SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment )*
ERLY INDUSTRIES INC.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
268839 10 7
(CUSIP Number)
N. Dwight Cary, Esq.
Murphy, Weir & Butler
2049 Century Park East, 21st floor
Los Angeles, CA 90067
310-788-3700
(Name, Address and Telephone Number
of Person Authorized to
Receive Notices and Communications)
March 1, 1995
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ]
Check the following box if a fee is being paid with this statement /x/ (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendments subsequent
thereto reporting beneficial ownership of less than five percent of such
class. See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosure provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 268839 10 7
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Internationale Nederlanden (U.S.) Capital Corporation
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / X /
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7. SOLE VOTING POWER 515,358
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 0
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER 515,358
REPORTING
PERSON
WITH 10. SHARED DISPOSITIVE POWER 0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
515,358
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.2%
14. TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
Item 1. Security and Issuer.
This statement relates to the Common Stock, par value $.01 per share (the
"Common Stock"), of Erly Industries Inc., a California corporation (the
"Issuer"). The Issuer's principal executive offices are located at 10990
Wilshire Boulevard, #1800, Los Angeles, California 90024.
Item 2. Identity and Background.
This statement is being filed on behalf of Internationale Nederlanden
(U.S.) Capital Corporation, a Delaware corporation ("Holder"). Holder is
engaged principally in the lending and financial services business. The
principal place of business and principal office of Holder is located at 135
East 57th Street, New York, New York 10022.
Holder is a wholly owned subsidiary of Internationale Nederlanden (U.S.)
Capital Holdings Corporation ("U.S. Holdings"), a holding company with
subsidiaries engaged principally in the financial services business. U.S.
Holdings is organized under the laws of the State of Delaware and its
principal executive office is located at 135 East 57th Street, New York, New
York 10022.
U.S. Holdings is a wholly owned subsidiary of Internationale Nederlanden
Bank N.V. ("INB"). INB is organized under the laws of The Netherlands and has
its principal executive offices at De Amsterdamse Poort, 1102 MG, Amsterdam
Zuid - Oost, Postbus 1800, 1000 AV, Amsterdam, The Netherlands. INB is engaged
principally in the financial services business.
INB is a wholly owned subsidiary of Internationale Nederlanden Groep N.V.
("ING"), a holding company with subsidiaries engaged principally in the
financial services business and organized under the laws of The Netherlands.
ING's principal executive office is located at Strawinskylaan 2631, Postbus
810, 1000 AV Amsterdam, The Netherlands.
Schedule 1 attached hereto and incorporated herein by reference sets
forth certain additional information with respect to each executive officer
and director of (i) Holder, (ii) U.S. Holdings, (iii) INB and (iv) ING.
During the last five years, none of (i) Holder, (ii) U.S. Holdings, (iii)
INB, (iv) ING and, (v) to the best knowledge of Holder, the persons identified
in Schedule 1, has been (a) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (b) a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violations with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
References in this Item 3 and in Items 4 and 6 to Holder shall include
Holder and, as appropriate, its predecessors in interest: Nederlandsche
Middenstandsbank NV, New York Branch; NMB Postbank Groep, NV, New York Branch;
and Internationale Nederlanden Bank, N.V., New York Branch, each organized
under the laws of The Netherlands.
In connection with a financing in April 1988 of Comet Rice, Inc., at such
time a Texas corporation and a wholly owned subsidiary of
<PAGE>
Issuer ("Comet"), Issuer granted Holder an option to purchase up to 54,000
shares of Common Stock at an exercise price of $7.25 per share (the "First
ERLY Stock Option"). Holder's right to acquire any shares of Common Stock
under the First ERLY Stock Option expired in full on November 26, 1993 as a
result of the repayment of the Comet financing.
On September 26, 1988, Holder and ERLY Juice Inc., a California
corporation and a wholly owned subsidiary of Issuer ("ERLY Juice") entered
into a Loan Agreement pursuant to which Holder agreed to lend up to
$24,250,000 to ERLY Juice (the "ERLY Juice Loan Agreement"). As an inducement
and condition to Holder's entering into the ERLY Juice Loan Agreement, Issuer
and Holder concurrently entered into a Stock Option Agreement, pursuant to
which Issuer granted Holder an option to purchase up to 43,000 shares of
Common Stock, at an exercise price of $7.00 per share (the "Second ERLY Stock
Option"). The Second ERLY Stock Option contained standard registration rights
and antidilution provisions. In connection with a subsequent restructuring of
the ERLY Juice Loan Agreement, Holder's right to acquire any shares of Common
Stock under the Second ERLY Stock Option were terminated in full.
As a result of certain defaults under the ERLY Juice Loan Agreement,
including but not limited to the failure to make payments of principal, Holder
and Issuer entered into a letter agreement, dated as of March 16, 1993,
pursuant to which, among other things, as consideration and in exchange for
Holder's forbearance from accelerating the loans under the ERLY Juice Loan
Agreement, Issuer would issue to Holder additional rights to acquire Common
Stock. Pursuant to such letter agreement, Issuer granted to Holder on October
22, 1993 (a) a Warrant to purchase 186,511 shares of Common Stock representing
5% of the number of then issued and outstanding shares of Common Stock, which
option became exercisable after April 30, 1994 at an exercise price of $.01
per share (such warrant, including any amendments thereto, the "A Warrant"),
and (b) a Warrant to purchase 186,511 shares of Common Stock, representing 5%
of the number of then issued and outstanding shares of Common Stock, which
option will be exercisable after April 30, 1995 at an exercise price of $.01
per share (such warrant, including any amendments thereto, the "B Warrant",
and together with the A Warrant, the "Warrants"). The Warrants provided that
if certain amounts owing to Holder by ERLY Juice were repaid as scheduled, the
Warrants would be terminated or adjusted to reduce the number of shares of
Common Stock for which they were exercisable. The Warrants contain standard
registration rights, as well as antidilution provisions. The Warrants also
include "put options", under which Holder may require Issuer to redeem the
Warrants at a price based on the market value of the Common Stock.
As a result of certain additional defaults under the ERLY Juice Loan
Agreement, including but not limited to the failure to make payments of
principal, on February 16, 1995, Holder and Issuer entered into a Loan Extension
Agreement pursuant to which, among other things, Holder (a) extended the
maturity and adjusted the interest rate of the ERLY Juice Loan Agreement, (b)
agreed to document the cancellation of the Second ERLY Stock Option, (c) granted
Issuer a "call" right to repurchase the Warrants at $8.75 per share if all
obligations owing under the ERLY Juice Loan Agreement were repaid by April 1,
1996, and (d) permitted early termination of certain warrants issued to Holder
by Issuer's subsidiaries, if all obligations owing under the ERLY Juice Loan
Agreement were repaid before specified dates, all as consideration and in
exchange for (i) a Warrant to purchase 51,536 shares of Common Stock,
representing 1.2% of the number of issued and outstanding shares of Common Stock
(assuming exercise in full of all rights of Holder to acquire Common Stock),
which option is exercisable after April 1, 1996 for an exercise price of $.01
per share (the "C Warrant"), (ii) a Warrant to purchase 206,143 shares of Common
Stock, representing 4.6% of the number of issued and outstanding shares of
Common Stock (assuming exercise in full of all rights
<PAGE>
of Holder to acquire Common Stock), which option is exercisable after April 1,
1996 for an exercise price of $.01 per share (the "D Warrant"), and (iii) an
amendment and restatement of each of the A Warrant and B Warrant, providing
that each such warrant is exercisable for 257,679 shares of Common Stock, each
warrant representing 5% of the Common Stock on a fully diluted basis. The C
Warrant and the D Warrant contain standard registration rights, as well as
antidilution provisions. The C Warrant and the D Warrant also include "put
options", under which Holder may require Issuer to redeem such warrants at a
price based on the market value of the Common Stock.
The descriptions of the A Warrant, B Warrant, C Warrant and D Warrant
contained herein are qualified in their entirety by reference to such
Warrants, copies of which are attached hereto as Exhibits 1, 2, 3 and 4,
respectively. It is currently anticipated that the consideration required to
purchase the shares of Common Stock pursuant to the Warrants will be provided
from Holder's working capital or through the forgiveness of an equal amount of
indebtedness under the ERLY Juice Loan Agreement.
Item 4. Purpose of Transaction.
The purposes for the acquisition of the Warrants were as an inducement
and condition to certain loans and financial accomodations described herein,
made by Holder for the benefit of Issuer and several of its subsidiaries, as
well as for general investment purposes. Except as set forth above and in Item
6 and the exhibits hereto, Holder has no plans or proposals relating to any
matters specified in paragraphs (a) through (j) of Item 4 of Schedule 13D.
However, Holder reserves the right to adopt such plans or proposals in the
future, subject to applicable regulatory requirements, if any.
Item 5. Interest in Securities of the Issuer.
(a) Holder may be deemed to own beneficially (as that term is defined in
Rule 13d-3 ("Rule 13d-3") under the Act) the shares of Common Stock which it
has a right to acquire pursuant to the Warrants (the "Warrant Shares").
According to the Issuer's Form 10-Q for the quarterly period ended December
31, 1994, there were 3,695,547 shares of Common Stock outstanding as of
December 31, 1994. Based on such number and assuming exercise of the Warrants
in full, the Warrant Shares that Holder may be deemed to own beneficially (as
that term is defined in Rule 13d-3) represent approximately 12.2% of the
outstanding Common Stock. Except as described herein, none of (i) Holder, (ii)
U.S. Holdings, (iii) INB, (iv) ING and, (v) to the best knowledge of Holder,
the persons identified in Schedule 1 hereto, presently beneficially own any
Common Stock.
(b) Upon exercise of the Warrants, Holder will have sole power to vote or
to direct the vote of, and to dispose or to direct the disposition of, the
Warrant Shares which Holder may be deemed to own beneficially (as that term is
defined in Rule 13d-3).
(c) Except as indicated herein, no transactions in the shares of Common
Stock have been effected by (i) Holder, (ii) U.S. Holdings, (iii) INB, (iv)
ING or, (v) to the best knowledge of Holder, by any of the persons listed on
Schedule 1 hereto, during the past 60 days.
(d) No other person is known to have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
Warrant Shares.
(e) Not applicable.
<PAGE>
Item 6. Contracts, Understandings or Relationships with
Respect to Securities of the Issuer.
From time to time, as further inducements and conditions to certain loans
and financial accomodations made by Holder for the benefit of Issuer and
several of its subsidiaries, Holder has received pledges from Issuer of the
capital stock of some of its subsidiaries, as well as options and warrants to
purchase shares of capital stock from some of Issuer's subsidiaries.
In connection with the ERLY Juice Loan Agreement, on September 26, 1988,
ERLY Juice granted Holder an option to purchase shares of its common stock up
to a number representing 5% of the common stock of ERLY Juice on a fully
diluted basis, for an aggregate exercise price of $3.75 (the "First ERLY Juice
Option"). The First ERLY Juice Option includes a "put option", under which
Holder may require ERLY Juice to redeem the stock option at a price equal to
the greatest of an amount based on (1) market value, (2) earnings multiples or
(3) book value.
In connection with an asset acquisition by ERLY Juice, and a loan of
$2,500,000 to Issuer by ERLY Juice, on April 13, 1989, ERLY Juice granted
Holder an option to purchase shares of a class of its nonvoting common stock
up to a number representing 1% of the capital stock of ERLY Juice on a fully
diluted basis, for an aggregate exercise price of $.75 (the "Second ERLY
Juice Option"). The Second ERLY Juice Option included a "put option", under
which Holder may require ERLY Juice to redeem the stock option at a price
equal to the greatest of an amount based on (1) market value, (2) earnings
multiples or (3) book value. Holder's right to acquire any shares of stock
under the Second ERLY Juice Option expired in full on January 27, 1994.
On December 1, 1989, Holder and Chemonics Industries, Inc., an Arizona
corporation and a wholly owned subsidiary of Issuer ("Chemonics") entered into
a loan agreement (the "Chemonics Loan Agreement") pursuant to which Holder
made a bridge loan to Chemonics in the amount of $5,100,000. On December 29,
1989, Chemonics and Holder amended the Chemonics Loan Agreement to convert the
bridge loan into a term loan in the amount of $3,200,000 and a revolving
credit facility in the amount of $8,000,000. As an inducement and a condition
to entering into such loans, (a) Issuer granted to Holder a first priority
pledge of all the capital stock of Chemonics to secure the obligations of
Chemonics to Holder under the Chemonics Loan Agreement (the "First Chemonics
Pledge") and (b) Chemonics issued to Holder a warrant to purchase shares of
its Class B Nonvoting Convertible Common Stock up to a number representing 15%
of the capital stock of Chemonics on a fully diluted basis, at an exercise
price of $.01 per share (the "Chemonics Warrant"). The Chemonics Warrant
includes a "put option" for Holder and a "call option" for Issuer, each at
prices based on the higher of (1) market value and (2) book value. Holder's
right to acquire stock under the Chemonics Warrant terminates in full if the
obligations owing under the ERLY Juice Loan Agreement are repaid by April 1,
1996.
In connection with certain defaults by ERLY Juice under the ERLY Juice
Loan Agreement, on January 27, 1992, ERLY Juice and Holder (a) amended the
First ERLY Juice Option to increase the number of shares subject to such
option to a number representing 17% of ERLY Juice's common stock on a fully
diluted basis. The exercise price for such option remains $.01 per share.
In connection with certain increases in, and defaults under, the ERLY
Juice Loan Agreement, on March 6, 1992, Issuer granted to Holder a second
priority pledge of all the capital stock of Chemonics to secure Issuer's
guaranty of the obligations of ERLY Juice under the ERLY Juice Loan Agreement
(the "Second Chemonics Pledge").
On September 22, 1993, Holder, Issuer and ERLY Juice entered into a
letter agreement, pursuant to which, among other things, (a) Holder forgave
$6,000,000 of ERLY Juice's obligations under the ERLY Juice Loan Agreement and
(b) Issuer entered into a recourse guaranty of ERLY Juice's obligations to
Holder under the ERLY Juice Loan Agreement.
<PAGE>
In November 1994, all the obligations owing to Holder under both the
Chemonics Loan Agreement and the ERLY Juice Loan Agreement, totalling
approximately $18,200,000, were due and payable. In connection with a
restructuring of such debt, the parties arranged a refinancing by another lender
of the Chemonics obligations and an extension by Holder of the ERLY Juice
obligations. Among other things, the conditions to such restructuring included
(a) reorganizing Chemonics' international consulting business as Chemonics
International, Inc., a California corporation and a wholly owned subsidiary of
Chemonics ("Chemonics International"), (b) Holder and Chemonics amending the
Chemonics Loan Agreement, (c) Holder and Chemonics entering into the
non-recourse guaranty and pledge agreement, under which Chemonics pledged the
stock of Chemonics International to secure ERLY Juice's obligations under the
ERLY Juice Loan Agreement, (d) Holder and Issuer amending the First Chemonics
Pledge and the Second Chemonics Pledge, (e) Chemonics and Holder amending the
Chemonics Warrant to grant Holder the right to purchase shares of its class of
voting common stock up to a number representing 15% of the common stock of
Chemonics on a fully diluted basis, and (f) Chemonics International issuing to
Holder a warrant to purchase shares of its common stock up to a number
representing 15% of the common stock of Chemonics International on a fully
diluted basis, at an exercise price of $.01 per share (the "Chemonics
International Warrant") . The Chemonics International Warrant includes a "put
option" for Holder and a "call option" for Issuer, each at prices based on the
higher of (1) market value and (2) book value. Holder's right to acquire stock
under the Chemonics International Warrant terminates in full if the obligations
owing under the ERLY Juice Loan Agreement are repaid by December 31, 1995. In
addition, as part of such restructuring, Holder released certain guaranties of
the ERLY Juice obligations, previously executed by two of Issuer's principal
shareholders.
In May 1993, American Rice, Inc., a Texas corporation ("ARI") acquired
substantially all the assets of Comet and assumed all Comet's liabilities. In
exchange for the assets acquired from Comet, ARI issued to Comet 14,000,000
shares of its Series B preferred stock, $1 par value, each share convertible
into two shares of common stock of ARI (the "ARI Preferred"). Comet thereupon
was liquidated. As a result of the foregoing, Issuer increased its ownership
interests in ARI from 48% to 81% of ARI's voting power. As part of the
reorganization of ARI and Comet, ARI refinanced the outstanding indebtedness
of both entities. ARI arranged for borrowings of $47,500,000 in revolving
credit loans and $65,300,000 in term loans. As collateral for the term loans,
Issuer pledged 13,000,000 shares of the ARI Preferred to the term lenders, and
ARI pledged the stock of its subsidiaries to the term lenders. Holder's
participation in such term loans to ARI in the approximate amount of
$28,333,000 entitles Holder to the benefit of such pledges according to its
proportionate share of the term loans.
It is possible from time to time in the future that an affiliate of
Holder, Internationale Nederlanden (U.S.) Securities Corporation, a registered
broker-dealer, could provide advisory or other financial services to Issuer or
its subsidiaries.
Except as described herein, there are no contracts, arrangements,
understandings or relationships among the persons named in Item 2 hereof or
between such persons and any other person with respect to any securities of
the Issuer.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 - "A" Warrant Agreement dated February 16, 1995, between Erly
Industries Inc. and Internationale Nederlanden (U.S.) Capital
Corporation, amending and restating warrant dated as of
October 22, 1993.
Exhibit 2 - "B" Warrant Agreement dated February 16, 1995, between Erly
Industries Inc. and Internationale Nederlanden (U.S.)
Capital Corporation, amending and restating warrant dated as
of October 22, 1993 and amended as of November 18, 1994.
<PAGE>
Exhibit 3 - "C" Warrant Agreement dated February 16, 1995, between
Erly Industries Inc. and Internationale Nederlanden (U.S.)
Capital Corporation.
Exhibit 4 - "D" Warrant Agreement dated February 16, 1995, between
Erly Industries Inc. and Internationale Nederlanden (U.S.)
Capital Corporation.
Exhibit 5 - Registration Rights Agreement dated February 16, 1995, between
Internationale Nederlanden (U.S.) Capital Corporation and Erly
Industries Inc.
Exhibit 6 - Securities Purchase Agreement dated February 16, 1995, between
Erly Industries Inc. and Internationale Nederlanden (U.S.)
Capital Corporation.
Exhibit 7 - Loan Extension Agreement dated February 16, 1995, among
Internationale Nederlanden (U.S.) Capital Corporation, Erly
Industries Inc., Erly Juice Inc., Chemonics Industries, Inc.
and Chemonics International, Inc.
Exhibit 8 - Amended and Restated Guaranty and Pledge Agreement dated
November 18, 1994, by Erly Industries Inc. in favor of
Internationale Nederlanden (U.S.) Capital Corporation.
Exhibit 9 - First Amendment, dated February 16, 1995, to Amended and
Restated Guaranty and Pledge Agreement, by Erly Industries
Inc. in favor of Internationale Nederlanden (U.S.) Capital
Corporation.
Exhibit 10- Letter Agreement dated March 16, 1993, between Internationale
Nederlanden Bank, N.V. and Erly Industries Inc., relating to
A Warrant and B Warrant.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 7, 1995
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ Michael W. Adler
----------------------
Name: Michael W. Adler
Title: Vice President
<PAGE>
SCHEDULE 1
Set forth below are the name and position of each of the executive
officers and directors of (i) Holder, (ii) U.S. Holdings, (iii) INB and (iv)
ING.
Except as otherwise indicated, the principal occupation of each person
listed below is as a Senior Officer of Holder, U.S. Holdings, INB and/or ING,
as the case may be. Unless otherwise indicated, each person listed below is a
citizen of The Netherlands.
The business address of each person at Holder and U.S. Holdings is 135
East 57th Street, New York, New York 10022. The business address of each
person at INB is De Amsterdamse Poort, 1102 MG, Amsterdam Zuid - Oost, Postbus
1800, 1000 AV, Amsterdam, The Netherlands. The business address of each person
at ING is Strawinskylaan 2631, Postbus 810, 1000 AV Amsterdam, The
Netherlands.
Executive Officers of Holder
Name Position
- ----- --------
L.C. Grijns Chairman
H.D. Bartges President
(U.S.)
Directors of Holder
Principal Occupation
Name (if other than as indicated above)
- ----- ------------------------------------
L.C. Grijns,
Chairman
H.D. Bartges
(U.S.)
J.C. Gray Treasurer of Holder
(U.S.)
Executive Officers of U.S. Holdings
Name Position
- ----- --------
L.C. Grijns Chairman
H.D. Bartges President
(U.S.)
P. Geraghty Senior Managing Director
(U.S.)
Directors of U.S. Holdings
<PAGE>
Principal Occupation
Name (if other than as indicated above)
- ----- ------------------------------------
L.C. Grijns,
Chairman
G.J. Tammes Retired
J. Kemp General Manager of INB
P. Geraghty Managing Director and Chief Executive Officer of
(U.S.) Internationale Nederlanden (U.K.) Capital Ltd.,
55 Basinghall Street, London EC2, U.K.
H.D. Bartges
(U.S.)
H.H. Idzerda General Manager of INB
Executive Officers of INB
Name Position
- ----- --------
G.J.A. van der Lugt Chairman
J.H.M. Lindenbergh
C. Maas
M. Minderhoud
Directors of INB
Principal Occupation
Name (if other than as indicated above)
- ----- ------------------------------------
J.W. Berghuis Vice Chairman, Executive Board, Koninklijke
Pakhoed N.V.
J. Kamminga Chairman of the Board, MKB Nederland; director of
Makelaarskantoor J. Kamminga & Zonen B.V.
O.H.A. van Royen Retired
G. Verhagen Retired
J.J.A. Vollebergh Retired
Executive Officers of ING
Name Position
- ----- --------
A.G. Jacobs Chairman
G.J.A. van der Lugt Vice Chairman
J.H. Holsboer
H. Huizinga
E. Kist
J.H.M. Lindenbergh
C. Maas
M. Minderhoud
<PAGE>
Directors of ING
Principal Occupation
Name (if other than as indicated above)
- ---- ----------------------------------
J.H. Choufoer, Retired
Chairman
T.C. Braakman, Retired
Vice Chairman
P.A.J.M. Steenkamp, Retired
Vice Chairman
L.A.A. van den Berghe Professor at Erasmus University of Rotterdam,
(Belgium) The Netherlands (Economics and management of
insurance companies)
J.W. Berghuis Vice Chairman, Executive Board, Koninklijke
Pakhoed N.V.
J.P. Erbe Retired
V. Halberstadt Professor at Leyden University, The Netherlands
(Faculty of Law, Public Finance)
J. Kamminga Chairman of the Board, MKB Nederland; director
of Makelaarskantoor J. Kamminga & Zonen B.V.
O.H.A. van Royen Retired
J.J. van Rijn Retired
G. Verhagen Retired
M. Ververs Chairman of Executive Board, Wolters Kluwer N.V.
J.J.A. Vollebergh Retired
<PAGE>
EXHIBIT INDEX
Exhibit 1 -- "A" Warrant Agreement dated February 16, 1995, between Erly
Industries Inc. and Internationale Nederlanden (U.S.) Capital
Corporation, amending and restating warrant dated as of October 22,
1993.
Exhibit 2 -- "B" Warrant Agreement dated February 16, 1995, between Erly
Industries Inc. and Internationale Nederlanden (U.S.) Capital
Corporation, amending and restating warrant dated as of October 22,
1993 and amended as of November 18, 1994.
Exhibit 3 -- "C" Warrant Agreement dated February 16, 1995, between Erly
Industries Inc. and Internationale Nederlanden (U.S.) Capital
Corporation.
Exhibit 4 -- "D" Warrant Agreement dated February 16, 1995, between Erly
Industries Inc. and Internationale Nederlanden (U.S.) Capital
Corporation.
Exhibit 5 -- Registration Rights Agreement dated February 16, 1995, between
Internationale Nederlanden (U.S.) Capital Corporation and Erly
Industries Inc.
Exhibit 6 -- Securities Purchase Agreement dated February 16, 1995, between
Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital
Corporation.
Exhibit 7 -- Loan Extension Agreement dated February 16, 1995, among
Internationale Nederlanden (U.S.) Capital Corporation, Erly
Industries Inc., Erly Juice Inc., Chemonics Industries, Inc. and
Chemonics International, Inc.
Exhibit 8 -- Amended and Restated Guaranty and Pledge Agreement dated
November 18, 1994, by Erly Industries Inc. in favor of
Internationale Nederlanden (U.S.) Capital Corporation.
Exhibit 9 -- First Amendment, dated February 16, 1995, to Amended and
Restated Guaranty and Pledge Agreement, by Erly Industries Inc. in
favor of Internationale Nederlanden (U.S.) Capital Corporation.
Exhibit 10-- Letter Agreement dated March 16, 1993, between Internationale
Nederlanden Bank, N.V. and Erly Industries Inc., relating to A
Warrant and B Warrant.
3.7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE PROPOSED
TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR
STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR
QUALIFIED AS REQUIRED.
THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER OF THIS WARRANT
A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY,
REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
THIS CERTIFICATE.
["A Warrant"]
No. of Stock Units: 257,679
AMENDED AND RESTATED WARRANT
to Purchase Common Stock of
ERLY INDUSTRIES INC.
a California corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Certain Definitions.................................................................................... 1
2. Exercise of Warrant.................................................................................... 6
3. Transfer, Division and Combination..................................................................... 8
4. Adjustment of Stock Unit or Exercise Price............................................................. 8
A. Stock Dividends, Subdivisions and Combinations.................................................... 9
B. Certain Other Dividends and Distributions......................................................... 9
C. Issuance of Additional Shares of Common Stock or Convertible
Securities................................................................................... 10
D. Other Provisions Applicable to Adjustments Under this Section..................................... 11
(1) Treasury Stock ........................................................................... 11
(2) When Adjustments to Be Made.................................................................. 11
(3) Fractional Interests......................................................................... 11
(4) When Adjustment Not Required................................................................. 11
E. Merger, Consolidation or Disposition of Assets.................................................... 11
F. Other Action Affecting Common Stock............................................................... 12
G. General ......................................................................................... 12
5. Notices to the Holder.................................................................................. 13
6. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority............................................................. 13
7. Taking of Record; Stock and Warrant Transfer Books..................................................... 14
8. Transfer Taxes......................................................................................... 14
9. No Voting Rights....................................................................................... 14
10. Restrictions on Transferability........................................................................ 14
A. Certain Conditions................................................................................ 14
B. Restrictive Legend................................................................................ 15
C. Notice of Proposed Transfers...................................................................... 15
D. Termination of Restrictions....................................................................... 16
11. Warranties and Representations of the Issuer........................................................... 16
A. Equity Capitalization, etc........................................................................ 16
B. Governmental Consent.............................................................................. 17
C. Survival of Representations....................................................................... 17
12. Limitation of Liability................................................................................ 17
13. Loss, Destruction of Warrant Certificates.............................................................. 18
14. Furnish Information.................................................................................... 18
15. Amendments............................................................................................. 18
16. Office of the Issuer................................................................................... 18
17. Notices Generally...................................................................................... 18
18. Successors and Assigns................................................................................. 19
19. Indemnification........................................................................................ 20
20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE....................................................... 20
21. MUTUAL WAIVER OF JURY TRIAL............................................................................ 20
22. No Waiver; Cumulative Remedies......................................................................... 21
23. Specific Performance................................................................................... 21
24. Modification and Severability.......................................................................... 21
25. Put Option............................................................................................. 21
A. Issuer's Obligation to Repurchase Warrants........................................................ 21
B. Determination of the Put Price.................................................................... 22
26. Call Option............................................................................................ 22
A. ......................................................................................... 22
B. Notice and Exercise of Call Option................................................................ 22
C. Requirement That Issuer Concurrently Exercise Call Option Under
B Warrant..................................................................................... 23
D. Call Price........................................................................................ 23
E. No Restriction on Holder's Right to Exercise Warrant; Certain
Restrictions on Transferability............................................................... 23
27. Amendment and Restatement of the Existing A Warrant.................................................... 23
</TABLE>
<PAGE>
["A Warrant"]
No. of Stock Units: 257,679
AMENDED AND RESTATED WARRANT
to Purchase Common Stock of
ERLY INDUSTRIES INC.
a California corporation
THIS IS TO CERTIFY THAT Internationale Nederlanden (U.S.) Capital
Corporation, a Delaware corporation ("INCC"), or registered assigns, is entitled
to purchase from ERLY Industries Inc., a California corporation (the "Issuer"),
at any time prior to the Expiration Date (as defined below), Two Hundred Fifty
Seven Thousand Six Hundred Seventy Nine (257,679) Stock Units, in whole or in
part, at a purchase price of $0.01 per Stock Unit (adjusted as provided below),
all on the terms and conditions provided in this warrant (this "Warrant").
1. Certain Definitions. As used in this Warrant, unless the context
otherwise requires:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Issuer after the date of this Warrant, other than the
Warrant Stock.
"Affiliate" shall mean, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Appraisal" shall have the meaning given to such term in the definition
of Appraised Value.
"Appraised Value" shall mean the fair market value of all outstanding
Common Stock, as determined by a written appraisal (the "Appraisal") prepared by
an appraiser selected by the Approving Holders and acceptable to the Issuer.
"Fair market value" is defined for this purpose as the price for one hundred
percent (100%) of the equity capital of the Issuer (determined on a
going-concern basis and without giving effect to any discount for (i) a minority
interest or (ii) any lack of liquidity of the Common Stock or the fact that the
Issuer may have no class of equity registered under the Exchange Act) on the
basis of a sale between a willing seller and buyer, neither acting under any
compulsion. In the event that the Issuer and Approving Holders cannot, in good
faith, agree upon an appraiser, then the Issuer, on the one hand, and Approving
Holders, on the other hand, shall each select an appraiser, the two appraisers
so selected shall select a third appraiser who shall be directed to prepare the
Appraisal, and the term Appraised Value shall mean the appraised value set forth
in the appraisal prepared in accordance with this definition.
"Approving Holders" shall mean the holders of Warrants evidencing more
than fifty percent (50%) in number of the total number of Stock Units at the
time purchasable upon the exercise of all then outstanding Warrants.
"B Warrant" means any "Warrant," as such term is defined in that certain
Amended and Restated Warrant to Purchase Common Stock of ERLY Industries Inc.,
denominated the "B Warrant," issued by the Issuer in favor of INCC of even date
herewith.
"B Warrant Stock" means any "Warrant Stock," as such term is defined in
the B Warrant.
"Book Value" shall mean, on any date herein specified, the consolidated
book value of the Issuer applicable to Common Stock as of the last day of any
fiscal month immediately preceding such date, as determined by independent
accountants of recognized national standing selected by the Issuer and
acceptable to the Approving Holders.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Los Angeles, California.
"Call Closing Date" shall have the meaning ascribed to that term in
Section 26.B.
"Call Cutoff Date" means the earlier to occur of (i) Maturity and (ii)
April 1, 1996.
"Call Option" shall have the meaning ascribed to that term in Section
26.A.
"Call Period" shall mean the period, if any, that commences on the
Termination Date and ends on the Call Cutoff Date (it being understood that the
Call Cutoff Date could occur prior to the Termination Date, in which case there
shall be no Call Period).
"Call Price" shall have the meaning ascribed to that term in Section
26.D.
"Call Price Credit" means, as of the Call Closing Date, if any, 100% of
the ING Securities Fees as of such Call Closing Date, it being understood and
agreed that the aggregate amount of the Call Price Credit hereunder and the
"Call Price Credit" under, and as defined in, the B Warrant as of such Call
Closing Date shall in no event be less than 200% of the ING Securities Fees as
of such date, and if for any reason the "Call Price Credit" under, and as
defined in, the B Warrant shall be less than 100% of the ING Securities Fees as
of such date, the Call Price Credit hereunder shall be adjusted accordingly
until the sum thereof and of the "Call Price Credit" under, and as defined in,
the B Warrant is 200% of the ING Securities Fees as of such date.
"Call Share Price" shall have the meaning ascribed to that term in
Section 26.D.
"Closing Date" is as defined in the Loan Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the United States government administering
the Securities Act.
"Common Stock" shall mean the Issuer's authorized Common Stock, par
value $0.01 per share, as constituted on the date of this Warrant, and (i) any
stock into which such Common Stock may subsequently be changed or any other
capital stock that is not preferred as to dividends or distribution of assets
over any other class of stock of the Issuer, and which is not subject to
redemption, that may be authorized by the Issuer and (ii) shares of common stock
of any successor or acquiring corporation received by or distributed to the
holders of Common Stock in the circumstances contemplated by Section 4.E.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock, warrants, rights or other securities which are convertible into or
exchangeable for Additional Shares of Common Stock, either immediately or upon
the arrival of a specified date or the happening of a specified event; provided
that Convertible Securities shall not mean the Warrants.
"Current Market Price" per share of Common Stock, for the purposes of
any provision of this Warrant at the date specified in such provision, shall be
deemed to be the price determined pursuant to the first applicable of the
following methods:
(i) If the Common Stock is traded on a national securities exchange or
is traded in the over-the-counter market, the Current Market Price per share of
Common Stock shall be deemed to be the average of the daily market prices for
thirty (30) consecutive Trading Days commencing forty-five (45) Trading Days
before such date. The market price for each such Trading Day shall be, (a) if
the Common Stock is traded on a national securities exchange, its last sale
price on the preceding Trading Day on such national securities exchange or, if
there was no sale on that day, the last reported sale price on such national
exchange on the next preceding Trading Day on which there was a sale, or (b) if
the principal market for the Common Stock is the over-the-counter market, and
the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), the last sale price reported on NASDAQ
on the preceding Trading Day or, if the Common Stock is an issue for which last
sale prices are not reported on NASDAQ, the average of the closing bid and asked
quotations on such day, but, in each of the immediately preceding two cases, if
the relevant NASDAQ price or quotations did not exist on such day, then the
price or quotations on the next preceding Trading Day in which there was such a
price or quotations.
(ii) If the Current Market Price per share of Common Stock cannot be
ascertained by any of the methods set forth in paragraph (i) immediately above,
the Current Market Price per share of outstanding Common Stock shall be deemed
to be the price equal to the quotient determined by dividing the higher of (i)
Book Value or (ii) Appraised Value, by the number of shares (including any
fractional shares) of Fully Diluted Outstanding Common Stock.
"Current Warrant Price" per share of Common Stock, for the purpose of
any provision of this Warrant at the date specified in this Warrant, shall mean
the amount equal to the quotient resulting from dividing the Exercise Price in
effect on such date by the number of shares (including any fractional share) of
Common Stock comprising a Stock Unit on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Price" shall mean the purchase price per Stock Unit as set
forth on the first page of this Warrant on the date of original issue of this
Warrant and thereafter shall mean such dollar amount as shall result from the
adjustments specified in Section 4, if any.
"Existing A Warrant" means the Warrant to Purchase Common Stock of ERLY
Industries Inc., denominated the "A Warrant," issued by the Issuer in favor of
INCC and dated as of October 22, 1993.
"Expiration Date" shall mean April 30, 1998.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, and any other options,
warrants or other rights to purchase or receive Common Stock outstanding on such
date.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time.
"Holder" shall mean the holder of this Warrant.
"ING Securities Fees" means, as of any time of determination, the
aggregate net advisory fees actually received by Internationale Nederlanden
(U.S.) Securities Corporation during the period from the Closing Date through
and including such time of determination with respect to or in connection with
financings with respect to the Issuer and/or American Rice, Inc., a Texas
corporation.
"Loan Agreement" shall mean that certain Amended and Restated Loan
Agreement dated as of the issue date hereof between ERLY Juice Inc. and INCC, as
amended from time to time.
"Maturity" is as defined in the Loan Agreement.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Issuer or any Subsidiary thereof, and shall include all shares
issuable in respect of any certificates representing fractional interests in
shares of Common Stock.
"Person" shall mean a corporation, an association, a trust, a
partnership, a joint venture, an organization, a business, an individual, a
government, a political subdivision or a governmental body.
"Put Price" shall have the meaning ascribed to that term in Section
25(B).
"Restricted Certificate" shall mean a Warrant or a certificate
representing Common Stock bearing the restrictive legend set forth in Section
10.
"Restricted Securities" shall mean Restricted Stock and Restricted
Warrants.
"Restricted Stock" shall mean Warrant Stock represented by a Restricted
Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a Restricted
Certificate.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
under such act, all as the same shall be in effect at the time.
"Subsidiary" shall mean, with respect to any Person, any corporation of
which an aggregate of more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person.
"Stock Unit" shall constitute one share of Common Stock, as such Common
Stock was constituted on the date of this Warrant and thereafter shall
constitute such number of shares (including any fractional shares) of Common
Stock as shall result from the adjustments specified in Section 4, if any.
"Subscription" shall mean a subscription form in the form set out in
Annex I hereto.
"Termination Date" is as defined in the Loan Agreement.
"Trading Day" shall mean any day on which trading occurs on the New York
Stock Exchange.
"Warrant Stock" shall mean the shares of Common Stock purchasable by the
holder of a Warrant upon the exercise of such Warrant.
"Warrants" shall mean this Warrant, and all additional or new warrants
issued upon transfer, division or combination of, or in substitution for, this
Warrant or any such additional or new warrant. All such additional or new
warrants shall at all times be identical as to terms and conditions and date,
except as to the number of Stock Units for which they may be exercised.
2. Exercise of Warrant. The Holder may, at any time prior to the
Expiration Date, exercise this Warrant in whole at any time or in part from time
to time for the number of Stock Units which such holder is then entitled to
purchase under this Warrant. In order to exercise this Warrant, in whole or in
part, the Holder shall deliver to the Issuer at its office maintained for such
purpose pursuant to Section 16 (i) a written notice of the Holder's election to
exercise this Warrant, which notice shall specify the number of Stock Units to
be purchased, (ii) this Warrant and (iii) a sum equal to the Exercise Price for
the number of Stock Units to be purchased in the manner specified below. Such
notice shall be in the form of Subscription set out at the end of this Warrant.
Upon delivery of one or more Subscriptions, the Issuer shall cause to be
executed and delivered to the Holder within five (5) Business Days a certificate
or certificates representing the aggregate number of fully paid and
nonassessable shares of Common Stock issuable upon such exercise.
At the option of the Holder, payment of the Exercise Price shall be made
(a) by wire transfer of funds to an account in a bank located in the United
States designated by the Issuer for such purpose, (b) by certified or official
bank check payable to the order of the Issuer and drawn on a member of the New
York Clearing House, (c) by application of all or any part of the principal
amount of the Obligations (as defined in the Loan Agreement) if such Holder is
INCC or an Affiliate of INCC, or (d) by any combination of such methods.
The stock certificate or certificates for Warrant Stock so delivered
shall be in such denominations as may be specified in such notice and shall be
registered in the name of the Holder or such other name or names as shall be
designated in such notice. Such certificate or certificates shall be deemed to
have been issued and the Holder or any other Person so designated to be named in
such certificate or certificates shall be deemed to have become a holder of
record of such shares, including, to the extent permitted by law, the right to
vote such shares or to consent or to receive notice as a stockholder, as of the
date the notice is delivered to the Issuer as set forth above. If this Warrant
shall have been exercised only in part, the Issuer shall, within five (5)
Business Days of delivery of such certificate or certificates, deliver to the
Holder a new Warrant dated the date it is issued, evidencing the rights of the
Holder to purchase the remaining Stock Units called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.
Except as otherwise provided in Section 8, the Issuer shall pay all
expenses, transfer taxes and other charges payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2,
except that, if such stock certificates shall be registered in a name or names
other than the name of the Holder, funds sufficient to pay all stock transfer
taxes which shall be payable upon the issuance of such stock certificate or
certificates shall be paid by the Holder prior to the issuance of such stock
certificate or certificates.
All shares of Common Stock issuable upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable, and free from all liens
and other encumbrances on such shares.
The Issuer will not close its books against the transfer of this Warrant
or of any share of Warrant Stock in any manner which interferes with the timely
exercise of this Warrant.
The Issuer shall not be obligated to issue certificates for fractional
shares of stock upon any exercise of this Warrant.
3. Transfer, Division and Combination. Subject to Section 10, this
Warrant is, and all rights under this Warrant are, transferable, in whole or in
part, on the books of the Issuer to be maintained for such purpose, upon
surrender of this Warrant at the office of the Issuer maintained for such
purpose pursuant to Section 16, together with a written assignment of this
Warrant in substantially the form of Annex II hereto duly executed by the Holder
or its agent or attorney and payment of funds sufficient to pay any stock
transfer taxes payable upon the making of such transfer. Upon such surrender and
payment the Issuer shall, subject to Section 10, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. This Warrant, if properly assigned in compliance with this
Section 3 and Section 10, may be exercised by an assignee for the purchase of
shares of Common Stock without having a new Warrant issued.
This Warrant may, subject to Section 10, be divided or combined with
other Warrants upon presentation at the office of the Issuer referenced above,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the preceding paragraph and with Section 10, as to
any transfer which may be involved in such division or combination, the Issuer
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
The Issuer shall pay all expenses, taxes (other than stock transfer
taxes excluded by the previous provision of this Section 3) and other charges
incurred by the Issuer in the performance of its obligations in connection with
the preparation, issue and delivery of Warrants under this Section 3.
The Issuer agrees to maintain at its office described in Section 16
books for the registration and transfer of the Warrants.
4. Adjustment of Stock Unit or Exercise Price. The number of shares of
Common Stock comprising a Stock Unit, or the Exercise Price, shall be subject to
adjustment from time to time as set forth in this Section 4 and in Section 5.
A. Stock Dividends, Subdivisions and Combinations. If at any time or
from time to time the Issuer shall:
(1) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Common Stock, or
(2) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(3) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Common Stock which a record holder of the number of shares
of Common Stock comprising a Stock Unit immediately prior to the happening of
such event would own or be entitled to receive after the happening of such
event.
B. Certain Other Dividends and Distributions. If at any time or from
time to time the Issuer shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive any dividend or other distribution
of:
(1) cash (other than a cash distribution made as a dividend and payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of the Issuer, to the
extent, but only to the extent, that the aggregate of all such dividends paid or
declared after the date of this Warrant, does not exceed the consolidated net
income of the Issuer earned subsequent to the date of this Warrant determined in
accordance with GAAP, consistently applied), or
(2) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of Common
Stock) or any other securities or property of any nature whatsoever (other than
cash and other than Convertible Securities or Additional Shares of Common
Stock), or
(3) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness (other than Convertible Securities), any shares of
its stock (other than Additional Shares of Common Stock) or any other securities
or property of any nature whatsoever (other than cash and other than Convertible
Securities or Additional Shares of Common Stock),
then the number of shares of Common Stock comprising a Stock Unit from such time
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (i) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record, and (ii) the
denominator of which shall be such Current Market Price per share minus the
portion applicable to one share of Common Stock of any such cash so
distributable and of the fair value of any and all such evidences of
indebtedness, shares of stock, other securities or property, or warrants or
other subscription or purchase rights, so distributable. Such fair value shall
be determined in good faith by the board of directors of the Issuer, provided
that if such determination is objected to by Approving Holders, such
determination shall be made by an independent appraiser chosen in the manner
specified in the definition of Appraised Value. A reclassification of the Common
Stock into shares of Common Stock and shares of any other class of stock shall
be deemed a distribution by the Issuer to the holders of its Common Stock of
such shares of such other class of stock within the meaning of this Subsection B
and, if the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification,
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Subsection A of this
Section 4.
C. Issuance of Additional Shares of Common Stock or Convertible
Securities. If at any time or from time to time the Issuer shall (except as
provided below) issue, whether in connection with the merger of a corporation
into the Issuer or otherwise, any Additional Shares of Common Stock or
Convertible Securities, then the number of shares of Common Stock comprising a
Stock Unit from such time shall be adjusted to be that number determined by
multiplying the number of shares of Common Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of shares of Fully Diluted Outstanding Common Stock plus the
number of such Additional Shares of Common Stock so issued (or the number of
shares of Common Stock into which such Convertible Securities are convertible or
exchangeable, as the case may be), and (y) the denominator of which shall be the
number of shares of Fully Diluted Outstanding Common Stock.
