SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
MARK ONE [1]
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Dectember 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from............to............
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Commission File Number 0-12114
CADIZ LAND COMPANY, INC.
(Exact name of registrant specified in its charter)
DELAWARE 77-0313235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Wilshire Boulevard, Suite 1600
Santa Monica, CA 90401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 899-4700
Securities Registered Pursuant to Section 12(b) of the Act: None
Name of each exchange
Title of each class on which registered
-------------------- -----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of regulation S-K (Sec. 220.405 of this chapter) is not contained
herein, and will not be contained to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. /X/
As of March 23, 1998, the registrant had 33,069,161 shares of Common Stock
outstanding. The aggregate market value of the Common Stock held by
nonaffiliates as of March 23, 1998, was approximately $237,543,000
based on the average of the closing bid and asked prices on that date.
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Documents Incorporated by Reference
Certain portions of Registrant's proxy statement for the annual meeting to
be held on May 13, 1998, to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the
close of the Registrant's fiscal year, are incorporated by reference
under Part II of this Form 10-K.
PART I
ITEM 1. Business
The long-term strategy of Cadiz Land Company, Inc. (the "Company") is
to acquire and develop water-related land and agricultural assets, as well
as selected water-related technologies. The Company has created an
integrated and complementary portfolio of landholdings, water resources,
and agricultural operations located throughout central and southern
California which either possess sizable assured supplies of water or can,
in future years, utilize water supplied from other Company properties.
Management therefore believes that, with both the increasing scarcity of
water supplies in California and the increasing demand for water, the
Company's access to water will provide it with a competitive advantage
both as a major agricultural concern and as a supplier of water, which
will lead to continued appreciation in the value of the Company's
portfolio.
In September 1996, the Company significantly enhanced this portfolio
through its acquisition of Sun World International, Inc. ("Sun World").
The Sun World acquisition has made the Company one of the largest fully
integrated agricultural companies in California by adding to the Company's
portfolio more than 17,200 acres of prime agricultural land, packing
facilities, marketing expertise, proprietary agricultural products and the
highly regarded Sun World brand name. The acquisition of Sun World also
added valuable water rights to the Company's existing water resource
development operations.
In addition to its Sun World properties, the Company holds more than
39,000 acres of land in eastern San Bernardino County which are underlain
by excellent groundwater resources with demonstrated potential for future
applications, including water storage and supply programs, and
agricultural, municipal, recreational and industrial development. All of
the Company's properties are located in close proximity to California's
major aqueduct systems. The Company expects to utilize its resources to
participate in a broad variety of water storage and supply programs,
including the storage and supply of surplus water for public agencies
which require supplemental sources of water. The Company has entered into
an interim Agreement with the Metropolitan Water District of Southern
California ("MWD") to develop principles and terms for a long-term
agreement at its Cadiz, California property. The program (the
"Cadiz/Fenner Water Storage and Supply Program") will provide storage
capacity of approximately 500,000 acre-feet and a dry-year source of up to
100,000 acre-feet per year of high quality water.
The Company continually seeks to develop and manage its land, water
and agricultural resources for their highest and best uses. Agricultural
development enables the Company to maximize the value of its landholdings
while generating cash flow. The Company also continues to evaluate
acquisition opportunities which are complementary to its current portfolio
of landholdings, water resources and agricultural operations.
(a) GENERAL DEVELOPMENT OF BUSINESS
As part of its current business plan, the Company's land acquisition,
development activities and agricultural operations are conducted for the
purpose of enhancing the long-term appreciation of its properties. See
"Narrative Description of Business," below.
As the most populous state in the nation, California's population is
projected to swell to nearly 50 million people by the year 2020. This
increasing population is placing great demands on California's
infrastructure, particularly its limited water resources. According to
the California Department of Water Resources, shortfalls of approximately
7 million acre-feet are forecasted in a dry year by the year 2020.
Management therefore believes that, with both the increasing scarcity of
water supplies in California and the increasing demand for water, the
Company's access to water will provide it with a competitive advantage
both as a major agricultural concern and as a supplier of water which will
lead to continued appreciation in the value of the Company's portfolio.
On September 13, 1996, the Company acquired all of the stock of a
reorganized Sun World pursuant to a consensual plan of reorganization for
a net purchase price of approximately $179 million (the "Sun World
Acquisition"). Sun World and certain subsidiaries of Sun World had filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on
October 3, 1994 after debt restructuring negotiations with its existing
lenders failed.
The Company's Sun World Acquisition was an integral part of the
Company's business strategy. Sun World has added to the Company's
portfolio approximately 17,200 acres of prime agricultural land primarily
in the San Joaquin and Coachella Valleys, increasing the Company's total
landholdings to approximately 56,200 acres. See Item 2, "Properties."
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
During the year ended December 31, 1997, the Company operated in one
industry segment: resource development. See Consolidated Financial
Statements. Also, see Item 7, "Management's Discussion and Analysis".
(c) NARRATIVE DESCRIPTION OF BUSINESS
Pursuant to its business strategy, the Company continually seeks to
develop and manage its portfolio of land, water and agricultural resources
for their highest and best uses. The development and management
activities of the Company are currently focused on agricultural operations
(primarily through its wholly-owned Sun World subsidiary) and water
resource development. Agricultural development enables the Company to
maximize the use of its landholdings while generating cash flow. The
Company also continues to evaluate acquisition opportunities which are
complementary to its current portfolio of landholdings, water resources,
and agricultural operations.
WATER RESOURCE DEVELOPMENT
The Company's portfolio of water resources, located in close
proximity to the major aqueduct systems of central and southern California
such as the State Water Project, the Colorado River Aqueduct, and the
Colorado River, provides the Company with the opportunity to participate
in a variety of water banking, exchange and storage and supply programs
in partnership with regional public water agencies.
CADIZ/FENNER WATER STORAGE AND SUPPLY PROGRAM. The Company's 27,400
acres in the Cadiz and Fenner Valleys of eastern California (the
"Cadiz/Fenner Property") are underlain by a substantial high-quality
groundwater basin. This groundwater is recharged by rain and snowfall
within a catchment area of nearly 1,300 square miles. Average annual
recharge is estimated by independent experts to be in the range of 20,000
to 30,000 acre-feet. See Item 2, "Properties - The Cadiz/Fenner
Property."
Pursuant to an Environmental Impact Report ("EIR") and land use
approvals by San Bernardino County, the Company is authorized to pump
approximately 30,000 acre-feet of groundwater per year for irrigation of
its Cadiz Valley property. An acre-foot is 326,000 gallons, or enough for
approximately two families for one year. The Company uses only
approximately 6,000 acre-feet per year to irrigate its Cadiz Valley
agricultural development. As a result, the Company has the ability to
supply groundwater - surplus to its present and near-term needs - to
public agencies which require supplemental sources of water.
Additionally, independent geotechnical and engineering studies confirm
that the Company's Cadiz Valley properties are well suited for temporary
storage of water which could be imported from the Colorado River during
periods of excess supply.
During wet years or periods of excess supply, the Company would store
water from the Colorado River in its groundwater basin. During periods of
regional drought or reduced allocations from the Colorado River, the
previously imported water, together with additional indigenous
groundwater, could be extracted and conveyed to the Colorado River
Aqueduct.
On December 23, 1997, the Company entered into an interim Agreement
with MWD to develop principles and terms for a long-term agreement in
which the Company would provide storage capacity of approximately 500,000
acre-feet and a dry-year source of up to 100,000 acre-feet per year of
high quality water. The interim Agreement calls for the development of
principles and terms, such as a fee structure, delivery schedule and
environmental compliance, and final verification of feasibility for a
water storage and supply program. The program would involve the
construction of groundwater spreading and recovery facilities, a pumping
plant, power facilities, and a pipeline that would convey the water to and
from the Cadiz property from the Colorado River Aqueduct. The program
could be fully operational by the year 2000.
The interim Agreement also calls for the Company and MWD to explore
two potential future additions to the water storage and supply program,
including the construction of a dual pipeline at the Cadiz/Fenner property
and/or the development of an additional program at the Company's nearby
Danby Lake property. Either addition would increase the storage and/or
supply capacity.
In addition, once operational, the Cadiz/Fenner Water Storage and
Supply Program will be conducted in accordance with a comprehensive,
independent basin management program to ensure long-term protection of the
groundwater basin.
PIUTE. The Company's water development operations at its 7,300 acre
Piute property are located in eastern San Bernardino County approximately
15 miles from the resort community of Laughlin, Nevada and about 12 miles
from the Colorado River town of Needles, California. Hydrological studies
and testing of a full scale production well have demonstrated that this
landholding is underlain by groundwater of excellent quality. Average
annual recharge is estimated by independent experts to be in the range of
10,000 to 20,000 acre-feet. See Item 2, "Properties - The Piute
Property."
Additional technical and environmental investigations are currently
underway for a water development program anticipated to transfer
approximately 10,000 to 15,000 acre feet per year.
DANBY LAKE AND OTHER. The Company currently owns or controls
additional acreage located throughout other areas of the Mojave Desert,
such as Danby Lake. This area is located approximately 30 miles southeast
of the Company's Cadiz/Fenner Valley property and 10 miles north of the
Colorado River Aqueduct.
As discussed above, the interim Agreement with MWD identifies the
Company's Danby Lake property as a potential addition to the Cadiz/Fenner
Water Storage and Supply Program.
SUN WORLD WATER RESOURCES. The Sun World Acquisition brought to the
Company valuable water rights in various parts of central and southern
California. The Company believes with increasing water shortages in
California, land with prime water rights will increase substantially in
value.
Sun World's landholdings and associated water resources are located
adjacent to the major aqueduct systems of central and southern California,
and in close proximity to the Colorado River. These holdings complement
the Company's other groundwater resources, and will enhance the Company's
opportunities to participate in a broad variety of water storage, supply,
exchange or banking programs.
AGRICULTURAL OPERATIONS
With the Sun World Acquisition, the Company has become one of
California's largest vertically integrated agricultural companies
combining an extensive research and development program, year-round
sourcing, farming and packing activities and strong marketing
capabilities. For the twelve months ended December 31, 1997, Sun World
recorded revenues of $99.9 million.
PRODUCT LINE. Sun World ships 75 different varieties of fresh fruits
and vegetables to all 50 States and to more than 30 foreign countries.
Sun World is a leading grower and marketer of table grapes, seedless
watermelons, colored sweet peppers, plums, peaches, nectarines, apricots
and lemons. It is also one of California's largest independent marketers
of grapefruit, tangerines, mandarins, and dates.
The breadth and diversity of the product line helps to minimize the
impact of individual crop earnings fluctuations. Further, the breadth and
diversity of its product offering provides Sun World with greater presence
and influence with its grocery and food service customers.
Although many fruits and vegetables are fungible commodities, Sun
World has adopted a strategy of developing or acquiring specialty produce
varieties with unique characteristics which differentiate them from
commodity produce varieties. Most of these varieties are harvested during
favorable marketing windows when available supply from competitors is
limited. These specialty varieties typically command a price premium and
are less subject to the same price volatility than the commodity
varieties. They also provide Sun World with a dominant position in a
number of product categories. Examples of the branded produce grown and
marketed by Sun World include Superior Seedless(TM) table grapes, Black
Diamond(TM) plums, Sun World Seedless(R) watermelons, Honeycot(R)
apricots, Amber Crest(R) peaches and Sun World sweet colored peppers.
These products evolved through a combination of internal development and
acquisition. Sun World's research and development center is dedicated to
developing additional high value proprietary varieties. See "Proprietary
Product Development," below.
FARMING OPERATIONS. Sun World's farming operations produced
approximately 8 million units of fruits and vegetables during the year
ended December 31, 1997. Its principal agricultural lands are located in
the San Joaquin and Coachella valleys of California. See Item 2,
"Properties."
Sun World properties are primarily dedicated to producing permanent
commercial crops and, to a lesser extent, annual (or row) crops.
Additionally, over 1,600 acres are currently utilized for developing crops
(e.g. vines and trees that have not yet reached a commercial maturity).
Subsequent to the Sun World acquisition, the Company implemented a crop
development plan that provides for the planting of certain proprietary
varieties of grapes and treefruit (approximately 1,100 acres) as well as
the removal of approximately 1,400 acres of certain under-performing
permanent crops. Given the Company's current crop allocation plan, it is
now redeploying marginally productive acreage to produce more varieties of
crops which are available for delivery at peak pricing windows throughout
the year.
PACKING AND MARKETING OPERATIONS. In addition to merchandising its
own products, Sun World provides marketing and packing services to third
party growers. For third party growers, Sun World provides three key
benefits: (i) Sun World's brand name, proprietary products and reputation
with wholesalers resulting in a significant pull through effect; (ii) a
full complement of handling services that include harvest, cooling,
packing and shipping; and (iii) an internal sales and marketing force
servicing over 650 customers throughout the world.
Sun World's packing facilities handled approximately 9 million units
of produce during the year ended December 31, 1997. These facilities
provide harvesting, packing, cooling and shipping services for Sun World
production, as well as for other commercial clients. Currently, Sun World
owns four facilities, three of which are located in the Coachella Valley
and one of which is located in the San Joaquin Valley. See Item 2,
"Properties."
Sun World's vertically integrated operations enable it to offer the
market a continuous stream of new, specialty products which receive a
market premium. As a large grower, Sun World is able to manage the
quality of its own product line, and as a significant packer/marketer, Sun
World works with other growers to ensure product quality through packing
and distribution. As a result, on average, the Company sells 12 to 13
million units annually with wholesale value of approximately $120 million.
This amount includes sale proceeds received for units sold on behalf of
third party growers for which only the sales commission and packing
revenues received by Sun World are included in Sun World's reported
revenues for 1997 of $99.9 million.
Sun World's sourcing, both external and internal, is diversified
geographically. Sun World's owned and leased farming operations are
located throughout California from the Coachella Valley in the south to
central California's San Joaquin Valley as well as operations near the
coast. Sun World sources externally produced product from throughout
California, from other areas of the United States, and from international
sources. This geographic diversification not only reduces the impact that
unfavorable weather conditions and infestations could have on Sun World's
operations, but also provides Sun World with a longer selling season for
many crops since the harvests occur at different times. In addition,
geographic diversification also allows Sun World the ability to provide
the quality and breadth of product throughout the year which is being
demanded by retailers.
Sun World's customer base consists of more than 650 accounts
including supermarket retailers, food service entities, warehouse clubs,
and international trading companies located in approximately 30 countries.
Domestic customers include national retailers such as Safeway Stores and
American Stores; club stores, including PriceCostco and Sam's; and food
service distributors, including Sysco and Alliant. Approximately 11% of
Sun World's products are marketed outside of the United States in Canada,
Europe, Australia, Japan, Hong Kong, Singapore, Malaysia and Taiwan. Only
one national retailer, Safeway Stores, (representing approximately 14%)
accounted for more than 10% of Sun World's revenues in 1997. As is
consistent with industry practice, Sun World does not maintain written
agreements with this or its other significant customers.
PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a long history of
product innovation, and its research and development center maintains a
fruit breeding program that has introduced dozens of proprietary fruit
varieties in the last five years. Recent product successes include the
Black Diamond(TM) plum, the Amber Crest(R) peach and the Honeycot(R)
apricot. There are several other promising grape and treefruit varieties
which are scheduled for commercial planting and production in the near
future.
Sun World utilizes approximately 235 acres for its research and
development center and crop experimentation. The research and development
center facility houses tissue culture rooms, growth rooms, four
greenhouses, and over 200 acres of experimental growing crops. The
amounts expended by Sun World on its research and development activities
since the Sun World Acquisition amounted to $809,000 for the year ended
December 31, 1997 and $120,000 for the period from September 14, 1996 to
December 31, 1996. Management expects to maintain at least its 1997 level
of expenditures in the future.
As a result of over 20 years of research and development, Sun World
holds rights to more than 600 patents and trademarks around the world.
The patent registrations exist in most major fruit producing countries and
the trademarks are held in both fruit producing and consuming regions.
Sun World's patents have varying expiration dates occurring within the
next several years through 2017; however, the expiration of any individual
patent will not have a material effect upon Sun World's operations.
Additionally, Sun World has a 50% ownership interest in American
Sunmelon, a partnership engaged in the proprietary development, production
and marketing of seedless watermelon seed. Sun World's share of net
income generated by American Sunmelon was approximately $1.4 million for
calendar year 1997.
SEASONALITY
In connection with the water resource development activities of the
Company, revenues are not expected to be seasonal in nature.
Sun World's agricultural operations are impacted by the general
seasonal trends that are characteristic of the agricultural industry. Sun
World has historically received the majority of its net income during the
months of June to October following the harvest and sale of its table
grape and treefruit crops. Due to this concentrated activity, the Company
has, therefore, historically incurred a loss with respect to its
agricultural operations in the other months during the year.
COMPETITION
The Company faces competition for the acquisition, development and
sale of its properties from a number of competitors, some of which have
greater resources than the Company. The Company may also face competition
in the development of water resources associated with its properties.
Since California has scarce water resources and an increasing demand for
available water, the Company believes that price and reliability of
delivery are the principal competitive factors affecting transfers of
water in California.
The agricultural business is highly competitive. Sun World's
competitors include a limited number of large international food
companies, as well as a large number of smaller independent growers and
grower cooperatives. No single competitor has a dominant market share in
this industry due to the regionalized nature of these businesses. In
addition to drawing from its proprietary base of products, Sun World
utilizes brand recognition, product quality, harvesting in favorable
production windows, effective customer service and consumer marketing
programs to enhance its position within the highly competitive fresh food
industry. Consumer and institutional recognition of the Sun World
trademark and related brands and the association of these brands with high
quality food products contribute to Sun World's ability to compete in the
market for fresh fruit and vegetables.
EMPLOYEES
As of December 31, 1997, the Company employed a total of 843
full-time employees. Sun World throughout the year engages various part
time and seasonal employees, with a seasonal high of approximately 2,500
part time employees. Approximately 119 of the Company's employees are
represented by a labor union pursuant to a contract that expires in 1999.
Generally, the Company believes that its employee relations are good.
REGULATION
Certain areas of the Company's operations are subject to varying
degrees of federal, state and local laws and regulations. The Company's
agricultural operations are subject to a broad range of evolving
environmental laws and regulations. These laws and regulations include
the Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act and
the Comprehensive Environmental Response, Compensation and Liability Act.
Compliance with these foreign and domestic laws and related regulations is
an ongoing process which is not currently expected to have a material
effect on the Company's capital expenditures, earnings or competitive
position. Environmental concerns are, however, inherent in most major
agricultural operations, including those conducted by the Company, and
there can be no assurance that the cost of compliance with environmental
laws and regulations in the future will not be material. However, neither
the Company nor Sun World expects to incur any material capital
expenditures for environmental control facilities during 1998.
The Company's food operations are also subject to regulations
enforced by, among others, the U.S. Food and Drug Administration and
state, local and foreign equivalents and to inspection by the U.S.
Department of Agriculture and other federal, state, local and foreign
environmental and health authorities. Among other things, the U.S. Food
and Drug Administration enforces statutory standards regarding the safety
of food products, establishes ingredients and manufacturing procedures for
certain foods, establishes standards of identity for foods and determines
the safety of food substances in the United States. Similar functions are
performed by state, local and foreign governmental entities with respect
to food products produced or distributed in their respective
jurisdictions. Existing environmental regulations have not, in the past,
had a materially adverse effect upon the operations of the Company, and
the Company believes that existing environmental regulations will not, in
the future, have a materially adverse effect upon its operations. There
can be no assurances, however, as to the effect of any environmental
regulations which may be adopted in the future.
As the Company proceeds with the development of its properties,
including related infrastructure, the Company will be required to satisfy
various regulatory authorities that it is in compliance with the laws,
regulations and policies enforced by such authorities. Groundwater
development, and the export of surplus groundwater for sale to single
entities such as public water agencies, are not subject to regulation by
existing statutes, other than general environmental statutes applicable to
all development projects. Although applicable laws, regulations and
policies have not had a materially adverse effect upon the ability of the
Company to develop its Cadiz or other properties to date, management
cannot predict with certainty what requirements, if any, may be imposed by
regulators upon future development. In addition, the time and costs
associated with obtaining regulatory approvals for resource development
are significant, and there can be no assurance that the Company will
receive desired approvals for future development plans.
ITEM 2. PROPERTIES
The Company currently leases its executive offices in Santa Monica,
California. The Company also maintains a development office in San
Bernardino, California. Sun World owns its main packing facility
(including sales and administrative offices) in Bakersfield, California
and owns three packing facilities (including sales offices) in Coachella,
California. The Company and each of its subsidiaries believe that their
property and equipment are generally well maintained, in good operating
condition and adequate for their present needs.
The following is a description of the Company's significant
properties.
THE CADIZ/FENNER PROPERTY
In 1984, the Company conducted an investigation of the feasibility of
the agricultural development of land located in the Mojave desert near
Cadiz, California, and confirmed the availability of prime quality water
in commercial quantities appropriate for agricultural development. Since
1985, the Company has acquired over 27,000 acres in the Cadiz and Fenner
valleys of eastern San Bernardino County. Since 1990, the Company has
been pumping an average of approximately 6,000 acre-feet of groundwater
annually from its well operations for agricultural purposes.
Additional independent geotechnical and engineering studies conducted
since 1985 have confirmed that the Cadiz/Fenner property is well suited
for temporary storage of water which could be imported from the Colorado
River during periods of excess supply and alternatively the transfer of
stored water from the Company's property and conveyed back to the Colorado
River Aqueduct.
In December 1997, the Company entered into an interim Agreement with
MWD to develop principles and terms for a long-term agreement in which the
Company would provide storage capacity of approximately 500,000 acre-feet
and a dry-year source of up to 100,000 acre-feet per year in connection
with this property. See Item 1, "Business-Narrative Description of
Business - Water Resource Development."
In November 1993, the San Bernardino County Board of Supervisors
unanimously approved a General Plan Amendment establishing an agricultural
land use designation for 9,600 acres at Cadiz for which 1,600 acres have
been developed and are leased to Sun World. This Board action represented
the largest land use approval on behalf of a single property holder in the
County's known history. This action also approved permits to construct
infrastructure and facilities to house as many as 1,150 seasonal workers
and 170 permanent residents (employees and their families) and allows for
the withdrawal of more than 1,000,000 acre-feet of groundwater from the
Company's underground water basin.
Substantially all Cadiz/Fenner acreage is held in fee directly by the
Company.
THE SUN WORLD PROPERTIES
FARM PROPERTIES. Sun World owns approximately 17,200 acres and
leases approximately 2,100 acres of improved land in central and southern
California. The majority of this land is used for the cultivation of
permanent and annual crops and support activities, including packing
facilities.
Sun World owned farming property is divided between five distinct
geographic regions: Madera, Bakersfield and Arvin (located within the San
Joaquin Valley), Coachella (located in the state's southeastern corner
near Palm Springs) and Blythe (located approximately 100 miles east of the
Coachella Valley adjoining the Colorado River).
PACKING AND HANDLING FACILITIES. Sun World owns four packing and
handling facilities, three of which are located in the Coachella Valley
and one of which is located in the San Joaquin Valley at Kimberlina, near
Bakersfield.
The Kimberlina facility, located on an 83 acre parcel owned by Sun
World, consists of two highly automated production lines for packing
treefruit and citrus, cold storage areas, and office space.
Sun World's primary Coachella Valley facility consists of two
independent buildings located on 22 acres of industrial commercial zoned
land in Coachella, California, two miles south of Indio. The 22 acres
consists of 5 acres of buildings and improvements, 6 acres of packing, and
11 acres of open land. One building is used primarily for packing citrus,
receiving table grapes, cold storage and office space. The other building
is used primarily for receiving, cooling and storing table grapes.
Sun World's other operating facility in Coachella consists of one
building on 4 acres of land and is used primarily for packing watermelons
and citrus and for storage.
All of the Sun World properties are subject to encumbrances in favor
of the holders of the Series B First Mortgage Notes issued by Sun World
with an aggregate outstanding balance of $115.0 million as of December 31,
1997. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources -
Current Financing Arrangements."
THE PIUTE PROPERTY
The Piute property consists of approximately 7,300 acres and is
located approximately 60 miles northeast of Cadiz and approximately 15
miles west of the Colorado River and Laughlin, Nevada, a small, fast
growing town with hotels, casinos and water recreation facilities. The
Piute property was identified for acquisition by the Company by a
combination of satellite imaging and geological techniques which were used
by the Company to identify water at Cadiz.
The Piute acreage adjoins Highway 95, which is a direct route to Las
Vegas, approximately 60 miles north. The Santa Fe Railroad passes through
the land and Interstate 40 is approximately 12 miles to the south. The
property is held by the Company in fee title as to approximately 3,600
acres, with the remaining acreage under option.
The Company has commenced the development of the water resources of
this property. See Item 1, "Business - Narrative Description of Business
- - Water Resource Development."
OTHER PROPERTIES
In addition to the Cadiz and Piute properties, the Company owns
approximately 4,300 additional acres in the Mojave Desert as to which
development has not yet commenced. These properties include the Danby
Lake property which has been identified as a potential future addition for
a water storage and supply program under the Company's interim agreement
with MWD. See Item 1, "Business - Narrative Description of Business -
Water Resource Development."
The Company will continue to seek to acquire additional properties
both in Southern California desert regions and elsewhere which are
believed to be suitable for development.
All of the Company's non-Sun World fee property is subject to
encumbrances in favor of Cadiz' primary lender as security for loans with
outstanding balances aggregating approximately $14.8 million as of
December 31, 1997. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources - Current Financing Arrangements."
ITEM 3. LEGAL PROCEEDINGS
In November 1995, the San Bernardino County Board of Supervisors
certified an Environmental Impact Report/Environmental Impact Statement
("EIR/EIS"), and approved a Conditional Use Permit for the proposed
construction and operation of a substantial landfill on the shore of
Bristol Lake near Amboy, California (the "Rail Cycle" Project). The
general partner of Rail Cycle is controlled by Waste Management, Inc.
("WMI"). The Rail Cycle Project would be located within a few miles of
land owned by the Company at Cadiz, California, which the County of San
Bernardino has designated for agricultural use in its General Plan.
The Company has vigorously opposed the Rail Cycle Project on a number
of grounds. In December 1995, an action styled CADIZ LAND COMPANY, INC.
VS. COUNTY OF SAN BERNARDINO, ET. AL. CASE NO. BCV 02341 was filed by the
Company in Superior Court in San Bernardino County. The action challenges
the various decisions by the County of San Bernardino relative to the
Rail Cycle Project. Named in this action, in addition to the County of
San Bernardino, were the Board of Supervisors of the County of San
Bernardino, three individual members of the Board of Supervisors, an
employee of the County, and Rail Cycle, L.P. whose general partner is
controlled by WMI. The Company alleges that the actions of the County of
San Bernardino did not comply with the guidelines prescribed by the
California Environmental Quality Act and violated state planning and
zoning laws. The action seeks to set aside the county certification of
the EIR/EIS and approval of the proposed Rail Cycle Project. The Company
continues to believe the proposed Rail Cycle Project, if constructed and
operated as currently designed, poses environmental risks both to the
Company's agricultural operations at Cadiz and to the groundwater basin
underlying the Cadiz property. Accordingly, the Company intends to pursue
a claim for damages against the County of San Bernardino and Rail Cycle
and the action seeks compensatory damages. On November 6, 1997, the San
Bernardino Superior Court denied the Company's application for a Writ of
Mandate to set aside the County of San Bernardino's certification of the
("EIR/EIS"). The Company intends to continue prosecuting its claim for
monetary damages. No trial date has yet been set.
On October 24, 1997, the Company filed suit in the United States
District Court, for the Central District of California, against WMI,
certain key executives and consultants of WMI, and certain other parties
in interest as to the Rail Cycle Project. The Complaint as originally
filed asserted the following claims arising under federal law: Violations
of the Racketeer Influenced and Corrupt Organization Act (RICO),
Conspiracy to Violate the Racketeer Influenced and Corrupt Organization
Act (RICO), violations of Section 10(b) of the Securities Exchange Act of
1934, and Interception of Wire Communications. Additionally, the
Complaint asserted the following claims arising under state law:
Conspiracy, Misappropriation of Trade Secrets, Conversion, Defamation,
Trade Libel, Wiretapping, Interference with Existing Business
Relationship, and Unfair Business Practices. On December 9, 1997, the
federal district court severed the eight state law claims from the
complaint and dismissed them without prejudice. Those claims have been
reasserted in a state proceeding filed on January 8, 1998 in Los Angeles
Superior Court (West Division).
Prior to the acquisition of Sun World, the Internal Revenue Service
(IRS) had filed claims against Sun World and certain of its subsidiaries
(collectively "the Sun World Claimants") for taxes refunded for workers
that the IRS claims were employees. The Sun World Claimants contend that
the workers are excluded from the definition of employment under the
Internal Revenue Code. On January 21, 1998, the District court ruled in
favor of one of the Sun World Claimants. Management believes that the
likelihood of an unfavorable future outcome with regard to this matter is
remote. Accordingly, the Company released $3,780,000 of reserves related
to this matter at December 31, 1997 which are reported on the Consolidated
Statement of Operations as Litigation Benefit.
The Company is involved in other legal and administrative proceedings
and claims. In the opinion of management, the ultimate outcome of each
proceeding or all such proceedings combined will not have a material
adverse impact on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The results of the Company's Annual Meeting of Stockholders held June
12, 1997 were reported in the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the Nasdaq National Stock
Market under the symbol "CLCI". The following table reflects actual sales
transactions. The high and low range of the sales price of the common
stock for the dates indicated have been provided by Nasdaq.
High Low
Quarter Ended Sales Price Sales Price
--------- -----------
1995:
March 31 $5.438 $4.125
June 30 $4.875 $4.000
September 30 $5.500 $3.688
December 31 $6.250 $4.063
1996:
March 31 $6.375 $5.250
June 30 $6.500 $5.219
September 30 $6.000 $3.875
December 31 $5.625 $3.875
1997:
March 31 $ 6.063 $4.838
June 30 $ 6.250 $4.813
September 30 $ 8.063 $5.000
December 31 $ 9.375 $6.125
On March 23, 1998, the high, low and last sales prices for the
shares, as reported by Nasdaq, were $9.7344, $9.7344 and $9.7344
respectively.
In January 1998, options in the Company's stock began trading on the
American Stock Exchange, The Chicago Board Options Exchange and the
Pacific Stock Exchange under the symbol "QAZ."
The Company also has an authorized class of 100,000 shares of
preferred stock ("Preferred Stock"). To date the Board of Directors has
designated three series of Preferred Stock for issuance, including (i) up
to 60,000 shares of Series A Preferred, of which 27,631 shares have been
issued and no shares remain outstanding; (ii) up to 1,000 shares of Series
B Preferred, of which 1,000 shares have been issued and no shares remain
outstanding; and (iii) up to 365 shares of Series C Preferred, of which
340 shares have been issued and no shares remain outstanding. The Board
of Directors has no present plans or arrangements for the issuance of
additional shares of Preferred Stock.
The estimated number of beneficial owners of the Company's Common
Stock is approximately 2,700, and the number of stockholders of record on
March 23, 1998, was 276.
To date, the Company has never paid a cash dividend on Common Stock.
The Company's ability to pay such dividends is subject to certain
covenants pursuant to agreements with the Company's lenders.
During the year ended December 31, 1997, the Company sold the
following securities which were not registered under the Securities Act of
1933, as amended (the "Securities Act"). The Company believes that the
transactions described below were all exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof as
transactions not involving any public offerings. In each transaction, the
number of investors was limited, the investors confirmed to the Company
their investment intent, the investors were provided with information
about the Company and/or access to such information, and restrictions were
placed on resales of the securities. In each transaction involving the
issuance of stock options or warrants, the exercise price was equal to the
fair market value of the Company's common stock as of the date of grant of
such options or warrants. No underwriters were used or commissions paid
on connection with any such sales.
In March, June, and September 1997, prior to the registration in
September 1997 of options issuable under the Company's 1996 Stock Option
Plan, the Company issued a total of 317,500 options to purchase common
stock to employees of the Company under the Plan. All such options vest
three years from issuance and are exercisable until five years from date
of grant. 280,000 options granted in March and 27,500 options granted in
June are exercisable at $5.00 per share; 5,000 options granted in June are
exercisable at $5.25 per share; and 5,000 options granted in September are
exercisable at $6.00 per share. In January 1997, the Company issued
50,000 options to purchase common stock to a consultant in consideration
of consulting services rendered to the Company. These options are
exercisable for three years at an exercise price of $5.50 per share. In
May 1997, the Company issued 75,000 warrants to ING Baring (U.S.) Capital
Corporation ("ING") in consideration of the assumption and extension by
ING of the Company's outstanding term loan. These warrants are
exercisable for five years at an exercise price of $5.03 per share. In
November 1997, the Company issued 200,000 warrants to ING in consideration
of the issuance by ING of a revolving credit facility to the Company. The
warrants have a term of seven years and an exercise price of $7.00 per
share. In April 1997, 50,000 shares were granted to the Company's Chief
Executive Officer at no cost as a bonus for extraordinary services
rendered. In May 1997, 65,000 shares valued at $5.00 per share were
issued to a single investor in connection with the settlement of
obligations assumed in connection with the Sun World Acquisition. In June
1997, 240,000 shares were issued to Rabobank for total consideration of
$12,000 upon the exercise of warrants previously granted in connection
with the Company's credit facilities with Rabobank.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data insofar as it relates to the
year ended December 31, 1997, the nine months ended December 31, 1996 and
to each of the years ended March 31, 1996, 1995, and 1994 has been derived
from financial statements audited by Price Waterhouse LLP, independent
accountants. The information that follows should be read in conjunction
with the audited consolidated financial statements and notes thereto for
the year ended December 31, 1997, the nine months ended December 31, 1996
and for the year ended March 31, 1996 included elsewhere herein. See also
Item 7, "Management's Discussion and Analysis".
CADIZ LAND COMPANY, INC.
