SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ended June 30, 1996
Commission File Number 0-17039
American Rice, Inc.
(Exact Name of Registrant as Specified in its Charter)
Texas 76-0231626
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
16825 Northchase, Suite 1600
Houston, Texas 77060
(Address of Principal Executive Offices) (Zip Code)
(713) 873-8800
Registrant's Telephone Number,
Including Area Code
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 [ ]
The number of shares outstanding of the registrant's common stock, $1 par
value, as of August 1, 1996 is 2,443,892 shares
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars)
(Unaudited)
Three Months
Ended June 30,
1996 1995
----------------------
Net sales $97,407 $86,392
Cost of sales 90,864 76,855
----------------------
Gross profit 6,543 9,537
Selling, general and
administrative expenses 6,425 5,771
----------------------
Operating income 118 3,766
Interest expense 4,619 3,398
Interest income (566) (175)
Other income and expense 121 (44)
----------------------
Earnings(loss) before income taxes (4,056) 587
Provision for income taxes (benefit) (1,460) 211
----------------------
Net earnings (loss) ($2,596) $376
======================
Preferred stock dividend
requirements 1,483 1,483
----------------------
Net loss applicable
to common stock ($4,079) ($1,107)
======================
Loss per applicable
common and common equivalent
share:
Primary ($1.67) ($.45)
======================
Fully diluted ($1.67) ($.45)
======================
See Notes to Consolidated Financial Statement
Page 1<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 30, March 31,
1996 1996
----------------------
ASSETS (Unaudited)
Current assets:
Cash $4,229 $2,803
Accounts receivable, net 34,540 33,541
Inventories
Finished goods 34,765 26,535
Raw materials 30,103 44,489
Prepaid expenses 1,134 832
Deferred income taxes 2,982 2,982
Net assets of Houston properties held for sale 13,535 13,535
----------------------
Total current assets 121,288 124,717
Other assets 20,998 20,587
Receivable from ERLY 23,505 24,795
Property, plant and equipment, net 41,970 42,062
----------------------
Total assets $207,761 $212,161
======================
Continued on next page
See Notes to Consolidated Financial Statement
Page 2<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Thousands of Dollars, except per share amounts)
June 30, March 31,
1996 1996
----------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $21,261 $19,826
Accounts payable and accrued expenses 51,216 53,233
Income taxes payable to ERLY - -
Current portion of long-term debt 103 106
----------------------
Total current liabilities 72,580 73,165
Long-term debt 95,847 95,609
Deferred income taxes 3,575 5,035
Commitments and contingencies (Note 5) - -
Stockholders' equity:
Preferred stock, $1.00 par value; 4,000,000
shares authorized;
Series A- 777,777 convertible shares issued
and outstanding, liquidation preference
of $19,989 778 778
Series B- 2,800,000 convertible shares issued
and outstanding, liquidation preference
of $14,000 2,800 2,800
Series C- 300,000 shares issued
and outstanding, liquidation preference
of $1,500 300 300
Common stock, $1.00 par value; 10,000,000
shares authorized; 2,443,892 shares
issued and outstanding 2,444 2,444
Paid-in capital 25,286 25,286
Retained earnings 4,862 7,458
Cumulative foreign currency translation
adjustments (711) (714)
----------------------
Total stockholders' equity 35,759 38,352
----------------------
Total liabilities and stockholders' equity $207,761 $212,161
======================
See Notes to Consolidated Financial Statement
Page 3<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Three Months
Ended June 30,
1996 1995
----------------------
OPERATING ACTIVITIES:
Net earnings ($2,596) $376
Adjustments to reconcile net earnings to net cash
provided by (used in) in operating activities:
Depreciation and amortization 1,419 1,398
Mortgage note discount accretion 139 -
Loss on sales of property 5 -
Deferred income taxes, net (1,460) -
Changes in assets and liabilities that
provided (used) cash:
Accounts receivable (999) 11,256
Inventories 6,156 4,177
Prepaid expenses (302) (268)
Other assets (772) (212)
Receivable from ERLY 1,290 (256)
Accounts payable and accrued expenses (2,017) (9,108)
Income taxes payable to ERLY - (100)
----------------------
Net cash provided by
operating activities 863 7,263
INVESTING ACTIVITIES:
Property, plant and equipment additions (988) (1,422)
Proceeds from sales of assets 20 -
----------------------
Net cash used in
investing activities (968) (1,422)
FINANCING ACTIVITIES:
Increase (decrease) in notes payable 1,435 (3,437)
Proceeds from issuance of long-term debt 117 -
Repayment of long-term debt (21) (1,500)
Other, net - (26)
----------------------
Net cash provided by (used in)
financing activities 1,531 (4,963)
----------------------
NET INCREASE IN CASH 1,426 878
CASH:
Beginning of the period 2,803 1,864
----------------------
End of the period $4,229 $2,742
======================
See Notes to Consolidated Financial Statement
Page 4<PAGE>
<TABLE>
AMERICAN RICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended June 30, 1996
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Foreign Total
Additional Currency Stock -
Preferred Common Paid-in Retained Translation Holders'
Stock Stock Capital Earnings Adjustments Equity
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance April 1, 1996 $3,878 $2,444 $25,286 $7,458 ($714) $38,352
Net loss - - - (2,596) - (2,596)
Foreign currency
translation - - - - 3 3
--------- --------- --------- --------- --------- ---------
Balance June 30, 1996 $3,878 $2,444 $25,286 $4,862 ($711) $35,759
========= ========= ========= ========= ========= =========
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
Page 5<PAGE>
AMERICAN RICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements presented herein at June 30, 1996 and
for each of the three month periods ended June 30, 1996 and 1995 are
unaudited; however, all adjustments which are, in the opinion of management
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods covered have been made and are of a
normal, recurring nature. The results of the interim periods are not
necessarily indicative of results for the full year. The consolidated balance
sheet at March 31, 1996 is derived from the March 31, 1996 audited
consolidated financial statements but does not include all disclosures
required by generally accepted accounting principles. Although management
believes the disclosures are adequate, certain information and disclosures
normally included in the notes to the financial statements has been condensed
or omitted as permitted by the rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the audited financial statements and notes thereto included in American
Rice, Inc.'s ("ARI" or the "Company") Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
2. Olive Business Acquisition
On July 5, 1996, the Company acquired the domestic and foreign olive business
from Campbell Soup Company for approximately $38 million. Assets acquired
include domestic inventories and fixed assets and all of the outstanding
common stock of Compania Envasadora Loreto, S.A., a Spanish company which
comprises the foreign olive business. The purchase was funded primarily from
ARI's credit facilities. The acquisition will be accounted for as a purchase,
and the results of operations of the acquired business will be included in the
Company's consolidated financial statements after July 5, 1996.
3. Notes Payable
On June 7, 1996 ARI replaced its existing $47.5 million revolving credit loan
with a $47.5 million revolving credit loan from a new lender, Harris Trust and
Savings Bank ("Harris"). Funds available for borrowing (including letters of
credit of up to $20.0 million) under this revolving credit loan at any time
may not exceed 85% of eligible accounts receivable (or 90% of accounts
receivable backed by acceptable letters of credit from customers), 75% of
eligible rough rice inventory, and 70% of eligible finished goods inventory.
The line is collateralized by substantially all of ARI's accounts receivable
and inventory. In addition, this facility contains restrictive covenants
which, among other things, require the attainment of certain financial ratios
and provide limitations on capital expenditures, lease obligations, and
prohibit dividend payments. The line also contains certain cross default
provisions with the indenture for the $100 million in principal amount of
13.0% mortgage notes due 2002. The Harris revolving credit line bears interest
at ARI's option at either the prime rate or the London Interbank Offered Rate
plus an applicable margin based upon ARI's adjusted funded debt ratio as
Page 6<PAGE>
defined, with outstanding principal and interest due upon termination of the
agreement, which continues in full force and effect until May 31, 1999 or
until terminated with five days written notice from ARI subsequent to May 31,
1997. This revolving credit loan was amended on June 28, 1996 to increase the
borrowing limit to $85.0 million. The other terms remained substantially
unchanged.
4. Statement of Cash Flows
Borrowings under the revolving credit lines in the three months ended June 30,
1996 and 1995 totaled $93.4 million and $94.4 million, respectively, and
repayments during the same periods totaled $92 million and $97.8 million,
respectively. ARI made cash payments for interest and financing fees of
approximately $1.8 million and $3.2 million during the three months ended June
30, 1996 and 1995, respectively. ARI paid $0 and $311 thousand for federal
and state income taxes during the three months ended June 30, 1996 and 1995,
respectively.
5. Commitments and Contingencies
The Company is involved in legal proceedings that arise in the ordinary course
of its business, all of which are routine in nature except for the matters
noted below. While the results of such litigation cannot be predicted with
certainty, the Company believes that the resolution of such legal proceedings,
including the matters noted below, will not have a material adverse effect on
the consolidated financial position or consolidated results of operations of
ARI.
The Company and ERLY have been named as defendants in a lawsuit filed in the
district court of Harris County, Texas. This is a dispute between the general
partner of a proposed real estate development and G.D. Murphy and D.A. Murphy,
Chairman and President, respectively, of ARI and ERLY. Damages sought are in
the range of $10 million plus attorneys' fees and punitive damages. ARI and
ERLY are named as defendants in the lawsuit because of their actions to obtain
restraining orders to prevent threatened foreclosures on ERLY common stock
pledged as collateral by G.D. Murphy and to stop interference by the plantiff
with ARI's mortgage note financing, as well as certain other alleged
activities. The Company and ERLY believe they have valid defenses in this case
and that damages, if any, will not have a material effect on the Company's
financial condition; however, as with any litigation, the ultimate outcome is
unknown. Accordingly, no provision for any liability that might result from
this litigation has been made in the accompanying consolidated financial
statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results Of Operations
The Company purchases and processes rough rice into branded and commodity rice
for sale in both international and domestic markets. Demand for branded rice
products is relatively constant and margins are typically higher than those
for commodity rice products. Demand for commodity rice products is relatively
constant globally, but demand for U.S. grown commodity rice is dependent upon
Page 7<PAGE>
supply and its cost relative to other sources of supply. Supply and costs for
both branded and commodity products depend on many factors including
governmental actions, crop yields and weather, and such factors can persist
through one or more fiscal years.
Three Months Ended June 30, 1996 Compared to
Three Months Ended June 30, 1995
Net Sales. Net sales increased $11.0 million, or 12.8%, from $86.4 million in
fiscal 1996 to $97.4 million in fiscal 1997. Export sales of $58.1 million
increased $3.1 million, or 5.7%, from the fiscal 1996 period while sales in
the U.S. and Canada increased $7.9 million, or 25.1% to $39.3 million.
Export sales increased due to higher prices partially offset by lower volume.
Average export prices increased approximately 12%, accounting for $6.3 million
in sales increases. The export sales volume decline accounted for a $3.2
million sales decrease. There were no sales to Japan in the 1997 quarter or in
the corresponding period of the prior year. These sales are expected to occur
in the third and fourth quarters of the fiscal year as was the case in fiscal
1996. Domestic sales were higher as a result of higher average prices
partially offset by lower volume.
Gross Profit. Gross profit was 7% of sales for the fiscal 1997 quarter and 11%
for the same period in 1996. Gross profit declined $3.0 million, or 31.4%,
from $9.5 million in the fiscal 1996 first quarter to $6.5 million in fiscal
1997, due primarily to declines in gross profit from sales in the Middle East
as a result of lower volume.
Selling, general and administrative expense. Selling, general and
administrative expense increased $654 thousand to $6.4 million in the fiscal
1997 quarter due to higher international advertising and promotional expenses
and higher general and administrative expenses from Vietnam operations.
Interest. Interest expense increased $1.2 million from $3.4 million in the
fiscal 1996 period to $4.6 million in fiscal 1997 due to higher average
balances outstanding and higher average interest rates. Interest expense in
both periods includes amortization of capitalized debt issuance costs.
Interest expense in the fiscal 1997 period includes accretion of the $6
million original issue discount on the Notes. Partially offsetting the
increase in interest expense, interest income increased $391 thousand to $566
thousand.
Liquidity and Capital Resources
ARI requires liquidity and capital primarily for the purchase of rough rice
and to invest in property, plant and equipment necessary to support
operations. Historically, ARI has financed both working capital and capital
expenditures through internally generated funds and by funds provided by
credit lines.
Comparing June 30, 1996 to March 31, 1996 balances ARI accounts receivable
increased $1 million to $34.5 million and inventories decreased $6.2 million
to $64.9 million.
Page 8<PAGE>
The $100 million in principal amount of 13.0% mortgage notes due 2002 (the
"Mortgage Notes") provide for interest payments semiannually, accruing fixed
interest at an annual rate of 13.0%, an effective yield rate of 14.4%. In
addition to fixed interest, the Notes bear contingent interest of 4.0% of
consolidated cash flow (as defined) up to a limit of $40.0 million of
consolidated cash flow during the fiscal year in which such interest accrues.
Contingent interest accrues in each semiannual period (as defined) in which
consolidated cash flow in such period and the immediately preceding semiannual
period is equal to or greater than $20.0 million. Contingent interest is
payable semiannually, but ARI may elect to defer all or a portion of any such
payment to the extent that (a) the payment of such portion of contingent
interest will cause ARI's adjusted fixed charge coverage ratio (as defined)
for the two consecutive applicable semiannual periods to be less than 2.0:1
and (b) the principal of the Notes corresponding to such contingent interest
has not then matured and become due and payable. The consolidated cash flow
for the quarter and the semiannual periods ended June 30, 1996 was $2.3
million and $7.5 million, respectively. No continent interest was accrued or
paid during the quarter. The total contingent interest accrued at June 30,
1996 was $447 thousand.
On June 7, 1996 ARI replaced its existing $47.5 million revolving credit loan
with a $47.5 million revolving credit loan from a new lender, Harris Trust and
Savings Bank ("Harris"). Funds available for borrowing (including letters of
credit of up to $20.0 million) under this revolving credit loan at any time
may not exceed 85% of eligible accounts receivable (or 90% of accounts
receivable backed by acceptable letters of credit from customers), 75% of
eligible rough rice inventory, and 70% of eligible finished goods inventory.
The line is collateralized by substantially all of ARI's accounts receivable
and inventory. In addition, this facility contains restrictive covenants
which, among other things, require the attainment of certain financial ratios
and provide limitations on capital expenditures, lease obligations, and
prohibit dividend payments. The line also contains certain cross default
provisions with the Indenture as discussed above. The Harris revolving credit
line bears interest at ARI's option at either the prime rate or the London
Interbank Offered Rate plus an applicable margin based upon ARI's adjusted
funded debt ratio as defined, with outstanding principal and interest due upon
termination of the agreement, which continues in full force and effect until
May 31, 1999 or until terminated with five days written notice from ARI
subsequent to May 31, 1997. This revolving credit loan was amended on June 28,
1996 to increase the borrowing limit to $85.0 million. The other terms
remained substantially unchanged. The outstanding balance on this loan at June
30, 1996 was $18.2 million. At July 3, 1996, the borrowing base under this
line of credit was $37.6 million and the maximum borrowing during the period
of June 7, 1996 through June 30, 1996 was $22.4 million.
The Company has contracted to sell its principal property held for sale,
located two miles west of downtown Houston for approximately $11.3 million in
cash net of expenses. The sale is expected to be consummated in calendar year
1996. The terms of the Mortgage Notes provide that proceeds are to be held in
a segregated account pledged to the trustee pending investment in a related
business (as defined) and further provide if uninvested proceeds exceed $5
million after one year from date of sale, they will be offered to repurchase a
portion of the Mortgage Notes.
Page 9<PAGE>
Capital expenditures, limited by the indenture for the Mortgage Notes to $5.5
million per fiscal year (with carryover provisions as defined) if the
consolidated cash flow (as defined) does not exceed $30 million per year, were
$988 thousand and $1.4 million for the three months ended June 30, 1996 and
1995, respectively. Management anticipates the $5.5 million limitation will
allow for maintenance of existing facilities and will also support limited
growth.
ARI's Preferred B and C stock carries annual cumulative, non-participating
dividends of $5.2 million and $750 thousand respectively. No dividends have
been declared or paid as of June 30, 1996. As of June 30, 1996, the Preferred
B dividends accumulated but not declared are $15.972 million and the Preferred
C dividends accumulated but not declared are $2.313 million.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in legal proceedings that arise in the ordinary course
of its business, all of which are routine in nature except for the matters
noted below. While the results of such litigation cannot be predicted with
certainty, the Company believes that the resolution of such legal proceedings,
including the matters noted below, will not have a material adverse effect on
the consolidated financial position or consolidated results of operations of
ARI.
The Company and ERLY have been named as defendants in a lawsuit filed in the
district court of Harris County, Texas. This is a dispute between the general
partner of a proposed real estate development and G.D. Murphy and D.A. Murphy,
Chairman and President, respectively, of ARI and ERLY. Damages sought are in
the range of $10 million plus attorneys' fees and punitive damages. ARI and
ERLY are named as defendants in the lawsuit because of their actions to obtain
restraining orders to prevent threatened foreclosures on ERLY common stock
pledged as collateral by G.D. Murphy and to stop interference by the plantiff
with ARI's mortgage note financing, as well as certain other alleged
activities. The Company and ERLY believe they have valid defenses in this case
and that damages, if any, will not have a material effect on the Company's
financial condition; however, as with any litigation, the ultimate outcome is
unknown. Accordingly, no provision for any liability that might result from
this litigation has been made in the accompanying consolidated financial
statements.
Page 10<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.24 Amended and Restated Secured Credit Agreement between American Rice,
Inc. as Borrower and Harris Trust and Savings Bank
11.1 Computation of Earnings Per Share
27 Financial Data Schedule
(b) During the quarter ended June 30, 1996, Registrant did not file any Form
8-K Reports.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
American Rice, Inc.
-------------------
Registrant
/S/ Joseph E. Westover
---------------------------
Joseph E. Westover
Vice-President / Controlle
Page 11<PAGE>
Exhibit 11.1
AMERICAN RICE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Thousands of Dollars Except Per Share Data)
Three Months
Ended June 30,
1996 1995
----------------------
PRIMARY EARNINGS (LOSS) PER SHARE
Net earnings ($2,596) $376
Less dividends on preferred stock:
Series B (1,295) (1,295)
Series C (188) (188)
----------------------
(1,483) (1,483)
----------------------
Earnings (loss) applicable to
common stock ($4,079) ($1,107)
======================
Average common and common
equivalent shares outstanding:
Common 2,444 2,444
Preferred Series A - -
----------------------
2,444 2,444
======================
Earnings (loss) per share
applicable to common stock ($1.67) ($.45)
======================
Continued on next pag
<PAGE>
Exhibit 11.1 (Continued)
AMERICAN RICE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Thousands of Dollars Except Per Share Data)
Three Months
Ended June 30,
1996 * 1995 *
----------------------
FULLY DILUTED EARNINGS PER SHARE
Net earnings ($2,596) $376
Less dividends on preferred stock:
Series C (188) (188)
----------------------
Earnings applicable to
common stock ($2,784) $188
======================
Average common and common
equivalent shares outstanding:
Common 2,444 2,444
Preferred Series A 778 778
Preferred Series B 5,600 5,600
----------------------
8,822 8,822
======================
Earnings per share
applicable to common stock ($.32) $.02
======================
* This calculation is presented in accordance with Regulation
S-K item 601(b)(11) although it is contrary to paragraphs 14, 30,
and 40 of APB Opinion No. 15 because it produces an antidilutive
result. The Opinion provides that a computation on a fully
diluted basis which results in an improvement in earnings
per share when compared to primary earnings per share
(antidilution) not be taken into account. Therefore fully diluted
earnings per share reported on the income statement are the same
as primary earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 3-MOS
<CASH> 4,229
<SECURITIES> 0
<RECEIVABLES> 36,012
<ALLOWANCES> 1,472
<INVENTORY> 64,868
<CURRENT-ASSETS> 121,288
<PP&E> 64,577
<DEPRECIATION> 22,607
<TOTAL-ASSETS> 207,761
<CURRENT-LIABILITIES> 72,580
<BONDS> 94,461
0
3,878
<COMMON> 2,444
<OTHER-SE> 29,437
<TOTAL-LIABILITY-AND-EQUITY> 207,761
<SALES> 97,407
<TOTAL-REVENUES> 97,407
<CGS> 90,864
<TOTAL-COSTS> 90,864
<OTHER-EXPENSES> 6,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,619
<INCOME-PRETAX> (4,056)
<INCOME-TAX> (1,460)
<INCOME-CONTINUING> (2,596)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,596)
<EPS-PRIMARY> (1.67)
<EPS-DILUTED> (1.67)
</TABLE>
AMENDED AND RESTATED
SECURED CREDIT AGREEMENT
AMERICAN RICE, INC.
as Borrower
AND
COMET VENTURES, INC.