Upon any subsequent adjustment in the number of shares of Common Stock
into which any Convertible Securities are convertible or exchangeable, the
number of shares of Common Stock comprising a Stock Unit shall be recalculated
in accordance with the preceding sentence. No further adjustments of the number
of shares of Common Stock comprising a Stock Unit shall be made upon the actual
issuance of Common Stock upon the conversion or exchange of any Convertible
Securities.
The foregoing provisions of this Subsection C shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Subsection A or B of this Section 4.
D. Other Provisions Applicable to Adjustments Under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock comprising a Stock Unit provided for above in
this Section 4:
(1) Treasury Stock. The sale or other disposition of any issued shares
of Common Stock owned or held by or for the account of the Issuer shall be
deemed an issuance of such stock for purposes of this Section 4.
(2) When Adjustments to Be Made. The adjustments required by the
preceding Subsections of this Section 4 shall be made whenever and as often as
any specified event requiring an adjustment shall occur (including upon any
adjustment in the number of shares of Common Stock into which any Convertible
Securities are convertible or exchangeable), except that no adjustment shall be
made except pursuant to Subsection A of this Section 4 if it would decrease the
number of shares of Common Stock comprising a Stock Unit immediately prior to
such adjustment. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(3) Fractional Interests. In computing adjustments under this Section 4,
fractional interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(4) When Adjustment Not Required. If the Issuer shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall, after
taking such record and before the distribution of such dividend, distribution,
subscription or purchase rights to shareholders, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then no
adjustment shall be required by reason of the taking of such record, and any
such adjustment previously made in respect of the taking of such record shall be
rescinded and annulled.
E. Merger, Consolidation or Disposition of Assets. In the event the
Issuer (1) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (2) shall permit any other corporation or entity to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving corporation but, in connection with such consolidation or merger,
the shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other person or cash or any other property, or (3) shall
transfer all or substantially all of its properties or assets to any other
corporation or entity, or (4) shall effect a capital reorganization or
reclassification of the Common Stock (other than a change from par to no-par
value stock or from no-par to par value stock, or a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the number of shares comprising a Stock Unit is provided in
Subsection C of this Section 4), then, and in each such event, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in this Subsection E, the Holder, upon the conversion of all or any part of this
Warrant at any time after the consummation of such consolidation, merger,
transfer, reorganization or reclassification, shall be entitled to receive, in
lieu of the shares of Common Stock issuable upon such conversion prior to such
consummation, the stock and other securities, cash and property to which such
Holder would have been entitled upon such consummation if such Holder had
converted the Warrant immediately prior to such consummation, subject to
adjustments (subsequent to such corporate action) as nearly equivalent as
possible to the adjustments provided for in this Section 4. Anything contained
in this Warrant to the contrary notwithstanding, the Issuer will not effect any
of the transactions described in clauses (1) through (4) above unless, prior to
the consummation of such transaction, each corporation (other than the Issuer)
which may be required to deliver any stock, securities, cash or property upon
the conversion of this Warrant shall assume, by written instrument delivered to
the Holder, the obligation to deliver to the Holder such shares of stock,
securities, cash or property as the Holder may be entitled to receive upon such
conversion.
The foregoing provisions of this Subsection E shall similarly apply to
successive mergers, consolidations or dispositions of assets. In addition to any
other requirements under this Subsection E, the Issuer shall give notice to the
Holder of this Warrants of any merger, consolidation or disposition at least
thirty (30) days before the occurrence of such merger, consolidation or
disposition.
F. Other Action Affecting Common Stock. In case at any time or from time
to time the Issuer shall take any action affecting its Common Stock, other than
an action described in any of the foregoing Subsections A to E inclusive, of
this Section 4, then, unless in the opinion of the Holder such action will not
have a materially adverse effect upon the rights of the Holder, the number of
shares of Common Stock or other stock comprising a Stock Unit, or the purchase
price of such shares, shall be adjusted in such manner and at such time as the
Issuer and the Holder may in good faith agree to be equitable in the
circumstances.
G. General. The Issuer hereby warrants and represents that, on the date
of issuance of this Warrant, this Warrant is exercisable (after giving effect to
the exercise in full of this Warrant) for not less than 5% of the number of
shares of Fully Diluted Outstanding Common Stock. The Issuer agrees that it will
at all times cause this Warrant to be exercisable (after giving effect to the
exercise in full of this Warrant) for not less than 5% of the number of shares
of Fully Diluted Outstanding Common Stock (or such lesser percentage as may
result solely from one or more partial exercises of this Warrant).
5. Notices to the Holder. Whenever the number of shares of Common Stock
comprising a Stock Unit, or the price at which a Stock Unit may be purchased
upon exercise of this Warrant, shall be adjusted pursuant to Section 4, the
Issuer shall forthwith obtain a certificate signed by the principal financial
officer of the Issuer or, if the Approving Holders request, by independent
accountants of recognized national standing selected by the Issuer and
acceptable to the Approving Holders, setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a statement of the fair value, as determined by the board
of directors of the Issuer or by appraisal (if applicable), of any evidences of
indebtedness, shares of stock, other securities or property or warrants or other
subscription or purchase rights referred to in Section 4.B(3) or Section 4.E)
and specifying the number of shares of Common Stock comprising a Stock Unit, and
any change in the Exercise Price of a Stock Unit, after giving effect to such
adjustment or change. The Issuer shall promptly, and in any case within three
(3) Business Days after the making of such adjustment, cause a signed copy of
such certificate to be delivered to the Holder. The Issuer shall keep at its
office or agency, maintained for the purpose pursuant to Section 16, copies of
all such certificates and cause the same to be available for inspection at said
office during normal business hours by the Holder or any prospective purchaser
of a Warrant designated by the Holder.
6. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority. The Issuer shall at all times reserve
and keep available for issue upon the exercise of this Warrant such number of
its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of this Warrant. All shares of Common Stock that
shall be issued upon exercise of this Warrant and payment of the Exercise Price
relating to such shares to the Issuer, shall be duly and validly issued and
fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price per share of Common Stock below the then par value, if
any, of the shares of Common Stock issuable upon exercise of this Warrant, the
Issuer shall take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Issuer may validly and legally issue fully paid
and nonassessable shares of Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock comprising a Stock Unit or in the Current
Warrant Price per share of Common Stock, the Issuer shall obtain all such
authorizations or exemptions of, or consents to, such action as may be necessary
from any public regulatory body or bodies having jurisdiction over it by virtue
of such action.
7. Taking of Record; Stock and Warrant Transfer Books. In the case of
all dividends or other distributions by the Issuer to the holders of its Common
Stock with respect to which any provision of Section 4 refers to the taking of a
record of such holders, the Issuer will in each such case take such a record and
will take such record as of the close of business on a Business Day. The Issuer
will not at any time, except upon dissolution, liquidation or winding up, close
its stock transfer books or Warrant transfer books so as to result in preventing
or delaying the exercise or transfer of this Warrant.
8. Transfer Taxes. The Issuer will pay any and all transfer taxes that
may be payable in respect of the issuance or delivery of shares of Common Stock
on exercise of this Warrant. The Issuer shall not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which this
Warrant is registered, and no such issue or delivery shall be made unless and
until the Person requesting such issue has paid to the Issuer the amount of any
such tax, or has established, to the satisfaction of the Issuer, that such tax
has been paid.
9. No Voting Rights. Except as expressly provided in this Warrant, this
Warrant shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Issuer.
10. Restrictions on Transferability.
A. Certain Conditions. To the extent that this Warrant or the Warrant
Stock covered by the Warrant constitute Restricted Securities, such Restricted
Securities shall not be transferable except upon the conditions specified in
this Section 10; provided that, notwithstanding any other provisions of this
Section 10, the Holder (and each other person mentioned below in this clause)
shall have the right to transfer all Restricted Securities or any Restricted
Security to any Affiliate of the Holder, in each case free of the restrictions
imposed by this Section 10 other than the requirement as to the legending of the
certificates for such Restricted Securities specified in Section 10.B. Each such
transferee shall be subject to the same transfer restrictions imposed on the
Warrant holder by this Warrant.
B. Restrictive Legend. Unless and until otherwise permitted by this
Section 10, each Warrant issued upon transfer, division or combination of, or in
substitution for, this Warrant, each certificate for any Warrant Stock issued
upon exercise of this Warrant and each certificate for any Warrant Stock issued
to any subsequent transferee of any such certificate shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED
TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR
STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR
QUALIFIED AS REQUIRED.
"THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A NEW
CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY,
REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
THIS CERTIFICATE."
C. Notice of Proposed Transfers. Prior to any transfer or attempted
transfer of any Restricted Securities not covered by the proviso contained in
Subsection A of this Section 10, the Holder shall give written notice to the
Issuer of the Holder's intention to effect a transfer of such Restricted
Securities. Each such notice shall describe the manner and circumstances of the
proposed transfer in material detail. Upon receipt of such notice, the Issuer
may request an opinion of Murphy, Weir & Butler or such other counsel of the
Holder (which counsel shall be reasonably satisfactory to the Issuer) to the
effect that such proposed transfer may be effected without registration under
the Securities Act. Upon receipt of such opinion, the Issuer shall, as promptly
as practicable, so notify the Holder. Upon such notice or if the Issuer has not
requested such an opinion, within ten (10) days after the Issuer's receiving
notice of the proposed transfer, the Holder shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the Holder to the Issuer. Each Warrant or certificate evidencing the Restricted
Securities thus to be transferred (and each Warrant or certificate evidencing
any untransferred balance of the Restricted Securities evidenced by such
Restricted Certificate) shall bear the restrictive legend set forth in Section
10.B, unless in the opinion of the Issuer or the opinion of such counsel, if
requested, such legend is not required in order to insure compliance with the
Securities Act.
D. Termination of Restrictions. Notwithstanding the foregoing provisions
of Section 10, the restrictions imposed upon the transferability of the
Restricted Securities shall cease and terminate as to any particular Restricted
Security when such Restricted Security shall have been effectively registered
under the Securities Act, including, without limitation, any registration
pursuant to the Registration Rights Agreement between the Issuer and INCC dated
as of the issue date hereof. Whenever such restrictions imposed shall terminate
as to any Restricted Certificate, as provided in this Section 10.D, the Holder
shall be entitled to receive from the Issuer, without expense, a new Warrant of
like tenor and date and representing the right to purchase the same number of
aggregate number of shares of Common Stock or a new certificate representing the
same number of shares of Warrant Stock (as the case may be), but not bearing the
restrictive legend otherwise required by this Warrant.
11. Warranties and Representations of the Issuer. The Issuer represents
and warrants to the Holder that as of the date of this Warrant:
A. Equity Capitalization, etc.
(1) Upon the issuance of this Warrant, the total number of shares of
capital stock which the Issuer has authority to issue is 5,006,000 shares,
consisting of 5,000,000 shares of Common Stock, par value $0.01 per share, and
6,000 shares of preferred stock, $100.00 par value per share. The Issuer has the
power and authority and has taken all actions (corporate or otherwise) necessary
to authorize it to enter into and perform its obligations and undertakings under
this Warrant. Except as set forth on Exhibit 11.A hereto, upon the issuance of
this Warrant, the Issuer will not have outstanding any stock or securities
convertible into or exchangeable for any shares of its capital stock nor does it
have outstanding any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any of its capital stock or stock or securities convertible into or exchangeable
for any of its capital stock other than the Warrants.
(2) When issued and delivered, the Warrants will have been duly
executed, issued and delivered and will constitute legal, valid and binding
obligations of the Issuer, enforceable by the Holder in accordance with their
terms.
(3) None of the issuance of any Warrant, the consummation of the
transactions contemplated in any Warrant, or compliance with the terms and
provisions of this Warrant will conflict with or result in a breach of, or
require any consent under, the certificate of incorporation or the by-laws of
the Issuer, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement or
instrument to which the Issuer is a party or by which it is bound or to which it
or its property is subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any lien upon any of the
revenues or assets of the Issuer pursuant to the terms of any such agreement or
instrument.
(4) There is not in effect on the date of this Warrant any agreement by
the Issuer (other than registration agreements copies of each of which have been
furnished by the Issuer to INCC) pursuant to which any holders of securities of
the Issuer have a right to cause the Issuer to register such securities under
the Securities Act.
(5) The Issuer is a corporation duly organized and validly existing in
good standing under the laws of the State of California and has the corporate
power and authority to execute and deliver this Warrant and to perform its
terms, including, without limitation, the issuance of Warrant Stock upon
exercise of this Warrant. The Issuer has taken all action necessary to authorize
the execution, delivery and performance of this Warrant and the issuance of the
Warrant Stock upon exercise of this Warrant.
B. Governmental Consent. Neither the nature of the Issuer or of any of
its businesses or properties, nor any relationship between the Issuer and any
other Person, nor (except as expressly provided for in this Warrant) any
circumstance in connection with the offer, issue or sale of this Warrant or the
Warrant Stock is such as to require consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of the Issuer as a condition to the execution and delivery of this Warrant
or the execution and filing of any certificate of amendment of the certificate
of incorporation of the Issuer required in connection with the authorization or
issuance of Warrant Stock or the offer, issue or sale of this Warrant or the
Warrant Stock.
C. Survival of Representations. All representations set forth in this
Section 11 shall survive the issuance and delivery of this Warrant.
12. Limitation of Liability. No provision of this Warrant, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration in this Warrant of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the purchase price of
the Warrant Stock or as a stockholder of the Issuer, whether such liability is
asserted by the Issuer or by creditors of the Issuer.
13. Loss, Destruction of Warrant Certificates. Upon receipt of evidence
satisfactory to the Issuer of the loss, theft, destruction or mutilation of this
Warrant and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security satisfactory to the Issuer (the original Warrant holder's
or any other institutional Warrant holder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of this Warrant), or, in
the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of the lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
14. Furnish Information. The Issuer will file with the Commission on or
before the due date all regular or periodic reports required to be filed
pursuant to the Exchange Act, and will deliver to the holder of record of this
Warrant promptly after their becoming available copies of all financial
statements, reports and proxy statements which the Issuer shall have sent to its
stockholders generally, and of each regular or periodic report (including,
without limitation, reports on Form 8-K) filed by it pursuant to the Exchange
Act, and any Registration Statement, prospectus or written communication (other
than transmittal letters and other communications not publicly available) filed
or delivered by it pursuant to the Securities Act.
15. Amendments. The terms of this Warrant and all other Warrants may be
amended, and the observance of any term in such Warrant may be waived, but only
with the written consent of the Approving Holders, provided that no such
amendment or waiver may change the number of shares of stock comprising a Stock
Unit or the Exercise Price, without the written consent of the Holders. For the
purposes of determining whether the Approving Holders have taken any action
authorized by this Warrant, any Warrants owned by the Issuer or any Affiliate of
the Issuer (other than an institutional investor which may be deemed an
Affiliate solely by reason of the ownership of Warrants) shall be deemed not to
be outstanding.
16. Office of the Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in Los Angeles, California where this
Warrant may be presented for exercise, transfer, division or combination as in
this Warrant provided. Such office shall be at 10990 Wilshire Boulevard, Los
Angeles, California 90024 unless and until the Issuer shall designate and
maintain some other office for such purposes and deliver written notice of the
address of such other office to the Holders.
17. Notices Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered (i) in person with receipt acknowledged, (ii) by facsimile
transmission, with receipt electronically confirmed during normal business hours
of recipient, and that is confirmed by sending, no later than one (1) Business
Day following such transmission, a copy of such facsimile, by registered or
certified mail, return receipt requested, postage prepaid, or (iii) by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(1) If to any Holder or holder of Warrant Stock, at its last known
address or facsimile transmission number appearing on the books of the Issuer
maintained for such purpose.
(2) If to the Issuer at:
Erly Industries Inc.
10990 Wilshire Boulevard
Los Angeles, California 90024
Attention: Kurt Grey
Facsimile: (310) 473-8890
with a copy to:
Magnus, Epman & Dwyer
300 Corporate Pointe, Suite 310
Culver City, California 90230-7614
Attention: Ronald J. Epman, Esq.
Facsimile: (310) 216-0701
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged or sent by facsimile with receipt
electronically confirmed during normal business hours of recipient, or three (3)
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration, delivery or other communication to the person
designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration,
delivery or other communication.
18. Successors and Assigns. This Warrant shall bind and inure to the
benefit of and, be enforceable by the parties to this Warrant and their
respective successors and assigns, and, without limiting the generality of the
foregoing, shall inure to the benefit of and be enforceable by each person who
shall from time to time be the Holder of this Warrant.
19. Indemnification. The Issuer agrees to indemnify and hold harmless
Holder, its officers, directors, employees, agents, and attorneys from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder
relating to or arising out of (i) Holder's exercise of this Warrant and/or
ownership of any shares of Warrant Stock issued in consequence thereof, or (ii)
any litigation to which Holder is made a party in its capacity as a stockholder
or warrant holder of the Issuer; provided, however, that the Issuer will not be
liable hereunder to the extent that any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses or disbursements are found in a final non-appealable judgment by a
court to have resulted from either (i) Holder's gross negligence or willful
misconduct, (ii) actions or omissions taken or not taken by Holder in any
capacity other than as a stockholder or warrant holder of the Issuer, or (iii)
any knowing violation of federal or state securities laws by Holder.
20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. THE ISSUER AND HOLDER CONSENT TO PERSONAL JURISDICTION, WAIVE ANY
OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED
ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA. SERVICE OF PROCESS ON THE ISSUER OR HOLDER IN ANY ACTION ARISING OUT
OF OR RELATING TO THIS WARRANT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN
ACCORDANCE WITH THE PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 17. NOTHING
HEREIN SHALL PRECLUDE HOLDER OR THE ISSUER FROM BRINGING SUIT OR TAKING LEGAL
ACTION IN ANY OTHER JURISDICTION.
21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE ISSUER AND HOLDER HEREOF WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
ISSUER AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE ISSUER AND HOLDER HEREOF
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS WARRANT, WHETHER ARISING IN CONTRACT,
TORT OR OTHERWISE.
22. No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Holder, any right, remedy, power or privilege
under this Warrant, shall operate as a waiver of any such right, remedy power or
privilege; nor shall any single or partial exercise of any right, remedy, power
or privilege under this Warrant preclude any other or further exercise of any
such right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Warrant are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
23. Specific Performance. The Issuer and the Holder agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Holder shall be entitled
to an injunction or injunctions to prevent breaches of this Warrant and to
enforce specifically the terms and provisions of this Warrant in any court of
the United States or any states of the United States having jurisdiction, this
being in addition to any other remedy to which it may be entitled at law or in
equity.
24. Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained in this Warrant, any
provision of this Warrant is found to be unenforceable, then such provision
shall be deemed modified to the extent necessary to make it enforceable by such
court or agency. If any such provision is not enforceable as set forth in the
preceding sentence, the unenforceability of such provision shall not affect the
other provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained in this Warrant.
25. Put Option.
A. Issuer's Obligation to Repurchase Warrants. Upon written notice from
the Holder from time to time prior to the Expiration Date, the Issuer shall, on
the date designated in such notice (which date shall be at least thirty (30)
Business Days after the date of such notice), repurchase from such Holder all or
the portion of this Warrant designated in such notice for an amount determined
by multiplying (i) the Put Price per Stock Unit in effect on the date of such
notice by (ii) the number of Stock Units that are designated for repurchase in
such notice. Upon such designated repurchase date, the Holder shall surrender
this Warrant to the Issuer, without being required to make any representation or
warranty (other than that the Holder has good and valid title to this Warrant),
against payment for such repurchase by (at the option of the Holder) (i) wire
transfer to an account in a bank located in the United States designated by the
Holder for such purposes or (ii) delivery of a certified or official bank check
drawn on a member of the New York Clearing House. If less than all of this
Warrant is being repurchased, the Issuer shall cancel this Warrant and issue in
the name of, and deliver to, the Holder a new Warrant for the portion of the
number of Stock Units not being repurchased.
B. Determination of the Put Price. The Put Price per Stock Unit as of a
date specified shall be equal to the Current Market Price per share of Common
Stock as of the date of such determination, multiplied by the number of shares
of Common Stock constituting a Stock Unit on such date, minus the Exercise
Price.
26. Call Option.
A. Option to Repurchase Warrant and Issued Warrant Stock. During the
Call Period, the Issuer shall have the right, subject to the terms and
conditions of this Section 26, to repurchase from Holders all (but not less than
all) of the Warrant and any Warrant Stock held by all Holders as of the Call
Closing Date (such right shall be referred to as the "Call Option").
B. Notice and Exercise of Call Option. In order to exercise the Call
Option, the Issuer must give written notice to all Holders during the Call
Period, which notice must (i) specify the date of the repurchase of the Warrant
and Warrant Stock pursuant to the Call Option (the "Call Closing Date"), which
date shall be no less than three (3) and no more than ten (10) Business Days
after the date such notice is given, (ii) state the Call Share Price applicable
as of the Call Closing Date, (iii) state the Call Price as calculated without
deduction for the Call Price Credit, if any, and (iv) indicate the methods by
which the Call Share Price and the portion of the Call Price specified in such
notice were calculated. Prior to the Call Closing Date, if there have been any
ING Securities Fees, INCC shall, after consultation with Issuer, specify in
writing to Issuer the amount of the Call Price Credit as of the Closing Date,
which amount so specified shall be conclusive and binding for all purposes
absent manifest error or bad faith. On the Call Closing Date, at the offices of
INCC or such other location as is designated by INCC, (A) each Holder shall
surrender any Warrants held by it to the Issuer, without being required to make
any representation or warranty, and (B) each Holder shall deliver to the Issuer
any certificates representing Warrant Stock held by it, duly endorsed for
transfer to the Issuer, without being required to make any representation or
warranty, all against payment of the Call Price by wire transfer of immediately
available funds to an account designated by each such Holder for such purpose.
Upon the surrender of the Warrants and delivery of the Warrant Stock to the
Issuer pursuant to this Section 26.B, the Issuer shall immediately cancel the
Warrants and any such Warrant Stock.
C. Requirement That Issuer Concurrently Exercise Call Option Under B
Warrant. No Holder shall have any obligations under this Section 26, and the
Issuer shall have no right to exercise the Call Option, unless, concurrently
with the consummation of the Issuer's repurchase of the Warrant and Warrant
Stock pursuant to the Call Option, the Issuer also consummates the repurchase of
the B Warrant and any B Warrant Stock pursuant to the "Call Option" provided for
in Section 26 of the B Warrant.
D. Call Price. The purchase price payable for the repurchase of the
Warrant and any Warrant Stock pursuant to the Call Option (the "Call Price"),
is, as of any time of determination, (i) an amount equal to the then applicable
Call Share Price multiplied by a number equal to the sum of (A) the number of
shares of Warrant Stock purchasable upon exercise of the Warrant and (B) the
number of shares of issued Warrant Stock held by all Holders, if any, plus (ii)
if any Warrant Stock has been issued, the aggregate Exercise Price that was paid
by Holders to the Issuer for such Warrant Stock pursuant to the Warrant, less
(iii) the Call Price Credit as of the Call Closing Date (but the Call Price
shall in no event be less than zero). As of the date hereof, the "Call Share
Price" is $8.75. Upon the making of any of the adjustments provided for in
Section 4.A(2) or 4.A(3) above, the Call Share Price shall be adjusted to the
amount obtained by multiplying the Call Share Price in effect immediately prior
to such adjustment by a fraction, the numerator of which shall be the number of
shares of Common Stock constituting a Stock Unit immediately prior to the
relevant adjustment provided for in Section 4.A(2) or 4.A(3), as the case may
be, and the denominator of which shall be the number of shares of Common Stock
constituting a Stock Unit immediately thereafter.
E. No Restriction on Holder's Right to Exercise Warrant; Certain
Restrictions on Transferability. Nothing in this Section 26 restricts or
otherwise limits Holder's right to exercise the Warrant in whole or in part at
any time prior to the commencement of or during the Call Period; provided,
however, that Holder hereby agrees that (i) it shall not sell or otherwise
transfer the Warrant, other than to an Affiliate of Holder which agrees to be
bound by the terms hereof, prior to the Call Cutoff Date, and (ii) if it does
exercise or partially exercise the Warrant prior to the Call Cutoff Date, it
shall not sell or otherwise transfer any issued Warrant Stock obtained upon such
exercise, other than to an Affiliate of Holder which agrees to be bound by the
terms hereof, prior to the Call Cutoff Date.
27. Amendment and Restatement of the Existing A Warrant. This Warrant
amends and restates the Existing A Warrant in full.
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly
executed and attested by its Secretary or an Assistant Secretary.
Dated as of February 16, 1995
ERLY INDUSTRIES INC., a
California corporation
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
ATTEST:
/s/ KURT GREY
[attestor]
THE UNDERSIGNED, AS THE SOLE
HOLDER OF THE EXISTING A WARRANT,
CONSENTS TO THE FOREGOING
AMENDMENT AND RESTATEMENT OF THE
EXISTING A WARRANT
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, a Delaware
corporation
By: /s/ MICHAEL W. ADLER
Name: Michael W. Adler
Title: Vice President
<PAGE>
EXHIBIT 11.A
As of the Closing Date, the Issuer has the following outstanding capital stock:
1. TOTAL SHARES OF COMMON STOCK OUTSTANDING: 3,695,547
2. TOTAL SHARES OF PREFERRED STOCK OUTSTANDING: 0
As of the Closing Date, the Issuer has no outstanding stock or securities
convertible into or exchangeable for any shares of capital stock, nor does it
have outstanding any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any of its capital stock or stock or securities convertible into or exchangeable
for any of its capital stock other than the following:
<TABLE>
<CAPTION>
==================================================================================================================
Convertible
Issue/Grant Into/Exercisable
Date For (as of the
Instrument/Agreement/Other In Favor of Closing Date)*
==================================================================================================================
<S> <C> <C> <C>
Amended and Restated Warrant 2/16/95 INCC 257,679 shares of
to Purchase Common Stock of Common Stock
ERLY Industries (denominated the
"A Warrant")
- ------------------------------------------------------------------------------------------------------------------
Amended and Restated Warrant 2/16/95 INCC 257,679 shares of
to Purchase Common Stock of Common Stock
ERLY Industries (denominated the
"B Warrant")
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Common 2/16/95 INCC 51,536 shares of
Stock of ERLY Industries Common Stock
(denominated the "C Warrant")
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Common 2/16/95 INCC 206,143 shares of
Stock of ERLY Industries Common Stock
(denominated the "D Warrant")
- ------------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 BT Commercial aggregate 277,157
Corporation shares of Common
Stock
- -------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 StanChart
Business Credit
- -------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 Union Bank
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Shares of 9/5/93 ABC Capital 10,000 shares of
Common Stock Markets Group Common Stock
- ------------------------------------------------------------------------------------------------------------------
Convertible Promissory Note 4/1/94 Douglas Murphy 266,596 shares of
Common Stock
- ------------------------------------------------------------------------------------------------------------------
Stock Options Awarded pursuant 1985 Bill J. McFarland 8,053 shares of
to Issuer's 1982 Incentive Stock Common Stock
Option Plan, as adjusted to date
------------------------------------------------------------------------
1988 Douglas A. 115,132 shares of
Murphy, Bill J. Common Stock
McFarland, John
Poole and Lolan
M. Pullen
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
<FN>
* All figures shown are as calculated after taking into account all adjustments necessary upon the issuance of
the four warrants (denominated the A Warrant, the B Warrant the C Warrant, and the D Warrant) being issued to
INCC on the Closing Date.
</FN>
</TABLE>
<PAGE>
ANNEX I
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for and purchases _________ Stock Units of
______________________________, a _________________, purchasable with this
Warrant, and herewith makes payment for such Stock Units (by check in the amount
of $__________), all at the price and on the terms and conditions specified in
this Warrant and requests that certificates for the shares of Common Stock
hereby purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered to _________________________
whose address is ____________________ and, if such Stock Units shall not include
all of the Stock Units issuable as provided in this Warrant that a new Warrant
of like tenor and date for the balance of the Stock Units issuable thereunder be
delivered to the undersigned.
Dated:
________________________________
(Signature of Registered Owner)
________________________________
(Street Address)
________________________________
(City) (State) (Zip Code)
NOTICE: The signature to the subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
The signature to this subscription must be guaranteed by a bank or
trust company having an office or correspondent in Los Angeles,
California or New York, New York, or by a firm having membership on
the New York Stock Exchange.
<PAGE>
ANNEX II
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
Stock Units set forth below:
No. of Stock
Name and Address of Assignee Units
---------------------------- -------------
and does hereby irrevocably constitute and appoint ___________ Attorney to
make sure transfer on the books of ERLY Industries Inc., a California
corporation, maintained for the purpose, with full power of substitution in the
premises.
Dated:
_____________________________
Signature
_____________________________
Witness
NOTICE: The signature to the subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
The signature to this subscription must be guaranteed by a bank or
trust company having an office or correspondent in Los Angeles,
California or New York, New York, or by a firm having membership on
the New York Stock Exchange.
3.8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE PROPOSED
TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR
STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR
QUALIFIED AS REQUIRED.
THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER OF THIS WARRANT
A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY,
REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
THIS CERTIFICATE.
["B Warrant"]
No. of Stock Units: 257,679
AMENDED AND RESTATED WARRANT
to Purchase Common Stock of
ERLY INDUSTRIES INC.
a California corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Certain Definitions.................................................................................... 1
2. Exercise of Warrant.................................................................................... 6
3. Transfer, Division and Combination..................................................................... 8
4. Adjustment of Stock Unit or Exercise Price............................................................. 8
A. Stock Dividends, Subdivisions and Combinations.................................................... 8
B. Certain Other Dividends and Distributions......................................................... 9
C. Issuance of Additional Shares of Common Stock or Convertible
Securities.................................................................................... 10
D. Other Provisions Applicable to Adjustments Under this Section..................................... 10
(1) Treasury Stock .......................................................................... 11
(2) When Adjustments to Be Made................................................................. 11
(3) Fractional Interests........................................................................ 11
(4) When Adjustment Not Required................................................................ 11
E. Merger, Consolidation or Disposition of Assets.................................................... 11
F. Other Action Affecting Common Stock............................................................... 12
G. General ......................................................................................... 12
5. Notices to the Holder.................................................................................. 12
6. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority.............................................................. 13
7. Taking of Record; Stock and Warrant Transfer Books..................................................... 13
8. Transfer Taxes......................................................................................... 14
9. No Voting Rights....................................................................................... 14
10. Restrictions on Transferability........................................................................ 14
A. Certain Conditions............................................................................... 14
B. Restrictive Legend............................................................................... 14
C. Notice of Proposed Transfers..................................................................... 15
D. Termination of Restrictions...................................................................... 15
11. Warranties and Representations of the Issuer.......................................................... 16
A. Equity Capitalization, etc....................................................................... 16
B. Governmental Consent............................................................................. 17
C. Survival of Representations...................................................................... 17
12. Limitation of Liability............................................................................... 17
13. Loss, Destruction of Warrant Certificates............................................................. 17
14. Furnish Information................................................................................... 17
15. Amendments............................................................................................ 18
16. Office of the Issuer.................................................................................. 18
17. Notices Generally..................................................................................... 18
18. Successors and Assigns................................................................................ 19
19. Indemnification....................................................................................... 19
20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE...................................................... 19
21. MUTUAL WAIVER OF JURY TRIAL........................................................................... 20
22. No Waiver; Cumulative Remedies........................................................................ 20
23. Specific Performance.................................................................................. 20
24. Modification and Severability......................................................................... 21
25. Put Option............................................................................................ 21
A. Issuer's Obligation to Repurchase Warrants....................................................... 21
B. Determination of the Put Price................................................................... 21
26. Call Option........................................................................................... 21
A. Option to Repurchase Warrant and Issued Warrant Stock............................................ 21
B. Notice and Exercise of Call Option............................................................... 22
C. Requirement That Issuer Concurrently Exercise Call Option Under
A Warrant.................................................................................... 22
D. Call Price....................................................................................... 22
E. No Restriction on Holder's Right to Exercise Warrant; Certain
Restrictions on Transferability.............................................................. 23
27. Amendment and Restatement of the Existing B Warrant................................................... 23
</TABLE>
<PAGE>
["B Warrant"]
No. of Stock Units: 257,679
AMENDED AND RESTATED WARRANT
to Purchase Common Stock of
ERLY INDUSTRIES INC.
a California corporation
THIS IS TO CERTIFY THAT Internationale Nederlanden (U.S.) Capital
Corporation, a Delaware corporation ("INCC"), or registered assigns, is entitled
to purchase from ERLY Industries Inc., a California corporation (the "Issuer"),
at any time after April 30, 1995 but prior to the Expiration Date (as defined
below), Two Hundred Fifty Seven Thousand Six Hundred Seventy Nine (257,679)
Stock Units, in whole or in part, at a purchase price of $0.01 per Stock Unit
(adjusted as provided below), all on the terms and conditions provided in this
warrant (this "Warrant").
1. Certain Definitions. As used in this Warrant, unless the context
otherwise requires:
"A Warrant" means any "Warrant," as such term is defined in that
certain Amended and Restated Warrant to Purchase Common Stock of ERLY Industries
Inc., denominated the "A Warrant," issued by the Issuer in favor of INCC of even
date herewith.
"A Warrant Stock" means any "Warrant Stock," as such term is defined in
the A Warrant.
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Issuer after the date of this Warrant, other than the
Warrant Stock.
"Affiliate" shall mean, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Appraisal" shall have the meaning given to such term in the definition
of Appraised Value.
"Appraised Value" shall mean the fair market value of all outstanding
Common Stock, as determined by a written appraisal (the "Appraisal") prepared by
an appraiser
1
<PAGE>
selected by the Approving Holders and acceptable to the Issuer. "Fair market
value" is defined for this purpose as the price for one hundred percent (100%)
of the equity capital of the Issuer (determined on a going-concern basis and
without giving effect to any discount for (i) a minority interest or (ii) any
lack of liquidity of the Common Stock or the fact that the Issuer may have no
class of equity registered under the Exchange Act) on the basis of a sale
between a willing seller and buyer, neither acting under any compulsion. In the
event that the Issuer and Approving Holders cannot, in good faith, agree upon an
appraiser, then the Issuer, on the one hand, and Approving Holders, on the other
hand, shall each select an appraiser, the two appraisers so selected shall
select a third appraiser who shall be directed to prepare the Appraisal, and the
term Appraised Value shall mean the appraised value set forth in the appraisal
prepared in accordance with this definition.
"Approving Holders" shall mean the holders of Warrants evidencing more
than fifty percent (50%) in number of the total number of Stock Units at the
time purchasable upon the exercise of all then outstanding Warrants.
"Book Value" shall mean, on any date herein specified, the consolidated
book value of the Issuer applicable to Common Stock as of the last day of any
fiscal month immediately preceding such date, as determined by independent
accountants of recognized national standing selected by the Issuer and
acceptable to the Approving Holders.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Los Angeles, California.
"Call Closing Date" shall have the meaning ascribed to that term in
Section 26.B.
"Call Cutoff Date" means the earlier to occur of (i) Maturity and (ii)
April 1, 1996.
"Call Option" shall have the meaning ascribed to that term in Section
26.A.
"Call Period" shall mean the period, if any, that commences on the
later to occur of the Termination Date and April 30, 1995, and ends on the Call
Cutoff Date (it being understood that the Call Cutoff Date could occur prior to
the later to occur of the Termination Date and April 30, 1995, in which case
there shall be no Call Period).
"Call Price" shall have the meaning ascribed to that term in Section
26.D.
"Call Price Credit" means, as of the Call Closing Date, if any, 100% of
the ING Securities Fees as of such Call Closing Date, it being understood and
agreed that the aggregate amount of the Call Price Credit hereunder and the
"Call Price Credit" under, and as defined in, the A Warrant as of such Call
Closing Date shall in no event be less
2
<PAGE>
than 200% of the ING Securities Fees as of such date, and if for any reason the
"Call Price Credit" under, and as defined in, the A Warrant shall be less than
100% of the ING Securities Fees as of such date, the Call Price Credit hereunder
shall be adjusted accordingly until the sum thereof and of the "Call Price
Credit" under, and as defined in, the A Warrant is 200% of the ING Securities
Fees as of such date.
"Call Share Price" shall have the meaning ascribed to that term in
Section 26.D.
"Closing Date" is as defined in the Loan Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the United States government administering
the Securities Act.
"Common Stock" shall mean the Issuer's authorized Common Stock, par
value $0.01 per share, as constituted on the date of this Warrant, and (i) any
stock into which such Common Stock may subsequently be changed or any other
capital stock that is not preferred as to dividends or distribution of assets
over any other class of stock of the Issuer, and which is not subject to
redemption, that may be authorized by the Issuer and (ii) shares of common stock
of any successor or acquiring corporation received by or distributed to the
holders of Common Stock in the circumstances contemplated by Section 4.E.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock, warrants, rights or other securities which are convertible into or
exchangeable for Additional Shares of Common Stock, either immediately or upon
the arrival of a specified date or the happening of a specified event; provided
that Convertible Securities shall not mean the Warrants.
"Current Market Price" per share of Common Stock, for the purposes of
any provision of this Warrant at the date specified in such provision, shall be
deemed to be the price determined pursuant to the first applicable of the
following methods:
(i) If the Common Stock is traded on a national securities
exchange or is traded in the over-the-counter market, the Current Market Price
per share of Common Stock shall be deemed to be the average of the daily market
prices for thirty (30) consecutive Trading Days commencing forty-five (45)
Trading Days before such date. The market price for each such Trading Day shall
be, (a) if the Common Stock is traded on a national securities exchange, its
last sale price on the preceding Trading Day on such national securities
exchange or, if there was no sale on that day, the last reported sale price on
such national exchange on the next preceding Trading Day on which there was a
sale, or (b) if the principal market for the Common Stock is the
over-the-counter market, and the Common Stock is quoted on the National
3
<PAGE>
Association of Securities Dealers Automated Quotations System ("NASDAQ"), the
last sale price reported on NASDAQ on the preceding Trading Day or, if the
Common Stock is an issue for which last sale prices are not reported on NASDAQ,
the average of the closing bid and asked quotations on such day, but, in each of
the immediately preceding two cases, if the relevant NASDAQ price or quotations
did not exist on such day, then the price or quotations on the next preceding
Trading Day in which there was such a price or quotations.
(ii) If the Current Market Price per share of Common Stock
cannot be ascertained by any of the methods set forth in paragraph (i)
immediately above, the Current Market Price per share of outstanding Common
Stock shall be deemed to be the price equal to the quotient determined by
dividing the higher of (i) Book Value or (ii) Appraised Value, by the number of
shares (including any fractional shares) of Fully Diluted Outstanding Common
Stock.
"Current Warrant Price" per share of Common Stock, for the purpose of
any provision of this Warrant at the date specified in this Warrant, shall mean
the amount equal to the quotient resulting from dividing the Exercise Price in
effect on such date by the number of shares (including any fractional share) of
Common Stock comprising a Stock Unit on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Price" shall mean the purchase price per Stock Unit as set
forth on the first page of this Warrant on the date of original issue of this
Warrant and thereafter shall mean such dollar amount as shall result from the
adjustments specified in Section 4, if any.
"Existing B Warrant" means the Warrant to Purchase Common Stock of ERLY
Industries Inc., denominated the "B Warrant," issued by the Issuer in favor of
INCC and dated as of October 22, 1993, as the same has been amended pursuant to
Amendment No. 1 to B Warrant dated as of November 18, 1994.
"Expiration Date" shall mean April 30, 1998; provided, however, that if
the Termination Amount (as such term is defined below) shall be fully and
finally repaid on or before April 30, 1995, then the Expiration Date shall be
the date of such payment. For the purposes hereof, the "Termination Amount"
shall be, as of any date of determination, the sum of (i) the amount of the
Obligations (as such term is defined in the Loan Agreement) as of such date of
determination, plus (ii) the $6,000,000 in indebtedness of ERLY Juice Inc. that
was forgiven pursuant to that certain letter agreement dated as of September 22,
1993 between Issuer, ERLY Juice Inc. and INCC's predecessor in interest
International Nederlanden Bank N.V. (formerly known
4
<PAGE>
as NMB Postbank Groep nv (formerly known as Nederlandsche Middenstandsbank nv)),
New York Branch.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, and any other options,
warrants or other rights to purchase or receive Common Stock outstanding on such
date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Holder" shall mean the holder of this Warrant.
"ING Securities Fees" means, as of any time of determination, the
aggregate net advisory fees actually received by Internationale Nederlanden
(U.S.) Securities Corporation during the period from the Closing Date through
and including such time of determination with respect to or in connection with
financings with respect to the Issuer and/or American Rice, Inc., a Texas
corporation.
"Loan Agreement" shall mean that certain Amended and Restated Loan
Agreement dated as of the issue date hereof between ERLY Juice Inc. and INCC, as
amended from time to time.
"Maturity" is as defined in the Loan Agreement.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Issuer or any Subsidiary thereof, and shall include all shares
issuable in respect of any certificates representing fractional interests in
shares of Common Stock.
"Person" shall mean a corporation, an association, a trust, a
partnership, a joint venture, an organization, a business, an individual, a
government, a political subdivision or a governmental body.
"Put Price" shall have the meaning ascribed to that term in Section
25(B).
"Restricted Certificate" shall mean a Warrant or a certificate
representing Common Stock bearing the restrictive legend set forth in Section
10.
"Restricted Securities" shall mean Restricted Stock and Restricted
Warrants.
5
<PAGE>
"Restricted Stock" shall mean Warrant Stock represented by a Restricted
Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a Restricted
Certificate.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
under such act, all as the same shall be in effect at the time.
"Subsidiary" shall mean, with respect to any Person, any corporation of
which an aggregate of more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person.
"Stock Unit" shall constitute one share of Common Stock, as such Common
Stock was constituted on the date of this Warrant and thereafter shall
constitute such number of shares (including any fractional shares) of Common
Stock as shall result from the adjustments specified in Section 4, if any.
"Subscription" shall mean a subscription form in the form set out in
Annex I hereto.
"Termination Date" is as defined in the Loan Agreement.
"Trading Day" shall mean any day on which trading occurs on the New
York Stock Exchange.
"Warrant Stock" shall mean the shares of Common Stock purchasable by
the holder of a Warrant upon the exercise of such Warrant.
"Warrants" shall mean this Warrant, and all additional or new warrants
issued upon transfer, division or combination of, or in substitution for, this
Warrant or any such additional or new warrant. All such additional or new
warrants shall at all times be identical as to terms and conditions and date,
except as to the number of Stock Units for which they may be exercised.
2. Exercise of Warrant. The Holder may, at any time after April 30,
1995 but prior to the Expiration Date, exercise this Warrant in whole at any
time or in part from time to time for the number of Stock Units which such
holder is then entitled to purchase under this Warrant. If the Expiration Date
shall occur on or prior to April 30, 1995, then this Warrant shall thereupon
terminate and shall be returned by the Holder
6
<PAGE>
to the Issuer. In order to exercise this Warrant, in whole or in part, the
Holder shall deliver to the Issuer at its office maintained for such purpose
pursuant to Section 16 (i) a written notice of the Holder's election to exercise
this Warrant, which notice shall specify the number of Stock Units to be
purchased, (ii) this Warrant and (iii) a sum equal to the Exercise Price for the
number of Stock Units to be purchased in the manner specified below. Such notice
shall be in the form of Subscription set out at the end of this Warrant. Upon
delivery of one or more Subscriptions, the Issuer shall cause to be executed and
delivered to the Holder within five (5) Business Days a certificate or
certificates representing the aggregate number of fully paid and nonassessable
shares of Common Stock issuable upon such exercise.
At the option of the Holder, payment of the Exercise Price shall be
made (a) by wire transfer of funds to an account in a bank located in the United
States designated by the Issuer for such purpose, (b) by certified or official
bank check payable to the order of the Issuer and drawn on a member of the New
York Clearing House, (c) by application of all or any part of the principal
amount of the Obligations (as defined in the Loan Agreement) if such Holder is
INCC or an Affiliate of INCC, or (d) by any combination of such methods.