Selected Financial Data
($ in thousands, except for per share data)
Year Nine Months
Ended Ended
December 31, December 31, Year Ended March 31,
-----------------------
1997 1996(1) 1996 1995 1994
---- ------ ---- ---- ----
Statement of
Operations Data:
Revenues $ 100,157 $ 23,780 $ 1,441 $ 543 $ 190
Loss from continuing
operations before
extraordinary items (8,538) (5,997) (8,487) (4,706) (4,239)
Gain from disposal
of discontinued
segment(2) -0- -0- -0- -0- 145
Extraordinary items -0- -0- -0- 115 343
Net loss (8,538) (5,997) (8,487) (4,591) (3,751)
Less: Preferred
stock
dividends (1,213) (674) -0- -0- -0-
Imputed
dividend
on preferred
stock -0- (2,451) -0- -0- -0-
------- -------- -------- ------- -------
Net loss applicable
to common stock $ (9,751) $ (9,122) $ (8,487) $ (4,591) $(3,751)
========= ========= ========= ========= ========
Per Share:
Net loss from continuing
operations before
extraordinary items $ (0.33) $ (0.44) $ (0.48) $ (0.29) $ (0.33)
Net income from
operations of
discounted segment
segment and disposal
of discontinued
segment(2) -0- -0- -0- -0- 0.01
Extraordinary items -0- -0- -0- 0.01 0.03
-------- -------- -------- ------- ------
Net loss $ (0.33) $ (0.44) $ (0.48) $ (0.28) $ (0.29)
========= ========= ======== ======== ========
Weighted average
common shares
and equivalents 29,485 20,500 17,700 16,500 12,800
======== ======== ======== ======= =======
December 31, December 31, March 31,
--------------------------
1997 1996 1996 1995 1994
---- ----- ---- ---- -----
Balance Sheet Data:
Total assets $ 203,049 $ 230,790 $ 38,663 $ 34,888 $ 34,058
Long-term debt $ 131,689 $ 149,111 $ 68 $ 16,827 $ 13,833
Redeemable
preferred stock $ -0- $ 27,431 $ -0- $ -0- $ -0-
Preferred stock,
common stock
and additional
paid-in-capital $ 121,199 $ 88,808 $ 73,149 $ 62,857 $ 60,044
Accumulated deficit $ (70,818) $ (61,067) $(54,396) $(45,909) $(41,318)
Stockholders'
Equity $ 50,381 $ 27,741 $ 18,753 $ 16,948 $ 18,726
- -----------------------------
(1) Subsequent to the Company's September 13, 1996 acquisition of Sun World,
the Company changed its fiscal year end from March 31 to December 31 in
order to align the Company's year end with that of Sun World.
Additionally, as a result of the Sun World Acquisition, the operations
for the nine months ended December 31, 1996 include the results of
operations of Sun World for the period September 14, 1996 through
December 31, 1996.
(2) In December 1990, the Company committed to a plan to eliminate all
agribusiness operations acquired as part of its 1988 merger with
Pacific Agricultural Services, Inc.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
On September 13, 1996, the Company acquired all of the outstanding
capital stock of Sun World. The Company's acquisition of Sun World was
accounted for using the purchase method of accounting. The Consolidated
Financial Statements include Sun World from the date of acquisition. In
addition, in 1996, the Company changed its fiscal year end from March 31
to December 31 in order to align the Company's year end with that of Sun
World.
RESULTS OF OPERATIONS
The consolidated financial statements set forth herein for the year
ended December 31, 1997, the nine months ended December 31, 1996, and the
year ended March 31, 1996, reflect the results of operations of the
Company and its wholly owned subsidiaries, Sun World (since September 14,
1996), and Southwest Fruit Growers ("SWFG") in which the Company is the
general partner and has an approximate 66.3 percent partnership interest.
As a result of the Sun World Acquisition and the change in fiscal
year end, direct comparisons of the Company's consolidated results of
operations for the year ended December 31, 1997 to the nine months ended
December 31, 1996 will not, in the view of management of the Company,
prove meaningful. Instead, a summary of the Sun World elements which
management of the Company believes is essential to an analysis of the
results of operations for such periods is presented below. For purposes
of this summary, the term Sun World will be used, when the context so
requires, with respect to the operations and activities of the Company's
Sun World subsidiary, and the term Cadiz will be used, when the context so
requires, with respect to those operations and activities of the Company
not involving Sun World.
The Company's net income or loss in future fiscal periods will be
largely reflective of (a) the operations of the Cadiz/Fenner Water Storage
and Supply Program and (b) the operations of Sun World. Sun World
conducts its operations through four operating divisions: farming,
packing, marketing and proprietary product development. Net income from
farming operations varies from year to year primarily due to yield and
pricing fluctuations which can be significantly influenced by weather
conditions, and are, therefore, generally subject to greater annual
variation than Sun World's other divisions. However, the geographic
distribution of Sun World's farming operations and the diversity of its
crop mix makes it unlikely that adverse weather conditions would affect
all of Sun World's properties or all of its crops in any single year.
Nevertheless, net profit from Sun World's packing, marketing and
proprietary product development operations tends to be more consistent
from year to year than net profit from Sun World's farming operations. As
such, Sun World continues to strategically add volume in the packing and
marketing areas that will compliment Sun World's in-house production or
fill in contra-seasonal marketing windows. Sun World is also actively
exploring various domestic and international opportunities to license
selected proprietary fruit varieties.
The following discussion contains trend analysis and other forward-
looking statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Actual results could differ materially from those
projected in the forward-looking statements throughout this document.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
- -----------------------------------------------------------------------
1996
- -----
The Company's agricultural operations are impacted by the general
seasonal trends that are characteristic of the agricultural industry. Sun
World has historically received the majority of its net income during the
months of June to October following the harvest and sale of its table
grape and treefruit crops. Due to this concentrated activity, Sun World
has, therefore, historically incurred a loss with respect to its
agricultural operations in the other months during the year.
During 1997, atypical weather conditions resulted in much higher
than normal crop yields for table grapes and treefruit crops, therefore
resulting in lower prices throughout the industry. However, Sun World's
proprietary products, such as Superior Seedless(TM) table grapes and Black
Diamond(TM) plums, allowed Sun World to continue to command a price
premium to the overall market which has helped mitigate the difficult
market conditions industry-wide.
The table below sets forth, for the periods indicated, the results
of operations for the Company's four main operating divisions (before
elimination of any interdivisional charges) as well as the categories of
costs and expenses incurred by the Company which are not included within
the divisional results (in thousands):
Nine Months
Year Ended Ended
December 31, December 31,
1997 1996
---- ----
Divisional net income:
Farming $ 7,839 $ 3,867
Packing 8,017 726
Marketing 4,126 666
Proprietary product development 1,568 718
------- -------
21,550 5,977
Landfill prevention activities 683 394
General and administrative 9,832 5,979
Litigation benefit (3,780) -
Depreciation and amortization 7,745 1,039
Interest expense, net 15,608 5,203
Income tax benefit - (641)
-------- -------
Net loss $ (8,538) $ (5,997)
======== ========
FARMING OPERATIONS. The Company farms over 19,000 acres of
agricultural properties, which are primarily dedicated to producing
permanent commercial crops. Revenues during the year ended December 31,
1997 resulted primarily from the harvest of table grapes, treefruit, sweet
red and yellow peppers and seedless watermelons from the San Joaquin
Valley; table grapes, sweet red and yellow peppers and seedless
watermelons from the Coachella Valley; lemons from the Cadiz and Blythe
ranches; as well as sweet red and yellow peppers from the California
coastal operations. Although yields for these crops were higher than
normal, similar high crop yields throughout the industry resulted in lower
prices. As Sun World is able to command a premium price for its
proprietary products such as Superior Seedless(TM) table grapes and Black
Diamond(TM) plums, the impact of the industry-wide lower prices have been
somewhat mitigated. Net income from farming operations totaled $7.8
million for the year ended December 31, 1997 based upon revenues of $77.3
million offset by farming expenses of $69.5 million. Net income from
farming operations for the nine months ended December 31, 1996, which
included the operations of Sun World subsequent to the acquisition from
September 14, 1996 to December 31, 1996, totaled $3.9 million on revenues
of $16.5 million and expenses of $12.6 million.
PACKING OPERATIONS. During 1997, Sun World's four packing and
handling facilities contributed $23.1 million in revenues offset by $15.1
million in expenses resulting in $8.0 million in net income. During the
year, Sun World packed 4.1 million units and moved an additional 5.1
million units through the cold storage facilities for a total of 9.2
million units processed through the packing operations. Products packed
or handled during the year primarily consisted of Sun World-grown table
grapes, treefruit, sweet red and yellow peppers, seedless watermelons and
lemons as well as table grapes and citrus products packed for third party
growers. The 1996 net income of $0.7 million from packing operations
related to the results of Sun World from September 14, 1996 to December
31, 1996 in which Sun World generated packing revenues of $4.7 million and
expenses of $4.0 million.
MARKETING OPERATIONS. Sun World's marketing operations include
selling, merchandising and promoting Sun World grown products, as well as
providing these services for third party growers. During the year ended
December 31, 1997, approximately 12.2 million units were sold primarily
consisting of Sun World-grown table grapes, treefruit, sweet red and
yellow peppers, seedless watermelons and lemons; and table grapes,
seedless watermelon, and citrus from domestic third party growers. These
unit sales resulted in marketing revenue of $9.0 million while marketing
expenses totaled $4.9 million for the year ended December 31, 1997
resulting in a net income from marketing operations of $4.1 million. The
1996 net income from marketing operations related to the results of Sun
World from September 14, 1996 to December 31, 1996 in which Sun World
generated marketing revenues of $2.5 million offset by expenses of $1.8
million resulting in net profits of $0.7 million.
PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a long history of
product innovation, and its research and development center maintains a
fruit breeding program that has introduced dozens of proprietary fruit
varieties during the past five years. In addition, Sun World has a 50%
interest in American Sunmelon, a partnership engaged in proprietary
development, production and marketing of seedless watermelon seed. During
the year ended December 31, 1997, net income from proprietary product
development was $1.6 million consisting of revenues of $2.4 million ($1.3
million from American Sunmelon) offset by expenses of $0.8 million. The
net income of $0.7 million for the nine months ended December 31, 1996
related primarily to the operations of American Sunmelon from September
14, 1996 to December 31, 1996.
LANDFILL PREVENTION ACTIVITIES. The Company is engaged in
opposition to the proposed construction and operation of a landfill to be
located adjacent to its Cadiz/Fenner Valley properties, and has filed
three lawsuits seeking, among other things, to set aside approvals for the
landfill project and monetary damages. See Item 3, "Legal Proceedings."
During the year ended December 31, 1997, expenses incurred in connection
with activities in opposition to the project, such as litigation costs and
professional fees and expenses totaled $0.7 million as compared to $0.4
million during the nine months ended December 31, 1996.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
during the year ended December 31, 1997 and the nine months ended December
31, 1996 consisted primarily of corporate operating expenses, professional
fees and salaries. These expenses increased by $3.9 million in 1997 as
compared to the nine months ended December 31, 1996 period primarily due
to the inclusion of a full year of operations for Sun World in 1997.
LITIGATION BENEFIT. Prior to the acquisition of Sun World by the
Company, the Internal Revenue Service (IRS) had filed claims against Sun
World and certain of its subsidiaries, (collectively "the Sun World
Claimants") for taxes refunded for workers that the IRS claims were
employees. The Sun World Claimants contend that the workers are excluded
from the definition of employment under the Internal Revenue Code. On
January 21, 1998, the District Court ruled in favor of the Sun World
Claimant who had the largest outstanding claim. Management believes that
the likelihood of an unfavorable future outcome with regard to this matter
is remote. Accordingly, Sun World released $3.8 million of reserves
related to this matter at December 31, 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
for the year ended December 31, 1997 totaled $7.7 million compared to $1.0
million for the nine months ended December 31, 1996. The increase is
attributable to depreciation relating to the acquired Sun World assets.
INTEREST EXPENSE. As a result of the acquisition of Sun World, net
interest expense totaled $15.6 million during the year ended December 31,
1997 compared to $5.2 million during the nine months ended December 31,
1996. The following table summarizes the components of net interest
expense for the two periods (in thousands):
Year Nine Months
Ended Ended
December 31, December 31,
1997 1996
---- -----
Interest on outstanding debt - Sun World $ 13,446 $ 4,411
Interest on outstanding debt - Cadiz 875 782
Amortization of financing costs 1,879 746
Interest income (592) (736)
-------- -------
$ 15,608 $ 5,203
======== =======
The increase in interest on outstanding debt during 1997 is
attributable to the long-term debt acquired as part of the Sun World
acquisition. Financing costs, which include legal fees and extension
fees, are amortized over the life of the debt agreement.
NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1996
During the nine months ended December 31, 1996, the Company incurred
a net loss of $6.0 million compared to a loss of $8.5 million during the
year ended March 31, 1996. The following table summarizes the net loss
for both periods (dollars in thousands):
Nine Months Year
Ended Ended
December 31, March 31,
1996 1996
---- ----
Revenues $ 23,780 $ 1,441
-------- -------
Costs and expenses:
Cost of sales 17,725 1,649
Landfill prevention activities 394 1,919
General and administrative 6,057 3,506
Depreciation and amortization 1,039 1,067
Interest expense, net 5,203 1,787
Income tax benefit (641) -
--------- -------
Net loss $ (5,997) $ (8,487)
========= ========
The operations of Sun World for the period September 14 through
December 31, 1996 are included above; however, due to the seasonality of
the operations of Sun World, this is not indicative of the results of
operations should a full fiscal year of activity be included.
REVENUES. During the nine months ended December 31, 1996, the
Company recorded revenues of $23.8 million, of which $22.5 million
resulted from Sun World operations, all of which were recognized from
September 14, 1996 (the date subsequent to the Sun World Acquisition)
through December 31, 1996. The balance of the Company's revenues were
recognized from the development activities of Cadiz, consisting primarily
of crop proceeds from the Cadiz ranch.
COST OF SALES. Cost of sales for the nine months ended December 31,
1996 of $17.7 million consisted of all direct costs and an allocation of
indirect costs related to revenue generated by the Company, $16.4 million
of which related to Sun World activities, for the period September 14,
1996 through December 31, 1996 as compared to $1.7 million for Cadiz
during the year ended March 31, 1996.
LANDFILL PREVENTION ACTIVITIES. During the nine months ended
December 31, 1996, expenses incurred in connection with activities in
opposition to the proposed landfill, such as litigation costs and
professional fees and expenses totaled $0.4 million as compared to $1.9
million during the fiscal year ending March 31, 1996.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
during both the nine months ended December 31, 1996 and the fiscal year
ended March 31, 1996 consisted primarily of corporate operating expenses,
professional fees and salaries as well as expenses incurred in the land
and water resource development of the Company's landholdings. These
expenses increased by $2.6 million during the nine months ended December
31, 1996 as compared to the year ended March 31, 1996 primarily as a
result of the Sun World Acquisition and the addition of corporate and
administrative costs related to Sun World in the amount of $2.5 million
for the period September 14, 1996 through December 31, 1996. During the
period ended December 31, 1996, Cadiz was awarded and received
approximately $0.4 million as final payment toward full reimbursement of
its legal fees and costs incurred in defending a legal action which was
netted against the related legal fees incurred.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization totaled
$1.0 million for the nine months ended December 31, 1996 as compared to
$1.1 million for the year ended March 31, 1996. The decrease is primarily
attributable to reduced amortization for Cadiz.
INTEREST EXPENSE. Net interest expense totaled $5.2 million during
the nine months ended December 31, 1996 as compared to $1.8 million during
the year ended March 31, 1996. The following table summarizes the
components of net interest expense for the nine months ended December 31,
1996 and the fiscal year ended March 31, 1996 (dollars in thousands):
Nine Months Year
Ended Ended
December 31, March 31,
1996 1996
---- -----
Interest expense on outstanding debt $ 5,193 $ 1,000
Amortization of financing costs 746 841
Interest income (736) (54)
------- -------
5,203 $ 1,787
======= =======
The increase in interest expense on outstanding debt during the
period ended December 31, 1996 is attributable to the long-term debt
acquired as part of the Sun World Acquisition. Interest income increased
due to the average Sun World cash balance of over $30 million maintained
during the fourth calendar quarter of 1996.
INCOME TAX BENEFIT. An income tax benefit of $0.6 million arose
during the nine months ended December 31, 1996 as a result of utilization
of net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES. With the
completion of the offering by Sun World of $115.0 million in secured notes
and the issuance of revolving credit facilities for both Sun World and
Cadiz, as further discussed below, the Company believes it will be able to
meet its working capital needs without looking to additional outside
funding sources, although no assurances can be made. See "Current
Financing Arrangements" below.
In order to provide additional availability of working capital at the
parent level and to provide a readily available funding mechanism for
add-on acquisition opportunities, Cadiz entered into a three year $15 million
revolving credit facility with ING Baring (U.S.) Capital Corporation
("ING") (the "Cadiz ING Revolver") in November 1997. As of December 31,
1997, $5.0 million was outstanding under the Cadiz ING Revolver.
On April 16, 1997, Sun World completed a private placement of $115.0
million in secured 11-1/4% Series A First Mortgage Notes (the "Sun World
Notes"). The notes have subsequently been exchanged for Series B First
Mortgage Notes registered under the Securities Act of 1933 which are
publicly traded. The proceeds from the Sun World Notes, when combined with
Sun World's existing cash and cash made available under a one year $30
million revolving credit facility with Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A. ("Rabobank") (the "Sun World Revolver") entered into
by Sun World concurrently with the issuance of the Sun World Notes, were
used to retire Sun World's existing indebtedness to John Hancock Mutual
Life Insurance Company and Caisse Nationale de Credit Agricole, acting
through its Grand Cayman branch, as well as Cadiz' existing indebtedness
to Rabobank (referred to hereinafter as the "Debt Refinancing" ).
Management believes that the terms of Sun World's debt facilities
following the issuance of the Sun World Notes are more favorable to Sun
World than the terms of the retired debt facilities. See "Outlook,"
below.
Under Sun World's historical working capital cycle, working capital
is required primarily to finance the costs of growing and harvesting
crops, which occurs from January through September with a peak need in
June. Sun World harvests and sells the majority of its crops during the
period from June through October, when it receives the majority of its
revenues. In order to bridge the gap between incurrence of expenditures
and receipt of revenues, large cash outlays are required each year. Prior
to its Debt Refinancing, Sun World's cash balance was sufficient to
provide for these seasonal working capital requirements without the need
for additional outside funding. However, Sun World determined that
utilizing a substantial portion of its cash on hand to pay down long-term
debt and concurrently entering into the Sun World Revolver to meet its
seasonal working capital needs was a more effective use of its financial
resources. Peak borrowings under the Sun World Revolver during the 1997
season were $18.2 million. As of December 31, 1997, no amount was
outstanding under the Sun World Revolver. Sun World has replaced the Sun
World Revolver with a $25 million one year facility which, in management's
view, provides more favorable terms. See "Current Financing Arrangements -
Sun World Obligations" below.
As of December 31, 1997, Cadiz had approximately $14.8 million of
indebtedness outstanding and $10.0 million borrowing availability under
the Cadiz ING Revolver. Sun World had $118.3 million of indebtedness
outstanding and $30.0 million of borrowing availability under the Sun
World Revolver.
CURRENT FINANCING ARRANGEMENTS.
- --------------------------------
CADIZ OBLIGATIONS
As Cadiz has not received significant revenues from its water
resource activity to date, Cadiz has been required to obtain financing to
bridge the gap between the time water resource development expenses are
incurred and the time that revenue will commence. Historically, Cadiz has
addressed these needs primarily through secured debt financing
arrangements with its lenders, private equity placements and the exercise
of outstanding stock options.
As of December 31, 1997, Cadiz was obligated to ING for approximately
$9.8 million under a senior term loan facility. The maturity date of the
ING obligation is April 30, 1998 (with the interest rate LIBOR plus 200
basis points, payable at LIBOR only semi-annually, with the remaining
accrued interest added to principal). ING also granted to Cadiz the right
to obtain two additional one-year extensions. Upon exercise of the first
and second extension, Cadiz would be required to issue certain warrants to
ING and the interest rate would be further adjusted. Currently, ING holds
a senior deed of trust on substantially all of Cadiz' non-Sun World
related property. Cadiz expects to exercise the first one-year extension
under the senior term loan facilities.
In November 1997, the Company entered into the Cadiz ING Revolver to
provide additional availability of working capital at the parent level and
to provide a readily available funding mechanism for add-on acquisition
opportunities. The Cadiz ING Revolver is secured by a second lien on
all of the non-Sun World assets of the Company. Principal is due on
December 31, 2000. Interest is payable semi-annually at 8% if paid in
cash and at 10% if paid in common stock of the Company. The Company had
$5.0 million outstanding under the Cadiz ING Revolver at December 31,
1997. The Company issued 200,000 warrants in connection with the initial
borrowings at $7.00, the market price at issuance. The agreement calls
for the issuance of certain additional warrants if and when the remaining
$10.0 million is drawn.
As the Company continues to actively pursue its business strategy,
additional financing specifically in connection with the Company's water
programs will be required. The nature of such additional financing for
the water storage and supply programs (including the Cadiz/Fenner Water
Storage and Supply Program - see Item 2 - Water Resource Development) will
depend upon how the development and ownership of each project is
ultimately structured, and how much of each project's funding will be the
Company's responsibility. Should the Company determine that it will be
able to maximize its profit potential through construction and ownership
of the water storage and/or delivery systems used in the program, the
Company will obtain appropriate long-term financing. Based upon the
results of analyses performed by an investment banking firm retained by
the Company, management believes that several alternative long-term
financing arrangements are available to the Company which will be further
evaluated once funding responsibility and ownership alternatives are
determined.
SUN WORLD OBLIGATIONS
The Sun World Notes, which were issued in the principal amount of
$115.0 million on April 16, 1997 and will mature on April 15, 2004, accrue
interest at the rate of 11-1/4% per annum. Interest only is payable semi-
annually on April 15 and October 15 of each year, commencing October 15,
1997. The Sun World Notes are secured by a first lien (subject to certain
permitted liens) on substantially all of the assets of Sun World and its
subsidiaries, other than growing crops, crop inventories and accounts
receivable and proceeds thereof, which secure the Sun World Revolver, and
certain real property pledged to third parties. The Sun World Notes are
also secured by the guarantee of Cadiz and the pledge by Cadiz of all of
the stock of Sun World.
Commencing October 14, 1997, Sun World offered to exchange (the
"Exchange Offer") up to $115.0 million aggregate principal amount of its
11-1/4% Series B First Mortgage Notes (the "Exchange Notes") for $115.0
million aggregate principal amount of the Sun World Notes. The Exchange
Notes are registered under the Securities Act of 1933 and have the same
terms as the Sun World Notes. The exchange of all of the Sun World Notes
was completed on November 12, 1997.
In April, 1997, Sun World entered into the Sun World Revolver which
is guaranteed by Cadiz. Amounts borrowed under the Sun World Revolver
accrue interest at either prime plus 1.50% or LIBOR plus 2.50%, at Sun
World's election, with an additional .50% payable for advances on eligible
inventory above specified levels. As of December 31, 1997, no amount was
outstanding under the Sun World Revolver. To meet working capital needs
for 1998, Sun World has replaced the existing Sun World Revolver with a
one year $25 million revolving credit facility (the "New Revolver") that
provides more favorable terms than the existing Sun World Revolver.
Interest on the New Revolver will accrue at either prime plus 1% or LIBOR
plus 2.50% at Sun World's election.
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES. Cash provided by
operating activities totaled $0.2 million for the year ended December 31,
1997 as compared to cash used for continuing operating activities of $0.2
million for the nine months ended December 31, 1996. The increase in cash
generated from operating activities primarily resulted from the inclusion
of Sun World's operations in the entire 1997 period. Significant working
capital changes included a decrease in accounts receivable of $1.6 million
primarily attributable to the lower FOB prices experienced due to atypical
weather conditions resulting in higher than normal crop yields industry
wide offset by an increase in accounts payable of $0.7 million and accrued
liabilities of $1.3 million (primarily related to accrued interest on the
Sun World Notes).
CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES. Cash used for
investing activities totaled $2.9 million during the year ended December
31, 1997 as compared to cash provided by investing activities of $6.7
million during the nine months ended December 31, 1996. The Company
invested $4.7 million in developing crops and $2.7 million in the purchase
of land, property, plant and equipment and in furtherance of its water
storage and supply programs. Additionally, the Company received proceeds
of $2.8 million from the disposal of underproducing Sun World assets
through an asset disposal program. In addition, partnership distributions
received by Sun World totaled $1.2 million and other assets decreased by
$0.5 million.
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES. Cash used for
financing activities totaled $25.3 million for the year ended December 31,
1997 as compared to cash provided by financing activities of $21.7 million
during the nine months ended December 31, 1996. Principal payments on
long-term debt of $141.2 million were made from the proceeds from the Debt
Refinancing. Costs related to debt issuances totaled approximately $5.8
million. Net proceeds from the issuance of stock including the exercise
of stock options and warrants totaled $1.7 million during the year ended
December 31, 1997.
OUTLOOK
The Company is actively pursuing the development of its water
resources. Specifically, on December 23, 1997, the Company announced an
interim agreement with the Metropolitan Water District of Southern
California ("MWD") to develop principles and terms for a water storage and
supply program on the Company's land in the Cadiz and Fenner valleys of
eastern San Bernardino County (the "Cadiz/Fenner Water Storage and Supply
Program"). The proposed long-term program will involve the conveyance of
water from MWD's Colorado River Aqueduct, during periods of excess supply,
for storage in the aquifers underlying the Company's properties. The
water will be delivered through a 35-mile transmission pipeline having a
capacity of 100,000 acre-feet per year. Total storage capacity is
expected to be approximately 500,000 acre-feet. During periods of
shortage, the stored water will be extracted by wells and returned to the
Colorado River Aqueduct by gravity flow through the transmission pipeline.
The program will also have the ability to transfer high quality indigenous
groundwater for distribution throughout MWD's service area. The program,
which is subject to regulatory approvals, could be operational by the year
2000. The Company anticipates that the revenue stream generated by the
program will be sufficient to meet the then existing operating
requirements of the Company, although no assurances can be given.
In addition to the development of its water resources, the Company is
actively involved in further agricultural development and reinvestment in
its landholdings. Such development will be systematic and in furtherance
of the Company's business strategy to provide for maximization of the
value of its assets. The Company also continually evaluates acquisition
opportunities which are complimentary to its current portfolio of
landholdings, water resources and agricultural operations.
The Company believes that, based upon current levels of operations
and anticipated growth, Sun World can adequately service its indebtedness
and meet its seasonal working capital needs utilizing available internal
cash, the New Revolver and, if necessary, through an intercompany revolver
with Cadiz. Cadiz expects to be able to meet its ordinary working capital
needs, in the short-term, through a combination of quarterly management
fee payments from Sun World, payments from Sun World under an agricultural
lease whereby Sun World now operates the Company's 1,600 acres of developed
agricultural property at Cadiz, California, draws from the Cadiz ING
Revolver, and the possible exercise of outstanding stock options. Except
for the foregoing, additional intercompany cash payments between Sun World
and Cadiz are subject to certain restrictions under its current lending
arrangements.
Since the Company's inception, inflation has not had a material
impact either on the costs of materials required in the development of
property and/or on labor costs. Similarly, the value of the Company's
real property has not been materially impacted by inflation. In the event
the rate of inflation should accelerate in the future, the Company
believes the increase in value of its real property will exceed any
increases in costs attributable to inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is submitted in response to
Part IV hereof. See the Index to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this item is incorporated herein by reference
to the definitive proxy statement involving the election of directors which
the Company intends to file with the Commission pursuant to Regulation 14A
under the Securities and Exchange Act of 1934 not later than 120 days after
December 31, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated herein by reference
to the definitive proxy statement involving the election of directors which
the Company intends to file with the Commission pursuant to Regulation 14A
under the Securities Exchange Act of 1934 not later than 120 days after
December 31, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this item is incorporated herein by reference
to the definitive proxy statement involving the election of directors which
the Company intends to file with the Commission pursuant to Regulation 14A
under the Securities Exchange Act of 1934 not later than 120 days after
December 31, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this item is incorporated herein by reference
to the definitive proxy statement involving the election of directors which
the Company intends to file with the Commission pursuant to Regulation 14A
under the Securities Exchange Act of 1934 not later than 120 days after
December 31, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. See Index to Consolidated Financial
Statements.
2. Financial Statement Schedules. See Index to Consolidated
Financial Statements.
3. Exhibits.
The following exhibits are filed or incorporated by reference as part
of this Annual Report:
3.1 Certificate of Incorporation of the Company, as amended(2)
3.2 Amendment to Certificate of Incorporation dated
November 8, 1996(3)
3.3 Bylaws of the Company, as amended to date(4)
3.4 Amended and Restated Certificate of Incorporation of Sun World,
Inc.(12)
3.5 Certificate of Merger of Sun World International, Inc. into Sun
World, Inc.(12)
3.6 Agreement and Plan of Merger of Sun World, Inc. and Sun World
International, Inc.(12)
3.7 Amended and Restated Bylaws of Sun World International, Inc.(12)
4.1 Specimen Form of Stock Certificate for the Company's registered
stock(4)
4.2 Certificate of Designations of 6% Convertible Series A Preferred
Stock(1)
4.3 Certificate of Designations of 6% Convertible Series B Preferred
Stock(5)
4.4 Certificate of Designations of 6% Convertible Series C Preferred
Stock(1)
4.5 Indenture dated as of April 16, 1997 among Sun World as issuer,
Sun World and certain subsidiaries of Sun World as guarantors,
and IBJ Schroder Bank & Trust Company as Trustee, for the
benefit of holders of 11-1/4% First Mortgage Notes due 2004
(including as Exhibit A to the Indenture, the form of the
Global Note and the form of each Guarantee)(10)
4.6 Form of Amendment to Indenture dated as of October 9, 1997(14)
4.7 Form of Amendment to Indenture dated as of January 23, 1998
10.1 Pacific Agricultural Holdings, Inc. 1988 Nonstatutory Stock
Option Plan(6)
10.2 The Company's 1996 Stock Option Plan(8)
10.3 Form of Limited Partnership Agreement of Southwest Fruit
Growers, L.P.(7)
10.4 Farm Management Agreement dated as of March 28, 1990 between
the Company and Southwest Fruit Growers, L.P.(7)
10.5 Promissory Note in the amount of $3,486,868 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P. in
favor of the Company (Hyder Note)(7)
10.6 Promissory Note in the amount of $4,934,922 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P. in
favor of the Company (Cadiz Note)(7)
10.7 Promissory Note in the amount of $3,141,344 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P. in
favor of the Company (Farming Note)(7)
10.8 Amended and Restated Credit Agreement between Sun World
International, Inc. and Caisse Nationale de Credit Agricole
dated September 13, 1996(3)
10.9 Promissory Note between Sun World International, Inc. and
Caisse Nationale de Credit Agricole dated September 13, 1996(3)
10.10 New Hancock Credit Agreement between Sun World International,
Inc. and John Hancock Mutual Life Insurance Company dated
September 13, 1996(3)
10.11 Secured Promissory Note between Sun World International, Inc.
and John Hancock Mutual Life Insurance Company dated
September 13, 1996(3)
10.12 Form of Employment Agreement dated September 13, 1996 between
Sun World, the Company and Timothy J. Shaheen(9)
10.13 Form of Employment Agreement dated September 13, 1996
between Sun World, the Company and Stanley E. Speer(9)
10.14 Form of Sun World Executive Officer Employment Agreement(11)
10.15 Credit Agreement between the Company and ING Baring (U.S.)
Capital Corporation dated November 25, 1997
10.16 Revolving Credit Note between the Company and ING Baring (U.S.)
Capital Corporation dated November 25, 1997
10.17 Agreement between Metropolitan Water District of Southern
California and Cadiz Land Company, Inc. to Develop Principles
and Terms for Agreement and to verify Program Feasibility
10.18 Employment Agreement between Cadiz Land Company, Inc. and Keith
Brackpool dated February 1, 1998
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants (included in Part IV of the
Form 10-K)
27.1 Financial Data Schedule
- ------------------------
(1) Previously filed as Exhibit to the Company's Report on Form 8-K
dated September 13, 1996
(2) Previously filed as Exhibit to the Company's Registration
Statement on Form S-1 (Registration No. 33-75642) declared
effective May 16, 1994
(3) Previously filed as Exhibit to the Company's Report on Form 10-Q
for the quarter ended September 30, 1996
(4) Previously filed as Exhibit to the Company's Report on Form 8-K
dated May 6, 1992
(5) Previously filed as Exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1996
(6) Previously filed as Exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1988
(7) Previously filed as Exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1990
(8) Previously filed as Exhibit A to the Company's Proxy Statement
relating to the Annual Meeting of Stockholders held on November 8,
1996
(9) Previously filed as Exhibit to Cadiz' Transition Report on Form
10-K for the nine months ended December 31, 1996
(10) Previously filed as Exhibit to Amendment No. 1 to Cadiz' Form S-1
Registration Statement No. 333-19109
(11) Previously filed as Exhibit to Cadiz' Report on Form 10-Q for the
quarter ended March 31, 1997
(12) Previously filed as Exhibit to Sun World's Form S-4 Registration
Statement No. 333-31103
(13) Previously filed as Exhibit to Amendment No. 1 to Sun World's Form
S-4 Registration Statement No. 333-31103
(14) Previously filed as Exhibit to Amendment No. 2 to Sun World's Form
S-4 Registration Statement No. 333-31103
(b) Reports on Form 8-K
1. Report on Form 8-K dated December 23, 1997 providing a Press Release
issued by the Company announcing the signing of an interim Agreement
with the Metropolitan Water District of Southern California.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereto duly authorized.
CADIZ LAND COMPANY, INC.
By: /s/ Keith Brackpool By: /s/ Stanley E. Speer
---------------------------- --------------------------
Keith Brackpool, President & Stanley E. Speer,
Chief Executive Officer and Director Chief Financial Officer
Date: March 26, 1998 Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
Name and Position Date
/s/ Dwight Makins Date: March 26, 1998
------------------------------------
Dwight Makins, Chairman of the Board
and Director
/s/ Keith Brackpool Date: March 26, 1998
------------------------------------
Keith Brackpool, President &
Chief Executive Officer
and Director (Principal Executive Officer)
/s/ Stanley E. Speer Date: March 26, 1998
--------------------------------------
Stanley E. Speer, Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Russ Hammond Date: March 26, 1998
--------------------------------
Russ Hammond, Director
/s/ Murray H. Hutchison Date: March 26, 1998
--------------------------------
Murray Hutchison, Director
/s/ Mitt Parker Date: March 26, 1998
--------------------------------
Mitt Parker, Director
CADIZ LAND COMPANY, INC.