COMET RICE OF PUERTO RICO, INC.
BARGECARIB, INC.
COMPANIA ENVASADORA LORETO, S.A.
as Guarantors
AND
HARRIS TRUST AND SAVINGS BANK,
Individually and as Agent
Dated as of June 28, 1996
Table of Contents
SECTION DESCRIPTION PAGE
SECTION 1. THE CREDITS...............................................1
Section 1.1. The Revolving Credit...................................1
Section 1.2. The Notes..............................................2
Section 1.3. Manner of Borrowing....................................2
Section 1.4. Funding of All Loans...................................2
Section 1.5. Letters of Credit......................................3
Section 1.6. Reimbursement Obligation...............................3
Section 1.7. Participation in L/Cs..................................4
Section 1.8. Disbursements for Rent.................................4
Section 1.9. Extensions of Revolving Credit One Termination Date....5
Section 1.10. Borrowings.............................................5
SECTION 2. INTEREST..................................................5
Section 2.1. Options................................................5
Section 2.2. Base Rate Portion......................................6
Section 2.3. LIBOR Portions.........................................6
Section 2.4. Computation............................................7
Section 2.5. Minimum Amounts........................................7
Section 2.6. Manner of Rate Selection...............................7
Section 2.7. Change of Law..........................................7
Section 2.8. Unavailability of Deposits.............................7
Section 2.9. Taxes and Increased Costs..............................8
Section 2.10. Funding Indemnity......................................9
Section 2.11. Lending Branch.........................................9
Section 2.12. Discretion of Banks as to Manner of Funding............9
SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND
NOTATIONS................................................10
Section 3.1. Commitment Fee........................................10
Section 3.2. Agent's Fees..........................................10
Section 3.3. Voluntary Prepayments.................................10
Section 3.4. Mandatory Prepayments.................................10
Section 3.5. Terminations..........................................11
Section 3.6. Place and Application.................................11
Section 3.7. Notations and Requests................................13
Section 3.8. Capital Adequacy......................................13
SECTION 4. THE COLLATERAL AND RESTRICTED ACCOUNTS..................13
Section 4.1. Collateral............................................13
Section 4.2. Accounts Receivable and Inventory Collections.........14
SECTION 5. REPRESENTATIONS AND WARRANTIES..........................14
Section 5.1. Organization and Qualification........................14
Section 5.2. Subsidiaries..........................................15
Section 5.3. Financial Reports.....................................15
Section 5.4. Litigation; Tax Returns; Approvals....................15
Section 5.5. Regulation U..........................................16
Section 5.6. No Default............................................16
Section 5.7. ERISA.................................................16
Section 5.8. Security Interests and Debt...........................16
Section 5.9. Accurate Information..................................16
Section 5.10. Enforceability........................................16
Section 5.11. No Default Under Other Agreements.....................17
Section 5.12. Status Under Certain Laws.............................17
Section 5.13. Compliance with Laws..................................17
Section 5.14. Federal Food Security Act.............................17
SECTION 6. CONDITIONS PRECEDENT....................................18
Section 6.1. All Advances..........................................18
Section 6.2. Initial Advance.......................................18
SECTION 7. COMPANY COVENANTS.......................................21
Section 7.1. Maintenance...........................................21
Section 7.2. Taxes.................................................21
Section 7.3. Maintenance of Insurance..............................21
Section 7.4. Financial Reports.....................................21
Section 7.5. Inspection and Reviews................................22
Section 7.6. Consolidation and Merger..............................23
Section 7.7. Transactions with Affiliates and Foreign Subsidiaries.23
Section 7.8. Capital Expenditures..................................23
Section 7.9. Dividends and Certain Other Restricted Payments.......23
Section 7.10. Liens.................................................24
Section 7.11. Borrowings and Guaranties.............................25
Section 7.12. Investments, Loans and Advances.......................26
Section 7.13. Sale of Property......................................27
Section 7.14. Notice of Suit, Adverse Change in Business or Default.28
Section 7.15. ERISA.................................................28
Section 7.16. Use of Loan Proceeds..................................28
Section 7.17. Conduct of Business and Maintenance of Existence......28
Section 7.18. Compliance with Laws, etc.............................28
Section 7.19. New Subsidiaries......................................29
Section 7.20. Environmental Covenant................................29
Section 7.21. Sale and Leasebacks...................................29
Section 7.22. Adjusted Funded Debt Ratio............................29
Section 7.23. Minimum Interest Coverage Ratio......................30
Section 7.24. Minimum Adjusted Tangible Net Worth...................30
Section 7.25. Minimum Current Ratio.................................30
Section 7.26. Federal Food Security Act.............................30
Section 7.27. Environmental Indemnification and Waiver..............30
SECTION 8. EVENTS OF DEFAULT AND REMEDIES..........................31
Section 8.1. Events of Default Defined.............................31
Section 8.2. Remedies for Non-Bankruptcy Defaults..................32
Section 8.3. Remedies for Bankruptcy Defaults......................33
Section 8.4. L/Cs..................................................33
SECTION 9. DEFINITIONS.............................................33
Section 9.1. Certain Terms Defined.................................33
SECTION 10. THE AGENT...............................................47
Section 10.1. Appointment and Authorization.........................47
Section 10.2. Rights as a Bank......................................47
Section 10.3. Standard of Care......................................47
Section 10.4. Costs and Expenses....................................48
Section 10.5. Indemnity.............................................48
Section 10.6. Collateral Servicing Agent............................49
SECTION 11. THE GUARANTEES..........................................49
Section 11.1. The Guarantees........................................49
Section 11.2. Guarantee Unconditional...............................50
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances.................................51
Section 11.4. Subrogation; Limitation on Right of Recovery..........51
Section 11.5. Waivers...............................................51
Section 11.6. Stay of Acceleration..................................51
Section 11.7. Currency..............................................51
SECTION 12. MISCELLANEOUS............................................52
Section 12.1. Holidays..............................................52
Section 12.2. No Waiver, Cumulative Remedies........................52
Section 12.3. Waivers, Modifications and Amendments.................52
Section 12.4. Costs and Expenses; Environmental Indemnity...........53
Section 12.5. Stamp Taxes...........................................54
Section 12.6. Survival of Representations...........................54
Section 12.7. Construction..........................................54
Section 12.8. Accounting Principles.................................54
Section 12.9. Addresses for Notices.................................54
Section 12.10. Headings..............................................55
Section 12.11. Severability of Provisions............................55
Section 12.12. Counterparts..........................................55
Section 12.13. Binding Nature........................................55
Section 12.14. Participants and Note Assignors.......................55
Section 12.15. Assignment of Commitments by Bank.....................56
Section 12.16. Withholding Taxes.....................................56
Section 12.17. Jurisdiction; Venue...................................58
Section 12.18. Lawful Rate...........................................58
Section 12.19. Governing Law.........................................59
Section 12.20. Limitation of Liability...............................59
Section 12.21. Nonliability of Lenders...............................60
Section 12.22. No Oral Agreements....................................60
Signature Page..............................................................61
Exhibit A Secured Revolving Credit Note
Exhibit B Borrowing Base Certificate
Exhibit C Compliance Certificate
Exhibit D Environmental Checklist
Exhibit E Permitted Locations
Schedule 5.2 Subsidiaries
Schedule 5.4. Litigation
Schedule 5.13 Compliance with Laws
Schedule 7.12 Existing Loans, Advances and Investments in Subsidiaries
American Rice, Inc.
Amended and Restated Secured Credit Agreement
To each of the Banks party hereto
Gentlemen:
The undersigned, American Rice, Inc., a Texas corporation (the "Company")
refers to that certain Secured Credit Agreement dated as of June 7, 1996 (the
"Prior Credit Agreement") and currently in effect between the Company and the
Banks party thereto. Upon satisfaction of the conditions precedent to
effectiveness set forth below, the Prior Credit Agreement (including all
Exhibits and Schedules thereto) shall be amended and restated in their
entirety to read as follows:
SECTION 1.THE CREDITS.
Section 1.1. The Revolving Credit. (a) Subject to all of the terms and
conditions hereof, the Banks agree to extend a revolving credit (the
"Revolving Credit") to the Company, which may be availed of by the Company in
its discretion from time to time, be repaid and used again, during the period
from the date hereof to and including the Termination Date. The Revolving
Credit may be utilized by the Company in the form of loans (individually a
"Revolving Credit Loan" and collectively the "Revolving Credit Loans") and
L/Cs (as hereinafter defined) provided that the sum of (i) the aggregate
principal amount of the Revolving Credit Loans, (ii) the Reimbursement
Obligations (as hereinafter defined), (iii) and the maximum amount available
to be drawn under all L/Cs (other than documentary L/Cs supporting the
purchase of Eligible Inventory) plus, (iv) 30% of the maximum amount available
to be drawn under all documentary L/Cs supporting the purchase of Eligible
Inventory outstanding at any one time shall not exceed the Borrowing Base as
then determined and computed. The maximum amount of the Revolving Credit,
which each Bank agrees to extend to the Company, shall be as set forth
opposite its signature hereto under the heading "Revolving Credit Commitment".
The obligations of the Banks hereunder are several and not joint and no Bank
shall under any circumstances be obligated to extend credit under the
Revolving Credit in excess of its Revolving Credit Commitment or its
Commitment Percentage of the credit outstanding hereunder. Notwithstanding
any other provision of this Agreement to the contrary, the Required Banks
shall have the right from time to time to establish reserves against the
amount of Revolving Credit that the Company may otherwise request hereunder in
such amounts and with respect to such matters as the Required Banks (as
hereinafter defined) shall deem necessary or appropriate in their reasonable
judgment after there has been a material adverse change in circumstances
relating to any or all of such Collateral from those circumstances in
existence on the date of this Agreement or in the condition (financial or
otherwise) of the Company. The amount of such reserves shall be subtracted
from the Borrowing Base when calculating the amount of availability under the
Revolving Credit Commitment. Additionally, the Required Banks may from time
to time reduce the percentages applicable to Eligible Accounts and Eligible
Inventory as they relate to the Borrowing Base if the Required Banks determine
in their reasonable judgment that there has been a material adverse change in
circumstances relating to any or all of such Collateral from those
circumstances in existence on the date of this Agreement or in the condition
(financial or otherwise) of the Company. The Required Banks agree to give the
Company fifteen (15) Business Days' prior notice of the establishment of any
such reserve or the reduction of any such percentage.
Section 1.2. The Notes. (a) All Revolving Credit Loans made by each
Bank under the Revolving Credit shall be evidenced by a Secured Revolving
Credit Note of the Company (individually a "Revolving Credit Note" and
collectively the "Revolving Credit Notes") payable to the order of such Bank
in the amount of its Revolving Credit Commitment, each Revolving Credit Note
to be in the form (with appropriate insertions) attached hereto as Exhibit A.
Without regard to the face principal amount of each Revolving Credit Note, the
actual principal amount at any time outstanding and owing by the Company on
account thereof during the period ending on the Termination Date shall be the
sum of all advances then or theretofore made thereon less all principal
payments actually received thereon during such period.
Section 1.3. Manner of Borrowing. The Company shall notify the Agent
(which may be written or oral, but which must be given prior to 11:00 a.m.
Chicago time) of the date (which may, subject to the immediately preceding
parenthetical and subject to Section 2.6 for any LIBOR Portion, be the date on
which such notice is given) upon which it requests that any Revolving Credit
Loan be made to it under the Revolving Credit specifying the amount of each
such Revolving Credit Loan and the Agent shall promptly notify each Bank of
its receipt of each such notice. Subject to all of the terms and conditions
hereof, the proceeds of each Revolving Credit Loan shall be made available to
the Company at the office of the Agent in Chicago and in funds there current
upon receipt by the Agent from each Bank of its pro rata share of such
Revolving Credit Loan, except to the extent any requested Revolving Credit
Loan represents (i) the conversion of an existing Portion or (ii) a
refinancing of a Reimbursement Obligation, in which case each Bank shall
record such conversion or refinancing, as the case may be, on the schedule to
the appropriate Revolving Credit Note or in lieu thereof, on its books and
records, and shall effect such conversion or refinancing, as the case may be,
on behalf of the Company in accordance with the provisions of Section 2.3
hereof and 2.10 hereof, respectively. Each Revolving Credit Loan from each
Bank shall initially constitute part of a Base Rate Portion (as hereinafter
defined) except to the extent the Company has otherwise timely elected, all as
provided in Section 2.6 hereof.
Section 1.4. Funding of All Loans. Unless the Agent shall have been
notified by a Bank prior to the date a Loan is to be made hereunder that such
Bank does not intend to make its pro rata share of such Loan available to the
Agent (which notice a Bank shall not be entitled to give unless a condition
precedent to lending has not been satisfied or waived), the Agent may assume
that such Bank has made such share available to the Agent on such date and the
Agent may in reliance upon such assumption make available to the Company a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank and the Agent has made such amount
available to the Company, the Agent shall be entitled to receive such amount
from such Bank forthwith upon its demand, together with interest thereon in
respect of each day during the period commencing on the date such amount was
made available to the Company and ending on but excluding the date the Agent
recovers such amount at a rate per annum (the "Fed Funds Rate") equal to the
effective rate charged to the Agent for overnight federal funds transactions
with member banks of the federal reserve system for each day as determined by
the Agent (or in the case of a day that is not a Business Day, then for the
preceding day).
Section 1.5. Letters of Credit. (a) Subject to all the terms and
conditions hereof, at the Company's request Harris will issue letters of
credit (an "L/C" and collectively the "L/Cs") for the account of the Company
subject to availability under the Revolving Credit, and the Banks hereby agree
to participate therein as more fully described in Section 1.7 hereof. Each
L/C shall be issued pursuant to an application and agreement for letter of
credit (the "L/C Agreement") in Harris' customary form in effect at the time
an L/C is requested. The L/Cs shall consist of documentary letters of credit
and standby letters of credit in an aggregate face amount not to exceed the
lesser of the available amount of the Revolving Credit Commitments or
$20,000,000. Each L/C shall have an expiry date not more than one year from
the date of issuance thereof (but in no event later than the Termination
Date). 100% of the amount available to be drawn under each L/C (other than
documentary L/C's supporting the purchase of Eligible Inventory in which case
such percentage shall be 30%) issued pursuant hereto shall be deducted from
the credit otherwise available under the Revolving Credit. In consideration
of the issuance of standby L/Cs the Company agrees to pay to the Agent for the
ratable account of the Banks a fee (the "L/C Participation Fee") in the amount
per annum equal to the Applicable Margin for LIBOR Portions of the stated
amount of each standby L/C issued hereunder (computed in each case on the
basis of a 360 day year and actual days elapsed). In addition the Company
shall pay Harris for its own account such issuance, drawing, amendment and
other administrative fees in connection with each L/C as may be established by
Harris from time to time (the "L/C Administrative Fees"). All L/C
Participation Fees shall be payable quarterly in arrears on the last day of
each March, June, September and December commencing June 30, 1996 and on the
Termination Date. All L/C Issuance Fees and L/C Administrative Fees shall be
payable on the date of issuance of each L/C hereunder and on the date of each
extension, if any, of the expiry date of each L/C.
(b)The Agent shall give prompt telephone, telex, or telecopy notice to
each Bank of each issuance of, or amendment to, an L/C specifying the
effective date of the L/C or amendment, the amount, the beneficiary, and the
expiration date of the L/C, in each case as established originally or through
the relevant amendment, as applicable, the account party or parties for the
L/C, each Bank's pro rata participation in such L/C and whether the Agent has
classified the L/C as a commercial, performance, or financial letter of credit
for regulatory reporting purposes.
Section 1.6. Reimbursement Obligation. The Company is obligated, and
hereby unconditionally agrees, to pay in immediately available funds to the
Agent for the account of Harris and the Banks who are participating in L/Cs
pursuant to Section 1.7 hereof the face amount of each draft drawn and paid
under an L/C issued by Harris hereunder not later than 11:00 a.m. (Chicago
Time) on the date such drawing is paid by Harris assuming such drawing is paid
by Harris prior to such time, otherwise such payment shall be due on the next
Business Day (the obligation of the Company under this Section 1.6 with
respect to any L/C is a "Reimbursement Obligation"). If at any time the
Company fails to pay any Reimbursement Obligation when due, the Company shall
be deemed to have automatically requested a Base Rate Loan from the Banks
hereunder, as of the maturity date of such Reimbursement Obligation, the
proceeds of which Loan shall be used to repay such Reimbursement Obligation.
Such Loan shall only be made if all conditions precedent set forth in Section
6 hereof are then satisfied, and shall be subject to availability under the
Revolving Credit. If such Loan is not made by the Banks for any reason, the
unpaid amount of such Reimbursement Obligation shall be due and payable to the
Agent for the pro rata benefit of the Banks upon demand and shall bear
interest at the post-default rate of interest specified in Section 2.2 hereof.
Section 1.7. Participation in L/Cs. Each of the Banks will acquire a
risk participation for its own account, without recourse to or representation
or warranty from Harris, in each L/C upon the issuance thereof ratably in
accordance with its Commitment Percentage. In the event any Reimbursement
Obligation is not paid by the Company pursuant to Section 1.6 hereof, each
Bank will pay to Harris funds in an amount equal to such Bank's Commitment
Percentage of the unpaid amount of such Reimbursement Obligation. The
obligation of the Banks to Harris under this Section 1.7 shall be absolute and
unconditional and shall not be affected or impaired by any Event of Default or
Default that may then be continuing hereunder. Harris shall notify each Bank
by telephone of its amount of such unpaid Reimbursement Obligation
attributable to its Commitment Percentage. If such notice has been given to
each Bank by 12:00 Noon, Chicago time, each Bank agrees to pay Harris in
immediately available and freely transferable funds on the same Business Day.
If such notice is received after 12:00 noon, Chicago time, each Bank agrees to
pay Harris in immediately available and freely transferable funds no later
than the following Business Day. Funds shall be so made available at the
account designated by Harris in such notice to the Banks. Upon the election
by the Banks to treat such funding as additional Revolving Credit Loans
hereunder and payment by each Bank, such Loans shall bear interest in
accordance with Section 2.2 hereof. Harris shall share with each Bank on a
pro rata basis relative to its Commitment Percentage a portion of each payment
of a Reimbursement Obligation (whether of principal or interest) and any L/C
Participation Fee (but not any L/C Issuance Fee or L/C Administrative Fee)
payable by the Company. Any such amount shall be promptly remitted to the
Banks when and as received by Harris from the Company.
Section 1.8. Disbursements for Rent. The Company and the Banks hereby
irrevocably authorize the Agent to, in its discretion, at any time or from
time to time, upon notice to the Company and the Banks, advance Loans (without
regard to Section 6 hereof or borrowing base limitations on the amount of
credit available hereunder) for the purpose of paying any sums then due by the
Company or a Guarantor, as the case may be, to lessors of facilities (other
than amounts that are being contested in good faith and by appropriate
proceedings in a manner sufficient to prevent enforcement of any lien that may
arise in connection therewith and as to which adequate reserves have been
established), in which Collateral is located.
Section 1.9. Extensions of Revolving Credit One Termination Date. At
any time not earlier than 60 days prior to, nor later than 30 days prior to,
the date that is two years before the Termination Date then in effect (the
"Anniversary Date"), the Company may request that the Banks extend the then
scheduled Termination Date for the Revolving Credit to the date one year from
such Termination Date. If such request is made by the Company each Bank shall
inform the Agent of its willingness to extend the Termination Date no later
than 30 days after the Banks receive such request. All Banks must approve in
writing received by the Agent any requested extension, and any Bank's failure
to approve a requested extension in writing during such period shall
constitute its refusal to agree to the requested extension. The Agent agrees
that if one or more Banks refuse a request for an extension hereunder when the
Required Banks have approved a request for extension, then the Agent will make
a good faith effort to replace such nonconsenting Bank or Banks with other
banks acceptable to the Agent and the Company. At any time more than 15 days
before such Anniversary Date the Banks may propose, by written notice to the
Company, an extension of the Termination Date for the Revolving Credit to such
later date on such terms and conditions as the Banks may then require. If the
extension of the Termination Date to such later date is acceptable to the
Company on the terms and conditions proposed by the Banks, the Company shall
notify the Banks of its acceptance of such terms and conditions no later than
the Anniversary Date, and such later date will become the Termination Date
hereunder and this Agreement shall otherwise be amended in the manner
described in the Banks' notice proposing the extension of the Termination Date
upon the Agent's receipt of (i) an amendment to this Agreement signed by the
Company and all of the Banks, (ii) resolutions of the Company's Board of
Directors authorizing such extension and (iii) an opinion of counsel to the
Company equivalent in form and substance to the form of opinion attached
hereto as Exhibit E and otherwise acceptable to the Banks.
