stock held by such stockholder.
2.10 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware, the Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute
a waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders needs to be specified in any
written waiver of notice unless so required by the Certificate of
Incorporation or these Bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.
a. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action (other than consent to corporate action in writing
without a meeting), the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) nor less than ten
(10) days prior to any other action. If the Board of Directors does not so
fix a record date:
1. The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day
on which the meeting is held.
2. The record date for determining stockholders for any other
purpose set forth above shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
b. In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix, in advance, a record date, which date shall not
be more than ten (10) days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors. If the Board of
Directors does not so fix a record date:
1. The record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by the General Corporation Law
of Delaware, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation's registered office in this State or its principal place of
business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified
or registered mail, return receipt requested.
2. If the Board of Directors does not so fix a record date and
prior action by the Board of Directors is required by the General Corporation
Law of Delaware, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
2.12 PROXIES.
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by a written proxy,
signed by the stockholder and filed with the Secretary of the corporation,
but no such proxy shall be voted or acted upon after three (3) years from its
date, unless the proxy provides for a longer period. A proxy shall be deemed
signed if the stockholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact.
2.13 STOCKHOLDER ACTION BY WRITTEN CONSENT.
a. Any action required by the General Corporation Law of Delaware or
which may be taken at any annual or special meeting of stockholders of the
corporation may be taken without a meeting, without prior notice and without
a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Such consent or consents shall be delivered to the
corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded. Delivery made to a corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
b. Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective
to take the corporate action referred to therein unless, within sixty days of
the earliest dated consent delivered in the manner required by this Section
to the corporation, written consents signed by a sufficient number of holders
to take action are delivered to the corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an
officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
c. The Secretary shall give prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent to
those stockholders who have not consented in writing. In the event that the
action which is consented to is such as would have required the filing of a
certificate under any provision of the General Corporation Law of Delaware,
if such action had been voted on by stockholders at a meeting thereof, the
certificate filed under such provision shall state, in lieu of any statement
required by such provision concerning any vote of stockholders, that written
consent has been given in accordance with the General Corporation Law of
Delaware, and that written notice has been given as provided therein.
2.14 INSPECTORS OF ELECTION.
Before any meeting of stockholders, the Board of Directors may appoint
any persons to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are appointed, the Chairman of the
meeting may, and on the request of any stockholder or his proxy shall,
appoint inspectors of election of the meeting. The number of inspectors
shall be either one (1) or three (3). If inspectors are appointed at a
meeting on the request of one (1) or more stockholders or proxies, the
holders of a majority of shares or their proxies present at the meeting shall
determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the vacancy may be filled by appointment by the Board of Directors before the
meeting, or by the Chairman at the meeting.
The duties of the inspectors of election shall be as follows:
a. Determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum and the authenticity, validity and effect of proxies;
b. Receive votes or ballots;
c. Hear and determine all challenges and questions in any way arising
in connection with the right to vote;
d. Count and tabulate all votes;
e. Determine the election result; and
f. Do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
3.1 POWERS.
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the Certificate of Incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the Board of Directors
shall have the power and authority to:
a. Select and remove all officers, agents and employees of the
corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Certificate of Incorporation or these Bylaws,
fix their compensation and require from them security for faithful service.
b. Change the principal executive office or the principal business
office in the State of Delaware, if any, from one location to another; cause
the corporation to be qualified to do business in any other State, territory,
dependency or foreign country, and conduct business within or without the
State; designate any place within or without the State for the holding of any
stockholders' meeting or meetings, including annual meetings; adopt, make and
use a corporate seal, and prescribe the forms of certificates of stock, and
alter the form of such seal and of such certificates from time to time as in
their judgment they may deem best, provided that such forms shall at all
times comply with the provisions of law.
c. Authorize the issuance of shares of stock of the corporation from
time to time, upon such terms as may be lawful.
d. Borrow money and incur indebtedness for the purposes of the
corporation, and cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and securities
therefor.
3.2 CHAIRMAN OF THE BOARD.
The Chairman of the Board shall, if present, preside at meetings of the
Board of Directors. The Chairman of the Board will have oversight over the
corporation's general business, but will have no direct role in the
corporation's day to day operations. The Chairman of the Board may also
exercise and perform such other powers and duties as may from time to time be
assigned to him by the Board of Directors or as may be prescribed by these
Bylaws. The Chairman of the Board shall not be considered as an officer of
the corporation except to the extent required by Delaware law or, if there is
no Chief Executive Officer/President, then the Chairman of the Board shall
also be the Chief Executive Officer/President of the corporation and shall
have the powers and duties prescribed in Section 5.6 of these Bylaws.
3.3 NUMBER OF DIRECTORS.
The Board of Directors shall consist of five (5) persons. This number
may be reduced or increased from time to time by a duly adopted amendment to
this Section 3.3 of these Bylaws adopted by the vote of the holders of a
majority of the stock issued and outstanding and entitled to vote, as
specified in Section 9.1 hereof, or by resolution of a majority of the Board
of Directors.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.4 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Directors need not be stockholders unless so required by the Certificate
of Incorporation or these Bylaws, wherein other qualifications for directors
may be prescribed. Each director, including a director elected to fill a
vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
3.5 RESIGNATION AND VACANCIES.
Any director may resign at any time effective upon written notice to the
attention of the Secretary of the corporation unless the notice specifies a
later date for the effectiveness of such resignation, in which case such
resignation shall be effective at the time specified. Unless such
resignation specified otherwise, its acceptance by the corporation shall not
be necessary to make it effective. When one or more directors so resigns and
the resignation is effective at a future date, a majority of the directors
then in office, though less than quorum, including those who have so
resigned, or the sole remaining director, shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective, and each director so chosen shall
hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
a. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class, may be filled by a
majority of the directors then in office, although less than a quorum, or by
a sole remaining director.
b. Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of
these Bylaws, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by
such class or classes or series thereof then in office, or by a sole
remaining director so elected.
c. A director elected or appointed to fill a vacancy shall serve until
the next election of the class for which such director shall have been
chosen, and until a successor shall be elected and qualified.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participating in a meeting shall constitute presence in
person at the meeting.
3.7 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice at
such time and at such place as shall from time to time be determined by the
Board. In the absence of such determination, regular meetings shall be held
at the principal executive office of the corporation.
3.8 SPECIAL MEETINGS; NOTICE.
Special meetings of the Board of Directors for any purposes may be
called at any time by the Chairman of the Board, the Chief Executive
Officer/President, any vice president, the Secretary or any two (2)
directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram or other facsimile transmission, charges prepaid, addressed to each
director at that director's address as it is shown on the records of the
corporation. If the notice is mailed, it shall be deposited in the United
States mail at least four (4) days before the time of the holding of the
meeting. If the notice is delivered personally or by telephone or telegram,
it shall be delivered personally or by telephone or to the telegraph company
at least forty-eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the
director who the person giving the notice has reason to believe will promptly
communicate it to the director. The notice need not specify the place of the
meeting if the meeting is to be held at the principal executive office of the
corporation.
3.9 ANNUAL MEETINGS.
Immediately following each annual meeting of stockholders, the Board of
Directors shall hold a regular meeting for the purpose of transacting other
business. Notice of this meeting shall not be required.
3.10 QUORUM; ADJOURNMENT.
At all meetings of the Board of Directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors, except as may
be otherwise specifically provided by statute, by the Certificate of
Incorporation or these Bylaws. If a quorum is not present at any meeting of
the Board of Directors, then the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present. Notice of the time and place of holding
an adjourned meeting need not be given, unless the meeting is adjourned for
more than twenty-four (24) hours, in which case notice of such time and place
shall be given prior to the time of the adjourned meeting, in the manner
specified in Section 3.8 of this Article III, to the directors who were not
present at the time of the adjournment.
3.11 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware, the Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute
a waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need to be specified in any written waiver or notice unless so
required by the Certificate of Incorporation or these Bylaws.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Members of a special or standing committee may be allowed compensation for
attending committee meetings.
3.14 APPROVAL OF LOANS TO OFFICERS.
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors,
such loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
3.15 REMOVAL OF DIRECTORS.
Unless otherwise allowed by statute, the Certificate of Incorporation or
these Bylaws, any director or the entire Board of Directors may be removed
only for cause by the holders of a majority of the shares voting and entitled
to vote in an election of directors.
ARTICLE IV
COMMITTEES
4.l COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority of the
Board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The Board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place
of any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors establishing such
committee or in the Bylaws of the corporation, shall have and may exercise
all the powers and authority of the Board of Directors in the management of
the business and affairs of the corporation, and may authorize the seal of
the corporation to be affixed to all papers that may require it, but no such
committee shall have the power or authority to (i) amend the Certificate of
Incorporation, except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock
adopted by the Board of Directors, fix any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution
of assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation, (ii) adopt
an agreement of merger or consolidation, (iii) recommend to the stockholders
the sale, lease or exchange of all of the corporation's property and assets,
(iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution or (v) amend the Bylaws of the corporation; and,
unless the Board resolution establishing the Committee, the Bylaws or the
Certificate of Incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance
of stock or to adopt a certificate of ownership and merger.
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
4.3 MEETINGS AND ACTIONS OF COMMITTEES.
Meetings and actions of committees shall be governed by, and held and
taken in accordance with the provisions of Article III of these Bylaws,
Section 3.6 (place of meetings; meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.10 (quorum
and adjournment), Section 3.l1 (waiver of notice), and Section 3.l2 (Board
action by written consent without a meeting), with such changes in the
context of those Bylaws as are necessary to substitute the committee and its
members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution
of the Board of Directors and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to
attend all meetings of the committee. The Board of Directors may adopt rules
for the government of any committee not inconsistent with the provisions of
these Bylaws.
ARTICLE V
OFFICERS
5.l OFFICERS.
The officers of the corporation shall be a Chief Executive
Officer/President, a Secretary, and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one
or more vice presidents, a treasurer, one or more assistant secretaries, one
or more assistant treasurers, and any such other officer as may be appointed
in accordance with the provisions of Section 5.3 of these Bylaws. Any number
of offices may be held by the same person.
5.2 ELECTION OF OFFICERS.
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be chosen by the Board of Directors.
5.3 SUBORDINATE OFFICERS.
The Board of Directors may appoint, or empower the Chief Executive
Officer/President to appoint such other officers and agents as the business
of the corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Any officer may be removed, whether with or without cause, by the Board
of Directors at any regular or special meeting of the Board or, except in the
case of an officer chosen by the Board of Directors, by any officer upon whom
such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Secretary of the corporation. Any resignation shall take effect at the date
of the receipt of that notice or at any later time specified in that notice;
and unless otherwise specified in that notice, the acceptance of the
resignation is without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these Bylaws for regular appointments to that office.