Index to Consolidated Financial Statements
Page
------
FINANCIAL STATEMENTS:
Report of Independent Accountants. . . . . . . . . . . . . . . 28
Consolidated Statement of Operations for the
year ended December 31, 1997,
the nine months ended December 31, 1996 and
the year ended March 31, 1996 . . . . . . . . . . . . . . . 29
Consolidated Balance Sheet at December 31, 1997 and 1996 . . . 30
Consolidated Statement of Cash Flows for the
year ended December 31, 1997, the nine months ended
December 31, 1996 and the year ended March 31, 1996 . . . . 32
Consolidated Statement of Stockholders' Equity
for the year ended December 31, 1997, the
nine months ended December 31, 1996 and the
year ended March 31, 1996 . . . . . . . . . . . . . . . . . 33
Notes to the Consolidated Financial Statements . . . . . . . . 35
FINANCIAL STATEMENT SCHEDULES:
Schedule I - Condensed Financial Information of Registrant
for the year ended December 31, 1997 and
the nine months ended December 31, 1996 . . . . . . . . . . 52
Schedule II - Valuation and Qualifying Accounts
For the year ended December 31, 1997,
the nine months ended December 31, 1996 and the
year ended March 31, 1996 . . . . . . . . . . . . . . . . . 55
(Schedules other than those listed above have been omitted since they are
either not required, inapplicable, or the required information is included
on the financial statements or notes thereto.)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Cadiz Land Company, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the
financial position of Cadiz Land Company, Inc. and its subsidiaries at
December 31, 1997 and 1996, and the results of their operations and
their cash flows for the year ended December 31, 1997, the nine months
ended December 31, 1996 and for the year ended March 31, 1996, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
- --------------------------
PRICE WATERHOUSE LLP
Los Angeles, California
February 13, 1998
CADIZ LAND COMPANY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Year Nine Months Year
Ended Ended Ended
December 31, December 31, March 31,
(In thousands except per share data) 1997 1996 1996
------ ------ ------
Revenues $100,157 $ 23,780 $ 1,441
-------- --------- --------
Costs and expenses:
Cost of sales 76,566 17,725 1,649
Landfill prevention activities 683 394 1,919
General and administrative 11,873 6,057 3,506
Litigation benefit (3,780) - -
Depreciation and amortization 7,745 1,039 1,067
-------- ------ ------
Total costs and expenses 93,087 25,215 8,141
------- ------ ------
Operating profit (loss) 7,070 (1,435) (6,700)
Interest expense, net 15,608 5,203 1,787
-------- ------ ------
Loss before income taxes (8,538) (6,638) (8,487)
Income tax benefit - (641) -
------ ------ ------
Net loss (8,538) (5,997) (8,487)
Less: Preferred stock dividends (1,213) (674) -
Imputed dividend on
preferred stock - (2,451) -
------ ------ -------
Net loss applicable to common stock $ (9,751) $ (9,122) $ (8,487)
======== ========= =========
Net loss per common share $ (.33) $ (.44) $ (.48)
======== ========= =========
Weighted average shares outstanding 29,485 20,500 17,700
========= ========= ========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONSOLIDATED BALANCE SHEET
December 31,
Assets ($ in thousands): 1997 1996
---- ----
Current assets:
Cash and cash equivalents $ 5,298 $ 33,307
Accounts receivable, net 5,881 7,533
Inventories 13,838 14,121
Prepaid expenses and other 1,161 1,225
Assets held for sale - 6,534
------- --------
Total current assets 26,178 62,720
Investment in partnerships 6,327 6,104
Property, plant, equipment and
water programs, net 160,193 155,453
Other assets 10,351 6,513
------- --------
$ 203,049 $ 230,790
========= =========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONSOLIDATED BALANCE SHEET (CONTINUED)
Liabilities and Stockholders' Equity December 31,
($ in thousands): 1997 1996
------ ------
Current liabilities:
Accounts payable $ 8,517 $ 7,845
Accrued liabilities 6,114 4,762
Long-term debt, current portion 519 4,753
Other current liabilities - 591
------- --------
Total current liabilities 15,150 17,951
Long-term debt 131,689 149,111
Deferred income taxes 5,447 4,347
Other liabilities 382 4,209
Commitments and contingencies
Series A redeemable preferred stock -
$.01 par value($1,000 liquidation
value); 60,000 shares authorized;
shares issued and outstanding -
none at December 31, 1997 and
27,431 at December 31, 1996 - 27,431
Stockholders' equity:
Preferred stock - $.01 par value;
40,000 shares authorized;
shares issued and outstanding -
none at December 31, 1997 and
340 shares at December 31, 1996 - -
Common stock - $.01 par value;
45,000,000 shares authorized; shares
issued and outstanding - 32,646,661 at
December 31, 1997 and 23,445,868
at December 31, 1996 326 234
Additional paid-in capital 120,873 88,574
Accumulated deficit (70,818) (61,067)
-------- --------
Total stockholders' equity 50,381 27,741
------- -------
$ 203,049 $ 230,790
========== =========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Nine Months Year
Ended Ended Ended
December 31, December 31, March 31,
($ in thousands) 1997 1996 1996
---- ---- ----
Cash flows from operating activities:
Net loss $ (8,538) $ (5,997) $ (8,487)
Adjustments to reconcile net
loss to cash provided by (used for)
operating activities:
Depreciation and amortization 9,227 1,654 1,909
Litigation benefit (3,780) - -
Issuance of shares for service 470 - -
Interest capitalized to debt 315 481 474
Loss on disposal of assets 99 - -
Share of partnership operations (1,388) (838) -
Changes in operating assets and
liabilities:
Decrease (increase) in
accounts receivable 1,652 11,367 (379)
Decrease in inventories 570 1,000 -
Decrease (increase) in prepaid
expenses and other 64 (428) 13
Increase (decrease) in accounts payable 672 (6,798) 734
Increase in accrued liabilities 1,332 68 -
Decrease in other current liabilities (591) - -
Increase (decrease) in other liabilities 54 (674) -
------- ------- ------
Net cash provided by (used for)
operating activities 158 (165) (5,736)
Cash flows from investing activities:
Additions to property, plant and equipment (2,114) (895) (932)
Additions to water programs (551) (343) (732)
Additions to developing crops (4,725) (187) -
Proceeds from disposal of property,
plant and equipment 2,817 12,415 -
Partnership distributions 1,165 140 -
Acquisition of Sun World, net of
cash acquired - (4,474) (693)
Decrease in other assets 509 - -
------- ------- ------
Net cash (used for) provided
by investing activities (2,899) 6,656 (2,357)
------- ------- -------
Cash flows from financing activities:
Net proceeds from issuance of stock 1,690 37,761 10,292
Proceeds from issuance of long-term debt 120,089 - -
Principal payments on long-term debt (141,248) (16,428) (177)
Proceeds from short-term borrowings, net - 330 677
Debt issuance costs (5,799) - -
------- ------- -------
Net cash (used for) provided
by financing activities (25,268) 21,663 10,792
------- ------- ------
Net (decrease) increase in cash and
cash equivalents (28,009) 28,154 2,699
Cash and cash equivalents,
beginning of period 33,307 5,153 2,454
------- ------- ------
Cash and cash equivalents,
end of period $ 5,298 $ 33,307 $ 5,153
======= ======= ======
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Year Ended December 31, 1997, the Nine Months Ended December
31, 1996 and the Year Ended March 31, 1996
($ in thousands)
Total
Additional Accumu- Share-
Preferred Stock Common Stock Paid-in lated holders'
Shares Amount Shares Amount Capital Deficit Equity
------- ------- ------- ------- -------- ------- ------
Balance as of
March 31, 1995 - $ - 16,988,454 $ 170 $ 62,687 $ (45,909) $ 16,948
Issuance of
shares in
connection with
private
placements 2,114,157 21 9,911 9,932
Exercise of
stock options 145,000 1 359 360
Net loss (8,487) (8,487)
------ ----- ---------- ------ -------- -------- --------
Balance as of
March 31, 1996 - - 19,247,611 192 72,957 (54,396) 18,753
Exercise of
stock options
and warrants 335,000 3 939 942
Common stock
issued for
acquisition
of Sun World 1,153,908 12 3,576 3,588
Net proceeds
from private
placements
of preferred
stock 1,300 10,688 10,688
Cash dividends
paid on
conversion of
preferred stock (99) (99)
Dividends paid
in common
stock on
conversion of
preferred stock 28,777 127 (127) -
Accrued
dividends on
preferred stock (448) (448)
Conversion of
redeemable
preferred
stock to
common stock 53,332 1 199 200
Conversion of
preferred
stock to
common stock (960) 2,627,240 26 (26) -
Issuance of
stock
warrants
for services 114 114
Net loss (5,997) (5,997)
------ ----- ---------- ------ -------- -------- --------
Balance as
of December
31, 1996 340 $ - 23,445,868 $ 234 $ 88,574 $ (61,067) $ 27,741
====== ==== ========== ======= ========= ========= =========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
For the Year Ended December 31, 1997, the Nine Months Ended December
31, 1996 and the Year Ended March 31, 1996
($ in thousands)
Total
Additional Accumu- Share-
Preferred Stock Common Stock Paid-in lated holders'
Shares Amount Shares Amount Capital Deficit Equity
------- ----- -------- ------ --------- ---------- --------
Balance as
of December
31, 1996 340 $ - 23,445,868 $ 234 $ 88,574 $ (61,067) $ 27,741
Conversion
of redeemable
preferred
stock
to common
stock 7,314,917 73 27,358 27,431
Exercise of
stock options
and warrants 588,500 7 1,358 1,365
Common stock
issued to
satisfy Sun
World
purchase
liability 65,000 1 324 325
Preferred
dividends
paid with
common stock 361,251 3 1,714 1,717
Issuance of
warrants to
a lender 1,083 1,083
Stock issued
for services 75,000 1 329 330
Issuance of
stock for
refinancing 30,000 140 140
Conversion
of preferred
stock to
common
stock (340) 766,125 7 (7) -
Accrued
dividends on
preferred
stock (1,213) (1,213)
Net loss (8,538) (8,538)
----- ---- ---------- ------ --------- ---------- --------
Balance as
of December
31, 1997 - $ - 32,646,661 $ 326 $ 120,873 $ (70,818) $ 50,381
===== ==== =========== ====== ========= =========== ========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
The primary business of Cadiz Land Company, Inc. (the "Company") is
to acquire and develop water-related land and agricultural assets. The
Company has created an integrated and complementary portfolio of
landholdings, water resources, and agricultural operations located
throughout central and southern California which either possess sizable
assured supplies of water or can, in future years, utilize water
supplied from other Company properties. Management believes that, with
both the increasing scarcity of water supplies in California and the
increasing demand for water, the Company's access to water will provide
it with a competitive advantage both as a major agricultural concern and
as a supplier of water, which will lead to continued appreciation in the
value of the Company's portfolio.
On September 13, 1996, the Company significantly enhanced this
portfolio through its acquisition of Sun World International, Inc. and
its wholly-owned subsidiaries, collectively referred to as "Sun World",
and became a vertically integrated agricultural company. Sun World
farms more than 19,000 acres, primarily located in two major growing
areas of California, the San Joaquin Valley and the Coachella Valley.
Fresh produce, including table grapes, treefruit, peppers and
watermelons is marketed, packed and shipped to food wholesalers and
retailers throughout the United States and to more than 30 foreign
countries. As of December 31, 1997, Sun World owned and operated four
cold storage and/or packing facilities in California.
In addition, the acquisition of Sun World provided the Company with
valuable water rights throughout central and southern California. The
Company's landholdings, which now total approximately 56,200 acres, are
located adjacent to the major aqueduct systems of central and southern
California. The Company expects to utilize its resources to participate
in a broad variety of water storage and supply projects, including the
storage and supply of surplus water for public agencies which require
supplemental sources of water. On December 23, 1997, the Company signed
an interim agreement with the Metropolitan Water District of Southern
California to develop principles and terms for a long-term storage and
supply agreement at its Cadiz, California property. The program (the
"Cadiz/Fenner Water Storage and Supply Program") will provide storage
capacity of approximately 500,000 acre-feet and a dry-year source of up
to 100,000 acre-feet per year of high-quality water.
Although the development and management activities of the Company
are currently focused on agricultural operations (primarily through its
wholly-owned subsidiary, Sun World) and water resource development, the
Company will continue to develop and manage its land, water and
agricultural resources for their highest and best uses.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Sun World (since September
14, 1996), and Southwest Fruit Growers Limited Partnership, a limited
partnership ("SWFG") in which the Company is the general partner and has
an approximate 66.3 percent partnership interest. Allocable losses
incurred through the year ended March 31, 1991 served to eliminate the
minority interest in SWFG for accounting purposes. All material
intercompany balances and activity have been eliminated from the
consolidated financial statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
CHANGE IN YEAR END AND RECLASSIFICATIONS
In 1996, the Company changed its fiscal year end from March 31 to
December 31 in order to align the Company's year end with that of Sun
World. These financial statements reflect certain reclassifications
made to the prior period balances to conform with the current year
presentation.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION
The Company recognizes crop sale revenue after harvest and shipment
to customers. Packing revenues are recognized as units are packed.
Marketing commission revenues are recognized at the time of product
shipment.
RESEARCH AND DEVELOPMENT
Sun World incurs costs to research and develop new varieties of
proprietary products. Research and development costs are expensed as
incurred. Such costs were approximately $809,000 for the year ended
December 31, 1997 and $120,000 for the period from September 14, 1996 to
December 31, 1996.
NET LOSS PER COMMON SHARE
As of December 31, 1997, the Company adopted and applied
retroactively the new accounting standard for computing earnings per
share (EPS). This standard replaces primary EPS with basic EPS and
requires the dual presentation of basic and diluted EPS where
appropriate. Because the Company had a net loss for all periods
presented, basic EPS equals diluted EPS. Basic EPS is computed by
dividing the net loss, after deduction for preferred dividends either
accrued or imputed, if any, by the weighted average common shares
outstanding. As described in Note 13, the terms for conversion of the
Series B and C preferred stock issued during the nine months ended
December 31, 1996 afforded the holders a conversion price lower than the
market price of the common stock at the time of issuance in order to
recognize the sales and other market restrictions of the unregistered
common stock to be issued upon conversion. The difference between the
conversion price and market price has been reported as an imputed
dividend for purposes of calculating basic EPS, although no assets of
the Company will ever be expended. The imputed dividend of $2,451,000
had the effect of increasing the loss per share for the nine months
ended December 31, 1996 by $0.11. It should be noted that the imputed
dividend has been given no other accounting recognition in the financial
statements of the Company for that period and any subsequent period.
All shares for all series of preferred stock had been converted to
common stock as of December 31, 1997.
CASH AND CASH EQUIVALENTS
The Company considers all short-term deposits with an original
maturity of three months or less to be cash equivalents. The Company
invests its excess cash in deposits with major international banks and
short-term commercial paper and, therefore, bears minimal risk. Such
investments are stated at cost, which approximates fair value, and are
considered cash equivalents for purposes of reporting cash flows.
INVENTORIES
Growing crops, pepper seed, and materials and supplies are stated
at the lower of cost or market, on a first-in, first-out (FIFO) basis.
Growing crops inventory includes direct costs and an allocation of
indirect costs.
INVESTMENT IN PARTNERSHIPS
Sun World, through a wholly-owned subsidiary, owns a 50% interest
in American Sunmelon. American Sunmelon is engaged in proprietary
development, production, and marketing of seedless watermelon seed. Sun
World accounts for its partnership investment in American Sunmelon using
the equity method. During 1997, Sun World sold its 50% interest in the
Sun Date partnership.
PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS
Property, plant, equipment and water programs are stated at cost.
The Company capitalizes direct and certain indirect costs of
planting and developing orchards and vineyards during the development
period, which varies by crop and ranges from three to seven years.
Depreciation commences in the year commercial production is achieved.
Permanent land development costs, such as acquisition costs,
clearing, initial leveling costs and other costs required to bring the
land into a suitable condition for general agricultural use, are
capitalized and not depreciated since these costs have an indeterminate
useful life.
Depreciation is provided using the straight-line method over the
estimated useful lives of the assets, generally ten to forty-five years
for land improvements and buildings, three to twenty-five years for
machinery and equipment, and five to thirty years for permanent crops.
Water rights and water storage and supply programs are stated at
cost. All costs directly attributable to the development of such
programs are being capitalized by the Company. These costs, which are
expected to be recovered through future revenues, consist of direct
labor, drilling costs, consulting fees for various engineering,
hydrological, environmental and feasibility studies, and other
professional and legal fees.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company annually evaluates its long-lived assets, including
intangibles, for potential impairment. When circumstances indicate that
the carrying amount of the asset may not be recoverable, as demonstrated
by estimated future cash flows, an impairment loss would be recorded
based on fair value.
OTHER ASSETS
As a result of a merger in May 1988 between two companies which
eventually became known as Cadiz Land Company, Inc., an excess of
purchase price over net assets acquired in the amount of $7,006,000 was
recorded. This amount is being amortized on a straight-line basis over
thirty years. Accumulated amortization was $2,259,000 and $2,026,000 at
December 31, 1997 and December 31, 1996, respectively.
Capitalized loan fees represent costs incurred to obtain debt
financing. Such costs are amortized over the life of the related loan.
At December 31, 1997, the majority of capitalized loan fees relate to
the issuance of the First Mortgage Notes described in Note 10.
INCOME TAXES
Income taxes are provided for using an asset and liability approach
which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences
between the financial statement and tax bases of assets and liabilities
at the applicable enacted tax rates. A valuation allowance is provided
when it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest during the year ended December 31, 1997, the
nine months ended December 31, 1996 and the fiscal year ended March 31,
1996 was $12,452,000, $3,892,000 and $455,000, respectively.
NOTE 3 - ACQUISITION OF SUN WORLD INTERNATIONAL, INC.
On September 13, 1996, the Company acquired all of the stock of a
reorganized Sun World. Sun World and certain subsidiaries had filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code
on October 3, 1994. The acquisition of Sun World was accounted for
under the purchase method of accounting. Accordingly, the results of
operations of Sun World have been included in the consolidated financial
statements since the date of acquisition. The total purchase price
consisted of the following: (i) $179 million of assumed bankruptcy
related obligations, including $156 million of restructured secured debt
with Sun World's existing lenders (of which $5.5 million was paid by
Cadiz concurrent with the acquisition), (ii) $11 million of ongoing
trade and other accrued liabilities which were assumed by Cadiz, (iii)
$3.2 million of direct acquisition costs, including 1,500 shares of
Redeemable Series A Preferred Stock valued at $1,000 per share; and (iv)
cash and stock of approximately $40 million, including a $15 million
capital contribution to Sun World which was made with the intent of
eliminating the requirement for Sun World to have any additional debt
facilities beyond those owed to its existing secured creditors. The
final effect of allocating the total purchase price to the net assets
acquired based on their estimated fair values is summarized as follows
(dollars in thousands):
Cash $32,113
Assets held for sale 18,049
Other current assets 44,997
Investments in partnerships 5,424
Property, plant and equipment 130,885
Other assets 3,409
-------
Total assets 234,877
-------
Prepetition bankruptcy claims payable (13,164)
Other current liabilities (16,477)
Long-term debt (151,783)
Other liabilities (10,170)
-------
Total liabilities (191,594)
--------
Net assets acquired $43,283
=======
No goodwill was recognized as a result of the acquisition. The
above purchase price allocation reflects certain changes made in 1997 to
estimated fair values used in the initial accounting for the acquisition
of Sun World. The net effect of these changes resulted in approximately
$5.7 million of permanent crops being reclassified to land based on
final appraisals received in 1997.
NOTE 4 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (dollars in
thousands):
December 31,
1997 1996
---- ----
Trade receivables $ 4,131 $ 4,200
Due from unaffiliated growers 535 1,153
Other 1,502 2,660
------- -------
6,168 8,013
Less allowance for doubtful accounts (287) (480)
------- -------
$ 5,881 $ 7,533
======= =======
Substantially all domestic receivables are from large national and
regional supermarket chain stores and produce brokers and are unsecured.
Amounts due from unaffiliated growers represent receivables for harvest
advances and for services (harvest, haul and pack) provided on behalf of
growers under agreement with Sun World and are recovered from proceeds
of product sales. Other receivables primarily include wine grape sales
and other miscellaneous receivables.
Approximately $13.6 and $3.8 million of sales made by Sun World for
the year ended December 31, 1997 and for the period September 14, 1996
through December 31, 1996, respectively, are attributable to one
national retailer. Export sales accounted for approximately 11.4% and
20.6% of the Company's sales for the year ended December 31, 1997 and
for the period September 14, 1996 to December 31, 1996, respectively.
NOTE 5 - INVENTORIES
Inventories consist of the following (dollars in thousands):
December 31,
1997 1996
---- -----
Growing crops $10,124 $10,299
Pepper seed 1,648 2,018
Harvested product 169 267
Materials and supplies 1,897 1,537
------- -------
$13,838 $14,121
======= =======
NOTE 6 - PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS
Property, plant, equipment and water programs consist of the
following (dollars in thousands):
December 31,
1997 1996
---- ----
Land $ 64,005 $ 54,029
Permanent crops 62,660 67,754
Developing crops 6,422 1,671
Water programs 5,435 4,885
Buildings 20,667 18,968
Machinery and equipment 14,262 13,573
------- -------
173,451 160,880
Less accumulated depreciation (13,258) (5,427)
------- -------
$ 160,193 $155,453
======= =======
NOTE 7 - OTHER ASSETS
Other assets consist of the following (dollars in thousands):
December 31,
1997 1996
---- ----
Capitalized loan fees, net $ 4,785 $ 150
Excess of purchase price
over assets acquired, net 4,747 4,980
Capitalized trademark
development, net 732 76
Deposits - 1,180
Other 87 127
------ -------
$10,351 $ 6,513
======= ========
NOTE 8 - ACCRUED LIABILITIES
Accrued liabilities consist of the following (dollars in
thousands):
December 31,
1997 1996
---- ----
Interest $ 2,989 $ 1,084
Payroll and benefits 2,433 2,801
Preferred dividends - 448
Other 692 429
------- -------
$ 6,114 $ 4,762
======= =======
NOTE 9 - REVOLVING CREDIT FACILITY
In April 1997, in connection with Sun World's debt restructuring
described in Note 10, Sun World entered into a one year $30 million
Revolving Credit Facility. The Revolving Credit Facility is secured by
eligible accounts receivable and inventory, and is guaranteed by the
Company. Amounts borrowed under the facility will accrue interest at
either prime plus 1.50% or LIBOR plus 2.50% at the Company's election
with an additional .50% payable for advances on eligible inventory above
specified levels. No amounts were outstanding under the Revolving
Credit Facility at December 31, 1997.
NOTE 10 - LONG-TERM DEBT
Management estimates that the fair value of the Company's long-term
debt approximates the carrying value for all debt instruments except for
the Series B First Mortgage Notes ("First Mortgage Notes"). The fair
value of the First Mortgage Notes is estimated to be approximately $106
million based on quoted market prices as of December 31, 1997. At
December 31, 1997 and December 31, 1996, the carrying amount of the
Company's outstanding debt is summarized as follows (dollars in
thousands):
December 31,
1997 1996
---- ----
Cadiz obligations:
Senior term bank loan, interest
payable monthly, variable
interest rate based upon
LIBOR plus 2% (7.78% at
December 31, 1997
and 6.34% at December 31, 1996) $ 9,752 $ 9,446
Subordinated term bank loan,
interest payable
monthly, interest at 4.81% - 9,100
$15 million revolving line of
credit, interest payable
semi-annually at 8% if paid in
cash and 10% if paid in stock 5,000 -
Other 49 88
Debt discount (935) (124)
------ ------
13,866 18,510
Sun World obligations: ------ ------
Series B First Mortgage Notes,
interest payable semi-annually
with principal due in
April 2004,
interest at 11.25% 115,000 -
Term insurance company loan
due in variable
installments through
September 13, 2006,
interest at 10.60% - 77,092
Term bank loan, interest
payable monthly with
principal due in variable
installments through
September 13, 2006, variable
interest rate
based upon prime or LIBOR - 53,284
Note payable to insurance
company, quarterly
installments of $93
(including interest),
due September 13, 2006,
interest at 7.75% 2,306 2,531
Note payable to supplier,
monthly installments of
$104 (including interest),
due March 1, 1998,
interest at 10.00% 205 1,458
Note payable to finance
company, monthly
installments of $18
(including interest),
due July 1, 2002, interest
at 7.50% 831 989
-------- --------
118,342 135,354
-------- --------
132,208 153,864
Less current portion (519) (4,753)
-------- ---------
$ 131,689 $ 149,111
========= =========
Annual maturities of long-term debt outstanding, excluding $935,000
representing the unamortized portion of warrants, on December 31, 1997
are as follows: 1998 - $519,000; 1999 - $391,000; 2000 - $15,184,000;
2001 - $445,000; 2002 - $384,000; 2003 and thereafter - $116,220,000.
Cadiz Obligations
As of December 31, 1996, the Company's obligations to Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A. ("Rabobank") and Henry Ansbacher
& Co. Limited ("Ansbacher") were approximately $9.1 million and $9.4
million, respectively.
ING Baring (U.S.) Capital Corporation ("ING") purchased the $9.4
million senior term bank loan effective March 31, 1997. The loan is
secured by substantially all of the Company's non-Sun World related
property. The maturity date of the obligation is April 30, 1998 with
interest at a rate of LIBOR plus 200 basis points payable at LIBOR
semi-annually, with the remaining accrued interest added to principal.
ING granted to the Company the right to two one-year extensions in
May 1997. In connection with this transaction, ING received warrants
to purchase 75,000 shares of the Company's common stock at $5.03, the
market price at issuance. The Company also issued 30,000 shares of
stock to Ansbacher in connection with the refinancing. The total fair
value of the warrants was $163,000 and has been recorded as a debt
discount and is being amortized over one year. If the Company elects
to exercise the first or second extension, the interest rate will be
further adjusted and the Company will be required to issue additional
warrants to ING. Additionally, as part of the Sun World debt
refinancing described below, the Company repaid its $9.1 million
subordinated term bank loan.
In November 1997, the Company entered into a three year $15 million
Revolving Credit Facility with ING. The Revolving Credit Facility is
secured by a second lien on all of the non-Sun World assets of the
Company. Principal is due in 2000. Interest is payable semi-annually
at 8% if paid in cash and at 10% if paid in stock. The Company had $5
million outstanding under the Revolving Credit Facility at December 31,
1997. The Company issued 200,000 warrants in connection with the
initial borrowings at $7.00, the market price at issuance. The
agreement calls for the issuance of certain additional warrants if and
when the remaining $10 million is drawn. The total fair value of the
warrants was $920,000 and has been recorded as a debt discount and is
being amortized over the three-year remaining term of the revolver.
Sun World Obligations
In April 1997, Sun World restructured its long-term debt by issuing
$115 million of Series A First Mortgage Notes through a private
placement. The notes have subsequently been exchanged for Series B
First Mortgage Notes which are registered under the Securities Act of
1933 and publicly traded. Sun World utilized the proceeds from the debt
offering and existing cash on hand to repay the term insurance company
loan and the term bank loan, totaling approximately $130 million.
The First Mortgage Notes are secured by a first lien (subject to
certain permitted liens) on substantially all of the assets of Sun World
and its subsidiaries, other than growing crops, crop inventories and
accounts receivable and proceeds thereof, which secure the Revolving
Credit Facility.
The First Mortgage Notes include covenants which restrict the
Company's ability to receive distributions from Sun World.
The Sun World Notes are also secured by the guarantees of Coachella
Growers, Inc., Sun Desert, Inc., Sun World Brands, Sun World Management
Corporation and Sun World/Rayo (collectively, the "Sun World Subsidiary
Guarantors") and by the Company. The Company also pledged all of the
stock of Sun World. Effective December 31, 1997, Agri-Land Realty,
Inc., Big Valley Leasing, Inc., Dinuba Packing Corporation, Pacific Farm
Service, Inc., SFC Marketing Corporation, Sun Harvest, Inc., Sun World
Avocado and Sun World Export, Inc., were dissolved and are no longer Sun
World Subsidiary Guarantors. Sun World and the Sun World Subsidiary
Guarantors are all direct and indirect wholly-owned subsidiaries of the
Company. The guarantees by the Sun World Subsidiary Guarantors are
full, unconditional, and joint and several. Sun World and the Sun World
Subsidiary Guarantors comprise all of the direct and indirect
subsidiaries of the Company other than inconsequential subsidiaries.
Additionally, management believes that the direct and indirect
non-guarantor subsidiaries of Cadiz are inconsequential, both individually
and in the aggregate, to the financial statements of the Company for all
periods presented.
SUMMARIZED FINANCIAL INFORMATION
Summarized consolidated financial information for Sun World is as
follows (in thousands):
December 31, 1997 December 31, 1996
----------------- -----------------
Current assets $ 22,483 $ 60,651
Noncurrent assets 145,318 136,344
Current liabilities 13,635 14,920
Noncurrent liabilities 123,623 139,615
For the Period
Year Ended September 14, 1996
December 31, 1997 to December 31, 1996
----------- ------------------
Revenues $ 99,929 $ 22,580
Cost of sales (76,535) (16,396)
Operating income 11,091 2,989
Net income (loss) (2,817) (823)
Combined summarized financial information for the Sun World
Subsidiary Guarantors is as follows (in thousands):
December 31, 1997 December 31, 1996
------------------ -------------------
Current assets $ - $ -
Noncurrent assets 8,833 7,439
Current liabilities 27 4
Noncurrent liabilities 107 107
For the Period
Year Ended September 14, 1996
December 31, 1997 to December 31, 1996
------------------ --------------------
Share of net income of
equity investee $ 1,388 $ 820
Separate financial statements for Sun World and each of the Sun
World Subsidiary Guarantors are not presented as management has
determined that they would not be material to investors.
NOTE 11 - INCOME TAXES
Deferred taxes are recorded based upon differences between the
financial statement and tax basis of assets and liabilities and
available carryforwards. Temporary differences and carryforwards which
gave rise to a significant portion of deferred tax assets and
liabilities as of December 31, 1997 and 1996 are as follows (in
thousands):
December 31, December 31,
1997 1996
---- ----
Deferred tax liabilities:
Net fixed asset basis difference $ 4,841 $ 5,786
Net basis difference in
partnership investments 3,886 4,734
Other 1,268 444
------ -------
Total deferred tax liabilities 9,995 10,964
------- -------
Deferred tax assets:
Net operating losses 25,815 23,943
Reserve for notes receivable 1,178 1,239
State taxes 1,779 1,142
Other 1,097 1,228
------ -------
Total deferred tax assets 29,869 27,552
Valuation allowance for deferred
tax assets (25,321) (20,935)
------- -------
Net deferred tax assets 4,548 6,617
------- -------
Net deferred tax liability $ 5,447 $ 4,347
======= =======
As of December 31, 1997, the Company has net operating loss (NOL)
carryforwards of approximately $71.1 million for federal income tax
purposes. Such carryforwards expire in varying amounts through the year
2013. In accordance with the Tax Reform Act of 1986, NOL utilization
may be subject to an annual limitation. When there is a change of
ownership, of more than 50% (as defined) of a corporation, the use of
any NOL is limited annually to an amount defined by law. As of December
31, 1997, $26.2 million of NOL carryforwards are limited to utilization
of $4.5 million per year. The remaining NOLs are not limited on an
annual basis.
The Company has state NOLs as of December 31, 1997 of $18.4
million. Of these, $14.2 million are not subject to limitations and
expire in varying amounts through the year 2002. The remaining $4.2
million of NOLs relate to Sun World prior to the acquisition. These
NOLs are limited to annual utilization of $400,000 plus any built-in
gains and expire in varying amounts through the year 2000.
A reconciliation of the income tax benefit for income taxes to the
statutory federal income tax rate is as follows (dollars in thousands):
Nine
Year Months Year
Ended Ended Ended
December 31, December 31, March 31,
1997 1996 1996
---- ---- ----
Expected federal income
tax benefit at 34% $(2,903) $ (2,257) $ (2,886)
Loss with no tax benefit 2,981 1,790 2,405
Amortization 79 60 80
Utilization of net operating losses - (696) -
Other nondeductible expenses (157) 462 401
------- ------- -------
Income tax benefit $ - $ (641) $ -
======= ======== ========
NOTE 12 - EMPLOYEE BENEFIT PLANS
In December 1994, the Company established a 401(k) Plan for all
employees of Cadiz. This plan contains no eligibility requirements and
contributions by the Company are at the option of the Company on a year-
to-year basis. No contributions by the Company to this plan have been
made to-date.
Sun World established a 401(k) Plan for its salaried employees on
January 1, 1996. Employees must work 1,000 hours and have completed one
year of service to be eligible to participate in this plan. Sun World
matches 75% of the first four percent deferred by an employee up to
$1,500 per year. In addition, Sun World maintains a defined
contribution pension plan covering substantially all of its employees
who (i) are not covered by a collective bargaining agreement, (ii) have
at least one year of service and (iii) have worked at least 1,000 hours.
Contributions are 2% of each covered employee's salary. For those
hourly employees covered under a collective bargaining agreement,
contributions are made to a multi-employer pension plan in accordance
with negotiated labor contracts and are generally based on the number of
hours worked.
NOTE 13 - PREFERRED AND COMMON STOCK
During the nine months ended December 31, 1996, the Company issued
(i) 27,431 shares totaling $27.6 million of newly authorized Convertible
Series A Redeemable Preferred Stock; (ii) $10.0 million of newly
authorized 6% Convertible Series B Preferred Stock; and (iii) $3.0
million of newly authorized 6% Convertible Series C Preferred Stock.
All preferred stock was converted to common stock as of December 31,
1997. During 1997, the Company paid $1,717,000 of preferred stock
dividends with common stock.
On October 1, 1997, the Company agreed to issue 375,000 shares of
common stock to a hydrological research company in order to acquire
title to substantially all of its assets. This transaction was
completed in February 1998.
NOTE 14 - STOCK-BASED COMPENSATION PLANS AND WARRANTS
STOCK OPTIONS AND WARRANTS
The Company issues options pursuant to its 1996 Stock Option Plan
(the "Plan") as well as options which are not pursuant to a plan. The
Plan provides for the granting of up to 3,000,000 shares. All options,
whether under the Plan or not, are granted at a price approximating fair
market value at the date of grant, have vesting periods ranging from
issuance date to three years, have maximum terms ranging from three to
five years and are issued to directors, officers, consultants and
employees of the Company. During the year ended December 31, 1997, the
Company granted options to purchase 527,500 shares of the Company's
common stock at a weighted average exercise price of $5.61 per share.
Compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock.
Had compensation cost for these plans been determined using fair value,
as explained below, rather than the quoted market price, the Company's
net loss and net loss per common share would have increased to the
following pro forma amounts (dollars in thousands):
Nine
Year Months Year
Ended Ended Ended
December 31, December 31, March 31
1997 1996 1996
---- ---- ----
Net loss: As reported $ (8,538) $ (5,997) $ (8,487)
Pro forma $ (10,203) $ (6,655) $ (8,665)
Net loss per common share:
As reported $ (.33)(a) $ (.44)(a) $ (.48)
Pro forma $ (.35)(a) $ (.48)(a) $ (.49)
(a) After adjustment for preferred dividends during the year
ended December 31, 1997 and the nine months ended December
31, 1996 of $1,213 and $3,125, respectively.
The fair value of each option granted during the periods reported
was estimated on the date of grant using the Black-Scholes option
pricing model.
The following table summarizes stock option activity for the
periods noted. All options listed below were issued to officers,
directors, employees and consultants.
Weighted-
Options Average
Outstanding Exercise
Number Price
----------- -------
Outstanding at March 31, 1995 2,335,500 $3.95
Granted 607,500 $5.19
Expired or canceled (7,000) $4.89
Exercised (145,000) $2.50
----------- -----
Outstanding at March 31, 1996 2,791,000 $4.29
Granted 1,800,000 $4.62
Expired or canceled (400,000) $5.50
Exercised (325,000) $2.79
---------- -----
Outstanding at December 31, 1996 3,866,000 $4.44
Granted 527,500 $5.61
Expired or canceled (120,000) $4.80
Exercised (348,500) $4.17
---------- -----
Outstanding at December 31, 1997 3,925,000(a) $4.61
========== =====
Options exercisable at March 31, 1996 2,116,000 $4.34
========== =====
Options exercisable at December 31, 1996 1,966,000 $4.30
========== =====
Options exercisable at December 31, 1997 2,297,500 $4.40
========== =====
Weighted-average fair value of
options grantedduring the year ended
December 31, 1997 $ 2.55
==========
Weighted-average remaining contractual
life of options outstanding at
December 31, 1997 2.7
==========
(a) Exercise prices vary from $3.00 to $7.00 and expiration dates
vary from February 1998 to October 2002.