Section 1.10. Borrowings. All Revolving Credit Loans made by the Banks
on the same date are hereinafter referred to as a "Borrowing". Each Borrowing
under the Revolving Credit shall be in a minimum amount of $100,000. Each
Borrowing hereunder shall be made pro rata from the Banks in accordance with
the amounts of their Revolving Credit Commitments.
SECTION 2.INTEREST.
Section 2.1. Options. Subject to all of the terms and conditions of
this Section 2, portions of the principal indebtedness evidenced by the Notes
(all of such indebtedness bearing interest at the same rate for the same
period of time being hereinafter referred to as a "Portion") may, at the
option of the Company, bear interest with reference to the Base Rate (the
"Base Rate Portions") or with reference to the Adjusted LIBOR Rate ("LIBOR
Portions"), and Portions may be converted from time to time from one basis to
the other. All of the indebtedness evidenced by the Notes which is not part
of a LIBOR Portion shall constitute a single Base Rate Portion. The foregoing
to the contrary notwithstanding, only Base Rate Portions shall be available
hereunder from the date hereof through and including the 120th day from the
date hereof and thereafter the Company may, in accordance with the terms and
conditions hereof, elect LIBOR Portions hereunder. All of the indebtedness
evidenced by the Notes which bears interest with reference to a particular
Adjusted LIBOR Rate for a particular Interest Period shall constitute a single
LIBOR Portion. The Company promises to pay interest on each Portion at the
rates and times specified in this Section 2.
Section 2.2. Base Rate Portion. Each Base Rate Portion shall bear
interest (which the Company promises to pay at the times herein provided), at
the rate per annum equal to the lesser of (a) the Highest Lawful Rate, or (b)
the rate per annum determined by adding the Applicable Margin (as hereinafter
defined) to the Base Rate as in effect from time to time, provided that if a
Base Rate Portion is not paid when due (whether by lapse of time, acceleration
or otherwise), such Portion shall bear interest (which the Company promises to
pay at the times hereinafter provided), whether before or after judgment, for
the period from the date such Portion became due and until payment in full
thereof, at the rate per annum equal to the lesser of (a) the Highest Lawful
Rate, or (b) the rate per annum determined by adding 2% to the interest rate
which would otherwise be applicable thereto from time to time. Interest on
the Base Rate Portions shall be payable monthly in arrears on the last
Business Day of each month in each year and at maturity of the Notes and
interest after maturity shall be due and payable upon demand.
Section 2.3. LIBOR Portions. Each LIBOR Portion shall bear interest
(which the Company promises to pay at the times herein provided) for each
Interest Period selected therefor at a rate per annum equal to the lesser of
(a) the Highest Lawful Rate, or (b) the rate per annum equal to the Adjusted
LIBOR Rate for such Interest Period plus the Applicable Margin, provided that
if any LIBOR Portion is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest (which the Company
promises to pay at the times hereinafter provided) whether before or after
judgment, for the period from the date such Portion became due and until
payment in full thereof, through the end of the Interest Period then
applicable thereto at the rate per annum equal to the lesser of (a) the
Highest Lawful Rate, or (b) the rate per annum determined by adding 2% to the
interest rate otherwise applicable thereto, and effective at the end of such
Interest Period such LIBOR Portion shall automatically be converted into and
added to the applicable Base Rate Portion and shall thereafter bear interest
at the interest rate applicable to the applicable Base Rate Portion after
default. Interest on each LIBOR Portion shall be due and payable on the last
Business Day of each Interest Period applicable thereto and, if an Interest
Period is longer than three months, then at the end of each three month period
and at the end of such Interest Period, and interest after maturity shall be
due and payable upon demand. The Company shall notify the Agent on or before
11:00 a.m. Chicago time on the third Business Day preceding the end of an
Interest Period applicable to a LIBOR Portion whether such LIBOR Portion is to
continue as a LIBOR Portion, in which event the Company shall notify the Agent
of the new Interest Period selected therefor, and in the event the Company
shall fail to so notify the Agent, such LIBOR Portion shall automatically be
converted into and added to the applicable Base Rate Portion as of and on the
last day of such Interest Period. The Agent shall promptly notify each Bank
of each notice received from the Company pursuant to the foregoing provisions.
Anything contained herein to the contrary notwithstanding, the obligation of
the Banks to create, continue or effect by conversion any LIBOR Portion shall
be conditioned upon the fact that at the time no Default or Event of Default
shall have occurred and be continuing.
Section 2.4. Computation. Interest on the Base Rate Portions shall be
computed on the basis of a year of 365/366 days for the actual number of days
elapsed, and all other interest on the Notes and all fees, charges and
commissions due hereunder shall be computed on the basis of a year of 360 days
for the actual number of days elapsed.
Section 2.5. Minimum Amounts. Each LIBOR Portion shall be in a minimum
amount of $1,000,000.00.
Section 2.6. Manner of Rate Selection. The Company shall notify the
Agent by 11:00 a.m. Chicago time at least three Business Days prior to the
date upon which it requests that any LIBOR Portion be created or that any part
of a Base Rate Portion be converted into a LIBOR Portion (such notice to
specify in each instance the amount thereof and the Interest Period selected
therefor) and the Agent shall promptly advise each Bank of each such notice.
If any request is made to convert a LIBOR Portion into a Base Rate Portion,
such conversion shall only be made so as to become effective as of the last
day of the Interest Period applicable thereto. All requests for the creation,
continuance or conversion of Portions under this Agreement shall be
irrevocable. Such requests may be written or oral and the Agent is hereby
authorized to honor telephonic requests for creations, continuances and
conversions received by it from any person purporting to be a person
authorized to act on behalf of the Company hereunder, the Company hereby
indemnifying the Agent and the Banks from any liability or loss ensuing from
so acting.
Section 2.7. Change of Law. Notwithstanding any other provisions of
this Agreement or the Notes, if at any time a Bank shall determine in good
faith that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for such Bank to create or continue
to maintain LIBOR Portions, it shall promptly so notify the Agent (which shall
in turn promptly notify the Company and the other Banks) and the obligation of
such Bank to create, continue or maintain any LIBOR Portion under this
Agreement shall terminate until it is no longer unlawful for such Bank to
create, continue or maintain LIBOR Portions. The Company, on demand, shall,
if the continued maintenance of an LIBOR Portion is unlawful, thereupon prepay
the outstanding principal amount of the LIBOR Portions, together with all
interest accrued thereon and all other amounts payable to the affected Banks
with respect thereto under this Agreement, provided, however, that the Company
may instead elect to convert the principal amount of the affected Portion into
the applicable Base Rate Portion, subject to the terms and conditions of this
Agreement relating to conversion. If a Bank affected by a change in law or
regulation can avoid the effect of such change by changing its lending or
funding branch it shall do so, provided that the same can be accomplished
without unreasonable disadvantage to it.
Section 2.8. Unavailability of Deposits. Notwithstanding any other
provision of this Agreement or the Notes, if prior to the commencement of any
Interest Period, the Required Banks shall determine that United States dollar
deposits in the amount of any LIBOR Portion scheduled to be outstanding during
such Interest Period are not readily available to such Banks in the offshore
interbank market, the Agent shall promptly give notice thereof to the Company
and each other Bank and the obligations of the Banks to create, continue or
effect by conversion any LIBOR Portion in such amount and for such Interest
Period shall terminate until United States dollar deposits in such amount and
for the Interest Period selected by the Company shall again be readily
available in the offshore interbank market.
Section 2.9. Taxes and Increased Costs. With respect to the LIBOR
Portions, if any Bank shall determine in good faith that any change after the
date hereof in any applicable law, treaty, regulation or guideline (including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System) or any new law, treaty, regulation or guideline, or any
interpretation of any of the foregoing by any governmental authority charged
with the administration thereof or any central bank or other fiscal, monetary
or other authority having jurisdiction over such Bank or its lending branch or
the Portions contemplated by this Agreement (whether or not having the force
of law) shall:
(a) impose, increase, or deem applicable any reserve, special deposit
or similar requirement against assets held by, or deposits in or for the
account of, or loans by, or any other acquisition of funds or disbursements
by, such Bank which is not in any instance already accounted for in computing
the Adjusted LIBOR Rate;
(b) subject such Bank, the LIBOR Portions or a Note to the extent it
evidences such Portions, to any tax (including, without limitation, any United
States interest equalization tax or similar tax however named applicable to
the acquisition or holding of debt obligations and any interest or penalties
with respect thereto), duty, charge, stamp tax, fee, deduction or withholding
in respect of this Agreement, any LIBOR Portion or a Note to the extent it
evidences such a Portion, except such taxes as may be measured by the overall
net income or gross receipts of such Bank or its lending branches and imposed
by the jurisdiction, or any political subdivision or taxing authority thereof,
in which such Bank's principal executive office or its lending branch is
located;
(c) change the basis of taxation of payments of principal or interest
due from the Company to such Bank hereunder or under a Note to the extent it
evidences any LIBOR Portion (other than by a change in taxation of the overall
net income or gross receipts of such Bank); or
(d) impose on such Bank any penalty with respect to the foregoing or
any other condition regarding this Agreement, its disbursement, any LIBOR
Portion or a Note to the extent it evidences any LIBOR Portion;
and such Bank shall determine that the result of any of the
foregoing is to increase the cost (whether by incurring a cost or
adding to a cost) to such Bank of creating or maintaining any LIBOR
Portion hereunder or to reduce the amount of principal or interest
received or receivable by such Bank (without benefit of, or credit
for, any prorations, exemption, credits or other offsets available
under any such laws, treaties, regulations, guidelines or
interpretations thereof), then the Company shall pay on demand to
such Bank from time to time as specified by such Bank such
additional amounts as such Bank shall reasonably determine are
sufficient to compensate and indemnify it for such increased cost
or reduced amount. If a Bank makes such a claim for compensation,
it shall provide to the Company a written explanation of the
circumstances giving rise to such claim and a certificate setting
forth the computation of the increased cost or reduced amount as a
result of any event mentioned herein in reasonable detail and
conforming to the principles set forth in Sections 2.11 and 2.12
hereof and such certificate shall be deemed correct absent manifest
error. If a Bank can avoid the effect of any such change by
changing its lending or funding branch, it shall do so provided
that the same can be accomplished without disadvantage to it.
Section 2.10. Funding Indemnity. In the event any Bank shall incur any
loss, cost or expense (including, without limitation, any loss (including loss
of profit), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired or contracted to be acquired
by such Bank to fund or maintain its part of any LIBOR Portion or the
relending or reinvesting of such deposits or other funds or amounts paid or
prepaid to such Bank), as a result of:
(i) any payment of a LIBOR Portion on a date other than the last
Business Day of the then applicable Interest Period for any reason, whether
before or after default, and whether or not such payment is required by any
provisions of the Agreement; or
(ii) any failure by the Company to create, borrow, continue or effect by
conversion a LIBOR Portion on the date specified in a notice given pursuant to
this Agreement;
then upon the demand of such Bank, the Company shall pay to such
Bank such amount as will reimburse such Bank for such loss, cost or
expense (computed after giving effect to Sections 2.11 and 2.12
hereof). If a Bank requests such a reimbursement it shall provide
the Company with a certificate setting forth the computation of the
loss, cost or expense giving rise to the request for reimbursement
in reasonable detail and conforming to the principles set forth in
Sections 2.11 and 2.12 hereof and such certificate shall be deemed
correct absent manifest error.
Section 2.11. Lending Branch. Each Bank may, at its option, elect to
make, fund or maintain its loans hereunder at the branches or offices
specified on the signature pages hereof or on any Assignment Agreement
executed and delivered pursuant to Section 12.15 hereof or at such other of
its branches or offices as such Bank may from time to time elect.
Section 2.12. Discretion of Banks as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Bank
shall be entitled to fund and maintain its funding of all or any part of its
Notes in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including
determinations under Sections 2.8, 2.9 and 2.10 hereof) shall be made as if
each such Bank had actually funded and maintained each LIBOR Portion during
each Interest Period applicable thereto through the purchase of deposits in
the offshore interbank market in the amount of its share of such LIBOR
Portion, having a maturity corresponding to such Interest Period and bearing
an interest rate equal to LIBOR for such Interest Period.
SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND NOTATIONS.
Section 3.1. Commitment Fee. For the period from the date hereof to
and including the Termination Date, the Company shall pay to the Agent for the
ratable account of the Banks a commitment fee at the rate per annum equal to
the Applicable Margin for the Commitment Fee on the average daily unused
amount of the Revolving Credit Commitments, such fee to be payable quarterly
in arrears on June 30, 1996 and on the last day of each March, June, September
and December thereafter to and including, and on, the Termination Date. For
purposes of this Section, the amount available to be drawn under all L/C's
outstanding hereunder shall be deemed to be usage of the Revolving Credit
Commitments.
Section 3.2. Agent's and Collateral Servicing Agent's Fees. The
Company shall pay to the Agent for its own account such fees as are mutually
agreed upon by the Company and the Agent pursuant to the terms of the letter
agreement dated May 31, 1996. The Company shall pay to the Collateral
Servicing Agent for its own account such fees as are mutually agreed upon by
the Company and the Collateral Servicing Agent.
Section 3.3. Voluntary Prepayments. Subject to the further provisions
of this Section 3.3 the Company shall have the privilege of prepaying the
Notes in whole or in part (but if in part then in a minimum amount of $100,000
or any greater amount that is a whole multiple of $10,000) at any time upon
notice to the Agent (such notices, if received subsequent to 12:00 noon
Chicago time on a given day, to be treated as though received at the opening
of business on the next Business Day), which shall promptly so notify the
Banks, by paying to the Agent for the account of the Banks (i) the principal
amount to be prepaid, (ii) if such prepayment prepays a Note in full, accrued
interest thereon to the date fixed for prepayment and (iii) any amount due the
Banks under Section 2.10 hereof. No amounts prepaid on the Revolving Credit
Two Loans may be reborrowed. Concurrently with each prepayment made on the
Revolving Credit Two Loans pursuant hereto, the Revolving Credit Two
Commitments shall be automatically reduced by a like amount as provided in
Section 3.5(b) hereof.
Section 3.4. Mandatory Prepayments.
(a) Borrowing Base. In the event that the outstanding principal amount
of the Revolving Credit Notes, Reimbursement Obligations, L/Cs (other than
documentary L/Cs supporting the purchase of Eligible Inventory) and 30% of
documentary L/Cs supporting the purchase of Eligible Inventory shall at any
time and for any reason exceed the lesser of the Revolving Credit Commitments
or the Borrowing Base as then determined and computed, the Company shall
immediately and without notice or demand pay over the amount of the excess to
the Agent as and for a mandatory prepayment on the Revolving Credit Notes and
Reimbursement Obligations and, if only L/Cs are then outstanding, deposit the
amount necessary to eliminate such excess into an account with the Agent which
shall be held as additional collateral security for such L/Cs.
(b) Excess Cash Flow. The Company covenants and agrees that on or
before July 1 in each year (commencing July 1, 1997) that it will, without
notice or demand by the Agent or Banks, pay over an amount equal to 50% of
Excess Cash Flow of the Company and its Subsidiaries for the immediately
preceding fiscal year as and for a mandatory prepayment on the Notes and other
obligations of the Company under the Loan Documents. Concurrently with the
determination of the amount of any prepayment required to be made pursuant to
this Section 3.4(b) the Spanish Inventory Borrowing Base Limit shall be
automatically reduced by a like amount until the same has been reduced to $0,
next to the reduction of the Spanish Receivables Borrowing Base Limit until
the same has been reduced to $0 and next to the reduction of the Finished
Goods Inventory Borrowing Base Limit until the same has been reduced to $0.
(c) Acquired Olive Assets. The Company covenants and agrees that all
proceeds derived from the sale or other disposition (whether voluntary of
involuntary), or on account of damage or destruction of, or on account of the
refinancing of, Acquired Olive Assets consisting of real estate, fixtures,
equipment or other fixed assets (to the extent permitted by the Indenture)
shall be immediately paid over to the Agent for the benefit of the Banks as
and for a mandatory prepayment on the Notes and other obligations of the
Company under the Loan Documents. Concurrently with any sale, disposition or
refinancing contemplated hereby, the Spanish Inventory Borrowing Base Limit
shall be automatically reduced by an amount equal to the prepayment required
pursuant to this Section 3.4(c) until the same has been reduced to $0, next to
the reduction of the Spanish Receivables Borrowing Base Limit until the same
has been reduced to $0 and next to the reduction of the Finished Goods
Inventory Borrowing Base Limit until the same has been reduced to $0.
Section 3.5. Terminations. The Company shall have the privilege at any
time and from time to time upon five (5) Business Days' prior written notice
to the Agent (which shall promptly notify the Banks) to ratably terminate the
Revolving Credit Commitments in whole or in part (but if in part then in a
minimum amount of $1,000,000 or an integral multiple thereof); provided,
however, that the Company may not terminate any portion of the Revolving
Credit Commitments in use in the form of L/Cs. The Company shall, on the date
the Revolving Credit Commitments are terminated in whole or in part, prepay
the Revolving Credit Notes and Reimbursement Obligations by the amount, if
any, necessary to reduce their aggregate outstanding principal balance to the
amount to which the Revolving Credit Commitments have been reduced. No
termination of the Revolving Credit Commitments may be reinstated.
Section 3.6. Place and Application. Except as otherwise provided
herein, all amounts payable hereunder shall be made to the Agent at its office
at 111 West Monroe Street, Chicago, Illinois (or at such other place as the
Agent may specify) in immediately available and freely transferable funds at
the place of payment. All such payments shall be made without setoff or
counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties, fees, charges, deductions,
withholdings, restrictions or conditions of any nature imposed by any
government or political subdivision or taxing authority thereof. Payments
received by the Agent after 12:00 noon Chicago time shall be deemed received
as of the opening of business on the next Business Day. The Agent shall remit
to each Bank its proportionate share of each payment of principal, interest
and fees received by the Agent on the same Business Day on which it is deemed
received in accordance with the foregoing. In the event the Agent does not
remit any amount to any Bank when required by the preceding sentence, the
Agent shall pay to such Bank interest on such amount until paid at a rate per
annum equal to the Fed Funds Rate. Except as otherwise provided in this
Agreement, all payments shall be received by the Agent for the ratable account
of the Banks, and shall be promptly distributed by the Agent ratably to the
Banks, except that payments that pursuant to the terms hereof are for the use
and benefit of the Agent shall be retained by it for its own account and
payments received to reimburse a Bank for a cost peculiar to that Bank shall
be remitted to it. Payments under Sections 2.9, 2.10 and 3.8 hereof may be
made by the Company directly to the Banks or to the Agent, which shall
promptly remit same to the Banks entitled thereto. Unless the Company
otherwise directs, payments applicable to the principal of the Notes shall be
deemed first applied to the applicable Base Rate Portion until payment in full
thereof, with any balance applied to the applicable LIBOR Portions in the
order in which their Interest Periods expire. All payments (whether voluntary
or required) shall be accompanied by any amount due the Banks under Section
2.10 hereof, but no acceptance of such a payment without requiring payment of
amounts due under Section 2.10 shall preclude a later demand by the Banks for
any amount due them under Section 2.10 in respect of such payment.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of the indebtedness evidenced by the
Notes, the L/Cs or Reimbursement Obligations and all proceeds of the
Collateral received, in each instance, by the Agent or any of the Banks after
the occurrence of an Event of Default shall be remitted to the Agent and
distributed as follows:
(a) first to the payment of any outstanding costs and expenses incurred
by the Agent or any security trustee in monitoring, verifying, protecting,
preserving or enforcing the liens on the Collateral or in protecting,
preserving or enforcing rights under the Credit Agreement, the Security
Documents or the Notes and in any event including all costs and expenses of a
character which the Company has agreed to pay under Section 12.4 hereof (such
funds to be retained by the Agent for its own account unless it has previously
been reimbursed for such costs and expenses by the Banks, in which event such
amounts shall be remitted to the Banks to reimburse them for payments
theretofore made to the Agent);
(b) second to the payment of any outstanding interest or other fees or
amounts due under the Notes, the L/C Agreements, the Security Documents, or
this Agreement other than for principal, ratably as among the Banks in accord
with the amount of such interest and other fees or amounts owing each;
(c) third, to the payment of the principal of the Notes and
Reimbursement Obligations ratably as among the Notes;
(d) fourth, to be held as collateral security for any outstanding L/Cs
as provided in Section 8.4 hereof;
(e) fifth, to the Banks ratably in accord with the amounts of any other
indebtedness, obligations or liabilities of the Company owing to each of them
and secured by the Security Documents unless and until all such indebtedness,
obligations and liabilities have been fully paid and satisfied; and
(f) sixth, to the Company or whoever may be lawfully entitled thereto.