5.6 CHIEF EXECUTIVE OFFICER/PRESIDENT.
Subject to such supervisory powers, if any, as may be given by the Board
of Directors to the Chairman of the Board, the Chief Executive
Officer/President of the corporation shall, subject to the control of the
Board of Directors, have general supervision, direction, and control of the
business and the officers of the corporation. He shall preside at all
meetings of the stockholders and, in the absence or nonexistence of a
Chairman of the Board, at all meetings of the Board of Directors. He shall
have the general powers and duties of management usually vested in the chief
executive officer of a corporation and shall have such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
5.7 VICE PRESIDENTS.
In the absence or disability of the Chief Executive Officer/President,
the vice presidents, if any, in order of their rank as fixed by the Board of
Directors, or, if not ranked, a vice president designated by the Board of
Directors, shall perform all of the duties of the Chief Executive
Officer/President and Chairman of the Board and when so acting shall have all
the powers of, and be subject to all the restrictions upon, the Chief
Executive Officer/President. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them respectively by the Board of Directors, these Bylaws, the Chief
Executive Officer/President or the Chairman of the Board.
5.8 SECRETARY.
The Secretary shall keep or cause to be kept, at the principal executive
offices of the corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of directors,
committees of directors, and stockholders. The minutes shall show the time
and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented
at stockholders' meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive offices of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names
of all stockholders and their addresses, the number and classes of shares
held by each, the number and date of certificates evidencing such shares, and
the number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law
or by these Bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by these
Bylaws.
5.9 CHIEF FINANCIAL OFFICER.
The Chief Financial Officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The Chief Financial Officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositories as
may be designated by the Board of Directors. He shall disburse the funds of
the corporation as may be ordered by the Board of Directors, shall render to
the Chief Executive Officer/President and directors, whenever they request
it, an account of all of his transactions as Chief Financial Officer and of
the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the Board of Directors
or these Bylaws.
5.l0 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The Chairman of the Board, the Chief Executive Officer/President, any
vice president, the Chief Financial Officer, the Secretary or assistant
secretary of this corporation, or any other person authorized by the Board of
Directors, the Chief Executive Officer/President or a Vice President, is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or
corporations standing in the name of this corporation. The authority granted
herein may be exercised by any other person authorized to do so by proxy or
power of attorney duly executed by such persons having the authority.
ARTICLE VI
INDEMNITY
6.l THIRD PARTY ACTIONS.
The corporation shall indemnify and hold harmless to the fullest extent
authorized by Delaware General Corporation Law, as the same exists and as
hereafter amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader
indemnification rights than said Delaware General Corporation Law permitted
the corporation to provide prior to such amendment) any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, or was a
director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of this corporation or of another
enterprise at the request of such predecessor corporation (collectively,
"Agent") against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful. Such indemnification right shall be a contract right
between the Agent and the corporation.
6.2 ACTION BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was an Agent of the corporation or
serving at the request of the corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
such defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent
that the Delaware Court of Chancery or the court in which such action or suit
was brought shall determine upon application that despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE; SERVICE AS A WITNESS.
To the extent that an Agent of the corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections 6.1 or 6.2 of this Article VI, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
To the extent any person who is or was a director or officer of the
corporation has served or prepared to serve as a witness in any action, suit
or proceeding (whether civil, criminal, administrative or investigative in
nature), or in any investigation by the corporation or the Board of Directors
thereof or a committee thereof or by any securities exchange on which
securities of the corporation are or were quoted or listed, by reason of, or
in connection with, such person's services as a director or officer of the
corporation or as a director or officer of any affiliate or predecessor of
the corporation (other than in a suit commenced by such person), the
corporation shall indemnify such person against expenses (including
attorneys' fees and disbursements) and costs actually and reasonably incurred
by such person in connection therewith within thirty (30) days after the
receipt by the corporation from such person of a statement requesting such
indemnification, averring such service and reasonably evidencing such costs
and expenses. The corporation may indemnify any employee or agent of the
corporation to the same extent as, or to a lesser extent than, it may
indemnify any director or officer of the corporation pursuant to the
foregoing sentence of this Section 6.3 of this Article.
6.4 DETERMINATION OF CONDUCT.
Subject to any rights under any contract between the corporation and any
Agent, any indemnification (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the Agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in Sections 6.1 or 6.2 of
this Article VI. Such determination shall be made (1) by the Board of
Directors (or by an executive committee thereof) by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
Notwithstanding the foregoing, an Agent of the corporation shall be able to
contest any determination that the director or officer has not met the
applicable standard of conduct, set forth in Section 6.1 or 6.2 of this
Article VI, by petitioning a court of appropriate jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE.
Expenses incurred in defending or settling a civil or criminal action,
suit or proceeding by an individual who may be entitled to indemnification
pursuant to Section 6.1 or 6.2 of this Article VI shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Article VI. Such
expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
6.6 INDEMNITY NOT EXCLUSIVE.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subparagraphs of this Article VI shall not be deemed
exclusive of, and shall be subject to, any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION.
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was an Agent of the corporation, or is or
was serving at the request of the corporation as an Agent against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions of
this Article VI.
6.8 INDEMNIFICATION CONTRACTS.
The Board of Directors is authorized to enter into a contract with any
director, officer, employee or agent of the corporation, or any person
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing for indemnification
rights equivalent to or, if the Board of Directors so determines, greater
than, those provided for in this Article VI.
6.9 INDEMNITY FUND.
Upon resolution passed by the Board of Directors, the Board of Directors
may establish a trust or other designated account, grant a security interest
or use other means (including, without limitation, a letter of credit), to
ensure the payment of any or all of its obligations arising under this
Article and/or agreements which may be entered into between the corporation
and its officers from time to time.
6.10 INDEMNIFICATION OF OTHER PARTIES.
The provisions of this Article VI shall not be deemed to preclude the
indemnification of any person who is not an Agent, but whom the corporation
has the power or obligation to indemnify under the provisions of the General
Corporation Law of the State of Delaware or otherwise. The corporation may,
in its sole discretion, indemnify an employee, trustee or other agent as
permitted by the General Corporation Law of the State of Delaware. The
corporation shall indemnify an employee, trustee or other agent where
required by law.
6.11 ACCRUAL OF CLAIMS; SUCCESSORS.
The indemnification provided or permitted under this Article VI shall
apply in respect of any expense, cost, judgment, fine, penalty or amount paid
in settlement, whether or not the claim or cause of action in respect thereof
accrued or arose before or after the effective date of this Article. The
right of any person who is or was a director or officer of the corporation to
indemnification and expense advances under this Article shall continue after
such person shall have ceased to be a director or officer and shall inure to
the benefit of the heirs, distributees, executors, administrators and other
legal representatives of such person.
6.12 EFFECT OF AMENDMENT.
Any amendment, repeal or modification of any provision of this Article
VI by the stockholders and the directors of the corporation shall not
adversely affect any right or protection of a director or officer of the
corporation existing at the time of such amendment, repeal or modification.
6.13 SETTLEMENT OF CLAIMS.
The corporation shall not be liable to indemnify any director or
executive officer under this Article VI: (i) for any amounts paid in
settlement of any action or claim effected without the corporation's written
consent, which consent shall not be unreasonably withheld or (ii) for any
judicial award, if the corporation was not given a reasonable and timely
opportunity, at its expense, to participate in the defense of such action.
6.14 SUBROGATION.
In the event of payment under this Article VI, the corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of
the indemnified party who shall execute all papers required and shall do
everything that may be necessary to enable the corporation effectively to
bring suit to enforce such rights.
6.15 NO DUPLICATION OF PAYMENTS.
The corporation shall not be liable under this Article VI to make any
payment in connection with any claim made against a director or executive
officer to the extent such director or officer has otherwise actually
received payment (under any insurance policy, agreement, vote, or otherwise)
of the amounts otherwise indemnifiable hereunder.
6.16 THE CORPORATION.
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person which is or was an Agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as an Agent, shall stand in the same position under
the provisions of this Article VI (including, without limitation, the
provisions of Section 6.4 of this Agreement) with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
6.17 EMPLOYEE BENEFIT PLANS.
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation
which imposes duties on, or involved services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this Article VI.
6.18 SAVINGS CLAUSE.
If this Article or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each Agent against expense (including attorneys'
fees), judgments, fines and amounts paid in settlement with respect to any
action, suit, proceeding or investigation, whether civil, criminal or
administrative, and whether internal or external, including a grand jury
proceeding and an action or suit brought by or in the right of the
corporation, to the full extent permitted by any applicable portion of this
Article that shall not have been invalidated or by any other applicable law.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER.
The Secretary of the corporation shall prepare and make, or cause to be
made, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The willful neglect or refusal of the directors
to produce such a list at any meeting for the election of directors, shall
make such directors ineligible for election to any office at such meeting.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders
required under this Section 7.1 of Article VII or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders.
Any stockholder, in person or by attorney or other agent, shall, upon
five (5) days written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other
books and records, and to make copies or extracts therefrom. A proper
purpose shall mean a purpose reasonably related to such person's interest as
a stockholder. In every instance where an attorney or other agent shall be
the person who seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such other writing which authorizes the
attorney or other agent to so act on behalf of the stockholder. The demand
under oath shall be directed to the Corporation at its registered office in
this State or at its principal place of business.
If the corporation or an officer or agent thereof refuses to permit an
inspection sought by a stockholder or attorney or other agent acting for the
stockholder pursuant to this Section 7.1 or does not reply to the demand
within five (5) business days after the demand has been made, the stockholder
may apply to the Court of Chancery for an order to compel such inspection.
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a
purpose reasonably related to his position as a director.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS.
The corporation shall keep at its principal executive office, or if its
principal executive office is not in this State at its principal business
office in this State, if any, the original or a copy of the Bylaws as amended
to date, which shall be open to inspection by the stockholders at all
reasonable times during office hours. If the principal executive office of
the corporation is outside this State and the corporation has no principal
business office in this State, the Secretary shall, upon the written request
of any stockholder, furnish to such stockholder a copy of the Bylaws as
amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
The accounting books and records and minutes of proceedings of the
stockholders and the board of directors and any committee or committees of
the board of directors shall be kept at such place or places designed by the
board of directors, or, in the absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written
form and the accounting books and records shall be kept either in written
form or in any other form capable of being converted into written form. Such
minutes and accounting books and records shall be open to inspection upon the
written demand of any stockholder or holder of a voting trust certificate, at
any reasonable time during usual business hours, for a purpose reasonably
related to such holder's interests as a stockholder or as the holder of a
voting trust certificate. Such inspection may be made in person or by an
agent or attorney, and shall include the right to copy and make extracts.
Except as otherwise provided in Section 7.1 of this Article VII, every
director shall have the absolute right at any reasonable time to inspect and
copy all books, records and documents of every kind and to inspect the
physical properties of the corporation and any subsidiary of the corporation
in person or by agent or attorney and the right of inspection includes the
right to copy and make extracts. The foregoing rights of inspection shall
extend to the records of each subsidiary of the corporation.
7.4 FINANCIAL STATEMENTS.
A copy of any annual financial statement and any income statement of the
corporation for each quarterly period of each fiscal year, and any
accompanying balance sheet of the corporation as of the end of each such
period, that has been prepared by the corporation shall be kept on file in
the principal executive office of the corporation for twelve (12) months and
each such statement shall be exhibited at all reasonable times to any
stockholder demanding an examination of any such statement or a copy shall be
mailed to any such stockholder.
The corporation also shall, upon the written request of any stockholder,
mail to the stockholder a copy of the last annual, semiannual and quarterly
income statement which it has prepared and a balance sheet as to the end of
such period.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS.