During the year ended December 31, 1997, the nine months ended
December 31, 1996 and the year ended March 31, 1996, the Company issued
275,000, 30,000 and 10,000 warrants with weighted-average exercise
prices of $6.45, $3.55 and $0.05, respectively. During the year ended
December 31, 1997 and the nine months ended December 31, 1996, 240,000
warrants with a weighted-average exercise price of $0.05 and 10,000
warrants with a weighted-average exercise price of $3.55 were exercised,
respectively. No warrants expired or were canceled during any of the
three periods discussed. At December 31, 1997 there were 275,000
warrants outstanding at a weighted average exercise price of $6.45 per
share which expire in 2004. See Note 10 for further discussion of these
warrants.
RESTRICTED STOCK AWARD
Following the Sun World acquisition in 1996, the Company's Chief
Executive Officer was awarded a stock bonus of 125,000 shares of
restricted common stock at no cost. 75,000 of these shares were issued
during the year ended December 31, 1997. The remaining 50,000 shares
are issuable in equal annual installments over the next two years.
Compensation expense is being recognized as earned over the period of
service.
NOTE 15 - CONTINGENCIES
In December 1995, the Company filed an action relative to the
proposed construction and operation of a landfill (the "Rail Cycle
Project") to be located adjacent to the Company's Cadiz property with
the Superior Court in San Bernardino County, California. The action
challenges the various decisions by the County of San Bernardino
relative to the proposed Rail Cycle Project. Named in this action, in
addition to the County of San Bernardino, were the Board of Supervisors
of the County of San Bernardino, three individual members of the Board
of Supervisors, an employee of the County and Rail Cycle, L.P.
("Rail Cycle") whose general partner is controlled by Waste Management,
Inc. ("WMI"). The Company alleges that the actions of the County of San
Bernardino did not comply with the guidelines prescribed by the
California Environmental Quality Act and violated state planning and
zoning laws. The action seeks to set aside the county certification of
Rail Cycle's EIR/EIS and approval of the proposed Rail Cycle Project.
The Company continues to believe the proposed Rail Cycle project, if
constructed and operated as currently designed, poses environmental
risks both to the Company's agricultural operations at Cadiz and to the
groundwater basin underlying the Cadiz property. Accordingly, the
Company intends to pursue its claims including compensatory damages
against the County of San Bernardino and Rail Cycle. On November 6,
1997, the San Bernardino Superior Court denied the Company's application
for a Writ of Mandate to set aside the County of San Bernardino's
certification of the EIR/EIS. The Company intends to continue
prosecuting its claim for monetary damages. No trial date has yet been
set.
On October 24, 1997, the Company filed suit in the United States
District Court, for the Central District of California, against WMI, and
certain key executives and consultants of WMI, and certain other parties
in interest as to the proposed Rail Cycle Project. The Complaint as
originally filed asserted the following claims arising under federal
law: Violations of the Racketeer Influenced and Corrupt Organization Act
(RICO), Conspiracy to Violate the Racketeer Influenced and Corrupt
Organization Act (RICO), violations of Section 10(b) of the Securities
Exchange Act of 1934 and Interception of Wire Communications.
Additionally, the Complaint asserted the following claims arising under
state law: Conspiracy, Misappropriation of Trade Secrets, Conversion,
Defamation, Trade Libel, Wiretapping, Interference with Existing
Business Relationship, and Unfair Business Practices. On December 9,
1997, the federal district court severed the eight state law claims from
the complaint and dismissed them without prejudice. Those claims have
been reasserted in a state proceeding filed on January 8, 1998 in Los
Angeles Superior Court (West Division).
Prior to the acquisition of Sun World, the Internal Revenue Service
(IRS) had filed claims against Sun World, and certain of its
subsidiaries (collectively "the Sun World Claimants"), for taxes
refunded for workers that the IRS claims were employees. The Sun World
Claimants contend that the workers are excluded from the definition of
employment under the Internal Revenue Code. On January 21, 1998, the
District Court ruled in favor of one of the Sun World Claimants.
Management believes that the likelihood of an unfavorable future outcome
with regard to this matter is remote. Accordingly, the Company released
$3,780,000 of reserves related to this matter at December 31, 1997 which
are reported on the Consolidated Statement of Operations as Litigation
Benefit.
In the normal course of its agricultural operations, the Company
handles, stores, transports and dispenses products identified as
hazardous materials. Regulatory agencies periodically conduct
inspections and, currently, there are no pending claims with respect to
hazardous materials.
The Company is involved in other legal and administrative
proceedings and claims. In the opinion of management, the ultimate
outcome of each proceeding or all such proceedings combined will not
have a material adverse impact on the Company's financial statements.
NOTE 16 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarter Ended
-----------------------------------------------
June 30, September 30, December 31, March 31,
1995 1995 1995 1996
---- ---- ---- ----
Revenues $ 54 $ 596 $ 470 $ 321
Gross profit (loss) 16 178 140 (542)
Net loss (1,851) (1,835) (1,660) (3,141)
Net loss per common share (0.11) (0.10) (0.10) (0.17)
Quarter Ended
------------------------------------
June 30, September 30, December 31,
1996 1996 1996
---- ---- ----
Revenues $ 82 $ 4,738 $ 18,960
Gross (loss) profit (426) 258 6,223
Net loss (1,987) (2,442) (1,568)
Preferred stock dividends - - (3,125)
Net loss per common share (0.10) (0.12) (0.23)
Quarter Ended
--------------------------------------------------
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
---- ---- ---- ----
Revenues $ 4,805 $ 25,656 $ 52,949 $ 16,747
Gross (loss) profit (213) 5,503 14,633 3,668
Net (loss) income (7,396) (3,569) 3,618 (1,191)
Preferred stock dividends (438) (766) (9) -
Net (loss) income per
common share (0.33) (0.15) 0.11 (0.04)
CADIZ LAND COMPANY, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
December 31,
BALANCE SHEET ($ in thousands): 1997 1996
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 3,590 $ 2,132
Accounts receivable, net 18 31
Inventories - 7
Due from subsidiary 86 332
Prepaid expenses and other 130 274
------- --------
Total current assets 3,824 2,776
Investment in subsidiary 30,543 42,460
Property, plant, equipment and
water programs, net 26,769 26,595
Other assets 4,740 5,131
-------- -------
$65,876 $76,962
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 710 1,332
Accrued liabilities 870 1,513
Deferred revenue - 375
Long-term debt, current portion 20 518
------ -------
Total current liabilities 1,600 3,738
Long-term debt 13,846 17,992
Other Liabilities 49 60
Commitments and contingencies
Series A redeemable preferred stock
- $.01 par value;
($1,000 liquidation value);
60,000 shares authorized;
shares issued and outstanding -
none at December 31, 1997 and
27,431 at December 31, 1996 - 27,431
Stockholders' equity:
Preferred stock - $.01 par value;
40,000 shares authorized;
shares issued and outstanding -
none at December 31, 1997 and
340 shares at December 31, 1996 - -
Common stock - $.01 par value;
45,000,000 shares
authorized; shares issued
and outstanding - 32,646,661
at December 31, 1997 and
23,445,868 at December 31,1996 326 234
Additional paid-in capital 120,873 88,574
Accumulated deficit (70,818) (61,067)
-------- --------
Total stockholders' equity: 50,381 27,741
-------- --------
$ 65,876 $ 76,962
======== ========
CADIZ LAND COMPANY, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF OPERATIONS
Year Nine Months
Ended Ended
December 31, December 31,
(In thousands except per share data): 1997 1996
---- ----
Revenues $ 1,968 $ 1,278
-------- --------
Costs and expenses:
Cost of sales 270 1,329
Landfill prevention activities 683 394
General and administrative 4,042 3,206
Depreciation and amortization 994 773
------ -----
Total costs and expenses 5,989 5,702
------ ------
Operating loss (4,021) (4,424)
Loss from subsidiaries (2,817) (823)
Interest expense, net 1,700 1,391
------- -------
Net loss before income taxes (8,538) (6,638)
Income tax benefit - 641
------- ------
Net Loss (8,538) (5,997)
Less: Preferred stock dividends (1,213) (674)
Imputed dividend on
preferred stock - (2,451)
------ -------
Net loss applicable to common stock $ (9,751) $ (9,122)
======= ======
Net loss per common share $ (.33) $ (.44)
======= =======
Weighted average shares outstanding 29,485 20,500
======= =======
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS ($ in thousands):
Year Nine Months
Ended Ended
December 31, December 31,
1997 1996
---- ----
Cash flows from operating activities:
Net loss $ (8,538) $ (5,997)
Adjustments to reconcile net loss
to cash used for operating activities:
Depreciation and amortization 1,462 1,388
Issuance of shares for services 470 -
Loss from subsidiaries 2,817 823
Provisions for loss on disposal of assets 138 -
Changes in operating assets
and liabilities:
Interest capitalized to debt 315 481
Decrease in accounts receivable 192 411
Decrease in inventories 7 259
Decrease (increase) in due
from subsidiary 131 (923)
Increase in prepaid expenses
and other (56) (317)
Decrease in accounts payable (667) (441)
Increase in accrued liabilities 506 219
Increase in deferred revenue - 375
Decrease in other liabilities (1,006) -
------ -------
Net cash used for operating
activities (4,229) (3,722)
Cash flows from investing activities:
Additions to property, plant and
equipment (638) (27)
Land purchase and development - (490)
Additions to water programs (466) (187)
Proceeds from disposal of property,
plant and equipment 33 -
Acquisition of Sun World - (36,587)
Decrease in other assets 153 -
------- -------
Net cash used for investing
activities (918) (37,291)
------- -------
Cash flows from financing activities:
Net proceeds from issuance of stock 1,690 37,761
Proceeds from short-term debt, net - 330
Proceeds from issuance of long-term
debt 5,084 -
Principal payments on long-term debt (9,231) -
Debt issuance costs (38) -
Dividends paid on conversion of
preferred stock - (99)
Return of capital from subsidiary 9,100 -
------- -------
Net cash provided by financing
activities 6,605 37,992
------- -------
Net increase (decrease) in cash
and cash equivalents 1,458 (3,021)
Cash and cash equivalents,
beginning of period 2,132 5,153
------ ------
Cash and cash equivalents,
end of period $ 3,590 $ 2,132
======= =======
SCHEDULE II - VALUATION & QUALIFYING ACCOUNTS
For the year ended December 31, 1997, the nine months ended December 31,
1996 and the year ended March 31, 1996 ($ in thousands)
Additions
------------------
Charged
Balance at to Charged
Beginning Costs to Balance
of and Other at End
Period Expenses Accounts Deductions of Period
--------- -------- -------- ---------- ---------
Year ended
December 31, 1997
Allowance for
doubtful accounts $ 480 $ - $ - $ 193 $ 287
Amortization of excess
of purchase price
over net assets
acquired 2,026 233 - - 2,259
------ ------ ------ ------ ------
$ 2,506 233 - 193 2,546
======= ====== ====== ====== =====
Nine months ended
December 31, 1996
Allowance for
doubtful accounts $ - $ 107 $ 373 $ - $ 480
Amortization of
excess of purchase
price over net
assets acquired 1,851 175 - - 2,026
------ ------- ------- ------ ------
$ 1,851 $ 282 $ 373 $ - $ 2,506
======== ======= ======= ====== =======
Year ended
March 31, 1996
Allowance for
doubtful accounts $ - $ - $ - $ - $ -
Amortization of
excess of purchase
price over net
assets acquired 1,617 234 - - 1,851
-------- ------- ------- ------ --------
$ 1,617 $ 234 $ - $ - $ 1,851
======= ====== ======= ======= =======
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 33-73936, 33-83360, 33-63065, 33-63667, 333-34911,
333-35491, 333-41367 and 333-47057) of Cadiz Land Company, Inc. of our
report dated February 13, 1998, appearing on page 28 of this Form 10-K.
Price Waterhouse LLP
Los Angeles, California
March 26, 1998
EXHIBIT 4.7
-----------
AMENDMENT TO INDENTURE
This AMENDMENT TO INDENTURE ("Amendment") is entered into as of
January 23, 1998 by and between Sun World International, Inc.
("Issuer"), Cadiz Land Company, Inc. ("Parent Guarantor"), Sun World
Management Corporation, Sun World Brands, Sun World/Rayo, Sun Desert,
Inc., and Coachella Growers (collectively, "Subsidiary Guarantors"), and
IBJ Schroder Bank & Trust Company (the "Trustee"). The parties to this
Amendment are hereinafter sometimes referred to collectively as the
"Parties."
RECITALS:
----------
WHEREAS, the Parties have entered into an Indenture dated as of
April 16, 1997, as amended (the "Indenture"); and
WHEREAS, pursuant to Section 12.03(a) of the Indenture, Agri-Land
Realty, Inc., Big Valley Leasing, Inc., Dinuba Packing Corporation,
Pacific Farm Service, Inc., SFC Marketing Corporation, Sun World
Avocado, Sun World Export, Inc., and SW Harvest, Inc. (formerly Sun
Harvest, Inc.), each of which was originally a party to the Indenture,
have merged with and into the Issuer effective as of December 31, 1997,
as a consequence of which the Guarantees of such entities automatically
terminated and such entities are no longer Subsidiary Guarantors under
the Indenture; and
WHEREAS, the Parties wish to amend the Indenture in order to
correct certain ambiguities, inconsistencies and defects within the
Indenture; and
WHEREAS, this Amendment will serve to accurately reflect the intent
of the parties and will not adversely affect the legal rights of any
Holder of a Note (as defined in the Indenture); and
WHEREAS, pursuant to Section 9.01 of the Indenture, this Amendment
may be entered into by the Parties without the consent of any Holder of
a Note;
NOW THEREFORE, in consideration of the above recitals, the promises
and the mutual representations, warranties, covenants and agreements
herein contained, the Parties hereby agree as follows:
1. AMENDMENT OF INDENTURE. The Indenture is hereby amended as set
forth below:
a. INVESTMENTS. The definition of the term "Investments" in
Section 1.01 of the Indenture is hereby amended in full as follows:
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including
Affiliates) in the forms of direct or indirect loans
(including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made
in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that
are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. Without limitation of the
foregoing, any acquisition by a Person of assets which do not
constitute an Investment under the preceding sentence and
which are not classified as an investment on a balance sheet
prepared by such Person in accordance with GAAP shall not be
deemed an Investment hereunder. If the Issuer or any
Subsidiary of the Issuer sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the
Issuer such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the
Issuer, the Issuer shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in
Section 4.07."
b. SECTION 12.03 (b). The initial paragraph of Section
12.03(b) of the Indenture is hereby amended by the addition, at the beginning of
such paragraph, of the following language:
"(b) Except for transactions completed in furtherance of
the requirements of Section 4.16(a) hereof,."
2. EXISTING INDENTURE. Except as otherwise amended or modified
herein or hereby, the provisions of the Indenture are hereby reaffirmed
and shall remain in full force and effect.
IN WITNESS WHEREOF, each of the Parties has caused this Amendment
to Indenture to be executed and deliverd by their duly authorized officers
as of the date first above written.
SUN WORLD INTERNATIONAL, INC.
By: /s/ Stanley E. Speer
-------------------------------
Name: Stanley E. Speer
Title: Chief Financial Officer
CADIZ LAND COMPANY, INC.
By: /s/ Stanley E. Speer
--------------------------------
Name: Stanley E. Speer
Title: Chief Financial Officer
SUN WORLD MANAGEMENT CORPORATION
SUN WORLD BRANDS
SUN WORLD/RAYO
SUN DESERT, INC.
COACHELLA GROWERS
By: /s/ Stanley E. Speer
----------------------------------
Name: Stanley E. Speer
Title: Chief Financial Officer
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: /s/ Luis Perez
----------------------------------
Name: Luis Perez
Title: Assistant Vice President
EXHIBIT 10.15
-------------
CREDIT AGREEMENT
dated as of
November 25, 1997
among
CADIZ LAND COMPANY, INC.,
The Lenders Party Hereto
and
ING BARING (U.S.) CAPITAL CORPORATION,
as Administrative Agent
_________________________
================================================================
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. . . . . . . . . . . . . . . . . . 1
SECTION 1.02. [Intentionally Omitted]. . . . . . . . . . . . . 15
SECTION 1.03. Terms Generally. . . . . . . . . . . . . . . . . 15
SECTION 1.04. Accounting Terms; GAAP . . . . . . . . . . . . . 16
ARTICLE II
The Credits
SECTION 2.01. Commitments. . . . . . . . . . . . . . . . . . . 16
SECTION 2.02. Loans and Borrowings . . . . . . . . . . . . . . 16
SECTION 2.03. Requests for Borrowings. . . . . . . . . . . . . 17
SECTION 2.04. Initial Borrowing. . . . . . . . . . . . . . . . 18
SECTION 2.05. [Intentionally Omitted]. . . . . . . . . . . . . 18
SECTION 2.06. Funding of Borrowings. . . . . . . . . . . . . . 18
SECTION 2.07. [Intentionally Omitted]. . . . . . . . . . . . . 18
SECTION 2.08. Security . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.09. Termination and Reduction of Commitments . . . . 19
SECTION 2.10. Repayment of Loans; Evidence of Debt . . . . . . 20
SECTION 2.11. Prepayment of Loans; Reborrowings. . . . . . . . 21
SECTION 2.12. Fees . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.13. Interest . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.14. Stock Payment Election . . . . . . . . . . . . . 23
SECTION 2.15. Increased Costs. . . . . . . . . . . . . . . . . 24
SECTION 2.16. [Intentionally Omitted]. . . . . . . . . . . . . 25
SECTION 2.17. Taxes. . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.18. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs. . . . . . . . . . . . . . . 27
SECTION 2.19. Mitigation Obligations; Replacement of
Lenders. . . . . . . . . . . . . . . . . . . . . 29
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers . . . . . . . . . . . . . . 30
SECTION 3.02. Authorization; Enforceability. . . . . . . . . . 30
SECTION 3.03. Governmental Approvals; No Conflicts . . . . . . 30
SECTION 3.04. Financial Condition; No Material Adverse
Change . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.05. Properties . . . . . . . . . . . . . . . . . . . 31
SECTION 3.06. Litigation and Environmental Matters . . . . . . 31
SECTION 3.07. Compliance with Laws and Agreements. . . . . . . 32
SECTION 3.08. Investment and Holding Company Status. . . . . . 32
SECTION 3.09. Taxes. . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.10. ERISA. . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.11. Disclosure . . . . . . . . . . . . . . . . . . . 33
SECTION 3.12. Security Interests . . . . . . . . . . . . . . . 33
SECTION 3.13. Participating Subsidiaries . . . . . . . . . . . 34
SECTION 3.14. Inactive Subsidiaries. . . . . . . . . . . . . . 34
SECTION 3.15. Solvency.. . . . . . . . . . . . . . . . . . . . 34
SECTION 3.16. Excluded Items.. . . . . . . . . . . . . . . . . 34
SECTION 3.17. Equity Acquisition Assets. . . . . . . . . . . . 35
SECTION 3.18. Rolling Stock. . . . . . . . . . . . . . . . . . 35
ARTICLE IV
Conditions
SECTION 4.01. Effective Date . . . . . . . . . . . . . . . . . 35
SECTION 4.02. Each Credit Event. . . . . . . . . . . . . . . . 37
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information . . . 38
SECTION 5.02. Notices of Material Events . . . . . . . . . . . 39
SECTION 5.03. Existence; Conduct of Business . . . . . . . . . 40
SECTION 5.04. Payment of Obligations . . . . . . . . . . . . . 40
SECTION 5.05. Maintenance of Properties; Insurance . . . . . . 40
SECTION 5.06. Books and Records; Inspection Rights . . . . . . 40
SECTION 5.07. Compliance with Laws . . . . . . . . . . . . . . 41
SECTION 5.08. Use of Proceeds. . . . . . . . . . . . . . . . . 41
SECTION 5.09. New Subsidiaries.. . . . . . . . . . . . . . . . 41
SECTION 5.10. Acquisitions by Borrower.. . . . . . . . . . . . 41
SECTION 5.11. Acquisitions with Proceeds of Loans. . . . . . . 43
SECTION 5.12. Warrants.. . . . . . . . . . . . . . . . . . . . 43
SECTION 5.13. Stock Payment Common Stock.. . . . . . . . . . . 43
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness . . . . . . . . . . . . . . . . . . 44
SECTION 6.02. Liens. . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.03. Fundamental Changes. . . . . . . . . . . . . . . 46
SECTION 6.04. Investments, Loans, Advances, Guarantees
and Acquisitions . . . . . . . . . . . . . . . . 47
SECTION 6.05. Hedging Agreements . . . . . . . . . . . . . . . 48
SECTION 6.06. Restricted Payments. . . . . . . . . . . . . . . 48
SECTION 6.07. Transactions with Affiliates . . . . . . . . . . 48
SECTION 6.08. Restrictive Agreements . . . . . . . . . . . . . 49
SECTION 6.09. Use of Proceeds. . . . . . . . . . . . . . . . . 49
SECTION 6.10. Management Fees from Sun World . . . . . . . . . 49
ARTICLE VII
Events of Default. . . . . . . . . . . . . . . . 50
ARTICLE VIII
The Administrative Agent. . . . . . . . . . . . 54
SECTION 8.01. Appointment, Powers and Immunities.. . . . . . . 54
SECTION 8.02. Administrative Agent in its Individual
Capacity . . . . . . . . . . . . . . . . . . . . 54
SECTION 8.03. Nature of Duties of Administrative Agent.. . . . 55
SECTION 8.04. Certain Rights of Administrative Agent.. . . . . 56
SECTION 8.05. Reliance by Administrative Agent.. . . . . . . . 56
SECTION 8.06. Sub-Agents.. . . . . . . . . . . . . . . . . . . 56
SECTION 8.07. Resignation by Administrative Agent. . . . . . . 57
SECTION 8.08. Non-Reliance on Administrative Agent and
Other Lenders. . . . . . . . . . . . . . . . . . 57
SECTION 8.09. Security Documents.. . . . . . . . . . . . . . . 57
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.02. Waivers; Amendments. . . . . . . . . . . . . . . 60
SECTION 9.03. Expenses; Indemnity; Damage Waiver . . . . . . . 61
SECTION 9.04. Successors and Assigns . . . . . . . . . . . . . 62
SECTION 9.05. Survival . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.06. Counterparts; Integration; Effectiveness . . . . 66
SECTION 9.07. Severability . . . . . . . . . . . . . . . . . . 66
SECTION 9.08. Right of Setoff. . . . . . . . . . . . . . . . . 66
SECTION 9.09. Governing Law; Jurisdiction; Consent to
Service of Process . . . . . . . . . . . . . . . 67
SECTION 9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . 68
SECTION 9.11. Headings . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.12. Confidentiality. . . . . . . . . . . . . . . . . 68
SECTION 9.13. Foreclosure of Cadiz/Sun World Lease . . . . . . 69
SECTION 9.14. Waiver of Anti-Deficiency Protection . . . . . . 69
SECTION 9.15. Costs Borne by Non-Prevailing Party. . . . . . . 70
SECTION 9.16. Interest Rate Limitation . . . . . . . . . . . . 70
SECTION 9.17. Registration under the Securities Act of 1933. . 70
SECTION 9.18. Status of ING. . . . . . . . . . . . . . . . . . 74
SECTION 9.19. Amendments to Sun World Indenture. . . . . . . . 75
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 2.04 -- Borrower's Wire Instructions for Initial Borrowing
Schedule 3.13 -- Borrower's Participating Subsidiaries
Schedule 3.14 -- Borrower's Inactive Subsidiaries
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.08 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Cadiz Reaffirmation Agreement
Exhibit C -- Form of Mortgage
Exhibit D -- Form of Note
Exhibit E -- Form of Pledge and Security Agreement
Exhibit F -- Form of Purchaser Certificate
Exhibit G -- Forms of Warrants
Exhibit H -- Form of Opinion of Borrower's Counsel
<PAGE>
CREDIT AGREEMENT dated as of November 25, 1997, among CADIZ
LAND COMPANY, INC., the LENDERS party hereto, and ING BARING (U.S.)
CAPITAL CORPORATION, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the
following terms have the meanings specified below:
"Administrative Agent" means ING Baring (U.S.) Capital
Corporation, in its capacity as administrative agent for the Lenders
hereunder.
"Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person,
another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.
"Agreement" means this Credit Agreement, dated as of the date
set forth above, among Borrower, the Lenders party hereto, and the
Administrative Agent.
"Applicable Percentage" means, with respect to any Lender,
the percentage of the total Commitments represented by such Lender's
Commitment. If the Commitments have terminated or expired, the
Applicable Percentages shall be determined based upon the
Commitments most recently in effect, giving effect to any
assignments.
"Assignment and Acceptance" means an assignment and
acceptance entered into by a Lender and an assignee (with the
consent of any party whose consent is required by Section 9.04), and
accepted by the Administrative Agent, in the form of Exhibit A or
any other form approved by the Administrative Agent.
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and
the date of termination of the Commitments.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" means Cadiz Land Company, Inc., a Delaware
corporation.
"Borrowing" means Loans of made, converted or continued on
the same date.
"Borrowing Request" means a request by the Borrower for a
Borrowing in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday
or other day on which commercial banks in New York City are
authorized or required by law to remain closed.
"Cadiz Reaffirmation Agreement" means the agreement
evidencing Borrower's assumption and reaffirmation of all
liabilities and obligations of Cadiz Valley Development Corporation
in the form as attached hereto in Exhibit B.
"Cadiz/Sun World Lease" means that certain Agricultural Lease
by and between Southwest Fruit Growers, L.P. and the Borrower (both
in its own capacity and as successor by merger to Cadiz Valley
Development Corporation), the lessors, and Sun World, as lessee,
dated as of September 13, 1996, as amended by that certain Amendment
to Lease with Lender Cure Rights between Southwest Fruit Growers,
L.P., Cadiz, Sun World and Credit Agricole, dated as of September
13, 1996, as further amended by that certain Amendment to
Agricultural Lease, dated as of April 16, 1997, as further amended
from time to time.
"Cadiz/Sun World Services Agreement" means that certain
Services Agreement between Borrower and Sun World, dated September
13, 1996, as amended by that certain Amendment dated as of April 16,
1997, as further amended from time to time.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a
balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in
accordance with GAAP.
"Cash Equivalent" has the meaning assigned to such term in
the Sun World Indenture.
"Cash Payment Rate" means 8% per annum, computed in
accordance with Section 2.13.
"Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or
group (within the meaning of the Securities Exchange Act of 1934 and
the rules of the Commission thereunder as in effect on the date
hereof), of shares representing more than 35% of the aggregate
ordinary voting power represented by the issued and outstanding
capital stock of the Borrower; (b) occupation of a majority of the
seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of
directors of the Borrower nor (ii) appointed by directors so
nominated; or (c) the acquisition of direct or indirect Control of
the Borrower by any Person or group.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any
law, rule or regulation or in the interpretation or application
thereof by any Governmental Authority after the date of this
Agreement or (c) compliance by any Lender (or, for purposes of
Section 2.15(b), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or
directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this
Agreement.
"Closing Price", means the last sale price per share of
Common Stock regular way or, in the case no such reported sale takes
place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading
on such exchange, the average of the last reported bid and asked
prices as reported by Nasdaq, or other similar organization if
Nasdaq is no longer reporting such information, or if not so
available, the fair market price, as determined in good faith by the
Administrative Agent.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" means the Securities and Exchange Commission.
"Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans, expressed as an
amount representing the maximum aggregate amount of such Lender's
Revolving Credit Exposure hereunder, as such commitment may be (a)
reduced from time to time pursuant to Section 2.09 and (b) reduced
or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04. The initial amount of each
Lender's Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have
assumed its Commitment, as applicable. The initial aggregate amount
of the Commitments is $15,000,000.
"Common Stock" means authorized common stock, $0.01 par
value, of the Borrower.
"Control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or
policies of a Person, whether through the ability to exercise voting
power, by contract or otherwise. "Controlling" and "Controlled"
have meanings correlative thereto.
"Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would,
unless cured or waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in any periodic and other
reports, proxy statements and other materials filed by the Borrower
or any Subsidiary with the Commission that are publicly available.
"dollars" or "$" refers to lawful money of the United States
of America.
"Effective Date" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance
with Section 9.02).
"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices
or binding agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the environment,
preservation or reclamation of natural resources, the management,
release or threatened release of any Hazardous Material or to health
and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of
environmental remediation, fines, penalties or indemnities), of the
Borrower or any Subsidiary directly or indirectly resulting from or
based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed
or imposed with respect to any of the foregoing.
"Equity Acquisition Asset" has the meaning set forth in
Section 5.10(c) hereof.
"Equity Acquisition Threshold" has the meaning set forth in
Section 5.10(c) hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a
single employer under Section 414(b) or (c) of the Code or, solely
for purposes of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with
respect to a Plan (other than an event for which the 30-day notice
period is waived); (b) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the
Code or Section 302 of ERISA), whether or not waived; (c) the filing
pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of
an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of
its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Plan; (e) the receipt by the
Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate
any Plan or Plans or to appoint a trustee to administer any Plan;
(f) the incurrence by the Borrower or any of its ERISA Affiliates of
any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; or (g) the receipt by the
Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Borrower or any ERISA Affiliate of any
notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be,
insolvent or in reorganization, within the meaning of Title IV of
ERISA.
"Event of Default" has the meaning assigned to such term in
Article VII.
"Exchange Act" has the meaning set forth in Section 9.17
hereof.
"Excluded Item" has the meaning set forth in Section 5.10(b)
hereof.
"Excluded Items/Rolling Stock Threshold" has the meaning set
forth in Section 5.10(b) hereof.
"Excluded Taxes" means, with respect to the Administrative
Agent, any Lender, any other recipient of any payment to be made by
or on account of any obligation of the Borrower hereunder, (a)
income or franchise taxes imposed on (or measured by) its net income
by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes
imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c)
in the case of a Foreign Lender (other than an assignee pursuant to
a request by the Borrower under Section 2.19(b)), any withholding
tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign
Lender's failure to comply with Section 2.17(e), except to the
extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or
assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.17(a).
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100
of 1%) of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the quotations
for such day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing
selected by it.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the
Borrower.
"Fixed Rate" means, with respect to any Borrowing for any
Interest Period, either (a) if the Borrower does not elect the Stock
Payment Option, the Cash Payment Rate or (b) if the Borrower elects
the Stock Payment Option, the Stock Payment Rate.
"Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction other than that in which the Borrower is
located. For purposes of this definition, the United States of
America, each State thereof and the District of Columbia shall be
deemed to constitute a single jurisdiction.
"GAAP" means generally accepted accounting principles in the
United States of America.
"Global Amendment Agreement" means that certain Global
Amendment Agreement, dated as of March 31, 1997, between Borrower
and Cadiz Valley Development Corporation, as borrowers, and ING, as
Lender.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision
thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing
or having the economic effect of guaranteeing any Indebtedness or
other obligation of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation
of the guarantor, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services
for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital,
equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation or (d) as an account
party in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation; provided, that
the term Guarantee shall not include endorsements for collection or
deposit in the ordinary course of business.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes
or other pollutants, including petroleum or petroleum distillates,
asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price
protection agreement or other interest or currency exchange rate or
commodity price hedging arrangement.
"Inactive Subsidiaries" means all Subsidiaries of the
Borrower, excluding Sun World Entities, that (a) do not conduct any
business activities and (b) hold no assets or properties (either
tangible or intangible).
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person
in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course
of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person
of Indebtedness of others, (h) all Capital Lease Obligations of such
Person, (i) all obligations, contingent or otherwise, of such Person
as an account party in respect of letters of credit and letters of
guaranty and (j) all obligations, contingent or otherwise, of such
Person in respect of bankers' acceptances. The Indebtedness of any
Person shall include the Indebtedness of any other entity (including
any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except
to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"ING" means ING Baring (U.S.) Capital Corporation, a Delaware
Corporation.
"ING Collateral" means the collateral security granted,
pledged or hypothecated to the Administrative Agent or the Lenders
under the Security Documents to secure the payment and satisfaction
of the obligations hereunder and under the other Loan Documents.
"Initial Borrowing" means the Fixed Rate Borrowing made on
the Effective Date in accordance with section 2.04.
"Interest Payment Date" means the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part.
"Interest Period" means each period commencing on the date of
such Borrowing or the last day of the next preceding Interest Period
for such Borrowing and ending thereafter on the first to occur of
April 15 or October 15 in each year, provided, that (i) except as
provided in clauses (ii) and (iii) below, if any Interest Period
would end on a day other than a Business Day, such Interest Period
shall be extended to the next succeeding Business Day, (ii) any
Interest Period that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar
month of such Interest Period, and (iii) if any Interest Period
would end after the Maturity Date, such Interest Period shall end on
the Maturity Date. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made.
"Lenders" means the Person or Persons, as the case may be,
listed on Schedule 2.01 and any other Person that shall have become
a party hereto pursuant to an Assignment and Acceptance, other than
any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or
security interest in, on or of such asset, (b) the interest of a
vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect
to such securities.
"Loan Documents" means this Agreement, each Security
Document, each Note and any other document, instrument or agreement
delivered, executed or to be executed under or in connection with
any of the foregoing.
"Loans" means the loans made by the Lenders to the Borrower
pursuant to this Agreement.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition,
financial or otherwise, of the Borrower and the Subsidiaries taken
as a whole, (b) the ability of the Borrower to perform any of its
obligations under this Agreement or any other Loan Document, (c) the
rights of or benefits available to the Lenders under this Agreement
or any other Loan Document, or (d) the Transactions.
"Material Indebtedness" means Indebtedness (other than the
Loans), or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrower and its Subsidiaries, but
excluding SWFG and PSWRI, in an aggregate principal amount exceeding
$500,000. For purposes of determining Material Indebtedness, the
"principal amount" of the obligations of the Borrower or any
Subsidiary in respect of any Hedging Agreement at any time shall be
the maximum aggregate amount (giving effect to any netting
agreements) that the Borrower or such Subsidiary would be required
to pay if such Hedging Agreement were terminated at such time.
"Maturity Date" means December 29, 2000.
"Moody's" means Moody's Investors Service, Inc.
"Mortgages" means, collectively, (a) any mortgage agreement
or deed of trust dated as of the Effective Date for the benefit of
Mortgagee pursuant to section 2.08 and (b) each other mortgage
granted to Mortgagee pursuant to Sections 2.08, 5.10 and 5.11, each
substantially in the form of Exhibit C.
"Mortgagee" means, with respect to any Mortgage, the
Administrative Agent as mortgagee or beneficiary thereof, for itself
and on behalf of the Lenders, under such Mortgage.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Non-Adverse Amendment" has the meaning set forth in Section
9.19 hereof.