The stock certificate or certificates for Warrant Stock so delivered
shall be in such denominations as may be specified in such notice and shall be
registered in the name of the Holder or such other name or names as shall be
designated in such notice. Such certificate or certificates shall be deemed to
have been issued and the Holder or any other Person so designated to be named in
such certificate or certificates shall be deemed to have become a holder of
record of such shares, including, to the extent permitted by law, the right to
vote such shares or to consent or to receive notice as a stockholder, as of the
date the notice is delivered to the Issuer as set forth above. If this Warrant
shall have been exercised only in part, the Issuer shall, within five (5)
Business Days of delivery of such certificate or certificates, deliver to the
Holder a new Warrant dated the date it is issued, evidencing the rights of the
Holder to purchase the remaining Stock Units called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.
Except as otherwise provided in Section 8, the Issuer shall pay all
expenses, transfer taxes and other charges payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2,
except that, if such stock certificates shall be registered in a name or names
other than the name of the Holder, funds sufficient to pay all stock transfer
taxes which shall be payable upon the issuance of such stock certificate or
certificates shall be paid by the Holder prior to the issuance of such stock
certificate or certificates.
All shares of Common Stock issuable upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable, and free from all liens
and other encumbrances on such shares.
7
<PAGE>
The Issuer will not close its books against the transfer of this
Warrant or of any share of Warrant Stock in any manner which interferes with the
timely exercise of this Warrant.
The Issuer shall not be obligated to issue certificates for fractional
shares of stock upon any exercise of this Warrant.
3. Transfer, Division and Combination. Subject to Section 10, this
Warrant is, and all rights under this Warrant are, transferable, in whole or in
part, on the books of the Issuer to be maintained for such purpose, upon
surrender of this Warrant at the office of the Issuer maintained for such
purpose pursuant to Section 16, together with a written assignment of this
Warrant in substantially the form of Annex II hereto duly executed by the Holder
or its agent or attorney and payment of funds sufficient to pay any stock
transfer taxes payable upon the making of such transfer. Upon such surrender and
payment the Issuer shall, subject to Section 10, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. This Warrant, if properly assigned in compliance with this
Section 3 and Section 10, may be exercised by an assignee for the purchase of
shares of Common Stock without having a new Warrant issued.
This Warrant may, subject to Section 10, be divided or combined with
other Warrants upon presentation at the office of the Issuer referenced above,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the preceding paragraph and with Section 10, as to
any transfer which may be involved in such division or combination, the Issuer
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
The Issuer shall pay all expenses, taxes (other than stock transfer
taxes excluded by the previous provision of this Section 3) and other charges
incurred by the Issuer in the performance of its obligations in connection with
the preparation, issue and delivery of Warrants under this Section 3.
The Issuer agrees to maintain at its office described in Section 16
books for the registration and transfer of the Warrants.
4. Adjustment of Stock Unit or Exercise Price. The number of shares of
Common Stock comprising a Stock Unit, or the Exercise Price, shall be subject to
adjustment from time to time as set forth in this Section 4 and in Section 5.
A. Stock Dividends, Subdivisions and Combinations. If at any time or
from time to time the Issuer shall:
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(1) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Common Stock, or
(2) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(3) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Common Stock which a record holder of the number of shares
of Common Stock comprising a Stock Unit immediately prior to the happening of
such event would own or be entitled to receive after the happening of such
event.
B. Certain Other Dividends and Distributions. If at any time or from
time to time the Issuer shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive any dividend or other distribution
of:
(1) cash (other than a cash distribution made as a dividend and payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of the Issuer, to the
extent, but only to the extent, that the aggregate of all such dividends paid or
declared after the date of this Warrant, does not exceed the consolidated net
income of the Issuer earned subsequent to the date of this Warrant determined in
accordance with GAAP, consistently applied), or
(2) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of Common
Stock) or any other securities or property of any nature whatsoever (other than
cash and other than Convertible Securities or Additional Shares of Common
Stock), or
(3) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness (other than Convertible Securities), any shares of
its stock (other than Additional Shares of Common Stock) or any other securities
or property of any nature whatsoever (other than cash and other than Convertible
Securities or Additional Shares of Common Stock),
then the number of shares of Common Stock comprising a Stock Unit from such time
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (i) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record, and (ii) the
denominator of which
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shall be such Current Market Price per share minus the portion applicable to one
share of Common Stock of any such cash so distributable and of the fair value of
any and all such evidences of indebtedness, shares of stock, other securities or
property, or warrants or other subscription or purchase rights, so
distributable. Such fair value shall be determined in good faith by the board of
directors of the Issuer, provided that if such determination is objected to by
Approving Holders, such determination shall be made by an independent appraiser
chosen in the manner specified in the definition of Appraised Value. A
reclassification of the Common Stock into shares of Common Stock and shares of
any other class of stock shall be deemed a distribution by the Issuer to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Subsection B and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Subsection A of this Section 4.
C. Issuance of Additional Shares of Common Stock or
Convertible Securities. If at any time or from time to time the Issuer shall
(except as provided below) issue, whether in connection with the merger of a
corporation into the Issuer or otherwise, any Additional Shares of Common Stock
or Convertible Securities, then the number of shares of Common Stock comprising
a Stock Unit from such time shall be adjusted to be that number determined by
multiplying the number of shares of Common Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of shares of Fully Diluted Outstanding Common Stock plus the
number of such Additional Shares of Common Stock so issued (or the number of
shares of Common Stock into which such Convertible Securities are convertible or
exchangeable, as the case may be), and (y) the denominator of which shall be the
number of shares of Fully Diluted Outstanding Common Stock.
Upon any subsequent adjustment in the number of shares of Common Stock
into which any Convertible Securities are convertible or exchangeable, the
number of shares of Common Stock comprising a Stock Unit shall be recalculated
in accordance with the preceding sentence. No further adjustments of the number
of shares of Common Stock comprising a Stock Unit shall be made upon the actual
issuance of Common Stock upon the conversion or exchange of any Convertible
Securities.
The foregoing provisions of this Subsection C shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Subsection A or B of this Section 4.
D. Other Provisions Applicable to Adjustments Under this Section. The
following provisions shall be applicable to the making of adjustments of the
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number of shares of Common Stock comprising a Stock Unit provided for above in
this Section 4:
(1) Treasury Stock. The sale or other disposition of any issued shares
of Common Stock owned or held by or for the account of the Issuer shall be
deemed an issuance of such stock for purposes of this Section 4.
(2) When Adjustments to Be Made. The adjustments required by the
preceding Subsections of this Section 4 shall be made whenever and as often as
any specified event requiring an adjustment shall occur (including upon any
adjustment in the number of shares of Common Stock into which any Convertible
Securities are convertible or exchangeable), except that no adjustment shall be
made except pursuant to Subsection A of this Section 4 if it would decrease the
number of shares of Common Stock comprising a Stock Unit immediately prior to
such adjustment. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(3) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest one-thousandth of a share.
(4) When Adjustment Not Required. If the Issuer shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall, after
taking such record and before the distribution of such dividend, distribution,
subscription or purchase rights to shareholders, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then no
adjustment shall be required by reason of the taking of such record, and any
such adjustment previously made in respect of the taking of such record shall be
rescinded and annulled.
E. Merger, Consolidation or Disposition of Assets. In the
event the Issuer (1) shall consolidate with or merge into any other corporation
or entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (2) shall permit any other corporation or
entity to consolidate with or merge into the Issuer and the Issuer shall be the
continuing or surviving corporation but, in connection with such consolidation
or merger, the shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other person or cash or any other property, or
(3) shall transfer all or substantially all of its properties or assets to any
other corporation or entity, or (4) shall effect a capital reorganization or
reclassification of the Common Stock (other than a change from par to no-par
value stock or from no-par to par value stock, or a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the number of shares comprising a Stock Unit is provided in
Subsection C of this Section 4), then, and in each such event, proper provision
shall be made so that,
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upon the basis and the terms and in the manner provided in this Subsection E,
the Holder, upon the conversion of all or any part of this Warrant at any time
after the consummation of such consolidation, merger, transfer, reorganization
or reclassification, shall be entitled to receive, in lieu of the shares of
Common Stock issuable upon such conversion prior to such consummation, the stock
and other securities, cash and property to which such Holder would have been
entitled upon such consummation if such Holder had converted the Warrant
immediately prior to such consummation, subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments
provided for in this Section 4. Anything contained in this Warrant to the
contrary notwithstanding, the Issuer will not effect any of the transactions
described in clauses (1) through (4) above unless, prior to the consummation of
such transaction, each corporation (other than the Issuer) which may be required
to deliver any stock, securities, cash or property upon the conversion of this
Warrant shall assume, by written instrument delivered to the Holder, the
obligation to deliver to the Holder such shares of stock, securities, cash or
property as the Holder may be entitled to receive upon such conversion.
The foregoing provisions of this Subsection E shall similarly apply to
successive mergers, consolidations or dispositions of assets. In addition to any
other requirements under this Subsection E, the Issuer shall give notice to the
Holder of this Warrants of any merger, consolidation or disposition at least
thirty (30) days before the occurrence of such merger, consolidation or
disposition.
F. Other Action Affecting Common Stock. In case at any time or
from time to time the Issuer shall take any action affecting its Common Stock,
other than an action described in any of the foregoing Subsections A to E
inclusive, of this Section 4, then, unless in the opinion of the Holder such
action will not have a materially adverse effect upon the rights of the Holder,
the number of shares of Common Stock or other stock comprising a Stock Unit, or
the purchase price of such shares, shall be adjusted in such manner and at such
time as the Issuer and the Holder may in good faith agree to be equitable in the
circumstances.
G. General. The Issuer hereby warrants and represents that, on
the date of issuance of this Warrant, this Warrant is exercisable (after giving
effect to the exercise in full of this Warrant) for not less than 5% of the
number of shares of Fully Diluted Outstanding Common Stock. The Issuer agrees
that it will at all times cause this Warrant to be exercisable (after giving
effect to the exercise in full of this Warrant) for not less than 5% of the
number of shares of Fully Diluted Outstanding Common Stock (or such lesser
percentage as may result solely from one or more partial exercises of this
Warrant).
5. Notices to the Holder. Whenever the number of shares of Common Stock
comprising a Stock Unit, or the price at which a Stock Unit may be purchased
upon exercise of this Warrant, shall be adjusted pursuant to Section 4, the
Issuer shall
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forthwith obtain a certificate signed by the principal financial officer of the
Issuer or, if the Approving Holders request, by independent accountants of
recognized national standing selected by the Issuer and acceptable to the
Approving Holders, setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
statement of the fair value, as determined by the board of directors of the
Issuer or by appraisal (if applicable), of any evidences of indebtedness, shares
of stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 4.B(3) or Section 4.E) and specifying the
number of shares of Common Stock comprising a Stock Unit, and any change in the
Exercise Price of a Stock Unit, after giving effect to such adjustment or
change. The Issuer shall promptly, and in any case within three (3) Business
Days after the making of such adjustment, cause a signed copy of such
certificate to be delivered to the Holder. The Issuer shall keep at its office
or agency, maintained for the purpose pursuant to Section 16, copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of a
Warrant designated by the Holder.
6. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority. The Issuer shall at all times reserve
and keep available for issue upon the exercise of this Warrant such number of
its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of this Warrant. All shares of Common Stock that
shall be issued upon exercise of this Warrant and payment of the Exercise Price
relating to such shares to the Issuer, shall be duly and validly issued and
fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price per share of Common Stock below the then par value, if
any, of the shares of Common Stock issuable upon exercise of this Warrant, the
Issuer shall take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Issuer may validly and legally issue fully paid
and nonassessable shares of Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock comprising a Stock Unit or in the Current
Warrant Price per share of Common Stock, the Issuer shall obtain all such
authorizations or exemptions of, or consents to, such action as may be necessary
from any public regulatory body or bodies having jurisdiction over it by virtue
of such action.
7. Taking of Record; Stock and Warrant Transfer Books. In the case of
all dividends or other distributions by the Issuer to the holders of its Common
Stock with respect to which any provision of Section 4 refers to the taking of a
record of such holders, the Issuer will in each such case take such a record and
will take such record as of the close of business on a Business Day. The Issuer
will not at any time, except upon dissolution, liquidation or winding up, close
its stock transfer books or Warrant
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transfer books so as to result in preventing or delaying the exercise
or transfer of this Warrant.
8. Transfer Taxes. The Issuer will pay any and all transfer taxes that
may be payable in respect of the issuance or delivery of shares of Common Stock
on exercise of this Warrant. The Issuer shall not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which this
Warrant is registered, and no such issue or delivery shall be made unless and
until the Person requesting such issue has paid to the Issuer the amount of any
such tax, or has established, to the satisfaction of the Issuer, that such tax
has been paid.
9. No Voting Rights. Except as expressly provided in this Warrant, this
Warrant shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Issuer.
10. Restrictions on Transferability.
A. Certain Conditions. To the extent that this Warrant or the
Warrant Stock covered by the Warrant constitute Restricted Securities, such
Restricted Securities shall not be transferable except upon the conditions
specified in this Section 10; provided that, notwithstanding any other
provisions of this Section 10, the Holder (and each other person mentioned below
in this clause) shall have the right to transfer all Restricted Securities or
any Restricted Security to any Affiliate of the Holder, in each case free of the
restrictions imposed by this Section 10 other than the requirement as to the
legending of the certificates for such Restricted Securities specified in
Section 10.B. Each such transferee shall be subject to the same transfer
restrictions imposed on the Warrant holder by this Warrant.
B. Restrictive Legend. Unless and until otherwise permitted by this
Section 10, each Warrant issued upon transfer, division or combination of, or in
substitution for, this Warrant, each certificate for any Warrant Stock issued
upon exercise of this Warrant and each certificate for any Warrant Stock issued
to any subsequent transferee of any such certificate shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE
PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
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"THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A NEW
CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY,
REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
THIS CERTIFICATE."
C. Notice of Proposed Transfers. Prior to any transfer or
attempted transfer of any Restricted Securities not covered by the proviso
contained in Subsection A of this Section 10, the Holder shall give written
notice to the Issuer of the Holder's intention to effect a transfer of such
Restricted Securities. Each such notice shall describe the manner and
circumstances of the proposed transfer in material detail. Upon receipt of such
notice, the Issuer may request an opinion of Murphy, Weir & Butler or such other
counsel of the Holder (which counsel shall be reasonably satisfactory to the
Issuer) to the effect that such proposed transfer may be effected without
registration under the Securities Act. Upon receipt of such opinion, the Issuer
shall, as promptly as practicable, so notify the Holder. Upon such notice or if
the Issuer has not requested such an opinion, within ten (10) days after the
Issuer's receiving notice of the proposed transfer, the Holder shall be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice delivered by the Holder to the Issuer. Each Warrant or certificate
evidencing the Restricted Securities thus to be transferred (and each Warrant or
certificate evidencing any untransferred balance of the Restricted Securities
evidenced by such Restricted Certificate) shall bear the restrictive legend set
forth in Section 10.B, unless in the opinion of the Issuer or the opinion of
such counsel, if requested, such legend is not required in order to insure
compliance with the Securities Act.
D. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 10, the restrictions imposed upon the transferability of
the Restricted Securities shall cease and terminate as to any particular
Restricted Security when such Restricted Security shall have been effectively
registered under the Securities Act, including, without limitation, any
registration pursuant to the Registration Rights Agreement between the Issuer
and INCC dated as of the issue date hereof. Whenever such restrictions imposed
shall terminate as to any Restricted Certificate, as provided in this Section
10.D, the Holder shall be entitled to receive from the Issuer, without expense,
a new Warrant of like tenor and date and representing the right to purchase the
same number of aggregate number of shares of Common Stock or a new certificate
representing the same number of shares of Warrant Stock (as the case may be),
but not bearing the restrictive legend otherwise required by this Warrant.
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11. Warranties and Representations of the Issuer. The Issuer represents
and warrants to the Holder that as of the date of this Warrant:
A. Equity Capitalization, etc.
(1) Upon the issuance of this Warrant, the total number of shares of
capital stock which the Issuer has authority to issue is 5,006,000 shares,
consisting of 5,000,000 shares of Common Stock, par value $0.01 per share, and
6,000 shares of preferred stock, $100.00 par value per share. The Issuer has the
power and authority and has taken all actions (corporate or otherwise) necessary
to authorize it to enter into and perform its obligations and undertakings under
this Warrant. Except as set forth on Exhibit 11.A hereto, upon the issuance of
this Warrant, the Issuer will not have outstanding any stock or securities
convertible into or exchangeable for any shares of its capital stock nor does it
have outstanding any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any of its capital stock or stock or securities convertible into or exchangeable
for any of its capital stock other than the Warrants.
(2) When issued and delivered, the Warrants will have been duly
executed, issued and delivered and will constitute legal, valid and binding
obligations of the Issuer, enforceable by the Holder in accordance with their
terms.
(3) None of the issuance of any Warrant, the consummation of the
transactions contemplated in any Warrant, or compliance with the terms and
provisions of this Warrant will conflict with or result in a breach of, or
require any consent under, the certificate of incorporation or the by-laws of
the Issuer, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement or
instrument to which the Issuer is a party or by which it is bound or to which it
or its property is subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any lien upon any of the
revenues or assets of the Issuer pursuant to the terms of any such agreement or
instrument.
(4) There is not in effect on the date of this Warrant any agreement by
the Issuer (other than registration agreements copies of each of which have been
furnished by the Issuer to INCC) pursuant to which any holders of securities of
the Issuer have a right to cause the Issuer to register such securities under
the Securities Act.
(5) The Issuer is a corporation duly organized and validly existing in
good standing under the laws of the State of California and has the corporate
power and authority to execute and deliver this Warrant and to perform its
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terms, including, without limitation, the issuance of Warrant Stock upon
exercise of this Warrant. The Issuer has taken all action necessary to authorize
the execution, delivery and performance of this Warrant and the issuance of the
Warrant Stock upon exercise of this Warrant.
B. Governmental Consent. Neither the nature of the Issuer or of any of
its businesses or properties, nor any relationship between the Issuer and any
other Person, nor (except as expressly provided for in this Warrant) any
circumstance in connection with the offer, issue or sale of this Warrant or the
Warrant Stock is such as to require consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of the Issuer as a condition to the execution and delivery of this Warrant
or the execution and filing of any certificate of amendment of the certificate
of incorporation of the Issuer required in connection with the authorization or
issuance of Warrant Stock or the offer, issue or sale of this Warrant or the
Warrant Stock.
C. Survival of Representations. All representations set forth in this
Section 11 shall survive the issuance and delivery of this Warrant.
12. Limitation of Liability. No provision of this Warrant, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration in this Warrant of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the purchase price of
the Warrant Stock or as a stockholder of the Issuer, whether such liability is
asserted by the Issuer or by creditors of the Issuer.
13. Loss, Destruction of Warrant Certificates. Upon receipt of evidence
satisfactory to the Issuer of the loss, theft, destruction or mutilation of this
Warrant and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security satisfactory to the Issuer (the original Warrant holder's
or any other institutional Warrant holder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of this Warrant), or, in
the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of the lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
14. Furnish Information. The Issuer will file with the Commission on or
before the due date all regular or periodic reports required to be filed
pursuant to the Exchange Act, and will deliver to the holder of record of this
Warrant promptly after their becoming available copies of all financial
statements, reports and proxy statements which the Issuer shall have sent to its
stockholders generally, and of each regular or periodic report (including,
without limitation, reports on Form 8-K) filed by it pursuant to the Exchange
Act, and any Registration Statement, prospectus or written
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communication (other than transmittal letters and other communications not
publicly available) filed or delivered by it pursuant to the Securities Act.
15. Amendments. The terms of this Warrant and all other Warrants may be
amended, and the observance of any term in such Warrant may be waived, but only
with the written consent of the Approving Holders, provided that no such
amendment or waiver may change the number of shares of stock comprising a Stock
Unit or the Exercise Price, without the written consent of the Holders. For the
purposes of determining whether the Approving Holders have taken any action
authorized by this Warrant, any Warrants owned by the Issuer or any Affiliate of
the Issuer (other than an institutional investor which may be deemed an
Affiliate solely by reason of the ownership of Warrants) shall be deemed not to
be outstanding.
16. Office of the Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in Los Angeles, California where this
Warrant may be presented for exercise, transfer, division or combination as in
this Warrant provided. Such office shall be at 10990 Wilshire Boulevard, Los
Angeles, California 90024 unless and until the Issuer shall designate and
maintain some other office for such purposes and deliver written notice of the
address of such other office to the Holders.
17. Notices Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered (i) in person with receipt acknowledged, (ii) by facsimile
transmission, with receipt electronically confirmed during normal business hours
of recipient, and that is confirmed by sending, no later than one (1) Business
Day following such transmission, a copy of such facsimile, by registered or
certified mail, return receipt requested, postage prepaid, or (iii) by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(1) If to any Holder or holder of Warrant Stock, at its last known
address or facsimile transmission number appearing on the books of the Issuer
maintained for such purpose.
(2) If to the Issuer at:
Erly Industries Inc.
10990 Wilshire Boulevard
Los Angeles, California 90024
Attention: Kurt Grey
Facsimile: (310) 473-8890
with a copy to:
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Magnus, Epman & Dwyer
300 Corporate Pointe, Suite 310
Culver City, California 90230-7614
Attention: Ronald J. Epman, Esq.
Facsimile: (310) 216-0701
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged or sent by facsimile with receipt
electronically confirmed during normal business hours of recipient, or three (3)
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration, delivery or other communication to the person
designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration,
delivery or other communication.
18. Successors and Assigns. This Warrant shall bind and inure to the
benefit of and, be enforceable by the parties to this Warrant and their
respective successors and assigns, and, without limiting the generality of the
foregoing, shall inure to the benefit of and be enforceable by each person who
shall from time to time be the Holder of this Warrant.
19. Indemnification. The Issuer agrees to indemnify and hold harmless
Holder, its officers, directors, employees, agents, and attorneys from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder
relating to or arising out of (i) Holder's exercise of this Warrant and/or
ownership of any shares of Warrant Stock issued in consequence thereof, or (ii)
any litigation to which Holder is made a party in its capacity as a stockholder
or warrant holder of the Issuer; provided, however, that the Issuer will not be
liable hereunder to the extent that any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses or disbursements are found in a final non-appealable judgment by a
court to have resulted from either (i) Holder's gross negligence or willful
misconduct, (ii) actions or omissions taken or not taken by Holder in any
capacity other than as a stockholder or warrant holder of the Issuer, or (iii)
any knowing violation of federal or state securities laws by Holder.
20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER
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SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE ISSUER AND HOLDER
CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR
VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR
VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. SERVICE OF PROCESS ON
THE ISSUER OR HOLDER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS WARRANT
SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN ACCORDANCE WITH THE PROCEDURES AND
REQUIREMENTS SET FORTH IN SECTION 17. NOTHING HEREIN SHALL PRECLUDE HOLDER OR
THE ISSUER FROM BRINGING SUIT OR TAKING LEGAL ACTION IN ANY OTHER JURISDICTION.
21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE ISSUER AND HOLDER HEREOF WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
ISSUER AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE ISSUER AND HOLDER HEREOF
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS WARRANT, WHETHER ARISING IN CONTRACT,
TORT OR OTHERWISE.
22. No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Holder, any right, remedy, power or privilege
under this Warrant, shall operate as a waiver of any such right, remedy power or
privilege; nor shall any single or partial exercise of any right, remedy, power
or privilege under this Warrant preclude any other or further exercise of any
such right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Warrant are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
23. Specific Performance. The Issuer and the Holder agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Holder shall be entitled
to an injunction or injunctions to prevent breaches of this Warrant and to
enforce specifically the terms and provisions of this Warrant in any court of
the United States or any states of the United States
20
<PAGE>
having jurisdiction, this being in addition to any other remedy to which it may
be entitled at law or in equity.
24. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained in this Warrant,
any provision of this Warrant is found to be unenforceable, then such provision
shall be deemed modified to the extent necessary to make it enforceable by such
court or agency. If any such provision is not enforceable as set forth in the
preceding sentence, the unenforceability of such provision shall not affect the
other provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained in this Warrant.
25. Put Option.
A. Issuer's Obligation to Repurchase Warrants. Upon written
notice from the Holder from time to time after April 30, 1995 but prior to the
Expiration Date, the Issuer shall, on the date designated in such notice (which
date shall be at least thirty (30) Business Days after the date of such notice),
repurchase from such Holder all or the portion of this Warrant designated in
such notice for an amount determined by multiplying (i) the Put Price per Stock
Unit in effect on the date of such notice by (ii) the number of Stock Units that
are designated for repurchase in such notice. Upon such designated repurchase
date, the Holder shall surrender this Warrant to the Issuer, without being
required to make any representation or warranty (other than that the Holder has
good and valid title to this Warrant), against payment for such repurchase by
(at the option of the Holder) (i) wire transfer to an account in a bank located
in the United States designated by the Holder for such purposes or (ii) delivery
of a certified or official bank check drawn on a member of the New York Clearing
House. If less than all of this Warrant is being repurchased, the Issuer shall
cancel this Warrant and issue in the name of, and deliver to, the Holder a new
Warrant for the portion of the number of Stock Units not being repurchased.
B. Determination of the Put Price. The Put Price per Stock
Unit as of a date specified shall be equal to the Current Market Price per share
of Common Stock as of the date of such determination, multiplied by the number
of shares of Common Stock constituting a Stock Unit on such date, minus the
Exercise Price.
26. Call Option.
A. Option to Repurchase Warrant and Issued Warrant Stock.
During the Call Period, the Issuer shall have the right, subject to the terms
and conditions of this Section 26, to repurchase from Holders all (but not less
than all) of the Warrant and any Warrant Stock held by all Holders as of the
Call Closing Date (such right shall be referred to as the "Call Option").
21
<PAGE>
B. Notice and Exercise of Call Option. In order to exercise
the Call Option, the Issuer must give written notice to all Holders during the
Call Period, which notice must (i) specify the date of the repurchase of the
Warrant and Warrant Stock pursuant to the Call Option (the "Call Closing Date"),
which date shall be no less than three (3) and no more than ten (10) Business
Days after the date such notice is given, (ii) state the Call Share Price
applicable as of the Call Closing Date, (iii) state the Call Price as calculated
without deduction for the Call Price Credit, if any, and (iv) indicate the
methods by which the Call Share Price and the portion of the Call Price
specified in such notice were calculated. Prior to the Call Closing Date, if
there have been any ING Securities Fees, INCC shall, after consultation with
Issuer, specify in writing to Issuer the amount of the Call Price Credit as of
the Closing Date, which amount so specified shall be conclusive and binding for
all purposes absent manifest error or bad faith. On the Call Closing Date, at
the offices of INCC or such other location as is designated by INCC, (A) each
Holder shall surrender any Warrants held by it to the Issuer, without being
required to make any representation or warranty, and (B) each Holder shall
deliver to the Issuer any certificates representing Warrant Stock held by it,
duly endorsed for transfer to the Issuer, without being required to make any
representation or warranty, all against payment of the Call Price by wire
transfer of immediately available funds to an account designated by each such
Holder for such purpose. Upon the surrender of the Warrants and delivery of the
Warrant Stock to the Issuer pursuant to this Section 26.B, the Issuer shall
immediately cancel the Warrants and any such Warrant Stock.
C. Requirement That Issuer Concurrently Exercise Call Option
Under A Warrant. No Holder shall have any obligations under this Section 26, and
the Issuer shall have no right to exercise the Call Option, unless, concurrently
with the consummation of the Issuer's repurchase of the Warrant and Warrant
Stock pursuant to the Call Option, the Issuer also consummates the repurchase of
the A Warrant and any A Warrant Stock pursuant to the "Call Option" provided for
in Section 26 of the A Warrant.
D. Call Price. The purchase price payable for the repurchase
of the Warrant and any Warrant Stock pursuant to the Call Option (the "Call
Price"), is, as of any time of determination, (i) an amount equal to the then
applicable Call Share Price multiplied by a number equal to the sum of (A) the
number of shares of Warrant Stock purchasable upon exercise of the Warrant and
(B) the number of shares of issued Warrant Stock held by all Holders, if any,
plus (ii) if any Warrant Stock has been issued, the aggregate Exercise Price
that was paid by Holders to the Issuer for such Warrant Stock pursuant to the
Warrant, less (iii) the Call Price Credit as of the Call Closing Date (but the
Call Price shall in no event be less than zero). As of the date hereof, the
"Call Share Price" is $8.75. Upon the making of any of the adjustments provided
for in Section 4.A(2) or 4.A(3) above, the Call Share Price shall be adjusted to
the amount obtained by multiplying the Call Share Price in effect immediately
prior to such adjustment by a fraction, the numerator of which shall be the
number of
22
<PAGE>
shares of Common Stock constituting a Stock Unit immediately prior to the
relevant adjustment provided for in Section 4.A(2) or 4.A(3), as the case may
be, and the denominator of which shall be the number of shares of Common Stock
constituting a Stock Unit immediately thereafter.
E. No Restriction on Holder's Right to Exercise Warrant;
Certain Restrictions on Transferability. Nothing in this Section 26 restricts or
otherwise limits Holder's right to exercise the Warrant in whole or in part at
any time prior to the commencement of or during the Call Period; provided,
however, that Holder hereby agrees that (i) it shall not sell or otherwise
transfer the Warrant, other than to an Affiliate of Holder which agrees to be
bound by the terms hereof, prior to the Call Cutoff Date, and (ii) if it does
exercise or partially exercise the Warrant prior to the Call Cutoff Date, it
shall not sell or otherwise transfer any issued Warrant Stock obtained upon such
exercise, other than to an Affiliate of Holder which agrees to be bound by the
terms hereof, prior to the Call Cutoff Date.
27. Amendment and Restatement of the Existing B Warrant. This Warrant
amends and restates the Existing B Warrant in full.
23
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly
executed and attested by its Secretary or an Assistant Secretary.
Dated as of February 16, 1995
ERLY INDUSTRIES INC., a
California corporation
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
ATTEST:
/s/ KURT GREY
[attestor]
THE UNDERSIGNED, AS THE SOLE
HOLDER OF THE EXISTING B WARRANT,
CONSENTS TO THE FOREGOING
AMENDMENT AND RESTATEMENT OF THE
EXISTING B WARRANT
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, a Delaware
corporation
By: /s/ MICHAEL W. ADLER
Name: Michael W. Adler
Title: Vice President
24
<PAGE>
EXHIBIT 11.A
As of the Closing Date, the Issuer has the following outstanding capital stock:
1. TOTAL SHARES OF COMMON STOCK OUTSTANDING: 3,695,547
2. TOTAL SHARES OF PREFERRED STOCK OUTSTANDING: 0
As of the Closing Date, the Issuer has no outstanding stock or securities
convertible into or exchangeable for any shares of capital stock, nor does it
have outstanding any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any of its capital stock or stock or securities convertible into or exchangeable
for any of its capital stock other than the following:
<TABLE>
<CAPTION>
==================================================================================================================
Convertible
Issue/Grant Into/Exercisable
Date For (as of the
Instrument/Agreement/Other In Favor of Closing Date)*
==================================================================================================================
<S> <C> <C> <C>
Amended and Restated Warrant 2/16/95 INCC 257,679 shares of
to Purchase Common Stock of Common Stock
ERLY Industries (denominated the
"A Warrant")
- ------------------------------------------------------------------------------------------------------------------
Amended and Restated Warrant 2/16/95 INCC 257,679 shares of
to Purchase Common Stock of Common Stock
ERLY Industries (denominated the
"B Warrant")
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Common 2/16/95 INCC 51,536 shares of
Stock of ERLY Industries Common Stock
(denominated the "C Warrant")
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Common 2/16/95 INCC 206,143 shares of
Stock of ERLY Industries Common Stock
(denominated the "D Warrant")
- ------------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 BT Commercial aggregate 277,157
Corporation shares of Common
Stock
- -------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 StanChart
Business Credit
- -------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 Union Bank
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Shares of 9/5/93 ABC Capital 10,000 shares of
Common Stock Markets Group Common Stock
- ------------------------------------------------------------------------------------------------------------------
Convertible Promissory Note 4/1/94 Douglas Murphy 266,596 shares of
Common Stock
25
<PAGE>
- ------------------------------------------------------------------------------------------------------------------
Stock Options Awarded pursuant 1985 Bill J. McFarland 8,053 shares of
to Issuer's 1982 Incentive Stock Common Stock
Option Plan, as adjusted to date
------------------------------------------------------------------------
1988 Douglas A. 115,132 shares of
Murphy, Bill J. Common Stock
McFarland, John
Poole and Lolan
M. Pullen
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
* All figures shown are as calculated after taking into account all adjustments
necessary upon the issuance of the four warrants (denominated the A Warrant, the
B Warrant the C Warrant, and the D Warrant) being issued to INCC on the Closing
Date.
26
<PAGE>
ANNEX I
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _________ Stock Units of
______________________________, a _________________, purchasable with this
Warrant, and herewith makes payment for such Stock Units (by check in the amount
of $__________), all at the price and on the terms and conditions specified in
this Warrant and requests that certificates for the shares of Common Stock
hereby purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered to _________________________
whose address is ____________________ and, if such Stock Units shall not include
all of the Stock Units issuable as provided in this Warrant that a new Warrant
of like tenor and date for the balance of the Stock Units issuable thereunder be
delivered to the undersigned.
Dated:
--------------------------------
(Signature of Registered Owner)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
NOTICE: The signature to the subscription must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The signature to this subscription must be guaranteed by a
bank or trust company having an office or correspondent in Los
Angeles, California or New York, New York, or by a firm having
membership on the New York Stock Exchange.
27
<PAGE>
ANNEX II
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
Stock Units set forth below:
No. of Stock
Name and Address of Assignee Units
and does hereby irrevocably constitute and appoint ___________ Attorney to make
sure transfer on the books of ERLY Industries Inc., a California corporation,
maintained for the purpose, with full power of substitution in the premises.
Dated:
-----------------------------
Signature
-----------------------------
Witness
NOTICE: The signature to the subscription must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The signature to this subscription must be guaranteed by a
bank or trust company having an office or correspondent in Los
Angeles, California or New York, New York, or by a firm having
membership on the New York Stock Exchange.
28
3.9
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE PROPOSED
TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR
STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR
QUALIFIED AS REQUIRED.
THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER OF THIS WARRANT
A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY,
REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
THIS CERTIFICATE.
["C Warrant"]
No. of Stock Units: 51,536
WARRANT
to Purchase Common Stock of
ERLY INDUSTRIES INC.
a California corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Certain Definitions.................................................................................... 1
2. Exercise of Warrant.................................................................................... 5
3. Transfer, Division and Combination..................................................................... 7
4. Adjustment of Stock Unit or Exercise Price............................................................. 8
A. Stock Dividends, Subdivisions and Combinations..................................................... 8
B. Certain Other Dividends and Distributions.......................................................... 8
C. Issuance of Additional Shares of Common Stock or Convertible
Securities.................................................................................... 9
D. Other Provisions Applicable to Adjustments Under this Section...................................... 10
(1) Treasury Stock ............................................................................. 10
(2) When Adjustments to Be Made.................................................................... 10
(3) Fractional Interests........................................................................... 10
(4) When Adjustment Not Required................................................................... 10
E. Merger, Consolidation or Disposition of Assets..................................................... 10
F. Other Action Affecting Common Stock................................................................ 11
G. General .......................................................................................... 12
5. Notices to the Holder.................................................................................. 12
6. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority................................................................. 12
7. Taking of Record; Stock and Warrant Transfer Books..................................................... 13
8. Transfer Taxes......................................................................................... 13
9. No Voting Rights....................................................................................... 13
10. Restrictions on Transferability........................................................................ 13
A. Certain Conditions................................................................................. 13
B. Restrictive Legend................................................................................. 14
C. Notice of Proposed Transfers....................................................................... 14
D. Termination of Restrictions........................................................................ 15
11. Warranties and Representations of the Issuer........................................................... 15
A. Equity Capitalization, etc......................................................................... 15
B. Governmental Consent............................................................................... 16
C. Survival of Representations........................................................................ 16
12. Limitation of Liability................................................................................ 17
13. Loss, Destruction of Warrant Certificates.............................................................. 17
14. Furnish Information.................................................................................... 17
15. Amendments............................................................................................. 17
16. Office of the Issuer................................................................................... 17
17. Notices Generally...................................................................................... 18
18. Successors and Assigns................................................................................. 19
19. Indemnification........................................................................................ 19
20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE....................................................... 19
21. MUTUAL WAIVER OF JURY TRIAL............................................................................ 20
22. No Waiver; Cumulative Remedies......................................................................... 20
23. Specific Performance................................................................................... 20
24. Modification and Severability.......................................................................... 20
25. Put Option............................................................................................. 20
A. Issuer's Obligation to Repurchase Warrants......................................................... 20
B. Determination of the Put Price..................................................................... 21
</TABLE>
3
<PAGE>
["C Warrant"]
No. of Stock Units: 51,536
WARRANT
to Purchase Common Stock of
ERLY INDUSTRIES INC.
a California corporation
THIS IS TO CERTIFY THAT Internationale Nederlanden (U.S.) Capital
Corporation, a Delaware corporation ("INCC"), or registered assigns, is entitled
to purchase from ERLY Industries Inc., a California corporation (the "Issuer"),
at any time after April 1, 1996 but prior to the Expiration Date (as defined
below), Fifty One Thousand Five Hundred Thirty Six (51,536) Stock Units, in
whole or in part, at a purchase price of $0.01 per Stock Unit (adjusted as
provided below), all on the terms and conditions provided in this warrant (this
"Warrant").
1. Certain Definitions. As used in this Warrant, unless the context
otherwise requires:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Issuer after the date of this Warrant, other than the
Warrant Stock.
"Affiliate" shall mean, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Appraisal" shall have the meaning given to such term in the definition
of Appraised Value.
"Appraised Value" shall mean the fair market value of all outstanding
Common Stock, as determined by a written appraisal (the "Appraisal") prepared by
an appraiser selected by the Approving Holders and acceptable to the Issuer.
"Fair market value" is defined for this purpose as the price for one hundred
percent (100%) of the equity capital of the Issuer (determined on a
going-concern basis and without giving effect to any discount for (i) a minority
interest or (ii) any lack of liquidity of the Common Stock or the fact that the
Issuer may have no class of equity registered under the Exchange Act) on the
basis of a sale between a willing seller and buyer, neither acting under any
compulsion. In the event that the Issuer and Approving Holders cannot, in good
faith,
1
<PAGE>
agree upon an appraiser, then the Issuer, on the one hand, and Approving
Holders, on the other hand, shall each select an appraiser, the two appraisers
so selected shall select a third appraiser who shall be directed to prepare the
Appraisal, and the term Appraised Value shall mean the appraised value set forth
in the appraisal prepared in accordance with this definition.
"Approving Holders" shall mean the holders of Warrants evidencing more
than fifty percent (50%) in number of the total number of Stock Units at the
time purchasable upon the exercise of all then outstanding Warrants.
"Book Value" shall mean, on any date herein specified, the consolidated
book value of the Issuer applicable to Common Stock as of the last day of any
fiscal month immediately preceding such date, as determined by independent
accountants of recognized national standing selected by the Issuer and
acceptable to the Approving Holders.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Los Angeles, California.
"Closing Date" is as defined in the Loan Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the United States government administering
the Securities Act.
"Common Stock" shall mean the Issuer's authorized Common Stock, par
value $0.01 per share, as constituted on the date of this Warrant, and (i) any
stock into which such Common Stock may subsequently be changed or any other
capital stock that is not preferred as to dividends or distribution of assets
over any other class of stock of the Issuer, and which is not subject to
redemption, that may be authorized by the Issuer and (ii) shares of common stock
of any successor or acquiring corporation received by or distributed to the
holders of Common Stock in the circumstances contemplated by Section 4.E.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock, warrants, rights or other securities which are convertible into or
exchangeable for Additional Shares of Common Stock, either immediately or upon
the arrival of a specified date or the happening of a specified event; provided
that Convertible Securities shall not mean the Warrants.
"Current Market Price" per share of Common Stock, for the purposes of
any provision of this Warrant at the date specified in such provision, shall be
deemed to be the price determined pursuant to the first applicable of the
following methods:
2
<PAGE>
(i) If the Common Stock is traded on a national securities
exchange or is traded in the over-the-counter market, the Current Market Price
per share of Common Stock shall be deemed to be the average of the daily market
prices for thirty (30) consecutive Trading Days commencing forty-five (45)
Trading Days before such date. The market price for each such Trading Day shall
be, (a) if the Common Stock is traded on a national securities exchange, its
last sale price on the preceding Trading Day on such national securities
exchange or, if there was no sale on that day, the last reported sale price on
such national exchange on the next preceding Trading Day on which there was a
sale, or (b) if the principal market for the Common Stock is the
over-the-counter market, and the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ"), the
last sale price reported on NASDAQ on the preceding Trading Day or, if the
Common Stock is an issue for which last sale prices are not reported on NASDAQ,
the average of the closing bid and asked quotations on such day, but, in each of
the immediately preceding two cases, if the relevant NASDAQ price or quotations
did not exist on such day, then the price or quotations on the next preceding
Trading Day in which there was such a price or quotations.
(ii) If the Current Market Price per share of Common Stock
cannot be ascertained by any of the methods set forth in paragraph (i)
immediately above, the Current Market Price per share of outstanding Common
Stock shall be deemed to be the price equal to the quotient determined by
dividing the higher of (i) Book Value or (ii) Appraised Value, by the number of
shares (including any fractional shares) of Fully Diluted Outstanding Common
Stock.
"Current Warrant Price" per share of Common Stock, for the purpose of
any provision of this Warrant at the date specified in this Warrant, shall mean
the amount equal to the quotient resulting from dividing the Exercise Price in
effect on such date by the number of shares (including any fractional share) of
Common Stock comprising a Stock Unit on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Price" shall mean the purchase price per Stock Unit as set
forth on the first page of this Warrant on the date of original issue of this
Warrant and thereafter shall mean such dollar amount as shall result from the
adjustments specified in Section 4, if any.
"Expiration Date" shall mean October 31, 2004; provided, however, that
if the Termination Date shall occur on or before April 1, 1996, then the
Expiration Date shall be the date of such Termination Date.
3
<PAGE>
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, and any other options,
warrants or other rights to purchase or receive Common Stock outstanding on such
date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Holder" shall mean the holder of this Warrant.
"Loan Agreement" shall mean that certain Amended and Restated Loan
Agreement dated as of the issue date hereof between ERLY Juice Inc. and INCC, as
amended from time to time.
"Maturity" is as defined in the Loan Agreement.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Issuer or any Subsidiary thereof, and shall include all shares
issuable in respect of any certificates representing fractional interests in
shares of Common Stock.
"Person" shall mean a corporation, an association, a trust, a
partnership, a joint venture, an organization, a business, an individual, a
government, a political subdivision or a governmental body.
"Put Price" shall have the meaning ascribed to that term in Section
25(B).
"Restricted Certificate" shall mean a Warrant or a certificate
representing Common Stock bearing the restrictive legend set forth in Section
10.
"Restricted Securities" shall mean Restricted Stock and
Restricted Warrants.
"Restricted Stock" shall mean Warrant Stock represented by a Restricted
Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a Restricted
Certificate.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
under such act, all as the same shall be in effect at the time.
4
<PAGE>
"Subsidiary" shall mean, with respect to any Person, any corporation of
which an aggregate of more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person.
"Stock Unit" shall constitute one share of Common Stock, as such Common
Stock was constituted on the date of this Warrant and thereafter shall
constitute such number of shares (including any fractional shares) of Common
Stock as shall result from the adjustments specified in Section 4, if any.
"Subscription" shall mean a subscription form in the form set out in
Annex I hereto.
"Termination Date" is as defined in the Loan Agreement.
"Trading Day" shall mean any day on which trading occurs on the New
York Stock Exchange.
"Warrant Stock" shall mean the shares of Common Stock purchasable by
the holder of a Warrant upon the exercise of such Warrant.
"Warrants" shall mean this Warrant, and all additional or new warrants
issued upon transfer, division or combination of, or in substitution for, this
Warrant or any such additional or new warrant. All such additional or new
warrants shall at all times be identical as to terms and conditions and date,
except as to the number of Stock Units for which they may be exercised.