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2. EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any
amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of the corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertified shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered
to the corporation. Notwithstanding the adoption of such a resolution by the
Board of Directors, every holder of stock represented by certificates and
upon request every holder of uncertified shares shall be entitled to have a
certificate signed by, or in the name of the corporation by the Chairman of
the Board, or the Chief Executive Officer/President or Vice President, and by
the Chief Financial Officer, or the Secretary or an assistant secretary of
such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate has ceased to be such
officer, transfer agent or registrar, before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, or upon the books and records of the
corporation in the case of uncertified partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same
class, but only upon the basis of the percentage of the consideration
actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may
be set forth on the face or back of the certificate that the corporation
shall issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests
such a statement of the powers, the designations, the preferences, and the
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
8.5 LOST CERTIFICATES.
The Board of Directors may direct a new certificate or certificates or
uncertified shares to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertified
shares, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
8.6 ANNUAL STATEMENT.
The Board of Directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
8.7 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and
a natural person.
8.8 DIVIDENDS.
The Board of Directors of the corporation, subject to any restrictions
contained in the General Corporation Law of Delaware or the Certificate of
Incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include
but not be limited to equalizing dividends, repairing or maintaining any
property of the corporation, and meeting contingencies.
8.9 FISCAL YEAR.
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.10 SEAL.
The corporation may adopt and may subsequently alter the corporation
seal and it may use the same by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
8.11 TRANSFER OF STOCK.
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate, and record the transaction in
its books.
8.12 STOCK TRANSFER ACCOUNTS.
The corporation shall have the power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock
of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any
manner not prohibited by the General Corporation Law of Delaware.
8.13 REGISTERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends
and to vote as such owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of another person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
8.14 RATIFICATION.
Any transaction questioned in any lawsuit on the ground of lack of
authority, defective or irregular execution, adverse interest of director,
officer or stockholder, nondisclosure, miscomputation or the application of
improper principles or practices of accounting may be ratified, before or
after judgment, by the Board of Directors or the stockholders and, if so
ratified, shall have the same force and effect as if the questioned
transaction had been originally duly authorized. Such ratification shall be
binding upon the corporation and its stockholders and shall constitute a bar
to any claim or execution of any judgment in respect of such questioned
transaction.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY STOCKHOLDERS.
Subject to the provisions of the Certificate of Incorporation, these
Bylaws may be altered, amended or repealed at any regular meeting of the
stockholders (or at a special meeting duly called for that purpose) by the
approval of at least a majority of the outstanding shares entitled to vote at
such meeting; provided that in the notice of such special meeting, notice of
such purpose shall be given.
9.2 AMENDMENT BY DIRECTORS.
Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these Bylaws, the Board of Directors may, by the majority
vote of the entire Board of Directors, amend or repeal these Bylaws or enact
such other bylaws as in their judgment may be advisable for the regulation of
the conduct of the affairs of the corporation.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am duly elected and acting Secretary of SUN WORLD
INTERNATIONAL, INC., under the laws of the State of Delaware, and
(2) That the foregoing Bylaws, comprising 26 pages, constitute the
original Bylaws of said Corporation as of September 13, 1996.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 13th
day of September 1996.
/s/ Stanley E. Speer, Secretary
-------------------------------
Stanley E. Speer, Secretary
EXHIBIT 12.1
------------
CADIZ LAND COMPANY, INC.
Ratio of Earnings to Fixed Charges Calculation
($ in thousands)
Pro
Forma
Three Nine Nine
Months Months Months
Ended Ended Ended
March December December Year Ended March 31,
31, 31, 31, ------------------------------------
1997 1996 1996 1996 1995 1994 1993
-------- ------ ------- ------- ------ ------- -------
Loss from
continuing
operations
before
income taxes
and extra-
ordinary
item $(7,396) $(3,518) $(6,638) $(8,487) $(4,706) $(4,239) $(4,087)
Fixed
charges:
Interest 4,229 11,838 5,855 2,523 1,317 888 912
Interest
factor
portion
of
rentals
(40%) 50 151 172 111 58 13 4
-------- -------- -------- -------- -------- ------- --------
Total
fixed
charges 4,279 11,989 6,027 2,634 1,375 901 916
------- ------- ------- -------- -------- ------- --------
Income
(loss)
from
continuing
opera-
tions $(3,117) $ 8,471 $ 611 $(5,853) $(3,331) $(3,338) $(3,171)
======== ======== ======= ======== ======== ======== ========
Deficiency
in the
coverage
of fixed
charges
by
earnings
before
total
fixed
charges $(7,396) $(3,518) $(6,638) $(8,487) $(4,706) $(4,239) $(4,087)
======== ======== ======== ======== ======== ======== ========
EXHIBIT 23.1
------------
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Sun World International, Inc. of our
report dated March 7, 1997, except for Notes 7 and 13 which are as of April 16,
1997, relating to the financial statements of Cadiz Land Company, Inc., which
appears in such Prospectus. We also consent to the application of such
report to the Financial Statement Schedules for the nine months ended
December 31, 1996 and the two years ended March 31, 1996 listed under Item
21(b) of this Registration Statement when such schedules are read in
conjunction with the financial statements referred to in our report. The
audits referred to in such report also included these schedules. We also
consent to the use of our reports dated November 22, 1996 and February 28,
1997, except for Note 12, which is as of April 16, 1997, relating to the
financial statements of Sun World International, Inc., which appear in such
Prospectus. We also consent to the references to us under the headings
"Experts" and "Selected Financial Data" in such Prospectus. However, it
should be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Financial Data."
/s/ PRICE WATERHOUSE LLP
- -------------------------
PRICE WATERHOUSE LLP
Los Angeles, California
July 9, 1997
EXHIBIT 23.2
------------
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Sun World
International, Inc. on Form S-4 of our report dated September 20, 1996 (which
expresses an unqualified opinion and includes an explanatory paragraph
referring to Sun World's bankruptcy and reorganization) with respect to the
consolidated financial statements of Sun World International, Inc. for the
years ended December 31, 1995 and 1994, appearing in the Prospectus, which is
a part of this Registration Statement, and to the reference to us under the
heading "Experts" in such Prospectus.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Fresno, California
July 9, 1997
EXHIBIT 25.1
----------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (b) (2)
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Barbara McCluskey, Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
SUN WORLD INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 95-3554353
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16350 Driver Road
Bakersfield, California
(Address of principal executive office) 93308
(Zip code)
$115,000,000 11 1/4% First Mortgage Notes due 2004
(Title of Indenture Securities)
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting
securities of the trustee:
As of May 19, 1997
Col. A Col. B
Title of class Amount Outstanding
Not Applicable
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each such other
indenture
Not Applicable
(b) A brief statement of the facts relied upon as a basis for
the claim that no conflicting interest within the meaning of
Section 310 (b) (1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other
indenture.
Not Applicable
Item 5. Interlocking directorates and similar relationships with the obligor
or underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner,
and executive officer of the obligor:
As of May 19, 1997
Col. A Col. B Col. C. Col. D
Name of Owner Title of Class Amount owned Percentage of voting
beneficially securities represented
by amount given in
Col. C.
------------ -------------- ------------- -----------------------
Not Applicable
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and
each director, partner and executive officer of each such
underwriter:
As of May 19, 1997
Col. A. Col. B Col. C. Col. D.
Name of Owner Title of class Amount owned Percentage of
beneficially voting securities
represented by
amount given in
Col. C.
- --------------- -------------- ----------- ---------------
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in
default by the trustee:
As of May 19,1997
Col. A. Col. B. Col. C. Col. D.
Title of Class Whether the Amount owned Percent of class
securities are beneficially represented by
voting or non- or held as amount given in
voting securities collateral Col. C.
security for
obligations in
default
- ---------------- --------------- ------------- ---------------
Not Applicable
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter any of which are so owned or held by
the trustee:
As of May 19, 1997
Col. A Col. B Col. C Col. D
Title of issuer Amount outstanding Amount owned Percent of class
and title of class beneficially represented by
or held as amount given in
collateral Col. C.
security for
obligations
in default by
trustee
- --------------- ----------------- --------------- ---------------
Not Applicable
Item 10. Ownership or holdings by the trustee of voting securities of certain
affiliates or securityholders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to
the voting securities of such person:
As of May 19, 1997
Col. A Col. B Col. C Col. D
Title of issuer Amount outstanding Amount owned Percent of clas
and title of class beneficially represented by
or held as amount given in
collateral Col. C.
security for
obligations
in default by
trustee
- --------------- ----------------- --------------- ---------------
Not Applicable
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the
knowledge of the trustee, owns 50 percent or more of the voting
securities of the obligor, furnish the following information as to
each class of securities of such person any of which are so owned or
held by the trustee:
As of May 19, 1997
Col. A Col. B Col. C Col. D
Title of issuer Amount outstanding Amount owned Percent of class
and title of beneficially represented by
or held as amount given in
collateral Col. C.
security for
obligations
in default by
trustee
- --------------- ----------------- --------------- ---------------
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted
to the trustee, furnish the following information:
As of May 19, 1997
Col. A Col. B Col. C
Nature of indebtedness Amount outstanding Date due
---------------------- ------------------- ---------
Not applicable.
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with
respect to the securities under this indenture.
Explain the nature of any such default.
Not Applicable
(b) If the trustee is a trustee under another indenture
under which any other securities, or certificates of
interest or participation in any other securities, of
the obligor are outstanding, or is trustee for more
than one outstanding series of securities under the
indenture, state whether there has been a default under
any such indenture or series, identify the indenture or
series affected, and explain the nature of any such
default.
Not Applicable
Item 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
Not Applicable
Item 15. Foreign Trustee.
Identify the order or rule pursuant to which the foreign trustee
is authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
Not Applicable
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust
Company as amended to date. (See Exhibit 1A to Form T-1,
Securities and Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the Trustee
to Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the Trustee, as amended
to date (See Exhibit 4 to Form T-1, Securities and
Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the Trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
5. A copy of each Indenture referred to in Item 4, if the
Obligor is in default. Not Applicable.