Section 3.7. Notations and Requests. All advances made against the
relevant Notes, the status of all amounts evidenced by the Notes as
constituting part of a Base Rate Portion or LIBOR Portion and the rates of
interest and Interest Periods applicable to such Portions shall be recorded by
the Banks on their books or, at their option in any instance, endorsed on the
reverse side of the Notes and the unpaid principal balances and status, rates
and Interest Periods so recorded or endorsed by the Banks shall be prima facie
evidence, absent manifest error, in any court or other proceeding brought to
enforce the Notes of the principal amount remaining unpaid thereon, the status
of the borrowings evidenced thereby and the interest rates and Interest
Periods applicable thereto. Prior to any negotiation of any Note the Bank
holding such Note shall endorse thereon the status of all amounts evidenced
thereby as constituting part of a Base Rate Portion or LIBOR Portion and the
rates of interest and Interest Periods applicable thereto.
Section 3.8. Capital Adequacy. If any Bank shall determine that there
has been any change in any applicable law, rule or regulation, or any new law,
rule or regulation has been adopted, regarding capital adequacy or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or compliance by such Bank (or its lending office) with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Bank's capital as
a consequence of its obligations hereunder or credit extended by it hereunder
to a level below that which such Bank could have achieved but for such law,
rule, regulation, change or compliance (taking into consideration such Bank's
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time as specified by such Bank the Company
shall pay such additional amount or amounts as will compensate such Bank for
such reduction; provided, however, that the Company shall have no obligation
to compensate any Bank for any such amounts incurred more than 180 days before
the date such Bank requests compensation from the Company under this Section.
A certificate of any Bank claiming compensation under this Section 3.8 and
setting forth the additional amount or amounts to be paid to it hereunder in
reasonable detail shall be prima facie evidence thereof absent manifest error.
In determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 4. THE COLLATERAL AND RESTRICTED ACCOUNTS.
Section 4.1. Collateral. The Notes and the other obligations of the
Company and the Guarantors hereunder and under the Security Documents shall be
secured by valid and perfected first liens (subject to liens and security
interests permitted by Section 7.10 hereof) on the inventory, accounts,
general intangibles (including patents, trademarks, licenses, copyrights and
applications therefor) and certain real estate, fixtures, furniture and
equipment to the extent permitted by the Intercreditor Agreement of the
Company and the Guarantors (other than inventory of Comet Rice of Puerto Rico,
Inc.) in each instance whether now owned or existing or hereafter acquired or
arising, (collectively the "Collateral") and the Company and each Guarantor
agrees that it will from time to time at the request of the Agent or the
Required Banks execute and deliver such documents and do such acts and things
as the Agent or the Required Banks may reasonably request in order to provide
for or perfect such liens.
Section 4.2. Accounts Receivable and Inventory Collections. The
Company agrees to make such arrangements as shall be necessary or appropriate
to assure that all of the proceeds from sales of inventory and proceeds of
accounts receivable of the Company and the Guarantors are deposited (in the
same form as received) in accounts maintained with or under the control of the
Agent, each such account to constitute a special restricted account. The
Company acknowledges for itself and the Guarantors that the Agent has (and is
hereby granted) a lien for the benefit of the Lenders on each such account and
all funds contained therein to secure the Notes and the other obligations of
the Company and the Guarantors under the Loan Documents. The Banks agree,
however, with the Company that if and so long as no Event of Default shall
occur and be continuing hereunder, amounts on deposit in each such special
account maintained with the Agent or any Bank will (subject to the rules and
regulations of the depository bank as from time to time in effect applicable
to demand deposit accounts) be made available to the Company or the relevant
Guarantor Subsidiary, as appropriate, for use in the conduct of its business
as provided in the Security Agreements. Upon the occurrence and during the
continuance of any Event of Default, the Agent may apply, or cause to be
applied, the funds on deposit in each such account in reduction of the Notes
and the other obligations of the Company and the Guarantors under the Loan
Documents.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Banks as to itself and, where
the following representations and warranties apply to Subsidiaries, as to each
of its Subsidiaries, and each Guarantor represents and warrants as to itself,
as follows:
Section 5.1. Organization and Qualification. The Company is a
corporation duly organized and existing under the laws of the State of Texas,
has full and adequate corporate power to carry on its business as now
conducted, is duly licensed or qualified in all jurisdictions wherein the
nature of its activities requires such licensing or qualification and the
failure to be so licensed or qualified would have a material adverse effect
upon the business, operations or financial condition of the Company or the
Collateral, has full right and corporate authority to enter into this
Agreement and the other Loan Documents, to make the borrowings herein provided
for, to issue the Notes in evidence thereof, to encumber its assets as
collateral security for such borrowings and to perform each and all of the
matters and things herein and therein provided for to enter into the
Acquisition Agreements and to perform all of the matters and things therein
provided for; and this Agreement, the other Loan Documents and the Acquisition
Agreements do not, nor does the performance or observance by the Company of
any of the matters or things provided for herein or therein contravene any
provision of any material law or any charter or by-law provision or any
covenant, indenture or agreement of or affecting the Company or its
Properties.
Section 5.2. Subsidiaries. Each Subsidiary is duly organized and
existing under the laws of the jurisdiction of its incorporation, has full and
adequate corporate power to carry on its business as now conducted and is duly
licensed or qualified in all jurisdictions wherein the nature of its business
requires such licensing or qualification and the failure to be so licensed or
qualified would have a material adverse effect upon the business, operations
or financial condition of such Subsidiary and the Company taken as a whole.
The only Subsidiaries of the Company and each Guarantor are listed on Schedule
5.2 hereto. Each Guarantor has full right, power and authority to execute and
deliver the Loan Documents executed by it and to perform each and all of the
matters and things therein provided for; and the Loan Documents executed by it
do not, nor does the performance or observance by any Guarantor of any of the
matters or things therein provided for, contravene any provision of any
material law or any provision of any charter, articles of incorporation or
bylaws of any Guarantor or any covenant, indenture or agreement of or
affecting any Guarantor or any of such Guarantor's Property.
Section 5.3. Financial Reports. The Company has heretofore delivered
to the Banks a copy of the audit report as of March 31, 1995 of the Company
and its Subsidiaries, and unaudited financial statements (including a
consolidated balance sheet, consolidated statements of income and cash flows,
and comparison to the comparable prior year period) of each of the Company and
its Subsidiaries as of, and for the 12 month period ending March 31, 1996.
The audited financial statements have been prepared in accordance with
generally accepted accounting principles on a consistent basis, except as
otherwise noted therein, with that of the previous fiscal year or period and
fairly reflect the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof, and the results of its operations for
the periods covered thereby. The Company and its Subsidiaries have no
material contingent liabilities other than as indicated on said financial
statements and since said date of March 31, 1995 there has been no material
adverse change in the condition, financial or otherwise, of the Company and
its Subsidiaries that has not been disclosed in writing to the Banks.
Section 5.4. Litigation; Tax Returns; Approvals. There is no
litigation or governmental proceeding pending, nor to the knowledge of the
Company threatened, against the Company or any Subsidiary which, if adversely
determined, is likely to result in any material adverse change in the
Properties, business and operations of the Company or any Subsidiary, except
as disclosed on Schedule 5.4 hereof. All federal, state and local income tax
returns for the Company required to be filed have been filed on a timely basis
(including any permissible extensions), all amounts required to be paid as
shown by said returns have been paid. There are no pending or, to the best of
the Company's knowledge, threatened objections to or controversies in respect
of the United States federal income tax returns of the Company for any fiscal
year. No authorization, consent, license, exemption or filing (other than the
filing of financing statements and the Trustee under the Indenture) or
registration with any court or governmental department, agency or
instrumentality, is or will be necessary to the valid execution, delivery or
performance by the Company of the Loan Documents.
Section 5.5. Regulation U. Neither the Company nor any Subsidiary is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any
Loan made or any L/C issued hereunder will be used to purchase or carry any
margin stock or to extend credit to others for such a purpose.
Section 5.6. No Default. As of the date of this Agreement, the Company
is in full compliance with all of the terms and conditions of this Agreement,
and no Default or Event of Default is existing under this Agreement.
Section 5.7. ERISA. The Company and its Subsidiaries are in compliance
in all material respects with ERISA to the extent applicable to them and have
received no notice to the contrary from the PBGC or any other governmental
entity or agency.
Section 5.8. Security Interests and Debt. There are no security
interests, liens or encumbrances on any of the Property of the Company or any
Subsidiary except such as are permitted by Section 7.10 of this Agreement, and
the Company and its Subsidiaries have no Debt except such as is permitted by
Section 7.11 of this Agreement.
Section 5.9. Accurate Information. No information, exhibit or report
furnished by the Company to the Banks in connection with the negotiation of
the Loan Documents or the Acquisition contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which made. The financial projections dated April 15, 1996 furnished by the
Company to the Banks and the financial projections furnished by the Company to
the Banks relating to the Acquisition contain to the Company's knowledge and
belief, reasonable projections as of the date hereof relating to future
results of operations and the future financial position of the Company based
upon the assumptions stated therein. The information and financial statements
furnished by the Company to the Banks in connection with the Acquisition
fairly present the information with respect to the Acquisition and do not
contain any material misstatement of fact or omission of any material fact or
any fact necessary to make the information contained therein not misleading in
light of the circumstances in which made.
Section 5.10. Enforceability. This Agreement, the other Loan Documents
and the Acquisition Agreements are legal, valid and binding agreements of the
Company, enforceable against it in accordance with their terms, except as
enforcement may be limited by (a) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or other similar laws or judicial decisions
for the relief of debtors or the limitation of creditors' rights generally; or
(b) any equitable principles relating to or limiting the rights of creditors
generally.
Section 5.11. No Default Under Other Agreements. Neither the Company
nor any Subsidiary is in default with respect to any note, indenture, loan
agreement, mortgage, lease, deed, or other agreement to which it is a party or
by which it or its Property is bound, which default could reasonably be
expected to materially and adversely affect the Collateral, the repayment of
the indebtedness, obligations and liabilities under the Loan Documents, any
Bank's or the Agent's rights under the Loan Documents or the Property,
business, operations or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole.
Section 5.12. Status Under Certain Laws. Neither the Company nor any
of its Subsidiaries is an "investment company" or a person directly or
indirectly controlled by or acting on behalf of an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate"
of a "holding company" or a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
Section 5.13. Compliance with Laws. Except as listed on Schedule 5.13,
the Company and its Subsidiaries each are in material compliance with the
requirements of all federal, state and local laws, rules and regulations
applicable to or pertaining to their Properties or business operations
(including, without limitation, the Occupational Safety and Health Act of
1970, the Americans with Disabilities Act of 1990, and Environmental Laws,
non-compliance with which could reasonably be expected to have a material
adverse effect on the financial condition, Properties, business or operations
of the Company and its Subsidiaries taken as a whole. Except as disclosed in
the materials supplied to the Banks and listed on Schedule 5.13, neither the
Company nor any Subsidiary has received notice to the effect that its
operations are not in compliance with any of the requirements of applicable
Environmental Laws, health and safety statutes and regulations or are the
subject of any governmental investigation evaluating whether any remedial
action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment, which non-compliance or remedial action could
reasonably be expected to have a material adverse effect on the financial
condition, Properties, business or operations of the Company and its
Subsidiaries taken as a whole.
Section 5.14. Federal Food Security Act. The Company has received no
notice given pursuant to Section 1324(e)(1) or (3) of the Federal Food
Security Act and there has not been filed any financing statement or notice,
purportedly in compliance with the provisions of the Federal Food Security
Act, purporting to perfect a security interest in farm products purchased by
the Company in favor of a secured creditor of the seller of such farm
products. The Company has registered pursuant to Section 1324(c)(2)(D) of the
Federal Food Security Act, with the Secretary of State of each State in which
are produced farm products purchased by the Company and which has established
or hereafter establishes a central filing system, as a buyer of farm products
produced in such State; and the Company will maintain each such registration
in full force and effect.
SECTION 6. CONDITIONS PRECEDENT.
Section 6.1. All Advances. The obligation of the Banks to make any
advance under the Revolving Credit (including the first advance) shall also be
subject to the conditions precedent that as of the time of the making of each
advance under the Revolving Credit:
(a) each of the representations and warranties set forth herein or in
the Security Documents shall be and remain true and correct as of said time
except that the representations and warranties made in Section 5.3 hereof
shall be deemed to refer to the most recent financial statements delivered to
the Banks pursuant to Section 7.4 hereof; and
(b) the Company shall be in compliance with all of the terms and
conditions hereof and of the Security Documents and no Default or Event of
Default shall have occurred and be continuing.
Any request made by the Company to the Agent for a Loan or L/C hereunder
shall be deemed to constitute a representation and warranty that the foregoing
statements are true and correct.
Section 6.2. Initial Advance. At or prior to the time of the initial
advance under this Agreement, the following conditions precedent shall also
have been satisfied:
(a) The Agent shall have received the following for the account of the
Banks (each to be properly executed and completed) and the same shall have
been approved as to form and substance by the Banks:
(i) the Notes;
(ii) the Security Documents;
(iii) any financing statements requested by the Agent;
(iv) certified copies of the Acquisition Agreements;
(v) copies (executed or certified as may be appropriate) for each
Bank of all legal documents or proceedings taken in connection with the
execution and delivery of this Agreement, the Notes and the Security
Documents to the extent the Agent or its counsel may reasonably request;
(vi) evidence of the maintenance of insurance as required hereby
and by the Security Documents;
(vii) a statement of status for each of the Company and the
Guarantors, dated as of the date no earlier than 30 days prior to the
date hereof, from the office of the secretary of state of the state of
its incorporation and each state in which it is qualified to do business
as a foreign corporation;
(viii) copies of the Articles of Incorporation and all amendments
thereto, of each of the Company and the Guarantors certified by the
office of the secretary of state of its respective state of incorporation
or organization as of the date no earlier than the date 30 days prior to
the date hereof;
(ix) copies of the By-Laws and all amendments thereto, of each of
the Company and the Guarantors certified as true, correct and complete on
the date hereof by the Secretary or Assistant Secretary of the Company
and each Guarantor, respectively;
(x) copies, certified by the Secretary or Assistant Secretary of
each of the Company and the Guarantors, of corporate resolutions
regarding the transactions contemplated by this Agreement, duly adopted
by their respective Board of Directors, and satisfactory in form and
substance to all of the Banks;
(xi) an incumbency and signature certificate for each of the Company
and each Guarantor satisfactory in form and substance to all of the
Banks; and
(xii) such other documents as the Banks may reasonably require.
(b) The Agent shall have received such current appraisals, reports and
certifications as it may require in order to satisfy itself as to the value of
the Collateral, the financial condition of each of the Company and each
Guarantor and the lack of material environmental or other contingent
liabilities of each of the Company and the Guarantors; including without
limitation an Environmental Checklist in the form of Exhibit D attached hereto
and copies of such environmental assessments and reports as the Banks may
require.
(c) The Agent and the Banks shall have received such fees as the
Company has otherwise agreed to pay to the Agent and the Banks.
(d) All legal matters incident to the transactions contemplated hereby
shall be acceptable to the Agent and its counsel and the Agent shall have
received for the account of the Banks the favorable written opinion of counsel
to the Company and the Guarantors acceptable to the Banks and the favorable
legal opinions of Irell & Manella, special California counsel to the Agent and
the Banks, and McConnell Valdes, special Puerto Rican counsel to the Agent and
the Banks.
(e) In addition to the requirements of subsection (b) of this Section
6.2, the Agent shall have received the following for the account of the Banks
(each to be properly executed and completed) and the same shall have been
approved as to form and substance by the Banks:
(i) with respect to the Mortgage, a commitment or commitments from
the Title Company stating that it is prepared to issue its standard form
of ALTA mortgagee's title policy in the amount of $3,762,500 with a
Comprehensive Number 1 endorsement, a 3.1 zoning endorsement, including
coverage for parking and loading docks, a revolving credit endorsement, a
letter of credit endorsement, and such other endorsements as the Agent
reasonably requests, such policy showing title to the Mortgaged Premises
in the Company and insuring such Mortgage as a first lien without
encroachments or prior rights of others on the Mortgaged Premises,
subject only to current general taxes and assessments not yet delinquent;
(ii) such additional documents, opinions or comments as may be
required by the Title Company in order to provide the insurance to be
afforded to the Agent pursuant to this Section 6.3;
(iii) complete and current plats of survey of the Mortgaged Premises
certified to the Agent and the Title Company prepared by an independent
registered land surveyor in accordance with standards acceptable to Agent
and satisfactory to the Banks and showing thereon the location of the
perimeter of the Mortgaged Premises by courses and distances, the lines
of the streets abutting the Mortgaged Premises and the width thereof, all
buildings and improvements located thereon and the relation of all
buildings and improvements by distance to the perimeter of the Mortgaged
Premises, and the established building lines and the street lines, all
encroachments and the extent thereof in feet and inches upon the
Mortgaged Premises and indicating that all buildings and improvements are
within the lot and building lines of the Mortgaged Premises and a
surveyor's certification that the Mortgaged Premises is not in a flood
plain or designated as flood prone by the U.S. Corps of Engineers or
alternatively evidence that appropriate flood insurance has been
obtained; and
(iv) Appraisal Reports with respect to the Mortgaged Premises from a
state certified appraiser satisfactory to Agent showing an appraised
value for the Mortgaged Premises of at least $3,010,000 on a stabilized
basis which meets or exceeds the requirements of FIRREA.
(f) All conditions precedent to the consummation of the transactions
contemplated by the Acquisition Documents shall have been satisfied.
(g) Within 30 days after the date hereof, the Agent shall receive for
the account of the Banks properly executed and completed lockbox and
restricted account agreements satisfactory to the Banks.
SECTION 7.COMPANY COVENANTS.
The Company and each Guarantor agrees that, so long as any credit is
available to or in use by the Company hereunder, except to the extent
compliance in any case or cases is waived in writing by the Required Banks:
Section 7.1. Maintenance. The Company and each Guarantor will, and
will cause each Subsidiary to, maintain, preserve and keep its plant,
Properties and equipment in reasonably good repair, working order and
condition and will from time to time make all needed and proper repairs,
renewals, replacements, additions and betterments thereto so that at all times
the efficiency thereof shall be preserved and maintained in all material
respects, normal wear and tear excepted.
Section 7.2. Taxes. The Company and each Guarantor will, and will
cause each Subsidiary to, duly pay and discharge all taxes, rates,
assessments, fees and governmental charges upon or against the Company or its
Subsidiaries or against their respective properties in each case before the
same become delinquent and before penalties accrue thereon unless and to the
extent that the same are being contested in good faith and by appropriate
proceedings diligently conducted and for which adequate reserves in form and
amount reasonably satisfactory to the Required Banks have been established,
provided that the Company and each Guarantor shall pay or cause to be paid all
such taxes, rates, assessments, fees and governmental charges forthwith upon
the commencement of proceedings to foreclose any lien that is attached as
security therefor, unless such foreclosure is stayed by the filing of an
appropriate bond in a manner reasonably satisfactory to the Required Banks.
Section 7.3. Maintenance of Insurance. The Company and each Guarantor
will, and will cause each Subsidiary to, maintain insurance coverage by good
and responsible insurance underwriters in such forms and amounts and against
such risks and hazards as are customary for companies engaged in similar
businesses and owning and operating similar Properties, all in amounts and
under policies containing loss payable clauses to the Agent as its interest
may appear (and, if the Required Banks request, naming the Agent as additional
insured therein) and providing for advance notice to the Agent of cancellation
thereof, issued by sound and reputable insurers and all premiums thereon shall
be paid by the Company and certificates summarizing the same delivered to the
Agent. The Banks hereby acknowledge that maintenance of insurance to the
extent required by the Indenture as in effect on the date hereof shall satisfy
the requirements of this Section 7.3. In any event, the Company and each
Guarantor will maintain insurance on the Collateral as required by the
Security Documents.
Section 7.4. Financial Reports. The Company and each Guarantor will,
and will cause each Subsidiary to, maintain a standard and modern system of
accounting in accordance with sound accounting practice and will furnish to
the Banks and their duly authorized representatives such information
respecting the business and financial condition of the Company, the Guarantors
and their respective Subsidiaries as may be reasonably requested and, without
any request, will furnish to the Banks:
(a) as soon as available, and in any event within 20 days (45 days in
the case of each fiscal quarter end) after the close of each monthly fiscal
period of the Company and its Subsidiaries a copy of the consolidated and
consolidating balance sheet, statement of income and retained earnings,
statement of cash flows for such period of the Company and its Subsidiaries,
together with all such information for the year to date, all in reasonable
detail, prepared by the Company and certified on behalf of the Company by the
Company's chief financial officer or Vice President-Finance;
(b) as soon as available, and in any event within 90 days after the
close of each fiscal year, a copy of the audit report for such year and
accompanying financial statements, including a consolidated balance sheet, a
statement of income and retained earnings, and a statement of cash flows,
together with all footnotes thereto, for the Company and its Subsidiaries, in
each case, showing in comparative form the figures for the previous fiscal
year of the Company, all in reasonable detail, accompanied by an opinion
satisfactory to the Required Banks of Deloitte & Touche or other independent
public accountants of nationally recognized standing selected by the Company
and reasonably satisfactory to the Required Banks, such opinion to indicate
that such statements are made in accordance with generally accepted accounting
principles;
(c) as soon as available, and in any event no later than 45 days after
the close of each fiscal quarter, a Compliance Certificate in the form of
Exhibit C hereto signed on behalf of the Company by its chief financial
officer or Vice President-Finance; and
(d) within 5 days after the end of each month, a Borrowing Base
Certificate in the form of Exhibit B hereto, setting forth a computation of
the Company's Borrowing Base and each Guarantor's Borrowing Base as of that
months end date, certified as correct on behalf of the Company by the
Company's chief financial officer or Vice President-Finance.