"Notes" means the Revolving Loan Notes issued by Borrower and
payable to the order of the Lenders, as evidence of the Revolving
Loans, each in the form of Exhibit D hereto, and any extensions,
renewals, modifications or replacements thereof or therefor.
"Obligors" has the meaning assigned to such term in the
Pledge and Security Agreement attached hereto as Exhibit E.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies arising from any payment made hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to,
this Agreement.
"Participating Subsidiaries" means the Subsidiaries excluding
(a) the Inactive Subsidiaries, (b) the Sun World Entities, and (c)
SWFG.
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA and any successor entity performing
similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or
are being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are
not overdue by more than 30 days or are being contested in
compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business;
(e) easements, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising
in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary
conduct of business of the Borrower or any Participating
Subsidiary;
(f) Liens arising out of any judgment awarded against the
Borrower which have been discharged, vacated, reversed or
execution thereof stayed pending appeal;
(g) any other Lien with respect to which the Borrower or
related lessee shall have provided a bond or other security in
an amount and under terms reasonably satisfactory to the
Required Lenders and which does not involve any material risk
of the sale, forfeiture or loss of any interest in Borrower's
real or personal property; and
(h) the Liens of the Security Documents;
provided that the term "Permitted Encumbrances" shall not include
any Lien securing Indebtedness.
"Permitted Investments" means:
(a) Cash Equivalents; and
(b) transactions permitted pursuant to the provisions of
Sections 5.10 and 5.11 hereof.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company,
partnership, Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA
or Section 412 of the Code or Section 302 of ERISA, and in respect
of which the Borrower or any ERISA Affiliate is (or, if such plan
were terminated, would under Section 4069 of ERISA be deemed to be)
an "employer" as defined in Section 3(5) of ERISA.
"Pledge and Security Agreements" means, collectively, (a) any
security agreement dated as of the Effective Date for the benefit of
the Administrative Agent , for itself and on behalf of the Lenders,
pursuant to Section 2.08, (b) any stock pledge agreement pursuant to
which the shares of capital stock of each Participating Subsidiary
are pledged to the Administrative Agent, and (c) each other security
agreement executed pursuant to Sections 2.08, 5.10 and 5.11, each
substantially (to the extent applicable) in the form of Exhibit E.
"Prepayment Date" has the meaning set forth in Section 2.11
hereof.
"PSWRI" means P.S.W.R.I. Limited, a Guernsey corporation.
"Purchaser Certificates" means the purchaser certificates
relating to the Warrants in the form as attached hereto in Exhibit
F.
"Register" has the meaning set forth in Section 9.04.
"Registrable Common Stock" means (a) Stock Payment Common
Stock and (b) any additional shares of Common Stock issued or
distributed by way of dividend, stock split or other distribution in
respect of the Stock Payment Common Stock, or acquired by way of any
rights offering or similar offering made in respect of the Stock
Payment Common Stock or any of the foregoing.
"Related Parties" means, with respect to any specified
Person, such Person's Affiliates and the respective directors,
officers, employees, agents and advisors of such Person and such
Person's Affiliates.
"Required Lenders" means, at any time, Lenders having
Revolving Credit Exposures and unused Commitments representing at
least 66 2/3% of the sum of the total Revolving Credit Exposures and
unused Commitments at such time.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any
shares of any class of capital stock of the Borrower or any
Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account
of the purchase, redemption, retirement, acquisition, cancellation
or termination of any such shares of capital stock of the Borrower
or any option, warrant or other right to acquire any such shares of
capital stock of the Borrower.
"Revolving Credit Exposure" means, with respect to any Lender
at any time, the sum of the outstanding principal amount of such
Lender's Revolving Loans.
"Rolling Stock": has the meaning assigned to such term in
the Pledge and Security Agreement attached hereto as Exhibit E.
"Revolving Loan" means a Loan made pursuant to Section 2.03
or 2.04 hereof.
"S&P" means Standard & Poor's.
"Securities Act" has the meaning set forth in Section 9.17
hereof.
"Security Documents" means, collectively, the Mortgages and
the Pledge and Security Agreement.
"Stock Payment" has the meaning set forth in Section 2.14
hereof.
"Stock Payment Common Stock" has the meaning set forth in
Section 5.13 hereof.
"Stock Payment Rate" means 10% per annum, computed in
accordance with Section 2.13.
"Stock Payment Election" has the meaning set forth in Section
2.14 hereof.
"Stock Payment Election Deadline" has the meaning set forth
in Section 2.14 hereof.
"Stock Payment Election Request" means a request by Borrower
to make a payment of accrued interest for a Borrowing through the
remittance of the Stock Payment in accordance with Section 2.14.
"subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company,
partnership, association or other entity the accounts of which would
be consolidated with those of the parent in the parent's
consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other
ownership interests representing more than 50% of the equity or more
than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
"Sun World" means Sun World International, Inc., a Subsidiary
of the Borrower.
"Sun World Documents" has the meaning assigned to such term
in the Global Amendment Agreement.
"Sun World Entities" means Sun World and its subsidiaries.
"Sun World Indenture" means that certain Indenture, dated as
of April 16, 1997, among Sun World, Borrower, the Subsidiary
Guarantors thereto, and the Sun World Trustee, as amended by that
certain Amendment to Indenture, dated as of October 9, 1997, as
further amended by any Non-Adverse Amendments.
"Sun World Notes" means the $115,000,000 of 11 1/4% First
Mortgage Notes due April 15, 2004 issued pursuant to the Sun World
Indenture.
"Sun World Trustee" means IBJ Schroder Bank & Trust Company
in its capacity as the trustee under the Sun World Indenture.
"SWFG" means Southwest Fruit Growers, L.P., a Delaware
limited partnership.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.
"Threshold" has the meaning assigned to such term in section
2.11(c).
"Transactions" means the execution, delivery and performance
by the Borrower of this Agreement, the other Loan Documents, the
transactions contemplated herein and therein, the borrowing of
Loans, and the use of the proceeds thereof.
"Warrants" means the warrant certificates entitling the
holder thereof to purchase shares of Borrower's Common Stock on the
terms and conditions set forth therein in the forms as attached
hereto as Exhibit G.
"Withdrawal Liability" means liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as such terms are defined in Part I of Subtitle
E of Title IV of ERISA.
SECTION 1.02. [Intentionally Omitted]
SECTION 1.03. TERMS GENERALLY. The definitions of terms
herein shall apply equally to the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The
words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". The word "will" shall
be construed to have the same meaning and effect as the word
"shall". Unless the context requires otherwise (a) any definition
of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's
successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e)
the words "asset" and "property" shall be construed to have the same
meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities,
accounts and contract rights.
SECTION 1.04. ACCOUNTING TERMS; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from
time to time; provided that, if the Borrower notifies the
Administrative Agent that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring
after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies
the Borrower that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the
basis of GAAP as in effect and applied immediately before such
change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS. Subject to the terms and
conditions set forth herein, each Lender severally agrees, upon
Borrower's request, to make Revolving Loans to the Borrower from
time to time during the Availability Period in an aggregate
principal amount that will not result in such Lender's Revolving
Credit Exposure exceeding such Lender's Commitment. Within the
foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, prepay and reborrow Revolving
Loans.
SECTION 2.02. LOANS AND BORROWINGS.
(a) Each Revolving Loan shall be made as part of a Borrowing
consisting of Revolving Loans made by the Lenders ratably in
accordance with their respective Commitments. The failure of any
Lender to make any Loan required to be made by it shall not relieve
any other Lender of its obligations hereunder; provided that the
Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender's failure to make Loans as
required.
(b) Each Borrowing shall be comprised entirely of Fixed Rate
Loans as the Borrower may request in accordance herewith. Except
for the Initial Borrowing (which shall be in an amount in accordance
with Section 2.04), each Borrowing shall be in an aggregate amount
equal to $2,500,000 or a larger multiple of $100,000 (provided that
a Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Commitments).
(c) The Borrower shall not be entitled to request, or to
elect to convert or continue, any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
SECTION 2.03. REQUESTS FOR BORROWINGS. Except for the Initial
Borrowing, to request a Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone not later than 1
p.m., New York City time, three Business Days before the date of the
proposed Borrowing. Any such notices received after 1 p.m., New
York time, shall be deemed received on the next Business Day, Each
such telephonic Borrowing Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower.
Each such telephonic and written Borrowing Request shall specify the
following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business
Day;
(iii) the location and number of the Borrower's account to
which funds are to be disbursed.
Promptly following receipt of a Borrowing Request in accordance with
this Section 2.03, the Administrative Agent shall (a) advise each
Lender of the details thereof and of the amount of such Lender's
Loan to be made as part of the requested Borrowing and (b) advise
the Borrower of the number of shares of the Borrower's Common Stock
that may be purchased as a result of the requested Borrowing through
the exercise of the Warrants.
SECTION 2.04. INITIAL BORROWING. As of the Effective Date,
the Borrower shall be deemed to have requested a Borrowing in the
aggregate amount of $5,000,000, with the Effective Date being the
date of such Borrowing. The location and number of the Borrower's
account to which these funds are to be disbursed are set forth in
Schedule 2.04 hereto.
SECTION 2.05. [Intentionally Omitted]
SECTION 2.06. FUNDING OF BORROWINGS.
(a) Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of
immediately available funds by 1 p.m., New York City time, to the
account of the Administrative Agent most recently designated by it
for such purpose by notice to the Lenders. The Administrative Agent
will make such Loans available to the Borrower by promptly crediting
the amounts so received, in like funds, to an account maintained and
designated by the Borrower in the applicable Borrowing Request (or
in the case of the Initial Borrowing, as set forth in Schedule 2.04
hereof).
(b) Unless the Administrative Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing
that such Lender will not make available to the Administrative Agent
such Lender's share of such Borrowing, the Administrative Agent may
assume that such Lender has made such share available on such date
in accordance with paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender hereby agrees to
pay to the Administrative Agent forthwith on demand such
corresponding amount with interest thereon, for each day from and
including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at
the interest rate applicable to that Loan. If such Lender pays such
amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.07. [Intentionally Omitted]
SECTION 2.08. SECURITY. The Borrower's obligations under this
Agreement shall be secured in accordance with and/or have the
benefit of the Pledge and Security Agreement, the Mortgages, any
other Security Document, and each other mortgage, security interest,
pledge agreement or other document granted pursuant to Sections
5.09, 5.10 and 5.11.
SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS.
(a) Unless previously terminated, the Commitments shall
terminate on the Maturity Date.
(b) The Borrower may at any time terminate, or from time to
time reduce, the Commitments; provided that (i) each reduction of
the Commitments shall be in an amount that is an integral multiple
of $500,000 and not less than $2,500,000 and (ii) the Borrower shall
not terminate or reduce the Commitments if, after giving effect to
any concurrent prepayment of the Loans in accordance with Section
2.11, the sum of the Revolving Credit Exposures would exceed the
total Commitments.
(c) The Borrower shall notify the Administrative Agent of
any election to terminate or reduce the Commitments under paragraph
(b) of this Section at least six Business Days prior to the
effective date of such termination or reduction, specifying such
election and the effective date thereof. Promptly following receipt
of any notice, the Administrative Agent shall advise the Lenders of
the contents thereof. Each notice delivered by the Borrower
pursuant to this Section 2.09 shall be irrevocable; provided that a
notice of termination of the Commitments delivered by the Borrower
may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by
the Borrower (by notice to the Administrative Agent on or prior to
the specified effective date) if such condition is not satisfied.
Any termination or reduction of the Commitments shall be permanent.
Each reduction of the Commitments shall be made ratably among the
Lenders in accordance with their respective Commitments.
(d) If at any time the aggregate outstanding principal amount
of all of the Revolving Loans made by any Lender shall exceed the
amount of the Commitment of such Lender, the Borrower shall
immediately upon receipt of notice thereof from the Administrative
Agent or such Lender, or immediately upon the Borrower's acquiring
actual knowledge thereof, prepay the Revolving Loans of such Lender
to the extent necessary to eliminate such excess.
(e) Notwithstanding anything herein to the contrary, the sum
of the aggregate outstanding principal balance of all Loans made by
all Lenders at any one time shall not exceed the aggregate amount of
all Commitments as then in effect. If at any time the aggregate
outstanding principal balance of the Loans exceeds the applicable
limit stated in the immediately preceding sentence, the Borrower
shall immediately upon receipt of notice thereof from the
Administrative Agent or such Lender, or immediately upon the
Borrower's acquiring actual knowledge thereof, prepay the Revolving
Loans to the extent necessary to eliminate such excess.
(f) Any reduction of the Commitments under this Section 2.09
shall apply as a proportional and permanent reduction of the
Commitments of each of the Lenders. If the aggregate outstanding
principal balance of the Loans exceeds any applicable limit
specified hereunder after giving effect to any such reduction of the
Commitments, Borrower shall immediately prepay such Loans to the
extent necessary to eliminate such excess.
(g) In the event any reduction in the Commitments is made in
accordance with this Section 2.09, the Administrative Agent will
issue to the Borrower and each Lender a revised Schedule 2.01 to
this Agreement reflecting such reduction, which revised Schedule
2.01 shall supersede and replace the prior version thereof and shall
be substituted by each party in lieu thereof.
SECTION 2.10. REPAYMENT OF LOANS; EVIDENCE OF DEBT.
(a) The Borrower hereby unconditionally promises to pay to
the Administrative Agent for the account of each Lender the then
unpaid principal amount of each Revolving Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the
Borrower to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and
paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in
which it shall record (i) the amount of each Loan made hereunder and
the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder and (iii) the amount of
any sum received by the Administrative Agent hereunder for the
account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence
of the existence and amounts of the obligations recorded therein;
provided that the failure of any Lender or the Administrative Agent
to maintain such accounts or any error therein shall not in any
manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
(e) To further evidence the existence and amounts of the
Borrower's obligations to pay principal and interest on each
Revolving Loan made by a Lender hereunder, the Borrower shall
execute and deliver to that Lender a Note payable to the Lender.
The Borrower shall prepare, execute and deliver the Note payable to
the order of such Lender (or, if requested by such Lender, to such
Lender and its registered assigns). Thereafter, the Loans evidenced
by such Note and interest thereon shall at all times (including
after assignment pursuant to Section 9.04) be represented by one or
more Notes payable to the order of the payee named therein (or, if
such Note is a registered note, to such payee and its registered
assigns).
SECTION 2.11. PREPAYMENT OF LOANS; REBORROWINGS.
(a) The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to
prior notice in accordance with paragraph (b) of this Section;
provided that unless all outstanding amounts are being repaid, each
prepayment of Borrowing shall be in an amount that is an integral
multiple of $100,000 and not less than $2,500,000.00.
(b) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder not
later than 1 p.m., New York City time, six Business Days before the
date of prepayment (the "Prepayment Date"). Each such notice shall
be irrevocable and shall specify the prepayment date and the
principal amount of each Borrowing or portion thereof to be prepaid;
provided that, if a notice of prepayment is given in connection with
a conditional notice of termination of the Commitments as
contemplated by Section 2.09, then such notice of prepayment may be
revoked if such notice of termination is revoked in accordance with
Section 2.09. Promptly following receipt of any such notice
relating to a Borrowing, the Administrative Agent shall advise the
Lenders of the contents thereof. Each partial prepayment of any
Borrowing shall be in an amount that would be permitted in the case
of an advance of a Borrowing as provided in Section 2.02. Each
prepayment of a Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.13 and
Section 2.14. At its discretion, Borrower may elect to make such
payment of accrued interest on the date of a prepayment through a
Stock Payment in accordance with Section 2.14 hereof.
(c) Notwithstanding any other provision of this Agreement,
until $15,000,000 of Loans are made to the Borrower (without taking
into account any repayments thereof) pursuant to the terms of this
Agreement (the "Threshold"), the Borrower may not reborrow any
amounts prepaid pursuant to this Section 2.11. After the Threshold
is satisfied, and provided that the Borrower can satisfy the
requirements for obtaining a Loan set forth in Section 4.02 hereof,
the Borrower may reborrow any principal amount repaid under this
Section 2.11 in accordance with the provisions of this Article II.
Each such reborrowing shall be treated as a Borrowing for all
purposes hereunder.
SECTION 2.12. FEES.
(a) As a fee for this facility and the Loans to Borrower
hereunder, on the Effective Date, the Borrower shall execute and
deliver to the Administrative Agent for the account of each Lender
(i) the Warrants and (ii) the Purchaser Certificate, each in form
and substance satisfactory to the Administrative Agent (in
Administrative Agent's absolute discretion).
(b) All fees payable hereunder shall be paid on the date due
to the Administrative Agent for distribution to the Lenders. Fees
paid shall not be refundable under any circumstances.
SECTION 2.13. INTEREST.
(a) The Loans comprising each Borrowing shall bear interest
at the Fixed Rate.
(b) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the
Borrower hereunder is not paid when due, whether at stated maturity,
upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum
equal to (i) in the case of overdue principal of any Loan, 2% plus
the rate otherwise applicable to such Loan as provided in the
preceding paragraph of this Section or (ii) in the case of any other
amount, 2% plus the rate applicable to Loans as provided in
paragraph (a) of this Section.
(c) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and upon termination of
the Commitments; provided that (i) interest accrued pursuant to
paragraph (b) of this Section shall be payable on demand and (ii) in
the event of any repayment or prepayment of any Loan, accrued
interest on the principal amount repaid or prepaid shall be payable
on the date of such repayment or prepayment.
(d) All interest hereunder shall be computed on the basis of
a year of 360 days, and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.14. STOCK PAYMENT ELECTION.
(a) In its sole discretion, as provided in this section,
Borrower may elect to pay accrued interest on a Borrowing on an
Interest Payment Date (or, in the case of a prepayment under Section
2.11, on the Prepayment Date) for such Borrowing through the
remittance of the Stock Payment (instead of immediately available
funds) (such election a "Stock Payment Election").
(b) To make a Stock Payment Election pursuant to this Section
2.14 with respect to any Borrowing for any Interest Period (or in
the case of a prepayment under Section 2.11, the portion of an
Interest Period ending on the Prepayment Date), the Borrower shall
notify the Administrative Agent of such election by telephone not
later than 1:00 p.m., New York time, six (6) Business Days before
the Interest Payment Date (or, in the case of a prepayment under
Section 2.11, six (6) Business Days before the Prepayment Date) for
the current Interest Period for such Borrowing (the "Stock Payment
Election Deadline"). Each telephone Stock Payment Election Request
shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Stock
Payment Election Request in a form approved by the Administrative
Agent and signed by the Borrower. Promptly upon receipt of the
written Stock Payment Election Request, the Administrative Agent
shall give notice of such Stock Payment Election Request to the
Lenders.
(c) Each telegraphic and written Stock Payment Election
Request shall specify the Borrowing to which such Stock Payment
Election Request applies;
(d) Following receipt of a Stock Payment Election Request, the
Administrative Agent shall advise each Lender and the Borrower by 11
a.m., New York time, on the Interest Payment Date (or, in the case
of a prepayment under Section 2.11, on the Prepayment Date) relating
to such Stock Payment Election Request of the details thereof,
including the Administrative Agent's determination of the Stock
Payment (including its calculation thereof) as determined pursuant
to subsection (g) hereof.
(e) If the Borrower fails to deliver a timely Stock Payment
Election Request with respect to any Borrowing prior to the Stock
Payment Election Deadline applicable thereto and in accordance with
requirements of this section, then (a) the Borrower shall be deemed
to have decided not to elect the Stock Payment Option for that
Borrowing for that Interest Period and (b) the Fixed Rate for that
Borrowing for that Interest Period shall be the Cash Payment Rate.
(f) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to make the Stock Payment Election or
notify the Administrative Agent of a Stock Payment Election Request
if a Default or an Event of Default has occurred and is continuing
(unless this requirement is waived by the Required Lenders).
(g) With respect to any Borrowing for which a Stock Payment
Election has been made in accordance with this Section 2.14, the
Stock Payment shall mean the quantity of shares of the Borrower's
Common Stock (with any fractional amount rounded to the next highest
integer) that has a value at least equal to the amount of accrued
interest at the Stock Payment Rate for that Borrowing for the
Interest Period (or, in the case of a prepayment under Section 2.11,
the portion of an Interest Period ending on the Prepayment Date) for
which the Stock Payment Election has been made (the "Stock
Payment"). For purposes of this Section 2.14, the value of each
share of Common Stock shall equal the average daily Closing Price of
the Common Stock over the five (5) Business Days immediately prior
to the Interest Payment Date (or, in the case of a prepayment under
Section 2.11, over the five (5) Business Days immediately prior to
the Prepayment Date) for the Borrowing for which the Stock Payment
Election has been made.
SECTION 2.15. INCREASED COSTS.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender; or
(ii) impose on any Lender any other condition affecting this
Agreement or Fixed Rate Loans made by such Lender or
participation therein;
and the result of any of the foregoing shall be to increase the cost
to such Lender of making or maintaining any Fixed Rate Loan (or of
maintaining its obligation to make any such Loan) or to increase the
cost to such Lender or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest
or otherwise), then the Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered.
(b) If any Lender determines that any Change in Law
regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's capital or on the
capital of such Lender's holding company, if any, as a consequence
of this Agreement or the Loans made by such Lender to a level below
that which such Lender or such Lender's holding company could have
achieved but for such Change in Law (taking into consideration such
Lender's policies and the policies of such Lender's holding company
with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender such additional amount or amounts
as will compensate such Lender or such Lender's holding company for
any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or
amounts necessary to compensate such Lender or its holding company,
as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender the
amount shown as due on any such certificate within 10 days after
receipt thereof.
(d) Failure or delay on the part of any Lender to demand
compensation pursuant to this Section 2.15 shall not constitute a
waiver of such Lender's right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender
pursuant to this Section 2.15 for any increased costs or reductions
incurred more than 270 days prior to the date that such Lender
notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's intention to
claim compensation therefor; provided further that, if the Change in
Law giving rise to such increased costs or reductions is
retroactive, then the 270-day period referred to above shall be
extended to include the period of retroactive effect thereof.
SECTION 2.16. [Intentionally Omitted]
SECTION 2.17. TAXES.
(a) Any and all payments by or on account of any obligation
of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided
that if the Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section) the Administrative Agent or Lender (as
the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance
with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable
law.
(c) The Borrower shall indemnify the Administrative Agent
and each Lender, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent or such Lender, as the case may be, on or with
respect to any payment by or on account of any obligation of the
Borrower hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified
Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the
amount of such payment or liability delivered to the Borrower by a
Lender, or by the Administrative Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority,
the Borrower shall deliver to the Administrative Agent the original
or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting
such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in
which the Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this
Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed
by applicable law or reasonably requested by the Borrower as will
permit such payments to be made without withholding or at a reduced
rate.
SECTION 2.18. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING
OF SET-OFFS.
(a) The Borrower shall make each payment required to be made
by it hereunder (whether of principal, interest, fees or
reimbursements, or of amounts payable under Section 2.15 or 2.17, or
otherwise) prior to 2:00 p.m., New York City time, on the date when
due, in immediately available funds (or (a) with respect to accrued
interest for a Borrowing for which the Borrower has made the Stock
Payment Election in accordance with section 2.14, Common Stock, or
(b) with respect to fees under Section 2.12, the Warrants), without
set-off or counterclaim. Any amounts received after such time on
any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. All such payments shall
be made to the Administrative Agent at its offices at c/o ING Baring
(U.S.) Capital Corporation, 135 East 57th Street, New York, New York
10022 Attention: Joan Chiappe, Vice President, except that payments
pursuant to Sections 2.15, 2.17 and 9.03 shall be made directly to
the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by it for the account of any
other Person to the appropriate recipient promptly following receipt
thereof. If any payment hereunder shall be due on a day that is not
a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such
extension. All payments hereunder shall be made in dollars (or, (a)
in the case of a Stock Payment Election, Common Stock, or (b) in the
case of the fees under Section 2.12, the Warrants).
(b) If at any time insufficient funds or property are
received by and available to the Administrative Agent to pay fully
all amounts of principal, interest and fees then due hereunder, such
funds or property shall be applied (i) first, towards payment of
interest and fees then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second, towards payment of
principal then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal then due to such
parties.
(c) If any Lender shall, by exercising any right of set-off
or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Revolving Loans resulting in
such Lender receiving payment of a greater proportion of the
aggregate amount of its Revolving Loans and accrued interest thereon
than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face
value) participations in the Revolving Loans of other Lenders to the
extent necessary so that the benefit of all such payments shall be
shared by the Lenders ratably in accordance with the aggregate
amount of principal of and accrued interest on their respective
Revolving Loans; provided that (i) if any such participations are
purchased and all or any portion of the payment giving rise thereto
is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this paragraph shall not be
construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any
payment obtained by a Lender as consideration for the assignment of
or sale of a participation in any of its Loans to any assignee or
participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this paragraph
shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of the Borrower in the amount of such
participation.
(d) Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment is
due to the Administrative Agent for the account of the Lenders
hereunder that the Borrower will not make such payment, the
Administrative Agent may assume that the Borrower has made such
payment on such date in accordance herewith and may, in reliance
upon such assumption, distribute to the Lenders the amount due. In
such event, if the Borrower has not in fact made such payment, then
each of the Lenders severally agrees to repay to the Administrative
Agent forthwith on demand the amount so distributed to such Lender
with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to
the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to
be made by it to the Administrative Agent pursuant to the terms of
this Agreement, then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of
such Lender to satisfy such Lender's obligations under such Sections
until all such unsatisfied obligations are fully paid.
SECTION 2.19. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) If any Lender requests compensation under Section 2.15,
or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.17, then such Lender shall use reasonable
efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i)
would eliminate or reduce amounts payable pursuant to Section 2.15
or 2.17, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by
any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15,
or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.17, or if any Lender defaults in its
obligation to fund Loans hereunder, then the Borrower may, at its
sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all its interests, rights and
obligations under this Agreement to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) the Borrower shall have
received the prior written consent of the Administrative Agent,
which consent shall not unreasonably be withheld, (ii) such Lender
shall have received payment of an amount equal to the outstanding
principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees)
or the Borrower (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for compensation
under Section 2.15 or payments required to be made pursuant to
Section 2.17, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make
any such assignment and delegation if, prior thereto, as a result of
a waiver by such Lender or otherwise, the circumstances entitling
the Borrower to require such assignment and delegation cease to
apply.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. ORGANIZATION; POWERS. Each of the Borrower and
its Participating Subsidiaries is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its
business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, is qualified to do business
in, and is in good standing in, every jurisdiction where such
qualification is required.
SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions
are within the Borrower's corporate powers and have been duly
authorized by all necessary corporate and, if required, stockholder
action. This Agreement has been duly executed and delivered by the
Borrower and constitutes a legal, valid and binding obligation of
the Borrower, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a
proceeding in equity or at law.
SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. The
Transactions (a) do not require any consent or approval of,
registration or filing with, or any other action by, any
Governmental Authority, except such as have been obtained or made
and are in full force and effect, (b) will not violate any
applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrower or any of its Subsidiaries
or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other
instrument binding upon the Borrower or any of its Subsidiaries or
its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and
(d) will not result in the creation or imposition of any Lien on any
asset of the Borrower or any of its Subsidiaries (except those
imposed by the Loan Documents).
SECTION 3.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
(a) The Borrower has heretofore furnished to the
Administrative Agent its consolidated balance sheet and statements
of income, stockholders equity and cash flows (i) as of and for the
fiscal year ended December 31, 1996, reported on by Price Waterhouse
LLP, independent public accountants, and (ii) as of and for the
fiscal quarter and the portion of the fiscal year ended September
30, 1997, certified by its chief financial officer. Such financial
statements present fairly, in all material respects, the financial
position and results of operations and cash flows of the Borrower
and its consolidated Subsidiaries as of such dates and for such
periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the
statements referred to in clause (ii) above.
(b) Since September 30, 1997, there has been no material
adverse change in the business, assets, operations, prospects or
condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole.
SECTION 3.05. PROPERTIES.
(a) Each of the Borrower and its Participating Subsidiaries
has good title to, or valid leasehold interests in, all its real and
personal property material to its business, except for Permitted
Encumbrances and minor defects in title that do not interfere with
its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
(b) Each of the Borrower and its Participating Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, copyrights,
patents and other intellectual property material to its business,
and the use thereof by the Borrower and its Participating
Subsidiaries does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.06. LITIGATION AND ENVIRONMENTAL MATTERS.
(a) There are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority pending against or, to the
knowledge of the Borrower, threatened against or affecting the
Borrower or any of its Subsidiaries (i) as to which there is a
reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or
in the aggregate, to result in a Material Adverse Effect (other than
the Disclosed Matters) or (ii) that involve this Agreement or the
Transactions.
(b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect,
neither the Borrower nor any of its Subsidiaries (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.
(c) Since the date of this Agreement, there has been no
change in the status of the Disclosed Matters that, individually or
in the aggregate, has resulted in, or materially increased the
likelihood of, a Material Adverse Effect.
SECTION 3.07. COMPLIANCE WITH LAWS AND AGREEMENTS. Each of
the Borrower and the Participating Subsidiaries is in compliance
with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, agreements and
other instruments binding upon it or its property, except where the
failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No
Default has occurred and is continuing.
SECTION 3.08. INVESTMENT AND HOLDING COMPANY STATUS. Neither
the Borrower nor any of its Subsidiaries is (a) an "investment
company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined
in, or subject to regulation under, the Public Utility Holding
Company Act of 1935.
SECTION 3.09. TAXES. Each of the Borrower and its
Participating Subsidiaries has timely filed or caused to be filed
all tax returns and reports required to have been filed and has paid
or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such
Participating Subsidiary, as applicable, has set aside on its books
adequate reserves or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all
other such ERISA Events for which liability is reasonably expected
to occur, could reasonably be expected to result in a Material
Adverse Effect. The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did
not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than
$500,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of
the date of the most recent financial statements reflecting such
amounts, exceed by more than $500,000 the fair market value of the
assets of all such underfunded Plans.
SECTION 3.11. DISCLOSURE. The Borrower has disclosed to the
Administrative Agent all agreements, instruments and corporate or
other restrictions to which it or any of its Subsidiaries is
subject, and all other matters known to it, that, individually or in
the aggregate, could reasonably be expected to result in a Material
Adverse Effect. None of the reports, financial statements,
certificates or other information furnished by or on behalf of the
Borrower to the Administrative Agent or any Lender in connection
with the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains
any material misstatement of fact or omits to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided
that, with respect to projected financial information, the Borrower
represents only that such information was prepared in good faith
based upon assumptions believed to be reasonable at the time.
SECTION 3.12. SECURITY INTERESTS. Except for (a) the filing
of UCC financing statements in respect of the collateral covered by
the Security Documents in the States of Delaware and California and
such other applicable jurisdictions in the United States of America
and (b) filing and recording of Mortgages in respect of the real
property collateral in the county in which the real property is
located, which filings shall have been made and be in effect on (or
simultaneously with) the Effective Date, the taking of possession by
the Administrative Agent of the certificates representing the shares
of capital stock of the Participating Subsidiaries and various
instruments pledged to it pursuant to the Pledge and Security
Agreement, and the delivery of notice of the security interests
granted in the accounts covered by the Pledge and Security Agreement
to the bank or banks whereat such accounts are maintained and
receipt of acknowledgements of such notices by such banks (which
actions shall be effected as of or promptly following the Effective
Date), no further filing or recording of any document and no other
action is necessary or advisable in the States of Delaware or
California or any other applicable jurisdiction in the United States
of America in order to establish and perfect, under the laws of
Delaware or California or such other applicable jurisdiction in the
United States of America, the Administrative Agent's security
interest in such collateral, to the extent required by the
applicable Security Documents, on behalf of the Lenders.
SECTION 3.13. PARTICIPATING SUBSIDIARIES. The Borrower has no
Participating Subsidiaries except as set forth on Schedule 3.13
hereto.
SECTION 3.14. INACTIVE SUBSIDIARIES. The Borrower has no
Inactive Subsidiaries except as set forth on Schedule 3.14 hereto.
The Inactive Subsidiaries (a) do not conduct any business activities
of any type or nature, and (b) do not own or have any interest in
any assets or property of any type or nature.
SECTION 3.15. SOLVENCY. After giving effect to the
Transactions, (i) the assets of the Borrower, at a fair valuation,
will exceed its debts, (ii) the Borrower's capital will not be
unreasonably small to conduct its business, (iii) the Borrower will
not have incurred debts, or have intended to incur debts, beyond its
ability to pay such debts as they mature, and (iv) the then-current
fair salable value of the Borrower's assets will be greater than the
amount that will be required to pay its probable liabilities
(including debts) as they become absolute and matured. For purposes
of this Section, "debt" means any liability on a claim, and "claim"
means (x) the right to payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or
unsecured, or (y) the right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured. For purposes of this Section, the Borrower may assume
that the Loans will be refinanced on the Maturity Date.
SECTION 3.16. EXCLUDED ITEMS. The aggregate acquisition cost
of (i) all Excluded Items plus (ii) all Rolling Stock (in existence
as of the Effective Date or thereafter acquired) for which the
Borrower or other Obligor, as the case may be, has not granted Liens
in favor of the Administrative Agent, for itself and on behalf of
the Lenders, is not more than $2,000,000.
SECTION 3.17. EQUITY ACQUISITION ASSETS. The aggregate
acquisition cost of all Equity Acquisition Assets for which the
Borrower or other Obligor, as the case may be, has not granted Liens
in favor of the Administrative Agent, for itself and on behalf of
the Lenders, is not more than $2,000,000.
SECTION 3.18. ROLLING STOCK. The aggregate acquisition cost
of all Rolling Stock for which the Borrower, without the consent of
the Administratrive Agent, has not granted Liens in favor of the
Administrative Agent, for itself and on behalf of the Lenders, is
not more than $2,000,000.
ARTICLE IV
CONDITIONS
SECTION 4.01. EFFECTIVE DATE. The obligations of the Lenders
to make Loans hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in
accordance with Section 9.02):
(a) The Administrative Agent shall have received the following
documents, each in form and substance satisfactory to the
Administrative Agent, and in the case of the document referred
to in clauses (i), (v) and (vii) , duly executed and delivered
by all the parties thereto:
(i) this Agreement;
(ii) the Borrower filed or registered Charter Documents,
as amended, modified, restated or supplemented to the date
hereof and certified as of the Effective Date as being a true
and correct copy thereof by the Secretary of State (or
comparable Governmental Authority) of the jurisdiction of its
formation;
(iii) a copy, certified as of the Effective Date of the
resolutions of the board of directors of the Borrower duly
authorizing the execution, delivery and performance by the
Borrower of this Agreement and the other Loan Documents to
which it is a party, and each other document required to be
executed and delivered by the Borrower pursuant to this
Agreement;
(iv) a certificate, dated the Effective Date and signed
by the President, a Vice President or a Financial Officer of
the Borrower, confirming compliance with the conditions set
forth in paragraphs (h) and (j) of this Section 4.01;
(v) the Pledge and Security Agreement (together with the
share certificates representing all of the issued and
outstanding shares of the Participating Subsidiaries,
endorsed in blank), and the Mortgages;
(vi) a favorable written opinion (addressed to the
Administrative Agent and the Lenders and dated the Effective
Date) of Miller & Holguin, counsel for the Borrower,
substantially in the form of Exhibit H, and covering such
other matters relating to the Borrower, this Agreement or the
Transactions as the Required Lenders shall reasonably
request. The Borrower hereby requests such counsel to
deliver such opinion;
(vii) the Cadiz Reaffirmation Agreement; and
(viii) such other documents relating to the transactions
contemplated hereby as the Administrative Agent or any Lender
may reasonably request.