2. Exercise of Warrant. The Holder may, at any time after April 1, 1996
but prior to the Expiration Date, exercise this Warrant in whole at any time or
in part from time to time for the number of Stock Units which such holder is
then entitled to purchase under this Warrant. If the Expiration Date is the date
of the Termination Date pursuant to the proviso to the definition of Expiration
Date, then this Warrant shall thereupon terminate and shall be returned by the
Holder to the Issuer. In order to exercise this Warrant, in whole or in part,
the Holder shall deliver to the Issuer at its office maintained for such purpose
pursuant to Section 16 (i) a written notice of the Holder's election to exercise
this Warrant, which notice shall specify the number of Stock Units to be
purchased, (ii) this Warrant and (iii) a sum equal to the Exercise Price for the
number of Stock Units to be purchased in the manner specified below. Such notice
shall be in the form of Subscription set out at the end of this Warrant. Upon
delivery of one or more Subscriptions, the Issuer shall cause to be executed and
delivered to the Holder within five (5) Business Days a certificate or
certificates
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representing the aggregate number of fully paid and nonassessable shares of
Common Stock issuable upon such exercise.
At the option of the Holder, payment of the Exercise Price shall be
made (a) by wire transfer of funds to an account in a bank located in the United
States designated by the Issuer for such purpose, (b) by certified or official
bank check payable to the order of the Issuer and drawn on a member of the New
York Clearing House, (c) by application of all or any part of the principal
amount of the Obligations (as defined in the Loan Agreement) if such Holder is
INCC or an Affiliate of INCC, or (d) by any combination of such methods.
The stock certificate or certificates for Warrant Stock so delivered
shall be in such denominations as may be specified in such notice and shall be
registered in the name of the Holder or such other name or names as shall be
designated in such notice. Such certificate or certificates shall be deemed to
have been issued and the Holder or any other Person so designated to be named in
such certificate or certificates shall be deemed to have become a holder of
record of such shares, including, to the extent permitted by law, the right to
vote such shares or to consent or to receive notice as a stockholder, as of the
date the notice is delivered to the Issuer as set forth above. If this Warrant
shall have been exercised only in part, the Issuer shall, within five (5)
Business Days of delivery of such certificate or certificates, deliver to the
Holder a new Warrant dated the date it is issued, evidencing the rights of the
Holder to purchase the remaining Stock Units called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.
Except as otherwise provided in Section 8, the Issuer shall pay all
expenses, transfer taxes and other charges payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2,
except that, if such stock certificates shall be registered in a name or names
other than the name of the Holder, funds sufficient to pay all stock transfer
taxes which shall be payable upon the issuance of such stock certificate or
certificates shall be paid by the Holder prior to the issuance of such stock
certificate or certificates.
All shares of Common Stock issuable upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable, and free from all liens
and other encumbrances on such shares.
The Issuer will not close its books against the transfer of this
Warrant or of any share of Warrant Stock in any manner which interferes with the
timely exercise of this Warrant.
The Issuer shall not be obligated to issue certificates for fractional
shares of stock upon any exercise of this Warrant.
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3. Transfer, Division and Combination. Subject to Section 10, this
Warrant is, and all rights under this Warrant are, transferable, in whole or in
part, on the books of the Issuer to be maintained for such purpose, upon
surrender of this Warrant at the office of the Issuer maintained for such
purpose pursuant to Section 16, together with a written assignment of this
Warrant in substantially the form of Annex II hereto duly executed by the Holder
or its agent or attorney and payment of funds sufficient to pay any stock
transfer taxes payable upon the making of such transfer. Upon such surrender and
payment the Issuer shall, subject to Section 10, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. This Warrant, if properly assigned in compliance with this
Section 3 and Section 10, may be exercised by an assignee for the purchase of
shares of Common Stock without having a new Warrant issued.
This Warrant may, subject to Section 10, be divided or combined with
other Warrants upon presentation at the office of the Issuer referenced above,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the preceding paragraph and with Section 10, as to
any transfer which may be involved in such division or combination, the Issuer
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
The Issuer shall pay all expenses, taxes (other than stock transfer
taxes excluded by the previous provision of this Section 3) and other charges
incurred by the Issuer in the performance of its obligations in connection with
the preparation, issue and delivery of Warrants under this Section 3.
The Issuer agrees to maintain at its office described in Section 16
books for the registration and transfer of the Warrants.
4. Adjustment of Stock Unit or Exercise Price. The number of shares of
Common Stock comprising a Stock Unit, or the Exercise Price, shall be subject to
adjustment from time to time as set forth in this Section 4 and in Section 5.
A. Stock Dividends, Subdivisions and Combinations. If at any time or
from time to time the Issuer shall:
(1) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Common Stock, or
(2) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
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(3) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Common Stock which a record holder of the number of shares
of Common Stock comprising a Stock Unit immediately prior to the happening of
such event would own or be entitled to receive after the happening of such
event.
B. Certain Other Dividends and Distributions. If at any time or from
time to time the Issuer shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive any dividend or other distribution
of:
(1) cash (other than a cash distribution made as a dividend and payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of the Issuer, to the
extent, but only to the extent, that the aggregate of all such dividends paid or
declared after the date of this Warrant, does not exceed the consolidated net
income of the Issuer earned subsequent to the date of this Warrant determined in
accordance with GAAP, consistently applied), or
(2) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of Common
Stock) or any other securities or property of any nature whatsoever (other than
cash and other than Convertible Securities or Additional Shares of Common
Stock), or
(3) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness (other than Convertible Securities), any shares of
its stock (other than Additional Shares of Common Stock) or any other securities
or property of any nature whatsoever (other than cash and other than Convertible
Securities or Additional Shares of Common Stock),
then the number of shares of Common Stock comprising a Stock Unit from such time
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (i) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record, and (ii) the
denominator of which shall be such Current Market Price per share minus the
portion applicable to one share of Common Stock of any such cash so
distributable and of the fair value of any and all such evidences of
indebtedness, shares of stock, other securities or property, or warrants or
other subscription or purchase rights, so distributable. Such fair value shall
be determined in good faith by the board of directors of the Issuer, provided
that if such determination is objected to by Approving Holders, such
determination shall be made by an independent appraiser chosen in the manner
specified in the definition of
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Appraised Value. A reclassification of the Common Stock into shares of Common
Stock and shares of any other class of stock shall be deemed a distribution by
the Issuer to the holders of its Common Stock of such shares of such other class
of stock within the meaning of this Subsection B and, if the outstanding shares
of Common Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, shall be deemed a subdivision
or combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Subsection A of this Section 4.
C. Issuance of Additional Shares of Common Stock or
Convertible Securities. If at any time or from time to time the Issuer shall
(except as provided below) issue, whether in connection with the merger of a
corporation into the Issuer or otherwise, any Additional Shares of Common Stock
or Convertible Securities, then the number of shares of Common Stock comprising
a Stock Unit from such time shall be adjusted to be that number determined by
multiplying the number of shares of Common Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of shares of Fully Diluted Outstanding Common Stock plus the
number of such Additional Shares of Common Stock so issued (or the number of
shares of Common Stock into which such Convertible Securities are convertible or
exchangeable, as the case may be), and (y) the denominator of which shall be the
number of shares of Fully Diluted Outstanding Common Stock.
Upon any subsequent adjustment in the number of shares of Common Stock
into which any Convertible Securities are convertible or exchangeable, the
number of shares of Common Stock comprising a Stock Unit shall be recalculated
in accordance with the preceding sentence. No further adjustments of the number
of shares of Common Stock comprising a Stock Unit shall be made upon the actual
issuance of Common Stock upon the conversion or exchange of any Convertible
Securities.
The foregoing provisions of this Subsection C shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Subsection A or B of this Section 4.
D. Other Provisions Applicable to Adjustments Under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock comprising a Stock Unit provided for above in
this Section 4:
(1) Treasury Stock. The sale or other disposition of any issued shares
of Common Stock owned or held by or for the account of the Issuer shall be
deemed an issuance of such stock for purposes of this Section 4.
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(2) When Adjustments to Be Made. The adjustments required by the
preceding Subsections of this Section 4 shall be made whenever and as often as
any specified event requiring an adjustment shall occur (including upon any
adjustment in the number of shares of Common Stock into which any Convertible
Securities are convertible or exchangeable), except that no adjustment shall be
made except pursuant to Subsection A of this Section 4 if it would decrease the
number of shares of Common Stock comprising a Stock Unit immediately prior to
such adjustment. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(3) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest one-thousandth of a share.
(4) When Adjustment Not Required. If the Issuer shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall, after
taking such record and before the distribution of such dividend, distribution,
subscription or purchase rights to shareholders, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then no
adjustment shall be required by reason of the taking of such record, and any
such adjustment previously made in respect of the taking of such record shall be
rescinded and annulled.
E. Merger, Consolidation or Disposition of Assets. In the
event the Issuer (1) shall consolidate with or merge into any other corporation
or entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (2) shall permit any other corporation or
entity to consolidate with or merge into the Issuer and the Issuer shall be the
continuing or surviving corporation but, in connection with such consolidation
or merger, the shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other person or cash or any other property, or
(3) shall transfer all or substantially all of its properties or assets to any
other corporation or entity, or (4) shall effect a capital reorganization or
reclassification of the Common Stock (other than a change from par to no-par
value stock or from no-par to par value stock, or a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the number of shares comprising a Stock Unit is provided in
Subsection C of this Section 4), then, and in each such event, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in this Subsection E, the Holder, upon the conversion of all or any part of this
Warrant at any time after the consummation of such consolidation, merger,
transfer, reorganization or reclassification, shall be entitled to receive, in
lieu of the shares of Common Stock issuable upon such conversion prior to such
consummation, the stock and other securities, cash and property to which such
Holder would have been entitled upon such consummation if such Holder had
converted the Warrant immediately prior to
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such consummation, subject to adjustments (subsequent to such corporate action)
as nearly equivalent as possible to the adjustments provided for in this Section
4. Anything contained in this Warrant to the contrary notwithstanding, the
Issuer will not effect any of the transactions described in clauses (1) through
(4) above unless, prior to the consummation of such transaction, each
corporation (other than the Issuer) which may be required to deliver any stock,
securities, cash or property upon the conversion of this Warrant shall assume,
by written instrument delivered to the Holder, the obligation to deliver to the
Holder such shares of stock, securities, cash or property as the Holder may be
entitled to receive upon such conversion.
The foregoing provisions of this Subsection E shall similarly apply to
successive mergers, consolidations or dispositions of assets. In addition to any
other requirements under this Subsection E, the Issuer shall give notice to the
Holder of this Warrants of any merger, consolidation or disposition at least
thirty (30) days before the occurrence of such merger, consolidation or
disposition.
F. Other Action Affecting Common Stock. In case at any time or
from time to time the Issuer shall take any action affecting its Common Stock,
other than an action described in any of the foregoing Subsections A to E
inclusive, of this Section 4, then, unless in the opinion of the Holder such
action will not have a materially adverse effect upon the rights of the Holder,
the number of shares of Common Stock or other stock comprising a Stock Unit, or
the purchase price of such shares, shall be adjusted in such manner and at such
time as the Issuer and the Holder may in good faith agree to be equitable in the
circumstances.
G. General. The Issuer hereby warrants and represents that, on
the date of issuance of this Warrant, this Warrant is exercisable (after giving
effect to the exercise in full of this Warrant) for not less than 1% of the
number of shares of Fully Diluted Outstanding Common Stock. The Issuer agrees
that it will at all times cause this Warrant to be exercisable (after giving
effect to the exercise in full of this Warrant) for not less than 1% of the
number of shares of Fully Diluted Outstanding Common Stock (or such lesser
percentage as may result solely from one or more partial exercises of this
Warrant).
5. Notices to the Holder. Whenever the number of shares of Common Stock
comprising a Stock Unit, or the price at which a Stock Unit may be purchased
upon exercise of this Warrant, shall be adjusted pursuant to Section 4, the
Issuer shall forthwith obtain a certificate signed by the principal financial
officer of the Issuer or, if the Approving Holders request, by independent
accountants of recognized national standing selected by the Issuer and
acceptable to the Approving Holders, setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a statement of the fair value, as determined by the board
of directors of the Issuer or by appraisal (if applicable), of any evidences of
indebtedness, shares of stock, other securities or property or warrants or other
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subscription or purchase rights referred to in Section 4.B(3) or Section 4.E)
and specifying the number of shares of Common Stock comprising a Stock Unit, and
any change in the Exercise Price of a Stock Unit, after giving effect to such
adjustment or change. The Issuer shall promptly, and in any case within three
(3) Business Days after the making of such adjustment, cause a signed copy of
such certificate to be delivered to the Holder. The Issuer shall keep at its
office or agency, maintained for the purpose pursuant to Section 16, copies of
all such certificates and cause the same to be available for inspection at said
office during normal business hours by the Holder or any prospective purchaser
of a Warrant designated by the Holder.
6. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority. The Issuer shall at all times reserve
and keep available for issue upon the exercise of this Warrant such number of
its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of this Warrant. All shares of Common Stock that
shall be issued upon exercise of this Warrant and payment of the Exercise Price
relating to such shares to the Issuer, shall be duly and validly issued and
fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price per share of Common Stock below the then par value, if
any, of the shares of Common Stock issuable upon exercise of this Warrant, the
Issuer shall take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Issuer may validly and legally issue fully paid
and nonassessable shares of Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock comprising a Stock Unit or in the Current
Warrant Price per share of Common Stock, the Issuer shall obtain all such
authorizations or exemptions of, or consents to, such action as may be necessary
from any public regulatory body or bodies having jurisdiction over it by virtue
of such action.
7. Taking of Record; Stock and Warrant Transfer Books. In the case of
all dividends or other distributions by the Issuer to the holders of its Common
Stock with respect to which any provision of Section 4 refers to the taking of a
record of such holders, the Issuer will in each such case take such a record and
will take such record as of the close of business on a Business Day. The Issuer
will not at any time, except upon dissolution, liquidation or winding up, close
its stock transfer books or Warrant transfer books so as to result in preventing
or delaying the exercise or transfer of this Warrant.
8. Transfer Taxes. The Issuer will pay any and all transfer taxes that
may be payable in respect of the issuance or delivery of shares of Common Stock
on exercise of this Warrant. The Issuer shall not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issue and
delivery of
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shares of Common Stock in a name other than that in which this Warrant is
registered, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Issuer the amount of any such tax,
or has established, to the satisfaction of the Issuer, that such tax has been
paid.
9. No Voting Rights. Except as expressly provided in this Warrant, this
Warrant shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Issuer.
10. Restrictions on Transferability.
A. Certain Conditions. To the extent that this Warrant or the
Warrant Stock covered by the Warrant constitute Restricted Securities, such
Restricted Securities shall not be transferable except upon the conditions
specified in this Section 10; provided that, notwithstanding any other
provisions of this Section 10, the Holder (and each other person mentioned below
in this clause) shall have the right to transfer all Restricted Securities or
any Restricted Security to any Affiliate of the Holder, in each case free of the
restrictions imposed by this Section 10 other than the requirement as to the
legending of the certificates for such Restricted Securities specified in
Section 10.B. Each such transferee shall be subject to the same transfer
restrictions imposed on the Warrant holder by this Warrant.
B. Restrictive Legend. Unless and until otherwise permitted by this
Section 10, each Warrant issued upon transfer, division or combination of, or in
substitution for, this Warrant, each certificate for any Warrant Stock issued
upon exercise of this Warrant and each certificate for any Warrant Stock issued
to any subsequent transferee of any such certificate shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE
PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
"THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A
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NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES
EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE,
AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE."
C. Notice of Proposed Transfers. Prior to any transfer or
attempted transfer of any Restricted Securities not covered by the proviso
contained in Subsection A of this Section 10, the Holder shall give written
notice to the Issuer of the Holder's intention to effect a transfer of such
Restricted Securities. Each such notice shall describe the manner and
circumstances of the proposed transfer in material detail. Upon receipt of such
notice, the Issuer may request an opinion of Murphy, Weir & Butler or such other
counsel of the Holder (which counsel shall be reasonably satisfactory to the
Issuer) to the effect that such proposed transfer may be effected without
registration under the Securities Act. Upon receipt of such opinion, the Issuer
shall, as promptly as practicable, so notify the Holder. Upon such notice or if
the Issuer has not requested such an opinion, within ten (10) days after the
Issuer's receiving notice of the proposed transfer, the Holder shall be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice delivered by the Holder to the Issuer. Each Warrant or certificate
evidencing the Restricted Securities thus to be transferred (and each Warrant or
certificate evidencing any untransferred balance of the Restricted Securities
evidenced by such Restricted Certificate) shall bear the restrictive legend set
forth in Section 10.B, unless in the opinion of the Issuer or the opinion of
such counsel, if requested, such legend is not required in order to insure
compliance with the Securities Act.
D. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 10, the restrictions imposed upon the transferability of
the Restricted Securities shall cease and terminate as to any particular
Restricted Security when such Restricted Security shall have been effectively
registered under the Securities Act, including, without limitation, any
registration pursuant to the Registration Rights Agreement between the Issuer
and INCC dated as of the issue date hereof. Whenever such restrictions imposed
shall terminate as to any Restricted Certificate, as provided in this Section
10.D, the Holder shall be entitled to receive from the Issuer, without expense,
a new Warrant of like tenor and date and representing the right to purchase the
same number of aggregate number of shares of Common Stock or a new certificate
representing the same number of shares of Warrant Stock (as the case may be),
but not bearing the restrictive legend otherwise required by this Warrant.
11. Warranties and Representations of the Issuer. The Issuer represents
and warrants to the Holder that as of the date of this Warrant:
A. Equity Capitalization, etc.
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(1) Upon the issuance of this Warrant, the total number of shares of
capital stock which the Issuer has authority to issue is 5,006,000 shares,
consisting of 5,000,000 shares of Common Stock, par value $0.01 per share, and
6,000 shares of preferred stock, $100.00 par value per share. The Issuer has the
power and authority and has taken all actions (corporate or otherwise) necessary
to authorize it to enter into and perform its obligations and undertakings under
this Warrant. Except as set forth on Exhibit 11.A hereto, upon the issuance of
this Warrant, the Issuer will not have outstanding any stock or securities
convertible into or exchangeable for any shares of its capital stock nor does it
have outstanding any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any of its capital stock or stock or securities convertible into or exchangeable
for any of its capital stock other than the Warrants.
(2) When issued and delivered, the Warrants will have been duly
executed, issued and delivered and will constitute legal, valid and binding
obligations of the Issuer, enforceable by the Holder in accordance with their
terms.
(3) None of the issuance of any Warrant, the consummation of the
transactions contemplated in any Warrant, or compliance with the terms and
provisions of this Warrant will conflict with or result in a breach of, or
require any consent under, the certificate of incorporation or the by-laws of
the Issuer, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement or
instrument to which the Issuer is a party or by which it is bound or to which it
or its property is subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any lien upon any of the
revenues or assets of the Issuer pursuant to the terms of any such agreement or
instrument.
(4) There is not in effect on the date of this Warrant any agreement by
the Issuer (other than registration agreements copies of each of which have been
furnished by the Issuer to INCC) pursuant to which any holders of securities of
the Issuer have a right to cause the Issuer to register such securities under
the Securities Act.
(5) The Issuer is a corporation duly organized and validly existing in
good standing under the laws of the State of California and has the corporate
power and authority to execute and deliver this Warrant and to perform its
terms, including, without limitation, the issuance of Warrant Stock upon
exercise of this Warrant. The Issuer has taken all action necessary to authorize
the execution, delivery and performance of this Warrant and the issuance of the
Warrant Stock upon exercise of this Warrant.
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B. Governmental Consent. Neither the nature of the Issuer or of any of
its businesses or properties, nor any relationship between the Issuer and any
other Person, nor (except as expressly provided for in this Warrant) any
circumstance in connection with the offer, issue or sale of this Warrant or the
Warrant Stock is such as to require consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of the Issuer as a condition to the execution and delivery of this Warrant
or the execution and filing of any certificate of amendment of the certificate
of incorporation of the Issuer required in connection with the authorization or
issuance of Warrant Stock or the offer, issue or sale of this Warrant or the
Warrant Stock.
C. Survival of Representations. All representations set forth in this
Section 11 shall survive the issuance and delivery of this Warrant.
12. Limitation of Liability. No provision of this Warrant, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration in this Warrant of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the purchase price of
the Warrant Stock or as a stockholder of the Issuer, whether such liability is
asserted by the Issuer or by creditors of the Issuer.
13. Loss, Destruction of Warrant Certificates. Upon receipt of evidence
satisfactory to the Issuer of the loss, theft, destruction or mutilation of this
Warrant and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security satisfactory to the Issuer (the original Warrant holder's
or any other institutional Warrant holder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of this Warrant), or, in
the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of the lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
14. Furnish Information. The Issuer will file with the Commission on or
before the due date all regular or periodic reports required to be filed
pursuant to the Exchange Act, and will deliver to the holder of record of this
Warrant promptly after their becoming available copies of all financial
statements, reports and proxy statements which the Issuer shall have sent to its
stockholders generally, and of each regular or periodic report (including,
without limitation, reports on Form 8-K) filed by it pursuant to the Exchange
Act, and any Registration Statement, prospectus or written communication (other
than transmittal letters and other communications not publicly available) filed
or delivered by it pursuant to the Securities Act.
15. Amendments. The terms of this Warrant and all other Warrants may be
amended, and the observance of any term in such Warrant may be waived, but only
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with the written consent of the Approving Holders, provided that no such
amendment or waiver may change the number of shares of stock comprising a Stock
Unit or the Exercise Price, without the written consent of the Holders. For the
purposes of determining whether the Approving Holders have taken any action
authorized by this Warrant, any Warrants owned by the Issuer or any Affiliate of
the Issuer (other than an institutional investor which may be deemed an
Affiliate solely by reason of the ownership of Warrants) shall be deemed not to
be outstanding.
16. Office of the Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in Los Angeles, California where this
Warrant may be presented for exercise, transfer, division or combination as in
this Warrant provided. Such office shall be at 10990 Wilshire Boulevard, Los
Angeles, California 90024 unless and until the Issuer shall designate and
maintain some other office for such purposes and deliver written notice of the
address of such other office to the Holders.
17. Notices Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered (i) in person with receipt acknowledged, (ii) by facsimile
transmission, with receipt electronically confirmed during normal business hours
of recipient, and that is confirmed by sending, no later than one (1) Business
Day following such transmission, a copy of such facsimile, by registered or
certified mail, return receipt requested, postage prepaid, or (iii) by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(1) If to any Holder or holder of Warrant Stock, at its last known
address or facsimile transmission number appearing on the books of the Issuer
maintained for such purpose.
(2) If to the Issuer at:
Erly Industries Inc.
10990 Wilshire Boulevard
Los Angeles, California 90024
Attention: Kurt Grey
Facsimile: (310) 473-8890
with a copy to:
Magnus, Epman & Dwyer
300 Corporate Pointe, Suite 310
Culver City, California 90230-7614
Attention: Ronald J. Epman, Esq.
Facsimile: (310) 216-0701
17
<PAGE>
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged or sent by facsimile with receipt
electronically confirmed during normal business hours of recipient, or three (3)
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration, delivery or other communication to the person
designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration,
delivery or other communication.
18. Successors and Assigns. This Warrant shall bind and inure to the
benefit of and, be enforceable by the parties to this Warrant and their
respective successors and assigns, and, without limiting the generality of the
foregoing, shall inure to the benefit of and be enforceable by each person who
shall from time to time be the Holder of this Warrant.
19. Indemnification. The Issuer agrees to indemnify and hold harmless
Holder, its officers, directors, employees, agents, and attorneys from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder
relating to or arising out of (i) Holder's exercise of this Warrant and/or
ownership of any shares of Warrant Stock issued in consequence thereof, or (ii)
any litigation to which Holder is made a party in its capacity as a stockholder
or warrant holder of the Issuer; provided, however, that the Issuer will not be
liable hereunder to the extent that any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses or disbursements are found in a final non-appealable judgment by a
court to have resulted from either (i) Holder's gross negligence or willful
misconduct, (ii) actions or omissions taken or not taken by Holder in any
capacity other than as a stockholder or warrant holder of the Issuer, or (iii)
any knowing violation of federal or state securities laws by Holder.
20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. THE ISSUER AND HOLDER CONSENT TO PERSONAL
JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR
18
<PAGE>
VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR
VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. SERVICE OF PROCESS ON
THE ISSUER OR HOLDER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS WARRANT
SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN ACCORDANCE WITH THE PROCEDURES AND
REQUIREMENTS SET FORTH IN SECTION 17. NOTHING HEREIN SHALL PRECLUDE HOLDER OR
THE ISSUER FROM BRINGING SUIT OR TAKING LEGAL ACTION IN ANY OTHER JURISDICTION.
21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE ISSUER AND HOLDER HEREOF WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
ISSUER AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE ISSUER AND HOLDER HEREOF
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS WARRANT, WHETHER ARISING IN CONTRACT,
TORT OR OTHERWISE.
22. No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Holder, any right, remedy, power or privilege
under this Warrant, shall operate as a waiver of any such right, remedy power or
privilege; nor shall any single or partial exercise of any right, remedy, power
or privilege under this Warrant preclude any other or further exercise of any
such right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Warrant are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
23. Specific Performance. The Issuer and the Holder agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Holder shall be entitled
to an injunction or injunctions to prevent breaches of this Warrant and to
enforce specifically the terms and provisions of this Warrant in any court of
the United States or any states of the United States having jurisdiction, this
being in addition to any other remedy to which it may be entitled at law or in
equity.
24. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained in this Warrant,
any provision of this Warrant is found to be unenforceable, then such provision
shall be deemed modified to the extent necessary to make it enforceable by such
court or
19
<PAGE>
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained in this Warrant.
25. Put Option.
A. Issuer's Obligation to Repurchase Warrants. Upon written
notice from the Holder, from time to time after Maturity but prior to the
Expiration Date, the Issuer shall, on the date designated in such notice (which
date shall be at least thirty (30) Business Days after the date of such notice),
repurchase from such Holder all or the portion of this Warrant designated in
such notice for an amount determined by multiplying (i) the Put Price per Stock
Unit in effect on the date of such notice by (ii) the number of Stock Units that
are designated for repurchase in such notice. Upon such designated repurchase
date, the Holder shall surrender this Warrant to the Issuer, without being
required to make any representation or warranty (other than that the Holder has
good and valid title to this Warrant), against payment for such repurchase by
(at the option of the Holder) (i) wire transfer to an account in a bank located
in the United States designated by the Holder for such purposes or (ii) delivery
of a certified or official bank check drawn on a member of the New York Clearing
House. If less than all of this Warrant is being repurchased, the Issuer shall
cancel this Warrant and issue in the name of, and deliver to, the Holder a new
Warrant for the portion of the number of Stock Units not being repurchased.
B. Determination of the Put Price. The Put Price per Stock
Unit as of a date specified shall be equal to the Current Market Price per share
of Common Stock as of the date of such determination, multiplied by the number
of shares of Common Stock constituting a Stock Unit on such date, minus the
Exercise Price.
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly
executed and attested by its Secretary or an Assistant Secretary.
Dated as of February 16, 1995
ERLY INDUSTRIES INC., a
California corporation
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
20
<PAGE>
ATTEST:
/s/ KURT GREY
[attestor]
21
<PAGE>
EXHIBIT 11.A
As of the Closing Date, the Issuer has the following outstanding capital stock:
1. TOTAL SHARES OF COMMON STOCK OUTSTANDING: 3,695,547
2. TOTAL SHARES OF PREFERRED STOCK OUTSTANDING: 0
As of the Closing Date, the Issuer has no outstanding stock or securities
convertible into or exchangeable for any shares of capital stock, nor does it
have outstanding any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any of its capital stock or stock or securities convertible into or exchangeable
for any of its capital stock other than the following:
<TABLE>
<CAPTION>
==================================================================================================================
Convertible
Issue/Grant Into/Exercisable
Date For (as of the
Instrument/Agreement/Other In Favor of Closing Date)*
==================================================================================================================
<S> <C> <C> <C>
Amended and Restated Warrant 2/16/95 INCC 257,679 shares of
to Purchase Common Stock of Common Stock
ERLY Industries (denominated the
"A Warrant")
- ------------------------------------------------------------------------------------------------------------------
Amended and Restated Warrant 2/16/95 INCC 257,679 shares of
to Purchase Common Stock of Common Stock
ERLY Industries (denominated the
"B Warrant")
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Common 2/16/95 INCC 51,536 shares of
Stock of ERLY Industries Common Stock
(denominated the "C Warrant")
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Common 2/16/95 INCC 206,143 shares of
Stock of ERLY Industries Common Stock
(denominated the "D Warrant")
- ------------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 BT Commercial aggregate 277,157
Corporation shares of Common
Stock
- -------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 StanChart
Business Credit
- -------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 Union Bank
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Shares of 9/5/93 ABC Capital 10,000 shares of
Common Stock Markets Group Common Stock
- ------------------------------------------------------------------------------------------------------------------
Convertible Promissory Note 4/1/94 Douglas Murphy 266,596 shares of
Common Stock
22
<PAGE>
- ------------------------------------------------------------------------------------------------------------------
Stock Options Awarded pursuant 1985 Bill J. McFarland 8,053 shares of
to Issuer's 1982 Incentive Stock Common Stock
Option Plan, as adjusted to date
------------------------------------------------------------------------
1988 Douglas A. 115,132 shares of
Murphy, Bill J. Common Stock
McFarland, John
Poole and Lolan
M. Pullen
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
* All figures shown are as calculated after taking into account all adjustments
necessary upon the issuance of the four warrants (denominated the A Warrant, the
B Warrant the C Warrant, and the D Warrant) being issued to INCC on the Closing
Date.
23
<PAGE>
ANNEX I
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _________ Stock Units of
______________________________, a _________________, purchasable with this
Warrant, and herewith makes payment for such Stock Units (by check in the amount
of $__________), all at the price and on the terms and conditions specified in
this Warrant and requests that certificates for the shares of Common Stock
hereby purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered to _________________________
whose address is ____________________ and, if such Stock Units shall not include
all of the Stock Units issuable as provided in this Warrant that a new Warrant
of like tenor and date for the balance of the Stock Units issuable thereunder be
delivered to the undersigned.
Dated:
--------------------------------
(Signature of Registered Owner)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
NOTICE: The signature to the subscription must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The signature to this subscription must be guaranteed by a
bank or trust company having an office or correspondent in Los
Angeles, California or New York, New York, or by a firm having
membership on the New York Stock Exchange.
24
<PAGE>
ANNEX II
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
Stock Units set forth below:
No. of Stock
Name and Address of Assignee Units
and does hereby irrevocably constitute and appoint ___________ Attorney to make
sure transfer on the books of ERLY Industries Inc., a California corporation,
maintained for the purpose, with full power of substitution in the premises.
Dated:
-----------------------------
Signature
-----------------------------
Witness
NOTICE: The signature to the subscription must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The signature to this subscription must be guaranteed by a
bank or trust company having an office or correspondent in Los
Angeles, California or New York, New York, or by a firm having
membership on the New York Stock Exchange.
25
3.10
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE PROPOSED
TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR
STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR
QUALIFIED AS REQUIRED.
THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER OF THIS WARRANT
A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY,
REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
THIS CERTIFICATE.
["D Warrant"]
No. of Stock Units: 206,143
WARRANT
to Purchase Common Stock of
ERLY INDUSTRIES INC.
a California corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Certain Definitions.................................................................................... 1
2. Exercise of Warrant.................................................................................... 6
3. Transfer, Division and Combination..................................................................... 7
4. Adjustment of Stock Unit or Exercise Price............................................................. 8
A. Stock Dividends, Subdivisions and Combinations.................................................... 8
B. Certain Other Dividends and Distributions......................................................... 8
C. Issuance of Additional Shares of Common Stock or Convertible
Securities.................................................................................... 9
D. Other Provisions Applicable to Adjustments Under this Section..................................... 10
(1) Treasury Stock ........................................................................... 10
(2) When Adjustments to Be Made.................................................................. 10
(3) Fractional Interests......................................................................... 10
(4) When Adjustment Not Required................................................................. 10
E. Merger, Consolidation or Disposition of Assets.................................................... 11
F. Other Action Affecting Common Stock............................................................... 12
G. General ......................................................................................... 12
5. Notices to the Holder.................................................................................. 12
6. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority................................................................. 12
7. Taking of Record; Stock and Warrant Transfer Books..................................................... 13
8. Transfer Taxes......................................................................................... 13
9. No Voting Rights....................................................................................... 13
10. Restrictions on Transferability........................................................................ 13
A. Certain Conditions................................................................................. 14
B. Restrictive Legend................................................................................. 14
C. Notice of Proposed Transfers....................................................................... 14
D. Termination of Restrictions........................................................................ 15
11. Warranties, Representations and Covenants of the Issuer................................................ 15
A. Equity Capitalization, etc......................................................................... 15
B. Governmental Consent............................................................................... 17
C. Survival of Representations........................................................................ 17
2
<PAGE>
12. Limitation of Liability................................................................................ 17
13. Loss, Destruction of Warrant Certificates.............................................................. 17
14. Furnish Information.................................................................................... 17
15. Amendments............................................................................................. 18
16. Office of the Issuer................................................................................... 18
17. Notices Generally...................................................................................... 18
18. Successors and Assigns................................................................................. 19
19. Indemnification........................................................................................ 19
20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE....................................................... 20
21. MUTUAL WAIVER OF JURY TRIAL............................................................................ 20
22. No Waiver; Cumulative Remedies......................................................................... 20
23. Specific Performance................................................................................... 21
24. Modification and Severability.......................................................................... 21
25. Put Option............................................................................................. 21
A. Issuer's Obligation to Repurchase Warrants......................................................... 21
B. Determination of the Put Price..................................................................... 21
</TABLE>
3
<PAGE>
["D Warrant"]
No. of Stock Units: 206,143
WARRANT
to Purchase Common Stock of
ERLY INDUSTRIES INC.
a California corporation
THIS IS TO CERTIFY THAT Internationale Nederlanden (U.S.) Capital
Corporation, a Delaware corporation ("INCC"), or registered assigns, is entitled
to purchase from ERLY Industries Inc., a California corporation (the "Issuer"),
at any time after April 1, 1996 but prior to the Expiration Date (as defined
below), Two Hundred Six Thousand One Hundred Forty Three (206,143) Stock Units,
in whole or in part, at a purchase price of $0.01 per Stock Unit (adjusted as
provided below), all on the terms and conditions provided in this warrant (this
"Warrant").
1. Certain Definitions. As used in this Warrant, unless the context
otherwise requires:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Issuer after the date of this Warrant, other than the
Warrant Stock.
"Affiliate" shall mean, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Appraisal" shall have the meaning given to such term in the definition
of Appraised Value.
"Appraised Value" shall mean the fair market value of all outstanding
Common Stock, as determined by a written appraisal (the "Appraisal") prepared by
an appraiser selected by the Approving Holders and acceptable to the Issuer.
"Fair market value" is defined for this purpose as the price for one hundred
percent (100%) of the equity capital of the Issuer (determined on a
going-concern basis and without giving effect to any discount for (i) a minority
interest or (ii) any lack of liquidity of the Common Stock or the fact that the
Issuer may have no class of equity registered under the Exchange Act) on the
basis of a sale between a willing seller and buyer, neither acting under any
compulsion. In the event that the Issuer and Approving Holders cannot, in good
faith,
1
<PAGE>
agree upon an appraiser, then the Issuer, on the one hand, and Approving
Holders, on the other hand, shall each select an appraiser, the two appraisers
so selected shall select a third appraiser who shall be directed to prepare the
Appraisal, and the term Appraised Value shall mean the appraised value set forth
in the appraisal prepared in accordance with this definition.
"Approving Holders" shall mean the holders of Warrants evidencing more
than fifty percent (50%) in number of the total number of Stock Units at the
time purchasable upon the exercise of all then outstanding Warrants.
"Book Value" shall mean, on any date herein specified, the consolidated
book value of the Issuer applicable to Common Stock as of the last day of any
fiscal month immediately preceding such date, as determined by independent
accountants of recognized national standing selected by the Issuer and
acceptable to the Approving Holders.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in Los Angeles, California.
"Closing Date" is as defined in the Loan Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the United States government administering
the Securities Act.
"Common Stock" shall mean the Issuer's authorized Common Stock, par
value $0.01 per share, as constituted on the date of this Warrant, and (i) any
stock into which such Common Stock may subsequently be changed or any other
capital stock that is not preferred as to dividends or distribution of assets
over any other class of stock of the Issuer, and which is not subject to
redemption, that may be authorized by the Issuer and (ii) shares of common stock
of any successor or acquiring corporation received by or distributed to the
holders of Common Stock in the circumstances contemplated by Section 4.E.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock, warrants, rights or other securities which are convertible into or
exchangeable for Additional Shares of Common Stock, either immediately or upon
the arrival of a specified date or the happening of a specified event; provided
that Convertible Securities shall not mean the Warrants.
"Current Market Price" per share of Common Stock, for the purposes of
any provision of this Warrant at the date specified in such provision, shall be
deemed to be the price determined pursuant to the first applicable of the
following methods:
2
<PAGE>
(i) If the Common Stock is traded on a national securities
exchange or is traded in the over-the-counter market, the Current Market Price
per share of Common Stock shall be deemed to be the average of the daily market
prices for thirty (30) consecutive Trading Days commencing forty-five (45)
Trading Days before such date. The market price for each such Trading Day shall
be, (a) if the Common Stock is traded on a national securities exchange, its
last sale price on the preceding Trading Day on such national securities
exchange or, if there was no sale on that day, the last reported sale price on
such national exchange on the next preceding Trading Day on which there was a
sale, or (b) if the principal market for the Common Stock is the
over-the-counter market, and the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ"), the
last sale price reported on NASDAQ on the preceding Trading Day or, if the
Common Stock is an issue for which last sale prices are not reported on NASDAQ,
the average of the closing bid and asked quotations on such day, but, in each of
the immediately preceding two cases, if the relevant NASDAQ price or quotations
did not exist on such day, then the price or quotations on the next preceding
Trading Day in which there was such a price or quotations.
(ii) If the Current Market Price per share of Common Stock
cannot be ascertained by any of the methods set forth in paragraph (i)
immediately above, the Current Market Price per share of outstanding Common
Stock shall be deemed to be the price equal to the quotient determined by
dividing the higher of (i) Book Value or (ii) Appraised Value, by the number of
shares (including any fractional shares) of Fully Diluted Outstanding Common
Stock.
"Current Warrant Price" per share of Common Stock, for the purpose of
any provision of this Warrant at the date specified in this Warrant, shall mean
the amount equal to the quotient resulting from dividing the Exercise Price in
effect on such date by the number of shares (including any fractional share) of
Common Stock comprising a Stock Unit on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Price" shall mean the purchase price per Stock Unit as set
forth on the first page of this Warrant on the date of original issue of this
Warrant and thereafter shall mean such dollar amount as shall result from the
adjustments specified in Section 4, if any.
"Expiration Date" shall mean October 31, 2004; provided, however, that
if the Termination Date shall occur on or before April 1, 1996, then the
Expiration Date shall be the date of such Termination Date.
3
<PAGE>
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, and any other options,
warrants or other rights to purchase or receive Common Stock outstanding on such
date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Holder" shall mean the holder of this Warrant.
"Loan Agreement" shall mean that certain Amended and Restated Loan
Agreement dated as of the issue date hereof between ERLY Juice Inc. and INCC, as
amended from time to time.
"Maturity" is as defined in the Loan Agreement.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Issuer or any Subsidiary thereof, and shall include all shares
issuable in respect of any certificates representing fractional interests in
shares of Common Stock.
"Person" shall mean a corporation, an association, a trust, a
partnership, a joint venture, an organization, a business, an individual, a
government, a political subdivision or a governmental body.
"Put Price" shall have the meaning ascribed to that term in Section
25(B).
"Restricted Certificate" shall mean a Warrant or a certificate
representing Common Stock bearing the restrictive legend set forth in Section
10.
"Restricted Securities" shall mean Restricted Stock and
Restricted Warrants.
"Restricted Stock" shall mean Warrant Stock represented by a Restricted
Certificate.
"Restricted Warrant" shall mean a Warrant evidenced by a Restricted
Certificate.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
under such act, all as the same shall be in effect at the time.
4
<PAGE>
"Share Availability Date" shall mean the first date upon which the
Issuer has sufficient shares authorized under its certificate of incorporation
to permit the issuance of all the shares of Common Stock required for the
satisfaction of the rights under this Warrant and all other option or conversion
rights granted on or prior to the date of issuance of this Warrant or granted
hereafter pursuant to Issuer's 1982 Incentive Stock Option Plan as in effect on
the Closing Date.
"Subsidiary" shall mean, with respect to any Person, any corporation of
which an aggregate of more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person.
"Stock Unit" shall constitute one share of Common Stock, as such Common
Stock was constituted on the date of this Warrant and thereafter shall
constitute such number of shares (including any fractional shares) of Common
Stock as shall result from the adjustments specified in Section 4, if any.
"Subscription" shall mean a subscription form in the form set out in
Annex I hereto.
"Termination Date" is as defined in the Loan Agreement.
"Trading Day" shall mean any day on which trading occurs on the New
York Stock Exchange.
"Warrant Stock" shall mean the shares of Common Stock purchasable by
the holder of a Warrant upon the exercise of such Warrant.
"Warrants" shall mean this Warrant, and all additional or new warrants
issued upon transfer, division or combination of, or in substitution for, this
Warrant or any such additional or new warrant. All such additional or new
warrants shall at all times be identical as to terms and conditions and date,
except as to the number of Stock Units for which they may be exercised.
2. Exercise of Warrant. The Holder may, at any time after April 1,
1996, but prior to the Expiration Date, exercise this Warrant in whole at any
time or in part from time to time for the number of Stock Units which such
holder is then entitled to purchase under this Warrant. If the Expiration Date
is the date of the Termination Date pursuant to the proviso to the definition of
Expiration Date, then this Warrant shall thereupon terminate and shall be
returned by the Holder to the Issuer. In order to exercise this Warrant, in
whole or in part, the Holder shall deliver to the Issuer at its
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office maintained for such purpose pursuant to Section 16 (i) a written notice
of the Holder's election to exercise this Warrant, which notice shall specify
the number of Stock Units to be purchased, (ii) this Warrant and (iii) a sum
equal to the Exercise Price for the number of Stock Units to be purchased in the
manner specified below. Such notice shall be in the form of Subscription set out
at the end of this Warrant. Upon delivery of one or more Subscriptions, the
Issuer shall cause to be executed and delivered to the Holder within five (5)
Business Days a certificate or certificates representing the aggregate number of
fully paid and nonassessable shares of Common Stock issuable upon such exercise.
At the option of the Holder, payment of the Exercise Price shall be
made (a) by wire transfer of funds to an account in a bank located in the United
States designated by the Issuer for such purpose, (b) by certified or official
bank check payable to the order of the Issuer and drawn on a member of the New
York Clearing House, (c) by application of all or any part of the principal
amount of the Obligations (as defined in the Loan Agreement) if such Holder is
INCC or an Affiliate of INCC, or (d) by any combination of such methods.
The stock certificate or certificates for Warrant Stock so delivered
shall be in such denominations as may be specified in such notice and shall be
registered in the name of the Holder or such other name or names as shall be
designated in such notice. Such certificate or certificates shall be deemed to
have been issued and the Holder or any other Person so designated to be named in
such certificate or certificates shall be deemed to have become a holder of
record of such shares, including, to the extent permitted by law, the right to
vote such shares or to consent or to receive notice as a stockholder, as of the
date the notice is delivered to the Issuer as set forth above. If this Warrant
shall have been exercised only in part, the Issuer shall, within five (5)
Business Days of delivery of such certificate or certificates, deliver to the
Holder a new Warrant dated the date it is issued, evidencing the rights of the
Holder to purchase the remaining Stock Units called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.
Except as otherwise provided in Section 8, the Issuer shall pay all
expenses, transfer taxes and other charges payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2,
except that, if such stock certificates shall be registered in a name or names
other than the name of the Holder, funds sufficient to pay all stock transfer
taxes which shall be payable upon the issuance of such stock certificate or
certificates shall be paid by the Holder prior to the issuance of such stock
certificate or certificates.