Section 7.5. Inspection and Reviews. The Company and each Guarantor
shall, and shall cause each Subsidiary to, permit the Collateral Servicing
Agent, Agent and the Banks, by their representatives and agents, to inspect
any of the properties, corporate books and financial records of the Company,
each Guarantor and its respective Subsidiaries, to review and make copies of
the books of accounts and other financial records of the Company, each
Guarantor and its respective Subsidiaries, and to discuss the affairs,
finances and accounts of the Company, each Guarantor and its respective
Subsidiaries with, and to be advised as to the same by, its officers at such
reasonable times and intervals as the Collateral Servicing Agent, Agent or the
Banks may designate. In addition to any other compensation or reimbursement
to which the Collateral Servicing Agent, Agent and the Banks may be entitled
under the Loan Documents, the Company shall pay to the Collateral Servicing
Agent, the Agent or any Bank from time to time upon demand the amount
necessary to compensate it for all fees, charges and expenses incurred by the
Collateral Servicing Agent, the Agent or any Bank or their respective
designees in connection with the audits of Collateral, or inspections or
review of the books, records and accounts of the Company, the Guarantors or
any domestic Subsidiary conducted by the Collateral Servicing Agent, the Agent
or its designee or any of the Banks; provided, however, that in the absence of
any Event of Default no more than four (4) such audits shall be conducted per
calendar year (regardless of by whom conducted) and the costs and expenses of
each such audit shall not exceed $5,000.
Section 7.6. Consolidation and Merger. The Company and each Guarantor
will not, and will not permit any Subsidiary to, consolidate with or merge
into any Person, or permit any other Person to merge into it, or acquire (in a
transaction analogous in purpose or effect to a consolidation or merger) all
or substantially all the Property of the other Person, or acquire
substantially as an entirety the business of any other Person except as
permitted under Section 7.12 hereof.
Section 7.7. Transactions with Affiliates and Foreign Subsidiaries.
Company shall not, and shall not permit any Subsidiary to, enter into any
contract, agreement or business arrangement with any of its Affiliates on
terms and conditions which are less favorable to the Company or such
Subsidiary than would be usual and customary in similar contracts, agreements
or business arrangements between Persons not affiliated with each other,
except that Company may make the following payments provided that before and
after giving effect to such payments, no Default or Event of Default has
occurred or shall occur: (i) a monthly management fee of not more than Eighty
Thousand Dollars ($80,000) to ERLY in each fiscal year of Company, payable
monthly in arrears, to the extent earned and payable pursuant to the
Management Agreement, and (ii) tax sharing payments to ERLY otherwise payable
in accordance with the Tax Sharing Agreement as in effect as of the date
hereof; provided, further, that all such tax sharing payments shall be paid
solely by setoff against the ERLY 15% Intercompany Note. The Company further
agrees that it shall not, nor shall it permit any Subsidiary to sell, assign
or transfer any of its Properties (other than cash and cash equivalents) to
any non-U.S. Subsidiary or Affiliate (a) other than sales of Inventory
consisting of rough rice, milled rice, pasta, olives and, in each case,
related packaging items including bags and similar items to the extent the
same does not exceed 2% of total consolidated revenues of the Company and its
Subsidiaries, other finished food product inventory so long as the monthly
maximum amount thereof does not exceed 25,000 metric tons of rice and no more
than 50% thereof is located in any one country, (b) sales of inventory to RMTI
if and so long as the aggregate outstanding amount owing by RMTI on account of
such purchases does not exceed $500,000 for more than 15 days and (c) sales of
other assets not exceeding $700,000 in any fiscal year.
Section 7.8. Capital Expenditures. The Company and each Guarantor will
not, and will not permit any Subsidiary to, make any Capital Expenditures
during any fiscal year in excess of the sum of (a) $5,500,000 ($10,000,000 if
EBITDA of the Company for the immediately preceding fiscal year exceeds
$30,000,000) plus (b) the Carryover Amount determined with respect to the
immediately preceding fiscal year.
Section 7.9. Dividends and Certain Other Restricted Payments. The
Company will not (a) declare or pay any dividends or make any distribution on
any class of its capital stock (other than dividends payable solely in its
capital stock) or (b) directly or indirectly purchase, redeem or otherwise
acquire or retire any of its capital stock (except out of the proceeds of, or
in exchange for, a substantially concurrent issue and sale of capital stock),
or (c) make any other distributions with respect to its capital stock.
Section 7.10. Liens. The Company and each Guarantor will not, and will
not permit any Subsidiary to, pledge, mortgage or otherwise encumber or
subject to or permit to exist upon or be subjected to any lien, charge or
security interest of any kind (including any conditional sale or other title
retention agreement and any lease in the nature thereof), on any of its
Properties of any kind or character other than:
(a) liens, pledges or deposits for workmen's compensation, unemployment
insurance, old age benefits or social security obligations, taxes,
assessments, statutory obligations or other similar charges, good faith
deposits made in connection with tenders, contracts or leases to which the
Company, a Guarantor or a Subsidiary is a party or other deposits required to
be made in the ordinary course of business, provided in each case the
obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate proceedings and adequate reserves have been provided
therefor in accordance with generally accepted accounting principles and that
the obligation is not for borrowed money, customer advances, trade payables or
obligations to agricultural producers;
(b) the pledge of Property for the purpose of securing an appeal or
stay or discharge in the course of any legal proceedings, provided that the
aggregate amount of liabilities of the Company, the Guarantors and their
Subsidiaries so secured by a pledge of Property permitted under this
subsection (b) including interest and penalties thereon, if any, shall not be
in excess of $1,000,000 at any one time outstanding;
(c) liens, pledges, mortgages, security interests, or other charges
granted to the Agent;
(d) liens in favor of the Trustee under the Indenture and subject to
the Intercreditor Agreement, liens on the Freeport Facility (as defined in the
Indenture) securing the Freeport IRBs (as defined in the Indenture) and other
liens, mortgage and security interests disclosed on the audited financial
statements referred to in Section 5.3 hereof, except that liens on the
Acquired Olive Assets (other than shares of stock of Loreto which shall be
pledged to the Trustee in accordance with the Indenture) shall not constitute
permitted liens hereunder;
(e) mechanics liens that have been bonded in a manner, for an amount
and by a surety company acceptable to the Required Banks;
(f) liens securing only indebtedness permitted by Sections 7.11(f) and
(l) but only in the Property purchased with the proceeds of such indebtedness
and liens securing indebtedness permitted by Section 7.11(i) hereof but only
in the Property of the relevant Subsidiary incurring such indebtedness;
(g) the interests of lessors in leased Property;
(h) liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Subsidiary of the Company;
provided that such Liens were in existence prior to the consummation and not
made in contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; and
(i) easements, rights-of-way, restrictions, covenants, mineral
reservations, minor defects or irregularities in title and other similar
charges or encumbrances which do not interfere in any material respect
with the ordinary conduct of business of the Company and its
Subsidiaries.
Section 7.11. Borrowings and Guaranties. The Company and each
Guarantor will not, and will not permit any Subsidiary to, issue, incur,
assume, create or have outstanding any Debt or customer advances, nor be or
remain liable, whether as endorser, surety, guarantor or otherwise, for or in
respect of any liability or Debt of any other Person, other than:
(a) indebtedness arising under or pursuant to this Agreement or the
other Loan Documents;
(b) the liability arising out of the endorsement for deposit or
collection of commercial paper received in the ordinary course of business;
(c) trade payables arising in the ordinary course of the Company's
business;
(d) customer prepayments not exceeding $2,000,000 in the ordinary
course of business;
(e) indebtedness disclosed on the audited financial statements referred
to in Section 5.3 hereof, except indebtedness in favor of the Existing Lender;
(f) indebtedness (including Capitalized Lease Obligations) incurred to
finance the purchase, or which represents the deferred purchase price, of
Property in an aggregate principal amount not to exceed $1,000,000 in any
fiscal year;
(g) indebtedness of the Guarantors to the Company;
(h) indebtedness evidenced by the Mortgage Notes;
(i) indebtedness of Rice Corporation of Haiti not exceeding $4,000,000
at any one time outstanding, indebtedness of Comet Rice of Jamaica Limited not
exceeding $2,000,000 at any one time outstanding, indebtedness of Corporation
RICA, S.A. de C.V. not exceeding $3,000,000 at any one time outstanding and
indebtedness of ARI Comet de Mexico S.A. de C.V. not exceeding $3,000,000 at
any one time outstanding in each case owing to local banks in connection with
working capital financing;
(j) Non-Recourse Debt of ARI-Vinafood;
(k) the guarantees by the Guarantors hereunder;
(l) unsecured indebtedness of the Company owing to Campbell Soup
Company provided for by the Acquisition Agreements;
(m) indebtedness of Loreto to owing to local banks in connection with
seasonal working capital financing provided that the aggregate amount of such
indebtedness shall not exceed $2,000,000 and further provided for a period of
15 consecutive days in each fiscal year to Loreto to the outstanding principal
amount of such indebtedness shall be less than or equal to $500,000; and
(n) indebtedness not otherwise permitted under this Section 7.11 not
exceeding $500,000 at any one time outstanding.
Section 7.12. Investments, Loans and Advances. The Company and each
Guarantor will not, and will not permit any Subsidiary to, make or retain any
investment (whether through the purchase of stock, obligations or otherwise)
in or make any loan or advance to, any other Person, other than:
(a) investments in certificates of deposit having a maturity of one
year or less issued by any of the Banks;
(b) marketable obligations of the United States;
(c) Receivables arising in the ordinary course of its business;
(d) existing loans, advances and investments in Subsidiaries shown on
Schedule 7.12 hereto;
(e) deposits in commercial banks having capital and surplus of not less
than $100,000,000;
(f) advances to officers and employees of the Company and the
Guarantors in the ordinary course of business;
(g) investments in commercial paper rated P1 by Moody's Investors
Service, Inc. or A1 by Standard & Poor's maturing within 270 days of the date
of issuance thereof;
(h) repurchase agreements and reverse repurchase agreements involving
marketable full faith and credit obligations of the United States of America,
provided that the Company, the Guarantor or the Subsidiary that is a party
thereto shall hold (individually or through an agent or bailee) all securities
relating thereto during the entire term of such agreement;
(i) additional loans and advances from the Company to the Guarantors
and from Subsidiaries to the Company;
(j) trade account advances from the Company to any Subsidiary in the
ordinary course of business;
(k) additional investments, loans and advances (in each instance other
than trade accounts) from the Company to Subsidiaries (other than the
Guarantors and ARI-Vinafood) that are required to be evidenced by Subsidiary
Intercompany Notes not exceeding an aggregate amount of $1,000,000;
(l) acquisitions by the Company of substantially all of the assets of
corporations which are engaged in similar lines of business as the Company so
long as (x) the aggregate amount of consideration payable in connection with
such acquisitions does not exceed $5,000,000, (y) no Default or Event of
Default shall exist at the time of any such acquisition or would occur as a
result thereof and (z) prior to any such acquisition the Company shall have
furnished the Banks with pro forma financial information verifying the
condition specified in the immediately preceding clause (y) is true and
correct;
(m) investments in up to 750 option and open contracts by the Company
or its Subsidiaries in connection with the protection of its commodity
inventory holdings or commitments to buy or sell commodities against adverse
price movements; and
(n) the transactions contemplated by the Acquisition Agreements.
Section 7.13. Sale of Property. The Company and each Guarantor will
not, and will not permit any Subsidiary to, sell, lease, assign, transfer or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or a material part of its Property to any other Person;
provided, however, that this Section shall not prohibit:
(a) sales of Inventory in the ordinary course of business;
(b) sales or leases of surplus, obsolete or worn-out machinery and
equipment;
(c) a sale of the Company's Houston, Texas property; and
(d) sales of Acquired Olive Assets so long as the proceeds thereof are
applied as a prepayment pursuant to Section 3.4 hereof and which prepayments
are permitted under the Indenture.
For purposes of this Section 7.13, "material part" shall mean
5% or more of the lesser of the book or fair market value of the
Property of the Company or any Guarantor determined at the time of
the sale.
Section 7.14. Notice of Suit, Adverse Change in Business or Default.
The Company shall, as soon as possible, and in any event within five (5) days
after the Company learns of the following, give written notice to the Banks of
(a) any proceeding(s) that, if determined adversely to the Company, any
Guarantor or any Subsidiary could reasonably be expected to have a material
adverse effect on the Properties, business or operations of the Company, such
Guarantor or such Subsidiary being instituted or threatened to be instituted
by or against the Company, such Guarantor or such Subsidiary in any federal,
state, local or foreign court or before any commission or other regulatory
body (federal, state, local or foreign); (b) any material adverse change in
the business, Property or condition, financial or otherwise, of the Company,
any Guarantor or any Subsidiary; and (c) the occurrence of a Default or Event
of Default.
Section 7.15. ERISA. The Company and each Guarantor will, and will
cause each Subsidiary to, promptly pay and discharge all obligations and
liabilities arising under ERISA of a character which if unpaid or unperformed
might result in the imposition of a lien against any of its Property and will
promptly notify the Agent of (a) the occurrence of any reportable event (as
defined in ERISA) that could reasonably be expected to result in the
termination by the PBGC of any Plan covering any officers or employees of the
Company, any Guarantor or any Subsidiary any benefits of which are, or are
required to be, guaranteed by PBGC, (b) receipt of any notice from PBGC of its
intention to seek termination of any Plan or appointment of a trustee
therefor, and (c) its intention to terminate or withdraw from any Plan. The
Company and each Guarantor will not, and will not permit any Subsidiary to,
terminate any Plan or withdraw therefrom unless it shall be in compliance with
all of the terms and conditions of this Agreement after giving effect to any
liability to PBGC resulting from such termination or withdrawal.
Section 7.16. Use of Loan Proceeds. The Company and each Guarantor
will use the proceeds of all Loans made or created hereunder solely to
purchase the Acquired Olive Assets pursuant to the Acquisition Agreements, and
thereafter to finance its working capital requirements.
Section 7.17. Conduct of Business and Maintenance of Existence. The
Company and each Guarantor will, and will cause each Subsidiary to, continue
to engage in business of the same general type as now conducted by it, and the
Company and each Guarantor will, and will cause each Subsidiary to, preserve,
renew and keep in full force and effect its corporate existence and its
rights, privileges and franchises necessary or desirable in the normal conduct
of business.
Section 7.18. Compliance with Laws, etc. The Company and each
Guarantor will, and will cause each of its Subsidiaries to, comply in all
material respects with all applicable laws, rules, regulations and orders,
such material compliance to include (without limitation) (a) the maintenance
and preservation of its corporate existence and qualification as a foreign
corporation, (b) compliance with all rules and regulations promulgated
pursuant to the Occupational Safety and Health Act of 1970, as amended, and
(c) compliance with all applicable Environmental Laws.
Section 7.19. New Subsidiaries. Without the prior written consent of
the Banks, the Company and each Guarantor will not, directly or indirectly,
create or acquire any Subsidiary other than Loreto.
Section 7.20. Environmental Covenant. The Company and each Guarantor
will:
(a) use and operate all of its facilities and Properties in compliance
with all Environmental Laws where the failure to do so could reasonably be
expected to have a material adverse effect on the condition, financial or
otherwise, of the Company or any Guarantor, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance therewith,
and handle all hazardous materials in material compliance with all applicable
Environmental Laws;
(b) immediately notify the Agent and provide copies upon receipt of all
written claims, complaints, notices or inquiries relating to the condition of
its facilities and Property or compliance with Environmental Laws, and shall
promptly cure and have dismissed, or take such other actions reasonably
satisfactory to the Banks, any actions and proceedings relating to compliance
with Environmental Laws; and
(c) provide such information and certifications that the Agent may
reasonably request from time to time to evidence compliance with this Section
7.20.
Section 7.21. Sale and Leasebacks. The Company and each Guarantor
shall not, and shall not permit any Subsidiary to, enter into any arrangement
with a bank, insurance company or any other lender or investor providing for
the leasing by the Company, any Guarantor or any Subsidiary of any Property
previously owned by it and which as been or is to be sold or transferred by
such owner to such lender or investor provided that the Company may enter into
such a transaction with respect to Acquired Olive Assets so long as the
proceeds thereof are applied as a prepayment on the Notes pursuant to Section
3.4 hereof.
Section 7.22. Adjusted Funded Debt Ratio. The Company will not, as of
the last day of any fiscal quarter of the Company during any of the periods
specified below, permit the Adjusted Funded Debt Ratio for the four fiscal
quarters of the Company then ended to exceed:
ADJUSTED FUNDED DEBT RATIO
FROM AND INCLUDING TO AND INCLUDING SHALL NOT EXCEED
7/1/96 9/30/96 5.7 to 1.0
10/1/96 3/31/97 5.0 to 1.0
4/1/97 and at all times thereafter 4.4 to 1.0
Section 7.23. Minimum Interest Coverage Ratio. The Company will not,
as of the last day of any fiscal quarter of the Company during any of the
periods specified below, permit its Interest Coverage Ratio for the applicable
Measurement Period then ended to be less than:
INTEREST COVERAGE RATIO
FROM AND INCLUDING TO AND INCLUDING SHALL NOT BE LESS THAN:
7/1/96 9/30/96 1.5 to 1.0
10/1/96 3/31/97 1.75 to 1.0
4/1/97 and at all times thereafter 2.0 to 1.0
The term "Measurement Period" as used herein shall mean (a) for
September 30, 1996, the fiscal quarter of the Company ending such
date, (b) for December 31, 1996, the two fiscal quarters of the
Company ending such date, (c) for March 31, 1997, the three fiscal
quarters of the Company ending such date and (d) for June 30, 1997
and each fiscal quarter end thereafter, the four fiscal quarters of
the Company ending such date.
Section 7.24. Minimum Adjusted Tangible Net Worth. The Company will
maintain Adjusted Tangible Net Worth in an amount not less than (a) Adjusted
Tangible Net Worth of the Company as of June 30, 1996 shall be maintained
through March 31, 1997, and (b) during each fiscal year of the Company
thereafter, an amount equal to the minimum amount required to be maintained
during the immediately preceding fiscal year of the Company plus an amount
equal to 90% of the Company's Net Income (but not less than zero) for the
immediately preceding fiscal year.
Section 7.25. Minimum Current Ratio. The Company will not permit its
Current Ratio to be less than 1.25 to 1 at any time.
Section 7.26. Federal Food Security Act. The Company will register,
pursuant to Section 1324(c)(2)(D) of the Federal Food Security Act, with the
Secretary of State of each State in which are produced farm products purchased
by the Company and which has established or hereafter establishes a central
filing system, as a buyer of farm products produced in such State; and the
Company will maintain each such registration in full force and effect.