6. The consent of the United States institutional trustee
required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a
reference to the copy of the Exhibit heretofore filed with the
Securities and Exchange Commission, to which there have been no
amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates
to matters peculiarly within the knowledge of the obligor and its
directors or officers, the trustee has relied upon information
furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2,
the answers to said Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items
1, 2 and 16 of this form since to the best knowledge of the trustee as
indicated in Item 13, the obligor is not in default under any
indenture under which the applicant is trustee.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, as amended, the trustee, IBJ Schroder Bank & Trust
Company, a corporation organized and existing under the laws
of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and
State of New York, on the 19th day of May, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Barbara McCluskey
-------------------------
Barbara McCluskey
Vice President
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the
issue by Sun World International, Inc. of its
11 1/4%% First Mortgage Notes due 2004, we hereby
consent that reports of examinations by Federal, State,
Territorial, or District authorities may be furnished
by such authorities to the Securities and Exchange
Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Barbara McCluskey
-------------------------
Barbara McCluskey
Vice President
Dated: May 19, 1997
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of September 30, 1996
Dollar Amounts
in Thousands
---------------
ASSETS
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin . . $ 34,228
Interest-bearing balances . . . . . . . . . . . . . . . . $229,175
Securities: Held-to-maturity securities. . . . . . . . . . $174,707
Available-for-sale securities. . . . . . $ 36,168
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold. . . . . . . . . . . . . . . . . . . . $ 15,062
Securities purchased under agreements to resell . . . . . $ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . $1,780,278
LESS: Allowance for loan and lease losses . . . $ 56,976
LESS: Allocated transfer risk reserve . . . . . $ -0-
Loans and leases, net of unearned income, allowance,
and reserve . . . . . . . . . . . . . . . . . . . . $1,723,302
Trading assets held in trading accounts . . . . . . . . . . . $ 622
Premises and fixed assets (including capitalized leases). . . $ 4,264
Other real estate owned . . . . . . . . . . . . . . . . . . . $ 397
Investments in unconsolidated subsidiaries and associated
companies $. . . . . . . . . . . . . . . . . . . . . . . . . . .-0-
Customers' liability to this bank on acceptances outstanding. $ 105
Intangible assets . . . . . . . . . . . . . . . . . . . . . . $ -0-
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . $153,290
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . $2,371,320
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . $671,747
Noninterest-bearing . . . . . . . . . . . . $ 224,231
Interest-bearing . . . . . . .. . . . . $ 447,516
In foreign offices, Edge and Agreement subsidiaries,
and IBFs. . . . . . . . . . . . . . . . . . . . . . . . $856,540
Noninterest-bearing . . . . . . . . . . . . $ 17,313
Interest-bearing. . . . . . . . . . . . . . $ 839,227
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased . . . . . . . . . . . . . . . . .$ 430,500
Securities sold under agreements to repurchase. . . . . .$ -0-
Demand notes issued to the U.S. Treasury. . . . . . . . . . .$ 50,000
Trading Liabilities . . . . . . . . . . . . . . . . . . . . .$ 539
Other borrowed money:
a) With a remaining maturity of one year or less. . . . .$ 61,090
b) With a remaining maturity of more than one year. . . .$ 7,647
Mortgage indebtedness and obligations under capitalized
leases. . . . . . . . . . . . . . . . . . . . . . . . $ -0-
Bank's liability on acceptances executed and outstanding. . .$ 105
Subordinated notes and debentures . . . . . . . . . . . . . .$ -0-
Other liabilities . . . . . . . . . . . . . . . . . . . . . .$ 77,289
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . .$2,155,457
Limited-life preferred stock and related surplus. . . . . . .$ -0-
EQUITY CAPITAL
Perpetual preferred stock and related surplus . . . . . . . .$ -0-
Common stock. . . . . . . . . . . . . . . . . . . . . . . . .$ 29,649
Surplus (exclude all surplus related to preferred stock). . .$ 217,008
Undivided profits and capital reserves. . . . . . . . . . . .$ (30,795)
Net unrealized gains (losses) on available-for-sale
securities. . . . . . . . . . . . . . . . . . . . . . . . $ 1
Cumulative foreign currency translation adjustments . . . . .$ -0-
TOTAL EQUITY CAPITAL. . . . . . . . . . . . . . . . . . . . .$ 215,863
TOTAL LIABILITIES AND EQUITY CAPITAL. . . . . . . . . . . . .$2,371,320
EXHIBIT 99.1
------------
REGISTRATION RIGHTS AGREEMENT
Dated as of April 16, 1997
by and among
SUN WORLD INTERNATIONAL, INC.,
Issuer
CADIZ LAND COMPANY, INC,
AGRI-LAND REALTY, INC.,
SUN WORLD MANAGEMENT CORPORATION,
SUN WORLD AVOCADO,
SUN WORLD EXPORT, INC.,
SUN WORLD BRANDS,
SUN WORLD\RAYO,
DINUBA PACKING CORPORATION,
SFC MARKETING CORPORATION,
SUN HARVEST, INC.,
PACIFIC FARM SERVICE, INC.,
BIG VALLEY LEASING, INC.,
SUN DESERT, INC., and
COACHELLA GROWERS,
Guarantors
and
SMITH BARNEY INC.
This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 16, 1997 by and among Sun World International, Inc.,
a Delaware corporation (the "Company"), Cadiz Land Company, Inc., Agri-Land
Realty, Inc., Sun World Management Corporation, Sun World Avocado, Sun World
Export, Inc., Sun World Brands, Sun World/Rayo, Dinuba Packing Corporation,
SFC Marketing Corporation, Sun Harvest, Inc., Pacific Farm Service, Inc., Big
Valley Leasing, Inc., Sun Desert, Inc., and Coachella Growers (collectively,
the "Guarantors"), and Smith Barney Inc. ("Purchaser"), who has agreed to
purchase the Company's 11-1/4% Series A First Mortgage Notes due 2004 (the
"Series A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated April
11, 1997 (the "Purchase Agreement"), by and among the Company, the Guarantors
and the Purchaser. In order to induce the Purchaser to purchase the Series
A Notes, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Purchaser set forth in Section 2 of the
Purchase Agreement.
The parties hereby agree as follows:
SECTION 1 DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CLOSING DATE: The date of this Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof, and (iii) the delivery by
the Company to the Registrar under the Indenture of Series B Notes in the
same aggregate principal amount as the aggregate principal amount of Series
A Notes that were tendered by Holders thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Series A Notes, each Interest
Payment Date.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Company under the Act of the
Series B Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities
the opportunity to exchange all such outstanding Transfer Restricted
Securities held by such Holders for Series B Notes in an aggregate principal
amount equal to the aggregate principal amount of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Purchaser proposes to
sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3)
and (7) of Regulation D under the Act ("Accredited Institutions").
HOLDERS: As defined in Section 2(b) hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated as of April 16, 1997, among the
Company, IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), and
the Guarantors, pursuant to which the Notes are to be issued, as such
Indenture is amended or supplemented from time to time in accordance with the
terms thereof.
INTEREST PAYMENT DATE: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
NOTES: The Series A Notes and the Series B Notes.
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
PURCHASER: As defined in the preamble hereto.
RECORD HOLDER: With respect to any Damages Payment Date relating to
Notes, each Person who is a Holder of Notes on the record date with respect
to the Interest Payment Date on which such Damages Payment Date shall occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer
or (b) the registration for resale of Transfer Restricted Securities pursuant
to the Shelf Registration Statement, which is filed pursuant to the
provisions of this Agreement, in each case, including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
SERIES B NOTES: The Company's 11-1/4% Series B First Mortgage Notes due
2004 to be issued pursuant to the Indenture in the Exchange Offer.
SHELF FILING DEADLINE: As defined in Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur
of (a) the date on which such Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which
such Note has been effectively registered under the Act and disposed of in
accordance with a Shelf Registration Statement and (c) the date on which such
Note is distributed to the public pursuant to Rule 144 under the Act or by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
SECTION 2 SECURITIES SUBJECT TO THIS AGREEMENT
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever
such Person owns Transfer Restricted Securities.
SECTION 3 REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a)
below have been complied with), the Company and the Guarantors shall (i)
cause to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 90 days after the Closing Date, a
Registration Statement under the Act relating to the Series B Notes and the
Exchange Offer, (ii) use their best efforts to cause such Registration
Statement to become effective at the earliest possible time, but in no event
later than 180 days after the Closing Date, (iii) in connection with the
foregoing, file (A) all pre-effective amendments to such Registration
Statement as may be necessary in order to cause such Registration Statement
to become effective, (B) if applicable, a post-effective amendment to such
Registration Statement pursuant to Rule 430A under the Act and (C) cause all
necessary filings in connection with the registration and qualification of
the Series B Notes to be made under the Blue Sky laws of such jurisdictions
as are necessary to permit Consummation of the Exchange Offer, and (iv) upon
the effectiveness of such Registration Statement, commence the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series B Notes to be offered in exchange for the Transfer
Restricted Securities and to permit resales of Notes held by Broker-Dealers
as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a
period of not less than the minimum period required under applicable federal
and state securities laws to Consummate the Exchange Offer; provided,
however, that in no event shall such period be less than 20 business days.
The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Notes shall
be included in the Exchange Offer Registration Statement. The Company shall
use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result
of market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer
may be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Series B Notes received by such Broker-
Dealer in the Exchange Offer, which prospectus delivery requirement may be
satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such resales
by Broker-Dealers that the Commission may require in order to permit such
resales pursuant thereto, but such "Plan of Distribution" shall not name any
such Broker-Dealer or disclose the amount of Notes held by any such Broker-
Dealer except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company and the Guarantors shall use their best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented
and amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities
or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the date on which the Exchange Offer Registration Statement is
declared effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during
such one-year period in order to facilitate such resales.
SECTION 4 SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company is not required to file an
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been
complied with) or (ii) if any Holder of Transfer Restricted Securities shall
notify the Company within 20 business days of the Consummation of the
Exchange Offer (A) that such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) that such
Holder may not resell the Series B Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and that the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder, or (C) that such Holder is a
Broker-Dealer and holds Series A Notes acquired directly from the Company or
one of its affiliates, then the Company and the Guarantors shall
(x) cause to be filed a shelf registration statement pursuant
to Rule 415 under the Act, which may be an amendment to the
Exchange Offer Registration Statement (in either event, the "Shelf
Registration Statement") on or prior to the earliest to occur of
(1) the 30th day after the date on which the Company determines
that it is not required to file the Exchange Offer Registration
Statement, and (2) the 30th day after the date on which the Company
receives notice from a Holder of Transfer Restricted Securities as
contemplated by clause (ii) above, (such earliest date being the
"Shelf Filing Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the
Holders of which shall have provided the information required
pursuant to Section 4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before
the 90th day after the Shelf Filing Deadline.