(b) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its
counsel may reasonably request relating to the organization,
existence and good standing of the Borrower, the authorization
of the Transactions and any other legal matters relating to the
Borrower, this Agreement or the Transactions, all in form and
substance satisfactory to the Administrative Agent and its
counsel.
(c) UCC financing statements covering all the security
interests created by or pursuant to the Pledge and Security
Agreements in the collateral pledged pursuant thereto, shall
have been executed and delivered by the Borrower to the
Administrative Agent and such financing statements, or other
statements or documents to the same purposes, shall have been
duly filed or shall be duly filed simultaneously with the
Initial Borrowing in all other applicable jurisdictions in the
United States of America necessary or desirable to perfect said
security interests and there shall have been taken all other
action as the Administrative Agent or any Lender through the
Administrative Agent may reasonably request or as shall be
necessary to perfect such security interests to the extent
required by the applicable Security Documents.
(d) The Administrative Agent shall have received evidence of
the insurance required to be carried pursuant to Section
5.05(b).
(e) The representations and warranties of the Borrower set
forth in this Agreement and each other Loan Document shall be
true and correct on and as of the Effective Date of such
Borrowing.
(f) No Default shall have occurred and be continuing.
(g) The Borrower shall have performed or observed and be
continuing to perform each term, covenant or agreement
contained in any Loan Document.
(h) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the
President, a Vice President or a Financial Officer of the
Borrower, confirming compliance with the conditions set forth
in paragraphs (a) and (b) of Section 4.02.
(i) The Administrative Agent shall have received all fees
and other amounts due and payable on or prior to the Effective
Date, including, to the extent invoiced, reimbursement or
payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrower hereunder.
(j) All governmental and third party approvals necessary or,
in the discretion of the Administrative Agent, advisable in
connection with the Transaction, the financing contemplated
hereby and the continuing operations of the Borrower shall have
been obtained and be in full force and effect, and all
applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse
conditions on the Transactions or the financing thereof.
The Administrative Agent shall notify the Borrower and the Lenders
of the Effective Date, and such notice shall be conclusive and
binding. Notwithstanding the foregoing, the obligations of the
Lenders to make Loans hereunder shall not become effective unless
each of the foregoing conditions is satisfied (or waived pursuant to
Section 9.02) at or prior to 3:00 p.m., New York City time, on
December 1, 1997 (and, in the event such conditions are not so
satisfied or waived, the Commitments shall terminate at such time).
SECTION 4.02. EACH CREDIT EVENT. The obligation of each
Lender to make a Loan on the occasion of any Borrowing is subject to
the satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set
forth in this Agreement shall be true and correct on and as of
the date of such Borrowing.
(b) At the time of and immediately after giving effect to
such Borrowing, no Default shall have occurred and be
continuing.
Each Borrowing shall be deemed to constitute a representation and
warranty by the Borrower on the date thereof as to the matters
specified in paragraphs (a) and (b) of this Section.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable
hereunder shall have been paid in full, the Borrower covenants and
agrees with the Lenders that:
SECTION 5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Borrower will furnish to the Administrative Agent and each Lender:
(a) within 15 days following Borrower's filing each Annual
Report on Form 10-K with the Commission, its audited
consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end
of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on
by Price Waterhouse LLP or other independent public accountants
of recognized national standing (without a "going concern" or
like qualification or exception and without any qualification
or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all
material respects the financial condition and results of
operations of the Borrower and its consolidated Subsidiaries on
a consolidated basis in accordance with GAAP consistently
applied;
(b) within 15 days following Borrower's filing each
Quarterly Report on Form 10-Q with the Commission, its
consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end
of and for such fiscal quarter and the then elapsed portion of
the fiscal year, setting forth in each case in comparative form
the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous
fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial
condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements
under subsection (a) or (b) above, a certificate of a Financial
Officer of the Borrower (i) certifying as to whether a Default
has occurred and, if a Default has occurred, specifying the
details thereof and any action taken or proposed to be taken
with respect thereto, and (ii) stating whether any change in
GAAP or in the application thereof has occurred since the date
of the audited financial statements referred to in Section 3.04
and, if any such change has occurred, specifying the effect of
such change on the financial statements accompanying such
certificate;
(d) [Intentionally omitted]
(e) promptly after the same become publicly available,
copies of all periodic and other reports, proxy statements and
other materials filed by the Borrower or any Subsidiary with
the Commission, or any Governmental Authority succeeding to any
or all of the functions of said Commission, or with any
national securities exchange, or distributed by the Borrower to
its shareholders generally, as the case may be; and
(f) promptly following any request therefor, such other
information regarding the operations, business affairs and
financial condition of the Borrower or any Subsidiary, or
compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.
SECTION 5.02. NOTICES OF MATERIAL EVENTS. The Borrower will
furnish to the Administrative Agent and each Lender prompt written
notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental
Authority against or affecting the Borrower or any Affiliate
thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or
together with any other ERISA Events that have occurred, could
reasonably be expected to result in a Material Adverse Effect;
and
(d) any other development that results in, or could
reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 5.02 shall be accompanied
by a statement of a Financial Officer or other executive officer of
the Borrower setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken
with respect thereto.
SECTION 5.03. EXISTENCE; CONDUCT OF BUSINESS. The Borrower
will, and will cause each of its Subsidiaries (including Sun World,
but excluding Borrower's Inactive Subsidiaries and the subsidiaries
of Sun World) to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business; provided that
the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 6.03.
SECTION 5.04. PAYMENT OF OBLIGATIONS. The Borrower will, and
will cause each of its Subsidiaries to, pay its obligations,
including tax liabilities, that, if not paid, could result in a
Material Adverse Effect before the same shall become delinquent or
in default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) the Borrower
or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make
payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.05. MAINTENANCE OF PROPERTIES; INSURANCE. The
Borrower will, and will cause each of its Participating Subsidiaries
and SWFG to, (a) keep and maintain all property material to the
conduct of its business in good working order and condition,
ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts
and against such risks as are customarily maintained by companies
engaged in the same or similar businesses operating in the same or
similar locations.
SECTION 5.06. BOOKS AND RECORDS; INSPECTION RIGHTS. The
Borrower will, and will cause each of its Subsidiaries to, keep
proper books of record and account in which full, true and correct
entries are made of all dealings and transactions in relation to its
business and activities. The Borrower will, and will cause each of
its Subsidiaries (excluding the Sun World Entities) to, permit any
representatives designated by the Administrative Agent or any
Lender, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as
often as reasonably requested.
SECTION 5.07. COMPLIANCE WITH LAWS. The Borrower will, and
will cause each of its Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to
it or its property, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 5.08. USE OF PROCEEDS. Subject to the terms and
restrictions set forth herein, the proceeds of the Loans will be
used solely for the purpose of (a) financing a Permitted Investment
and (b) financing the working capital and general corporate needs of
the Borrower. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Board, including
Regulations G, U and X.
SECTION 5.09. NEW SUBSIDIARIES. In the event that any Person
shall become a Participating Subsidiary of Borrower after the date
hereof, Borrower shall execute (or cause such other Participating
Subsidiary as may be the direct parent company of the new
Participating Subsidiary to execute) a Pledge and Security
Agreement, as the case may be, sufficient to subject all of the
capital stock of such new or additional Participating Subsidiary to
a Lien in favor of the Administrative Agent, on behalf of the
Lenders, and any other documents as the Administrative Agent may
reasonably request from time to time in order to perfect or maintain
the perfection of the Administrative Agent's Liens thereunder, each
in form and substance reasonably satisfactory to the Administrative
Agent.
SECTION 5.10. ACQUISITIONS BY BORROWER.
(a) In the event that after the date of this Agreement the
Borrower acquires ownership of any additional real or personal
property of any type or nature (including, but not limited to, notes
or other obligations from a Subsidiary or Affiliate to Borrower),
the Borrower shall promptly give written notice of such acquisition
to the Administrative Agent, and if requested by the Administrative
Agent at the direction of the Required Lenders, Borrower shall
execute and deliver any and all Security Documents or collateral
assignments, security agreements, mortgages, deeds of trust, pledge
agreements, financing statements, fixture filings, notice filings or
other documents as the Administrative Agent may reasonably request
from time to time in order for the Administrative Agent to acquire a
Lien on the property so acquired by Borrower as additional security
for the obligations under this Agreement or to perfect or maintain
the perfection of such Lien.
(b) Notwithstanding paragraph (a) of this Section 5.10, so
long as no Event of Default is then in existence, Borrower shall not
be required to deliver to the Administrative Agent any Security
Documents or collateral assignments, security agreements, mortgages,
deeds of trust, pledge agreements, financing statements, fixture
filings, notice filings or other documents for any item of real or
personal property acquired by Borrower on or after the Effective
Date if both (i) the acquisition cost of each such item of real or
personal property (including, but not limited to, Rolling Stock) is
less than $250,000 and (ii) the aggregate acquisition cost of (A)
all such real or personal property (including, but not limited to,
Rolling Stock) in which no Lien has been granted in favor of the
Administrative Agent pursuant to this paragraph (b) of this Section
(collectively, the "Excluded Items") plus (B) Rolling Stock in
existence as of the Effective Date is not more than $2,000,000. To
the extent that the aggregate acquisition cost of (i) all Excluded
Items plus (ii) Rolling Stock in existence as of the Effective Date
is more than $2,000,000 (the "Excluded Items/Rolling Stock
Threshold"), Borrower will, and will cause its Subsidiaries to,
grant (and such Liens shall be deemed immediately to have been
granted) Liens on such assets to the extent in excess of the
Excluded Items/Rolling Stock Threshold in favor of the
Administrative Agent, for itself and on behalf of the Lenders.
(c) Notwithstanding paragraph (a) and (b) of this Section
5.10, so long as no Event of Default is then in existence, Borrower
also shall not be required to deliver to the Administrative Agent
any Security Documents or collateral assignments, security
agreements, mortgages, deeds of trust, pledge agreements, financing
statements, fixture filings, notice filings or other documents for
any item of real or personal property acquired on or after the
Effective Date if each of the following conditions are satisfied:
(a) each such item of real or personal property is acquired or
purchased on or after the Effective Date solely in exchange for the
Common Stock or other equity interest in the Borrower (an "Equity
Acquisition Asset"), (b) no Lien is created, imposed, or permitted
to exist on any Equity Acquisition Asset, and (c) the aggregate
acquisition value of all Equity Acquisition Assets does not exceed
$2,000,000. To the extent that the aggregate acquisition value of
all Equity Acquisition Assets is more than $2,000,000 ("Equity
Acquisition Threshold"), Borrower will, and will cause its
Subsidiaries to, grant Liens (and such Liens shall be deemed
immediately to have been granted) on such assets to the extent in
excess of the Equity Acquisition Threshold in favor of the
Administrative Agent, for itself and on behalf of the Lenders.
SECTION 5.11. ACQUISITIONS WITH PROCEEDS OF LOANS. In the
event that after the date of this Agreement, a Subsidiary or
Borrower's Affiliate utilizes the proceeds of any Loans, which are
either directly or indirectly transferred or otherwise forwarded to
such Subsidiary or Borrower's Affiliate from Borrower, to acquire
real or personal property of any type or nature, Borrower shall
promptly give written notice of such acquisition to the
Administrative Agent, and if requested by the Administrative Agent
at the direction of the Required Lenders, Borrower shall cause such
Subsidiary or Borrower's Affiliate to execute and deliver Security
Documents or collateral assignments, security agreements, mortgages,
deeds of trust, pledge agreements, financing statements, fixture
filings, notice filings or other documents the Administrative Agent
may reasonably request from time to time in order for the
Administrative Agent to acquire a Lien on the property so acquired
by the Subsidiary or Borrower's Affiliate as the case may be, as
additional security for the obligations under this Agreement or to
perfect or maintain the perfection of such Lien.
SECTION 5.12. WARRANTS. On the date hereof, the Borrower
shall issue the Warrants and the Purchaser Certificate. The
Warrants shall be duly executed and registered in such name or names
and in such denominations as each Lender shall have notified the
Borrower and shall be deemed earned in accordance with section 2.12
hereof and the terms and conditions of the Warrants. The Borrower
shall keep available for issuance upon exercise of the Warrants a
sufficient quantity of Common Stock to satisfy the exercise in full
of the Warrants from time to time outstanding. The Borrower will
comply in all respects with its obligations under the Warrants and
shall take all steps as shall be necessary to insure that the
Lenders and any subsequent holders of the Warrants receive all of
the benefits which they are intended to receive thereunder.
SECTION 5.13. STOCK PAYMENT COMMON STOCK. On each Interest
Payment Date that the Borrower has made a Stock Payment Election on
account of a Borrowing, the Borrower shall issue Common Stock to the
Lenders equal to the applicable Stock Payment ("Stock Payment Common
Stock"). All shares of Common Stock issued pursuant to a Stock
Payment shall be duly authorized, validly issued, fully paid,
non-assessable, and free and clear of all Liens and other encumbrances.
ARTICLE VI
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable
hereunder have been paid in full, the Borrower covenants and agrees
with the Lenders that:
SECTION 6.01. INDEBTEDNESS. The Borrower will not, and will
not permit any Participating Subsidiary or SWFG to, create, incur,
assume or permit to exist any Indebtedness of Borrower, the
Participating Subsidiaries or SWFG, except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth
in Schedule 6.01 and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding
principal amount thereof;
(c) Indebtedness of the Borrower to any Subsidiary and of
any Subsidiary to the Borrower or any other Subsidiary;
(d) Guarantees by the Borrower of Indebtedness of any
Subsidiary and by any Subsidiary of Indebtedness of the
Borrower or any other Subsidiary;
(e) Indebtedness of the Borrower or any Subsidiary incurred
to finance the acquisition, construction or improvement of any
assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any
such assets or secured by a Lien on any such assets prior to
the acquisition thereof, and extensions, renewals and
replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; provided that (i) such
Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or
improvement and (ii) the aggregate principal amount of
Indebtedness permitted by this subsection (e) shall not exceed
$135 million at any time outstanding;
(f) Indebtedness of the Borrower or any Subsidiary as an
account party in respect of trade letters of credit;
(g) "Parent Permitted Debt" (as defined in the Sun World
Indenture), to the extent such debt may be incurred by Borrower
pursuant to the terms of the Sun World Indenture without any
action or authorization by the Sun World Trustee under the Sun
World Indenture or by the holders of the Sun World Notes;
provided, however, no "Parent Permitted Debt" (as defined in
the Sun World Indenture) may be created, incurred, assumed or
permitted to exist that would have a Material Adverse Effect
upon Borrower's ability to satisfy the Borrower's obligations
hereunder and under the other Loan Documents.
SECTION 6.02. LIENS. The Borrower will not, and will not
permit any Subsidiary (excluding the Sun World Entities) to, create,
incur, assume or permit to exist any Lien on any property or asset
now owned or hereafter acquired by it, or assign or sell any income
or revenues (including accounts receivable) or rights in respect of
any thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Borrower or any
Subsidiary (excluding the Sun World Entities) existing on the
date hereof and set forth in Schedule 6.02; provided that (i)
such Lien shall not apply to any other property or asset of the
Borrower or any Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on the date hereof and
extensions, renewals and replacements thereof that do not
increase the outstanding principal amount thereof;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or
existing on any property or asset of any Person that becomes a
Subsidiary after the date hereof prior to the time such Person
becomes a Subsidiary; provided that (i) such Lien is not
created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, as the case
may be, (ii) such Lien shall not apply to any other property or
assets of the Borrower or any Subsidiary and (iii) such Lien
shall secure only those obligations which it secures on the
date of such acquisition or the date such Person becomes a
Subsidiary, as the case may be and extensions, renewals and
replacements thereof that do not increase the outstanding
principal amount thereof;
(d) Liens on assets acquired, constructed or improved by the
Borrower or any Subsidiary; provided that (i) such security
interests secure Indebtedness permitted by subsection (e) of
Section 6.01, (ii) such security interests and the Indebtedness
secured thereby are incurred prior to or within 90 days after
such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not
exceed 90% of the cost of acquiring, constructing or improving
such assets and (iv) such security interests shall not apply to
any other property or assets of the Borrower or any Subsidiary;
(e) Liens to the extent permitted pursuant to the terms of
the Sun World Indenture without any action or authorization by
the Sun World Trustee under the Sun World Indenture or by the
holders of the Sun World Notes; provided that such Liens do not
include any Liens on the ING Collateral; and
(f) Liens on the Excluded Items or any portion thereof;
notwithstanding the foregoing, the Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist
any Lien on any Equity Acquisition Asset now owned or hereafter
acquired, or any proceeds thereof.
SECTION 6.03. FUNDAMENTAL CHANGES.
(a) The Borrower will not, and will not permit any
Subsidiary, excluding the Sun World entities, to, merge into or
consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of
transactions) any substantial part of its assets, or all or
substantially all of the stock of any of its Subsidiaries (in each
case, whether now owned or hereafter acquired), or liquidate or
dissolve, except that, if at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be
continuing (i) any Subsidiary/Person may merge into the Borrower in
a transaction in which the Borrower is the surviving corporation,
(ii) any Subsidiary/Person may merge into any Subsidiary in a
transaction in which the surviving entity is a Subsidiary, (iii) any
Subsidiary may sell, transfer, lease or otherwise dispose of its
assets to the Borrower or to another Subsidiary and (iv) any
Subsidiary may liquidate or dissolve if the Borrower determines in
good faith that such liquidation or dissolution is in the best
interests of the Borrower and is not materially disadvantageous to
the Lenders; provided that any such merger involving a Person that
is not a wholly owned Subsidiary immediately prior to such merger
shall not be permitted unless also permitted by Section 6.04.
(b) The Borrower will not, and will not permit any of its
Subsidiaries (excluding the Sun World Entities) to, engage to any
material extent in any business other than businesses of the type
conducted by the Borrower and its Subsidiaries on the date of
execution of this Agreement and businesses reasonably related
thereto.
(c) Notwithstanding the foregoing, the Borrower may sell
assets to the extent such sale may be consummated pursuant to the
terms of the Sun World Indenture without any action or authorization
by the Sun World Trustee under the Sun World Indenture or the
holders of the Sun World Notes; provided that such sales do not
include or affect in any manner the ING Collateral.
(d) Unless an Inactive Subsidiary shall comply with each and
every obligation that Participating Subsidiaries (either directly or
indirectly) have hereunder or under any of the Loan Documents, (a)
the Borrower will not permit such Inactive Subsidiary to engage in
any business of any type or nature, (b) the Borrower will not permit
the Inactive Subsidiaries, and will cause the Inactive Subsidiaries
to refrain from, obtaining any assets or properties of any type or
nature, (c) the Borrower will not permit any Inactive Subsidiary to,
create, incur, assume or permit to exist any Indebtedness, and (d)
the Borrower will not permit any Inactive Subsidiary to, create,
incur, assume or permit to exist any Lien on any property or asset
now owned or hereafter acquired by it, or assign or sell any income
or revenues.
SECTION 6.04. INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND
ACQUISITIONS. The Borrower will not, and will not permit any of its
Subsidiaries to, purchase, hold or acquire (including pursuant to
any merger with any Person that was not a wholly owned Subsidiary
prior to such merger) any capital stock, evidences of indebtedness
or other securities (including any option, warrant or other right to
acquire any of the foregoing) of, make or permit to exist any loans
or advances to, Guarantee any obligations of, or make or permit to
exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person constituting a business
unit, except:
(a) Permitted Investments;
(b) investments by the Borrower existing on November 15,
1997 in the capital stock, other securities or equity interests
of its Subsidiaries;
(c) loans or advances made by the Borrower to any Subsidiary
and made by any Subsidiary to the Borrower or any other
Subsidiary;
(d) Guarantees constituting Indebtedness permitted by
Section 6.01; and
(e) assets acquired by Borrower solely in exchange for the
equity interests of the Borrower.
SECTION 6.05. HEDGING AGREEMENTS. The Borrower will not, and
will not permit any of its Subsidiaries (excluding the Sun World
Entities) to, enter into any Hedging Agreement, other than Hedging
Agreements entered into in the ordinary course of business to hedge
or mitigate risks to which the Borrower or any Subsidiary is exposed
in the conduct of its business or the management of its liabilities.
SECTION 6.06. RESTRICTED PAYMENTS. The Borrower will not, and
will not permit any of its Subsidiaries to, declare or make, or
agree to pay or make, directly or indirectly, any Restricted
Payment; except that the Borrower and its Affiliates may make
"Restricted Payments" (as defined in the Sun World Indenture) to the
extent such payments may be effected pursuant to the terms of the
Sun World Indenture without any action or authorization by the Sun
World Trustee under the Sun World Indenture or by the holders of the
Sun World Notes, provided, however, that no such "Restricted
Payments" (as defined in the Sun World Indenture) may be made that
would have a Material Adverse Effect upon Borrower's ability to
satisfy the Borrower's obligations hereunder and under the other
Loan Documents.
SECTION 6.07. TRANSACTIONS WITH AFFILIATES. The Borrower will
not, and will not permit any of its Subsidiaries to, sell, lease or
otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage
in any other transactions with, any of its Affiliates, except (a) in
the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third
parties, (b) transactions between or among the Borrower and its
Subsidiaries not involving any other Affiliate, (c) any Restricted
Payment permitted by Section 6.06, and (d) "Affiliate Transactions"
(as defined in the Sun World Indenture), to the extent such
transactions may be incurred by Borrower and its Subsidiaries
pursuant to the terms of the Sun World Indenture without any action
or authorization by the Sun World Trustee under the Sun World
Indenture or by the holders of the Sun World Notes, provided,
however, that no such "Affiliate Transactions" (as defined in the
Sun World Indenture) may be undertaken that would have a Material
Adverse Effect upon Borrower's ability to satisfy the Borrower's
obligations hereunder and under the other Loan Documents.
SECTION 6.08. RESTRICTIVE AGREEMENTS. The Borrower will not,
and will not permit any of its Subsidiaries (excluding the Sun World
Entities) to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any
Subsidiary (excluding the Sun World Entities) to create, incur or
permit to exist any Lien upon any of its property or assets, or (b)
the ability of any Subsidiary (excluding the Sun World Entities) to
pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to the
Borrower or any other Subsidiary or to Guarantee Indebtedness of the
Borrower or any other Subsidiary; provided that (i) the foregoing
shall not apply to restrictions and conditions imposed by law or by
this Agreement or any other Loan Document, (ii) the foregoing shall
not apply to restrictions and conditions existing on the date hereof
identified on Schedule 6.08 (but shall apply to any amendment or
modification expanding the scope of any such restriction or
condition), (iii) except as may be required pursuant to Section 5.10
hereof, the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such
sale is permitted hereunder, (iv) except as may be required pursuant
to Section 5.10 hereof, subsection (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets
securing such Indebtedness and (v) except as may be required
pursuant to Section 5.10 hereof, subsection (a) of the foregoing
shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.
SECTION 6.09. USE OF PROCEEDS. Borrower shall not use the
proceeds of any of the Revolving Loans for any purpose other than as
and to the extent permitted by Section 5.08 hereof.
SECTION 6.10. MANAGEMENT FEES FROM SUN WORLD. Borrower shall
not, and will cause Sun World to refrain from taking any action to,
either directly or indirectly, amend, modify, alter or voluntary
terminate or suspend the Cadiz/Sun World Services Agreement in any
manner that would restrict, limit, affect, modify, suspend or
terminate Borrower's right to receive at least $1,500,000.00
annually for management fees paid by Sun World to Cadiz under the
terms of the Cadiz/Sun World Services Agreement.
ARTICLE VII
EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall
occur:
(a) the Borrower shall fail to pay any principal of, or
interest on, any Loan or any fee or any other amount payable
under this Agreement or any other Loan Document when and as the
same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
(b) any representation or warranty made or deemed made by or
on behalf of the Borrower or any Subsidiary in or in connection
with this Agreement or any other Loan Document or any amendment
or modification hereof or waiver hereunder, or in any report,
certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any other
Loan Document or any amendment or modification hereof or waiver
hereunder, shall prove to have been incorrect in any material
respect when made or deemed made;
(c) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02,
5.03 (with respect to the Borrower's existence) or 5.08 or in
Article VI;
(d) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement
(other than those specified in clauses (a), (b) or (c) of this
Article), and such failure shall continue unremedied for a
period of 30 days after notice thereof from the Administrative
Agent to the Borrower (which notice will be given at the
request of any Lender);
(e) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of
amount) in respect of any Material Indebtedness, when and as
the same shall become due and payable; provided that this
clause (e) shall not apply solely by reason of a failure to
make a payment when and as the same shall become due and
payable under the Sun World Indenture or other Sun World
Documents unless (i) such failure would cause an Event of
Default hereunder pursuant to a section other than this section
(e), (ii) the Sun World Notes or any of the obligations under
the Sun World Documents to the Sun World Trustee or the holders
of the Sun World Notes have been accelerated pursuant to the
provisions of the Sun World Indenture or otherwise, (iii) the
Sun World Trustee and/or any of the holders of the Sun World
Notes have instituted legal proceedings to enforce the Sun
World Notes, the Sun World Indenture, or any obligations
referred to in any of the Sun World Documents, (iv) the Sun
World Trustee and/or any of the holders of the Sun World Notes
have commenced foreclosure proceedings (judicial or
nonjudicial) with respect to any collateral held as security
for the obligations under the Sun World Documents, or (v) such
failure to make payments has a Material Adverse Effect upon
Borrower's ability to satisfy its obligations under this
Agreement or any other Loan Document (as determined solely in
the Administrative Agent's reasonable judgment); provided
further that this clause (e) shall not apply solely by reason
of a failure to make a payment when and as the same shall
become due and payable under any other Sun World Indebtedness
unless (i) such failure would cause an Event of Default
hereunder pursuant to a section other than this section (e),
(ii) such Sun World Indebtedness have been accelerated pursuant
to the terns thereof or otherwise, (iii) the holders of such
Sun World Indebtedness or any agent therefor have instituted
legal proceedings to enforce such Sun World Indebtedness, (iv)
the holders of such Sun World Indebtedness or any agent
therefor have commenced foreclosure proceedings (judicial or
nonjudicial) with respect to any collateral held as security
for such Indebtedness, or (v) such failure to make payments has
a Material Adverse Effect upon Borrower's ability to satisfy
its obligations under this Agreement or any other Loan Document
(as determined solely in the Administrative Agent's reasonable
judgment).
(f) any event or condition occurs that results in any
Material Indebtedness becoming due prior to its scheduled
maturity or that enables or permits (with or without the giving
of notice, the lapse of time or both) the holder or holders of
any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due,
or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; provided
that this clause (f) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer
of the property or assets securing such Indebtedness; provided
further that this clause (f) shall not apply solely by reason
of an "Event of Default" under the Sun World Indenture or other
Sun World Documents unless (i) such event would cause an Event
of Default hereunder regardless of its classification as an
"Event of Default" under the Sun World Indenture or other Sun
World Documents, (ii) the Sun World Notes or any of the
obligations under the Sun World Documents to the Sun World
Trustee or the holders of the Sun World Notes have been
accelerated pursuant to the provisions of the Sun World
Indenture or otherwise, (iii) the Sun World Trustee and/or any
of the holders of the Sun World Notes have instituted legal
proceedings to enforce the Sun World Notes, the Sun World
Indenture, or any obligations referred to in any of the Sun
World Documents, (iv) the Sun World Trustee and/or any of the
holders of the Sun World Notes have commenced foreclosure
proceedings (judicial or nonjudicial) with respect to any
collateral held as security for the obligations under the Sun
World Documents, or (v) such event has a Material Adverse
Effect upon Borrower's ability to satisfy its obligations under
this Agreement or any other Loan Document (as determined solely
in the Administrative Agent's reasonable judgment); provided
further that this clause (f) shall not apply solely by reason
of an "Event of Default" under any other Sun World Indebtedness
unless (i) such event would cause an Event of Default hereunder
regardless of its classification as an "Event of Default" for
such other Sun World Indebtedness, (ii) such Sun World
Indebtedness has been accelerated pursuant to the terms thereof
or otherwise, (iii) the holders of such Sun World Indebtedness
or any agent therefor have instituted legal proceedings to
enforce the Sun World Indebtedness, (iv) the holders of such
Sun World Indebtedness or any agent therefor have commenced
foreclosure proceedings (judicial or nonjudicial) with respect
to any collateral held as security for such Indebtedness, or
(v) such event has a Material Adverse Effect upon Borrower's
ability to satisfy its obligations under this Agreement or any
other Loan Document (as determined solely in the Administrative
Agent's reasonable judgment).
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of the Borrower or
any Subsidiary or its debts, or of a substantial part of its
assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for
the Borrower or any Subsidiary or for a substantial part of its
assets, and, in any such case, such proceeding or petition
shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(h) the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal,
state or foreign bankruptcy, insolvency, receivership or
similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate
manner, any proceeding or petition described in clause (g) of
this Article, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting
the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit
of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;
(i) the Borrower or any Subsidiary (other than PSWRI and
SWFG) shall become unable, admit in writing or fail generally
to pay its debts as they become due;
(j) one or more judgments for the payment of money in excess
of insurance coverage in an aggregate amount in excess of
$500,000 shall be rendered against the Borrower, any
Participating Subsidiary, SWFG or any combination thereof and
the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the
Borrower or any Participating Subsidiary to enforce any such
judgment;
(k) an ERISA Event shall have occurred that, in the opinion
of the Required Lenders, when taken together with all other
ERISA Events that have occurred, could reasonably be expected
to result in a Material Adverse Effect;
(l) a Change in Control shall occur;
(m) any of the Security Documents shall for any reason cease
to be a valid perfected security interest in favor of the
Administrative Agent, for itself and on behalf of the Lenders,
in the Borrower's right, title and interest in and to the
collateral subject thereto (subject only to Permitted
Encumbrances), to the extent required by such Security
Document, and in the case of any Mortgage, such cessation
continues unremedied for more than 10 days; or
(n) an "Event of Default" shall have occurred and be
continuing under any other Loan Document;
then, and in every such event (other than an event with respect to
the Borrower described in clause (g) or (h) of this Article), and at
any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders
shall, by notice to the Borrower, take either or both of the
following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Loans then outstanding to be due
and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due
and payable), and thereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and
all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby
waived by the Borrower; and in case of any event with respect to the
Borrower described in clause (g) or (h) of this Article, the
Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and
all fees and other obligations of the Borrower accrued hereunder,
shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby
waived by the Borrower. In addition to any other remedies available
to the Administrative Agent and the Lenders hereunder or at law or
otherwise, if an Event of Default shall have occurred and so long as
the same shall be continuing unremedied, then and in every such
case, the Administrative Agent and the Required Lenders may exercise
any or all of the rights and powers and pursue any and all of the
remedies set forth in any Security Document in accordance with terms
thereof.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
SECTION 8.01. APPOINTMENT, POWERS AND IMMUNITIES.
Each of the Lenders hereby irrevocably appoints the Administrative
Agent as its agent and authorizes the Administrative Agent to take
such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof and by the
other Loan Documents, together with such actions and powers as are
reasonably incidental thereto.
SECTION 8.02. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
The Lender serving as the Administrative Agent hereunder and under
the other Loan Documents shall have the same rights and powers in
its capacity as a Lender as any other Lender and may exercise the
same as though it were not the Administrative Agent, and such Lender
and its Affiliates may lend money to and generally engage in any
kind of business with the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent
hereunder. In that regard, the terms "Lenders", "Required Lenders",
or any similar terms used herein shall, unless the context clearly
otherwise indicates, include the Administrative Agent in its
individual capacity. The Administrative Agent may lend money to,
and generally engage in any kind of financial, financial advisory or
other business with the Borrower or any Affiliate of the Borrower as
if it were not performing the duties specified herein, and may
accept fees and other consideration from the Borrower for services
in connection with this Agreement and otherwise without having to
account for the same to the Lenders.
SECTION 8.03. NATURE OF DUTIES OF ADMINISTRATIVE AGENT. The
Administrative Agent shall not have any duties or obligations except
those expressly set forth herein and in the other Loan Documents.
Without limiting the generality of the foregoing (a) the
Administrative Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby
that the Administrative Agent is required to exercise in writing by
the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and (c) except as expressly set forth herein or in
any other Loan Document, the Administrative Agent shall not have any
duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of its
Subsidiaries that is communicated to or obtained by the Lender
serving as Administrative Agent or any of its Affiliates in any
capacity. The Administrative Agent shall not be liable for any
action taken or not taken by it with the consent or at the request
of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.02) or in the absence of its own gross negligence or
wilful misconduct. The Administrative Agent shall be deemed not to
have knowledge of any Default unless and until written notice
thereof is given to the Administrative Agent by the Borrower or a
Lender, and the Administrative Agent shall not be responsible for or
have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other
document delivered hereunder or in connection herewith, (iii) the
performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or
any other agreement, instrument or document, or (v) the satisfaction
of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered
to the Administrative Agent.
SECTION 8.04. CERTAIN RIGHTS OF ADMINISTRATIVE AGENT. If the
Administrative Agent shall request instructions from the Required
Lenders with respect to any act or action (including the failure to
act) in connection with this Agreement or any other Credit Document,
the Administrative Agent shall be entitled to refrain from such act
or taking such action unless and until the Administrative Agent
shall have received instructions from the Required Lenders; and the
Administrative Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, but
subject to the terms of Section 9.02 hereof, no Lender shall have
any right of action whatsoever against the Administrative Agent as a
result of the Administrative Agent acting or refraining from acting
hereunder in accordance with the instructions of the Required
Lenders.
SECTION 8.05. RELIANCE BY ADMINISTRATIVE AGENT. The
Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent
by the proper Person. The Administrative Agent also may rely upon
any statement made to it orally or by telephone and believed by it
to be made by the proper Person, and shall not incur any liability
for relying thereon. The Administrative Agent may consult with
legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with
the advice of any such counsel, accountants or experts. The
Administrative Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed
with the Administrative Agent pursuant to Section 9.04 below. Any
request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Note or any Note issued in
exchange therefor.
SECTION 8.06. SUB-AGENTS. The Administrative Agent may
perform any and all its duties and exercise its rights and powers by
or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to
any such sub-agent and to the Related Parties of the Administrative
Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit
facilities provided for herein as well as activities as
Administrative Agent.
SECTION 8.07. RESIGNATION BY ADMINISTRATIVE AGENT. Subject to
the appointment and acceptance of a successor Administrative Agent
as provided in this paragraph, the Administrative Agent may resign
at any time by notifying the Lenders and the Borrower. Upon any
such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no
successor shall have been so appointed by the Required Lenders and
shall have accepted such appointment within 30 days after the
retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent. Upon the acceptance of
its appointment as Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative
Agent and the retiring Administrative Agent shall be discharged from
its duties and obligations hereunder and under the other Loan
Documents. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent's resignation hereunder,
the provisions of this Article and Section 9.03 shall continue in
effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any
actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
SECTION 8.08. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER
LENDERS. Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender
and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent or
any other Lender and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own
decisions in taking or not taking action under or based upon this
Agreement, any related agreement or any document furnished hereunder
or thereunder.