Section 7.27. Environmental Indemnification and Waiver. The Company
unconditionally agrees to forever indemnify, defend and hold harmless, and
covenants not to sue for any claim for contribution against, the Agent and the
Banks for any damages, costs, loss or expense, including without limitation,
response, remedial or removal costs, arising out of any of the following: (i)
any presence, release, threatened release or disposal of any hazardous or
toxic substance or petroleum by the Company or otherwise occurring on or with
respect to its property, (ii) the operation or violation of any environmental
law, whether federal, state, or local, and any regulations promulgated
thereunder, by the Company or otherwise occurring on or with respect to its
property, (iii) any claim for personal injury or property damage in connection
with the Company or otherwise occurring on or with respect to its property,
and (iv) the inaccuracy or breach of any environmental representation,
warranty or covenant by the Company made herein or in any loan agreement,
promissory note, mortgage, deed of trust, security agreement or any other
instrument or document evidencing or securing any indebtedness, obligations or
liabilities of the Company owing to the Banks or setting forth terms and
conditions applicable thereto or otherwise relating thereto. This
indemnification shall survive the payment and satisfaction of all
indebtedness, obligations and liabilities of the Company owing to the Banks
and the termination of this agreement, and shall remain in force beyond the
expiration of any applicable statute of limitations and payment or
satisfaction in full of any single claim under this indemnification. This
indemnification shall be binding upon the successors and assigns of the
Company and shall inure to the benefit of the Agent and the Banks and their
respective directors, officers, employees, agents, and collateral trustees,
and their successors and assigns.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Events of Default Defined. Any one or more of the
following shall constitute an Event of Default hereunder:
(a) default in the payment of any principal of any Note when due,
whether at the stated maturity thereof or at any time provided for in this
Agreement, or default for a period of three (3) days in the payment when due
of any Reimbursement Obligation, interest, fee, commission, charge or other
amount payable by the Company hereunder;
(b) default in the observance or performance of any covenant set forth
in Sections 7.3, 7.4, 7.5, 7.6, 7.8, 7.9, 7.11, 7.12, 7.13, 7.14, 7.16, 7.22,
7.23, 7.24, 7.25 or 7.27 hereof or of any covenant in any Security Document
dealing with the use, disposition or remittance of the proceeds of Collateral
or the maintenance of insurance thereon;
(c) default in the observance or performance of any other provision
hereof or of any of the Security Documents that is not remedied or waived by
the Required Banks within 30 days after notice thereof to the Company by the
Agent or by the holder or holders of a Note;
(d) default shall occur under any evidence of indebtedness in an
aggregate principal amount in excess of $250,000 issued, assumed or guaranteed
by the Company or any Guarantor or under any indenture, agreement or other
instrument under which the same may be issued, and such default shall continue
for a period of time sufficient to permit the acceleration of the maturity of
any such indebtedness;
(e) any representation or warranty made herein or in any of the
Security Documents or pursuant hereto or thereto or in connection with any
transaction contemplated hereby proves untrue in any material respect as of
the date of the issuance or making thereof;
(f) any judgment or judgments, writ or writs or warrant or warrants of
attachment, or any similar process or processes in an aggregate amount in
excess of $500,000 shall be entered or filed against the Company, any
Guarantor or any Subsidiary or against any of its respective Property or
assets and remain undischarged, unvacated, unbonded or unstayed for a period
of 30 days;
(g) an event occurs which is specified as an event of default in any of
the Security Documents;
(h) bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or
similar law for the relief of debtors are instituted against the Company, any
Guarantor or any Subsidiary and are not dismissed within 45 days after such
institution or a decree or order of a court having jurisdiction in the
premises for the appointment of a trustee, custodian or receiver for the
Company, any Guarantor or any Subsidiary or for the major part of its
respective Property is entered and the trustee, custodian or receiver
appointed pursuant to such decree or order is not discharged within 45 days
after such appointment, or an order for relief shall be entered in any such
proceeding;
(i) the Company, any Guarantor or any Subsidiary shall institute
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or laws for the
relief of debtors or shall consent to the institution of such proceedings
against it by others or to the entry of any decree or order adjudging it
bankrupt or insolvent or approving as filed any petition seeking
reorganization under any bankruptcy or similar law or shall apply for or shall
consent to the appointment of a receiver, custodian or trustee for it or for
the major part of its property or shall make an assignment for the benefit of
creditors or shall take any corporate action authorizing any of the foregoing;
or
(j) a Change in Control shall occur.
Section 8.2. Remedies for Non-Bankruptcy Defaults. When any Event of
Default other than any Event of Default described in subsections 8.1(h) or
8.1(i) has occurred and is continuing, the Agent shall, upon request of the
Required Banks, by notice to the Company, take any or all of the following
actions:
(a) terminate the obligation of the Banks to extend any further credit
hereunder on the date (which may be the date thereof) stated in such notice;
(b) declare the principal of and the accrued interest on the Notes and
Reimbursement Obligations to be forthwith due and payable and thereupon the
Notes and Reimbursement Obligations, including both principal and interest,
and all unpaid fees, charges and commissions payable hereunder, shall be and
become immediately due and payable without further demand, presentment,
protest or notice of any kind; and
(c) enforce any and all rights and remedies available hereunder and
under the Security Documents.
Section 8.3. Remedies for Bankruptcy Defaults. When any Event of
Default described in subsection 8.1(h) or 8.1(i) has occurred and is
continuing, then the then unpaid balance of the Notes and Reimbursement
Obligations, including both principal and interest, and all fees, charges and
commissions payable hereunder, shall immediately become due and payable
without presentment, demand, protest or notice of any kind, the obligation of
the Banks to extend further credit pursuant to any of the terms hereof shall
immediately terminate and the Agent may exercise all remedies available to it
hereunder and under the Security Documents.
Section 8.4. L/Cs. Promptly following the acceleration of the maturity
of the Notes and Reimbursement Obligations pursuant to Section 8.2 or 8.3
hereof, the Company shall immediately pay to the Agent for the benefit of the
Banks the full aggregate amount of all outstanding L/Cs. The Agent shall hold
all such funds and proceeds thereof as additional collateral security for the
obligations of the Company to the Banks under the Loan Documents. The amount
paid under any of the L/Cs for which the Company has not reimbursed the Banks
shall bear interest from the date of such payment at the default rate of
interest specified in Section 2.2 hereof.
SECTION 9. DEFINITIONS.
Section 9.1. Certain Terms Defined. The following terms when used
herein shall have the following meanings; such terms to be equally applicable
to both the singular and plural of the terms defined (capitalized terms
defined elsewhere in this Agreement to have the meanings so ascribed to them
in all provisions of this Agreement):
"Account Debtor" shall mean the Person who is obligated on a Receivable.
"Acquired Olive Assets" shall mean all assets acquired by the Company
pursuant to the Acquisition Agreements including the indirect acquisition of
all assets of Loreto.
"Acquisition Agreements" shall mean that certain Asset Purchase and Sale
Agreement dated as of June 11, 1996 between the Company and Campbell Soup
Company, that certain Share Sale Agreements dated as of June 11, 1996 between
the Company and Campbell Soup Company and all other agreements, instruments,
notices, filing or other documents at any time executed or delivered pursuant
thereto or in connection with the transactions contemplated thereby.
"Adjusted Funded Debt" shall mean all Debt (other than the Revolving
Credit except as hereinafter provided) of the Company and its Subsidiaries
that has a final maturity of more than one year from the date of issuance,
including current maturities of such Debt, Capitalized Lease Obligations, and
all guaranteed third party Debt plus an amount equal to the lowest aggregate
principal amount outstanding under the Revolving Credit (or the revolving
credit from the Existing Lender as appropriate) averaged for a period of 15
consecutive days during the most recent twelve months then ended.
"Adjusted Funded Debt Ratio" shall mean the ratio of Adjusted Funded Debt
to EBITDA.
"Adjusted LIBOR Rate" shall mean a rate per annum determined pursuant to
the following formula:
Adjusted LIBOR Rate = LIBOR Rate_______
100%-Reserve Percentage
"Adjusted Tangible Net Worth" shall mean the sum of all capital stock,
preferred stock, capital in excess of par value and retained earnings of the
entity in question minus the aggregate amount of all equity amounts on account
of notes receivable from shareholders and the total amount of all Intangible
Assets, all determined on a consolidated basis in accordance with generally
accepted accounting principles, consistently applied.
"Affiliate" shall mean any person, firm, corporation or entity (herein
collectively called a "Person") directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another
Person. A Person shall be deemed to control another Person for the purposes
of this definition if such first Person possesses, directly or indirectly, the
power to direct, or cause the direction of, the management and policies of the
second Person, whether through the ownership of voting securities, common
directors, trustees or officers, by contract or otherwise.
"Agent" shall mean Harris Trust and Savings Bank and any successor
thereto appointed pursuant to Section 10.1 hereof.
"Agreement" shall mean this Secured Credit Agreement as supplemented,
modified, restated and amended from time to time.
"Applicable Margin" with respect to the commitment fee payable pursuant
to Section 3.1 hereof and LIBOR Portions and Base Rate Portions, shall mean
the rate specified for such obligation below at each level of Adjusted Funded
Debt Ratio specified below:
Level I Level II Level III Level IV
Adjusted Funded 1.75<2.50> 2.50 and >3.25 and >4.0
Debt Ratio <3.25 <4.0
LIBOR Margin 1.25% 1.75% 2.25% 2.75%
Base Rate Margin 0.0% 0.0% 0.0% 0.0%
Commitment Fee .375% .375% .50% .50%
Not later than ten (10) Business Days after receipt by the Banks of the
Compliance Certificate called for by Section 7.4(c) hereof for the fiscal
quarter ending September 30, 1996, the Agent shall determine the Adjusted
Funded Debt Ratio for the applicable period and shall promptly notify the
Company and the Banks of such determination and of any change in the
Applicable Margins resulting therefrom. Any such change in the Applicable
Margins shall be effective as of the date the Agent so notifies the Company
with respect to all Loans outstanding on such date, and such new Applicable
Margins as determined by the Agent in accordance with this Section shall be
conclusive and binding on the Company absent manifest error. From the date
hereof through and including the date occurring 120 days from the date hereof,
the Applicable Margins shall be those set forth at Level IV above.
"ARI-Vinafood" means American Rice-Vinafood Co., Ltd., a limited
liability company organized under the laws of the Socialist Republic of
Vietnam.
"Assignment of Hedging Contracts" shall mean any Assignment of Hedging
Contracts from time to time executed and delivered by the Company to the
Agent, as agent thereunder for itself and the Banks in a form acceptable to
the Banks.
"Bank" means Harris Trust and Savings Bank and all other lenders becoming
parties hereto pursuant to Section 12.15 hereof.
"Base Rate" shall mean a fluctuating interest rate per annum at all times
equal to the rate of interest announced by Harris Trust and Savings Bank from
time to time as its prime commercial rate with any change in such rate
resulting from a change in said prime commercial rate to be effective as of
the date of the relevant change in said prime commercial rate (the "Harris
Prime Rate"), provided that if the rate per annum determined by adding 1/2 of
1% to the rate at which Harris would offer to sell federal funds in the
interbank market on or about 10:00 A.M. (Chicago time) on any day (the
"Adjusted Fed Funds Rate") shall be higher than the Harris Prime Rate on such
day, then the Base Rate for such day and for any succeeding day which is not a
Business Day shall be such Adjusted Fed Funds Rate. The determination of the
Adjusted Fed Funds Rate by the Agent shall be final and conclusive provided it
has acted in good faith in connection therewith.
"Borrowing Base" shall mean, as of any time the same is to be determined
and as to the Company and each Guarantor Subsidiary, the sum at such time of:
(a) 85% of the then outstanding unpaid balance (computed, in the case
of Eligible Receivables payable in a currency other than U.S. Dollars, at the
U.S. Dollar Equivalent thereof) of Eligible Receivables of the Company or such
Guarantor; plus
(b) 90% of the then outstanding unpaid balance (computed, in the case
of Eligible Receivables payable in a currency other than U.S. Dollars, at the
U.S. Dollar Equivalent thereof) of Eligible Credit Enhanced Receivables of the
Company or such Guarantor; plus
(c) 75% lower of average cost or market value of Eligible Inventory
consisting of raw rice (including rough rice and milled rice, unpackaged, in
bulk) of the Company or such Guarantor; plus
(d) 70% of the lower of average cost or market value of Eligible
Inventory consisting of rice, olives or pasta finished goods or, to the extent
included in the definition of "Eligible Inventory" hereunder, other finished
food goods of the Company or such Guarantor; plus
(e) the lesser of (i) the Finished Goods Borrowing Base Limit or (ii)
5% of the lower of average cost or market value of Eligible Inventory
consisting of rice, olives or pasta finished goods, or to the extent included
in the definition of "Eligible Inventory" hereunder, other finished food goods
of the Company or such Guarantor; plus
(f) the lesser of (i) the Spanish Receivables Borrowing Base Limit or
(ii) 85% of the face amount of all accounts receivable owned by Loreto that
are not more than 90 days past due; plus
(g) the lesser of (i) the Spanish Inventory Borrowing Base Limit or
(ii) 75% of the lower of the book value (calculated on a FIFO basis) or fair
market value of all inventory owned by Loreto; minus
(h)the outstanding amount of all Secured Grower Payables; minus
(i)the Rent Reserve.
"Borrowing Base Certificate" shall mean a certificate in the form annexed
hereto as Exhibit B, as modified with the written approval of the Agent.
"Business Day" shall mean any day (other than a Saturday or Sunday) on
which banks are generally open for business in Chicago, Illinois, Houston,
Texas, Minneapolis, Minnesota and Denver, Colorado and, when used with respect
to LIBOR Portions, a day on which banks are also dealing in United States
Dollar deposits in London, England and Nassau, Bahamas.
"Capital Expenditures" shall mean capital expenditures as defined and
classified in accord with generally accepted principles of accounting
consistently applied.
"Capitalized Lease" shall mean, as applied to any Person, any lease of
any Property which, in accordance with generally accepted accounting
principles, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligation" shall mean, as applied to any Person, the
discounted present value of the rental obligation, as lessee, under any
Capitalized Lease.
"Carryover Amount" means with respect to each fiscal year of the Company,
the amount by which (x) the sum of (1) the Carryover Amount with respect to
the immediately prior fiscal year of the Company plus (2) $5.5 million exceeds
(y) the amount of Capital Expenditures paid or incurred during the fiscal year
of the Company with respect to which such determination is being made;
provided, however, that for any fiscal year of the Company ending on or after
March 31, 1997 that immediately follows a fiscal year in which the EBITDA of
the Company exceeds $30.0 million, then the Carryover Amount for such fiscal
year shall be deemed to be the Carryover Amount for the next preceding fiscal
year of the EBITDA that followed a fiscal year of the Company in which such
EBITDA was less than or equal to $30.0 million.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of
which is that any "person" (as defined above), other than Douglas A. Murphy or
Gerald D. Murphy, acquires a direct or indirect interest in more than 50% of
the voting power of the Voting Stock of the Company or (iv) the first day on
which a majority of the members of the Board of Directors of the Company are
not Continuing Directors. For purposes of this definition, any transfer of an
equity interest of an entity that was formed for the purpose of acquiring
Voting Stock of the Company shall be deemed to be a transfer of such portion
of such Voting Stock as corresponds to the portion of the equity of such
entity that has been so transferred.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean the collateral security provided to the Agent for
the benefit of the Banks pursuant to the Security Documents.
"Collateral Servicing Agent" shall mean, initially, FBS Ag Credit, Inc.
provided however that if and so long as no Default or Event of Default shall
have occurred and be continuing, from and after June 28, 1997 such term shall
mean the Agent.
"Commitment Percentage" shall mean the percentage set forth opposite each
Bank's signature hereto or in the assignment agreement to which it is a party
under the heading "Commitment Percentage".
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was nominated for election, elected or
appointed to such Board to fill a vacancy caused by the death of a member of
the Board of Directors.
"Current Ratio" shall mean the ratio of the current assets to current
liabilities of the Company and its Subsidiaries, determined on a consolidated
basis in accordance with generally accepted accounting principles,
consistently applied; provided, however, that there shall be excluded from
current assets any asset related to the sale of the Company's Houston, Texas
properties and there shall be included in current liabilities an amount equal
to all outstanding Loans and L/Cs hereunder.
"Debt" of any Person shall mean as of any time the same is to be
determined, the aggregate of (a) all liabilities, reserves and any other items
which would be classified as a liability on a balance sheet in accordance with
generally accepted accounting principles, (b) all guaranties, endorsements
(other than any liability arising out of the endorsement of items for deposit
or collection in the ordinary course of business) and other contingent
obligations in respect of, or any obligations to purchase or otherwise
acquire, indebtedness of others, (c) all reimbursement and other obligations
with respect to letters of credit and banker's acceptances, (d) the aggregate
amount of Capitalized Lease Obligations, (e) all indebtedness, obligations and
liabilities representing the deferred purchase price of property and (f) all
indebtedness and liabilities secured by any lien or any security interest on
any Property or assets of such person, whether or not the same would be
classified as a liability on a balance sheet, but excluding all general
contingency reserves and reserves for deferred income taxes and investment
credit, and with respect to Debt of the Company, all computed and determined
on a consolidated basis for the Company and its Subsidiaries after the
elimination of intercompany items in accordance with generally accepted
accounting principles consistent with those used in the preparation of the
audit report referred to in Section 5.3 hereof.
"EBIT" shall mean, with reference to any period, Net Income for such
period plus all amounts deducted in arriving at such Net Income amount in
respect of (a) Interest Expense for such period and (b) federal, state and
local income taxes for such period.
"EBITDA" shall mean, with reference to any period, Net Income for such
period plus all amounts deducted in arriving at such Net Income amount in
respect of (a) Interest Expense for such period, plus (b) federal, state and
local income taxes for such period, plus (c) all amounts properly charged for
depreciation of fixed assets and amortization of Intangible Assets during such
period.
"Eligible Credit Enhanced Receivable" means any Receivable which would
otherwise constitute an Eligible Receivable but for subparagraphs (g), (i) and
(m) of the definition of such term contained herein or any other Eligible
Receivable which is at all times supported by an irrevocable letter of credit
having terms acceptable to the Banks in all respects and issued by a bank
satisfactory to the Banks and which is, if requested by the Agent,
transferable to the Agent and the rights to draw under which will be assigned
or transferred to the Agent upon the Agent's request.
"Eligible Inventory" shall mean any Inventory of the Company or any
Guarantor (other than Comet Rice of Puerto Rico, Inc.) in which the Agent has
a first priority perfected security interest and which complies with each of
the following requirements:
(a) it consists solely of raw rice (including rough rice and milled
rice, unpackaged, in bulk), rice finished goods inventory, olives and pasta
and, to the extent the same does not exceed an amount equal to 2% of
consolidated total revenues of the Company and its Subsidiaries, other
finished food products;
(b) it is in first class condition, not obsolete, and is readily usable
or salable by the Company or such Guarantor in the ordinary course of its
business;
(c) it substantially conforms to the advertised or represented
specifications and other quality standards of the Company or such Guarantor,
and has not been determined by the Banks to be unacceptable due to age, type,
category, quality and/or quantity;
(d) all warranties as set forth in this Agreement and the applicable
Security Agreements are true and correct with respect thereto;
(e) it has been identified to the Banks in the manner prescribed
pursuant to the Security Agreements;
(f) it is located at a location described in Part I of Exhibit E hereto
(or, with respect to Inventory consisting of olives and only until August 30,
1996, at the locations listed in Part II of Exhibit E hereof) or at another
location within the United States disclosed to and approved by the Banks and,
if requested by the Agent, any Person (other than the Company or such
Guarantor) owning or controlling such location shall have waived, by no later
than July 20, 1996, all right, title and interest in and to such Inventory in
a manner satisfactory to the Banks or it is in transit to or from any such
location and is fully insured and the Company or Guarantor is a charter party
to the vessel or owner of the vessel in which it is being transported and the
Company shall have received a clean bill of lading with respect thereto.
"Eligible Receivables" shall mean any Receivable of the Company or any
Guarantor in which the Agent has a first priority perfected security interest
and which complies with each of the following requirements:
(a) it arises out of a bona fide rendering of services or sale of goods
sold and delivered by or on behalf of the Company or such Guarantor to, or in
the process of being delivered by or on behalf of the Company or such
Guarantor to, the Account Debtor on said Receivables;
(b) all warranties set forth in this Agreement and the applicable
Security Agreement are true and correct with respect thereto;
(c) it has been identified to the Banks in a manner satisfactory to the
Banks;
(d) it is evidenced by an invoice (dated not later than 5 days after
the date of shipment or performance of services) rendered to the Account
Debtor thereunder;
(e) it is not owing by an Account Debtor who shall have failed to pay
10% or more of all Receivables owed by such Account Debtor within the period
set forth in (f) below or who has become insolvent or is the subject of any
bankruptcy, arrangement, reorganization proceedings or other proceedings for
relief of debtors;
(f) it has not remained unpaid in whole or in part more than 90 days
after the invoice date thereof;
(g) it is payable in United States or Canadian Dollars or in the case
of an Eligible Credit Enhanced Receivable, another foreign currency acceptable
to the Banks;
(h) it is not owing by the United States of America or any department,
agency or instrumentality thereof unless the Company or such Guarantor shall
have provided evidence satisfactory to the Required Banks of compliance with
the Assignment of Claims Act but only to the extent that the aggregate amount
of Receivables described in this clause (h) exceeds $500,000;
(i) it is not owing by any Account Debtor located outside of the United
States or so long as the Agent shall have received evidence of perfection and
enforceability of its lien satisfactory to it, Canada, unless such Receivable
is supported by a guaranty, surety bond or other form of credit enhancement in
each case in form and substance and issued by a bank satisfactory to the
Banks, and the rights to draw on demand payment under which will be assigned
or transferred to the Agent upon the Agent's request;
(j) it is net of any credit or allowance given by the Company or such
Guarantor to such Account Debtor;
(k) the Receivable is not subject to any counterclaim or defense
asserted by the Account Debtor thereunder, nor is it subject to any offset or
contra account payable to the Account Debtor (in any case, unless the amount
of such Receivable is net of such counterclaim, defense, offset or contra
account);
(l) it is not owing by an Account Debtor that is an Affiliate of the
Company or such Guarantor; and
(m) it is not an Eligible Credit Enhanced Receivable.