The Company and the Guarantors shall use their best efforts to keep such
Shelf Registration Statement continuously effective, supplemented and amended
as required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders
of Transfer Restricted Securities entitled to the benefit of this Section
4(a), and to ensure that it conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years following the
Closing Date.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 20 business days after
receipt of a request therefor, such information as the Company may reasonably
request for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have used its best
efforts to provide all such reasonably requested information. Each Holder as
to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not
been declared effective by the Commission on or prior to the date specified
for such effectiveness in this Agreement (the "Effectiveness Target Date"),
(iii) the Exchange Offer has not been Consummated within 30 business days
after the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being
succeeded immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself immediately declared
effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company and the Guarantors hereby jointly and
severally agree to pay liquidated damages to each Holder of Transfer
Restricted Securities with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues. The amount of the liquidated damages shall increase by an
additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.50 per week per $1,000 principal amount of Transfer Restricted
Securities. All accrued liquidated damages shall be paid to Record Holders
by the Company by wire transfer of immediately available funds or by federal
funds check on each Damages Payment Date, as provided in the Indenture.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages with
respect to such Transfer Restricted Securities will cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer
Restricted Security shall survive until such time as all such obligations
with respect to such Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company and the Guarantors shall comply with all of the
provisions of Section 6(c) below, shall use their best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by
applicable law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the Commission
allowing the Company and the Guarantors to Consummate an Exchange Offer
for such Series A Notes. The Company and the Guarantors each hereby
agrees to pursue the issuance of such a decision to the Commission staff
level but shall not be required to take commercially unreasonable action
to effect a change of Commission policy. The Company and the Guarantors
each hereby agrees, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an
Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of the Company, (B) it is not engaged
in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is
acquiring the Series B Notes in its ordinary course of business. In
addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company's preparations for the Exchange
Offer. Each Holder shall acknowledge and agree that any Broker-Dealer
and any such Holder using the Exchange Offer to participate in a
distribution of the securities to be acquired in the Exchange Offer (1)
could not under Commission policy as in effect on the date of this
Agreement rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration
and prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes acquired by
such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available
May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991)
and, if applicable, any no-action letter obtained pursuant to clause (i)
above and (B) including a representation that neither the Company nor
any Guarantor has entered into any arrangement or understanding with any
Person to distribute the Series B Notes to be received in the Exchange
Offer and that, to the best of the Company's information and belief,
each Holder participating in the Exchange Offer is acquiring the Series
B Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all
the provisions of Section 6(c) below and shall use their best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will as expeditiously
as possible prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which
form shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales
of Notes by Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder,
financial statements of any Guarantor) for the period specified in
Section 3 or 4 of this Agreement, as applicable; upon the occurrence of
any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B),
use its best efforts to cause such amendment to be declared effective
and such Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as applicable, or
such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause
the Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Act,
and to comply fully with the applicable provisions of Rules 424 and 430A
under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening of
any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement,
or any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company and the Guarantors shall use
their best efforts to obtain the withdrawal or lifting of such order at
the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review of such Holders and underwriter(s), if any, for a
period of at least five business days, and the Company will not file any
such Registration Statement or Prospectus or any amendment or supplement
to any such Registration Statement or Prospectus (including all such
documents incorporated by reference) to which a selling Holder of
Transfer Restricted Securities covered by such Registration Statement or
the underwriter(s), if any, shall reasonably object within five business
days after the receipt thereof. A selling Holder or underwriter, if
any, shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Company's representatives available
(and representatives of the Guarantors) for discussion of such document
and other customary due diligence matters, and include such information
in such document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant
retained by such selling Holders or any of the underwriter(s), all
financial and other records, pertinent corporate documents and
properties of the Company and the Guarantors and cause the Company's and
the Guarantors' officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Registration Statement
subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s),
if any, may reasonably request to have included therein, including,
without limitation, information relating to the "Plan of Distribution"
of the Transfer Restricted Securities, information with respect to the
principal amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities to be sold
in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal
amount of Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the underwriter(s),
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantors hereby
consent to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s),
if any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xi) enter into, and cause the Guarantors to enter into, such
agreements (including an underwriting agreement), and make, and cause
the Guarantors to make, such representations and warranties, and take
all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement,
all to such extent as may be requested by any Purchaser or by any Holder
of Transfer Restricted Securities or underwriter in connection with any
sale or resale pursuant to any Registration Statement contemplated by
this Agreement; and whether or not an underwriting agreement is entered
into and whether or not the registration is an Underwritten
Registration, the Company and the Guarantors shall:
(A) furnish to each Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the Consummation
of the Exchange Offer and, if applicable, the effectiveness of the
Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial
or accounting officer of the Company and each of the
Guarantors, confirming, as of the date thereof, the matters
set forth in paragraphs (d), (f), and (h) of Section 8 of the
Purchase Agreement and such other matters as such parties may
reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors, covering the matters set forth in
paragraph (f) of Section 8 of the Purchase Agreement and such
other matter as such parties may reasonably request, and in
any event including a statement to the effect that such
counsel has participated in conferences with officers and
other representatives of the Company, representatives of the
independent public accountants for the Company, the
Purchaser's representatives and the Purchaser's counsel in
connection with the preparation of such Registration Statement
and the related Prospectus and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing
(relying as to materiality to a large extent upon facts
provided to such counsel by officers and other representatives
of the Company and without independent check or verification),
no facts came to such counsel's attention that caused such
counsel to believe that the applicable Registration Statement,
at the time such Registration Statement or any post-effective
amendment thereto became effective, and, in the case of the
Exchange Offer Registration Statement, as of the date of
Consummation, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer,
as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further
that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness
of the financial statements, notes and schedules and other
financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section
8(g) of the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company
and the Guarantors contemplated in clause (A)(1) above cease to be true
and correct, the Company or such Guarantor shall so advise the Purchaser
and the underwriter(s), if any, and each selling Holder promptly and, if
requested by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause the Guarantors to cooperate with,
the selling Holders, the underwriter(s), if any, and their respective
counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may request
and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided,
however, that neither the Company nor any Guarantor shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Series A
Notes covered by the Shelf Registration Statement, Series B Notes,
having an aggregate principal amount equal to the aggregate principal
amount of Series A Notes surrendered to the Company by such Holder in
exchange therefor or being sold by such Holder; such Series B Notes to
be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Series A
Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) cooperate with, and cause the Guarantors to cooperate with,
the selling Holders and the underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to
any sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s),
if any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (viii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus
or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Indenture with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter")
that is required to be retained in accordance with the rules and
regulations of the NASD, and use its reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if
not sold to underwriters in such an offering, beginning with the first
month of the Company's first fiscal quarter commencing after the
effective date of the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate, and cause the
Guarantors to cooperate, with the Trustee and the Holders of Notes to
effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA;
and execute, and cause the Guarantors to execute, and use its best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by
the Holders of a majority in aggregate principal amount of Series A
Notes or the managing underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any
fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant
to the applicable Registration Statement until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company shall give any such notice,
the time period regarding the effectiveness of such Registration Statement
set forth in Section 3 or 4 hereof, as applicable, shall be extended by the
number of days during the period from and including the date of the giving of
such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date
when each selling Holder covered by such Registration Statement shall have
received the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or any Guarantor's
performance of or compliance with this Agreement will be borne by the Company
or such Guarantor, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by any Purchaser or Holder with the NASD
(and, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel that may be required by the rules and
regulations of the NASD)); (ii) all fees and expenses of compliance with
federal securities and state Blue Sky or securities laws; (iii) all expenses
of printing (including printing certificates for the Series B Notes to be
issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel
for the Company, the Guarantors and, subject to Section 7(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing
fees in connection with listing Notes on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors'
internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse
the Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for
the reasonable fees and disbursements of not more than one counsel, who shall
be Latham & Watkins or such other counsel as may be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and each Guarantor, jointly and severally, agree
to indemnify and hold harmless (i) each Holder and (ii) each person, if any,
who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) any Holder (any of the persons referred to in this clause
(ii) being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and
agents of any Holder or any controlling person (any person referred to in
clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified
Holder"), to the fullest extent lawful, from and against any and all losses,
claims, damages, liabilities, judgments, actions and expenses (including
without limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses are caused
by an untrue statement or omission or alleged untrue statement or omission
that is made in reliance upon and in conformity with information relating to
any of the Holders furnished in writing to the Company by any of the Holders
expressly for use therein.
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against
any of the Indemnified Holders with respect to which indemnity may be sought
against the Company or any Guarantor, such Indemnified Holder (or the
Indemnified Holder controlled by such controlling person) shall promptly
notify the Company and the Guarantors in writing; provided, that the failure
to give such notice shall not relieve the Company or the Guarantors of their
obligations pursuant to this Agreement. Such Indemnified Holder shall have
the right to employ its own counsel in any such action and the fees and
expenses of such counsel shall be paid, as incurred, by the Company and the
Guarantors (regardless of whether it is ultimately determined that an
Indemnified Holder is not entitled to indemnification hereunder). The
Company and the Guarantors shall not, in connection with any one such action
or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys (in addition to any local
counsel) at any time for such Indemnified Holders, which firm shall be
designated by the Holders. The Company shall be liable for any settlement of
any such action or proceeding effected with the Company's prior written
consent, which consent shall not be withheld unreasonably, and the Company
agrees to indemnify and hold harmless any Indemnified Holder from and against
any loss, claim, damage, liability or expense by reason of any settlement of
any action effected with the written consent of the Company. The Company
shall not, without the prior written consent of each Indemnified Holder,
settle or compromise or consent to the entry of judgment in or otherwise seek
to terminate any pending or threatened action, claim, litigation or pro-
ceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Holder is a party thereto), unless
such settlement, compromise, consent or termination includes an unconditional
release of each Indemnified Holder from all liability arising out of such
action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company and the
Guarantors, and their respective directors, officers, and any person
controlling (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, and the respective officers, directors, partners,
employees, representatives and agents of each such person, to the same extent
as the foregoing indemnity from the Company and the Guarantors to each of the
Indemnified Holders, but only with respect to claims and actions based on
information relating to such Holder furnished in writing by such Holder ex-
pressly for use in any Registration Statement. In case any action or
proceeding shall be brought against the Company or its directors or officers
or any such controlling person in respect of which indemnity may be sought
against a Holder of Transfer Restricted Securities, such Holder shall have
the rights and duties given the Company and the Company or its directors or
officers or such controlling person shall have the rights and duties given to
each Holder by the preceding paragraph. In no event shall the liability of
any selling Holder hereunder be greater in amount than the dollar amount of
the proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Holders on the other
hand from their sale of Transfer Restricted Securities or if such allocation
is not permitted by applicable law, the relative fault of the Company on the
one hand and of the Indemnified Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors on the
one hand and of the Indemnified Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Guarantors or by the Indemnified Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim.
The Company, the Guarantors and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, none of
the Holders (and its related Indemnified Holders) shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total discount received by such Holder with respect to the Series A Notes
exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Series A Notes held by each of the Holders hereunder and
not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any
sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
(b) completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering,
the investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) REMEDIES. The Company and the Guarantors agree that monetary
damages (including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not, and will
cause the Guarantors not to, on or after the date of this Agreement enter
into any agreement with respect to its securities that is inconsistent with
the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Neither the Company nor the Guarantors, except
for Cadiz Land Company, Inc., have previously entered into any agreement
granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders
of the Company's securities under any agreement in effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES. The Company will not take
any action, or permit any change to occur, with respect to the Notes that
would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being
tendered pursuant to the Exchange Offer and that does not affect directly or
indirectly the rights of other Holders whose securities are not being
tendered pursuant to such Exchange Offer may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted
Securities being tendered or registered.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier,
or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records
of the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
Sun World International, Inc.
P.O. Box 80298
Bakersfield, CA 93312
Telecopier No.: (805) 392-5092
Attention: Chief Financial Officer
With a copy to:
Miller & Holguin
1801 Century Park East, 7th Floor
Los Angeles, CA 90067
Telecopier No.: (310) 557-2205
Attention: Howard Unterberger
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities from such Holder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) ENTIRE AGREEMENT. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration rights granted
by the Company with respect to the Transfer Restricted Securities. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
SUN WORLD INTERNATIONAL, INC.
By: /s/ Timothy J. Shaheen
--------------------------
Name: Timothy J. Shaheen
Title: Chief Executive Officer
CADIZ LAND COMPANY, INC
By: /s/ Keith Brackpool
-----------------------------
Name: Keith Brackpool
Title: Chief Executive Officer
AGRI-LAND REALTY, INC.
SUN WORLD MANAGEMENT CORPORATION
SUN WORLD AVOCADO
SUN WORLD EXPORT, INC.
SUN WORLD BRANDS
SUN WORLD/RAYO
DINUBA PACKING CORPORATION
SFC MARKETING CORPORATION
SUN HARVEST, INC.