From and after the Share Availability Date, all shares of Common Stock
issuable upon the exercise of this Warrant shall be validly issued, fully paid
and nonassessable, and free from all liens and other encumbrances on such
shares.
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The Issuer will not close its books against the transfer of this
Warrant or of any share of Warrant Stock in any manner which interferes with the
timely exercise of this Warrant.
The Issuer shall not be obligated to issue certificates for fractional
shares of stock upon any exercise of this Warrant.
3. Transfer, Division and Combination. Subject to Section 10, this
Warrant is, and all rights under this Warrant are, transferable, in whole or in
part, on the books of the Issuer to be maintained for such purpose, upon
surrender of this Warrant at the office of the Issuer maintained for such
purpose pursuant to Section 16, together with a written assignment of this
Warrant in substantially the form of Annex II hereto duly executed by the Holder
or its agent or attorney and payment of funds sufficient to pay any stock
transfer taxes payable upon the making of such transfer. Upon such surrender and
payment the Issuer shall, subject to Section 10, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. This Warrant, if properly assigned in compliance with this
Section 3 and Section 10, may be exercised by an assignee for the purchase of
shares of Common Stock without having a new Warrant issued.
This Warrant may, subject to Section 10, be divided or combined with
other Warrants upon presentation at the office of the Issuer referenced above,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with the preceding paragraph and with Section 10, as to
any transfer which may be involved in such division or combination, the Issuer
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
The Issuer shall pay all expenses, taxes (other than stock transfer
taxes excluded by the previous provision of this Section 3) and other charges
incurred by the Issuer in the performance of its obligations in connection with
the preparation, issue and delivery of Warrants under this Section 3.
The Issuer agrees to maintain at its office described in Section 16
books for the registration and transfer of the Warrants.
4. Adjustment of Stock Unit or Exercise Price. The number of shares of
Common Stock comprising a Stock Unit, or the Exercise Price, shall be subject to
adjustment from time to time as set forth in this Section 4 and in Section 5.
A. Stock Dividends, Subdivisions and Combinations. If at any time or
from time to time the Issuer shall:
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(1) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Common Stock, or
(2) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(3) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the happening of any such event shall be adjusted so as to consist of the
number of shares of Common Stock which a record holder of the number of shares
of Common Stock comprising a Stock Unit immediately prior to the happening of
such event would own or be entitled to receive after the happening of such
event.
B. Certain Other Dividends and Distributions. If at any time or from
time to time the Issuer shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive any dividend or other distribution
of:
(1) cash (other than a cash distribution made as a dividend and payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of the Issuer, to the
extent, but only to the extent, that the aggregate of all such dividends paid or
declared after the date of this Warrant, does not exceed the consolidated net
income of the Issuer earned subsequent to the date of this Warrant determined in
accordance with GAAP, consistently applied), or
(2) any evidence of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of Common
Stock) or any other securities or property of any nature whatsoever (other than
cash and other than Convertible Securities or Additional Shares of Common
Stock), or
(3) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness (other than Convertible Securities), any shares of
its stock (other than Additional Shares of Common Stock) or any other securities
or property of any nature whatsoever (other than cash and other than Convertible
Securities or Additional Shares of Common Stock),
then the number of shares of Common Stock comprising a Stock Unit from such time
shall be adjusted to that number determined by multiplying the number of shares
of Common Stock comprising a Stock Unit immediately prior to such adjustment by
a fraction (i) the numerator of which shall be the Current Market Price per
share of Common Stock at the date of taking such record, and (ii) the
denominator of which
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shall be such Current Market Price per share minus the portion applicable to one
share of Common Stock of any such cash so distributable and of the fair value of
any and all such evidences of indebtedness, shares of stock, other securities or
property, or warrants or other subscription or purchase rights, so
distributable. Such fair value shall be determined in good faith by the board of
directors of the Issuer, provided that if such determination is objected to by
Approving Holders, such determination shall be made by an independent appraiser
chosen in the manner specified in the definition of Appraised Value. A
reclassification of the Common Stock into shares of Common Stock and shares of
any other class of stock shall be deemed a distribution by the Issuer to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Subsection B and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Subsection A of this Section 4.
C. Issuance of Additional Shares of Common Stock or
Convertible Securities. If at any time or from time to time the Issuer shall
(except as provided below) issue, whether in connection with the merger of a
corporation into the Issuer or otherwise, any Additional Shares of Common Stock
or Convertible Securities, then the number of shares of Common Stock comprising
a Stock Unit from such time shall be adjusted to be that number determined by
multiplying the number of shares of Common Stock comprising a Stock Unit
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of shares of Fully Diluted Outstanding Common Stock plus the
number of such Additional Shares of Common Stock so issued (or the number of
shares of Common Stock into which such Convertible Securities are convertible or
exchangeable, as the case may be), and (y) the denominator of which shall be the
number of shares of Fully Diluted Outstanding Common Stock.
Upon any subsequent adjustment in the number of shares of Common Stock
into which any Convertible Securities are convertible or exchangeable, the
number of shares of Common Stock comprising a Stock Unit shall be recalculated
in accordance with the preceding sentence. No further adjustments of the number
of shares of Common Stock comprising a Stock Unit shall be made upon the actual
issuance of Common Stock upon the conversion or exchange of any Convertible
Securities.
The foregoing provisions of this Subsection C shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Subsection A or B of this Section 4.
D. Other Provisions Applicable to Adjustments Under this Section. The
following provisions shall be applicable to the making of adjustments of the
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number of shares of Common Stock comprising a Stock Unit provided for above in
this Section 4:
(1) Treasury Stock. The sale or other disposition of any issued shares
of Common Stock owned or held by or for the account of the Issuer shall be
deemed an issuance of such stock for purposes of this Section 4.
(2) When Adjustments to Be Made. The adjustments required by the
preceding Subsections of this Section 4 shall be made whenever and as often as
any specified event requiring an adjustment shall occur (including upon any
adjustment in the number of shares of Common Stock into which any Convertible
Securities are convertible or exchangeable), except that no adjustment shall be
made except pursuant to Subsection A of this Section 4 if it would decrease the
number of shares of Common Stock comprising a Stock Unit immediately prior to
such adjustment. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(3) Fractional Interests. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest one-thousandth of a share.
(4) When Adjustment Not Required. If the Issuer shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall, after
taking such record and before the distribution of such dividend, distribution,
subscription or purchase rights to shareholders, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then no
adjustment shall be required by reason of the taking of such record, and any
such adjustment previously made in respect of the taking of such record shall be
rescinded and annulled.
E. Merger, Consolidation or Disposition of Assets. In the
event the Issuer (1) shall consolidate with or merge into any other corporation
or entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (2) shall permit any other corporation or
entity to consolidate with or merge into the Issuer and the Issuer shall be the
continuing or surviving corporation but, in connection with such consolidation
or merger, the shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other person or cash or any other property, or
(3) shall transfer all or substantially all of its properties or assets to any
other corporation or entity, or (4) shall effect a capital reorganization or
reclassification of the Common Stock (other than a change from par to no-par
value stock or from no-par to par value stock, or a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the number of shares comprising a Stock Unit is provided in
Subsection C of this Section 4), then, and in each such event, proper provision
shall be made so that,
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upon the basis and the terms and in the manner provided in this Subsection E,
the Holder, upon the conversion of all or any part of this Warrant at any time
after the consummation of such consolidation, merger, transfer, reorganization
or reclassification, shall be entitled to receive, in lieu of the shares of
Common Stock issuable upon such conversion prior to such consummation, the stock
and other securities, cash and property to which such Holder would have been
entitled upon such consummation if such Holder had converted the Warrant
immediately prior to such consummation, subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments
provided for in this Section 4. Anything contained in this Warrant to the
contrary notwithstanding, the Issuer will not effect any of the transactions
described in clauses (1) through (4) above unless, prior to the consummation of
such transaction, each corporation (other than the Issuer) which may be required
to deliver any stock, securities, cash or property upon the conversion of this
Warrant shall assume, by written instrument delivered to the Holder, the
obligation to deliver to the Holder such shares of stock, securities, cash or
property as the Holder may be entitled to receive upon such conversion.
The foregoing provisions of this Subsection E shall similarly apply to
successive mergers, consolidations or dispositions of assets. In addition to any
other requirements under this Subsection E, the Issuer shall give notice to the
Holder of this Warrants of any merger, consolidation or disposition at least
thirty (30) days before the occurrence of such merger, consolidation or
disposition.
F. Other Action Affecting Common Stock. In case at any time or
from time to time the Issuer shall take any action affecting its Common Stock,
other than an action described in any of the foregoing Subsections A to E
inclusive, of this Section 4, then, unless in the opinion of the Holder such
action will not have a materially adverse effect upon the rights of the Holder,
the number of shares of Common Stock or other stock comprising a Stock Unit, or
the purchase price of such shares, shall be adjusted in such manner and at such
time as the Issuer and the Holder may in good faith agree to be equitable in the
circumstances.
G. General. The Issuer hereby warrants and represents that, on
the date of issuance of this Warrant, this Warrant is exercisable (after giving
effect to the exercise in full of this Warrant) for not less than 4% of the
number of shares of Fully Diluted Outstanding Common Stock. The Issuer agrees
that it will at all times cause this Warrant to be exercisable (after giving
effect to the exercise in full of this Warrant) for not less than 4% of the
number of shares of Fully Diluted Outstanding Common Stock (or such lesser
percentage as may result solely from one or more partial exercises of this
Warrant).
5. Notices to the Holder. Whenever the number of shares of Common Stock
comprising a Stock Unit, or the price at which a Stock Unit may be purchased
upon exercise of this Warrant, shall be adjusted pursuant to Section 4, the
Issuer shall
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forthwith obtain a certificate signed by the principal financial officer of the
Issuer or, if the Approving Holders request, by independent accountants of
recognized national standing selected by the Issuer and acceptable to the
Approving Holders, setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
statement of the fair value, as determined by the board of directors of the
Issuer or by appraisal (if applicable), of any evidences of indebtedness, shares
of stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 4.B(3) or Section 4.E) and specifying the
number of shares of Common Stock comprising a Stock Unit, and any change in the
Exercise Price of a Stock Unit, after giving effect to such adjustment or
change. The Issuer shall promptly, and in any case within three (3) Business
Days after the making of such adjustment, cause a signed copy of such
certificate to be delivered to the Holder. The Issuer shall keep at its office
or agency, maintained for the purpose pursuant to Section 16, copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of a
Warrant designated by the Holder.
6. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority. The Issuer shall, at all times on and
after the Share Availability Date, reserve and keep available for issue upon the
exercise of this Warrant such number of its authorized but unissued shares of
Common Stock as will be sufficient to permit the exercise in full of this
Warrant. From and after the Share Availability Date, all shares of Common Stock
that shall be issued upon exercise of this Warrant and payment of the Exercise
Price relating to such shares to the Issuer, shall be duly and validly issued
and fully paid and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price per share of Common Stock below the then par value, if
any, of the shares of Common Stock issuable upon exercise of this Warrant, the
Issuer shall take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Issuer may validly and legally issue fully paid
and nonassessable shares of Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock comprising a Stock Unit or in the Current
Warrant Price per share of Common Stock, the Issuer shall obtain all such
authorizations or exemptions of, or consents to, such action as may be necessary
from any public regulatory body or bodies having jurisdiction over it by virtue
of such action.
7. Taking of Record; Stock and Warrant Transfer Books. In the case of
all dividends or other distributions by the Issuer to the holders of its Common
Stock with respect to which any provision of Section 4 refers to the taking of a
record of such holders, the Issuer will in each such case take such a record and
will take such record as of the close of business on a Business Day. The Issuer
will not at any time, except
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upon dissolution, liquidation or winding up, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of this Warrant.
8. Transfer Taxes. The Issuer will pay any and all transfer taxes that
may be payable in respect of the issuance or delivery of shares of Common Stock
on exercise of this Warrant. The Issuer shall not, however, be required to pay
any tax that may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which this
Warrant is registered, and no such issue or delivery shall be made unless and
until the Person requesting such issue has paid to the Issuer the amount of any
such tax, or has established, to the satisfaction of the Issuer, that such tax
has been paid.
9. No Voting Rights. Except as expressly provided in this Warrant, this
Warrant shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Issuer.
10. Restrictions on Transferability.
A. Certain Conditions. To the extent that this Warrant or the Warrant
Stock covered by the Warrant constitute Restricted Securities, such Restricted
Securities shall not be transferable except upon the conditions specified in
this Section 10; provided that, notwithstanding any other provisions of this
Section 10, the Holder (and each other person mentioned below in this clause)
shall have the right to transfer all Restricted Securities or any Restricted
Security to any Affiliate of the Holder, in each case free of the restrictions
imposed by this Section 10 other than the requirement as to the legending of the
certificates for such Restricted Securities specified in Section 10.B. Each such
transferee shall be subject to the same transfer restrictions imposed on the
Warrant holder by this Warrant.
B. Restrictive Legend. Unless and until otherwise permitted by this
Section 10, each Warrant issued upon transfer, division or combination of, or in
substitution for, this Warrant, each certificate for any Warrant Stock issued
upon exercise of this Warrant and each certificate for any Warrant Stock issued
to any subsequent transferee of any such certificate shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE
PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
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FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
"THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES
SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A NEW
CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY,
REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF
THIS CERTIFICATE."
C. Notice of Proposed Transfers. Prior to any transfer or
attempted transfer of any Restricted Securities not covered by the proviso
contained in Subsection A of this Section 10, the Holder shall give written
notice to the Issuer of the Holder's intention to effect a transfer of such
Restricted Securities. Each such notice shall describe the manner and
circumstances of the proposed transfer in material detail. Upon receipt of such
notice, the Issuer may request an opinion of Murphy, Weir & Butler or such other
counsel of the Holder (which counsel shall be reasonably satisfactory to the
Issuer) to the effect that such proposed transfer may be effected without
registration under the Securities Act. Upon receipt of such opinion, the Issuer
shall, as promptly as practicable, so notify the Holder. Upon such notice or if
the Issuer has not requested such an opinion, within ten (10) days after the
Issuer's receiving notice of the proposed transfer, the Holder shall be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice delivered by the Holder to the Issuer. Each Warrant or certificate
evidencing the Restricted Securities thus to be transferred (and each Warrant or
certificate evidencing any untransferred balance of the Restricted Securities
evidenced by such Restricted Certificate) shall bear the restrictive legend set
forth in Section 10.B, unless in the opinion of the Issuer or the opinion of
such counsel, if requested, such legend is not required in order to insure
compliance with the Securities Act.
D. Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 10, the restrictions imposed upon the transferability of
the Restricted Securities shall cease and terminate as to any particular
Restricted Security when such Restricted Security shall have been effectively
registered under the Securities Act, including, without limitation, any
registration pursuant to the Registration Rights Agreement between the Issuer
and INCC dated as of the issue date hereof. Whenever such restrictions imposed
shall terminate as to any Restricted Certificate, as provided in this Section
10.D, the Holder shall be entitled to receive from the Issuer, without expense,
a new Warrant of like tenor and date and representing the right to purchase the
same number of aggregate number of shares of Common Stock or a
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new certificate representing the same number of shares of Warrant Stock (as the
case may be), but not bearing the restrictive legend otherwise required by this
Warrant.
11. Warranties, Representations and Covenants of the Issuer. The Issuer
represents, warrants and covenants to the Holder that as of the date of this
Warrant:
A. Equity Capitalization, etc.
(1) Upon the issuance of this Warrant, the total number of shares of
capital stock which the Issuer has authority to issue is 5,006,000 shares,
consisting of 5,000,000 shares of Common Stock, par value $0.01 per share, and
6,000 shares of preferred stock, $100.00 par value per share. The Issuer and
Holder acknowledge that as of the Closing Date, and until the Share Availability
Date shall have occurred, the Issuer does not and will not have sufficient
shares authorized under its certificate of incorporation to permit the issuance
of all the shares of Common Stock required for the satisfaction of the rights
under this Warrant and all other option or conversion rights granted on or prior
to the date of issuance of this Warrant (it being understood that this Warrant
is not exercisable until April 1, 1996). The Issuer covenants that it will take
all actions (corporate or otherwise) necessary to cause the Share Availability
Date to occur before April 1, 1996. The Issuer has the power and authority and
has taken all actions (corporate or otherwise) necessary to authorize it to
enter into this Warrant and to perform its obligations and undertakings under
this Warrant. No later than thirty days after the Share Availability Date,
Issuer shall deliver to Holder such officer's certificates, board resolutions,
and other documents deemed necessary or appropriate by Holder and its counsel
with respect to the performance by Issuer of its obligations hereunder,
including, without limitation, (i) Issuer's due authorization to issue shares of
Common Stock upon exercise of this Warrant and (ii) the due reservation by
Issuer of such number of Issuer's authorized but unissued shares of Common Stock
as will be sufficient to permit the exercise in full of this Warrant). Except as
set forth on Exhibit 11.A hereto, upon the issuance of this Warrant, the Issuer
will not have outstanding any stock or securities convertible into or
exchangeable for any shares of its capital stock nor does it have outstanding
any rights to subscribe for or to purchase, or any options for the purchase of,
or any agreements providing for the issuance (contingent or otherwise) of, or
any calls, commitments or claims of any character relating to, any of its
capital stock or stock or securities convertible into or exchangeable for any of
its capital stock other than the Warrants.
(2) When issued and delivered, the Warrants will have been duly
executed, issued and delivered and will constitute legal, valid and binding
obligations of the Issuer, enforceable by the Holder in accordance with their
terms.
(3) Except as set forth in Section 11.A(1), none of the issuance of any
Warrant, the consummation of the transactions contemplated in any Warrant, or
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compliance with the terms and provisions of this Warrant will conflict with or
result in a breach of, or require any consent under, the certificate of
incorporation or the by-laws of the Issuer, or any applicable law or regulation,
or any order, writ, injunction or decree of any court or governmental authority
or agency, or any agreement or instrument to which the Issuer is a party or by
which it is bound or to which it or its property is subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any lien upon any of the revenues or assets of the Issuer pursuant
to the terms of any such agreement or instrument.
(4) There is not in effect on the date of this Warrant any agreement by
the Issuer (other than registration agreements copies of each of which have been
furnished by the Issuer to INCC) pursuant to which any holders of securities of
the Issuer have a right to cause the Issuer to register such securities under
the Securities Act.
(5) The Issuer is a corporation duly organized and validly existing in
good standing under the laws of the State of California and has the corporate
power and authority to execute and deliver this Warrant and, except as set forth
in Section 11.A(1), to perform its terms, including, without limitation, the
issuance of Warrant Stock upon exercise of this Warrant. Except as set forth in
Section 11.A(1), the Issuer has taken all action necessary to authorize the
execution, delivery and performance of this Warrant and the issuance of the
Warrant Stock upon exercise of this Warrant.
B. Governmental Consent. Neither the nature of the Issuer or of any of
its businesses or properties, nor any relationship between the Issuer and any
other Person, nor (except as expressly provided for in this Warrant) any
circumstance in connection with the offer, issue or sale of this Warrant or the
Warrant Stock is such as to require consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of the Issuer as a condition to the execution and delivery of this Warrant
or the execution and filing of any certificate of amendment of the certificate
of incorporation of the Issuer required in connection with the authorization or
issuance of Warrant Stock or the offer, issue or sale of this Warrant or the
Warrant Stock.
C. Survival of Representations. All representations set forth in this
Section 11 shall survive the issuance and delivery of this Warrant.
12. Limitation of Liability. No provision of this Warrant, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration in this Warrant of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the purchase price of
the Warrant Stock or as a stockholder of the Issuer, whether such liability is
asserted by the Issuer or by creditors of the Issuer.
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13. Loss, Destruction of Warrant Certificates. Upon receipt of evidence
satisfactory to the Issuer of the loss, theft, destruction or mutilation of this
Warrant and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security satisfactory to the Issuer (the original Warrant holder's
or any other institutional Warrant holder's indemnity being satisfactory
indemnity in the event of loss, theft or destruction of this Warrant), or, in
the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of the lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock.
14. Furnish Information. The Issuer will file with the Commission on or
before the due date all regular or periodic reports required to be filed
pursuant to the Exchange Act, and will deliver to the holder of record of this
Warrant promptly after their becoming available copies of all financial
statements, reports and proxy statements which the Issuer shall have sent to its
stockholders generally, and of each regular or periodic report (including,
without limitation, reports on Form 8-K) filed by it pursuant to the Exchange
Act, and any Registration Statement, prospectus or written communication (other
than transmittal letters and other communications not publicly available) filed
or delivered by it pursuant to the Securities Act.
15. Amendments. The terms of this Warrant and all other Warrants may be
amended, and the observance of any term in such Warrant may be waived, but only
with the written consent of the Approving Holders, provided that no such
amendment or waiver may change the number of shares of stock comprising a Stock
Unit or the Exercise Price, without the written consent of the Holders. For the
purposes of determining whether the Approving Holders have taken any action
authorized by this Warrant, any Warrants owned by the Issuer or any Affiliate of
the Issuer (other than an institutional investor which may be deemed an
Affiliate solely by reason of the ownership of Warrants) shall be deemed not to
be outstanding.
16. Office of the Issuer. So long as this Warrant remains outstanding,
the Issuer shall maintain an office in Los Angeles, California where this
Warrant may be presented for exercise, transfer, division or combination as in
this Warrant provided. Such office shall be at 10990 Wilshire Boulevard, Los
Angeles, California 90024 unless and until the Issuer shall designate and
maintain some other office for such purposes and deliver written notice of the
address of such other office to the Holders.
17. Notices Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered (i) in person with receipt acknowledged, (ii) by facsimile
transmission, with receipt electronically confirmed during normal business hours
of recipient, and that is confirmed by sending, no later than one (1) Business
Day following such transmission,
17
<PAGE>
a copy of such facsimile, by registered or certified mail, return receipt
requested, postage prepaid, or (iii) by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(1) If to any Holder or holder of Warrant Stock, at its last known
address or facsimile transmission number appearing on the books of the Issuer
maintained for such purpose.
(2) If to the Issuer at:
Erly Industries Inc.
10990 Wilshire Boulevard
Los Angeles, California 90024
Attention: Kurt Grey
Facsimile: (310) 473-8890
with a copy to:
Magnus, Epman & Dwyer
300 Corporate Pointe, Suite 310
Culver City, California 90230-7614
Attention: Ronald J. Epman, Esq.
Facsimile: (310) 216-0701
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged or sent by facsimile with receipt
electronically confirmed during normal business hours of recipient, or three (3)
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration, delivery or other communication to the person
designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration,
delivery or other communication.
18. Successors and Assigns. This Warrant shall bind and inure to the
benefit of and, be enforceable by the parties to this Warrant and their
respective successors and assigns, and, without limiting the generality of the
foregoing, shall inure to the benefit of and be enforceable by each person who
shall from time to time be the Holder of this Warrant.
18
<PAGE>
19. Indemnification. The Issuer agrees to indemnify and hold harmless
Holder, its officers, directors, employees, agents, and attorneys from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder
relating to or arising out of (i) Holder's exercise of this Warrant and/or
ownership of any shares of Warrant Stock issued in consequence thereof, or (ii)
any litigation to which Holder is made a party in its capacity as a stockholder
or warrant holder of the Issuer; provided, however, that the Issuer will not be
liable hereunder to the extent that any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses or disbursements are found in a final non-appealable judgment by a
court to have resulted from either (i) Holder's gross negligence or willful
misconduct, (ii) actions or omissions taken or not taken by Holder in any
capacity other than as a stockholder or warrant holder of the Issuer, or (iii)
any knowing violation of federal or state securities laws by Holder.
20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. THE ISSUER AND HOLDER CONSENT TO PERSONAL JURISDICTION, WAIVE ANY
OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED
ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA. SERVICE OF PROCESS ON THE ISSUER OR HOLDER IN ANY ACTION ARISING OUT
OF OR RELATING TO THIS WARRANT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN
ACCORDANCE WITH THE PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 17. NOTHING
HEREIN SHALL PRECLUDE HOLDER OR THE ISSUER FROM BRINGING SUIT OR TAKING LEGAL
ACTION IN ANY OTHER JURISDICTION.
21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE ISSUER AND HOLDER HEREOF WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
ISSUER AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE ISSUER AND HOLDER HEREOF
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR
19
<PAGE>
DEFEND ANY RIGHTS UNDER THIS WARRANT, WHETHER ARISING IN CONTRACT,
TORT OR OTHERWISE.
22. No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Holder, any right, remedy, power or privilege
under this Warrant, shall operate as a waiver of any such right, remedy power or
privilege; nor shall any single or partial exercise of any right, remedy, power
or privilege under this Warrant preclude any other or further exercise of any
such right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Warrant are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
23. Specific Performance. The Issuer and the Holder agree that
irreparable damage would occur in the event that any of the provisions of this
Warrant were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Holder shall be entitled
to an injunction or injunctions to prevent breaches of this Warrant and to
enforce specifically the terms and provisions of this Warrant in any court of
the United States or any states of the United States having jurisdiction, this
being in addition to any other remedy to which it may be entitled at law or in
equity.
24. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained in this Warrant,
any provision of this Warrant is found to be unenforceable, then such provision
shall be deemed modified to the extent necessary to make it enforceable by such
court or agency. If any such provision is not enforceable as set forth in the
preceding sentence, the unenforceability of such provision shall not affect the
other provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained in this Warrant.
25. Put Option.
A. Issuer's Obligation to Repurchase Warrants. Upon written
notice from the Holder, from time to time after Maturity but prior to the
Expiration Date, the Issuer shall, on the date designated in such notice (which
date shall be at least thirty (30) Business Days after the date of such notice),
repurchase from such Holder all or the portion of this Warrant designated in
such notice for an amount determined by multiplying (i) the Put Price per Stock
Unit in effect on the date of such notice by (ii) the number of Stock Units that
are designated for repurchase in such notice. Upon such designated repurchase
date, the Holder shall surrender this Warrant to the Issuer, without being
required to make any representation or warranty (other than that the Holder has
good and valid title to this Warrant), against payment for such repurchase by
(at the option of the Holder) (i) wire transfer to an account in a bank located
in the United States designated by the Holder for such purposes or (ii) delivery
20
<PAGE>
of a certified or official bank check drawn on a member of the New York Clearing
House. If less than all of this Warrant is being repurchased, the Issuer shall
cancel this Warrant and issue in the name of, and deliver to, the Holder a new
Warrant for the portion of the number of Stock Units not being repurchased.
B. Determination of the Put Price. The Put Price per Stock
Unit as of a date specified shall be equal to the Current Market Price per share
of Common Stock as of the date of such determination, multiplied by the number
of shares of Common Stock constituting a Stock Unit on such date, minus the
Exercise Price.
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly
executed and attested by its Secretary or an Assistant Secretary.
Dated as of February 16, 1995
ERLY INDUSTRIES INC., a
California corporation
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
ATTEST:
/s/ KURT GREY
[attestor]
21
<PAGE>
EXHIBIT 11.A
As of the Closing Date, the Issuer has the following outstanding capital stock:
1. TOTAL SHARES OF COMMON STOCK OUTSTANDING: 3,695,547
2. TOTAL SHARES OF PREFERRED STOCK OUTSTANDING: 0
As of the Closing Date, the Issuer has no outstanding stock or securities
convertible into or exchangeable for any shares of capital stock, nor does it
have outstanding any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any of its capital stock or stock or securities convertible into or exchangeable
for any of its capital stock other than the following:
<TABLE>
<CAPTION>
==================================================================================================================
Convertible
Issue/Grant Into/Exercisable
Date For (as of the
Instrument/Agreement/Other In Favor of Closing Date)*
==================================================================================================================
<S> <C> <C> <C>
Amended and Restated Warrant 2/16/95 INCC 257,679 shares of
to Purchase Common Stock of Common Stock
ERLY Industries (denominated the
"A Warrant")
- ------------------------------------------------------------------------------------------------------------------
Amended and Restated Warrant 2/16/95 INCC 257,679 shares of
to Purchase Common Stock of Common Stock
ERLY Industries (denominated the
"B Warrant")
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Common 2/16/95 INCC 51,536 shares of
Stock of ERLY Industries Common Stock
(denominated the "C Warrant")
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Common 2/16/95 INCC 206,143 shares of
Stock of ERLY Industries Common Stock
(denominated the "D Warrant")
- ------------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 BT Commercial aggregate 277,157
Corporation shares of Common
Stock
- -------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 StanChart
Business Credit
- -------------------------------------------------------------------------------------
Common Stock Purchase Warrant 5/30/90 Union Bank
- ------------------------------------------------------------------------------------------------------------------
Warrant to Purchase Shares of 9/5/93 ABC Capital 10,000 shares of
Common Stock Markets Group Common Stock
- ------------------------------------------------------------------------------------------------------------------
Convertible Promissory Note 4/1/94 Douglas Murphy 266,596 shares of
Common Stock
22
<PAGE>
- ------------------------------------------------------------------------------------------------------------------
Stock Options Awarded pursuant 1985 Bill J. McFarland 8,053 shares of
to Issuer's 1982 Incentive Stock Common Stock
Option Plan, as adjusted to date
------------------------------------------------------------------------
1988 Douglas A. 115,132 shares of
Murphy, Bill J. Common Stock
McFarland, John
Poole and Lolan
M. Pullen
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
* All figures shown are as calculated after taking into account all adjustments
necessary upon the issuance of the four warrants (denominated the A Warrant, the
B Warrant the C Warrant, and the D Warrant) being issued to INCC on the Closing
Date.
23
<PAGE>
ANNEX I
SUBSCRIPTION FORM
(to be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _________ Stock Units of
______________________________, a _________________, purchasable with this
Warrant, and herewith makes payment for such Stock Units (by check in the amount
of $__________), all at the price and on the terms and conditions specified in
this Warrant and requests that certificates for the shares of Common Stock
hereby purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered to _________________________
whose address is ____________________ and, if such Stock Units shall not include
all of the Stock Units issuable as provided in this Warrant that a new Warrant
of like tenor and date for the balance of the Stock Units issuable thereunder be
delivered to the undersigned.
Dated:
--------------------------------
(Signature of Registered Owner)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
NOTICE: The signature to the subscription must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The signature to this subscription must be guaranteed by a
bank or trust company having an office or correspondent in Los
Angeles, California or New York, New York, or by a firm having
membership on the New York Stock Exchange.
24
<PAGE>
ANNEX II
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
Stock Units set forth below:
No. of Stock
Name and Address of Assignee Units
and does hereby irrevocably constitute and appoint ___________ Attorney to make
sure transfer on the books of ERLY Industries Inc., a California corporation,
maintained for the purpose, with full power of substitution in the premises.
Dated:
-----------------------------
Signature
-----------------------------
Witness
NOTICE: The signature to the subscription must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The signature to this subscription must be guaranteed by a
bank or trust company having an office or correspondent in Los
Angeles, California or New York, New York, or by a firm having
membership on the New York Stock Exchange.
25
3.12
REGISTRATION RIGHTS AGREEMENT
(ERLY Industries)
This Registration Rights Agreement (ERLY Industries), dated as
of February 16, 1995, is made by and between ERLY INDUSTRIES INC., a California
corporation having an office at 10990 Wilshire Boulevard, Los Angeles,
California 90024 (the "Company"), and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION, a Delaware corporation having an office at 333 South Grand Avenue,
Suite 3000, Los Angeles, California 90071 (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Company and Purchaser have entered into a Securities
Purchase Agreement (ERLY Industries), dated as of the date hereof (the "Purchase
Agreement"), pursuant to which Company agreed to issue and sell to Purchaser,
and Purchaser agreed to purchase from Company, (i) the C Warrant (as defined
below), which is initially exercisable for a number of shares equal to 1% of the
common stock, $0.01 par value, of Company ("Common Stock") on a fully diluted
basis (subject to adjustment as provided in the C Warrant), and (ii) the D
Warrant (as defined below), which is initially exercisable for a number of
shares equal to 4% of Common Stock on a fully diluted basis (subject to
adjustment as provided in the D Warrant), in exchange for, among other things,
Purchaser's agreement to enter into the Loan Extension Agreement, the
transactions referenced therein, and the Related Documents as defined therein;
and
WHEREAS, in order to induce Purchaser to enter into the
Purchase Agreement and to purchase such C Warrant and D Warrant, Company agreed
to provide registration rights with respect to all warrants to purchase Common
Stock held by Purchaser.
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the C Warrant are used herein as therein defined, and the following shall
have the following respective meanings (such meanings being equally applicable
to both the singular and plural form of the terms defined):
"A Warrant" shall mean (i) the Amended and Restated Warrant to
Purchase Common Stock of ERLY Industries Inc., denominated the "A Warrant,"
issued by Company to Purchaser dated as of the date hereof, as the same may be
amended from time to time, and (ii) all additional or new warrants issued upon
transfer, division
<PAGE>
or combination of, or in substitution for, the A Warrant or any such
additional or new warrants.
"Agreement" shall mean this Registration Rights Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"B Warrant" shall mean (i) the Amended and Restated Warrant to
Purchase Common Stock of ERLY Industries Inc., denominated the "B Warrant,"
issued by Company to Purchaser dated as of the date hereof, as the same may be
amended from time to time, and (ii) all additional or new warrants issued upon
transfer, division or combination of, or in substitution for, the B Warrant or
any such additional or new warrants.
"C Warrant" shall mean (i) that certain Warrant to Purchase
Common Stock of ERLY Industries Inc, denominated the "C Warrant," issued by
Company to Purchaser dated the date hereof, as the same may be amended from time
to time, and (ii) all additional or new warrants issued upon transfer, division
or combination of, or in substitution for, the C Warrant or any such additional
or new warrants.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
"D Warrant" shall mean (i) that certain Warrant to Purchase
Common Stock of ERLY Industries Inc, denominated the "D Warrant," issued by
Company to Purchaser dated the date hereof, as the same may be amended from time
to time, and (ii) all additional or new warrants issued upon transfer, division
or combination of, or in substitution for, the D Warrant or any such additional
or new warrants.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Loan Extension Agreement" shall mean that certain Loan
Extension Agreement of even date herewith among the Company, ERLY Juice Inc.,
Chemonics Industries, Inc., Chemonics International, Inc., and the Purchaser,
together with all amendments, modifications and supplements thereto.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor corporation thereto.
"Registrable Securities" shall mean the Warrants and the Warrant Stock.
2
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Warrants" shall mean the A Warrant, the B Warrant, the C
Warrant and the D Warrant.
"Warrant Stock" shall mean the shares of Common Stock
purchased or purchasable by the holders of the Warrants upon the exercise
thereof.
2. Required Registration. At any time after the Closing Date,
(i) upon receipt of a written request from the holders of
Registrable Securities representing at least an aggregate of
fifty percent (50%) of the total of (A) all shares of Warrant
Stock then subject to purchase upon exercise of the A Warrant
and (B) all then outstanding shares of Warrant Stock that have
been purchased pursuant to the A Warrant, or
(ii) upon receipt of a written request from the holders of
Registrable Securities representing at least an aggregate of
fifty percent (50%) of the total of (A) all shares of Warrant
Stock then subject to purchase upon exercise of the B Warrant
and (B) all then outstanding shares of Warrant Stock that have
been purchased pursuant to the B Warrant, or
(iii) upon receipt of a written request from the holders of
Registrable Securities representing at least an aggregate of
fifty percent (50%) of the total of (A) all shares of Warrant
Stock then subject to purchase upon exercise of the C Warrant,
(B) all shares of Warrant Stock then subject to purchase upon
exercise of the D Warrant, (C) all then outstanding shares of
Warrant Stock that have been purchased pursuant to the C
Warrant, and (D) all then outstanding shares of Warrant Stock
that have been purchased pursuant to the D Warrant,
requesting that Company effect the registration of such Registrable Securities
under the Securities Act and specifying the intended method or methods of
disposition thereof, Company shall promptly notify all holders of Registrable
Securities in writing of the receipt of such request and each such holder, in
lieu of exercising its rights under Section 3, may elect (by written notice sent
to Company within ten (10) Business Days from the date of such holder's receipt
of the aforementioned Company's notice) to have its Registrable Securities
included in such registration thereof pursuant to this Section 2. Thereupon
Company shall, as expeditiously as is possible, use its best efforts to effect
the registration under the Securities Act of all such Registrable Securities
which Company has been so requested to register by such holders for sale, all to
the extent required to permit the disposition (in accordance with the intended
3
<PAGE>
method or methods thereof, as aforesaid) of such Registrable Securities so
registered; provided, however, that Company shall not be required to effect more
than (A) two (2) registrations of any Registrable Securities pursuant to a
request made pursuant to Section 2(i), (B) two (2) registrations of any
Registrable Securities pursuant to a request made pursuant to Section 2(ii), and
(C) two (2) registrations of any Registrable Securities pursuant to a request
made pursuant to Section 2(iii).
3. Incidental Registration. If Company at any time proposes to
file on its behalf and/or on behalf of any of its security holders (the
"demanding security holders") a Registration Statement under the Securities Act
(a "Registration Statement") on any form (other than a Registration Statement on
Form S-4 or S-8 or any successor form for securities to be offered in a
transaction of the type referred to in Rule 145 under the Securities Act or to
employees of Company pursuant to any employee benefit plan, respectively) for
the general registration of securities to be sold for cash with respect to any
class of equity security (as defined in Section 3(a)(11) of the Exchange Act) of
Company, it will give written notice to all holders of Registrable Securities at
least forty-five (45) days before the initial filing with the Commission of such
Registration Statement, which notice shall set forth the intended method of
disposition of the securities proposed to be registered by Company. The notice
shall offer to include in such filing the aggregate number of Registrable
Securities as such holders may request (subject to the immediately following
paragraph). Nothing in this Section 3 shall preclude Company from discontinuing
the registration of the securities being effected on its behalf or on behalf of
the demanding security holders at any time prior to the effective date of the
Registration Statement relating thereto.
Each holder of any such Registrable Securities desiring to
have Registrable Securities registered under this Section 3 shall advise Company
in writing within thirty (30) days after the date of receipt of such offer from
Company, setting forth the number of such Registrable Securities for which
registration is so requested. Company shall thereupon include in such filing the
number of shares of Registrable Securities for which registration is so
requested, subject to the next sentence, and shall use its best efforts to
effect registration under the Securities Act of such securities. If the managing
underwriter of a proposed public offering shall advise Company in writing that,
in its opinion, the distribution of the Registrable Securities requested to be
included in the registration concurrently with the securities being registered
by Company or such demanding security holder would materially and adversely
affect the distribution of such securities by Company or such demanding security
holder, then all selling security holders (other than any demanding security
holder who requested such registration) and Company (if such Registration
Statement was filed at the request of a demanding security holder) shall reduce
the amount of securities each intended to distribute through such offering on a
pro rata basis. Except as otherwise provided in Section 5, all expenses of such
registration shall be borne by Company.
4
<PAGE>
4. Registration Procedures. If Company is required by the provisions of
Section 2 or Section 3 to use its best efforts to effect the registration of any
of its securities under the Securities Act, Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a Registration Statement with
respect to such securities and use its best efforts to cause such Registration
Statement to become and remain effective for a period of time required for the
disposition of such securities by the holders thereof;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such Registration Statement until
the earlier of such time as all of such securities have been disposed of in a
public offering or the expiration of one hundred eighty (180) days;
(c) furnish to such selling security holders such number of copies of a
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such selling security holders may reasonably request;
(d) use its best efforts to register or qualify the securities covered
by such Registration Statement under such other securities or blue sky laws of
such jurisdictions within the United States and Puerto Rico as each holder of
such securities shall request (provided, however, Company shall not be obligated
to qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it is not then qualified or to file any general consent to
service of process), and do such other reasonable acts and things as may be
required of it to enable such holder to consummate the disposition in such
jurisdiction of the securities covered by such Registration Statement;
(e) unless waived in writing by each holder of any Registrable
Securities being included in such registration, use its best efforts to obtain
from a nationally recognized underwriter or investment banker acceptable to such
holder a firm commitment (pursuant to an underwriting agreement in customary
form) to underwrite the public offering of the securities covered by such
Registration Statement;
(f) furnish, at the request of any holder requesting registration of
Registrable Securities pursuant to Section 2, on the date that such shares of
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration or, if such Registrable Securities are not being sold through
underwriters, on the date that the Registration Statement with respect to such
shares of Registrable Securities becomes effective, (1) a copy of an opinion, in
form and substance
5
<PAGE>
satisfactory to a majority of the holders of such Registrable Securities, dated
such date, of the independent counsel representing Company for the purposes of
such registration, addressed to the underwriters, if any, and to the holders
making such request, substantially to the effect that such Registration
Statement has become effective under the Securities Act and that (i) to the best
knowledge of such counsel, no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (ii) the Registration
Statement, the related prospectus, and each amendment or supplement thereto,
comply as to form in all material respects with the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder (except that such counsel need express no opinion as to financial
statements and data contained therein), (iii) the descriptions in the
Registration Statement or the prospectus, or any amendment or supplement
thereto, of all legal matters and contracts and other legal documents or
instruments are accurate and fairly present the information required to be
shown, and (iv) such counsel does not know of any legal or governmental
proceedings, pending or contemplated, required to be described in the
Registration Statement or prospectus, or any amendment or supplement thereto,
which are not described as required, nor of any contracts or documents or
instruments of a character required to be described in the Registration
Statement or prospectus, or any amendment or supplement thereto, or to be filed
as exhibits to the Registration Statement which are not described and filed or
incorporated by reference as required; such counsel shall also confirm that it
has no reason to believe that either the Registration Statement or the
prospectus, or any amendment or supplement thereto (other than financial
statements and data as to which such counsel need make no statement) contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which made, not misleading; and (2) a letter dated
such date, from the independent certified public accountants of Company,
addressed to the underwriters, if any, and to the holders making such request
(or if such accountants are unable to deliver such letter to such holders under
applicable professional rules or guidelines, then to Company) stating that they
are independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements and other financial data of Company included in the Registration
Statement or the prospectus, or any amendment or supplement thereto, comply as
to form in all material respects with the applicable accounting requirements of
the Securities Act and, if permitted under applicable professional rules or
guidelines, that such opinion is rendered for the benefit of the selling
security holders and that they have a right to rely thereon. Such opinion of
counsel shall additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as such holders of
Registrable Securities may reasonably request. Such letter from the independent
certified public accountants shall additionally cover such other financial
matters (including information as to the period ending not more than five (5)
Business Days prior to the date of such
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letter) with respect to the registration in respect of which such letter is
being given as such holders of Registrable Securities being so registered may
reasonably request;
(g) enter into customary agreements (including an underwriting
agreement in customary form containing standard indemnification provisions) and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities; and
(h) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, but not later than eighteen (18) months after
the effective date of the Registration Statement, an earnings statement covering
the period of at least twelve (12) months beginning with the first full month
after the effective date of such Registration Statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of Company
to take any action pursuant to this Agreement in respect of the securities which
are to be registered at the request of any holder of Registrable Securities that
such holder shall furnish to Company such information regarding the securities
held by such holder and the intended method of disposition thereof as Company
shall reasonably request and as shall be required in connection with the action
taken by Company.
5. Expenses. All expenses incurred in complying with this
Agreement, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), printing expenses,
fees and disbursements of counsel for Company, the reasonable fees and expenses
of counsel for the selling security holders (selected by those holding a
majority of the shares being registered), expenses of any special audits
incident to or required by any such registration and expenses of complying with
the securities or blue sky laws of any jurisdictions pursuant to Section 4(d),
shall be paid by Company, except that
(a) all such expenses in connection with any amendment or supplement to
the Registration Statement or prospectus filed more than 180 days after the
effective date of such Registration Statement because any holder of Registrable
Securities has not effected the disposition of the securities requested to be
registered shall be paid by such holder; and
(b) Company shall not be liable for any fees, discounts or commissions
to any underwriter or any fees or disbursements of counsel for any underwriter
in respect of the securities sold by such holder of Registrable Securities.
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6. Indemnification and Contribution.