"Environmental Laws" shall mean all federal, state and local
environmental, health and safety statutes and regulations, including without
limitation all statutes and regulations establishing quality criteria and
standards for air, water, land and toxic or hazardous wastes and substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERLY" shall mean ERLY Industries Inc., a California corporation.
"ERLY 15% Intercompany Note" shall mean that certain Promissory Note in
favor of the Company, dated August 24, 1995 in the aggregate principal amount
of $10,500,000, bearing interest at the rate of 15% per annum and maturing
August 1, 2002.
"Event of Default" shall mean any event or condition specified as such in
Section 8.1 hereof and "Default" shall mean any event or condition which with
the lapse of time, the giving of notice or both would constitute an Event of
Default.
"Excess Cash Flow" shall mean, with reference to any period, Net Income
for such period plus (a) all amounts deducted in arriving at such Net Income
amount in respect of amounts properly charged for depreciation of fixed assets
and amortization of intangible Assets during such period minus (b) Capital
Expenditures for such period, all as computed and determined on a consolidated
basis for the Company and its Subsidiaries in accordance with generally
accepted accounting principles consistently applied.
"Finished Goods Borrowing Base Limit" shall mean $2,868,000, as such
amount is reduced from time to time pursuant to Sections 3.4(b) and 3.4(c)
hereof.
"Guarantors" shall mean Comet Ventures, Inc., a California corporation,
BargeCarib, Inc., a Texas corporation, Comet Rice of Puerto Rico, Inc., a
Puerto Rico corporation and Loreto and "Guarantor" shall mean any of them.
"Harris" means Harris Trust and Savings Bank.
"Highest Lawful Rate" shall have the meaning specified in Section 12.18
hereof.
"Indenture" shall mean the Indenture dated as of August 24, 1995 between
the Company and U.S. Trust Company of Texas, N.A., as Trustee thereunder.
"Intangible Assets" shall mean amortizeable loan costs, business
acquisition costs, license agreements, trademarks, trade names, patents,
capitalized research and development costs, proprietary products (the results
of past research and development treated as long term assets and excluded from
Inventory), goodwill and all other assets which would be classified as
intangible assets (all determined on a consolidated basis in accordance with
generally accepted accounting principles consistently applied).
"Intercreditor Agreement" shall have the meaning herein as such term is
defined in the Indenture.
"Interest Coverage Ratio" shall mean, for any period, the ratio of EBIT
to Interest Expense of the Company and its Subsidiaries, each determined on a
consolidated basis in accordance with generally accepted accounting
principles, consistently applied, for such period.
"Interest Expense" shall mean with reference to any period all interest
charges (including amortization of debt discount and expense and imputed
interest on capitalized lease obligations) accrued for such period, whether or
not paid, net of interest income received for such period, all determined on a
consolidated basis in accordance with generally accepted accounting
principles, consistently applied.
"Interest Period" shall mean with respect to any LIBOR Portion, the
period commencing on, as the case may be, the creation or conversion date with
respect to such LIBOR Portion and ending one, two, three or six months
thereafter as selected by the Company in its notice as provided herein;
provided, that:
(a) if any Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the next succeeding
Business Day, unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such Interest
Period shall end on the immediately preceding Business Day;
(b) no Interest Period may extend beyond the final maturity date of the
Notes;
(c) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such Interest
Period to but excluding the last day thereof; and
(d) no Interest Period may be selected if after giving effect thereto
the Company will be unable to make a principal payment scheduled to be made
during such Interest Period without paying part of a LIBOR Portion on a date
other than the last day of the Interest Period applicable thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an
Interest Period begins on the last day of a month or if there is no
numerically corresponding day in the month in which an Interest Period is to
end, then such Interest Period shall end on the last Business Day of such
month.
"Inventory" shall mean all raw materials, work in process, finished
goods, and goods held for sale or lease or furnished or to be furnished under
contracts of service in which the Company or any Subsidiary now has or
hereafter acquires any right.
"L/C" shall have the meaning specified in Section 1.5 hereof.
"L/C Administrative Fee" shall have the meaning specified in Section 1.5
hereof.
"L/C Agreement" shall have the meaning specified in Section 1.5 hereof.
"L/C Issuance Fee" shall have the meaning specified in Section 1.5
hereof.
"L/C Participation Fee" shall have the meaning specified in Section 1.5
hereof.
"LIBOR Index Rate" shall mean, for any Interest Period applicable to a
LIBOR Portion, the rate per annum (rounded upwards, if necessary, to the next
higher one hundred-thousandth of a percentage point) for deposits in U.S.
Dollars for a period equal to such Interest Period, which appears on the
Telerate Page 3750 as of 11:00 a.m. (London, England time) on the day two
Business Days before the commencement of such Interest Period.
"LIBOR Rate" shall mean for each Interest Period applicable to a LIBOR
Portion, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to nearest 1/100 of 1%) at which deposits in U.S. dollars in
immediately available funds are offered to the Agent at 11:00 a.m. (London,
England time) two (2) Business Days before the beginning of such Interest
Period by three (3) or more major banks in the interbank eurodollar market for
a period equal to such Interest Period and in an amount equal or comparable to
the principal amount of the LIBOR Portion scheduled to be made by the Agent
during such Interest Period.
"Loans" shall mean the Revolving Credit Loans.
"Loan Documents" shall mean this Agreement and any and all exhibits
hereto, the Notes, the L/C Agreements, and the Security Documents.
"Loreto" shall mean Compania Envasadora Loreto, S.A., a sociedad anonima
organized and existing under the laws of Spain.
"Management Agreement" shall mean that certain Amended and Restated
Management Agreement dated as of August 24, 1995 by and between ERLY and the
Company.
"Mortgage" shall mean that certain Deed of Trust and Security Agreement
with Assignment of Rents dated July __, 1996 from the Company in favor of the
Agent for the benefit of the Banks.
"Mortgage Notes" shall mean the Company's 13% Mortgage Notes due 2002
with Contingent Interest in the original principal amount of $100,000,000
issued pursuant to the Indenture.
"Mortgaged Premises" shall mean the property mortgaged to the Agent for
the benefit of the Banks as security for the Loans more fully described in the
Mortgage.
"Net Income" for any period shall mean the net income of the Company and
its Subsidiaries for such period as computed on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Subsidiaries (other than ARI-Vinafood) (a) provides
credit support of any kind (including any undertaking, agreement or instrument
that would constitute Debt of the Company or any of its Subsidiaries), or (b)
is directly or indirectly liable (as a guarantor or otherwise) and (ii) no
default with respect to which (including any rights that the holders thereof
may have to take enforcement action against ARI-Vinafood) would permit (upon
notice, lapse of time or both) any holder of any other Debt of the Company or
any of its Subsidiaries (other than ARI-Vinafood) to declare a default on such
other Debt or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Notes" shall mean and include the Revolving Credit Notes.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean and include any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
limited liability company, corporation, institution, entity, party or
government (whether national, federal, state, county, city, municipal, or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
"Plan" shall mean any employee benefit plan covering any officers or
employees of the Company or any Subsidiary, any benefits of which are, or are
required to be, guaranteed by the PBGC.
"Portion" shall have the meaning specified in Section 2.1 hereof.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed or tangible or intangible.
"Real Property" shall mean the land, easements and rights legally
described in the Mortgage.
"Receivables" shall mean all accounts, contract rights, instruments,
documents, chattel paper and general intangibles in which the Company or any
Subsidiary now has or hereafter acquires any right.
"Reimbursement Obligation" shall have the meaning specified in Section
1.6 hereof.
"Required Banks" shall mean at any time Banks whose Commitments aggregate
52% or more of the total Commitments or, if at the time no Commitments are
outstanding, Banks holding 52% or more of the aggregate outstanding principal
balance of the Notes.
"Rent Reserve" shall mean (a) $672,411 at all times through and including
July 20, 1996 (provided that the Rent Reserve shall be reduced by the
"Estimated Semi-Annual Rental" amount set forth on Exhibit F hereto opposite
the name of the Person leasing a facility location to the Company or
Guarantor, as the case may be, who has executed and delivered to the Agent a
landlord's waiver agreement in form satisfactory to the Banks) and (b) $0 at
all times thereafter.
"Reserve Percentage" shall mean, for the purpose of computing the
Adjusted LIBOR Rate, the maximum rate of all reserve requirements (including,
without limitation, any marginal emergency, supplemental or other special
reserves) imposed by the Board of Governors of the Federal Reserve System (or
any successor) under Regulation D on Eurocurrency liabilities (as such term is
defined in Regulation D) for the applicable Interest Period as of the first
day of such Interest Period, but subject to any amendments to such reserve
requirement by such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during such Interest
Period. For purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or
credit for prorations, exemptions or offsets under Regulation D.
"Revolving Credit Commitments" shall mean the commitments of the Banks to
make loans under the Revolving Credit in the amounts set forth opposite their
signatures hereto under the heading "Revolving Credit Commitment" or opposite
their signatures on Assignment Agreements delivered pursuant to Section 12.15
hereof under the heading "Revolving Credit Commitment", as such amounts may be
reduced pursuant hereto.
"Secured Grower Payables" shall mean all amounts owed from time to time
by the Company to any Person on account of the purchase price of agricultural
products if the Required Banks reasonably determine that such Person is
entitled to the benefits of any grower's lien, statutory trust or similar
security arrangement to secure the payment of any amount owed to such Person.
"Security Agreements" shall mean the separate Security Agreements dated
as of June 7, 1996 from the Company and each Guarantor to the Agent, and that
certain Assignment of Purchase Agreement dated as of even date herewith as the
same may be supplemented and amended from time to time.
"Security Documents" shall mean the Security Agreements, the Mortgage,
the Assignments of Hedging Contracts and any and all other security
agreements, assignments, financing statements and other documents as shall
from time to time secure the Notes and other obligations of the Company to the
Banks or any of them.
"Spanish Inventory Borrowing Base Limit" shall mean $5,899,000, as such
amount is reduced from time to time pursuant to Sections 3.4(b) and 3.4(c)
hereof.
"Spanish Receivables Borrowing Base Limit" shall mean $1,233,000, as such
amount is reduced from time to time pursuant to Sections 3.4(b) and 3.4(c)
hereof.
"Stockholders' Equity" shall mean stockholders' equity determined on a
consolidated basis in accordance with generally accepted accounting
principles, consistently applied.
"Subsidiary" shall mean collectively any corporation or other entity at
least a majority of the outstanding voting equity interests (other than
directors' qualifying shares) of which is at the time owned directly or
indirectly by the Company or by one of more Subsidiaries or by the Company and
one or more Subsidiaries. The term "Consolidated Subsidiary" shall mean any
Subsidiary whose accounts are consolidated with those of the Company in
accordance with generally accepted accounting principles.
"Subsidiary Intercompany Notes" shall mean the intercompany Promissory
Notes issued by the Company's Subsidiaries in favor of the Company to evidence
loans by the Company and to be pledged to the Trustee under the Indenture.
"Tax Sharing Agreement" shall mean that certain Amended and Restated Tax
Agreement dated as of August 24, 1995 among, inter alia, ERLY and the Company.
"Telerate Page 3750" shall mean the display designated as "Page 3750" on
the Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar deposits).
"Termination Date" shall mean July 1, 1999 or such earlier date on which
the Revolving Credit Commitments are terminated in whole pursuant to Sections
3.5, 8.2 or 8.3 hereof.
"Title Company" shall mean Lawyers Title Insurance Corporation.
"Total Capitalization" shall mean the sum of all capital stock, preferred
stock, capital in excess of par value and returned earnings of the Company and
its Subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principles, consistently applied, plus the
aggregate principal amount of the Total Consolidated Indebtedness of the
Company and its Subsidiaries.
"U.S. Dollar Equivalent" means the amount of U.S. Dollars which would be
realized by converting the relevant foreign currency into U.S. Dollars in the
spot market at the exchange rate quoted by the Agent, at approximately 11:00
a.m. (London, England time) two Business Days prior to the date on which a
computation thereof is required to be made, to major banks in the interbank
foreign exchange market for the purchase of U.S. Dollars for such foreign
currency.
"Voting Stock" of a corporation means all classes of capital stock of
such corporation then outstanding and normally entitled to vote in the
election of directors.
SECTION 10. THE AGENT.
Section 10.1. Appointment and Authorization. Each Bank hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers hereunder and under the Security Documents as are
designated to the Agent by the terms hereof and thereof together with such
powers as are reasonably incidental thereto. The Agent may resign at any time
by sending twenty (20) days prior written notice to the Company and the Banks
and may be removed by the Required Banks upon twenty (20) days prior written
notice to the Company and the Banks. In the event of any such resignation or
removal the Required Banks may appoint a new agent with the consent of the
Company (which consent shall not unreasonably be withheld), which shall
succeed to all the rights, powers and duties of the Agent hereunder and under
the Security Documents. Any resigning or removed Agent shall be entitled to
the benefit of all the protective provisions hereof with respect to its acts
as an agent hereunder, but no successor Agent shall in any event be liable or
responsible for any actions of its predecessor. If the Agent resigns or is
removed and no successor is appointed, the rights and obligations of such
Agent shall be automatically assumed by the Required Banks and (i) the Company
shall be directed to make all payments due each Bank hereunder directly to
such Bank and (ii) the Agent's rights in the Security Documents shall be
assigned without representation, recourse or warranty to the Banks as their
interests may appear.
Section 10.2. Rights as a Bank. The Agent has and reserves all of the
rights, powers and duties hereunder and under its Notes and the Security
Documents as any Bank may have and may exercise the same as though it were not
the Agent and the terms "Bank" or "Banks" as used herein and in all of such
documents shall, unless the context otherwise expressly indicates, include the
Agent in its individual capacity as a Bank.
Section 10.3. Standard of Care. The Banks acknowledge that they have
received and approved copies of the Security Documents, and such other
information and documents concerning the transactions contemplated and
financed hereby as they have requested to receive and/or review. The Agent
makes no representations or warranties of any kind or character to the Banks
with respect to the validity, enforceability, genuineness, perfection, value,
worth or collectibility hereof or of the Notes, Applications or Security
Documents or of the liens provided for thereby or of any other documents
called for hereby or thereby or of the Collateral. The Agent need not verify
the worth or existence of the Collateral and may rely exclusively on reports
of the Company in computing the Borrowing Base, provided that the Agent agrees
to furnish to the Banks copies of any field audit reports made in connection
with inspections which the Agent or its designee may make pursuant to Section
7.5 hereof. Neither the Agent nor any director, officer employee, agent or
representative thereof (including any security trustee therefor) shall in any
event be liable for any clerical errors or errors in judgment, inadvertence or
oversight, or for action taken or omitted to be taken by it or them hereunder
or under the Security Documents or in connection herewith or therewith except
for its or their own gross negligence or willful misconduct. The Agent shall
incur no liability under or in respect of this Agreement or the Security
Documents by acting upon any notice, certificate, warranty, instruction or
statement (oral or written) of anyone (including anyone in good faith believed
by it to be authorized to act on behalf of the Company), unless it has actual
knowledge of the untruthfulness of same. The Agent may execute any of its
duties hereunder by or through employees, agents, and attorneys-in-fact and
shall not be answerable to the Banks for the default or misconduct of any such
agents or attorneys-in-fact selected with reasonable care. The Agent shall be
entitled to advice of counsel concerning all matters pertaining to the
agencies hereby created and its duties hereunder, and shall incur no liability
to anyone and be fully protected in acting upon the advice of such counsel.
The Agent shall be entitled to assume that no Default or Event of Default
exists unless notified to the contrary by a Bank. The Agent shall in all
events be fully protected in acting or failing to act in accord with the
instructions of the Required Banks. Upon the occurrence of an Event of
Default hereunder, the Agent shall take such action with respect to the
enforcement of its liens on the Collateral and the preservation and protection
thereof as it shall be directed to take by the Required Banks but unless and
until the Required Banks have given such direction the Agent shall take or
refrain from taking such actions as it deems appropriate and in the best of
interest of all Banks. The Agent shall in all cases be fully justified in
failing or refusing to act hereunder unless it shall be indemnified to its
reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent may treat the owner of any Note as the holder thereof until
written notice of transfer shall have been filed with it signed by such owner
in form satisfactory to the Agent. Each Bank acknowledges that it has
independently and without reliance on the Agent or any other Bank and based
upon such information, investigations and inquiries as it deems appropriate
made its own credit analysis and decision to extend credit to the Company. It
shall be the responsibility of each Bank to keep itself informed as to the
creditworthiness of the Company and the Agent shall have no liability to any
Bank with respect thereto.
Section 10.4. Costs and Expenses. Each Bank agrees to reimburse the
Agent for all out-of-pocket costs and expenses suffered or incurred by the
Agent or any security trustee in performing its duties hereunder and under the
Security Documents or in the exercise of any right or power imposed or
conferred upon the Agent hereby or thereby, to the extent that the Agent is
not promptly reimbursed for same by the Company or out of the Collateral, all
such costs and expenses to be borne by the Banks ratably in accordance with
the amounts of their respective Commitments.
Section 10.5. Indemnity. The Banks, to the extent not prohibited by
applicable law, shall ratably indemnify and hold the Agent, and its directors,
officers, employees, agents or representatives (including as such any security
trustee therefor) harmless from and against any liabilities, losses, costs or
expenses suffered or incurred by them hereunder or under the Applications or
the Security Documents or in connection with the transactions contemplated
hereby or thereby, regardless of when asserted or arising, except to the
extent they are promptly reimbursed for the same by the Company or out of the
Collateral and except to the extent that any event giving rise to a claim was
caused by the gross negligence or willful misconduct of the party seeking to
be indemnified.
Section 10.6. Collateral Servicing Agent.
(a) Appointment and Acceptance of Appointment. The Agent and the Banks
hereby appoint FBS Ag Credit, Inc. ("FBS") as the "Collateral Servicing Agent"
under Credit Agreement, and FBS hereby accepts the duties and obligations of
the Collateral Servicing Agent expressly set forth herein, subject to the
terms and conditions contained herein.
(b) Monitoring Obligations. The monitoring obligations to be performed
by the Collateral Servicing Agent shall consist of the following and no
others:
(i) The Collateral Servicing Agent shall verify calculations
reported in each Borrowing Base Certificate delivered by the Company
(including without limitation, the information and calculations reported
in the attached supporting schedules to each such Borrowing Base
Certificate) and reconcile the Borrowing Base Certificates, the financial
statements and the sub-ledgers;
(ii) The Collateral Servicing Agent shall make physical inspections
of the Company facilities as needed and at least once per year, for the
purpose of ascertaining the number, amount or general physical condition
of Collateral and for such other purpose as the Agent and the Banks shall
request consistent with the Loan Documents, and the Collateral Servicing
Agent shall promptly report the results of such inspections to the Agent
and the Banks;
(iii) The Collateral Servicing Agent shall promptly report to the
Agent and the Banks any facts coming to its attention which may impair
the lien of the Collateral Documents or adversely affect the consummation
of the transactions contemplated by the Loan Documents, including without
limitation, the following:
(A) ANY SALE, TRANSFER OR PLEDGE OF THE COLLATERAL
OTHER THAN AS PERMITTED BY THE LOAN DOCUMENTS;
(B) ANY MATERIAL DAMAGE OR ANY MATERIAL
DETERIORATION, INJURY OR WASTE SUFFERED OR
PERMITTED WITH RESPECT TO THE COLLATERAL;
(C) ANY ABANDONMENT OF COLLATERAL; AND
(D) ANY EVENT, HAPPENING OR CONDITION WHICH THE
COLLATERAL SERVICING AGENT KNOWS WOULD CONSTITUTE
A DEFAULT OR AN EVENT OF DEFAULT UNDER ANY OF THE
LOAN DOCUMENTS.
(c) Compensation. For its services in connection with the monitoring
of the Collateral as set forth in this Agreement, the Collateral Servicing
Agent shall receive fees from the Company as set forth in Section 3.2 hereof.
(d) Reports. The Collateral Servicing Agent shall provide to the Agent
and the Banks, copies of the inspection reports of the Collateral Servicing
Agent in connection with its duties under this Agreement.
The Collateral Servicing Agent shall be entitled to the same privileges,
rights and immunities that the Agent has under this Section 10 to the same
extent as if all references therein to the Agent were references to the
Collateral Servicing Agent as well.
SECTION 11. THE GUARANTEES.