PACIFIC FARM SERVICE, INC.
BIG VALLEY LEASING, INC.
SUN DESERT, INC.
COACHELLA GROWERS
By: /s/ Timothy J. Shaheen
----------------------------
Name: Timothy J. Shaheen
Title: Chief Executive Officer
SMITH BARNEY INC.
By: /s/ Michael D. Del Giudice
-------------------------------
Name: Michael D. Del Giudice
Title: Director
EXHIBIT 99.2
FORM OF
LETTER OF TRANSMITTAL
for
11-1/4% First Mortgage Notes due 2004
of
SUN WORLD INTERNATIONAL, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON, , 1997 (the "EXPIRATION DATE") UNLESS EXTENDED.
EXCHANGE AGENT:
IBJ SCHRODER BANK & TRUST COMPANY
By Hand/Overnight Express:
IBJ Schroder Bank & Trust
Company
One State Street
New York, New York 10004
Attention: Securities
Processing
Window, Subcellar One (SC-1)
By Mail:
(insured or registered mail
recommended)
IBJ Schroder Bank & Trust
Company
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attention: Reorganization
Operations Department
By Facsimile Transmission:
(212) 858-2611
(For Eligible Institutions Only)
To Confirm receipt:
(212) 858-2103
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions via facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus, dated
, 1997 (the "Prospectus"), of Sun World International, Inc. ("Sun
World"), and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe Sun World's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 11-1/4% First Mortgage Notes due 2004 (the "Exchange
Notes") for each $1,000 principal amount of its outstanding 11-1/4% First
Mortgage Notes due 2004 (the "Old Notes"). Capitalized terms used but not
defined herein have the meanings given to them in the Prospectus.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and
Principal Amounts should be listed on a separate signed schedule affixed
hereto.
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
Aggregate
Name(s) and Principal
Address(es) of Amount Principal
Registered Holder(s) Certificate Represented Amount
(Please fill in) Number(s) by Old Notes* Tendered
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Total
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* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by such Old Notes.
See instruction 2.
This Letter of Transmittal is to be used whether the Old Notes are to
be physically delivered herewith or whether guaranteed delivery procedures
or book-entry delivery procedures are being used, pursuant to the
procedures set forth in "The Exchange Offer Procedures for Tendering Old
Notes" in the Prospectus. If delivery of Old Notes is to be made by book-
entry transfer to the account maintained by the Exchange Agent at The
Depository Trust Company (the "Depository"), this Letter of Transmittal
need not be manually executed, provided, however, that tenders of Old Notes
must be effected in accordance with the procedures mandated by the
Depository and the procedures set forth in the Prospectus under the caption
"The Exchange Offer Procedures for Tendering Old Notes Book-Entry
Delivery."
Registered holders whose Old Notes are not immediately available or
who cannot deliver their Old Notes and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or if the procedures for
delivery by book-entry transfer cannot be completed on a timely basis, may
tender their Notes according to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer Procedures
for Tendering Old Notes Guaranteed Delivery Procedures."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution________________________________________
_________________________________________________________________
/ / The Depository Trust Company
Account Number:______________________________________________________
Transaction Code Number:_____________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s):________________________________________
Name of Eligible Institution that Guaranteed Delivery:_______________
Date of Execution of Notice of Guaranteed Delivery:__________________
If Delivered by Book-Entry Transfer:
Account Number:______________________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:_______________________________________________________________
Address:____________________________________________________________
(Including Zip Code)
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution
of Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading
activities, it acknowledges that it ill deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
SPECIAL EXCHANGE INSTRUCTIONS
(See Instructions 4 and 5)
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO A PERSON OTHER
THAN THE PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name:_______________________________________________________________
Address_____________________________________________________________
(Including Zip Code)
Employer Identification or Social Security Number
(Complete the Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4 and 5)
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO AN ADDRESS
DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Name:________________________________________________________________
Address:____________________________________________________________
(Including Zip Code)
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Employer Identification or Social Security Number
(Complete the Substitute Form W-9)
PAYER'S NAME:______________________________
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT THE RIGHT
AND CERTIFY BY SIGNING AND OR________________________
Form W-9 DATING BELOW.
--
Employer Identification
Number
-------------------------------------------------------
Department of the Part 2.-- Please check the box at the right if you have
Treasury applied for, and are awaiting receipt of, your TIN / /
Internal Revenue
Service
Payer's Request for
Taxpayer Identification
Number (TIN)
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Certification--under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the IRS that I am subject to backup withholding as a
result of a failure to report all interests or dividends, or the IRS
has notified me that I am no longer subject to backup withholding.
Certification Instructions--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of under reporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer
subject to backup withholding, do not cross out item (2). (Also see
Certification under Specific Instructions in the enclosed Guidelines.)
SIGNATURE________________________________________DATE___________________1997
IF YOU CHECKED THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9, YOU MUST SIGN
AND DATE THE FOLLOWING CERTIFICATION:
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
(or I intend to mail or deliver an application in the near future). I
understand that if I do not provide a Taxpayer Identification Number to the
payer, 31% of all payments made to me pursuant to this exchange Offer shall
be retained until I provide a Tax Identification Number to the payer and
that, if I do not provide my Taxpayer Identification Number within sixty
(60) days, such retained amounts shall be remitted to the Internal Revenue
Service as backup withholding and 31% of all reportable payments made to me
thereafter will be withheld and remitted to the Internal Revenue service
until I provide a Taxpayer Identification Number.
SIGNATURE_______________________________DATE___________________, 1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to Sun World the principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, Sun World all
rights, title and interest in and to such Old Notes. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge
that said Exchange Agent acts as the agent of Sun World in connection with
the exchange Offer) with respect to the Old Notes to be assigned,
transferred and exchanged with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest).
The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes tendered
hereby and to acquire Exchange Notes issuable upon the exchange of such
tendered Old Notes, and that, when the same are accepted for exchange, Sun
World will acquire good and unencumbered title to the tendered Old Notes,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim or right. The undersigned also warrants that
it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent to be necessary or desirable to complete the
exchange, assignment and transfer of the Old Notes tendered hereby or
transfer ownership of such Old Notes on the account books maintained by the
book-entry transfer facility.
The Exchange Offer is subject to certain conditions as set forth in
the Prospectus under the caption "The Exchange Offer Conditions of the
Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived by Sun World, in whole or in part, in the
reasonable judgment of Sun World), as more particularly set forth in the
Prospectus, Sun World may not be required to exchange any of the Old Notes
tendered hereby and, in such event, the Old Notes not exchanged will be
returned to the undersigned at the address shown above.
The undersigned acknowledges that the Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchased Old Notes directly from Sun World for resale
pursuant to Rule 144A under the Securities Act or (ii) a person that is an
"affiliate" of Sun World within the meaning of Rule 405 under the
Securities Act provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such
Exchange Notes. See Morgan Stanley & Co., Inc. (available June 5, 1991)
and Exxon Capital Holdings Corporation (available May 13, 1988); and "The
Exchange Offer Resales of the Exchange Notes" in the Prospectus.
THE UNDERSIGNED UNDERSTANDS AND AGREES THAT SUN WORLD RESERVES THE
RIGHT NOT TO ACCEPT TENDERED OLD NOTES FROM ANY TENDERING HOLDER IF SUN
WORLD DETERMINES, IN ITS SOLE AND ABSOLUTE DISCRETION, THAT SUCH ACCEPTANCE
COULD RESULT IN A VIOLATION OF APPLICABLE SECURITIES LAWS.
The undersigned, if the undersigned is a beneficial holder,
represents, or, if the undersigned is a broker, dealer, commercial bank,
trust company or other nominee, represents that it has received
representations from the beneficial owners of the Old Notes stating that
(i) the Exchange Notes to be acquired in connection with the Exchange Offer
by the Eligible Holder and each Beneficial Owner of the Old Notes are being
acquired by the Eligible Holder (as defined in the Exchange Offer) and each
Beneficial Owner in the ordinary course of business of the Eligible Holder
and each Beneficial Owner, (ii) the Eligible Holder and each Beneficial
Owner are not participating, do not intend to participate, and have no
arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) the Eligible Holder and each
Beneficial Owner acknowledge and agree that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Old Notes must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of the
Exchange Notes acquired by such person and cannot rely on the position of
the staff of the Commission set forth in no-action letters that are
discussed in the Prospectus under the caption "The Exchange Offer Resales
of the Exchange Notes," (iv) that if the Eligible Holder is a broker-dealer
that acquired Old Notes as a result of market-making or other trading
activities, it will deliver a prospectus in connection with any resale of
Exchange Notes acquired in the Exchange Offer, (v) the Eligible Holder and
each Beneficial Owner understand that a secondary resale transaction
described in clause (iii) above should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 of Regulation S-K of the Securities act and (vi)
neither the Eligible Holder nor any Beneficial Owner is an "affiliate," as
defined under Rule 405 of the Securities Act, of Sun World except as
otherwise disclosed to Sun World in writing.
In addition, if the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will
deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
All authority herein conferred or agreed to be conferred by this
Letter of Transmittal and every obligation of the undersigned hereunder
shall be binding upon the heirs, legal representatives, successors and
assigns, executors, administrators and trustees in bankruptcy of the
undersigned and shall survive the death or incapacity of the undersigned.
Tendered Old Notes may be withdrawn at any time prior to the Expiration
Date in accordance with the terms of the Letter of Transmittal.
The undersigned understands that tenders of the Old Notes pursuant to
any one of the procedures described under "The Exchange Offer Procedures
for Tendering Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and Sun World in
accordance with the terms and subject to the conditions of the Exchange
Offer.
The undersigned understands that by tendering Notes pursuant to one of
the procedures described under "The Exchange Offer Procedures for
Tendering Old Notes" in the Prospectus and the instructions hereto, the
tendering holder will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued up to the date of
issuance of the Exchange Notes.
The undersigned understands and acknowledges that Sun World reserves
the right in its sole discretion to purchase or make offers for any Old
Notes that remain outstanding subsequent to the Expiration Date in the open
market, in privately negotiated transactions, through subsequent exchange
offers or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
Certificates for all Exchange Notes delivered in exchange for tendered
Old Notes and any Old Notes delivered herewith but not exchanged, and
registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
ALL TENDERING HOLDER(S) SIGN HERE
(Complete accompanying Substitute Form W-9)
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Signature(s) of Holder(s)
Dated: ________________Area Code and Telephone Number:______________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Old Notes. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set
forth the full title of such person.)
See Instruction 3.
Name(s):_______________________________________________________________
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(Please Type or Print)
Capacity (full title):__________________________________________________
Address:________________________________________________________________
_________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.:_____________________________________________
Taxpayer Identification or Social Security No.(s):_________________________
GUARANTEE OF SIGNATURE(S)
(If Required See Instruction 3)
Authorized Signature:______________________________________________________
Name:______________________________________________________________________
Title:_____________________________________________________________________
Address:___________________________________________________________________
Name of Firm:______________________________________________________________
Area Code and Telephone No.:______________________Dated:___________________
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
Certificates for all physically delivered Old Notes or confirmation of
any book-entry transfer to the Exchange Agent's or its agent's account at a
Book-Entry Transfer Facility of Old Notes tendered by book-entry transfer,
as well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile thereof, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at any of its
addresses set forth herein on or prior to the Expiration Date.