(a) In the event of any registration of any Registrable Securities
under the Securities Act pursuant to this Agreement, Company shall indemnify and
hold harmless the holder of such Registrable Securities, such holder's directors
and officers, and each other Person, if any, who controls such holder within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or
officer or controlling Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any Registration Statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
reimburse such holder or such director, officer or controlling Person for any
legal or any other expenses reasonably incurred by such holder or such director,
officer or controlling Person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any alleged untrue statement
or alleged omission made in such Registration Statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to Company by such holder specifically for use
therein. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or such director, officer or
controlling Person, and shall survive the transfer of such securities by such
holder.
(b) Each holder of any Registrable Securities, by acceptance thereof,
agrees to indemnify and hold harmless Company, its directors and officers and
each other Person, if any, who controls Company within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which Company or any such director or officer or any such Person may
become subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon written information provided to Company
by such holder of such Registrable Securities specifically for use therein and
contained, on the effective date thereof, in any Registration Statement under
which securities were registered under the Securities Act at the request of such
holder, any final prospectus contained therein, or any amendment or supplement
thereto; provided, however, that such holder's obligation under this Section
6(b) to indemnify and hold harmless Company shall in no event exceed, with
respect to all such obligations, the lesser of the proceeds received by such
selling securityholder from the sale of the Registrable Securities through such
offering, or the damage attributable solely to the inclusion of such written
information in
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such Registration Statement, prospectus, or amendment or supplement, suffered by
the Person or Persons whose claims gave rise to such losses, claims, damages or
liabilities; and further, provided, however, that no such indemnity shall exist
with respect to any Person making claims or demands to whom Company or any other
Person responsible for delivering a final Prospectus to such claimant failed to
deliver such prospectus as amended or supplemented.
(c) If the indemnification provided for in this Section 6 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to herein, then
the 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 fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. 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 any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 6(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
7. Certain Limitations on Registration Rights. Notwithstanding
the other provisions of this Agreement, Company shall not be obligated to
register the Registrable Securities of any holder if (x) Company delivers to
such holder the written opinion of counsel to Company, which opinion and counsel
shall each be satisfactory to such holder, stating that the sale or other
disposition of such holder's Registrable Securities, in the manner proposed by
such holder (or, if such holder has engaged an investment banking firm, in the
manner proposed by such investment banking firm), may be effected without
registering such Registrable Securities under the Securities Act, and (y) the
failure of Company to register such Registrable Securities will not result in a
reduction in the net proceeds to be received by such holder in connection with
9
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such sale or other disposition; and Company shall not be obligated to register
the Registrable Securities of any holder pursuant to Section 2, if Company has
had a Registration Statement, under which such holder had a right to have its
Registrable Securities included pursuant to Section 3, declared effective within
one year prior to the date of the request pursuant to Section 2; provided,
however, that if any holder elected to have any of its Registrable Securities
included under such Registration Statement but some or all of such shares were
excluded pursuant to the second to last sentence of Section 3, then such
one-year period shall be reduced to six (6) months.
8. Selection of Managing Underwriters. The managing
underwriter or underwriters for any offering of Registrable Securities to be
registered pursuant to Section 2 shall be selected by the holders of a majority
of the shares being so registered (other than any shares being registered
pursuant to Section 3).
9. Miscellaneous.
(a) No Inconsistent Agreements. Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
Company has not previously entered into any agreement with respect to any of its
securities granting to any Person any other registration rights which are in
effect as of the date hereof, other than registration rights granted in respect
of the Registrable Securities and other than as disclosed in writing to
Purchaser.
(b) Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departure from the provisions hereof may not be given,
unless Company has obtained the written consent of holders of at least a
majority of the Registrable Securities then outstanding.
(d) Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Agreement shall be sufficiently given or made if in
writing and either delivered (i) in person with receipt acknowledged, (ii) by
facsimile transmission, with receipt electronically confirmed during normal
business hours of recipient, and confirmed by sending, no later than one (1)
Business Day following such transmission,
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a copy of such facsimile, by registered or certified mail, return receipt
requested, postage prepaid, or (iii) by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to any Holder or holder of Registrable Securities, at its last known
address or facsimile transmission number appearing on the books of Company
maintained for such purpose.
If to Company at:
ERLY Industries Inc.
10990 Wilshire Boulevard
Los Angeles, California 90024
Attention: Kurt Grey
Facsimile: (310) 473-8890
with a copy to:
Magnus, Epman & Dwyer
300 Corporate Pointe, Suite 310
Culver City, California 90230-7614
Attention: Ronald J. Epman, Esq.
Facsimile: (310) 216-0701
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered with receipt acknowledged or sent by facsimile with receipt
electronically confirmed during normal business hours of recipient, or three (3)
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration, delivery or other communication to the person
designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration,
delivery or other communication.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto
including any Person to whom Registrable Securities are transferred.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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(g) GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. COMPANY AND PURCHASER CONSENT TO PERSONAL JURISDICTION, WAIVE ANY
OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED
ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA. SERVICE OF PROCESS ON COMPANY OR PURCHASER IN ANY ACTION ARISING OUT
OF OR RELATING TO THIS AGREEMENT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT
THE ADDRESS LISTED IN SECTION 9(d). NOTHING HEREIN SHALL PRECLUDE PURCHASER OR
COMPANY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION.
(h) MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.
(i) Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(j) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Purchaser shall operate
as a waiver of such right or otherwise prejudice Purchaser's rights, powers or
remedies. If Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Agreement,
Company shall pay to Purchaser such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate
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proceedings, incurred by Purchaser in collecting any amounts due pursuant hereto
or in otherwise enforcing any of its rights, powers or remedies hereunder.
(k) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Warrants, 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 and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof.
(l) Counterparts. This Agreement may be executed by the parties hereto
in several counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, Company and Purchaser have executed this
Agreement as of the date first above written.
ERLY INDUSTRIES INC.
By /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
[SIGNATURES CONTINUED]
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[SIGNATURES CONTINUED]
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By /s/ MICHAEL W. ADLER
Name: Michael W. Adler
Title: Vice President
14
3.11
SECURITIES PURCHASE AGREEMENT
(ERLY Industries)
THIS SECURITIES PURCHASE AGREEMENT (ERLY Industries) ("Agreement"),
dated as of February 16, 1995, between ERLY INDUSTRIES INC., a California
corporation, with its chief executive office and principal place of business at
10990 Wilshire Boulevard, Los Angeles, California 90024 (the "Company"), and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation,
with an office at 333 South Grand Avenue, Suite 3000, Los Angeles, California
90071, successor in interest to Internationale Nederlanden Bank N.V. (formerly
known as NMB Postbank Groep NV), New York Branch ("ING Capital"), is made with
reference to the following facts:
RECITALS
WHEREAS, ERLY Juice Inc., a California corporation and a wholly owned
subsidiary of the Company ("ERLY Juice") and ING Capital entered into that
certain Loan Agreement dated as of September 26, 1988, pursuant to which ING
Capital has provided loans and other extensions of credit to ERLY Juice (as
amended, the "Loan Agreement," and ERLY Juice's obligations thereunder shall be
referred to as the "ERLY Juice Obligations");
WHEREAS, in connection with the Loan Agreement, (i) the Company granted
ING Capital an option to purchase up to 43,000 shares (subject to adjustment) of
the common stock of Company (the "Stock Option") pursuant to the Stock Option
Agreement entered into in September, 1988, and (ii) the Company issued to ING
Capital two warrants dated as of October 22, 1993, denominated the "A Warrant"
and the "B Warrant" (and referred to herein as the "Existing A Warrant" and the
"Existing B Warrant," respectively), each initially exercisable for 186,511
shares (subject to adjustment) of the common stock of the Company;
WHEREAS, Chemonics Industries, Inc. ("Chemonics"), an Arizona
corporation and a wholly owned subsidiary of the Company, entered into the
Amended and Restated Warrant to Purchase Common Stock of Chemonics Industries,
Inc. dated as of November 18, 1994 (the "Chemonics Warrant") for the benefit of
ING Capital, which amended and restated the Existing Warrant (as defined in the
Chemonics Warrant);
WHEREAS, Chemonics International, Inc., a wholly owned subsidiary of
Chemonics ("Chemonics International"), issued to ING Capital the Warrant to
Purchase Common Stock of Chemonics International, Inc., dated as of November 18,
1994 (the "Chemonics International Warrant");
WHEREAS, the Company entered into that certain Amended and Restated
Guaranty and Pledge Agreement (the "Existing Parent Guaranty"), pursuant to
which the Company, among other things, (a) amended and restated its guaranty of
the payment and performance of the ERLY Juice Obligations, enforceable with
recourse against the Company on and after December 21, 1994, and (b) amended and
restated its pledge of the stock of Chemonics to secure the payment of the ERLY
Juice Obligations;
WHEREAS, on December 21, 1994 the ERLY Juice Obligations became due and
payable and the Company's guaranty under the Existing Parent Guaranty became a
full recourse guaranty;
WHEREAS, the Company has requested, among other things, that ING Capital
(i) agree to extend the due date of the ERLY Juice Obligations and modify
certain provisions regarding applicable interest obligations with respect
thereto, (ii) amend the Existing A Warrant and Existing B Warrant to grant to
the Company an option to repurchase such warrants, and any stock purchased
pursuant to such warrants, under certain terms and conditions, (iii) return the
Chemonics International Warrant to Chemonics International and the Chemonics
Warrant to Chemonics under certain conditions, and (iv) terminate the Stock
Option. The Company will derive substantial direct and indirect economic benefit
if ING Capital consents to the foregoing transactions;
WHEREAS, ING Capital is willing to consent to the transactions in the
preceding recital, and in connection therewith is entering into that certain
Loan Extension Agreement (the "Loan Extension Agreement") among ING Capital,
ERLY Juice, the Company, Chemonics, and Chemonics International of even date
hereof and the Related Documents, as defined in the Loan Extension Agreement;
WHEREAS, simultaneously with the consummation of the transactions under
the Loan Extension Agreement, the Company has agreed to sell to ING Capital that
certain Warrant dated the date hereof and denominated the C Warrant (the "C
Warrant"), initially exercisable for a number of shares equal to 1% of the
Company's common stock, $0.01 par value (the "Common Stock") on a fully diluted
basis (subject to adjustment as provided in the C Warrant) and that certain
Warrant dated the date hereof and denominated the D Warrant (the "D Warrant"),
initially exercisable for a number of shares equal to 4% of Common Stock on a
fully diluted basis (subject to adjustment as provided in the D Warrant). The C
Warrant and the D Warrant shall be referred to collectively herein as the
"Warrants," the Warrant Stock (as such term is defined in the C Warrant) and the
Warrant Stock (as such term is defined in the D Warrant) shall be referred to
collectively herein as the "Warrant Stock," and the Warrants and Warrant Stock
shall be referred to collectively herein as the "Securities."
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. CONSTRUCTION; DEFINITIONS
1.1 Accounting Terms. Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the meaning customarily
given to such term in accordance with GAAP.
1.2 Certain Matters of Construction. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the schedules and exhibits hereto, as the same may from time to
time be amended or supplemented, and not to any particular section, subsection
or clause contained in this Agreement. References to this "Agreement" shall mean
this Securities Purchase Agreement, including all amendments, modifications and
supplements and any exhibits or schedules to any of the foregoing, and shall
refer to the Agreement as the same may be in effect at the time such reference
becomes operative. The term "including" shall not be limiting or exclusive.
1.3 Definitions. Unless otherwise defined in this Agreement, terms
defined in the D Warrant are used herein as therein defined.
2. PURCHASE OF SECURITIES
2.1 Purchase of the C Warrant and D Warrant. ING Capital agrees to
subscribe for and purchase, and the Company agrees to authorize as necessary,
issue and sell to ING Capital, the C Warrant to purchase up to 51,536 shares of
Common Stock (subject to adjustment) and the D Warrant to purchase up to 206,143
shares of Common Stock (subject to adjustment) in consideration of, among other
things, ING Capital's agreement (i) to extend the due date of the ERLY Juice
Obligations, (ii) to grant the Company an option to repurchase the A Warrant and
the B Warrant under certain terms and conditions, (iii) to return the Chemonics
International Warrant and the Chemonics Warrant under certain conditions, and
(iv) terminate the Stock Option.
2.2 Closing. The closing of the purchase and sale of the Warrants (the
"Closing") shall take place at such date and time and place as the closing of
the transactions contemplated by the Loan Extension Agreement.
At the Closing, subject to satisfaction of the conditions to the Loan
Extension Agreement, the Company will deliver the Warrants to ING Capital and
ING Capital will enter into the Loan Extension Agreement and Related Documents
and terminate the Stock Option.
2.3 Original Issue Discount. ING Capital and the Company hereby
acknowledge and agree that there is no original issue discount with respect to
the Warrants and, for tax and accounting purposes, each of them shall treat the
Warrants in such manner.
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES
ING Capital makes the following representations and warranties to the
Company, each and all of which shall survive the execution and delivery of this
Agreement and the Closing:
3.1 Authorization of Agreement. ING Capital is authorized to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
3.2 Investment Representations. ING Capital is purchasing the Securities
for its own account and not with a view to the distribution thereof. ING Capital
agrees that it will not, directly or indirectly, offer, transfer, sell, assign,
pledge, hypothecate or otherwise dispose of any of the Securities (or solicit
any offers to buy, purchase, or otherwise acquire or take a pledge of any of the
Securities), except in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations under the Securities Act.
ING Capital acknowledges that it (i) is an institutional "accredited
investor" within the meaning of subparagraph (a) of Rule 501 under the
Securities Act; (ii) has had an opportunity to investigate the business and
financial condition of the Company, and to obtain such information as it
requires from the officers and directors, as applicable, of the Company; (iii)
in the normal course of its business, invests in or purchases securities similar
to the Securities; (iv) has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
purchasing the Securities; (v) is aware that it may be required to bear the
economic risk of an investment in the Securities for an indefinite period of
time and is able to bear such risk for an indefinite period of time; and (vi) is
not purchasing any Securities on behalf of any managed accounts.
ING Capital understands that, except as otherwise provided in the
Warrants, the Warrants and each certificate representing any Warrant Stock shall
bear a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR
QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE
PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED.
THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED IN THAT
CERTAIN WARRANT DATED AS OF FEBRUARY 16, 1995, ORIGINALLY ISSUED BY ERLY
INDUSTRIES INC., AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE ABOVE-REFERENCED
WARRANT, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A NEW
CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED
HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY
ALL OF THE PROVISIONS OF THIS CERTIFICATE.
4. COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and warranties to ING
Capital, each and all of which shall survive the execution and delivery of this
Agreement and the Closing:
4.1 Authorized and Outstanding Shares of Capital Stock. After giving
effect to the Closing, the authorized capital stock of the Company consists of
(a) 5,000,000 shares of Common Stock, par value $0.01, of which 3,695,547 shares
are issued and outstanding, and (b) 6,000 shares of preferred stock, par value
$100.00, of which no shares are issued and outstanding. Except for the
Securities and the items identified in Exhibit 11.A of each of the Warrants,
after giving effect to the Closing and as of the date hereof, there is no
commitment, contingent or otherwise, of the Company to issue any shares of any
class of capital stock of the Company or securities convertible into such
capital stock, warrants, options or other such rights or securities.
4.2 Authorization of Agreement and Issuance of Securities. The Company
is authorized to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby, including the issuance
of the Warrants. Upon delivery of the Warrants to ING Capital, the Warrants will
have been duly executed and issued and, when delivered in exchange for the
consideration set forth in Section 2.1, will constitute legal, valid and binding
obligations of the Company, enforceable in accordance with their terms. The
issuance of the Warrant Stock has been duly authorized (subject, in the case of
the D Warrant, to the occurrence of the Share Availability Date) and when issued
upon exercise of, and pursuant to, the Warrants, will have been validly issued
and will be fully paid and nonassessable, free and clear of all pledges, liens,
encumbrances and preemptive rights. There are 51,536 shares of Common Stock duly
reserved for issuance pursuant to the C Warrant and upon the occurrence of the
Share Availability Date there shall be 206,143 shares of Common Stock duly
reserved for issuance pursuant to the D Warrant.
4.3 Securities Laws. In reliance on, among other things, the investment
representations contained in Section 3.2, the offer, issuance, sale and delivery
of the Warrants to ING Capital, as provided in this Agreement, and pursuant to,
the Warrants, are exempt from the registration requirements of Section 5 of the
Securities Act and all applicable state securities laws.
5. COVENANTS
The Company covenants and agrees that from and after the date hereof
(except as otherwise provided herein, or unless ING Capital has given its prior
written consent), so long as ING Capital owns any Securities:
5.1 Maintenance of Existence and Conduct of Business. The Company shall
(a) do or cause to be done all things necessary to preserve and keep in full
force and effect its (i) corporate existence, and (ii) rights to use trademarks,
trade names, service marks, and franchises so that the business carried on in
connection therewith may be conducted consistent with current operating
practices at all times, and (b) continue to conduct its business substantially
as now conducted.
5.2 Transactions with Affiliates. The Company shall not enter into or be
a party to any agreement or transaction with any Affiliates of the Company
except in the ordinary course of, and pursuant to the reasonable requirements
of, the Company's business and upon fair and reasonable terms that are approved
by a majority of the disinterested members of the Company's board of directors,
fully disclosed to ING Capital and no less favorable to the Company than would
be obtained in a comparable arms-length transaction with a Person not an
Affiliate of the Company.
5.3 Books and Records. The Company shall keep adequate records and books
of account with respect to its business activities in which proper entries,
reflecting all of its financial transactions, are made in accordance with GAAP.
The Company shall permit ING Capital or its officers, employees, and/or agents,
during normal business hours (or at such other times as may reasonably be
requested by ING Capital), as frequently as ING Capital deems appropriate, to
inspect such records and books of account and the properties and facilities of
the Company, and the Company shall provide extracts and/or photocopies of such
records and books of account as reasonably requested by ING Capital at no cost
to ING Capital. The rights set forth in this Section 5.3 shall not negate any
other rights that ING Capital may have under any applicable law.
5.4 Financial and Business Information.
(a) Filings. So long as the Company is a Public Company (as hereinafter
defined), the Company will file with the Securities and Exchange Commission (the
"Commission") on or before the due date all regular or periodic reports required
to be filed pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and will deliver to each holder of the Securities, promptly
upon its becoming available, one copy of each report, notice or proxy statement
sent by the Company to its shareholders generally, and one copy of each regular
or periodic report (including, without limitation, reports on Form 8-K) pursuant
to the Exchange Act or any registration statement, prospectus or written
communication (other than transmittal letters and other communications that are
not publicly available) pursuant to the Securities Act, filed by the Company
with (i) the Commission or (ii) any securities exchange on which shares of the
Common Stock are listed. For purposes of this Section 5.4, the term "Public
Company" shall mean a company (i) that is subject to the reporting requirements
of Section 15(d) of the Exchange Act, or (ii) any of whose securities are
registered pursuant to Section 12(b) or 12(g) of the Exchange Act.
(b) Quarterly Information. During any period in which the Company is not
a Public Company, it will deliver to each holder of the Securities as soon as
practicable after the end of each Fiscal Quarter (as defined below), and in any
event within 45 days after the end of each Fiscal Quarter, on a Consolidated and
consolidating basis, a copy of the Company's unaudited income statement and
balance sheet as of the close of such Fiscal Quarter and for that portion of the
Fiscal Year (as defined below) ending as of the close of such Fiscal Quarter,
all prepared in accordance with GAAP (subject to normal year end adjustments and
the inclusion of footnotes), together with a certification of the chief
executive officer or chief financial officer of the Company that all such
financial statements are, to his or her knowledge, after due inquiry, complete
and correct and present fairly in accordance with GAAP (subject to normal year
end adjustments and the inclusion of footnotes) the financial position and the
results of operations of the Company as at the end of such Fiscal Quarter and
for the period then ended. For the purposes of this Agreement, (i) "Fiscal
Quarter" means any quarter of a Fiscal Year, and (ii) "Fiscal Year" means any
period of 12 consecutive calendar months ending on March 31.
(c) Annual Information. During any period in which the Company is not a
Public Company, it will deliver to each holder of the Securities as soon as
practicable after the end of each Fiscal Year of the Company, and in any event
within 90 days thereafter, on a Consolidated and consolidating basis, a copy of
the Company's audited financial statements, certified (only with respect to the
financial statements) without qualification by a firm of independent certified
public accountants of recognized national standing, and accompanied by (i) any
management letter that may be issued by such accountants, (ii) the annual letter
from the Company's chief financial officer to such accountants in connection
with their audit examination detailing the Company's contingent liabilities and
material litigation matters involving the Company, and (iii) a certification of
the chief executive officer or chief financial officer of the Company that all
such financial statements are, to his or her knowledge, after due inquiry,
complete and correct and present fairly in accordance with GAAP the financial
position, the results of operations and the statements of cash flow of the
Company as at the end of such Fiscal Year and for the period then ended.
5.5 Tax Compliance. The Company shall pay all transfer, excise or
similar taxes (not including income or franchise taxes) in connection with the
issuance, sale, delivery or transfer by the Company to ING Capital of the
Securities and shall save ING Capital and any other holder of the Securities
harmless without limitation as to time against any and all liabilities with
respect to such taxes. The Company shall not be responsible for any taxes in
connection with the transfer of the Securities by the holder thereof. The
obligations of the Company under this Section 5.5 shall survive the payment,
prepayment or redemption of the Securities and the termination of this
Agreement.
6. CONDITIONS PRECEDENT
The obligation of ING Capital to purchase the Warrants pursuant to
Section 2.1 is subject to the satisfaction of each of the conditions precedent
set forth in Section 3 of the Loan Extension Agreement unless otherwise waived
in writing by ING Capital.
7. INDEMNIFICATION
The Company agrees to indemnify and hold harmless ING Capital from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees and expenses (including
reasonable attorneys' fees and disbursements and other costs of investigations
or defense, including those incurred upon any appeal) (each, an "Indemnified
Claim") which may be imposed upon, incurred by or asserted against ING Capital
in any manner relating to or arising out of any untrue representation, breach of
warranty or failure to perform any covenants by the Company contained herein or
in any certificate delivered pursuant hereto; provided, that the Company shall
not be liable for any indemnification to ING Capital to the extent that any
Indemnified Claim results solely from ING Capital's gross negligence or willful
misconduct.
8. MISCELLANEOUS
8.1 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any such communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and either (i) delivered
in person with receipt acknowledged, (ii) sent by facsimile transmission, with
receipt electronically confirmed during normal business hours of recipient, and
confirmed by sending, no later than one (1) Business Day following such
transmission, a copy of such facsimile, by registered or certified mail, return
receipt requested, postage prepaid, or (iii) sent by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company at
ERLY Industries Inc.
10990 Wilshire Boulevard
Los Angeles, California 90024
Attention: Kurt Grey
Facsimile: (310) 473-8890
With a copy to
Magnus, Epman & Dwyer
300 Corporate Pointe, Suite 310
Culver City, California 90230-7614
Attention: Ronald J. Epman, Esq.
Facsimile: (310) 216-0701
If to ING Capital at
333 South Grand Avenue
Suite 3000
Los Angeles, California 90071
Attention: Gil Kirkpatrick
Facsimile: (213) 687-7324
With a copy to
Murphy, Weir & Butler
2049 Century Park East, Suite 2100
Los Angeles, California 90067
Attention: N. Dwight Cary, Esq.
Facsimile: (310) 788-3777
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered with
receipt acknowledged or sent by facsimile with receipt electronically confirmed
during normal business hours of recipient, or three (3) Business Days after the
same shall have been deposited in the United States mail. Failure or delay in
delivering copies of any notice, demand, request, consent, approval,
declaration, or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
8.2 Binding Effect; Assignability; Benefits. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of the parties to this Agreement and their respective successors and permitted
assigns. Neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by the Company or ING
Capital without the prior written consent of the other party, which consent
shall not unreasonably be withheld. Nothing in this Agreement, express or
implied, is intended or shall be construed to give any person other than the
parties to this Agreement or their respective successors or permitted assigns
any legal or equitable right, remedy or claim under or in respect of any
agreement or any provision contained herein.
8.3 Waiver. Either party hereto may by written notice to the other: (a)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement; (b) waive compliance with any of the
conditions or covenants of the other contained in this Agreement; and (c) waive
or modify performance of any of the obligations of the other under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including any investigation by or on behalf of any
party shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained herein. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any preceding or
succeeding breach and no failure by either party to exercise any right or
privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
8.4 Amendment. This Agreement may be amended, modified or supplemented
only by a written instrument executed by ING Capital and the Company.
8.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of this
Agreement.
8.6 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
8.8 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT
AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. THE COMPANY AND ING CAPITAL CONSENT TO PERSONAL JURISDICTION, WAIVE
ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE
BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA. SERVICE OF PROCESS ON THE COMPANY OR ING CAPITAL IN ANY ACTION
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE EFFECTIVE IF MAILED TO
SUCH PARTY AT THE ADDRESS LISTED IN SECTION 8.1. NOTHING HEREIN SHALL PRECLUDE
ING CAPITAL OR THE COMPANY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION.
8.9 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY, RATHER THAN ARBITRATION RULES, THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.
IN WITNESS WHEREOF, the Company and ING Capital have executed this
Securities Purchase Agreement as of the day and year first above written.
ERLY INDUSTRIES INC.
By /s/ KURT GREY
Name: Kurt Grey
Its: Vice President
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION
By: /s/ MICHAEL W. ADLER
Name: Michael W. Adler
Its: Vice President
3.1
LOAN EXTENSION AGREEMENT
Dated as of February 16, 1995
Among
ERLY JUICE INC.,
a California corporation,
ERLY INDUSTRIES INC.,
a California corporation,
CHEMONICS INDUSTRIES, INC.,
an Arizona corporation,
CHEMONICS INTERNATIONAL, INC.,
a California corporation,
and
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION,
a Delaware corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. DEFINITIONS............................................................................................ 3
a. Defined Terms..................................................................................... 3
b. Use of Defined Terms.............................................................................. 6
c. Cross-References.................................................................................. 6
d. Certain Matters of Construction................................................................... 7
2. LENDER'S AGREEMENT..................................................................................... 7
a. Extension of Due Date of ERLY Juice Obligations; Modification of
Interest Provisions........................................................................... 7
b. Grant of Option to Parent to Repurchase A and B Warrants.......................................... 8
c. Return of Chemonics Warrant and Chemonics International
Warrant and Related Stock and Proceeds In Certain
Circumstances................................................................................. 8
d. Termination of Parent Stock Option and Parent Stock Option
Agreement..................................................................................... 8
3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATIONS........................................................... 8
a Execution and Delivery of This Loan Extension Agreement and
Related Documents............................................................................. 9
b. Satisfactory Legal Form........................................................................... 9
c. Intentionally Blank............................................................................... 9
4. REPRESENTATIONS AND WARRANTIES......................................................................... 9
a. Organization, etc................................................................................. 9
b. Validity, etc..................................................................................... 9
5. MISCELLANEOUS.......................................................................................... 10
a. Waivers, Amendments, etc.......................................................................... 10
b. Costs and Expenses................................................................................ 10
c. Severability...................................................................................... 10
d. Further Assurances................................................................................ 10
e. Headings ......................................................................................... 10
f. Counterparts...................................................................................... 10
g. Interpretation.................................................................................... 10
h. Complete Agreement................................................................................ 11
i. Time of the Essence............................................................................... 11
j. Successors and Assigns............................................................................ 11
k. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.................................................. 11
l. MUTUAL WAIVER OF JURY TRIAL....................................................................... 11
</TABLE>
ii
<PAGE>
LOAN EXTENSION AGREEMENT
THIS LOAN EXTENSION AGREEMENT (this "Loan Extension
Agreement"), dated as of February 16, 1995, is made by ERLY Juice Inc., a
California corporation ("ERLY Juice"), ERLY Industries Inc., a California
corporation, the owner of 100% of the issued and outstanding shares of capital
stock of ERLY Juice ("Parent"), Chemonics Industries, Inc., an Arizona
corporation ("Chemonics"), Chemonics International, Inc., a California
corporation ("Chemonics International"), and Internationale Nederlanden (U.S.)
Capital Corporation, a Delaware corporation, successor in interest to
International Nederlanden Bank N.V., New York Branch (formerly known as NMB
Postbank Groep nv, New York Branch (formerly known as Nederlandsche
Middenstandsbank nv, New York Branch)) ("Lender").
RECITALS
A. ERLY Juice and Lender have entered into a Loan Agreement dated as of
September 26, 1988 (as amended prior to November 18, 1994, and subject to
Recital D below, the "ERLY Juice Loan Agreement"), pursuant to which Lender
agreed to make certain loans and financial accommodations to or for the benefit
of ERLY Juice. As used in these Recitals, the term "ERLY Juice Obligations"
means the "Obligations" as such term is defined in the ERLY Juice Loan
Agreement.
B. In connection with the ERLY Juice Loan Agreement, Parent (i) granted
Lender an option to purchase up to 43,000 (subject to adjustment) shares of the
common stock of Parent (the "Parent Stock Option") pursuant to the Stock Option
Agreement entered into in September, 1988 (the "Parent Stock Option Agreement")
and (ii) issued to Lender two warrants dated as of October 22, 1993, denominated
the "A Warrant" and the "B Warrant" (which shall be referred to herein as the
"Existing A Warrant" and the "Existing B Warrant," respectively) each initially
exercisable for 186,511 (subject to adjustment) shares of the common stock of
Parent.
C. The ERLY Juice Obligations became due and payable on December 21,
1993.
D. ERLY Juice and Lender entered into that certain ERLY Juice Agreement
dated as of November 18, 1994 (the "ERLY Juice Agreement"; all references
hereafter to the ERLY Juice Loan Agreement shall be to the ERLY Juice Loan
Agreement as amended by the ERLY Juice Agreement), which, among other things,
(i) amended the ERLY Juice Loan Agreement to extend the due date of the ERLY
Juice Obligations to December 21, 1994, and (ii) provided for the forgiveness of
$497,284.73 of the ERLY Juice Obligations as of November 18, 1994, subject to
the retroactive revocation and rescission of such forgiveness as of such date if
the Chemonics Obligations (as defined in Section 3 of the ERLY Juice Agreement)
were not satisfied in full on or before March 31, 1995. Such Chemonics
Obligations have been timely satisfied.
1
<PAGE>
E. Concurrently with the execution of the ERLY Juice Agreement, Lender,
ERLY Juice, Parent, Chemonics, Chemonics International, Douglas Murphy and
Gerald Murphy entered into that certain Master Agreement dated as of November
18, 1994 (the "Master Agreement") and the Related Documents (as defined
therein), pursuant to which, among other things, (i) Lender and ERLY Juice
entered into the ERLY Juice Agreement, (ii) Parent entered into the Amended and
Restated Guaranty and Pledge Agreement (the "Parent Guaranty"), pursuant to
which Parent, among other things, (a) amended and restated its guaranty of the
payment and performance of the ERLY Juice Obligations, enforceable with recourse
against Parent on and after December 21, 1994, and (b) amended and restated its
pledge of the stock of Chemonics, of which Parent is the sole stockholder, to
secure the payment of the ERLY Juice Obligations, (iii) Chemonics entered into
the Amended and Restated Warrant to Purchase Common Stock of Chemonics
Industries, Inc. dated as of November 18, 1994 (the "Chemonics Warrant") for the
benefit of Lender, which amended and restated the Existing Warrant (as defined
in the Master Agreement), (iv) Chemonics International issued to Lender the
Warrant to Purchase Common Stock of Chemonics International, Inc., dated as of
November 18, 1994 (the "Chemonics International Warrant") and (v) Chemonics
entered into the Non-Recourse Guaranty and Pledge Agreement (ERLY Juice
Obligations) (the "Chemonics Pledge"), pursuant to which Chemonics, among other
things, pledged the stock of Chemonics International, of which Chemonics is the
sole stockholder, to secure the payment of the ERLY Juice Obligations.
F. On December 21, 1994, the ERLY Juice Obligations became due and
payable and the recourse obligations of Parent to Lender pursuant to the Parent
Guaranty became effective. The ERLY Juice Obligations remain due and payable. As
of February 16, 1995, the ERLY Juice Obligations are as follows:
Principal and Interest $8,943,570.10
Fees and Costs 85,438.00
Total 9,029,008.10
G. ERLY Juice, Parent, Chemonics, and Chemonics International have
requested that Lender (i) agree to extend the due date of the ERLY Juice
Obligations and modify certain provisions regarding applicable interest
obligations with respect thereto, (ii) amend the Existing A Warrant and Existing
B Warrant to grant to Parent an option to repurchase such warrants, and any
stock purchased pursuant to such warrants, under certain terms and conditions,
(iii) return the Chemonics International Warrant to Chemonics International and
the Chemonics Warrant to Chemonics under certain conditions specified herein,
and (iv) terminate the Parent Stock Option.
H. Lender is willing to consent to the requests described in the
foregoing paragraph, subject to the terms and conditions hereof and in the
Related Documents (as defined below).
2
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the receipt and adequacy of which are hereby
acknowledged, it is agreed as follows:
1. DEFINITIONS.
a. Defined Terms. The following terms (whether or not
underscored) when used in this Loan Extension Agreement, including its Preamble
and Recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms thereof):
"A Warrant" means the Amended and Restated Warrant to Purchase
Common Stock of ERLY Industries Inc., denominated the "A Warrant," of even date
herewith, which amends and restates the Existing A Warrant, together with all
amendments, modifications and supplements thereto and replacements thereof.
"Amended Loan Agreement" means the Amended and Restated Loan
Agreement between ERLY Juice and Lender of even date herewith, together with all
amendments, modifications and supplements thereto.
"Amended Security Agreement" means the Amended and Restated
Security Agreement between ERLY Juice and Lender of even date herewith, together
with all amendments, modifications and supplements thereto.
"Amended Term Note" means the Amended and Restated Term Note
of ERLY Juice in favor of Lender of even date herewith, together with all
amendments, modifications and supplements thereto.
"B Warrant" means the Amended and Restated Warrant to Purchase
Common Stock of ERLY Industries Inc., denominated the "B Warrant," of even date
herewith, which amends and restates the Existing B Warrant, together with all
amendments, modifications and supplements thereto and replacements thereof.
"Business Day" means any day which is neither a Saturday nor
Sunday nor a legal holiday on which banks are authorized or required to be
closed in Los Angeles, California.
"C Warrant" means the Warrant to Purchase Common Stock of ERLY
Industries Inc., denominated the "C Warrant," of even date herewith which is
initially exercisable for a number of shares equal to 1% of Parent's common
stock on a fully diluted basis (subject to adjustment as provided therein),
together with all amendments, modifications and supplements thereto.
3
<PAGE>
"Chemonics" is defined in the Preamble.
"Chemonics International" is defined in the Preamble.
"Chemonics International Warrant" is as defined in Recital E,
together with all amendments, modifications, and supplements thereto and
replacements thereof.
"Chemonics International Warrant Stock" means, as of any time
of determination, all Warrant Stock (as defined in the Chemonics International
Warrant).
"Chemonics Pledge" is as defined in Recital E, together with
all amendments, modifications, and supplements thereto.
"Chemonics Pledge Amendment" means the First Amendment to
Non-Recourse Guaranty and Pledge Agreement (ERLY Juice Obligations) of even date
herewith, executed by Chemonics in favor of Lender, together with all
amendments, modifications and supplements thereto, which amends the Chemonics
Pledge.
"Chemonics Warrant" is as defined in Recital E, together with
all amendments, modifications, and supplements thereto and replacements thereof.
"Chemonics Warrant Stock" means, as of any time of
determination, all Warrant Stock (as defined in the Chemonics Warrant).
"Closing Date" means the Business Day on which all of the
conditions precedent set forth in Section 3 have been satisfied, in Lender's
sole discretion, or waived in writing by Lender.
"D Warrant" means the Warrant to Purchase Common Stock of ERLY
Industries Inc., denominated the "D Warrant," of even date herewith which is
initially exercisable for a number of shares equal to 4% of Parent's common
stock on a fully diluted basis (subject to adjustment as provided therein),
together with all amendments, modifications and supplements thereto.
"ERLY Juice" is defined in the Preamble.
"ERLY Juice Agreement" is as defined in Recital D, together
with all amendments, modifications, and supplements thereto.
"ERLY Juice Loan Agreement" is as defined in Recital A.
"ERLY Juice Obligations" (i) means for purposes of all
provisions of this Loan Extension Agreement other than the Recitals, the
"Obligations" as such term is
4
<PAGE>
defined in the Amended Loan Agreement, and (ii) for purposes of the Recitals, is
as defined in Recital A.
"Lender" is defined in the Preamble.
"Lien" is as defined in the Amended Loan Agreement.
"Loan Extension Agreement" is defined in the Preamble,
together with all amendments, modifications, and supplements.
"Master Agreement" is as defined in Recital E, together with
all amendments, modifications, and supplements thereto and replacements thereof.
"Maturity" is as defined in the Amended Loan Agreement.
"Organic Document" means, relative to ERLY Juice, Parent,
Chemonics, or Chemonics International, its certificate of incorporation, its
by-laws, and all shareholder agreements, voting trusts, and similar arrangements
applicable to any of its authorized shares of stock.
"Parent" is defined in the Preamble.
"Parent Documents" means the Parent Guaranty Amendment, the A
Warrant, the B Warrant, the C Warrant, the Parent Registration Rights Agreement,
the Parent Securities Purchase Agreement, and each other document or instrument
executed and delivered by Parent to Lender pursuant hereto or in connection
herewith.
"Parent Guaranty" is as defined in Recital E, together with
all amendments, modifications, and supplements thereto.
"Parent Guaranty Amendment" means the First Amendment to
Amended and Restated Guaranty and Pledge Agreement between Parent and Lender of
even date herewith, which amends the Parent Guaranty, together with all
amendments, modifications and supplements thereto.
"Parent Pledge" means that certain ERLY Pledge Agreement dated
as of September 26, 1988, together with all amendments, modifications, and
supplements thereto, pursuant to which Parent pledged the stock of ERLY Juice to
Lender to secure the ERLY Juice Obligations (as defined in the Recitals).
"Parent Registration Rights Agreement" means the Registration
Rights Agreement (ERLY Industries) between Parent and Lender of even date
herewith, together with all amendments, modifications and supplements thereto.
5
<PAGE>
"Parent Securities Purchase Agreement" means the Securities
Purchase Agreement (ERLY Industries) between Parent and Lender of even date
herewith, together with all amendments, modifications and supplements thereto.
"Parent Stock Option" is as defined in Recital B.
"Parent Stock Option Agreement" is as defined in Recital B.
"Related Documents" means the Amended Loan Agreement, the
Amended Note, the Amended Security Agreement, the Parent Documents, the
Chemonics Pledge Amendment, and each other agreement executed and delivered to
Lender pursuant hereto, whether or not mentioned herein.
"Schedule of Documents" means the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents to be
delivered and information to be provided in connection with this Loan Extension
Agreement and the transactions contemplated hereunder, substantially in the form
of Annex A hereto.
b. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this Loan
Extension Agreement shall have such meanings when used in any Schedules or
Annexes hereto, including the Schedule of Documents, and in each notice and
other communication delivered from time to time in connection with this Loan
Extension Agreement or any Related Document.
c. Cross-References. Unless otherwise specified, references in
this Loan Extension Agreement and in each Related Document to any Section are
references to such Section of this Loan Extension Agreement or such Related
Document, as the case may be, and unless otherwise specified, references in any
Section or definition to any clause are references to such clause of such
Section or definition. In addition, it is expressly agreed that any reference in
any "Other Document" (as defined below) to the ERLY Juice Loan Agreement or any
Section or provision thereof shall, unless the context otherwise requires, be
deemed to be a reference to the Amended Loan Agreement (and if such reference
was a reference to a specific section or provision, it shall be deemed a
reference to the comparable provision of the Amended Loan Agreement). If any
Other Document refers to or relies upon the ERLY Juice Loan Agreement for
purposes of defining a particular term in such Other Loan Document and such term
is not defined in the Amended Loan Agreement, the definition of such term that
was set forth in the ERLY Juice Loan Agreement shall apply and be used to define
such term. For purposes hereof, "Other Document" means and includes any Loan
Document (as defined in the ERLY Juice Loan Agreement) that may remain in effect
after the Closing Date, including the Parent Pledge, and any other document or
agreement that may have been executed in connection with any of the foregoing.
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d. Certain Matters of Construction. All Schedules or Annexes
identified by this Loan Extension Agreement are incorporated herein by
reference, and taken together, shall constitute but a single agreement. Unless
otherwise expressly set forth herein, or in a written amendment referring to
such Schedules, all Schedules referred to herein shall mean the Schedules as in
effect as of the Closing Date. The Recitals shall be construed as part of this
Loan Extension Agreement. For purposes of this Loan Extension Agreement and the
Related Documents, the following additional rules of construction shall apply,
unless specifically indicated to the contrary: (a) wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, the feminine and the
neuter; (b) the term "or" is not exclusive; (c) the term "including" (or any
form thereof) shall not be limiting or exclusive; (d) all references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations; and (e) all references to any instruments or
agreements, including references to any of the Related Documents, shall include
any and all modifications or amendments thereto and any and all extensions or
renewals thereof.
2. LENDER'S AGREEMENT. Subject to Section 3 below, Lender hereby
agrees as follows:
a. Extension of Due Date of ERLY Juice Obligations;
Modification of Interest Provisions. As provided in the Amended Loan Agreement,
which amends and restates the ERLY Juice Loan Agreement, Lender shall, among
other things, (i) extend the due date of the ERLY Juice Obligations to April 1,
1996, and (ii) modify certain provisions regarding applicable interest
obligations with respect thereto, all subject to the terms and conditions of the
Amended Loan Agreement.
b. Grant of Option to Parent to Repurchase A and B Warrants.
As provided in the A Warrant and the B Warrant, which amend and restate the
Existing A Warrant and Existing B Warrant, respectively, Lender shall grant to
Parent an option to repurchase such warrants, or any stock purchased pursuant to
such warrants, subject to the terms and conditions set forth in Section 26 of
such A Warrant and B Warrant, respectively.
c. Return of Chemonics Warrant and Chemonics International
Warrant and Related Stock and Proceeds In Certain Circumstances. If the ERLY
Juice Obligations are satisfied in full on or before the earlier to occur of
December 31, 1995 and Maturity, then Lender shall return to Chemonics or
Chemonics International, as the case may be, (A) (1) the Chemonics Warrant and
Chemonics International Warrant, (2) any Chemonics Warrant Stock or Chemonics
International Warrant Stock then held by Lender (subject to the repayment to
Lender of the aggregate Exercise Price (as defined in the relevant warrant) paid
by Lender for such stock pursuant to the relevant warrant), and (3) the actual
amount of any cash proceeds received by
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Lender upon the sale by Lender of the Chemonics Warrant, the Chemonics
International Warrant, any Chemonics Warrant Stock, or any Chemonics
International Warrant Stock, less, in the case of proceeds of any Chemonics
Warrant Stock or Chemonics International Warrant Stock, the amount of the
aggregate Exercise Price (as defined in the relevant warrant) paid by Lender for
such stock pursuant to the relevant warrant. If the ERLY Juice Obligations are
satisfied in full after December 31, 1995 but on or before Maturity, then Lender
shall return to Chemonics (B) (1) the Chemonics Warrant, (2) any Chemonics
Warrant Stock then held by Lender (subject to the repayment to Lender of the
amount of the aggregate Exercise Price (as defined in the Chemonics Warrant)
paid by Lender for such stock pursuant to the Chemonics Warrant), and (3) the
actual amount of any cash proceeds received by Lender upon the sale by Lender of
the Chemonics Warrant or any Chemonics Warrant Stock, less, in the case of
proceeds of any Chemonics Warrant Stock, the amount of the purchase price paid
by Lender for such stock pursuant to the Chemonics Warrant).
d. Termination of Parent Stock Option and Parent Stock Option
Agreement. As of the Closing Date, the Parent Stock Option shall be terminated,
and the Parent Stock Option Agreement shall be of no further force or effect.