SECTION 8.09. SECURITY DOCUMENTS.
(a) Each Lender hereby authorizes the Administrative Agent
to enter into each of the Security Documents and to take all actions
contemplated thereby. All rights and remedies under the Security
Documents may be exercised by the Administrative Agent for the
benefit of the Lenders and the other beneficiaries thereof upon the
terms thereof. With the consent of the Required Lenders, the
Administrative Agent may assign its rights and obligations as
Administrative Agent under any of the Security Documents to any
Affiliate of the Administrative Agent, and such Affiliate thereafter
shall be entitled to (i) all the rights of the Administrative Agent
under the applicable Security Document and (ii) all rights hereunder
of the Administrative Agent with respect to the applicable Security
Document.
(b) In each circumstance where, under any provision of any
Security Document, the Administrative Agent shall have the right to
grant or withhold any consent, exercise any remedy, make any
determination or direct any action by the Administrative Agent under
such Security Document, the Administrative Agent shall act in
respect of such consent, exercise of remedies, determination or
action, as the case may be, with the consent of and at the direction
of the Required Lenders; provided, however, that no such consent of
the Required Lenders shall be required with respect to any consent,
determination or other matter that is, in the Administrative Agent's
judgment, ministerial or administrative in nature. In each
circumstance where any consent of or direction from the Required
Lenders is required, the Administrative Agent shall send to the
Lenders a written notice setting forth a description in reasonable
detail of the matter as to which consent or direction is requested
and the Administrative Agent's proposed course of action with
respect thereto. In the event the Administrative Agent shall not
have received a response from any Lender within five (5) Business
Days after the giving of such notice, such Lender shall be deemed to
have agreed to the course of action proposed by the Administrative
Agent.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. Except in the case of notices and
other communications expressly permitted to be given by telephone,
all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as
follows:
(a) if to the Borrower, to it at:
Cadiz Land Company, Inc.
Attn: Chief Financial Officer
100 Wilshire Blvd.
Sixteenth Floor
Santa Monica, CA 90401-1115
Telephone No.: 310-899-4700
Facsimile No.: 310-899-4747
with a copy to:
Howard Unterberger, Esq.
Miller & Holguin
1801 Century Park East
Seventh Floor
Los Angeles, CA 90067
Telephone No.: 310-556-1990
Facsimile No.: 310-557-2205
(b) if to the Administrative Agent, to it at:
ING Baring (U.S.) Capital Corporation
135 E. 57th Street
New York, NY 10022-2101
Attention: Joan Chiappe, Vice President
Reference: Cadiz
Telephone No.: 212-409-1742
Facsimile No.: 212-371-9295
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Michael J. Edelman, Esq.
Telephone No.: 212-530-5000
Facsimile No.: 212-530-5219
(c) if to ING, as a Lender, to it at:
ING Baring (U.S.) Capital Corporation
135 E. 57th Street
New York, NY 10022-2101
Attention: Joan Chiappe, Vice President
Reference: Cadiz
Telephone No.: 212-409-1742
Facsimile No.: 212-371-9295
with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Michael J. Edelman, Esq.
Telephone No.: 212-530-5000
Facsimile No.: 212-530-5219
(d) if to any other Lender, to it at its address (or
telecopy number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other
parties hereto. All notices and other communications given to any
party hereto in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of receipt.
SECTION 9.02. WAIVERS; AMENDMENTS.
(a) No failure or delay by the Administrative Agent or any
Lender in exercising any right or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent and the Lenders
hereunder are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision
of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or
consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan shall not be construed as a waiver
of any Default, regardless of whether the Administrative Agent or
any Lender may have had notice or knowledge of such Default at the
time.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Borrower and the Required
Lenders or by the Borrower and the Administrative Agent with the
consent of the Required Lenders; provided that no such agreement
shall (i) increase the Commitment of any Lender without the written
consent of such Lender, (ii) reduce the principal amount of any Loan
or reduce the rate of interest thereon, or reduce any fees payable
hereunder, without the written consent of each Lender affected
thereby, (iii) postpone the scheduled date of payment of the
principal amount of any Loan or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected
thereby, (iv) change Section 2.18(b) or (c) in a manner that would
alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (v) change any of the provisions of
this Section 9.02 or the definition of "Required Lenders" or any
other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or
make any determination or grant any consent hereunder, without the
written consent of each Lender, or (vi) release any security
interest in any material collateral for the obligations evidenced by
the Loan Documents (except in accordance with the Loan Documents)
without the written consent of each Lender; provided further that no
such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent hereunder without the prior
written consent of the Administrative Agent.
SECTION 9.03. EXPENSES; INDEMNITY; DAMAGE WAIVER.
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates,
including the reasonable fees, charges and disbursements of counsel
for the Administrative Agent, in connection with the syndication of
the credit facilities provided for herein, the preparation and
administration of this Agreement and the other Loan Documents or any
amendments, modifications or waivers of the provisions hereof
(whether or not the transactions contemplated hereby or thereby
shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Administrative Agent or any Lender, including the
fees, charges and disbursements of any counsel for the
Administrative Agent or any Lender, in connection with the
enforcement or protection of its rights in connection with this
Agreement or any other Loan Document, including its rights under
this Section 9.03, or in connection with the Loans made hereunder,
including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans.
(b) The Borrower shall indemnify the Administrative Agent
and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and
hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or
instrument contemplated therein, the performance by the parties
hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby,
(ii) any Loan or the use of the proceeds therefrom, (iii) any actual
or alleged presence or release of Hazardous Materials on or from any
property owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to
the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating
to any of the foregoing, whether based on contract, tort or any
other theory and regardless of whether any Indemnitee is a party
thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court
of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or wilful misconduct of such
Indemnitee.
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent under
paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Administrative Agent such Lender's Applicable
Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was
incurred by or asserted against the Administrative Agent in its
capacity as such.
(d) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or the use of the proceeds thereof.
(e) All amounts due under this Section 9.03 shall be payable
promptly after written demand therefor.
SECTION 9.04. SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that the Borrower
may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each
Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon
any Person (other than the parties hereto, their respective
successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the
time owing to it); provided that (i) except in the case of an
assignment to a Lender or an Affiliate of a Lender, each of the
Borrower and the Administrative Agent must give their prior written
consent to such assignment (which consent shall not be unreasonably
withheld), (ii) except in the case of an assignment to a Lender or
an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment, the amount of the
Commitment of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent)
shall not be less than $2,000,000 unless each of the Borrower and
the Administrative Agent otherwise consents, (iii) each partial
assignment shall be made as an assignment of a proportionate part of
all the assigning Lender's rights and obligations under this
Agreement, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance,
together with a processing and recordation fee of $1,000, and (v)
the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; provided
further that any consent of the Borrower otherwise required under
this paragraph shall not be required if an Event of Default under
clause (h) or (i) of Article VII has occurred and is continuing.
Subject to acceptance and recording thereof pursuant to paragraph
(d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such
Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder
shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of
the assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto but shall continue to
be entitled to the benefits of Sections 2.15, 2.17 and 9.03). Any
assignment or transfer by a Lender of rights or obligations under
this Agreement that does not comply with this paragraph shall be
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at its offices in The City of
New York a copy of each Assignment and Acceptance delivered to it
and a register for the recordation of the names and addresses of the
Lenders, and the Commitment of, and principal amount of the Loans
owing to, each Lender pursuant to the terms hereof from time to time
(the "Register"). The entries in the Register shall be conclusive,
and the Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register
shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the
assignee's completed Administrative Questionnaire (unless the
assignee shall already be a Lender hereunder), the processing and
recordation fee referred to in paragraph (b) of this Section and any
written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in
this paragraph.
(e) Any Lender may, without the consent of the Borrower or
the Administrative Agent, sell participations to one or more banks
or other financial institutions (a "Participant") in all or a
portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to
it); provided that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance
of such obligations and (iii) the Borrower, the Administrative Agent
and the other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or
waiver described in the first proviso to Section 9.02(b) that
affects such Participant. Subject to paragraph (f) of this Section,
the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.15 and 2.17 to the same extent as if it were
a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 9.08
as though it were a Lender, provided such Participant agrees to be
subject to Section 2.18(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any
greater payment under Section 2.15 or 2.17 than the applicable
Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower's prior
written consent. A Participant that would be a Foreign Lender if it
were a Lender shall not be entitled to the benefits of Section 2.17
unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.17(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this
Section 9.04 shall not apply to any such pledge or assignment of a
security interest; provided that no such pledge or assignment of a
security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
SECTION 9.05. SURVIVAL. All covenants, agreements,
representations and warranties made by the Borrower herein and in
the certificates or other instruments delivered in connection with
or pursuant to this Agreement shall be considered to have been
relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent
or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding
and unpaid and so long as the Commitments have not expired or
terminated. The provisions of Sections 2.15, 2.17 and 9.03 and
Article VIII shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, the expiration of the
Commitments or the termination of this Agreement or any provision
hereof.
SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a
single contract. This Agreement and any separate letter agreements
with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall
become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have
received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall
be effective as delivery of a manually executed counterpart of this
Agreement.
SECTION 9.07. SEVERABILITY. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability without affecting the
validity, legality and enforceability of the remaining provisions
hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. RIGHT OF SETOFF. If an Event of Default shall
have occurred and be continuing, each Lender and each of its
Affiliates is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or
final) at any time held and other obligations at any time owing by
such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now
or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section 9.08 are in
addition to other rights and remedies (including other rights of
setoff) which such Lender may have.
SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE
OF PROCESS.
(a) This Agreement shall be construed in accordance with and
governed by the law of the State of California.
(b) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive
jurisdiction of (i) the Supreme Court of the State of New York
sitting in New York County, (ii) the United States District Court of
the Southern District of New York, (iii) any United States federal
court sitting in the Central District of California, or (iv) any
other court of appropriate jurisdiction sitting in the County of Los
Angeles, City of Los Angeles, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to
this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action
or proceeding may be heard and determined in such New York State or
California Court or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative Agent or any Lender may
otherwise have to bring any action or proceeding relating to this
Agreement against the Borrower or its properties in the courts of
any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so,
any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating
to this Agreement in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such
court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section
9.01. Nothing in this Agreement will affect the right of any party
to this Agreement to serve process in any other manner permitted by
law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.
SECTION 9.11. HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only,
are not part of this Agreement and shall not affect the construction
of, or be taken into consideration in interpreting, this Agreement.
SECTION 9.12. CONFIDENTIALITY. Each of the Administrative
Agent and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be
disclosed (a) to its and its Affiliates' directors, officers,
employees and agents, including accountants, legal counsel and other
advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any
other party to this Agreement, (e) in connection with the exercise
of any remedies hereunder or any suit, action or proceeding relating
to this Agreement or the enforcement of rights hereunder, (f)
subject to an agreement containing provisions substantially the same
as those of this Section, to any assignee of or Participant in, or
any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement, (g) with the consent of the
Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section or (ii)
becomes available to the Administrative Agent or any Lender on a
nonconfidential basis from a source other than the Borrower;
provided, however, that such information, to the Administrative
Agent's or Lender's knowledge, without any duty of inquiry, has not
been provided in violation of any obligation owed by the source
thereof to the Borrower. For the purposes of this Section,
"Information" means all information received from the Borrower
relating to the Borrower or its business, other than any such
information that is available to the Administrative Agent or any
Lender on a nonconfidential basis prior to disclosure by the
Borrower; provided that, in the case of information received from
the Borrower after the date hereof, such information is clearly
identified at the time of delivery as confidential. Any Person
required to maintain the confidentiality of Information as provided
in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 9.13. FORECLOSURE OF CADIZ/SUN WORLD LEASE. If, in
enforcing remedies hereunder, the Administrative Agent or a Lender
forecloses on the property subject to that certain Cadiz/Sun World
Lease, whether judicially or non-judicially, or obtains title to
such property by deed in lieu of foreclosure, by purchase, or
otherwise, then (a) so long as Sun World is not in default under the
Cadiz/Sun World Lease: (i) Sun World and the Sun World Trustee under
the Sun World Indenture shall be named or joined in any foreclosure,
trustee's sale or other proceeding only if required by law; and (ii)
the enforcement of any remedies hereunder that effects a transfer of
title to the property subject to the Cadiz/Sun World Lease shall not
terminate the Cadiz/Sun World Lease nor terminate nor affect in any
manner the lien of the Sun World Trustee thereon, nor disturb Sun
World in the possession and use of the property subject thereto.
SECTION 9.14. WAIVER OF ANTI-DEFICIENCY PROTECTION. Borrower
hereby waives, as to this Agreement and any and all Loan Documents
heretofore or hereafter executed in connection with the Transactions
any defense, protection or right under:
(a) California Code of Civil Procedure ("CCP") Section
580(d) concerning the bar against rendition of a
deficiency judgment after foreclosure under a power of
sale;
(b) CCP Section 580(a) purporting to limit the amount of a
deficiency judgment which may be obtained following
exercise of a power of sale under a deed of trust; and
(c) CCP Section 726 concerning exhaustion of collateral, the
form of foreclosure proceedings with respect to real
property security located in California and otherwise
limiting the amount of a deficiency judgment which may
be recovered following completion of judicial
foreclosure by reference to the "fair value" of the
foreclosed collateral.
SECTION 9.15. COSTS BORNE BY NON-PREVAILING PARTY. In the
event of any dispute with respect to this Agreement or any other
Loan Document, the prevailing party shall be entitled to recover
from the non-prevailing party all costs and attorneys' fees.
SECTION 9.16. INTEREST RATE LIMITATION. Notwithstanding
anything herein to the contrary, if at any time the interest rate
applicable to any Loan, together with all fees, charges and other
amounts which are treated as interest on such Loan under applicable
law (collectively the "Charges"), shall exceed the maximum lawful
rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in
respect of such Loan hereunder, together with all Charges payable in
respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable
in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods
shall be increased (but not above the Maximum Rate therefor) until
such cumulated amount, together with interest thereon at the Federal
Funds Effective Rate to the date of repayment, shall have been
received by such Lender.
SECTION 9.17. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(a) The Borrower shall advise the Lenders, as holders of the
Registrable Common Stock (if any) or any then holder of Registrable
Common Stock (such persons being collectively referred to in this
Section as "holders") by written notice at least four weeks prior to
the filing of any new registration statement under the Securities
Act of 1933, as amended, or the Rules and Regulations promulgated
thereunder (such Act and Rules and Regulations being hereinafter
referred to as the "Securities Act") covering securities of the
Borrower and will for a period ending on the first anniversary of
the final Interest Payment Date on which a Stock Payment was made
and commencing as of the date hereof, upon the request of any such
holder, include in any such registration statement such information
as may be required to permit a public offering of the Registrable
Common Stock which is eligible to be included in such Registration
Statement. The Borrower shall supply prospectuses, use its best
efforts to cause the registration statement to become effective and
to qualify the Registrable Common Stock for sale in such state as
any such holder designates and furnish indemnification in the manner
as set forth in section (b) of this Section. Such holders shall
furnish information and indemnification as set forth in section (b)
of this Section.
(b) The Borrower shall bear the entire cost and expense of
any registration of securities initiated by it under section (a) of
this Section notwithstanding that Registrable Common Stock may be
included in any such registration. Any holder whose Registrable
Common Stock is included in any such registration statement pursuant
to this Section shall, however, bear the fees of such holder's own
counsel and any registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Common Stock sold by such
holder pursuant thereto.
(c) The Borrower shall indemnify and hold harmless each such
holder and each underwriter, within the meaning of the Securities
Act, who may purchase from or sell for any such holder any
Registrable Common Stock for any such holder (in the case of
indemnification of such underwriter) from and against any and all
losses, claims, damages and liabilities ("Losses") arising out of or
based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or any post-
effective amendment thereto under the Securities Act or any
prospectus included therein required to be filed or furnished by
reason of this Section or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as such Losses arise out of or are based
upon any such untrue statement or alleged untrue statement or
omission or alleged omission based upon information furnished or
required to be furnished in writing to the Borrower by such holder,
or underwriter, in the case of indemnification of such underwriter,
expressly for use therein, which indemnification shall include each
person, if any, who controls any such holder or each person, if any,
who controls any such holder or underwriter within the meaning of
such Securities Act; provided, however, that the Borrower shall not
be obliged so to indemnify any such holder or underwriter or
controlling person unless such holder or underwriter shall at the
same time indemnify, severally and not jointly, the Borrower, its
directors, each officer signing the related registration statement
and each person, if any, who controls the Borrower within the
meaning of such Securities Act, from and against any and all Losses
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any registration statement
or any prospectus required to be filed or furnished by reason of
this Section or arising out of or based upon any omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, insofar as such
Losses arise out of or are based upon any untrue statement or
alleged untrue statement or omission made in conformity with
information furnished in writing to the Borrower by any such holder
or underwriter expressly for use therein.
(d) If the indemnify obligation provided for above is
unavailable or insufficient to hold harmless an indemnified party in
respect of any Losses, then the indemnifying party shall contribute
to the amount paid or payable by the indemnified party as a result
of such Losses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and the
indemnified party, on the other hand, in connection with statements
or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified parties and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph were to be 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
previous sentence.
(e) Notwithstanding anything herein to the contrary, a
holder shall have no rights to have the Registrable Common Stock
registered if in the opinion of either counsel for the Borrower,
knowledgeable and experienced in Federal securities matters (said
counsel to be acceptable to such holder in the reasonable judgement
of such holder), or counsel for the holder knowledgeable and
experienced in Federal securities matters (said counsel to be
acceptable to the Borrower in the Borrower's reasonable judgement),
the holder may lawfully sell publicly, at the time and in the manner
the holder proposes to sell the Registrable Common Stock, all of the
securities proposed to be sold without registering the sale under
the Securities Act, whether pursuant to an exemption from
registration available under Section 4(1) of the Securities Act,
Rule 144 or Rule 144(k) under the Securities Act, or otherwise.
(f) The Borrower will (i) file reports in compliance with
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (ii) comply with all rules and regulations of the Commission
applicable in connection with the use of Rule 144 under the
Securities Act and take such other actions and furnish the holder
with such other information as such holder may request in order to
avail itself of such rule or any other rule or regulations of the
Commission allowing such holder to sell any Registrable Common Stock
without registration, and (iii) at its expense, upon the request of
the holder, deliver to such holder a certificate, signed by the
Borrower's principal financial officer, stating (A) the Borrower's
name, address and telephone number (including area code), (B) the
Borrower's Internal Revenue Service identification number, (C) the
Borrower's Commission file number, (D) the number of shares of each
class of stock outstanding as shown by the most recent report or
statement published by the Borrower, and (E) whether the Borrower
has filed the reports required to be filed under the Exchange Act
for a period of at least ninety (90) days prior to the date of such
certificate and in addition has filed the most recent annual report
required to be filed thereunder. If at any time the Borrower is not
required to file reports in compliance with either Section 13 or
Section 15(d) of the Exchange Act, the Borrower at its expense will,
upon the written request of the holder, make available adequate
current public information with respect to the Borrower within the
meaning of paragraph (c)(2) of Rule 144 under the Securities Act.
(g) The holders of the Registrable Common Stock and any
transferee thereof, by their acceptance hereof, hereby agree that:
(a) the Registrable Common Stock to be being acquired hereunder are
being purchased for investment purposes only and not with a view to
distribution and will not be transferred unless registered or unless
there is an exemption available from the registration requirement of
the Securities Act, which exemption has been established to the
reasonable satisfaction of the Borrower; (b) no public distribution
of the Registrable Common Stock Warrants will be made in violation
of the provisions of the Securities Act or any applicable state
laws; and (c) during such period as delivery of a prospectus with
respect to the Registrable Common Stock may be required by the
Securities Act, no public distribution of Registrable Common Stock
Warrants will be made in a manner or on terms different from those
set forth in, or without delivery of, a prospectus then meeting the
requirements of Section 10 of the Securities Act and in compliance
with all applicable state laws. The Lenders and any such assignee
of the Lenders further agree that if any public distribution of any
of the Registrable Common Stock is proposed to be made by them
otherwise than by delivery of a prospectus meeting the requirements
of Section 10 of the Securities Act, which action shall be taken
only after submission to the Borrower of an opinion of counsel,
reasonably satisfactory in form and substance to the Borrower's
counsel, to the effect that the proposed distribution will not be in
violation of the Securities Act or of applicable state law.
Furthermore, it shall be a condition to the transfer of the
Registrable Common Stock that the transferee thereof deliver to the
Borrower such holder's written agreement to accept and be bound by
all of the terms and conditions of this Section.
SECTION 9.18. STATUS OF ING. ING hereby represents to the
Borrower that it is not a Foreign Lender.
SECTION 9.19. AMENDMENTS TO SUN WORLD INDENTURE. An amendment
or modification of the Sun World Indenture will be a Non-Adverse
Amendment only upon the satisfaction of each and every one of the
following conditions (such amendment or modification that satisfies
all of the following requirements, a "Non-Adverse Amendment"):
(a) the Borrower, in accordance with section 9.01 of this
Credit Agreement, gives notice of, and delivers to, the
Administrative Agent, a true and correct copy of such
amendment or modification;
(b) as determined solely in the Administrative Agent's
reasonable judgment, the terms of the amendment or
modification of the Sun World Indenture do not, and will
not, adversely affect either (i) the ability of the
Borrower or the other Obligors to satisfy their
respective obligations under this Credit Agreement
and/or the other Loan Documents or (ii) the rights of
the Administrative Agent or Lenders hereunder or under
the other Loan Documents; and
(c) such amendment or modification of the Sun World
Indenture is validly effected and becomes effective
pursuant to the terms of the Sun World Indenture.
The failure of the Borrower to notify, and deliver to, the
Administrative Agent any amendment or modification of the Sun World
Indenture will preclude such amendment or modification from being a
Non-Adverse Amendment until each of the requirements set forth in
the previous sentence are satisfied. If, however,
(x) the Borrower gives notice of, and delivers to, the
Administrative Agent, a true and correct copy of an
amendment or modification to the Sun World Indenture;
and
(y) the Administrative Agent does not notify the Borrower
within five (5) Business Days after the Administrative
Agent's receipt of the documents set forth in subclause
(x) above that the amendment or modification (in the
Administrative Agent's reasonable judgment) has or will
have an adverse effect upon (i) the ability of the
Borrower or the other Obligors to satisfy their
respective obligations under this Credit Agreement
and/or the other Loan Documents or (ii) the rights of
the Administrative Agent or Lenders hereunder or under
the other Loan Documents;
then such amendment or modification of the Sun World Indenture shall
be deemed to be a Non-Adverse Amendment for all purposes hereunder.
Notwithstanding the foregoing, and without requiring any action by
the Borrower or the Administrative Agent, any amendments or
modifications of the Sun World Indenture that may be validly
effected pursuant to the terms of the Sun World Indenture without
any action or authorization by the holders of the Sun World Notes
(or any portion of such holders) shall also be deemed to be a
Non-Adverse Amendment provided that such amendment or modification does
not, and will not, in the Administrative Agent's reasonable
judgment, adversely affect (i) Borrower's ability to satisfy the
Borrower's obligations hereunder and under the other Loan Documents
or (ii) the rights of the Administrative Agent or Lenders hereunder
or under the other Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
CADIZ LAND COMPANY, INC.,
the Borrower
by: /s/ Stanley E. Speer
-----------------------------
Name: Stanley E. Speer
Title: Chief Financial Officer
ING BARING (U.S.) CAPITAL CORPORATION,
individually and as
Administrative Agent
by /s/ Joan M. Chiappe
--------------------------------
Name: Joan M. Chiappe
Title: Vice President
SCHEDULE 2.01
COMMITMENTS
1. Lender: ING Baring (U.S.) Capital Corporation
135 E. 57th Street
New York, NY 10022-2101
Attention: Joan Chiappe, Vice President
Telephone No.: 212-409-1742
Facsimile No.: 212-371-9295
Commitment: $15,000,000.00
SCHEDULE 2.04
BORROWER'S WIRING INSTRUCTIONS FOR INITIAL BORROWING
BANK
ABA #: 121000248
Wells Fargo Bank
10270 Foothill Blvd.
Rancho Cucamonga, CA
Account
Cadiz Land Company, Inc.
Acct. 4896044211
SCHEDULE 3.13
BORROWER'S PARTICIPATING SUBSIDIARIES
None
SCHEDULE 3.14
BORROWER'S INACTIVE SUBSIDIARIES
Pacific Packing, Inc., a California corporation;
Pacific Real Estate, Inc., a California corporation;
Rancho Cadiz Mutual Water Company, a California mutual water
company; and
PSWRI, a Guernsey corporation.
SCHEDULE 6.01
SCHEDULE OF INDEBTEDNESS FOR BORROWER,
PARTICIPATING SUBSIDIARIES AND SWFG
The "Term Loan", as defined in the Pledge and Security Agreement.
SCHEDULE 6.02
SCHEDULE OF LIENS ON PROPERTY OF BORROWER
AND/OR SUBSIDIARIES (Excluding the Sun World Entities)
Liens granted to secure the "Term Obligations", as defined in the
Pledge and Security Agreement.
Liens described in Title Policy No. 7222428 (the "Title Policy")
issued by Chicago Title Insurance Company, insuring priority in the
Mortgage, and showing Cadiz as owner in fee simple absolute and ING
as insured.
With respect to property owned of record by Southwest Fruit Growers,
a Delaware limited partnership ("SWFG"), (i) Liens arising pursuant
to the SWFG-Farming Deed of Trust and the SWFG-Grape Deed of Trust
(as such terms are defined in the Pledge and Security Agreement);
(ii) such Liens as may be described in the Title Policy which affect
such property; and (iii) such additional Liens on such property as
may be non-material in effect and amount.
Liens on Rolling Stock existing as of the Effective Date.
Lien on telephone system at San Bernardino, CA office by Mellon
First United Leasing (monthly payment $164.00).
Lien on Mita DC-6590 copier at Santa Monica, CA office by Mita
Financial Services (monthly payment $580.00).
Lien on Minolta EP 3050 copier at Santa Monica, CA office by GE
Capital (monthly payment $254.08).
Lien on Mita 4086 copier at San Bernardino, CA office by Capelco
Capital, Inc. (monthly payment $240.00).
SCHEDULE 6.08
SCHEDULE OF RESTRICTIVE AGREEMENTS OF BORROWER
AND/OR SUBSIDIARIES (Excluding the Sun World Entities)
1. Restrictions and conditions arising under and pursuant to the
Term Loan, as defined in the Pledge and Security Agreement.
2. Restrictions and conditions arising under and pursuant to the
Sun World Documents.
3. Restrictions and conditions arising under and pursuant to the
Limited Partnership Agreement of SWFG.
EXHIBIT A
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of
[ ] (as amended and in effect on the date hereof, the
"Credit Agreement"), among Cadiz Land Company, Inc., the Lenders
named therein and ING Baring (U.S.) Capital Corporation, as
Administrative Agent for the Lenders. Terms defined in the Credit
Agreement are used herein with the same meanings.
The Assignor named on the reverse hereof hereby sells and
assigns, without recourse, to the Assignee named on the reverse
hereof, and the Assignee hereby purchases and assumes, without
recourse, from the Assignor, effective as of the Assignment Date set
forth on the reverse hereof, the interests set forth on the reverse
hereof (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without
limitation, the interests set forth herein in the Commitment of the
Assignor on the Assignment Date and Revolving Loans owing to the
Assignor which are outstanding on the Assignment Date, held by the
Assignor on the Assignment Date, but excluding accrued interest and
fees to and excluding the Assignment Date. The Assignee hereby
acknowledges receipt of a copy of the Credit Agreement. From and
after the Assignment Date (i) the Assignee shall be a party to and
be bound by the provisions of the Credit Agreement and, to the
extent of the Assigned Interest, have the rights and obligations of
a Lender thereunder and (ii) the Assignor shall, to the extent of
the Assigned Interest, relinquish its rights and be released from
its obligations under the Credit Agreement.
This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is a Foreign
Lender, any documentation required to be delivered by the Assignee
pursuant to Section 2.17(e) of the Credit Agreement, duly completed
and executed by the Assignee, and (ii) if the Assignee is not
already a Lender under the Credit Agreement, an Administrative
Questionnaire in the form supplied by the Administrative Agent, duly
completed by the Assignee. The [Assignee/Assignor] shall pay the
fee payable to the Administrative Agent pursuant to Section 9.04(b)
of the Credit Agreement.
This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of California.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
("Assignment Date") (1):
Percentage Assigned of
Commitment (set forth,
to at least 8 decimals,
as a percentage of the
Principal Amount Commitments of all
Facility Assigned Lenders thereunder)
Commitment Assigned: $ %
The terms set forth above and on the reverse side hereof are hereby
agreed to:
[Name of Assignor] , as Assignor
By:__________________________________
Name:
Title:
[Name of Assignee] , as Assignee
By:__________________________________
Name:
Title:
- --------------------------
(1) Must be at least five Business Days after execution hereof by all
required parties.
The undersigned hereby consent to the within assignment (2):
CADIZ LAND COMPANY, INC., ING BARING (U.S.) CAPITAL
the Borrower CORPORATION, as
Administrative Agent,
By:_________________________ By:_________________________
Name: Name:
Title: Title:
- -----------------------------
(2) Consents to be included to the extent required by Section 9.04(b)
of the Credit Agreement.
Revolving Credit Note
EXHIBIT 10.16
-------------
REVOLVING CREDIT NOTE
$15,000,000 November 25, 1997
Los Angeles, California
FOR VALUE RECEIVED, CADIZ LAND COMPANY, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of ING
BARING (U.S.) CAPITAL CORPORATION, a Delaware corporation (the
"Lender"), at the place and currency and manner designated in the Credit
Agreement referred to below and in immediately available funds, the
principal sum of FIFTEEN MILLION Dollars ($15,000,000) (or such lesser
amount as shall equal the aggregate unpaid principal amount of the
Revolving Loans made by the Lender to the Borrowers under the Credit
Agreement), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts
provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Revolving Loan, at the place and currency
and manner designated in the Credit Agreement, for the period commencing
on the date of such Revolving Loan until such Revolving Loan shall be
paid in full, at the rates per annum and on the dates provided in the
Credit Agreement.
The date, amount, interest rate and Interest Payment Date of each
Revolving Loan made by the Lender to the Borrower, and each payment made
on account of the principal thereof, shall be recorded by the Lender on
its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof,
provided that the failure of the Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower to make a
payment when due of any amount owing under the Credit Agreement or
hereunder in respect of the Revolving Loans made by the Lender.
This Note is one of the Notes referred to in the Credit Agreement
dated as of November 25, 1997 (as modified and supplemented and in
effect from time to time, the "Credit Agreement") among CADIZ LAND
COMPANY, INC., the LENDERS party hereto, and ING BARING (U.S.) CAPITAL
CORPORATION, as Administrative Agent, and evidences Revolving Loans made
by the Lender thereunder. Terms used but not defined in this Note have
the respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity
of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
Except as permitted by Section 9.04 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with,
the law of the State of California.
CADIZ LAND COMPANY, INC.,
the Borrower
by: /s/ Stanley E. Speer
---------------------
Name: Stanley E. Speer
Title: Chief Financial Officer
SCHEDULE OF REVOLVING LOANS
This Note evidences Revolving Loans made, continued or converted
under the within-described Credit Agreement to the Borrowers, on the
dates, in the principal amounts, bearing interest at the rates and
having Interest Periods (if applicable) of the durations set forth
below, subject to the payments, continuations, conversions and
prepayments of principal set forth below:
Date Amount Paid,
Made, Principal Prepaid, Unpaid
Continued Amount Continued Principal Notation
Or Converted of Loan or Converted Amount Made by
- -------------- --------- ------------ -------- ----------
EXHIBIT 10.17
-------------
AGREEMENT BETWEEN METROPOLITAN WATER DISTRICT OF
SOUTHERN CALIFORNIA AND CADIZ LAND COMPANY, INC. TO DEVELOP
PRINCIPLES AND TERMS FOR AGREEMENT
AND TO VERIFY PROGRAM FEASIBILITY
THIS AGREEMENT TO DEVELOP PRINCIPLES AND TERMS FOR AGREEMENT
AND TO VERIFY PROGRAM FEASIBILITY (hereinafter "Agreement") is entered
into this 23rd day of December, 1997, by Cadiz Land Company, Inc.
("CLCI"), a Delaware corporation with its principal office in Santa
Monica, California, and Metropolitan Water District of Southern
California ("Metropolitan"), a public agency formed under the
Metropolitan Water District Act, 1969 Cal. Stat. 492, Ch. 209 et seq.,
as amended, Water Code Uncodified Act 9129 (b) (the "Act").
CLCI and Metropolitan are sometimes referred to individually
as a "Party" or collectively as the "Parties".
RECITALS
A. WHEREAS, CLCI is a publicly-held agricultural company
that owns and manages substantial land and water resources throughout
Central and Southern California, including more than 27,000 acres (43
square miles) of land located in the Cadiz and Fenner valleys of San
Bernardino County, California (the "Property");
B. WHEREAS, CLCI, as one of the largest United States
growers and marketers of table grapes, stone fruit, and specialty row
crops, has developed farming operations at the Property using water-
conserving irrigation techniques and has completed an Environmental
Impact Report certified by the County of San Bernardino, which approved
the development of up to 9,600 acres of irrigated agriculture and the
withdrawal of approximately 1,000,000 acre-feet of indigenous
groundwater;
C. WHEREAS, Metropolitan was created in 1928 under the Act
for the purpose of providing supplemental water supplies to the cities
and communities of Southern California within its 5,155 square-mile
service area, which includes portions of Los Angeles, Orange, San
Diego, Riverside, San Bernardino and Ventura Counties;
D. WHEREAS, Metropolitan has entitlements to Colorado River
water pursuant to the 1928 Boulder Canyon Project Act, the United
States Supreme Court 1983 opinion in Arizona v. California and
subsequent decrees, and contracts with the United States and others;
E. WHEREAS, Metropolitan owns and operates the Colorado
River Aqueduct ("CRA"), which imports water from the Colorado River for
use in Southern California;
F. WHEREAS, Metropolitan employs an Integrated Resources
Planning process which has identified a full CRA as an integral
component to achieving long-term supply reliability required for the
region;
G. WHEREAS, Metropolitan's Integrated Resources Plan,
California law and water policy all recognize the importance of
groundwater storage and conjunctive use programs in meeting the water
supply needs of the state;
H. WHEREAS, various studies and reports prepared by public
agencies and private companies indicate that the Property overlies a
large groundwater basin that has significant water recharge and storage
capabilities, and which can yield substantial amounts of high-quality
water in excess of the present and projected agricultural requirements
of CLCI;
I. WHEREAS, various hydrological, environmental, and
engineering studies and reports, together with empirical data acquired
by CLCI from more than ten years of groundwater pumping, support the
proposition that the Property is well suited technically and
economically for a conjunctive use and storage program, involving both
storage of Colorado River water and transfer of indigenous groundwater,
subject to Metropolitan's final review and verification of such
studies, reports, and empirical data;
J. WHEREAS, the Parties have discussed and are reviewing
the feasibility of such a program on the Property and therefore desire
to commence negotiating an appropriate water management strategy and
program that achieves reasonable and beneficial conjunctive use of
Colorado River water and CLCI's indigenous groundwater by the operation
of a conjunctive use and storage program that entails the delivery of
high quality, reliable, supplemental water supplies to Metropolitan on
a long-term basis for use within its service area, provided mutually
satisfactory terms and conditions for the storage and extraction of
Metropolitan's Colorado River water and transfer of CLCI's indigenous
groundwater can be reached by the Parties; and
K. WHEREAS, the Parties desire to document their
demonstrated commitment by entering into this Agreement.