The method of delivery of the Old Notes, this Letter of Transmittal
and any other required documents is at the election and risk of the holder.
If such delivery is by mail, it is suggested that registered mail, properly
insured, with return receipt requested, be used. It is recommended that
the holders use an overnight or hand delivery service. in all cases
sufficient time should be allowed to permit timely delivery.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other required documents to the exchange
Agent on or prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis must tender their Old Notes pursuant to the
guaranteed delivery procedure set forth in that Prospectus under "The
Exchange Offer Procedures for Tendering Old Notes Guaranteed Delivery
Procedures." Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) on or prior to the Expiration
Date, the Exchange Agent must have received from such Eligible Institution
a letter, telex, telegram or facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight courier)
setting forth the name and address of the tendering holder, the names in
which such Old Notes are registered, and, if possible, the certificate
numbers of the Old Notes to be tendered; and (iii) all tendered Old Notes
(or a confirmation of any book-entry transfer of such Old Notes into the
Exchange Agent's account at a Book-Entry Transfer Facility) as well as this
Letter of Transmittal and all other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within three business
days after the Expiration Date, all as provided in the Prospectus under the
caption "The Exchange Offer Procedures for Tendering Old Notes."
No alternative, condition, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of
Transmittal (or manually signed facsimile thereof), shall waive any right
to receive notice of the acceptance of the Old Notes for exchange.
2. Partial Tenders; Withdrawals.
Tenders of Old Notes will be accepted only in integral multiples of
$1,000. If less than the entire principal amount of Old Notes evidenced by
a submitted certificate is tendered, the tendering holder should fill in
the principal amount tendered in the box entitled "Principal Amount
Tendered." A newly issued certificate for the principal amount of Old
Notes submitted but not tendered will be sent to such holder as soon as
practicable after the Expiration Date. All Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
clearly indicated.
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable,
except that Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. To be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at one of its addresses set forth in
this Letter of Transmittal by 5:00 P.M., New York City time, on the
Expiration Date unless extended by Sun World. Any such notice of
withdrawal, the certificate number(s) of the Old Notes to be withdrawn
(except in the case of book-entry tenders), the principal amount of Old
Notes delivered for exchange or a Book-Entry Confirmation with respect to
such Old Notes and must be signed by the holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees). The signature(s) on the notice of withdrawal must
be guaranteed by an Eligible Institution unless such Old Notes have been
tendered (i) by a Registered Holder (which term for purposes of this
document shall include any participant tendering by book-entry transfer) of
Old Notes who has not completed either the box entitled "Special Exchange
Instructions" or the box entitled "Special Delivery Instructions" on this
Letter of Transmittal or (ii) for the account of an Eligible Institution.
If the Old Notes have been tendered pursuant to the procedure for book-entry
tender set forth in the Prospectus under the caption "The Exchange
Offer Procedures for Tendering Old Notes Book-Entry Delivery" a notice
of withdrawal is effective immediately upon receipt by the Exchange Agent
of a written, telegraphic or facsimile transmission notice of withdrawal
even if physical release is not yet effected. In addition, such notice
must specify, in the case of Old Notes tendered by delivery of such Old
Notes, the name of the Registered Holder (if different from that of the
tendering holder) to be credited with the withdrawn Old Notes. Withdrawals
may not be rescinded and any Old Notes withdrawn will thereafter be deemed
not validly tendered for purposes of the Exchange Offer. However, properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "The Exchange Offer Procedures for Tendering Old Notes"
in the Prospectus at any time on or prior to the applicable Expiration
Date.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder(s) of
the Old Notes tendered hereby, the signature must correspond with the
name(s) as written on the face of the certificates without alternation,
enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any of the Old Notes tendered hereby are registered in different
names, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations
of Old Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
Book-Entry Transfer Facility whose name appears on a security listing as
the owner of the Old Notes) of Old Notes specified herein and tendered
hereby, no endorsements of certificates or separate written instruments of
transfer or exchange are required. If, however, Exchange Notes are to be
issued, or any untendered principal amount of Old Notes are to be reissued
to a person other than the registered holder, then endorsements of any Old
Notes transmitted hereby or separate bond powers are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Old Notes specified herein, such Old
Notes must be endorsed or accompanied by separate written instruments of
transfer or exchange in form satisfactory to Sun World and duly executed by
the registered holder, in either case signed exactly as the name or names
of the registered holder or holders appear(s) on the Old Notes.
If this Letter of Transmittal or a Notice of Guaranteed Delivery or
any certificates or separate written instruments of transfer or exchange
are signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by Sun World, proper evidence satisfactory to Sun World of
their authority so to act must be submitted.
Except as described in this paragraph, signatures on this Letter of
Transmittal or a notice of withdrawal, as the case may be, must be
guaranteed by an Eligible Institution which is a firm which is a member of
a registered national securities exchange or the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an
office or correspondent in the Untied States or otherwise be an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (each an "Eligible Institution"). Signatures on this Letter
of Transmittal or a notice of withdrawal, as the case may be, need not be
guaranteed if the Old Notes tendered pursuant hereto are tendered (i) by a
Registered Holder of Old Notes who has not completed either the box
entitled "Special Exchange Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (ii) for the
account of an Eligible Institution.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders should indicate in the applicable box the name and
address to which Exchange Notes and/or substitute Old Notes for the
principal amounts not exchanged are to be issued or sent, if different from
the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. If no
such instructions are given, such Old Notes not exchanged will be returned
to the name and address of the person signing this Letter of Transmittal.
5. Tax Identification Number and Backup Withholding.
Federal income tax law of the United States requires that a holder of
Old Notes whose Old Notes are accepted for exchange provide Sun World with
such holder's correct taxpayer identification number, which, in the case of
a holder who is an individual, is the holder's social security number, or
otherwise establish an exemption from backup withholding. If Sun World is
not provided with the holder's correct taxpayer identification number, the
exchanging holder of Old Notes may be subject to a penalty imposed by the
Internal Revenue Service. In addition, interest on the Exchange Notes
acquired pursuant to the Exchange Offer may be subject to backup
withholding in an amount equal to 31 percent of any interest payment. If
withholding occurs and results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service through the filing of a return.
To prevent backup withholding, each exchanging holder of Old Notes
subject to backup withholding must provide his correct taxpayer
identification number by completing the Substitute Form W-9 provided in
this Letter of Transmittal, certifying that the taxpayer identification
number provided is correct (or that the exchanging holder of Old Notes is
awaiting a taxpayer identification number) and that either (a) the
exchanging holder has not been notified by the Internal Revenue Service
that he is subject to backup withholding as a result of failure to report
all interest or dividends or (b) the Internal Revenue Service has notified
the exchanging holder that he is no longer subject to backup withholding.
Certain exchanging holders of Old Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these
backup withholding requirements. A foreign individual and other exempt
holders (e.g., corporations) should certify, in accordance with the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9, to such exempt status on the Substitute Form W-9
provided in this Letter of Transmittal.
6. Transfer Taxes.
Holders tendering pursuant to the Exchange Offer will not be obligated
to pay brokerage commissions or fees or to pay transfer taxes with respect
to their exchange under the Exchange Offer unless the box entitled "Special
Exchange Instructions" in this Letter of Transmittal has been completed, or
unless the securities to be received upon exchange are to be issued to any
person other than the holder of the Old Notes tendered for exchange. Sun
World will pay all other charges or expenses in connection with the
Exchange Offer. If holders tender Old Notes for exchange and the Exchange
Offer is not consummated, such Old Notes will be returned to the holders at
Sun World's expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
7. Waiver of Conditions.
Sun World reserves the right to waive, in whole or in part, in its
reasonable judgment, any of the conditions to the Exchange Offer set forth
in the Prospectus under the caption "The Exchange Offer Conditions of the
Exchange Offer".
8. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost, stolen or
destroyed, should contact the Exchange Agent at the address indicated above
for further instructions.
9. Validity and Acceptance of Tenders.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will
be determined by Sun World in its sole discretion, which determination
shall be final and binding. Sun World reserves the absolute right to
reject any and all Old Notes not properly tendered and to reject any Old
Notes Sun World's acceptance of which might, in the judgment of Sun World
or its counsel, be unlawful. Sun World also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as
to particular Old Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Old Notes in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal
and the instructions hereto) by Sun World shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes for exchange must be cured within such period of time
as Sun World shall determine. Sun World will use reasonable efforts to
give notification of defects or irregularities with respect to tenders of
Old Notes for exchange but shall not incur any liability for failure to
give such notification. Tenders of the Old Notes will not be deemed to
have been made until such irregularities have been cured or waived.
10. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal,
should be directed to the Exchange Agent at the address and telephone
number set forth above.
IMPORTANT: This Letter of Transmittal or a facsimile hereof (together
with certificates of Old Notes or confirmation of book-entry transfer and
all other required documents) or a Notice of Guaranteed Delivery must be
received by the Exchange Agent on or prior to the Expiration Date.
EXHIBIT 99.3
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FORM OF
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
11-1/4% First Mortgage Notes due 2004
in Exchange for New
11-1/4% First Mortgage Notes due 2004
of
SUN WORLD INTERNATIONAL, INC.
Registered holders of outstanding 11-1/4% First Mortgage Notes due 2004
(the Old "Notes") who wish to tender their Notes in exchange for a like
principal amount of new 11-1/4% Notes due 2004 which have been registered
under the Securities Act of 1933, as amended (the "Exchange Notes"), and whose
Old Notes are not immediately available or who cannot deliver their Old Notes
and all other required documents to IBJ Schroder Bank & Trust Company (the
"Exchange Agent") prior to the Expiration date (as defined), or if the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis, may use this Notice of Guaranteed Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by
hand or sent by facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight delivery) or mail to the Exchange
Agent. See "The Exchange Offer--Procedures for Tendering Old Notes" in the
Prospectus, dated _____________, 1997 (the "Prospectus").
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
By Hand/Overnight Express:
IBJ Schroder Bank & Trust
Company
One State Street
New York, New York 10004
Attention: Securities
Processing
Window, Subcellar One (SC-1)
By Mail:
(insured or registered mail
recommended)
IBJ Schroder Bank & Trust
Company
P.O. Box 84
Blowling Green Station
New York, New York 10274-0084
Attention: Reorganization
Operations Department
By Facsimile Transmission:
(212) 858-2611
(For Eligible Institutions Only)
To confirm receipt:
(212) 858-2103
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via facsimile transmission to
a number other than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON ____________________________________, 1997, UNLESS THE
EXCHANGE OFFER IS EXTENDED.
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes indicated
below, upon the terms and subject to the conditions contained in the
Prospectus and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Exchange
Offer"), receipt of which is hereby acknowledged, pursuant to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The
Exchange Offer--Procedures For Tendering Old Notes--Guaranteed Delivery
Procedures."