3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATIONS. Notwithstanding any
other provision of this Loan Extension Agreement or any Related Document, no
party other than Lender shall have any rights hereunder or under any Related
Document, and Lender shall have no obligations hereunder or thereunder, until
the following conditions have been satisfied, in Lender's sole discretion, or
waived in writing by Lender:
a. Execution and Delivery of This Loan Extension Agreement and
Related Documents. This Loan Extension Agreement or counterparts thereof shall
have been duly executed by, and delivered to, each of the parties hereto, and
Lender shall have received each of the Related Documents, duly executed, and all
such documents, instruments and agreements that Lender may reasonably request in
connection with the transactions contemplated by this Loan Extension Agreement
including all documents, instruments, agreements, listed in the Schedule of
Documents, each in form and substance satisfactory to Lender.
b. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of ERLY Juice, Parent, Chemonics or
Chemonics International shall be satisfactory in form and substance to Lender
and its counsel; Lender and its counsel shall have received all information, and
such counterpart originals or such certified or other copies of such materials,
as Lender or its counsel may request; and all legal matters incident to the
transactions contemplated by this Loan Extension Agreement shall be satisfactory
to counsel to Lender.
c. Intentionally Blank.
8
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4. REPRESENTATIONS AND WARRANTIES. Each of ERLY Juice, Parent,
Chemonics and Chemonics International represents and warrants to Lender as
follows:
a. Organization, etc. Each of ERLY Juice, Parent, Chemonics
and Chemonics International is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation, is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the nature of its business makes such qualification
necessary, has full power and authority to own, and hold under lease, its
property and to conduct its business as presently conducted by it and as
proposed to be conducted, and has full power and authority to enter into and
perform its obligations under this Loan Extension Agreement and each Related
Document to which it is a party.
b. Validity, etc. This Loan Extension Agreement constitutes,
and all Related Documents to which any such party is a party will, when executed
and delivered by such party, constitute, the legal, valid, and binding
obligation of such party enforceable in accordance with their terms, subject, as
to enforcement, only to bankruptcy, insolvency, reorganization, moratorium, or
similar laws at the time in effect affecting the enforceability of the rights of
creditors generally.
5. MISCELLANEOUS.
a. Waivers, Amendments, etc. The provisions of this Loan
Extension Agreement and of each Related Document may from time to time be
amended, modified, or waived if such amendment, modification or waiver is in
writing and consented to by Lender and the other parties hereto or thereto, as
the case may be. No failure or delay on the part of Lender in exercising any
power or right under this Loan Extension Agreement or any Related Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right.
b. Costs and Expenses. Whether or not the transactions hereby
contemplated shall be consummated, ERLY Juice and Parent shall pay all
reasonable out-of-pocket costs and expenses of Lender incurred in connection
with the preparation, execution, delivery, and enforcement of or preservation of
any rights under, this Loan Extension Agreement and the Related Documents.
c. Severability. Any provision of this Loan Extension Agreement or any
Related Document which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Loan
Extension Agreement or such Related Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
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<PAGE>
d. Further Assurances. Each of ERLY Juice, Parent, Chemonics, and
Chemonics International agrees, upon the written request of Lender, to execute
and deliver to Lender, from time to time, any additional instruments or
documents reasonably considered necessary by Lender to accomplish the
transactions contemplated herein or in any Related Documents.
e. Headings. The various headings of this Loan Extension Agreement and
of each of the Related Documents are inserted for convenience of reference only
and shall not affect the meaning or interpretation of this Loan Extension
Agreement or any such Related Document or any provisions hereof or thereof.
f. Counterparts. This Loan Extension Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.
g. Interpretation. No provision of this Loan Extension Agreement or any
of the Related Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party's having or being deemed to have structured,
drafted or dictated such provision.
h. Complete Agreement. This Loan Extension Agreement constitutes the
complete agreement between the parties, and supersedes any prior written or oral
agreements, writings, communications or understandings of the parties with
respect to the subject matter hereof.
i. Time of the Essence. Time is of the essence with respect to this Loan
Extension Agreement and each of the Related Documents.
j. Successors and Assigns. This Loan Extension Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
k. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS LOAN
EXTENSION AGREEMENT AND THE RELATED DOCUMENTS AND THE OBLIGATIONS ARISING
HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. THE PARTIES CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO
JURISDICTION OR VENUE, AND
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AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA.
l. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY, RATHER THAN ARBITRATION RULES, THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS LOAN EXTENSION AGREEMENT, OR ANY RELATED DOCUMENT, WHETHER ARISING IN
CONTRACT, TORT OR OTHERWISE.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ERLY INDUSTRIES INC. ERLY JUICE INC.
By: /s/ KURT GREY By: /s/ KURT GREY
Name: Kurt Grey Name: Kurt Grey
Its: Vice President Title: Vice President
CHEMONICS INDUSTRIES, INC. CHEMONICS INTERNATIONAL, INC.
By: /s/ KURT GREY By: /s/ KURT GREY
Name: Kurt Grey Name: Kurt Grey
Its: Vice President Its: Vice President
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By: /s/ MICHAEL W. ADLER
Name: Michael W. Adler
Its: Vice President
11
3.14
AMENDED AND RESTATED GUARANTY AND PLEDGE AGREEMENT
THIS AMENDED AND RESTATED GUARANTY AND PLEDGE AGREEMENT (this
"Agreement"), dated as of November 18, 1994, is made by ERLY INDUSTRIES INC., a
California corporation ("Guarantor"), in favor of INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, a Delaware corporation, successor in interest to
Internationale Nederlanden Bank N.V., New York Branch (formerly known as NMB
Postbank Groep nv, New York Branch (formerly known as Nederlandsche
Middenstandsbank nv, New York Branch)) ("Lender").
RECITALS
A. Guarantor is the record and beneficial owner of all of the issued
and outstanding shares of Stock (as defined herein), described in Schedule I
attached hereto, as may be amended or supplemented pursuant to the terms hereof
(the "Pledged Shares") issued by Chemonics Industries, Inc., an Arizona
corporation ("Chemonics").
B. Chemonics and Lender entered into that certain Loan Agreement dated
as of December 1, 1989, as amended and restated by that certain Amended and
Restated Loan Agreement dated as of December 29, 1989 (as amended, the
"Chemonics Loan Agreement"), pursuant to which Lender agreed to make certain
loans and financial accommodations to or for the benefit of Chemonics.
C. Lender and Guarantor entered into the Stock Pledge Agreement dated
as of December 1, 1989 (such agreement, as it has been amended pursuant to the
ERLY Agreement of Amendment, Ratification and Confirmation Dated As Of December
29, 1989, the "First Pledge"), pursuant to which Guarantor made a first priority
pledge of the Pledged Shares in favor of Lender to secure all of the Obligations
of Chemonics to Lender under and as defined in the Chemonics Loan Agreement (the
"Chemonics Loan Obligations"). The Chemonics Loan Obligations are currently due
and payable.
D. ERLY Juice Inc. ("ERLY Juice") and Lender have entered into a Loan
Agreement dated as of September 26, 1988 (such agreement, as heretofore amended,
shall, subject to Recital L, be referred to as the "ERLY Juice Loan Agreement"),
pursuant to which Lender agreed to make certain loans and financial
accommodations to or for the benefit of ERLY Juice.
E. Lender and Guarantor entered into the Amended and Restated Pledge
Agreement dated as of March 31, 1993 (the "Second Pledge"), pursuant to which
Guarantor made a second priority pledge of the Pledged Shares in favor of Lender
to
<PAGE>
secure all of the obligations of ERLY Juice to Lender under the ERLY Juice Loan
Agreement.
F. Guarantor and Lender entered into the Guaranty, dated as of December
21, 1993 (the "ERLY Juice Guaranty"), pursuant to which Guarantor guaranteed the
payment and performance by ERLY Juice of its obligations under the ERLY Juice
Loan Agreement, provided that the ERLY Juice Guaranty was not enforceable at any
time prior to December 21, 1994.
G. As of December 21, 1993, ERLY Juice's obligations under the ERLY
Juice Loan Agreement were, and still are, due and payable.
H. Pursuant to Guaranties dated as of March 31, 1993 (the "Murphy
Guaranties"), Douglas Murphy, a Vice President and director of Chemonics and the
President and a director of Guarantor, and Gerald Murphy, the Chairman and a
director of Chemonics and the Chairman and a director of Guarantor, have
guaranteed, subject to the terms and conditions of such Murphy Guaranties, the
payment of the ERLY Juice Obligations (as defined herein).
I. Chemonics has informed Lender that it has received a financing
commitment from NationsBank, N.A. to provide financing with respect to Chemonics
International, Inc. ("Chemonics International"), which was formerly a division
of Chemonics, subject to the incorporation of Chemonics International (which has
taken place) and the transfer of various of Chemonics's assets to Chemonics
International, free of Lender's liens and security interests (such incorporation
of Chemonics International and transfer of assets from Chemonics to Chemonics
International shall be referred to as the "Restructuring"), and that Chemonics
intends to use the proceeds of such financing and other funds of Chemonics to
pay the Closing Payment Amount (as defined in the Master Agreement, defined
below), after which payment the Chemonics Loan Obligation Amount (as defined in
the Master Agreement) will have been reduced to $500,000 (the Chemonics
Carryover Amount").
J. Guarantor, Chemonics, Chemonics International, ERLY Juice, Gerald
Murphy and Douglas Murphy have requested that Lender (i) consent to the
Restructuring, (ii) extend the due date of the ERLY Juice Obligations, (iii)
reduce the ERLY Juice Obligations in the amount of the Reduction Amount (as
defined in the ERLY Juice Agreement (defined below)), subject to reinstatement
of such reduction in certain circumstances, (iv) release the Murphy Guaranties,
and (v) amend and restate the Chemonics Loan Agreement pursuant to that certain
Second Amended and Restated Loan Agreement of even date herewith (the "Amended
Chemonics Loan Agreement") to, among other things, provide that the Chemonics
Carryover Amount be converted to a term loan having a due date of March 31,
1995.
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K. Guarantor, as the sole holder of the Pledged Shares and the sole
holder of shares of Stock of ERLY Juice, will derive substantial direct and
indirect economic benefit if Lender grants the consents and takes the actions
set forth in the preceding recital. Lender is willing to do so, subject to, and
in reliance upon, among other things, the requirement that Guarantor execute and
deliver this Agreement and grant the security interest contemplated hereby to
secure Guarantor's obligations to Lender under this Agreement, and in connection
with such consent Lender is entering into that certain Master Agreement of even
date herewith (the "Master Agreement") and the Related Documents (as defined
therein).
L. Lender and ERLY Juice are concurrently entering into the ERLY Juice
Agreement of even date herewith (the "ERLY Juice Agreement"), pursuant to which,
among other things, the ERLY Juice Loan Agreement is being amended (and all
further references to the ERLY Juice Loan Agreement shall be to such agreement
as amended by the ERLY Juice Agreement or by any subsequent amendment).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the receipt and adequacy of which are hereby
acknowledged, to induce Lender (i) to consent to the Restructuring, (ii) to
release the Murphy Guaranties, and (iii) to extend the due date of the ERLY
Juice Obligations (as defined herein) and reduce the amount of such obligations
as set forth in the ERLY Juice Agreement, it is hereby agreed, and the First
Pledge, Second Pledge and ERLY Juice Guaranty are hereby amended and restated,
as follows:
1. DEFINED TERMS. The following terms shall have the following meanings
(such meanings being equally applicable to both the singular and plural form of
the terms defined):
"Agreement" means this Amended and Restated Guaranty and
Pledge Agreement, including all amendments, modifications and supplements and
any exhibits and schedules to any of the foregoing, and shall refer to the
Agreement as the same may be in effect at the time such reference becomes
operative.
"Allowed Encumbrances" means the following encumbrances: (i)
Liens for Taxes upon or relating to the Pledged Collateral, which Liens either
are not yet due and payable or to the extent that nonpayment thereof is
permitted by the terms of Section 8.7 hereof; (ii) attachment or judgment Liens
(exclusive of (a) any amounts that are duly bonded to the satisfaction of Lender
in its sole judgment, or (b) any amount adequately covered by insurance as to
which the insurance company has assumed the defense without denying coverage);
and (iii) presently existing and hereafter created Liens in favor of Lender.
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"Amended Chemonics Loan Agreement" is defined in the recitals.
"Bankruptcy Code" means title 11, United States Code, as
amended from time to time, and any successor statute thereto.
"Business Day" means any day which is neither a Saturday nor
Sunday nor a legal holiday on which banks are authorized or required to be
closed in Los Angeles, California.
"Chemonics" is defined in the recitals.
"Chemonics Carryover Amount" is defined in the recitals.
"Chemonics Guaranteed Obligations" is defined in Section 2.1.a
hereof.
"Chemonics International" is defined in the recitals.
"Chemonics Obligations" means the "Obligations" as such term
is defined in the Amended Chemonics Loan Agreement.
"Collateral" means anything that is either Collateral as
defined in the Amended Chemonics Loan Agreement or Collateral as defined in the
ERLY Juice Loan Agreement.
"ERLY Juice" is defined in the recitals.
"ERLY Juice Guaranteed Obligations" is defined in Section
2.1.b hereof.
"ERLY Juice Loan Agreement" is defined in the recitals.
"ERLY Juice Obligations" means all obligations of ERLY Juice
to pay any amounts to Lender pursuant to the ERLY Juice Loan Agreement or the
Notes or Loan Documents (as both such terms are defined in the ERLY Juice Loan
Agreement), whether for principal, interest, fees and expenses or otherwise.
"Event of Default" is defined in Section 9.1 hereof.
"Exchange Act" is defined in Section 7.8 hereof.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, consistently applied.
"Guarantor" is defined in the preamble.
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"Guaranty" is defined in Section 2.1 hereof.
"Lender" is defined in the preamble.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code as enacted in any state, or comparable law of any
jurisdiction).
"Loan Documents" means, collectively, (i) the Loan Documents
(as defined in the ERLY Juice Loan Agreement), and (ii) the Loan Documents (as
defined in the Amended Chemonics Loan Agreement).
"Master Agreement" is defined in the recitals.
"Notes" means, collectively, (i) the Notes (as defined in the
ERLY Juice Loan Agreement) and (ii) the Term Note (as defined in the Amended
Chemonics Loan Agreement).
"Person" means any natural person, corporation, firm,
association, government, governmental agency, trust, partnership, joint venture
or any other entity, whether acting in an individual, fiduciary, or other
capacity.
"Pledge Amendment" is defined in Section 8.4 hereof.
"Pledged Collateral" is defined in Section 3 hereof.
"Pledged Shares" is defined in the recitals.
"Restructuring" is defined in the recitals.
"Secured Obligations" means (i) Guarantor's obligation to pay
the Chemonics Guaranteed Obligations, (ii) Guarantor's obligation to pay the
ERLY Juice Guaranteed Obligations, and (iii) all other obligations of Guarantor
hereunder other than those described in clauses (i) and (ii) of this definition.
"Securities Act" is defined in Section 7.8 hereof.
"Stock" means all shares, options, warrants, general or
limited partnership interests, participation or other equivalents (regardless of
how designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting,
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including common stock, preferred stock, or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934).
"Subsidiary" of any corporation means any other corporation
51% or more of the outstanding shares of Stock of which having ordinary voting
power for the election of directors is owned directly or indirectly by such
corporation.
"Taxes" means taxes, fees or other charges of any nature
whatsoever imposed by any taxing authority (whether pursuant to United States
Federal or any state or local law or any foreign law), other than taxes imposed
on or measured by Lender's net income pursuant to the income tax laws of the
jurisdiction wherein Lender's principal or lending office is located.
"Termination Date" means the date upon which all Secured
Obligations have been paid in full.
2. GUARANTY.
2.1 Subject to Section 4, Guarantor hereby absolutely,
unconditionally and irrevocably makes the following guaranty (the "Guaranty"):
(a) Guarantor hereby guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all of the Chemonics Obligations now or hereafter
existing, whether for principal, interest, fees, expenses, or otherwise,
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent or now or hereafter existing or due or to become due (including in
all cases all such amounts which would become due but for the operation of the
automatic stay under Bankruptcy Code sections 362(a), 502(b) and 506(b) (such
obligations guaranteed by Guarantor being hereinafter referred to as the
"Chemonics Guaranteed Obligations").
(b) Guarantor hereby guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all of the ERLY Juice Obligations now or hereafter
existing, whether for principal, interest, fees, expenses, or otherwise,
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent or now or hereafter existing or due or to become due (including in
all cases all such amounts which would become due but for the operation of the
automatic stay under Bankruptcy Code sections 362(a), 502(b) and 506(b) (such
obligations guaranteed by Guarantor being hereinafter referred to as the "ERLY
Juice Guaranteed Obligations").
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2.2 The Guaranty shall in all respects be a continuing,
absolute, unconditional and irrevocable guaranty of payment, and shall remain in
full force and effect until all of the Chemonics Guaranteed Obligations and ERLY
Juice Guaranteed Obligations have been paid in full.
2.3 The Guaranty constitutes a guaranty of payment when due
and not of collection, and Guarantor specifically agrees that it shall not be
necessary or required that Lender or any holder of any Notes assert any claim or
demand or enforce any remedy whatsoever against Chemonics, ERLY Juice, or any
other Person before or as a condition to the obligations of Guarantor under the
Guaranty.
2.4 Guarantor hereby indemnifies and holds harmless Lender and
each holder of the Term Note (as defined in the Amended Chemonics Loan
Agreement) or any Notes (as defined in the ERLY Juice Loan Agreement), for any
and all costs and expenses (including reasonable attorney's fees and expenses)
incurred by Lender or such holder, as the case may be, in enforcing any right
under this Agreement.
3. PLEDGE. In order to secure the prompt payment in full when due,
whether at stated maturity, by acceleration, or otherwise, and the performance
of all Secured Obligations, Guarantor hereby pledges and grants to Lender a
first priority security interest in all of the following (the "Pledged
Collateral"):
3.1 the Pledged Shares and the certificates representing such
Pledged Shares, and all dividends, cash, instruments, securities, and other
property or proceeds from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares of
Guarantor; and
3.2 all additional shares of Stock of Chemonics from time to
time acquired by Guarantor in any manner (which additional shares shall be
deemed to be part of the Pledged Shares), and the certificates representing such
additional shares, and all dividends, cash, instruments, securities, and other
property or proceeds from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of such shares.
4. RECOURSE. Notwithstanding any other provision in this Agreement, at
any time before December 21, 1994, Lender's sole recourse against Guarantor with
respect to the Secured Obligations and the enforcement of the Guaranty shall be
limited to Lender's first priority security interest in the Pledged Collateral.
On and after December 21, 1994, in addition to, and without in any way limiting
Lender's recourse to, the Pledged Collateral, Lender shall have full recourse
against Guarantor with respect to the enforcement of the Guaranty as it relates
to all of the Secured Obligations other than the Chemonics Guaranteed
Obligations.
5. DELIVERY OF PLEDGED COLLATERAL; GUARANTOR'S RIGHTS.
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5.1 All certificates representing or evidencing the Pledged
Shares shall be delivered to and held by or on behalf of Lender in accordance
herewith and accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance satisfactory to Lender. Guarantor shall
receive all certificates, dividends, cash, instruments, and other property or
proceeds from time to time received, receivable, or otherwise distributed in
respect of or in exchange for any or all of the Pledged Collateral in trust for
Lender and shall immediately upon receipt deliver to Lender such certificates,
dividends, cash, instruments, and other property and proceeds, together with any
necessary endorsement. All dividends and all other distributions in respect of
any of the Pledged Collateral, whenever paid or made, shall be delivered to
Lender to hold as Pledged Collateral and shall, if recovered by Guarantor, be
received in trust for the benefit of Lender, be segregated from the other
property or funds of Guarantor, and be forthwith delivered to Lender as Pledged
Collateral in the same form as so received (with any necessary endorsement).
5.2 Unless an Event of Default shall have occurred and be
continuing, Guarantor shall have the right, from time to time, to exercise all
voting, consensual and other powers of ownership pertaining to the Pledged
Collateral for all purposes not inconsistent with the terms of this Agreement,
the ERLY Juice Loan Agreement, the Amended Chemonics Loan Agreement, or any of
the Loan Documents, provided, however, that Guarantor agrees that it will not
vote the Pledged Collateral in any manner that is inconsistent with the terms of
any of the foregoing; and provided, further, that no vote shall be cast by
Guarantor, and no consent shall be given or action taken by Guarantor, which
would have the effect of impairing the position or interest of Lender in respect
of the Pledged Collateral or which would authorize or effect: (a) the
dissolution, reorganization, or liquidation, in whole or in part, of Chemonics
or any of its Subsidiaries; (b) the consolidation or merger of Chemonics or any
of its Subsidiaries with any other Person; (c) the sale, disposition, or
encumbrance of all or substantially all of the assets of Chemonics or any of its
Subsidiaries; or (d) (i) an amendment to Chemonics's charter or by-laws, (ii)
any change in the authorized number of shares, the stated capital, or the
authorized share capital of Chemonics, (iii) the issuance of any additional
shares of Stock of Chemonics, or (iv) the alteration of the voting rights with
respect to the Stock of Chemonics (and any action described in this clause (d)
that is taken in violation of this Section 5.2 shall be void and of no force or
effect).
6. GUARANTOR WAIVERS. Subject to the provisions of Section 4,
Guarantor hereby agrees as follows:
6.1 The Secured Obligations are the immediate, direct,
primary, and absolute obligations of Guarantor, shall not be subject to any
condition precedent, and are independent of and not co-extensive with the
Chemonics Obligations and the ERLY Juice Obligations. Guarantor expressly waives
any right it may now or in the future have to require Lender to, and Lender
shall have no obligation to, first pursue or
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enforce against Chemonics, ERLY Juice, the Collateral, or any other security,
guaranty, or pledge that may now or hereafter be held by Lender for the
Chemonics Obligations, the ERLY Juice Obligations, or the Secured Obligations,
or to apply such security, guaranty, or pledge to the Chemonics Obligations, the
ERLY Juice Obligations, or the Secured Obligations, or to pursue any other
remedy in Lender's power that Guarantor may or may not be able to pursue itself
and that may lighten Guarantor's burden, before proceeding against the Pledged
Collateral or Guarantor. Guarantor shall remain liable for the Secured
Obligations, notwithstanding any judgment Lender may obtain against Chemonics or
ERLY Juice, or any other guarantor or other Person, and notwithstanding any
modification, extension, or renewal with respect thereto.
6.2 Guarantor hereby authorizes and empowers Lender in its
sole discretion, without any notice or demand to Guarantor whatsoever and
without affecting the liability of Guarantor hereunder, to exercise any right or
remedy which Lender may have available to it, including, but not limited to,
judicial foreclosure, exercise of rights of power of sale without judicial
action, or taking a deed or an assignment in lieu of foreclosure as to any
collateral security for the Chemonics Obligations, ERLY Juice Obligations, or
Secured Obligations, whether real, personal or intangible property. No election
to proceed in one form of action or against any party shall constitute a waiver
of Lender's right to proceed in any other form of action or against Guarantor or
any other person, or diminish the liability of Guarantor, or affect the right of
Lender to proceed against Guarantor for any deficiency, except to the extent
that Lender realizes payments by such action, notwithstanding the effect of such
action upon Guarantor's rights of subrogation, reimbursement, or indemnity, if
any against ERLY Juice, Chemonics, or any other guarantor, maker or endorser, or
against any Collateral. Without limiting the generality of the foregoing,
Guarantor: (a) expressly waives any defense or benefits that may be available
from California Code of Civil Procedure ("CCP") section 580(a) and its
subdivisions or section 726, which provide, among other things, that the amount
of any deficiency judgment which may be recovered following either a judicial or
non-judicial foreclosure is limited to the difference between the amount of any
indebtedness owed and the greater of the fair value of the security or the
amount for which the security was actually sold, or comparable provisions of the
laws of any other state, as well as all suretyship defenses Guarantor would
otherwise have under California law or the laws of any other state; (b)
expressly waives all rights and benefits, if any, applicable to Guarantor under
CCP sections 580(b), providing that no deficiency may be recovered on a real
property purchase money obligation, and 580(d), providing that no deficiency may
be recovered on a note secured by a deed of trust on real property if the real
property is sold under a power of sale contained in the deed of trust, or
comparable provisions of the laws of any other state; and (c) specifically
agrees that any action maintained by Lender for the appointment of any receiver,
trustee or custodian to collect rents, issues or profits or to obtain possession
of any property or any setoff shall not
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constitute an "action" within the meaning of section 726 of the CCP or any other
comparable provision of any other state.
Guarantor is aware that the ERLY Juice Obligations or the Chemonics
Obligations may now or at any future time be secured by a Lien upon real
property of ERLY Juice or Chemonics, and in connection therewith, expressly
acknowledges that:
(i) If ERLY Juice or Chemonics defaults in the payment or performance
of the ERLY Juice Obligations or the Chemonics Obligations, as applicable, and
Guarantor pays to Lender all or part of such obligations, Guarantor would have a
right to proceed against ERLY Juice or Chemonics to the extent of the
obligations so paid by Guarantor and to have the benefit of any Lien held by
Lender for the obligations to the extent of the obligations so paid by
Guarantor. Such right is commonly known as the "right of subrogation."
(ii) If ERLY Juice or Chemonics so defaults, Lender, among other
things, may enforce any Lien upon any interest in real property ("Real Property
Lien") by means of judicial action or by nonjudicial action commonly known as a
"nonjudicial foreclosure," "trustee's sale" or "power of sale foreclosure."
(iii) If ERLY Juice or Chemonics so defaults and Lender enforces any
Real Property Lien by means of a nonjudicial foreclosure, trustee's sale or
power of sale foreclosure, Guarantor's right of subrogation to proceed against
Borrower would be extinguished by the operation of CCP section 580d or similar
laws, and, in such case, Guarantor might have a defense against payment under
this Agreement.
(iv) If ERLY Juice or Chemonics so defaults and Lender enforces any
Real Property Lien by means of judicial action, Guarantor's right to proceed
against Borrower might be limited by the operation of CCP section 580a or
similar laws, in which case Guarantor might have a complete or partial defense
against payment under this Agreement.
NEVERTHELESS, GUARANTOR EXPRESSLY, KNOWINGLY AND
INTENTIONALLY WAIVES AND RELINQUISHES ANY AND ALL RIGHTS, DEFENSES OR BENEFITS
GUARANTOR MIGHT HAVE UNDER CCP SECTIONS 580a OR 580d OR SIMILAR LAWS. IN
ADDITION, GUARANTOR ALSO EXPRESSLY, KNOWINGLY AND INTENTIONALLY WAIVES AND
RELINQUISHES ANY AND ALL RIGHTS, DEFENSES OR BENEFITS GUARANTOR MAY HAVE BASED
UPON AN ELECTION OF REMEDIES BY LENDER WHICH IN ANY MANNER IMPAIRS, AFFECTS,
REDUCES, RELEASES, DESTROYS OR EXTINGUISHES GUARANTOR'S SUBROGATION RIGHTS OR
GUARANTOR'S RIGHTS TO PROCEED AGAINST ERLY JUICE, CHEMONICS, OR AGAINST ANY
OTHER PERSON OR ANY SECURITY FOR THE CHEMONICS OBLIGATIONS, ERLY JUICE
OBLIGATIONS, OR SECURED OBLIGATIONS, BY WAY OF SUBROGATION, INDEMNITY,
CONTRIBUTION,
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REIMBURSEMENT OR OTHERWISE. IN PARTICULAR, GUARANTOR AGREES THAT THIS AGREEMENT
WILL REMAIN FULLY EFFECTIVE AND GUARANTOR WILL BE LIABLE TO LENDER FOR ANY
SECURED OBLIGATIONS EVEN IF LENDER ENFORCES ANY REAL PROPERTY LIEN THAT SECURES
THE CHEMONICS OBLIGATIONS OR ERLY JUICE OBLIGATIONS BY MEANS OF A NONJUDICIAL
FORECLOSURE, TRUSTEE'S SALE OR POWER OF SALE FORECLOSURE AND THE EFFECT OF SUCH
SALE IS TO PREVENT GUARANTOR FROM TAKING ANY ACTION AGAINST ERLY JUICE OR
CHEMONICS TO RECOVER ANY AMOUNTS PAID BY GUARANTOR TO LENDER UNDER THIS
AGREEMENT OR OTHERWISE LIMITS OR DESTROYS GUARANTOR'S RIGHT OF SUBROGATION.
GUARANTOR ALSO AGREES THAT THIS AGREEMENT WILL REMAIN FULLY
EFFECTIVE AND GUARANTOR WILL BE LIABLE TO LENDER FOR THE SECURED OBLIGATIONS
EVEN IF LENDER SELLS REAL PROPERTY BY JUDICIAL FORECLOSURE ACTION AND
GUARANTOR'S RIGHTS AGAINST ERLY JUICE OR CHEMONICS ARE LIMITED BY THE OPERATION
OF CCP SECTIONS 580a OR 580d OR SIMILAR LAWS.
6.3 Guarantor acknowledges that this is a continuing guaranty
and that the Secured Obligations shall extend to and include each and every
extension or renewal of any of the ERLY Juice Obligations or Chemonics
Obligations, regardless of whether the ERLY Juice Obligations or the Chemonics
Obligations may, in successive transactions, be paid, repaid, advanced, or
renewed from time to time. Guarantor has entered into this Agreement based
solely upon its independent investigation of Chemonics's and ERLY Juice's
financial condition, and Guarantor assumes full responsibility for obtaining any
further information with respect to Chemonics and ERLY Juice, the conduct of
their respective businesses, or any other guarantor. Guarantor acknowledges and
agrees that Lender has not provided to Guarantor any information concerning
Chemonics or ERLY Juice, including, without limitation, any information
concerning the financial condition of Chemonics or ERLY Juice, Chemonics's or
ERLY Juice's value, or Chemonics's or ERLY Juice's future prospects, and Lender
has not provided to Guarantor any information concerning any action Lender may
take, or may fail to take, with respect to Chemonics, with respect to ERLY
Juice, or with respect to the Pledged Collateral at any time. Guarantor
represents that it is now, and during the term of this Agreement will be,
responsible for ascertaining the financial condition of Chemonics, ERLY Juice,
and each other guarantor. Guarantor hereby waives any duty on the part of Lender
to disclose to Guarantor, and agrees that it is not relying upon nor expecting
Lender to disclose to Guarantor, any fact known or hereafter known by Lender
relating to the operation or condition of Chemonics or its business, relating to
ERLY Juice, or relating to the existence, liability, or financial condition of
any other guarantor of the ERLY Juice Obligations or Chemonics Obligations,
notwithstanding any effect that such fact may have upon Guarantor's risk
hereunder or Guarantor's right to contribution, subrogation, reimbursement, or
indemnity, if any. Guarantor knowingly accepts the full range of
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risk encompassed in a contract of continuing guaranty, which risk includes, but
is not limited to, the possibility that ERLY Juice or Chemonics may incur
obligations to Lender after ERLY Juice's or Chemonics's financial condition or
ability to pay debts as they mature have deteriorated.
6.4 Lender shall be under no obligation to marshal any assets
in favor of Guarantor or in payment of any or all of the ERLY Juice Obligations,
Chemonics Obligations, or Secured Obligations.
6.5 Guarantor hereby waives: (a) presentment, demand, and
protest, and notice of acceleration, presentment, dishonor, non-payment, or
protest, or any delay with respect thereto, with respect to any instruments or
documents relating to the ERLY Juice Obligations, the Chemonics Obligations, or
the Secured Obligations; (b) notice of any extension, modification, renewal, or
amendment of any of the terms of the ERLY Juice Loan Agreement, the Amended
Chemonics Loan Agreement, or any other Loan Document, or the Secured
Obligations; (c) notice of the occurrence of any Default or Event of Default
other than the notice required by Section 9.2 hereof; (d) notice of any exercise
or non-exercise by Lender of any right, power, or remedy with respect to the
ERLY Juice Obligations, the Chemonics Obligations, the Secured Obligations or
the Collateral.
6.6 Guarantor hereby irrevocably waives any and all rights it
may have at any time (whether arising directly or indirectly, by operation of
law or contract) to assert any claim against ERLY Juice, Chemonics, or any other
guarantor or any Person now or hereafter primarily or secondarily liable for any
obligations of Chemonics or ERLY Juice on account of payments made under this
Agreement, including, without limitation, any and all rights of subrogation,
reimbursement, exoneration, contribution or indemnity. Guarantor further hereby
irrevocably waives any recourse against, right to, or benefit of any Collateral,
any other guaranty, or any security interest or Lien held therefor.
6.7 If, notwithstanding the foregoing waivers or any other
waivers herein, pursuant to applicable law, Guarantor, by payment or otherwise,
becomes subrogated to all or any of the rights of Lender under the ERLY Juice
Loan Agreement, the Amended Chemonics Loan Agreement, or any of the Loan
Documents or otherwise, the rights of Lender to which Guarantor shall be
subrogated shall be accepted by Guarantor "as is" and without any representation
or warranty of any kind by Lender, express or implied, with respect to the
legality, value, validity, or enforceability of any of such rights, or the
existence, availability, value, merchantability or fitness for any particular
purpose of any Collateral, and shall be without recourse to Lender.
6.8 In the event Lender shall, with respect to any Collateral, bid at
any foreclosure or trustee's sale or at any public or private sale permitted by
law or the
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ERLY Juice Loan Agreement, the Amended Chemonics Loan Agreement, or any of the
Loan Documents, Lender may bid all or less than the amount of the Chemonics
Obligations or the ERLY Juice Obligations, as the case may be, and the amount of
such bid need not be paid by Lender but shall be credited against such
obligations, as appropriate. The amount of the successful bid at any such sale,
whether Lender or any other party is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral being sold
thereunder, and the difference between such bid amount and the remaining balance
of the Chemonics Guaranteed Obligations or the ERLY Juice Guaranteed
Obligations, as the case may be, shall be conclusively deemed to be the amount
of the Chemonics Guaranteed Obligations or the ERLY Juice Guaranteed
Obligations, as the case may be, under this Agreement as of such time,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Lender
might otherwise be entitled but for such bidding at any such sale.
6.9 A separate action or actions may be brought and prosecuted
by Lender against Guarantor whether or not an action is brought against ERLY
Juice or Chemonics, as applicable, or whether or not ERLY Juice or Chemonics, or
any other guarantor or pledgor is joined in any such action or actions. Without
limiting the generality of the foregoing, Guarantor expressly waives the benefit
of any statute of limitation affecting the ERLY Juice Obligations, the Chemonics
Obligations, or the Secured Obligations and expressly agrees that the running of
a period of limitation on, or Lender's delay or omission in, any action by
Lender against ERLY Juice, Chemonics, or Guarantor or for the foreclosure of any
Lien or the enforcement of any security interest in the Collateral shall not
exonerate or affect Guarantor's obligation to pay and perform the Secured
Obligations, notwithstanding the effect of the running of any such period of
limitation upon Guarantor's right of subrogation, reimbursement, or indemnity,
if any, against ERLY Juice, Chemonics, or any other Person.
6.10 Guarantor hereby represents and agrees that none of the
ERLY Juice Obligations, Chemonics Obligations or Secured Obligations is consumer
debt, or was or shall be incurred by ERLY Juice, Chemonics, or Guarantor
primarily for personal, family, or household purposes. Guarantor further agrees
and represents that the ERLY Juice Obligations were incurred by ERLY Juice, that
the Chemonics Obligations were incurred by Chemonics, and the Secured
Obligations are and shall be incurred by Guarantor, for business and commercial
purposes. Guarantor agrees that any claim of Lender against Guarantor arising
out of this Agreement arises out of the conduct by Guarantor of its trade,
business, or profession.
6.11 Guarantor acknowledges that it has been provided with or
had an opportunity to review the Amended Chemonics Loan Agreement and the ERLY
Juice Loan Agreement (including the ERLY Juice Agreement) and the other Loan
Documents existing as of the date hereof, and Guarantor knowingly undertakes all
the Secured Obligations as they may be affected by such agreements and such
other
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documents as they may be now or are hereafter agreed upon by Lender and the
other parties thereto.
----------
(initialed on behalf of Guarantor)
6.12 Either before or after the Termination Date, Lender, in
such manner and upon such terms and at such time as it deems best, and with or
without notice to Guarantor, may release, add, or subordinate Guarantor or any
guarantor or endorser of Collateral or additional or substituted security for
the Chemonics Obligations, the ERLY Juice Obligations or the Secured
Obligations, notwithstanding the effect thereof on Guarantor's rights of
reimbursement, subrogation, or indemnity, if any.
7. REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Lender that:
7.1 Guarantor is the sole holder of record and the sole
beneficial owner of the Pledged Collateral, free and clear of any Lien thereon
or affecting the title thereto, except for the Lien created by this Agreement
and Allowed Encumbrances.
7.2 All of the Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable.
7.3 Guarantor has the right and requisite authority to pledge,
assign, transfer, deliver, deposit, and set over the Pledged Collateral to
Lender as provided herein.
7.4 None of the Pledged Shares has been issued or transferred
in violation of the securities registration, securities disclosure or similar
laws of any jurisdiction to which such issuance or transfer may be subject.
7.5 No consent, approval, authorization or other order of any
Person and no consent, authorization, approval, or other action by, and no
notice to or filing with, any governmental authority is required either (i) for
the pledge of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery, or performance of this Agreement by Guarantor, or (ii) for
the exercise by Lender of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to this
Agreement, except as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally.
7.6 The pledge, grant of a security interest in, and delivery
of the Pledged Collateral pursuant to this Agreement will create a valid first
priority Lien on
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and first priority perfected security interest in the Pledged Collateral and the
proceeds thereof, securing the payment of the Secured Obligations.
7.7 This Agreement has been duly executed and delivered by
Guarantor and constitutes a legal, valid, and binding obligation of Guarantor
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, or other similar laws affecting the rights of
creditors generally or by the application of general equity principles.
7.8 Guarantor has purchased the Pledged Collateral for its own
account, for investment purposes and not with a view to the distribution
thereof. Guarantor agrees that it will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate, or otherwise dispose of any of the
Pledged Collateral (or solicit any offers to buy, purchase, or otherwise acquire
or take a pledge of any of the Pledged Collateral), except in compliance with
the Securities Act of 1933, as amended (or any similar statute then in effect)
(the "Securities Act"), and the Securities Exchange Act of 1934, as amended (or
any similar statute then in effect) (the "Exchange Act"), and the rules and
regulations under the Securities Act and the Exchange Act.
The representations and warranties set forth in this Section 7
shall survive the execution and delivery of this Agreement.
8. COVENANTS. Guarantor covenants and agrees that until the
Termination Date:
8.1 Without the prior written consent of Lender, Guarantor
will not sell, assign, transfer, pledge, or otherwise encumber any of its rights
in or to the Pledged Collateral or any unpaid dividends or other distributions
or payments with respect thereto or grant a Lien in any thereof.
8.2 Guarantor will, at its own expense, promptly execute,
acknowledge, and deliver all such instruments and take all such action as Lender
from time to time may request in order to ensure to Lender the benefits of the
Liens in and to the Pledged Collateral intended to be created by this Agreement.
8.3 Guarantor will defend the title to the Pledged Collateral
and Lender's Liens thereon against the claim of any Person, and Guarantor will
maintain and preserve such Liens until such Liens are realized in accordance
with the terms hereof or until this Agreement terminates pursuant to the terms
of Section 13 hereof.
8.4 Guarantor will, upon obtaining any additional shares of
Stock of Chemonics that are not already Pledged Collateral promptly (and in any
event within three (3) Business Days) deliver to Lender such Stock, together
with a Pledge Amendment, in substantially the form of Schedule II attached
hereto (a "Pledge
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Amendment"), duly executed by Guarantor, in respect of the additional Pledged
Shares which are to be pledged pursuant to this Agreement. Guarantor hereby
authorizes Lender to attach each Pledge Amendment to this Agreement and agrees
that all Pledged Shares listed on any Pledge Amendment delivered to Lender shall
for all purposes hereunder be considered Pledged Collateral. The delivery by
Guarantor of a Pledge Amendment shall constitute a ratification by Guarantor of
the Secured Obligations and of the rights and remedies of Lender under this
Agreement.
8.5 If Guarantor proposes to transfer to any other Person,
other than to Chemonics, pursuant to Section 8.6 hereof, any of the Pledged
Collateral, Guarantor shall notify Lender in writing of the circumstances and
details of such proposed transfer and the identity of the proposed transferee.
Any such transferee must be an employee or director of Chemonics. Lender shall
take all steps reasonably necessary to allow Guarantor and the proposed
transferee, if not already a pledgor hereunder, to effect the proposed transfer;
provided, that: (a) before the proposed transfer is effected, the proposed
transferee shall deliver to Lender a Pledge Amendment, duly executed by such
proposed transferee, or such other amendments or other documents or instruments
reasonably required by Lender to make the proposed transferee a Guarantor under
this Agreement; and (b) such transfer is effected in a manner reasonably
satisfactory to Lender that ensures that Lender's Lien remains a continuously
perfected first priority security interest on the Pledged Collateral to be
transferred, subject to any Allowed Encumbrances.
8.6 If Guarantor proposes to transfer to Chemonics any of the
Pledged Collateral pledged by Guarantor under this Agreement and still subject
to Lender's Lien, Guarantor shall notify Lender in writing of the circumstances
and details of such proposed transfer. Any transfer to Chemonics by Guarantor of
any of such Pledged Collateral shall be subject to all of the following
conditions:
(a) Any Pledged Collateral that is transferred to Chemonics
must be cancelled and retired by Chemonics. If any new shares of Stock are
subsequently issued by Chemonics with respect to any Pledged Collateral that is
cancelled and retired in accordance with the previous sentence, then such shares
of Stock shall be subject to the following restrictions: (i) such Stock may only
be issued to an employee or director of Chemonics; and (ii) before such Stock
may be issued, the proposed recipient, if not already a Guarantor hereunder,
shall execute such amendments or other documents or instruments reasonably
required by Lender to make the proposed transferee a Guarantor under this
Agreement; and
(b) Any such transfer to Chemonics and reissuance by Chemonics
of such Pledged Collateral must be effected in a manner reasonably satisfactory
to Lender and that ensures that Lender's Lien remains a continuously perfected
first priority security interest in the Pledged Collateral, subject to any
Allowed Encumbrances.
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8.7 Guarantor will, and will cause each of its Subsidiaries
to, pay and discharge, as the same may become due and payable, all Federal,
state, and local taxes, assessments, and other governmental charges or levies
against or on any of its property, as well as claims of any kind which, if
unpaid, might become a Lien upon any one of its properties; provided, however,
that the foregoing shall not require Guarantor or any Subsidiary to pay or
discharge any such tax, assessment, charge, levy, or Lien so long as it shall
contest the validity thereof in good faith by appropriate proceedings and shall
set aside on its books adequate reserves in accordance with GAAP with respect
thereto.
9. DEFAULTS AND REMEDIES.
9.1 The occurrence of any one or more of the following events
shall constitute an "Event of Default" hereunder (regardless of the reason
therefor):
(a) An Event of Default (as defined in the ERLY Juice Loan Agreement or
as defined in the Amended Chemonics Loan Agreement) occurs and is continuing;
(b) Any representation or warranty of Guarantor made under this
Agreement is breached, or proves to be untrue or incorrect in any material
respect as of the date made or deemed made;
(c) Guarantor fails or neglects to perform, keep or observe any other
provision of this Agreement, the Amended Chemonics Loan Agreement, or of any of
the other Loan Documents (as "Loan Documents" is defined in the Amended
Chemonics Loan Agreement), and the same shall remain unremedied for a period
ending on the first to occur of 30 days after Guarantor, ERLY Juice, and
Chemonics shall receive written notice of any such failure from Lender or 30
days after Guarantor shall become aware thereof;
(d) Any of the assets of Guarantor are attached, seized, levied upon or
subjected to a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian, or assignee for the benefit of creditors of
Guarantor, which writ, warrant, or other procedure shall remain unstayed or
undismissed for thirty (30) consecutive days; or any Person shall apply for the
appointment of a receiver, trustee, or custodian for any of the assets of
Guarantor and such application or proceeding shall remain unstayed or
undismissed for thirty (30) consecutive days; or Guarantor shall have concealed,
removed, or permitted to be concealed or removed, any part of its property, with
intent to hinder, delay, or defraud its creditors or any of them, or made or
suffered a transfer of any of its property or the incurring of an obligation
which would be fraudulent under any bankruptcy, fraudulent conveyance, or other
similar law;
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(e) A case or proceeding shall have been commenced against Guarantor in
a court having competent jurisdiction seeking a decree or order in respect of
Guarantor (i) under the Bankruptcy Code, or any other applicable Federal, state,
or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee, or sequestrator (or similar official)
of Guarantor or of any substantial part of its properties, or (iii) ordering the
winding-up or liquidation of the affairs of Guarantor, and such case or
proceeding shall remain undismissed or unstayed for thirty (30) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding; or
(f) Guarantor shall (i) file a petition seeking relief under the
Bankruptcy Code, or any other applicable Federal, state, or foreign bankruptcy
or other similar law, (ii) consent to the institution of proceedings thereunder
or to the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee, or
sequestrator (or similar official) of Guarantor or of any substantial part of
its properties, or (iii) fail generally to pay its debts as such debts become
due.