NOW, THEREFORE, the Parties hereby enter into this Agreement
and agree to work jointly and cooperatively to complete the following
tasks by March 31, 1998: (i) verify the feasibility of such a program
in accordance with Section 1, (ii) negotiate the material terms of an
agreement for a conjunctive use and storage program as described in
Section 2 ("Principles and Terms For Agreement") and (iii) explore the
viability of implementing certain additions to the program identified
in Section 3. In negotiating the Principles and Terms For Agreement,
the Parties will have the responsibilities and will follow the
procedures set forth in Section 4.
SECTION 1: ISSUES FOR VERIFICATION.
CLCI has provided to Metropolitan a number of studies, reports,
and documents that support the feasibility of a conjunctive use and
storage program on the Property that would result in the ability to
deliver high-quality and reliable supplemental water supplies to
Metropolitan on a long-term basis for use in Metropolitan's service
area. Metropolitan has performed a preliminary review of these
studies, reports and documents and, based on this preliminary review,
believes that such a program is technically feasible and merits serious
consideration by Metropolitan. The Parties agree to cooperate in
verifying the findings in the studies, reports and documents, the
technical feasibility of such a program, the practical and financial
feasibility of such a program, and the Parties' relative legal rights
to enter into the proposed program as the first phase of work under
this Agreement.
SECTION 2: PRINCIPLES AND TERMS FOR AGREEMENT.
Assuming negotiations result in terms which are acceptable to both
Parties, the negotiated Principles and Terms For Agreement will be sent
to the respective governing Boards of both Parties for approval and for
direction for the Parties to then draft a comprehensive agreement based
on the Principles and Terms For Agreement and completion of all
environmental documentation. The Principles and Terms For Agreement
will set forth the significant terms and principles for a comprehensive
agreement for a conjunctive use and storage program at the Property
("Core Program") that would provide for the cost-effective and
beneficial storage of Metropolitan's Colorado River water, produce a
new and reliable dry-year source of significant water supplies, and
improve the quality of water conveyed through the CRA.
The Principles and Terms For Agreement would reflect certain
material terms negotiated between the Parties, including but not
limited to the following, which are described below in greater detail:
refinement and review of a Core Program proposal, the financing and
ownership of any Core Program facilities, the duration and appropriate
fee structure of a Core Program, a schedule for the implementation of
the water supply benefits available under a Core Program, and full and
complete compliance with applicable environmental laws.
2.1. CORE PROGRAM.
2.1.1. The Core Program would provide Metropolitan with a dry-
year source for up to 100,000 acre-feet/year of water having a low
concentration of total dissolved solids ("TDS"). This dry-year source
would be made up of a combination of stored imported water and
indigenous low-TDS groundwater. The storage operations of the Core
Program would involve conveyance of Colorado River water via a 35-mile
pipeline from the CRA to the Property during periods of available
supply. The imported water would be stored in the groundwater aquifers
underlying the Property. This water and indigenous groundwater would
be extracted by wells and conveyed to the CRA according to scheduled
delivery periods as agreed upon by the Parties.
2.1.2. The capabilities of the Core Program would be on the order
of the following:
* Put operations ("Put") refer to the conveyance of water from the
forebay of the Iron Mountain Pumping Plant ("IMPP") on the CRA to
the Property. Put capacity at 100,000 acre-feet/year.
* Storage operations ("Storage") refer to the storage of CRA water
in the aquifers underlying the Property. Storage capacity at
500,000 acre-feet.
* Take operations ("Take") refer to extraction of stored water and
conveyance back to the CRA. Take capacity for the Core Program
at 100,000 acre-feet/year.
* Transfer operations ("Transfer") refer to extraction and
conveyance of low-TDS indigenous groundwater to the CRA.
Transfer capacity for the Core Program at 100,000 acre-feet/year
(such transfers to be consistent with a comprehensive groundwater
management plan).
Operation of the Core Program would be conducted in accordance with a
comprehensive basin management program to ensure long-term protection
of the groundwater basin.
2.2. FINANCING.
CLCI is prepared to arrange to privately finance all costs,
maintain ownership of, and fully operate the Core Program.
Alternatively, the Principles and Terms For Agreement may include the
following:
* Financial participation and/or ownership by Metropolitan.
* Financial participation and/or ownership by other public water
agencies.
2.3. FEE STRUCTURE.
Metropolitan and CLCI agree to negotiate a fee structure for
the various Core Program elements, examples of which may include the
following:
* Put, Take, Storage, and Transfer fees.
* Minimum standby fees.
* Options to purchase indigenous groundwater.
* Fee escalation formulas.
2.4. CONSTRUCTION SCHEDULE.
The Principles and Terms For Agreement would reflect
construction needs and schedule for the Core Program.
2.5. TIMETABLE AND MILESTONES.
The Principles and Terms For Agreement would reflect the
Parties commitment to establish a timetable for completing the Core
Program on the Property prior to the year 2000.
2.6. ENVIRONMENTAL COMPLIANCE.
The Parties would cooperate to ensure compliance with all
federal and state environmental laws, including but not limited to the
California Environmental Quality Act ("CEQA"), upon the execution of a
final agreement, including the designation of an appropriate lead
agency under CEQA for implementing and operating the Core Program on
the Property and for the transportation of water supplies to the
service area.
SECTION 3: POTENTIAL FUTURE ADDITIONS TO CORE PROGRAM.
Several engineering additions ("Additions") have been
identified which could potentially be added to the Core Program in the
future, based on further investigations and evaluations. Potential
Additions include, but are not limited to, the following:
* "Danby Lake Addition"
CLCI controls approximately 7,000 acres (11 square
miles) near Danby Lake, approximately 10 miles north of
the IMPP. If this property were developed as an
addition to the Core Program, total Put, Storage, Take,
and Transfer capacities could be significantly increased.
* "Dual Pipeline Addition"
A second transmission pipeline from the CRA to the
Property could be employed to increase Put, Take, and
Transfer capacities or to allow continuous cycling for
increased water quality benefits to Metropolitan's
service area.
SECTION 4: RESPONSIBILITIES OF THE PARTIES UNDER THE AGREEMENT.
4.1. REVIEW PROCEDURES.
The Parties acknowledge that Metropolitan is developing a
process for the uniform evaluation of potential storage and water
supply programs that will coincide with the activities contemplated by
this Agreement. This process will include analysis of potential
programs by a review committee established by Metropolitan. The
Parties desire to move forward expeditiously with evaluation of the
Core Program as part of Metropolitan's review process. Accordingly,
the review committee will be regularly briefed on the progress made in
the activities contemplated by this Agreement and any completed
Principles and Terms For Agreement will be brought to the review
committee for its consideration. Subject to this process, the Parties
agree to complete their respective review and evaluation procedures
with respect to the Core Program and, as appropriate, negotiate the
Principles and Terms For Agreement by March 31, 1998.
4.2. NEGOTIATION OF THE PRINCIPLES AND TERMS FOR AGREEMENT.
The Parties agree to negotiate and, as appropriate, draft the
Principles and Terms For Agreement by March 31, 1998, to be brought to
Metropolitan's governing Board for direction at the next appropriate
Board meeting. The Principles and Terms For Agreement shall be used as
the basis for drafting a comprehensive agreement.
4.3. MUTUAL UNDERSTANDING.
The Parties, by execution of this Agreement, confirm their
mutual understanding and desire to enter into good faith negotiations
toward preparation of the Principles and Terms For Agreement as soon as
reasonably practicable for the performance of the responsibilities
identified in this Agreement, including those pertaining to the
refinement and review of the Core Program proposal, the financing and
ownership of Core Program facilities, the duration and appropriate fee
structure of the Core Program, a schedule for the implementation for
the water supply benefits available under the Core Program, and full
and complete compliance with applicable environmental laws.
4.4. APPROVAL OF AGREEMENT.
This Agreement has been approved by the management of each
Party.
4.5. CONFIDENTIAL INFORMATION.
To promote the open exchange of information between the
Parties necessary to negotiate the Principles and Terms For Agreement
and investigate the Additions, each of the Parties will, to the extent
allowed by applicable law, execute concurrently with this Agreement a
Confidentiality Agreement to preserve the Parties' protected trade
secrets, proprietary information, and confidential business plans.
4.6. NOTICE.
Any notice to a Party shall be in writing and effective when
delivered to:
METROPOLITAN:
---------------------
John R. Wodraska
General Manager
Metropolitan Water District of
Southern California
350 South Grand Avenue
Los Angeles, California 90071
CLCI:
-------------------------
Keith Brackpool
Chief Executive Officer
Cadiz Land Company, Inc.
100 Wilshire Boulevard, 16th Floor
Santa Monica, California 90401
IN WITNESS WHEREOF, The Parties hereto have executed this
Agreement as of the day and year first above written.
Metropolitan Water District of Southern California
By: /s/ John R. Wodraska
------------------------------------
John R. Wodraska
General Manager
Approved as to form:
By: /s/ N. Gregory
--------------------------------
N. Gregory Taylor
General Counsel
Cadiz Land Company, Inc.
By: /s/ Keith Brackpool
------------------------------
Keith Brackpool
Chief Executive Officer
EXHIBIT 10.18
-------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
February 1, 1998, by and between Cadiz Land Company, Inc., a Delaware
corporation (the "Company") and Keith Brackpool, an individual
("Brackpool").
WHEREAS, the Company wishes to employ Brackpool and Brackpool
wishes to accept such employment on the terms and conditions set forth
herein;
NOW, THEREFORE, the parties agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Brackpool and
Brackpool accepts such employment for an initial term of three (3) years
commencing as of the date of this Agreement (the "Commencement Date"),
and automatically continuing thereafter upon the same terms and
conditions until terminated in accordance with the termination
provisions of Section 6 below (the "Term").
2. DUTIES. Brackpool shall be employed as the Chief Executive
Officer of the Company. Brackpool's base of operations shall be at the
corporate headquarters office of the Company in Santa Monica, California
unless changed by mutual agreement. However, Brackpool shall also
render services at such other sites at which the Company's operations
are conducted as necessary to properly perform his duties. Brackpool's
duties and responsibilities shall relate, generally, to the operational
management of the Company. Brackpool shall report to, and take
direction from, the Board of Directors of the Company. Brackpool shall
also perform such other duties pertaining to the operations of the
Company as the Board of Directors of the Company (the "Board") may from
time to time direct. Brackpool hereby consents to serve in further
capacities as an officer and/or director of the Company or any
subsidiary or affiliate (including, without limitation, Chairman of the
Company's wholly owned subsidiary, Sun World International, Inc. ("Sun
World")) without any additional salary or compensation.
3. NECESSARY SERVICES.
a. PERFORMANCE OF DUTIES. Brackpool agrees that he will at
all times faithfully, industriously and to the best of his ability,
experience and talents, perform to the reasonable satisfaction of the
Company all of the duties that may be assigned to him hereunder and
shall devote such time to the performance of these duties as may be
necessary therefor.
b. FULL-TIME SERVICE. During the term of the
Agreement, Brackpool shall be available on a full-time basis to
perform the duties assigned him in accordance with paragraph 2
hereof; provided, however, that nothing herein shall preclude
Brackpool from spending a reasonable amount of time in the
management of his personal investments or with any charitable or
civic venture with which Brackpool may be involved as of the date
hereof; and provided, further, that such involvement shall not
detract from the performance of Brackpool's duties hereunder.
c. EXCLUSIVE SERVICES. Brackpool agrees that during
the period of his employment, Brackpool shall provide services
exclusively pursuant to this Agreement, and Brackpool will not,
without the prior written consent of the Company (which consent
may be granted or withheld in the sole and absolute discretion of
the Company), directly or indirectly:
(i) engage in the business of, or own or control
any interest in (except as a passive investor owning less than
10% of the equity securities of a publicly held company), or act
as director, officer of employee of, or consultant to, any
individual, partnership, joint venture, corporation or other
business entity, directly or indirectly engaged anywhere in the
United States, its possessions or territories, in any business
competitive with the business then being carried on by the
Company or any affiliate;
(ii) plan or organize any business activity
competitive with the business or planned business of the Company
or its affiliates, or combine, participate, or conspire with
other employees of the Company or its affiliates or other persons
or entities for the purpose of organizing any such competitive
business activity; or
(iii) divert or take away, or attempt to divert
or take away, any of the customers or potential customers of the
Company or its affiliates, either for himself or for any other
person, firm, partnership, corporation or other business entity.
4. BASIC COMPENSATION. Brackpool shall be paid an initial
base salary of $500,000 per annum, commencing as of the
Commencement Date. Payments shall be made in equal monthly
installments in accordance with the normal payroll practices of
the Company. Such base salary will be subject to annual increase
by the Compensation Committee of the Board, in its sole and
absolute discretion.
Brackpool agrees to accept the foregoing, along with any
other compensation to which Brackpool may be entitled under
Section 5 below, as payment in full for all services rendered by
him to or for the benefit of the Company and its subsidiaries.
Brackpool acknowledges and agrees that a portion of the
compensation payable to him pursuant to this Agreement may be
paid directly by Sun World or any other affiliate of the Company,
and that any compensation payments received by Brackpool from
such entities shall be credited against and applied to the total
compensation to which Brackpool is entitled under this Agreement.
5. OTHER COMPENSATION.
a. ANNUAL BONUS. Brackpool will be entitled to
receive an annual bonus comprised of an EBITDA Bonus, a Water
Development Bonus and a Discretionary Bonus (in the aggregate not
to exceed 120% of the annual base compensation payable to
Brackpool pursuant to Section 4 above) as follows:
i. EBITDA BONUS. Prior to the commencement of
each fiscal year during the term of this Agreement, the
Company's budgeted EBITDA Amount for such year shall be
established by the Board. For purposes hereof, the term
"EBITDA Amount" shall mean the Company's earnings before
interest, taxes, depreciation and amortization (subject to
such adjustments for extraordinary items as the Board may
establish at the time it establishes the budgeted EBITDA
Amount), as certificated by the independent outside auditors
of the Company. In the event of a change in the fiscal year
end of the Company, suitable pro-rata adjustments shall be
made to the foregoing EBITDA Amount. If the Company
achieves 100% of its budgeted EBITDA Amount for the year,
Brackpool will be paid a bonus equal to 20% of Brackpool's
annual base salary. The amount of this bonus will be
subject to increase if the EBITDA Amount for the year is
greater than 100% of budget, up to a maximum of 40% of
Brackpool's annual base salary if the EBITDA Amount is 120%
of budget. If the EBITDA Amount for the year is greater
than 100% of budget, but lower than 120% of budget, the
amount of the bonus payable shall be calculated on a pro-
rata basis. By way of example only, if the Company achieves
110% of budget, the bonus will equal 30% of Brackpool's
annual base salary. Similarly, the amount of this bonus
will be subject to decrease if the EBITDA Amount for the
year is less than 100% of budget, with no bonus payable
unless the EBITDA Amount exceeds 80% of budget. If the
EBITDA Amount for the year is greater than 80% of budget,
but lower than 100% of budget, the amount of the bonus
payable shall be calculated on a pro-rata basis. By way of
example only, if the Company achieves 90% of budget, the
bonus will equal 10% of Brackpool's annual base salary.
ii. WATER DEVELOPMENT BONUS. Prior to the
commencement of each fiscal year during the term of this
Agreement, the Board shall establish a set of criteria based
on advancements to be made during such year in fulfilling
the Company's water development business plan which, if met,
will result in the payment to Brackpool of a bonus in an
amount not to exceed 40% of Brackpool's annual base salary.
In establishing such criteria, the Board shall use 20% of
Brackpool's annual base salary as a target bonus; provided,
however, that the criteria shall be established by the Board
so that the actual amount of the bonus may range anywhere
from 0% to 40% of Brackpool's annual base salary depending
upon the degree to which such criteria are met during the
year.
iii. DISCRETIONARY BONUS. Following the
conclusion of each fiscal year during the term of this
Agreement, the Board shall make a good faith evaluation of
the performance of the Company under Brackpool's direction
during such year, on the basis of which Brackpool shall
receive a bonus in an amount not to exceed 40% of
Brackpool's annual base salary for such year. In
determining the amount of such bonus, the Board shall use
20% of Brackpool's annual base salary as a target bonus;
provided, however, that the actual amount of the bonus may
range anywhere from 0% to 40% of Brackpool's annual base
salary depending upon the Board's subjective evaluation of
the performance of the Company under Brackpool's direction
during the year.
iv. TIMING AND FORM OF BONUS PAYMENT. Any annual
bonus payments payable to Brackpool hereunder shall be paid
as soon as possible following the end of the fiscal year to
which such bonus relates and the determination of the
amounts owed; provided, however, that all such payments
shall be made within 90 days of the end of the appropriate
fiscal year. Bonus payments payable to Brackpool hereunder
shall be paid in cash except that the Board, in its
discretion, may pay up to 50% of the aggregate amount of any
annual bonus earned in the form of theretofore authorized
but unissued common shares of the Company, valued for such
purpose at a price equal to the market value of the
Company's common stock upon the date of the Board's
determination to issue shares in lieu of cash. Upon the
issuance of such shares, Brackpool shall provide to the
Company such written documentation, including
representations and warranties, as the Company may require
in order to establish compliance with any applicable state
or federal securities laws.
v. ADDITIONAL CONDITIONS TO BONUSES. It shall
be a further condition to the payment of any bonuses
described in this paragraph 5(a) that Brackpool be an
employee of the Company at the end of the fiscal year to
which such bonuses relate.
b. FRINGE BENEFITS. In addition to the compensation
set forth above, Brackpool shall be entitled to the following
benefits:
i. Four (4) weeks annual vacation, provided that
no more than two weeks are to be taken consecutively;
ii. Sick leave and personal leave with pay in
accordance with the prevailing policies of the Company;
iii. Medical coverage under the group medical
insurance plan of the Company (or COBRA coverage, at the election
of Brackpool);
iv. Participation in any life insurance plans
generally made available by the Company to its employees;
v. Additional life insurance through the
purchase, by the Company, of a $1,000,000 face-value term life
insurance policy for the benefit of Brackpool (or, alternatively,
the payment of premiums by the Company with respect to a policy
in such amount purchased by Brackpool);
vi. Participation in any disability plan
generally made available by the Company to its employees, which,
as of the date of this Agreement, provides for 60% of base
compensation after 90 days of disability up to $10,000 per month;
vii. Additional individual disability insurance
coverage providing for 75% of Brackpool's base compensation (or
such greater percentage as the Board may determine); provided,
however, that the additional monthly premium payable by the
Company for such coverage shall not exceed $750.00 per month;
viii. Participation in any retirement or pension
plan maintained by the Company for the general benefit of its
employees, including any nonqualified or supplemental retirement
plans that are implemented after the effective date of this
Agreement;
ix. A fully equipped automobile of Brackpool's
choice but at the Company's expense (with a retail value not to
exceed $85,000) for Brackpool's use during the term of this
Agreement;
x. Participation in any long term incentive
plans maintained by the Company for the general benefit of its
employees; provided, however that the terms and conditions of any
long-term incentive awards (including form, amount and vesting
conditions) shall be established by the Board in its sole and
absolute discretion;
xi. Participation in any other benefit plan
maintained by the Company for the general benefit of its
employees; and
xii. Any other benefits not specifically set forth
herein as may be granted by the Company in its sole and absolute
discretion.
c. VESTING OF RIGHTS UPON CHANGE IN CONTROL. As
further consideration for the execution by Brackpool of this
Agreement and the provision of services hereunder, the Company
hereby agrees that if a Change in Control of the Company (as
defined in the Company's 1996 Stock Option Plan) occurs, then any
conditions to (i) the vesting of Brackpool's right to exercise
outstanding stock options or (ii) the issuance to Brackpool of
shares of the Company's common stock pursuant to outstanding
stock bonus plans to which Brackpool is a party shall be deemed
to have been satisfied, and any such options shall become fully
exercisable and any such shares shall become immediately issuable
as of the date such Change in Control occurred; provided,
however, that the acceleration of exercisability or issuance
shall be subject to the imposition of such restrictions on
transferability of the subject shares of the Company's common
stock as are necessary to permit stock issued upon exercise of
such options or under such stock bonus plans to continue to
qualify for the exception from Section 16(b) of the Securities
Act of 1933, as amended, as provided under Rule 16(b)(3).
d. DEDUCTION AND REIMBURSEMENT. Brackpool hereby
agrees that the Company may deduct and withhold from the
compensation payable to Brackpool hereunder any amounts of money
required to be deducted or withheld by the Company under the
provisions of any and all applicable local, state or federal
statutes or regulations or any amendments thereto hereafter
enacted requiring the withholding or deducting of compensation.
In the event the Company makes any payments or incurs any charges
for Brackpool's account, the Company shall have the right, and
Brackpool hereby authorizes the Company, to deduct from any
compensation payable to Brackpool hereunder any charges so paid
or incurred by the Company, but such right of deduction shall not
be deemed to limit or exclude any other rights of credit or
recovery or any other remedies the Company otherwise may have.
Nothing hereinabove set forth shall be deemed to obligate the
Company to make any such payments or incur any such charges. If
it is determined that such deduction is unauthorized, the Company
agrees to reimburse Brackpool promptly, it being understood,
however, that notwithstanding the determination that any
deduction was unauthorized, the making of such deductions shall
not be deemed to be a breach by the Company of any of its
obligations to Brackpool hereunder.
6. TERMINATION.
a. INITIAL TERM AND AUTOMATIC EXTENSIONS. Except as
provided in subsection (b) below, this Agreement shall terminate
three (3) years from the date of this Agreement (the "Initial
Term"); provided, however, that in the event that neither
Brackpool nor the Company (acting through its Board of Directors)
has given the other party written notice at least 30 days prior
to the expiration of the Initial Term of such party's desire not
to extend this Agreement then, upon the expiration of the Initial
Term (and provided that this Agreement has not otherwise been
terminated pursuant to the provisions of subsection (b) below)
this Agreement shall automatically be extended for a period of
one (1) year. This Agreement shall continue thereafter to be
automatically extended for successive one (1) year periods unless
and until (i) Brackpool or the Company gives the other party
written notice at least 30 days prior to the expiration of any
one (1) year extension period of such party's desire not to
further extend this Agreement, or (ii) this Agreement is
otherwise terminated pursuant to the provisions of subsection (b)
below.
b. OTHER TERMINATION EVENTS. Notwithstanding the
provisions of subsection (a) above, this Agreement shall
terminate:
i. At the election of the Company, upon the
death or permanent disability of Brackpool, "permanent
disability" being defined as any continuous loss of one-half (1/2)
or more of the time spent by Brackpool in the usual daily
performance of his duties as a result of physical or mental
illness for a continuous period in excess of ninety (90) days.
ii. At the election of the Company, at such time,
if any, as the Company ceases to conduct business for any reason
whatsoever.
iii. At the election of the Company, upon the
breach by Brackpool of any term or condition of this Agreement or
upon the dismissal of Brackpool by the Company for cause. For
purposes of this Agreement, the Company shall have "cause" to
terminate Brackpool's employment if he (1) engages in one or more
acts constituting a felony; (2) engages in one or more acts
involving fraud or serious moral turpitude; (3) misappropriates
Company assets or engages in gross misconduct materially
injurious to the Company or its affiliates or subsidiaries; or
(4) willfully fails to comply with the written instructions of
the Board.
iv. At the election of Brackpool, upon a breach
by the Company of this Agreement by reason of a material change
in Brackpool's job title or a material reduction in Brackpool's
duties and responsibilities hereunder.
c. PAYMENTS FOLLOWING TERMINATION. Following
termination of this Agreement, whether for any of the reasons
specifically set forth above or for any other reason, the Company
shall have no obligation to make payments to, or bestow benefits
upon, Brackpool after the date of termination (otherwise than as
required by law), except as follows:
i. In the event of termination by the Company
pursuant to Section b(ii) as the result of Brackpool's death,
payment of the base compensation otherwise payable to Brackpool
pursuant to Section 4 hereof shall continue to be paid to
Brackpool's estate for a period of 90 days following Brackpool's
death (such payments to be in addition to, and not in lieu of,
any payments made pursuant to any Company provided death benefit
plans).
ii. In the event of termination of this Agreement
by Brackpool pursuant to Section (b)(iv) above, or in the event
of termination of this Agreement by the Company prior to the
expiration of the term of this Agreement for any reason not
specifically set forth above, Brackpool shall be entitled to
receive for the entire remaining term of this Agreement as though
Brackpool were continuing to provide services to the Company
under this Agreement (i) base compensation as set forth in
Section 4 above as in effect on the date of termination and (ii)
all fringe benefits as described in Section 5(b) above (other
than use of an automobile) to the extent that such benefits can
then lawfully be made available by the Company to Brackpool. In
addition, in the event of termination of this Agreement by the
Company prior to the expiration of the term of this Agreement for
any reason not specifically set forth above, Brackpool shall be
entitled to receive for the entire remaining term of this
Agreement as though Brackpool were continuing to provide services
to the Company a monthly payment equal to one-twelfth of his
annual bonus target (i.e. 60% of Brackpool's base compensation as
set forth in Section 4 above as in effect on the date of
termination).
iii. The termination of this Agreement shall not
affect the right of Brackpool to exercise any stock options or
other rights to purchase securities of the Company which may have
vested in full prior to the date of termination or Brackpool's
right to any as yet unpaid bonus payable under Section 5(a) with
respect to a fiscal year ending prior to the date of termination.
d. RETURN OF COMPANY'S PROPERTY. If this Agreement
is terminated for any reason, the Company may, at its option,
require Brackpool to vacate his offices prior to the effective
date of a termination and to cease all activities on the
Company's behalf. Brackpool agrees that on the termination of
his employment in any manner, he will immediately deliver to the
Company all notebooks, brochures, documents, memoranda, reports,
price lists, files, invoices, purchase orders, books,
correspondence, customer lists, or other written or graphical
records, and the like, relating to the business or work of the
Company, which are or have been in his possession or under his
control and which have not been returned to the Company.
Brackpool hereby expressly acknowledges that all such materials
referenced above are the property of the Company.
e. PUBLIC IDENTIFICATION. If this Agreement is
terminated for any reason, Brackpool shall immediately and
forever thereafter cease to hold himself out to any person, firm,
partnership, corporation or other entity as an employee, agent,
independent contractor or representative of the Company or of any
entity owned by, or affiliated with, the Company.
7. EXPENSES. The Company shall reimburse Brackpool for
all out-of-pocket expenses incurred by Brackpool in the
performance of his duties hereunder, including, but not limited
to, telephone, travel, and office expenses, all subject to such
written guidelines and/or requirements for verification as the
Company may, in its sole and absolute discretion, establish.
8. CONFIDENTIALITY AND TRADE SECRETS. For purposes of
this Section 8, the term "Company" shall collectively refer to
the Company and any affiliate thereof.
a. CONFIDENTIAL INFORMATION. Brackpool shall keep in
strictest confidence all information relating to the business,
affairs, customers and suppliers of the Company (collectively
hereinafter referred to as "Trade Secrets"), including, among
other things but without limitation, the Company's cost of
performing services, pricing formulae, methods or procedures, and
customer lists, which Brackpool may acquire during the
performance of his services and duties hereunder and which is not
otherwise generally known to the public. Brackpool acknowledges
that such Trade Secrets are of great value, and have been
developed and/or acquired at great expense to the Company, and
the Company would not enter into this contract of employment and
such information would not be made available to Brackpool in
Brackpool's fiduciary capacity unless the Company were assured
that all such information will be used for the exclusive benefit
of the Company. Accordingly, during the term of this Agreement,
and at all times thereafter, Brackpool shall not publish,
communicate, divulge, disclose or use, whether or not for his own
benefit, any such information without the prior written consent
of the Company. Further, Brackpool agrees that during the period
of his employment, Brackpool will not, directly or indirectly,
engage in the business of, or own or control any interest in
(except as a passive investor owning less than 10% of the equity
securities of a publicly held company), or act as a director,
officer of employee of, or consultant to, any individual,
partnership, joint venture, corporation or other business entity,
directly or indirectly engaged anywhere in the United States, its
possessions and territories, in any business competitive with the
business then being carried on by the Company; nor will Brackpool
engage in any such activity following the termination of his
employment hereunder (however and by whomever caused and
irrespective or whether or not such termination is for cause), if
the loyal and complete fulfillment by Brackpool of such
activities would demand, inherently, that Brackpool reveal Trade
Secrets.
b. CUSTOMER INFORMATION. Brackpool hereby
specifically agrees that he will not utilize any information
concerning the customers of the Company which Brackpool acquires
during the term of this Agreement, whether or not the same
originated through Brackpool's efforts, for any purpose
detrimental to the business of the Company. Without limitation
of the foregoing, Brackpool agrees that he shall not at any time
interfere with any existing contracts of the Company, and further
agrees that he shall not engage in business discussions with any
person or entity with whom he or the Company are in negotiations
at the time he ceases to be an employee of the Company until
after such negotiations have been concluded.
c. SOLICITATION OF EMPLOYEES. Brackpool acknowledges
that important factors in the Company's business and operations
are the loyalty and good will of its employees and its customers.
Accordingly, Brackpool agrees that both during the term of this
Agreement and after the expiration or termination of this
Agreement he will not enter into, and will not participate in,
any plan or arrangement to cause any of the Company's employees
to terminate his employment with the Company or hire any of such
employees in connection with business initiated by Brackpool or
any other person, firm or corporation. Brackpool further agrees
that information as to the capabilities of the Company's
employees, their salaries and benefits, and the other terms of
their employment is confidential and proprietary to the Company
and constitutes its valuable trade secrets.
d. ONGOING OBLIGATION. The provisions in this
Section 8 shall be binding during Brackpool's employment and at
all times thereafter, regardless of the circumstances or reasons
for termination of this Agreement. In the event the provisions
in this Section 8 are more restrictive than permitted by the laws
of the jurisdiction in which enforcement of this provision is
sought, such provisions shall be interpreted to extend only over
the maximum period of time, range of activities or geographic
area as to which it may be enforceable.
9. REMEDY FOR BREACH. Brackpool acknowledges that the
services to be rendered by him hereunder are of a special, unique
and extraordinary character, which gives this Agreement a
peculiar value to the Company, the loss of which cannot be
reasonably or adequately compensated in damages in an action at
law, and a breach by Brackpool of the provisions of this
Agreement will cause the Company irreparable injury. It is,
therefore, expressly acknowledged that this Agreement may be
enforced by injunction and other equitable remedies, without
bond. Such relief shall not be exclusive, but shall be in
addition to any other rights or remedies Company may have for
such breach, and Company shall be entitled to recover all costs
and expenses, including reasonably attorneys' fees, incurred by
reason of any breach of the covenants of this Agreement.
10. LITIGATION AND ATTORNEYS FEES. In the event of any
litigation between the parties hereto in connection with this
Agreement or to enforce any provision or right hereunder, the
unsuccessful party to such litigation shall pay to the successful
party therein all costs and expenses, including but not limited
to reasonable attorneys' fees incurred therein by such successful
party, which costs, expenses and attorneys' fees shall be
included as a part of any judgment rendered in such action in
addition to any other relief to which the successful party may be
entitled.
11. BOARD ACTIONS. Any actions required to be taken or
determinations to be made by the Board under this Agreement may,
at the discretion of the Board, be taken or made by the
Compensation Committee or any other duly authorized committee of
the Board.
12. GENERAL PROVISIONS.
a. The failure of the Company at any time to enforce
performance by Brackpool of any provisions of this Agreement
shall in no way affect the Company's rights thereafter to enforce
the same, nor shall the waiver by the Company of any breach of
any provision hereof be held to be a waiver of any other breach
of the same or any other provision.
b. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and the successors and assigns
of the Company; provided, however, it is understood and agreed
that the services to be rendered and the duties to be performed
by Brackpool hereunder are of a special, unique and personal
nature and that it would be difficult or impossible to replace
such services; by reason thereof, Brackpool may not assign either
the benefits or the obligations of this Agreement.
c. Brackpool shall be considered an employee of the
Company within the meaning of all federal, state and local laws
and regulations governing unemployment insurance, workers'
compensation, industrial accident, labor and taxes.
d. This Agreement is the entire agreement between the
parties hereto with respect to the subject matter hereof and
supersedes all prior oral and written agreements and negotiations
between the parties.
e. The headings of the several paragraphs in this
Agreement are inserted solely for the convenience of the parties
and are not a part of and are not intended to govern, limit or
aid in the construction of any term or provision hereof.
f. This Agreement may not be modified except by a
written instrument signed by all parties hereto.
g. All clauses and covenants contained in this
Agreement are severable, and in the event any of them shall be
held to be invalid by any court, such clauses or covenants shall
be limited as permitted under applicable law, or, if the same are
not susceptible to such limitation, this Agreement shall be
interpreted as if such invalid clauses or covenants were not
contained herein.
h. This Agreement is made with reference to the laws
of the State of California and shall be governed by and construed
in accordance therewith. Any litigation concerning or to enforce
the provisions of this Agreement shall be brought in the courts
of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
BRACKPOOL:
/s/ Keith Brackpool
-------------------------
Keith Brackpool
THE COMPANY
Cadiz Land Company, Inc.
By: /s/ Dwight Makins
------------------------
Dwight Makins
Chairman
EXHIBIT 21.1
-------------
CADIZ LAND COMPANY, INC.
SUBSIDIARIES OF THE COMPANY
Pacific Packing, Inc.
Pacific Real Estate, Inc.
Rancho Cadiz Mutual Water Company
Southwest Fruit Growers, LP
Sun World International, Inc.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,298
<SECURITIES> 0
<RECEIVABLES> 5,881
<ALLOWANCES> 0
<INVENTORY> 13,838
<CURRENT-ASSETS> 26,178
<PP&E> 160,193
<DEPRECIATION> 0
<TOTAL-ASSETS> 203,049
<CURRENT-LIABILITIES> 15,150
<BONDS> 0
0
0
<COMMON> 326
<OTHER-SE> 120,873
<TOTAL-LIABILITY-AND-EQUITY> 203,049
<SALES> 100,157
<TOTAL-REVENUES> 100,157
<CGS> 76,566
<TOTAL-COSTS> 76,566
<OTHER-EXPENSES> 16,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,608
<INCOME-PRETAX> (8,538)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,538)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,538)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> 0
</TABLE>