DESCRIPTION OF SECURITIES TENDERED
Name(s) and address(es) of
registered holder as it Certificate Number(s) of Principal amount of
Old
appears on the Old Notes Old Notes Tendered Notes Tendered
(Please Print)
- ------------------------ --------------------- -----------------------
- ----------------------- --------------------- -----------------------
- ------------------------ --------------------- -----------------------
- ----------------------- --------------------- -----------------------
- ------------------------ --------------------- -----------------------
- ----------------------- --------------------- -----------------------
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH
THE BOOK ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:_____________________________________
/ / The Depository Trust Company
Account Number:____________________________________________________
Transaction Code Number:___________________________________________
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution (as defined in the Prospectus),
hereby (a) represents that the above named person(s) "own(s)" the Old Notes
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities exchange Act of 1934, as amended ("Rule 14e-4"), (b) represents
that such tender of Old Notes complies with Rule 14e-4, and (c) guarantees
to either deliver to the Exchange Agent the certificates representing all
of the Old Notes tendered hereby, in proper form for transfer, or to
deliver such Old Notes pursuant to the procedure for book-entry transfer
into the Exchange Agent's account at The Depository Trust Company, in
either case together with the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Prospectus) in the case
of a book-entry transfer, and any other required documents, all within
three business days after the date hereof.
Name of Firm:__________________________ ____________________________
(Authorized Signature)
Address:_______________________________ Title:_______________________
_______________________________________ Name:
_______________________
(Zip Code) (Please type or
print)
Area Code and Telephone Number: Date:________________________
______________________________________
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY,
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
EXHIBIT 99.4
------------
FORM OF
EXCHANGE AGENCY AGREEMENT
This Agreement is entered into as of ______________, 1997 between IBJ
Schroder Bank & Trust Company, a corporation organized under the laws of the
State of New York, as Exchange Agent (the "Agent") and Sun World
International, Inc. a corporation organized under the laws of the State of
Delaware (the "Company").
The Company proposes to exchange $1,000 principal amount of the Company's
11-1/4% First Mortgage Notes due 2004, Series B (the "New Notes") in exchange
(the "Exchange Offer") for an equal aggregate principal amount of the
Company's outstanding 11-1/4% First Mortgage Notes due 2004, Series A (the
"Old Notes") pursuant to the Registration Rights Agreement dated as of
April 16, 1997 and the accompanying Letter of Transmittal. The
Exchange Offer will terminate at 5:00 p.m. New York City Time on
____________, unless extended by the Company in its sole discretion (the
"Expiration Date"). The New Notes are to be issued by the Company pursuant
to the terms of an Indenture dated as of April 13, 1997 (the "Indenture")
between the Company, and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee").
Subject to the provisions hereof, the Company hereby appoints and the Agent
hereby accepts the appointment as Agent for the purposes of receiving,
accepting for delivery and otherwise acting upon tenders of the Old Notes
(the "Certificates") in accordance with the form of Letter of Transmittal
attached hereto (the "L/T") and with the the terms and conditions set forth
herein and under the caption "The Exchange Offer" in the Prospectus.
The Agent has received the following documents in connection with its
appointment:
(1) L/T
(2) a form of Notice of Guaranteed Delivery
(3) the Prospectus
The Agent is authorized and hereby agrees to act as follows:
(a) to address, and deliver by hand or next day courier, a complete set
of the Exchange Offer Documents to each person who, prior to the
Expiration Date, becomes a registered holder of Old Notes promptly
after such person becomes a registered holder of Old Notes;
(b) to receive all tenders of Old Notes made pursuant to the Exchange
Offer and stamp the L/T with the day, month and approximate time of
receipt;
(c) to examine each L/T and Old Notes received to determine that all
requirements necessary to constitute a valid tender have been met.
The Agent shall be entitled to rely on the DTC electronic messages
sent regarding ATOP delivery of the Notes to the Agent's account at
DTC from the DTC participants listed on the DTC position listing
provided to the Agent;
(d) to take such actions necessary and appropriate to correct any
irregularity or deficiency associated with any tender not in proper
order;
(e) to follow instructions given by Susan Chapman of the Company, with
respect to the waiver of any irregularities or deficiencies associated
with any tender;
(f) to hold all valid tenders subject to further instructions from Susan
Chapman of the Company;
(g) to render a written report, in the form of Exhibit A attached hereto,
on each business day during the Exchange Offer and promptly confirm,
by telephone, the information contained therein to Susan Chapman at
100 Wilshire Boulevard, Santa Monica, CA 90401, telephone:
(310) 899-4700, facsimile: (310) 899-4747;
(h) to follow and act upon any written amendments, modifications or
supplements to these instructions, any of which may be given to the
Agent by the President, any Vice President or the Secretary of the
Company or such other person or persons as they shall designate in
writing;
(i) to return to the presentors, in accordance with the provisions of the
L/T, any Old Notes that were not received in proper order and as to
which the irregularities or deficiencies were not cured or waived;
(j) in the event the Exchange Offer is consummated, to deliver
authenticated Exchange Notes to tendering Noteholders, in accordance
with the instructions of such Noteholder's specified in the respective
L/T's, as soon as practicable after receipt thereof;
(k) to determine that all endorsements, guarantees, signatures,
authorities, stock transfer taxes (if any) and such other requirements
are fulfilled in connection with any request for issuance of the
Exchange Notes in a name other than that of the registered owner of
the Old Notes;
(l) to deliver to, or upon the order of, the Company all certificates
received under the Exchange Offer, together with any related
assignment forms and other documents; and
(m) to take all other actions reasonable and necessary in the good faith
judgment of the Agent, to effect the foregoing matters.
The Agent shall:
(a) have no duties or obligations other than those specifically set forth
herein;
(b) not be required to refer to any documents for the performance of its
obligations hereunder other than this Agreement, the L/T and the
documents required to be submitted with the L/T; other than such
documents, the Agent will not be responsible or liable for any
directions or information in the Prospectus or any other document
unless the Agent specifically agrees thereto in writing;
(c) not be required to act on the directions of any person, including the
persons named above, unless the Company provides a corporate
resolution to the Agent or other evidence satisfactory to the Agent
of the authority of such person;
(d) not be required to and shall make no representations and have no
responsibilities as to the validity, accuracy, value or genuineness
of (i) the Exchange Offer, (ii) any Certificates, L/T's or documents
prepared by the Company in connection with the Exchange Offer or (iii)
any signatures or endorsements, other than its own;
(e) not be obligated to take any legal action hereunder that might, in its
judgement, involve any expense or liability, unless it has been
furnished with reasonable indemnity by the Company;
(f) be able to rely on and shall be protected in acting on the written or
oral instructions with respect to any matter relating to its actions
as Agent specifically covered by this Agreement, of any officer of the
Company authorized to give instructions under paragraph (g) above;
(g) be able to rely on and shall be protected in acting upon any
certificate, instrument, opinion, notice, letter, telegram or any
other document or security delivered to it and believed by it
reasonably and in good faith to be genuine and to have been signed by
the proper party or parties;
(h) not be responsible for or liable in any respect on account of the
identity, authority or rights of any person executing or delivering
or purporting to execute or deliver any document or property under
this Agreement and shall have no responsibility with respect to the
use or application of any property delivered by it pursuant to the
provisions hereof;
(i) be able to consult with counsel satisfactory to it (including counsel
for the Company or staff counsel of the Agent) and the advice or
opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with advice or opinion of
such counsel;
(j) not be called on at any time to advise, and shall not advise, any
person delivering an L/T pursuant to the Exchange Offer as to the
value of the consideration to be received;
(k) not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own gross negligence,
willful misconduct or bad faith;
(l) not be bound by any notice or demand, or any waiver or modification
of this Agreement or any of the terms hereof, unless evidenced by a
writing delivered to the Agent signed by the proper authority or
authorities and, if the Agent's duties or rights are affected, unless
the Agent shall give its prior written consent thereto;
(m) have no duty to enforce any obligation of any person to make delivery,
or to direct or cause any delivery to be made, or to enforce any
obligation of any person to perform any other act; and
(n) have the right to assume, in the absence of written notice to the
contrary from the proper person or persons, that a fact or an event
by reason of which an action would or might be taken by the Agent does
not exist or has not occurred without incurring liability for any
action taken or omitted, or any action suffered by the Agent to be
taken or omitted, in good faith or in the exercise of the Agent's best
judgement, in reliance upon such assumption.
The Agent shall be entitled to compensation as set forth in Exhibit B
attached hereto.
The Company covenants and agrees to reimburse the Agent for, indemnify it
against, and hold it harmless from any and all reasonable costs and expenses
(including reasonable fees and expenses of counsel and allocated cost of
staff counsel) that may be paid or incurred or suffered by it or to which it
may become subject without gross negligence, willful misconduct or bad faith
on its part by reason of or as a result of its compliance with the
instructions set forth herein or with any additional or supplemental written
or oral instructions delivered to it pursuant hereto, or which may arise out
of or in connection with the administration and performance of its duties
under this Agreement.
This Agreement shall be construed and enforced in accordance with the laws of
the State of New York and shall inure to the benefit of, and the obligations
created hereby shall be binding upon, the successors and assigns of the
parties hereto. The parties agree to submit and to the exclusive
jurisdiction of the federal or state courts located in the State of New York,
New York County.
Unless otherwise expressly provided herein, all notices, requests, demands
and other communications hereunder shall be in writing, shall be delivered by
hand, facsimile or by First Class Mail, postage prepaid, shall be deemed
given when received and shall be addressed to the Agent and the Company at
the respective addresses listed below or to such other addresses as they
shall designate from time to time in writing, forwarded in like manner.
If to the Agent, to: IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Reorganization Operations Dept.
Telephone: (212) 858-2103
Facsimile: (212) 858-2611
with copies to: IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Corporate Finance Trust Services
Telephone: (212) 858-2529
Facsimile: (212) 858-2952
If to the Company, to: Stanley Speer
Sun World International, Inc.
100 Wilshire Boulevard
16th Floor
Santa Monica, CA 90401-1115
Telephone: (310) 899-4700
Facsimile: (310) 899-4747
with copies to: Lisa Hamilton Klein, Esq.
Miller & Holguin
1801 Century Park East
7th Floor
Los Angeles, CA 90067
Telephone: (310) 556-1990
Facsimile: (310) 557-2205
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their officers thereunto duly authorized, all
as of the day and year first above written.
IBJ Schroder Bank & Trust Company
By:__________________________________
Vice President
By:__________________________________
Vice President
EXHIBIT A
- --------- SAMPLE REPORT
Date:___________________________________
Report Number:___________________________
As of Date:______________________________
Ladies & Gentlemen:
As Exchange Agent for the Exchange Offer dated____________________,1997,
we hereby render the following report:
Principal Amount previously received: _______________________________
Principal Amount received today: _______________________________
Principal Amount received against Guarantees: __________________________
Principal Amount withdrawn today: _______________________________
Total Principal Amount received to date: ===============================
RECAP OF PRINCIPAL AMOUNT REPRESENTED BY GUARANTEES
Guarantees previously outstanding: _______________________________
Guarantees received today: _______________________________
Guarantees withdrawn today: _______________________________
Guarantees outstanding: _______________________________
Total Principal Amount and Guarantees
Outstanding: ==============================
Very truly yours,
Reorganization Operations Dept.
EXHIBIT B
COMPENSATION
The Agent for serving as the Exchange
Agent pursuant to this Agreement, shall
receive a fee of $3,500, payable upon
commencement of the Exchange Offer, and
the Agent's out-of-pocket expenses
incurred in connection with completing
its duties pursuant to this Agreement.