9.2 Upon the occurrence and during the continuance of an Event
of Default, Lender (personally or through an agent) is hereby authorized and
empowered to (i) transfer and register in its name or in the name of its nominee
the whole or any part of the Pledged Collateral (ii) exchange certificates or
instruments representing or evidencing Pledged Shares for certificates or
instruments of smaller or larger denominations, (iii) exercise the voting rights
with respect thereto, (iv) collect and receive all cash dividends and other
distributions made thereon, (v) sell in one or more sales if such notice
includes notice of the time and place of any public sale or of the time after
which a private sale is to take place (which notice Guarantor agrees is
commercially reasonable), but without any previous notice or advertisement, the
whole or any part of the Pledged Collateral, and (vi) otherwise act with respect
to the Pledged Collateral as though Lender was the outright owner thereof,
Guarantor hereby irrevocably constituting and appointing Lender as the proxy and
attorney-in-fact of Guarantor, with full power of substitution to do so;
provided, that Lender shall not have any duty to exercise any such right or to
preserve the same and shall not be liable for any failure to do so or for any
delay in doing so. Any sale shall be made at a public or private sale at
Lender's place of business, or at any public building in the City of Los Angeles
or elsewhere to be named in the notice of sale, either for cash or upon credit
or for future delivery at such price as Lender may deem fair, and Lender may be
the purchaser of the whole or any part of the Pledged Collateral so sold and
hold the same thereafter in its own right free from any claim of Guarantor or
any right of redemption. Each sale shall be made to the highest bidder, but
Lender reserves the right to reject any and all bids at such sale which, in its
discretion, it shall deem inade- quate. Demands of performance, except as
otherwise herein specifically provided for, notices of sale, advertisements, and
the presence of property at sale are hereby
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waived and any sale hereunder may be conducted by an auctioneer or any officer
or agent of Lender.
9.3 If, at the original time or times appointed for the sale
of the whole or any part of the Pledged Collateral, the highest bid shall be
inadequate to discharge in full all the Secured Obligations if there be but one
sale, or if the Pledged Collateral be offered for sale in lots, if at any of
such sales, the highest bid for the lot offered for sale would indicate to
Lender, in its discretion, the unlikelihood of the proceeds of the sales of the
whole of the Pledged Collateral being sufficient to discharge all the Secured
Obligations, Lender may, on one or more occasions and in its discretion,
postpone any of said sales by public announcement at the time of sale or the
time of previous postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being hereby waived;
provided, that any sale or sales made after such postponement shall be after
five (5) days' notice to Guarantor.
9.4 If, at any time when Lender in its sole discretion
determines, following the occurrence and during the continuance of an Event of
Default, that, in connection with any actual or contemplated exercise of its
rights (when permitted under this Section 9) to sell the whole or any part of
the Pledged Collateral hereunder, it is necessary or advisable to effect a
public registration of all or part of the Pledged Collateral pursuant to the
Securities Act, Guarantor shall, in an expeditious manner, to the extent
Guarantor has authority or the right to, cause Chemonics to take, and if
Guarantor cannot cause Chemonics to take, then Guarantor must cooperate with
Chemonics in taking, any and all steps necessary to effect a registration of all
or any portion of the Pledged Collateral.
9.5 If, at any time when Lender shall determine to exercise
its rights to sell the whole or any part of the Pledged Collateral hereunder,
such Pledged Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Act, then Lender may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as Lender may deem necessary or advisable, but subject to the
other requirements of this Section 9, and shall not be required to effect such
registration or cause the same to be effected. Without limiting the generality
of the foregoing, in any such event Lender may, in its discretion, (a) in
accordance with applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Collateral or part thereof could be or shall have been filed under
the Securities Act (or similar statute), (b) approach and negotiate with a
single possible purchaser to effect such sale, and (c) restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Pledged Collateral or part thereof. In addition to a private sale as
provided above in this Section 9, if any of
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the Pledged Collateral shall not be freely distributable to the public without
registration under the Securities Act (or similar statute) at the time of any
proposed sale pursuant to this Section 9, then Lender shall not be required to
effect such registration or cause the same to be effected but, in its discretion
(subject only to applicable requirements of law), Lender may require that any
sale hereunder (including a sale at auction) be conducted subject to
restrictions (i) as to the financial sophistication and ability of any Person
permitted to bid or purchase at any such sale, (ii) as to the content of legends
to be placed upon any certificates representing the Pledged Collateral sold in
such sale, including restrictions on future transfer thereof, (iii) as to the
representations required to be made by each Person bidding or purchasing at such
sale relating to that Person's access to financial information about Chemonics
and Guarantor and such Person's intentions as to the holding of the Pledged
Collateral so sold for investment, for its own account, and not with a view to
the distribution thereof, and (iv) as to such other matters as Lender may, in
its discretion, deem necessary or appropriate in order that such sale
(notwithstanding any failure to so register) may be effected in compliance with
the Bankruptcy Code and other laws affecting the enforcement of creditors'
rights and the Securities Act and all applicable state securities laws.
Guarantor agrees that a sale of Pledged Collateral held or to be held in
accordance with the foregoing provisions shall be a commercially reasonable
disposition of such Pledged Collateral.
9.6 Guarantor acknowledges that, notwithstanding the legal
availability of a private sale or a sale subject to the restrictions described
above in Section 9.5, Lender may, in its discretion, elect to register any or
all of the Pledged Collateral under the Securities Act (or any applicable state
securities law) in accordance with Lender's rights hereunder. Guarantor,
however, recognizes that Lender may be unable, and in any event shall be under
no obligation, to effect a registration or public sale of any or all the Pledged
Collateral and may elect, in Lender's sole discretion, to resort to one or more
private sales thereof. Guarantor also acknowledges that any such private sale
may result in prices and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner. Lender shall not be under any obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the registrant to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if Chemonics or Guarantor would agree to
do so.
9.7 Guarantor agrees that following the occurrence and during
the continuance of an Event of Default it will not at any time plead, claim or
take the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the
enforcement of this Agreement or the absolute sale of the whole or any part of
the Pledged Collateral or the possession thereof by any purchaser at any sale
hereunder, and Guarantor waives the benefit of all such laws to the extent it
lawfully may do so. Guarantor agrees that it will not
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interfere with any right, power, or remedy of Lender provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by Lender of any one or
more of such rights, powers, or remedies. No failure or delay on the part of
Lender to exercise any such right, power, or remedy and no notice or demand
which may be given to or made upon Guarantor by Lender with respect to any such
remedies shall operate as a waiver thereof, or limit or impair Lender's right to
take any action or to exercise any power or remedy hereunder, without notice or
demand, or prejudice its rights against Guarantor in any respect.
10. APPLICATION OF PROCEEDS. Any cash held by Lender as Pledged
Collateral and all cash proceeds received by Lender in respect of any sale of,
liquidation of, or other realization upon all or any part of the Pledged
Collateral shall be applied by Lender as follows:
10.1 First, to the payment of the costs and expenses of such
sale, including reasonable compensation to Lender and its agents and counsel,
and all expenses, liabilities, and advances made or incurred by Lender in
connection therewith;
10.2 Next, to the payment of the Secured Obligations (and
Lender may apply the Pledged Collateral and such proceeds to the Chemonics
Guaranteed Obligations, the ERLY Juice Guaranteed Obligations, and the other
Secured Obligations in any order in which Lender in its sole discretion shall
determine); and
10.3 Finally, after payment in full of all Secured
Obligations, and subject to Section 9504(1)(c) of the California Commercial
Code, to the payment of Guarantor, or its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
11. WAIVER. No failure or delay on Lender's part in exercising any
power of sale, Lien, option or other right, power or remedy hereunder, and no
notice or demand which may be given to or made upon Guarantor by Lender with
respect to any power of sale, Lien, option or other right, power or remedy
hereunder, shall constitute a waiver thereof, or limit or impair Lender's right
to take any action or to exercise any power of sale, Lien, option, or any other
right, power or remedy hereunder, without notice or demand, or prejudice
Lender's rights as against Guarantor in any respect.
12. ASSIGNMENT. Lender may assign, endorse or transfer any instrument
evidencing all or any part of the Chemonics Obligations, the ERLY Juice
Obligations or the Secured Obligations and the holder of such instrument shall
be entitled to the benefits of this Agreement.
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13. TERMINATION. Immediately following the Termination Date, unless the
Pledged Collateral secures other obligations in favor of Lender, Lender shall
deliver to Guarantor the Pledged Collateral at the time subject to this
Agreement and all instruments of assignment executed in connection therewith,
free and clear of the Liens hereof. Except as otherwise provided herein, all of
Guarantor's obligations hereunder shall terminate on the Termination Date.
Immediately following the Termination Date, unless the Pledged Collateral
secures other obligations in favor of Lender, Lender shall deliver to Guarantor
the Pledged Collateral at the time subject to this Agreement and all instruments
of assignment executed in connection therewith, free and clear of the Liens
hereof. Except as otherwise provided herein, all of Guarantor's obligations
hereunder shall terminate on the Termination Date.
14. LIEN ABSOLUTE. All rights of Lender hereunder, and all obligations
of Guarantor hereunder, shall be absolute and unconditional and shall remain in
full force and effect without regard to, and shall not be impaired or affected
by, or deemed to be satisfied by, and neither Guarantor nor any Pledged
Collateral shall be exonerated, discharged, or released by, any of the following
events:
14.1 Lender's exercise or enforcement of or failure or delay
in exercising or enforcing any legal proceedings to collect the ERLY Juice
Obligations, the Chemonics Obligations, or the Secured Obligations or any power,
right, or remedy with respect to the ERLY Juice Obligations, the Chemonics
Obligations, or the Secured Obligations or the Collateral or Pledged Collateral,
including, but not limited to, any action or inaction of Lender to perfect,
protect, or enforce any security interest in any Collateral, any impairment or
suspension of any Collateral, Lender's compromise, exchange, release,
settlement, amendment, or waiver with or of ERLY Juice, Chemonics, or any other
Person, or the Collateral or Pledged Collateral, or any change in the time,
manner, or place of payment of, or in any other term of, all or any part of the
ERLY Juice Obligations, Chemonics Obligations, or Secured Obligations, or any
other amendment, impairment, renunciation, cancellation, surrender, suspension,
or waiver of the ERLY Juice Loan Agreement, the Amended Chemonics Loan
Agreement, any other Loan Document, or any other agreement or instrument
governing or evidencing any of the ERLY Juice Obligations, Chemonics
Obligations, or Secured Obligations;
14.2 Insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition, assignment for the benefit of creditors, appointment of
a receiver or trustee for all or any significant part of the assets of ERLY
Juice, Chemonics or Guarantor, or the liquidation, winding up, or dissolution of
ERLY Juice, Chemonics, or Guarantor or any other guarantor of the ERLY Juice
Obligations or the Chemonics Obligations;
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14.3 Any limitation, discharge, cessation, or partial
satisfaction of all or any portion of the ERLY Juice Obligations or the
Chemonics Obligations, the liability of any other guarantor of all or any
portion of the ERLY Juice Obligations, the Chemonics Obligations, or the Secured
Obligations, whether by operation of any statute, regulation, or rule of law, or
otherwise, regardless of the intervention or omission of Lender, except payment
and performance in full of the ERLY Juice Obligations, the Chemonics
Obligations, or the Secured Obligations, or any invalidity, voidability,
unenforceability, or irregularity, or future change to or amendment of, in whole
or in part, this Agreement, the ERLY Juice Loan Agreement, the Amended Chemonics
Loan Agreement, any other Loan Document, or any other agreement or instrument
evidencing any ERLY Juice Obligations, Chemonics Obligations, or Secured
Obligations;
14.4 Any merger, acquisition, consolidation, or change in
structure of ERLY Juice or Chemonics; or any sale, lease, transfer, or other
disposition of any or all of the assets of ERLY Juice, Chemonics, Guarantor, or
any other guarantor of the ERLY Juice Obligations or the Chemonics Obligations;
14.5 Any assignment, endorsement, or other transfer, in whole
or in part, of Lender's interest in the ERLY Juice Obligations, the Chemonics
Obligations, the Secured Obligations, or the Collateral or Pledged Collateral;
14.6 Any claim, defense, counterclaim, or setoff, other than
(i) any defense of prior performance, or (ii) any defense based on any
applicable provision of the California Commercial Code requiring that the
Collateral and the Pledged Collateral be disposed of in a commercially
reasonable manner, which ERLY Juice, Chemonics, Guarantor, or any other
guarantor of the ERLY Juice Obligations or Chemonics Obligations may have or
assert, including any defense of incapacity, disability, or lack of corporate or
other authority to execute any documents relating to the ERLY Juice Obligations,
the Chemonics Obligations, the Secured Obligations, the Collateral, the Pledged
Collateral or any other guaranty of the ERLY Juice Obligations or the Chemonics
Obligations;
14.7 Lender's vote, claim, distribution, election, acceptance,
action, or inaction in any bankruptcy or reorganization case related to the
Collateral, the ERLY Juice Obligations, the Chemonics Obligations, the Secured
Obligations, or the Pledged Collateral;
14.8 Any cancellation, renunciation, or surrender of any
pledge or any other debt instrument evidencing the ERLY Juice Obligations, the
Chemonics Obligations, or the Secured Obligations; or
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14.9 Any other action or circumstance which might otherwise
constitute a defense available to, or a legal or equitable discharge of, any
surety, guarantor, or Guarantor.
15. INDEMNIFICATION. Guarantor agrees to indemnify and hold Lender
harmless from and against any taxes, liabilities, claims and damages, including
reasonable attorneys' fees and disbursements, and other expenses incurred or
arising by reason of the taking or the failure to take action by Lender, in good
faith, in respect of any transaction effected under this Agreement or in
connection with the Lien provided for herein, including, without limitation, any
taxes payable in connection with the delivery or registration of any of the
Pledged Collateral as provided herein. The obligations of Guarantor under this
Section 15 shall survive the termination of this Agreement but shall be subject
to the limitations regarding recourse set forth in Section 4 hereof.
16. REINSTATEMENT. This Agreement shall remain in full force and effect
and continue to be effective if at any time payment and performance of the ERLY
Juice Obligations, the Chemonics Obligations, or the Secured Obligations, or any
part thereof, is, pursuant to applicable law, avoided, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the ERLY
Juice Obligations, the Chemonics Obligations, or the Secured Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is avoided, rescinded, reduced, restored, or
returned, the ERLY Juice Obligations, the Chemonics Obligations, or the Secured
Obligations, as the case may be, shall be reinstated and deemed reduced only by
such amount paid and not so avoided, rescinded, reduced, restored, or returned.
17. SUBORDINATION. Except as otherwise provided in this Section 17, any
Indebtedness (as defined in the Amended Chemonics Loan Agreement) of ERLY Juice
or Chemonics or any Subsidiary of either of them now or hereafter owing to
Guarantor is hereby subordinated to all obligations of ERLY Juice or Chemonics
to Lender heretofore, now or hereafter created, whether before or after notice
of termination hereof, and without the prior consent of Lender shall not be paid
in whole or in part nor will Guarantor accept any payment of or on account of
any such indebtedness at any time while Guarantor remains liable under this
Agreement. At the request of Lender, ERLY Juice or Chemonics shall pay to Lender
all or any part of such subordinated indebtedness and any amount so paid to
Lender at its request shall be applied to payment of the ERLY Juice Obligations
or the Chemonics Obligations, as applicable. Any payment to Guarantor received
in violation of any of the provisions hereof shall be deemed to have been
received by Guarantor as trustee for Lender and shall be paid over to Lender
immediately on account of the ERLY Juice Obligations or the Chemonics
Obligations, as appropriate, but without otherwise affecting in any manner
Guarantor's liability under any of the provisions of this Agreement. Guarantor
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agrees to file all claims against ERLY Juice or Chemonics in any bankruptcy or
other proceeding in which the filing of claims is required by law in respect of
any indebtedness of ERLY Juice or Chemonics to Guarantor, and Lender shall be
entitled to all of Guarantor's rights thereunder. If for any reason Guarantor
fails to file such claim at least thirty (30) days prior to the last date on
which such claim should be filed, Lender, as Guarantor's attorney-in-fact, is
hereby authorized to do so in Guarantor's name or, in Lender's discretion, to
assign such claim to and cause proof of claim to be filed in the name of
Lender's nominee. In all such cases, whether in administration, bankruptcy or
otherwise, the person or persons authorized to pay such claim shall pay to
Lender the full amount payable on the claim in the proceeding, and to the full
extent necessary for that purpose Guarantor hereby assigns to Lender all
Guarantor's rights to any payments or distributions to which Guarantor otherwise
would be entitled. If the amount so paid is greater than Guarantor's liability
hereunder, Lender will pay the excess amount to the party entitled thereto.
Notwithstanding the foregoing, (i) so long as no Event of Default has occurred
and is continuing, Guarantor may, on or before December 15, 1994, be paid up to
the aggregate sum of $100,000 by Chemonics on account of Chemonics's now
existing Indebtedness to Guarantor, and (ii) from and after the time at which
the Chemonics Obligations have been paid in full, this Section 17 shall not
apply to payments from Chemonics to Guarantor.
18. MISCELLANEOUS.
18.1 Lender may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its duties hereunder.
18.2 Neither Lender nor any of its officers, directors,
employees, agents, or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own respective gross negligence or willful misconduct.
18.3 This Agreement shall be binding upon Guarantor and the
successors and assigns of Guarantor, and shall inure to the benefit of, and be
enforceable by, Lender and its successors and assigns, and none of the terms or
provisions of this Agreement may be waived, altered, modified, or amended except
in writing duly signed on behalf of Lender and Guarantor.
18.4 This Agreement shall constitute the complete agreement
between the parties with respect to the subject matter hereof.
19. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. THIS
AGREEMENT AND ALL OBLIGATIONS ARISING HEREUNDER SHALL IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
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ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT
AND OTHER PROCESS ISSUED IN ANY LEGAL ACTION OR SUIT TO COLLECT THE SECURED
OBLIGATIONS OR TO REALIZE ON THE PLEDGED COLLATERAL, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF LENDER AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO GUARANTOR AT THE ADDRESS SET FORTH BELOW THE SIGNATURES HERETO AND
THAT SERVICE SO MADE SHALL BE DEEDED COMPLETED UPON THE EARLIER OF GUARANTOR'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
20. SEVERABILITY. If for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid.
21. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and two (2)
days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon transmission,
when sent by telecopy or other similar facsimile transmission (with such
telecopy or facsimile confirmed by telecopy answerback) or by delivery of a copy
by personal delivery, (c) one (1) Business Day after deposit with a reputable
overnight courier with all charged prepaid or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number indicated below or to such
other address (or facsimile number) as may be substituted by notice given as
provided herein. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Failure or delay in
delivering copies of any notice, demand, request, consent, approval, declaration
or other communication to the persons designated below to receive copies shall
in no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
22. FURTHER ASSURANCES. Guarantor agrees, upon the written request of
Lender, to execute and deliver to Lender, from time to time, any additional
instruments or documents reasonably considered necessary by Lender to cause this
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Agreement and the Secured Obligations to be, become, or remain valid and
effective, and to cause Lender's security interest in the Pledged Collateral to
be, become, or remain duly perfected.
23. SECTION TITLES. The section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.
24. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts which shall, collectively and separately, constitute one
agreement.
25. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, BETWEEN LENDER AND GUARANTOR ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS
HEREUNDER.
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Guaranty and Pledge Agreement to be duly executed as of the
date first written above.
ERLY INDUSTRIES, INC.
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
Address: 10990 Wilshire Boulevard
Los Angeles, California 90024
Attention: Kurt Grey,
Vice President
Facsimile No.: (310) 473-8890
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with a copy to:
Magnus, Epman & Dwyer
300 Corporate Pointe, Suite 310
Culver City, CA 90230-7614
Attn: Ronald J. Epman, Esq.
Facsimile No.: (310) 216-0701
[SIGNATURES CONTINUED]
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[SIGNATURES CONTINUED]
ACCEPTED AS OF NOVEMBER 18, 1994:
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
By: /s/ MICHAEL W. ADLER
Name: Michael W. Adler
Title: Vice President
Address: 333 South Grand Avenue, Suite 3000
Los Angeles, CA 90071
Attention: Gil Kirkpatrick
Facsimile No.: (213) 687-7324
with copies to:
Murphy, Weir & Butler
2049 Century Park East, 21st Floor
Los Angeles, CA 90067
Attention: N. Dwight Cary, Esq.
Telecopy No.: (310) 788-3777
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ACKNOWLEDGMENT BY ERLY JUICE
ERLY Juice Inc. acknowledges and agrees to be bound by
the terms of this Amended and Restated Guaranty and Pledge Agreement.
ERLY JUICE INC.
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
Address: 16825 Northchase Drive., Suite 1600
Houston, Texas 77060
Attention: Douglas A. Murphy
President & Chief Executive Officer
Facsimile No.: (713) 876-3624
ACKNOWLEDGMENT BY CHEMONICS INDUSTRIES, INC.
Chemonics Industries, Inc. ("Chemonics") acknowledges and
agrees to be bound by the terms of this Amended and Restated Guaranty and Pledge
Agreement (the "Agreement"). Without limiting the generality of the foregoing,
Chemonics agrees to cancel and retire any and all Pledged Shares which are
repurchased or otherwise received from Guarantor, and agrees that any issuance
of new shares after the date of the Agreement shall be subject to the
restrictions set forth in Section 8.6 hereof.
CHEMONICS INDUSTRIES, INC.
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
Address: 734 E. Southern Pacific Dr.
Phoenix, Arizona 85034
Attention: Gerald Murphy
Facsimile No.: (602) 254-9685
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SCHEDULE I
This Schedule I is attached to and forms a part of that
certain Amended and Restated Guaranty and Pledge Agreement dated as of November
18, 1994 by ERLY Industries, Inc., as Guarantor, to Internationale Nederlanden
(U.S.) Capital Corporation, as Lender and pledgee.
Class of Certificate Number
Stock No(s) of Shares
Common 1 500
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SCHEDULE II
Attached to and forming a part of that certain Amended and Restated
Guaranty and Pledge Agreement dated as of November 18, 1994 between ERLY
Industries Inc., a California corporation as Guarantor in favor of
Internationale Nederlanden (U.S.) Capital Corporation as Lender and pledgee.
PLEDGE AMENDMENT
This Pledge Amendment, dated ________________, 19__, is delivered
pursuant to Section [8.4] [8.5] of the Amended and Restated Guaranty and Pledge
Agreement dated as of November 18, 1994 between ERLY Industries Inc., a
California corporation in favor of Internationale Nederlanden (U.S.) Capital
Corporation (the "Guaranty Agreement"). The undersigned hereby agrees that (a)
this Pledge Amendment may be attached to the Guaranty Agreement, (b) by
executing this Pledge Amendment it shall become a "Guarantor" under the Guaranty
Agreement, and (c) the Pledged Shares listed on this Pledge Amendment shall be
and become a part of the Pledged Collateral and shall secure all of the Secured
Obligations (as defined in the Guaranty Agreement). The undersigned hereby
represents and warrants that it has reviewed the Loan Documents (as defined in
the Guaranty Agreement) and agrees to comply with and be bound by all of the
terms and conditions of the Guaranty Agreement.
[Name of Guarantor]
By:______________________________
Title:
Name and
Address of Class of Certificate Number of
Guarantor Stock No(s) Shares
32
3.6
FIRST AMENDMENT TO AMENDED AND
RESTATED GUARANTY AND PLEDGE AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED GUARANTY AND
PLEDGE AGREEMENT (this "Parent Guaranty Amendment"), dated as of February 16,
1995, is made by ERLY INDUSTRIES INC., a California corporation ("Guarantor"),
in favor of INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation, successor in interest to Internationale Nederlanden Bank N.V., New
York Branch (formerly known as NMB Postbank Groep nv, New York Branch (formerly
known as Nederlandsche Middenstandsbank nv, New York Branch)) ("Lender").
RECITALS
A. Guarantor and Lender entered into that certain Amended and Restated
Guaranty and Pledge Agreement (the "Parent Guaranty"), dated as of November 18,
1994. Capitalized terms used but not defined herein are used as defined in the
Parent Guaranty.
B. Pursuant to the Parent Guaranty, among other things, Guarantor (i)
guarantied the payment and performance of the ERLY Juice Obligations, with full
recourse against Guarantor on and after December 21, 1994, (ii) guarantied the
payment and performance of the Chemonics Obligations, and (iii) pledged its
Stock of Chemonics to secure such guaranties.
C. On December 21, 1994, the ERLY Juice Obligations became due and
payable and the recourse obligations of Guarantor pursuant to the Parent
Guaranty became effective. The ERLY Juice Obligations remain due and payable.
D. Guarantor has requested that Lender, among other things, agree to
extend the due date of the ERLY Juice Obligations and modify certain provisions
regarding applicable interest obligations with respect thereto, and in
connection therewith Lender, Guarantor, and ERLY Juice, among others, are
entering into that certain Loan Extension Agreement of even date herewith (the
"Loan Extension Agreement"), and Lender and ERLY Juice are entering into that
certain Amended and Restated Loan Agreement of even date herewith (the "Amended
Loan Agreement"), which amends and restates the ERLY Juice Loan Agreement (as
defined in the Parent Guaranty). Lender's agreement to enter into such
agreements and the other Related Documents (as defined in the Loan Extension
Agreement) is subject to, among other things, Guarantor's execution and delivery
of this Parent Guaranty Amendment.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the receipt and adequacy of which are hereby
acknowledged, and to induce Lender to enter into the Loan Extension Agreement,
the Amended Loan Agreement, and the other Related Documents, it is agreed as
follows:
1. ACKNOWLEDGEMENT. Guarantor hereby acknowledges, confirms, and
ratifies its obligations under the Parent Guaranty, as amended hereunder.
2. AMENDMENT TO THE PARENT GUARANTY.
(a) The definition of "ERLY Juice Loan Agreement" in Section 1
of the Parent Guaranty is deleted in its entirety and the following is
substituted in its place:
"ERLY Juice Loan Agreement" means the Amended and Restated Loan
Agreement between ERLY Juice and Lender dated as of February 16, 1995,
as the same may be subsequently amended.
(b) Section 6.2 of the Parent Guaranty is hereby amended
by inserting the following at the end thereof:
In addition, Guarantor waives all rights and defenses arising out of an
election of remedies by Lender, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a
guaranteed obligation, has destroyed Guarantor's rights of subrogation
and reimbursement against the principal by the operation of CCP Section
580d or otherwise.
3. PRIORITY OF GUARANTIES
Guarantor hereby represents, warrants, covenants and agrees
that its obligations to Lender under the Parent Guaranty (as amended hereby) (i)
are "Senior Indebtedness," as such term is defined in that certain Indenture
dated as of December 1, 1978 by and between Guarantor's predecessor in interest
ERLY California Industries Inc. and J. Henry Schroder Bank & Trust Company as
Trustee, having priority in right of payment to the Debentures (as defined in
such Indenture), (ii) are "Senior Indebtedness," as such term is defined in that
certain Indenture dated as of December 1, 1993 by and between Guarantor and
Trust Company of Texas as Trustee, having priority in right of payment to the
Debentures (as defined in such Indenture), and (iii) are and will have priority
in right of payment to any other now existing or hereafter incurred subordinated
obligations of the Guarantor to any other Person.
2
<PAGE>
4. AFFIRMATION OF PARENT PLEDGE. Parent and Lender entered into that
certain ERLY Pledge Agreement dated as of September 26, 1988 (the "ERLY Pledge
Agreement"), pursuant to which Parent, the sole stockholder of ERLY Juice,
pledged its stock of ERLY Juice to secure the Secured Obligations (as defined
therein). Parent hereby (i) reaffirms the terms of the ERLY Pledge Agreement,
(ii) acknowledges that all references in the ERLY Pledge Agreement to the "Loan
Agreement" shall mean the Amended Loan Agreement, as the same may be amended,
modified, or supplemented, and (iii) acknowledges that the Secured Obligations,
as defined in the ERLY Pledge Agreement, include (a) all obligations of ERLY
Juice under the Amended Loan Agreement, as the same may be amended, modified, or
supplemented, and (b) all other obligations of Parent under the ERLY Pledge
Agreement.
5. ENTIRE AGREEMENT. This Parent Guaranty Amendment, together with the
Loan Extension Agreement and the Related Documents (as defined therein), is the
entire agreement between the parties hereto with respect to the subject matter
hereof. This Parent Guaranty Amendment supersedes all prior and contemporaneous
oral and written agreements and discussions with respect to the subject matter
hereof. Except as otherwise expressly modified herein, the Parent Guaranty shall
remain in full force and effect.
6. MISCELLANEOUS.
(a) Counterparts. This Parent Guaranty Amendment may be
executed in identical counterpart copies, each of which shall be an original,
but all of which shall constitute one and the same agreement.
(b) Headings. Section headings used herein are for convenience
of reference only, are not part of this Parent Guaranty Amendment, and are not
to be taken into consideration in interpreting this Parent Guaranty Amendment.
(c) Recitals. The recitals set forth at the beginning of this
Parent Guaranty Amendment are true and correct, and such recitals are
incorporated into and are a part of this Parent Guaranty Amendment.
(d) Governing Law. This Parent Guaranty Amendment shall be
governed by, and construed and enforced in accordance with, the laws of the
State of California applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws.
(e) Effect. Upon the effectiveness of this Parent Guaranty
Amendment, on and after the date hereof, each reference in the Parent Guaranty
to "this Agreement," "hereunder," "hereof" or words of like import shall mean
and be a reference to the Parent Guaranty as amended hereby and each reference
in the other
3
<PAGE>
Loan Documents to the Parent Guaranty, "thereunder," "thereof," or words of like
import shall mean and be a reference to the Parent Guaranty as amended hereby.
(f) Conflict of Terms. In the event of any inconsistency
between the provisions of this Parent Guaranty Amendment and any provision of
the Parent Guaranty, the terms and provisions of this Parent Guaranty Amendment
shall govern and control.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Amended and Restated Guaranty and Pledge Agreement to be duly
executed as of the date first written above.
ERLY INDUSTRIES, INC.
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
ACCEPTED AS OF FEBRUARY 16, 1995:
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
By: /s/ MICHAEL W. ADLER
Name: Michael W. Adler
Title: Vice President
[SIGNATURES CONTINUED]
4
<PAGE>
[SIGNATURES CONTINUED]
ACKNOWLEDGMENT BY ERLY JUICE
ERLY Juice Inc. acknowledges and agrees to be bound by the
terms of the Amended and Restated Guaranty and Pledge Agreement, as amended by
the First Amendment to Amended and Restated Guaranty and Pledge Agreement.
ERLY JUICE INC.
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
ACKNOWLEDGMENT BY CHEMONICS INDUSTRIES, INC.
Chemonics Industries, Inc. ("Chemonics") acknowledges and
agrees to be bound by the terms of the Amended and Restated Guaranty and Pledge
Agreement, as amended by the First Amendment to Amended and Restated Guaranty
and Pledge Agreement (the "Agreement"). Without limiting the generality of the
foregoing, Chemonics reaffirms its agreement to cancel and retire any and all
Pledged Shares which are repurchased or otherwise received from Guarantor, and
agrees that any issuance of new shares after the date of the Agreement shall be
subject to the restrictions set forth in Section 8.6 thereof.
CHEMONICS INDUSTRIES, INC.
By: /s/ KURT GREY
Name: Kurt Grey
Title: Vice President
5
March 16, 1993
ERLY Industries Inc.
10990 Wilshire Boulevard
Las Angeles, California
Re: ERLY Juice Inc.
Gentlemen:
Please refer to the $24,250,000 loan agreement dated as of September
26, 1988 between ERLY Juice Inc., as the Borrower, and Internationale
Nederlanden Bank N.V. (formerly known as Nederlansdsche Middenstandsbank nv), as
the Bank, as the same has been amended prior to the date hereof (as so amended,
the "Loan Agreement"). Capitalized terms used in this letter and not otherwise
defined shall have the meanings ascribed thereto in the Loan Agreement.
As you know, various Events of Default now exist under the Loan
Agreement. As of the date hereof, no waiver, consent or forbearance of any kind
is now in effect with respect to any such Event of Default. The Bank has no
obligation to make any further Loans under the Loan Agreement.
We have had discussions with you concerning tho Loan Agreement and
various related matters, and we have reached an agreement concerning the terms
on which the is willing to restructure the Borrower's obligations under the Loan
Agreement. After each of the Parties hereto has signed this letter, this letter
agreement shall constitute a binding agreement among the parties hereto. Except
as modified hereby, the terms of the Loan Agreement and all other Loan Documents
shall remain in full force and effect.
We have reached an understanding concerning the following matters:
1. The Borrower agrees to execute a definitive asset sale
agreement for the sale of the Borrower's juice processing
facility in Lakeland, Florida (the "Lakeland Facility") on or
before March 31, 1993. On or before April 30, 1993, the Borrower
shall receive not less than $12,000,000 in net cash proceeds from
the sale of the Lakeland Facility, all of which shall be
immediately applied to the repayment of the Obligations. In
<PAGE>
ERLY Industries Inc.
March 16, 1993
Page 2
addition, on or before April 30, 1993, the Borrower shall, subject to ING Bank
providing the financing referred to in this paragraph, have consummated a sale
of its orange juice concentrate inventory for net cash proceeds of not less than
$4,200,000, all of which shall be immediately applied to the repayment of the
Obligations, provided that the Bank understands that, in the event Sunray Farms
is the purchaser of such concentrate inventory, the Bank will consider providing
financing for such purchase on terms acceptable to the Bank (including, without
limitation, compliance with any applicable bulk sales laws).
2. You shall cause Chemonics Industries Inc. ("Chemonics") to use its
best efforts to consummate, as promptly as possible, a sale of its consulting
division for net cash proceeds of not less than $15,000,000, $9,000,000 of which
shall immediately be used to repay in full all obligations of Chemonics to the
Bank (and to terminate the Banks commitment to Chemonics) and $6,000,000 of
which shall immediately be applied to the repayment of the Obligations.
3. The Borrower shall use its best efforts to arrange, as promptly as
possible, for a working capital credit facility with a third party lender on
terms and conditions reasonably satisfactory to the Bank (the "Working Capital
Facility"). The Working Capital Facility may be secured by the Borrower's
Accounts and Inventory and shall provide for revolving credit loans to the
Borrower in an aggregate principal amount of not less than $5,000,000. Not less
than 70% of the maximum amount available under the Working Capital Facility
shall be borrowed upon the closing thereof and applied by the Borrower to the
repayment of the Obligations.
4. When the Working Capital Facility becomes effective, the Bank will
release its lien on all Inventory and Accounts of the Borrower. Upon the sale of
the Lakeland Facility and the orange juice concentrate inventory, Bank will
release its lien on such assets. Thereafter, all Obligations will be secured by
all remaining real and personal property of the Borrower (including, without
limitation, all trademarks of the Borrower), as well as all third party
collateral pledged to the Bank under the Loan Documents.
5. In addition to the repayments of the Borrower's
Obligations to the Bank required to be made pursuant to
paragraph 1 of this letter, a further $10,000,000 (or such
greater amount as may be necessary to reduce the remaining amount
<PAGE>
ERLY Industries Inc.
March 16, 1993
Page 3
of the Obligations below $10,000,000) of the Borrower's Obligations to the Bank
shall be fully and finally paid on or before March 31, 1994, and all of the
Borrower's remaining Obligations to the Bank shall be fully and finally paid on
or before March 31, 1995.
6. Gerald Murphy and Douglas Murphy (each, a "Guarantor") shall each
execute and deliver to the Bank guarantees, in form and substance satisfactory
to the Bank, guarantying the repayment of all Obligations of the Borrower to the
Bank. The liability of each of the Guarantors would be limited to $5,000,000. If
the asset sale described in the first two sentences of paragraph 1 of this
letter are completed on or before the date specified in such paragraph in
conformity with the terms hereof, the Guarantees would be voided.
7. The pricing for any letter of credit that may be issued by the Bank
for the account of American Rice, Inc. to replace up to 50% of the previously
existing Rabobank letter of credit will be 4% per annum on the undrawn face
amount thereof. The pricing on any unreimbursed drawings under any such letter
of credit will be determined by the Bank prior to the issuance thereof.
8. On or before March 31, 1993, the Bank shall receive, for nominal
consideration, two separate common stock warrants to acquire up to an aggregate
of 10% of the fully diluted common equity of ERLY Industries Inc. ("ERLY")
exercisable at any time after March 31, 1994 (in the case of the "A Warrant"
described below) or March 31, 1995 (in the case of the as "B Warrant" described
below) for a nominal exercise price. One warrant, the "A Warrant," will be
exercisable for 5% of the fully diluted common stock of ERLY. The second
warrant, the "B Warrant" will be exercisable for 5% of the fully diluted common
stock of ERLY. If the $10,000,000 payment of the Obligations of the Borrower to
the Bank required pursuant to paragraph 5 of this letter to be made on or before
March 31, 1994 is in fact so made an or prior to such date, the "A Warrant"
would be voided. If all Obligations of the Borrower to the Bank shall be fully
and finally repaid by March 31, 1995, the "B Warrant" would be voided.
9. You shall cause Chemonics to use its best efforts to consummate, as
promptly an possible, a sale of its "Firstrol" division for net cash proceeds of
not less than $6,000,000 all of which shall be immediately applied to the
Obligations.
<PAGE>
ERLY Industries Inc.
March 16, 1993
Page 4
10. If on or before March 31, 1995, all Obligations of the Borrower to
the Bank shall be fully and finally repaid and all obligations of Chemonics to
the Bank shall be fully and finally repaid in accordance with the terms of such
obligations, all existing warrants for common stock of ERLY, the Borrower or
Chemonics held by the Bank would be voided.
11. On or before March 31, 1993, that certain Pledge Agreement, dated
as of March 6, 1992, between ERLY and the Bank, shall be amended and restated in
a manner satisfactory to the Bank.
12. On or before April 30, 1993, the Borrower shall enter into a
settlement agreement with Anchor Glass having terms and conditions satisfactory
to the Bank.
13. As promptly as possible (but in any event on or before March 31,
1993), the Borrower will deliver to the Bank a business plan giving effect to
the asset sales described in paragraph 1 of this letter (including, without
limitation, a plan for the resolution of all remaining liabilities of the
Borrower), such business plan to be satisfactory in all respects to the Bank.
14. Upon your execution and delivery of this letter, all parties shall
immediately undertake to use their best efforts to complete and execute the
legal documentation contemplated hereby.
This letter is being provided to you on the condition that, except as
required by law, neither it nor its contents will be disclosed publicly or
privately except to those individuals who are your officers, employees or
advisors who have a need to know of them as a result of their being specifically
involved in the proposed restructuring and then only on the condition that such
matters may not, except as required by law, be further disclosed. Without
limiting the generality of the foregoing, none of such persons shall, except as
required by law, use or refer to the Bank, or any of its respective affiliates,
in any disclosure made in connection with the transactions described above
without the prior consent of the Bank.
By execution and return of this letter the Borrower agrees (i) to pay
(by means of an increase in the outstanding principal amount of the Obligations)
all out-of-pocket fees and expenses (up to a maximum of $750,000) which have
been or may be incurred by the Bank in connection with the potential sales of
the Borrower's assets that have been proposed to the Borrower and the Bank, the
formation of TreeSweet Products, Inc., all negotiations
<PAGE>
ERLY Industries Inc.
March 16, 1993
Page 5
with various potential purchasers, investors and managers of the Borrower, the
execution and delivery of this letter, and the transactions described herein an
in connection with any of the foregoing (including, without limitation, travel
expenses and fees and expenses of counsel, consultants, field examiners, and
other experts, appraisal fees, environmental analysts fees, and printing,
document production and delivery and communication costs), whether or not the
restructuring contemplated by this letter is provided, or another restructuring
is arranged, (ii) to indemnify and hold harmless the Bank and its affiliates,
officers, directors, employees and agents (each an "Indemnified Person") against
all losses, claims, damages, liabilities and expenses which may be incurred by
or asserted against any of them in connection with the statements contained in
this letter or the transactions contemplated hereby and to reimburse each
Indemnified Person upon its demand for any reasonable legal or other expense
(including allocated costs of internal counsel) incurred in connection with
investigating, defending or participating in any such loss, claim, damage,
liability or action or other proceeding, whether commenced or threatened
(whether or not any such Indemnified Person is a party to any action or
proceeding out of which any such expenses arise), or in any way relating to the
matters contemplated by this letter, except, in the case of any Indemnified
Person, to the extent any such loss, claim, damage or liability is determined by
a final judgment of a court of competent jurisdiction to be attributable solely
to the gross negligence or willful misconduct of such Indemnified Person and
(iii) to provide the Bank with all information required for its due diligence
analysis, regardless of when, by whom or for whom prepared. Your obligation to
indemnify such Indemnified Person and pay such expenses shall remain effective
regardless of whether a definitive financing agreement is executed. None of the
Bank or any other Indemnified Person shall be responsible or liable to any other
party hereto or any other person for consequential damages which may be alleged
as a result of this letter. The foregoing provisions of this paragraph shall be
in addition to any rights that the Bank or any other Indemnified Person may have
at common law or otherwise, including but not limited to, any right to
contribution.
Neither this letter nor compliance with any or all of the provisions
hereof or of the Loan Agreement or the other Loan Documents by you, the
Borrower, any Guarantor or Chemonics shall in any manner require or obligate the
Bank to make any further Loans under the Loan Agreement.
<PAGE>
ERLY Industries Inc.
March 16, 1993
Page 6
This letter may be executed in counterparts, each of which shall be
deemed an original and all of which counterparts shall constitute one and the
same document.
This letter shall be governed by, and construed in accordance with, the
internal laws of the State of New York without reference to principles of
conflicts of law.
This letter supersedes any and all discussions, written and oral
between us. THIS LETTER MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ACTUAL OR
ALLEGED PRIOR, CONTEMPORANEOUS OR SUBSEQUENT UNDERSTANDINGS OR AGREEMENTS OF THE
PARTIES, WRITTEN OR ORAL, EXPRESSED OR IMPLIED, OTHER THAN A WRITING WHICH
EXPRESSLY AMENDS OR SUPERSEDES THIS LETTER. THERE ARE NO UNWRITTEN ORAL
UNDERSTANDINGS OR AGREEMENTS BETWEEN THE PARTIES.
To indicate your agreement with the terms of this letter, please sign
and return the enclosed copy of this letter by the close of business on March
16, 1993.
Sincerely,
INTERNATIONALE NEDERLANDEN
BANK N.V.
By: /s/ JAIME GUBBINS
Name: JAIME GUBBINS
Title: SVP
Agreed to and accepted this
17 day of March, 1993
ERLY INDUSTRIES, INC.
By: /s/ RICHARD McCOMBS
Name: RICHARD McCOMBS
Title: VP Finance
<PAGE>
ERLY Industries Inc.
March 16, 1993
Page 7
ERLY JUICE INC.
By: /s/ DOUGLAS MURPHY
Name: DOUGLAS MURPHY
Title: Chief Executive
/s/ GERALD MURPHY
Gerald Murphy, in his
individual capacity
/s/ DOUGLAS MURPHY
Douglas Murphy, in his
individual capacity