Section 11.1. The Guarantees. To induce the Banks to provide the
credits described herein and in consideration of benefits expected to accrue
to each Guarantor by reason of the Commitments and for other good and valuable
consideration, receipt of which is hereby acknowledged, each Guarantor hereby
unconditionally and irrevocably guarantees jointly and severally to the Agent,
the Banks and each other holder of any of the Company's obligations under the
Loan Documents, the due and punctual payment of all present and future
indebtedness, obligations and liabilities of the Company evidenced by or
arising out of the Loan Documents, including, but not limited to, the due and
punctual payment of principal of and interest on the Notes and Reimbursement
Obligations and the due and punctual payment of all other obligations now or
hereafter owed by the Company under the Loan Documents as and when the same
shall become due and payable, whether at stated maturity, by acceleration or
otherwise, according to the terms hereof and thereof. In case of failure by
the Company punctually to pay any indebtedness guaranteed hereby, each
Guarantor hereby unconditionally agrees jointly and severally to make such
payment or to cause such payment to be made punctually as and when the same
shall become due and payable, whether at stated maturity, by acceleration or
otherwise, and as if such payment were made by the Company.
Section 11.2. Guarantee Unconditional. The obligations of each
Guarantor as a guarantor under this Section 11 shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Company or of any other Guarantor under
this Agreement or any other Loan Document or by operation of law or otherwise;
(b) any modification or amendment of or supplement to this Agreement or
any other Loan Document;
(c) any change in the corporate existence, structure or ownership of,
or any insolvency, bankruptcy, reorganization or other similar proceeding
affecting, the Company, any other Guarantor, or any of their respective
assets, or any resulting release or discharge of any obligation of the Company
or of any other Guarantor contained in any Loan Document;
(d) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Agent, any Bank or any other
Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or demand or
any exercise of, or failure to exercise, any rights or remedies against the
Company, any other Guarantor or any Collateral;
(f) any application of any sums by whomsoever paid or howsoever
realized to any obligation of the Company, regardless of what obligations of
the Company remain unpaid;
(g) any release of the Company, any other Guarantor, or any Collateral;
(h) any invalidity or unenforceability relating to or against the
Company or any other Guarantor for any reason of this Agreement or of any
other Loan Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Company of the principal of or
interest on any Note, any Reimbursement Obligations or any other amount
payable by it under the Loan Documents; or
(i) any other act or omission to act or delay of any kind by the Agent,
any Bank or any other Person or any other circumstance whatsoever that might,
but for the provisions of this paragraph, constitute a legal or equitable
discharge of the obligations of the Guarantor under this Section 11.
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations under this Section 11
shall remain in full force and effect until the Commitments are terminated and
the principal of and interest on the Notes and all other amounts payable by
the Company under this Agreement and all other Loan Documents shall have been
paid in full. If at any time any payment of the principal of or interest on
any Note or any other amount payable by the Company under the Loan Documents
is rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Company or of a Guarantor, or otherwise,
each Guarantor's obligations under this Section 11 with respect to such
payment shall be reinstated at such time as though such payment had become due
but had not been made at such time.
Section 11.4. Subrogation; Limitation on Right of Recovery. No
Guarantor will exercise any rights which it may acquire by way of subrogation
by any payment made hereunder, or otherwise, until the Notes and all other
amounts payable by the Company under the Loan Documents shall have been paid
in full and after the termination of the Commitments. If any amount shall be
paid to a Guarantor on account of such subrogation rights at any time prior to
the later of (a) the payment in full of the Notes and all other amounts
payable by such Guarantor hereunder and (y) the termination of all the
Commitments, such amount shall be held in trust for the benefit of the Agent
and the Banks and shall forthwith be paid to the Agent and the Banks or be
credited and applied upon the Company's obligations under the Loan Documents,
whether matured or unmatured, in accordance with the terms of this Agreement.
Notwithstanding any other provision hereof, the right to recovery against each
Guarantor under this Section 11 shall not exceed $1.00 less than the amount
which would render such Guarantor's obligations under this Section 11 void or
voidable under applicable law, including without limitation fraudulent
conveyance law.
Section 11.5. Waivers. Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein,
as well as any requirement that at any time any action be taken by the Agent,
any Bank or any other Person against the Company, another Guarantor or any
other Person.
Section 11.6. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Company under this Agreement or any other
Loan Document is stayed upon the insolvency, bankruptcy or reorganization of
the Company, all such amounts otherwise subject to acceleration under the
terms of this Agreement or the other Loan Documents shall nonetheless be
payable jointly and severally by the Guarantors hereunder forthwith on demand
by the Agent or any Bank.
Section 11.7. Currency. The payment by any Guarantor of any amount or
amounts due the Banks hereunder shall be made in the same currency (the
"relevant currency") and funds in which the underlying indebtedness of the
Company are payable. To the fullest extent permitted by law, the obligation
of the Guarantors in respect of any amount due in the relevant currency under
this guaranty shall, notwithstanding any payment in any other currency
(whether pursuant to a judgment or otherwise), be discharged only to the
extent of the amount in the relevant currency that the Banks may, in
accordance with normal banking procedures, purchase with the sum paid in such
other currency (after any premium and costs of exchange) on the business day
immediately following the day on which the Banks receive such payment. If the
amount in the relevant currency that may be so purchased for any reason falls
short of the amount originally due, the relevant Guarantor shall pay such
additional amounts, in the relevant currency, as may be necessary to
compensate for the shortfall. Any obligations of the Guarantors not
discharged by such payment shall, to the fullest extent permitted by
applicable law, be due as a separate and independent obligation and, until
discharged as provided herein, shall continue in full force and effect.
SECTION 12. MISCELLANEOUS.
Section 12.1. Holidays. If any principal of any of the Notes or
Reimbursement Obligations shall fall due on a Saturday, Sunday or on another
day which is a legal holiday for Banks in the State of Illinois, interest at
the rates such Notes or Reimbursement Obligations bear for the period prior to
maturity shall continue to accrue on such principal from the stated due date
thereof to and including the next succeeding Business Day on which the same is
payable.
Section 12.2. No Waiver, Cumulative Remedies. No delay or failure on
the part of any Bank in the exercise of any power or right shall operate as a
waiver thereof, nor as an acquiescence in any Default or Event of Default nor
preclude any other or further exercise thereof, or the exercise of any other
power or right, and the rights and remedies hereunder of the Banks are
cumulative to, and not exclusive of, any rights or remedies which any of them
would otherwise have.
Section 12.3. Waivers, Modifications and Amendments. Any provision
hereof or of the Notes or Security Documents, may be amended, modified, waived
or released and any Default or Event of Default and its consequences may be
rescinded and annulled upon the written consent of the Required Banks (any
such amendment, modification, waiver, release, rescission or annulment is
hereinafter collectively referred to as a "Modification"); provided, however,
that without the consent of all Banks no such Modification shall increase the
amount or extend the terms of such Bank's Commitment or reduce the interest
rate applicable to or extend the maturity of its Notes or Reimbursement
Obligations or reduce the amount of the fees to which it is entitled hereunder
or change this Section 12.3 or change the definition of "Required Banks" or
"Borrowing Base" or change the number of Banks required to take any action
hereunder or under the Security Documents or release any Guarantor from its
obligations under Section 11 of this Agreement or release the Company of its
obligations under any of the Loan Documents or release all or any substantial
(in value) part of the collateral security afforded by the Security Documents,
except that the Agent may release its lien on Collateral without the consent
of any Bank if made in connection with a sale or other disposition thereof
required to be effected by the provisions hereof or of the Security Documents.
No amendment, modification or waiver of the Agent's protective provisions
shall be effective without the prior written consent of the Agent, and no
amendment or modification of the provisions of Section 11 hereof shall be
effective as to any Guarantor unless in writing signed by it.
Section 12.4. Costs and Expenses; Environmental Indemnity. (a) The
Company agrees to pay on demand all reasonable out-of-pocket costs and
expenses of the Agent and the Banks in connection with the negotiation,
preparation, execution, delivery, recording and/or filing and/or release of
this Agreement, the Notes, the L/C Agreements and the Security Documents and
the other instruments and documents to be delivered hereunder or thereunder or
in connection with the transactions contemplated hereby or thereby or in
connection with any consents hereunder or thereunder or waivers or amendments
hereto or thereto, including the reasonable fees and out-of-pocket expenses of
counsel for the Agent with respect to all of the foregoing, and all recording,
filing, title insurance or other fees, costs and taxes incident to perfecting
a lien upon the collateral security for the Notes, and all reasonable costs
and expenses (including reasonable attorneys' fees), incurred by the Agent,
any security trustee for the Banks, the Banks or any other holders of a Note
in connection with a default or the enforcement of this Agreement, the Notes,
the L/C Agreements or the Security Documents and the other instruments and
documents to be delivered hereunder or thereunder and all costs, fees and
taxes of the types enumerated above incurred in supplementing (and recording
or filing supplements to) the Security Documents in connection with
assignments contemplated by Section 12.15 hereof if counsel to the Agent
believes such supplements to be appropriate or desirable (but the Company
shall be obligated to pay such costs, expenses and taxes incurred in
supplementing the Security Documents in connection with such assignments for
only one concurrent series of assignments). The Company agrees to indemnify
and save the Banks, the Agent and any security trustee for the Banks harmless
from any and all liabilities, losses, costs and expenses incurred by the Banks
or the Agent in connection with any action, suit or proceeding brought against
the Agent, security trustee or any Bank by any person which arises out of the
transactions contemplated or financed hereby or by the Notes or Security
Documents or out of any action or inaction by the Agent, any security Trustee
or any Bank hereunder or thereunder, except for such thereof (a) as is caused
by the gross negligence or willful misconduct of the party indemnified, or (b)
arising from any action brought by the Company against the Agent or any Bank
in which the Company ultimately prevails in a final, non-appealable judgment.
(b)Without limiting the generality of the foregoing, the Company and each
Guarantor unconditionally agrees to forever indemnify, defend and hold
harmless, the Agent and each Bank, and covenants not to sue for any claim for
contribution against, the Agent or any Bank for any damages, costs, loss or
expense, including without limitation, response, remedial or removal costs,
arising out of any of the following: (i) any presence, release, threatened
release or disposal of any hazardous or toxic substance or petroleum by the
Company or any Guarantor or otherwise occurring on or with respect to its
Property, (ii) the operation or violation of any Environmental Law, whether
federal, state, or local, and any regulations promulgated thereunder, by the
Company or any Guarantor or otherwise occurring on or with respect to its
Property, (iii) any claim for personal injury or property damage in connection
with the Company or any Guarantor or otherwise occurring on or with respect to
its Property, and (iv) the inaccuracy or breach of any environmental
representation, warranty or covenant by the Company or any Guarantor made
herein or in any loan agreement, promissory note, mortgage, deed of trust,
security agreement or any other instrument or document evidencing or securing
any indebtedness, obligations or liabilities of the Company or any Guarantor
owing to the Agent or any Bank or setting forth terms and conditions
applicable thereto or otherwise relating thereto, except for damages arising
from the Agent's or such Bank's willful misconduct or gross negligence. This
indemnification shall survive the payment and satisfaction of all
indebtedness, obligations and liabilities of the Company and the Guarantors
owing to the Agent and the Banks and the termination of this Agreement, and
shall remain in force beyond the expiration of any applicable statute of
limitations and payment or satisfaction in full of any single claim under this
indemnification. This indemnification shall be binding upon the successors
and assigns of the Company and each Guarantor and shall inure to the benefit
of Agent and the Banks and their respective directors, officers, employees,
agents, and collateral trustees, and their successors and assigns.
(c)The provisions of this Section 12.4 and the protective provisions of
Section 2 hereof shall survive payment of the Notes and the termination of the
Banks' Revolving Credit Commitments hereunder.
Section 12.5. Stamp Taxes. Although the Company is of the opinion that
no documentary or similar taxes are payable in respect to this Agreement, the
Security Documents, the Reimbursement Obligations or the Notes, the Company
agrees that it will pay such taxes, including interest and penalties, in the
event any such taxes are assessed, irrespective of when such assessment is
made and whether or not any credit to it is then in use or available.
Section 12.6. Survival of Representations. All representations and
warranties made herein or in the Security Documents or in certificates given
pursuant hereto shall survive the execution and delivery of this Agreement,
the Security Documents and the Note, and shall continue in full force and
effect with respect to the date as of which they were made as long as any
credit is in use or available hereunder.
Section 12.7. Construction. The parties hereto acknowledge and agree
that this Agreement shall not be construed more favorably in favor of one than
the other based upon which party drafted the same, it being acknowledged that
all parties hereto contributed substantially to the negotiation and
preparation of this Agreement.
Section 12.8. Accounting Principles. All computations of compliance
with the terms hereof shall be made on the basis of generally accepted
principles of accounting applied in a manner consistent with those used in the
preparation of the audit report of the Company referred to in the first
sentence of Section 5.5 hereof.
Section 12.9. Addresses for Notices. All communications provided for
herein shall be in writing and shall be deemed to have been given or made when
served personally or three days after being deposited in the United States
mail addressed, if to the Company, at 16825 Northchase Drive, Suite 1600,
Houston, Texas 77060 Attention: Vice President-Finance, if to the Agent at
111 West Monroe Street, Chicago, Illinois 60690 Attention: Agribusiness
Division, if to the Banks at their addresses as shown on the signature pages
hereof or on any Assignment Agreement, if to the Guarantors at their addresses
as shown on the signature pages hereof, or at such other address as shall be
designated by any party hereto in a written notice given to each party
pursuant to this Section 12.9.
Section 12.10. Headings. Article and Section headings used in this
Agreement are for convenience of reference only and are not a part of this
Agreement for any other purpose.
Section 12.11. Severability of Provisions. Any provision of this
Agreement which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. All rights,
remedies and powers provided in this Agreement and the Notes may be exercised
only to the extent that the exercise thereof does not violate any applicable
mandatory provisions of law, and all the provisions of this Agreement and the
Notes are intended to be subject to all applicable mandatory provisions of law
which may be controlling and to be limited to the extent necessary so that
they will not render this Agreement or the Notes invalid or unenforceable.
Section 12.12. Counterparts. This Agreement may be executed in any
number of counterparts, and by different parties hereto on separate
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 12.13. Binding Nature. This Agreement shall be binding upon
the Company and its successors and assigns, and shall inure to the benefit of
the Banks and the benefit of their successors and assigns, including any
subsequent holder of an interest in the Notes. The Company may not assign its
rights hereunder without the written consent of the Banks.
Section 12.14. Participants and Note Assignors. (a) Each Bank shall
have the right, at its own cost to grant participations (to be evidenced by
one or more agreements or certificates of participation) in the Loans made,
and/or Revolving Credit Commitment and participations in L/Cs and
Reimbursement Obligations held, by such Bank at any time and from time to
time, and to assign its rights under such Loans, participations in L/Cs and
Reimbursement Obligations or the Notes evidencing such Loans to one or more
other Persons; provided that no such participation or assignment shall relieve
any Bank of any of its obligations under this Agreement, and any agreement
pursuant to which such participation or assignment of a Note or the rights
thereunder is granted shall provide that the granting Bank shall retain the
sole right and responsibility to enforce the obligations of the Company under
the Loan Documents, including, without limitation, the right to approve any
amendment, modification or waiver of any provision thereof, except that such
agreement may provide that such Bank will not agree without the consent of
such participant or assignee to any modification, amendment or waiver of this
Agreement that would (A) increase any Revolving Credit Commitment of such
Bank, or (B) reduce the amount of or postpone the date for payment of any
principal of or interest on any Loan or Reimbursement Obligation or of any fee
payable hereunder in which such participant or assignee has an interest or (C)
reduce the interest rate applicable to any Loan or other amount payable in
which such participant or assignee has an interest or (D) release any
guarantor for any of the Company's Obligations under the Loan Documents, and
provided further that no such assignee or participant shall have any rights
under this Agreement except as provided in this Section 12.14, and the Agent
shall have no obligation or responsibility to such participant or assignee,
except that nothing herein provided is intended to affect the rights of an
assignee of a Note to enforce the Note assigned. Any party to which such a
participation or assignment has been granted shall have the benefits of
Section 2.7, 2.8, 2.9 and 2.10 hereof but shall not be entitled to receive any
greater payment under any such Section than the Bank granting such
participation or assignment would have been entitled to receive with respect
to the rights transferred. Any Bank assigning any Note hereunder shall give
prompt notice thereof to the Company and the Agent, who shall in each case
only be required to treat such assignee of a Note as the holder thereof after
receipt of such notice. The Company and each Guarantor authorizes each Bank
to disclose (with appropriate confidentiality agreements) to any purchaser or
prospective purchaser of an interest in its Loans or Reimbursement Obligations
owed to it or its Revolving Credit Commitment under this Section 12.14 any
financial or other information pertaining to the Company or any Guarantor.
Section 12.15. Assignment of Commitments by Bank. Each Bank shall have
the right at any time, with the prior consent of the Company and the Agent
(which consents will not be unreasonably withheld (it being understood that of
such proposed assignee is a Bank to whom payments would be required to be made
pursuant to Section 12.16(c) hereof, the Company shall be entitled to withhold
its consent) and which consents of the Company will not be required during the
existence of any Event of Default or Default hereunder), to sell, assign,
transfer or negotiate all or any part of its Revolving Credit Commitment to
one or more commercial banks or other financial institutions; provided that
such assignment is in an amount of at least $5,000,000. Upon any such
assignment, and its notification to the Agent, the assignee shall become a
Bank hereunder, all Loans, Reimbursement Obligations and the Revolving Credit
Commitment it thereby holds shall be governed by all the terms and conditions
hereof, and the Bank granting such assignment shall have its Revolving Credit
Commitment and its obligations and rights in connection therewith, reduced by
the amount of such assignment. Concurrently with the execution and delivery
of an assignment agreement pursuant hereto, the Company shall execute and
deliver a Note to the assignee Bank in the amount of its Commitment and a new
Note to the assigning Bank in the amount of its Commitment after giving effect
to the reduction occasioned by such assignment, all such Notes to constitute
"Notes" for all purposes of this Agreement and the other Loan Documents. Upon
each such assignment the Bank granting such assignment shall pay to the Agent
for the Agent's sole account a fee of $3,000. The Company and each Guarantor
authorizes each Bank to disclose (with appropriate confidentiality agreements)
to any purchaser or prospective purchaser of an interest in its Loans or
Reimbursement Obligations owed to it or its Revolving Credit Commitment under
this Section 12.15 any financial or other information pertaining to the
Company and each Guarantor.
Section 12.16. Withholding Taxes.
(a) U.S. Withholding Tax Exemptions. Each Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
shall submit to the Company and the Agent on or before the date the initial
Borrowing is made hereunder or, if later, the date such Bank becomes a Bank
hereunder, two duly completed and signed copies of either Form 1001 (relating
to such Bank and entitling it to a complete exemption from withholding on all
amounts to be received by such Bank, including fees, pursuant to this
Agreement and the Loans) or Form 4224 (relating to all amounts to be received
by such Bank, including fees, pursuant to this Agreement and the Loans and
Reimbursement Obligations) of the United States Internal Revenue Service.
Thereafter and from time to time, each such Bank shall submit to the Company
and the Agent such additional duly completed and signed copies of one or the
other of such Forms (or such successor forms as shall be adopted from time to
time by the relevant United States taxing authorities) as may be (i) notified
by the Company or Agent to such Bank and (ii) required under then-current
United States law or regulations to avoid or reduce United States withholding
taxes on payments in respect of all amounts to be received by such Bank,
including fees, pursuant to this Agreement or the Loans and Reimbursement
Obligations. Upon the request of the Company or Agent, each Bank that is a
United States person (as such term is defined in Section 7701(a)(30) of the
Code) shall submit to the Company a certificate to the effect that it is such
a United States person.
(b) Inability of Bank to Submit Forms. If any Bank determines, as a
result of any change in applicable law, regulation or treaty, or in any
official application or interpretation thereof, that it is unable to submit to
the Company any form or certificate that such Bank is obligated to submit
pursuant to subsection (a) of this Section 12.16, or that such Bank is
required to withdraw or cancel any such form or certificate previously
submitted or any such form or certificate otherwise become ineffective or
inaccurate, such Bank shall promptly notify the Company and Agent of such fact
and the Bank shall to that extent not be obligated to provide any such form or
certificate and will be entitled to withdraw or cancel any affected form or
certificate, as applicable.
(c) Payment of Additional Amounts. If, as a result of any change in
applicable law, regulation or treaty, or in any official application or
interpretation thereof after the date of this Agreement or, if later, the date
a Bank becomes a Bank hereunder, and the Company is required by law or
regulation to make any deduction, withholding or backup withholding of any
taxes, levies, imposts, duties, fees, liabilities or similar charges of the
United States of America, any possession or territory of the United States of
America (including the Commonwealth of Puerto Rico) or any area subject to the
jurisdiction of the United States of America ("U.S. Taxes") from any payments
to a Bank in respect of Loans or Reimbursement Obligations then or thereafter
outstanding, or other amounts owing hereunder, the amount payable by the
Company will be increased to the amount which, after deduction from such
increased amount of all U.S. Taxes required to be withheld or deducted
therefrom, will yield the amount required under this Agreement to be payable
with respect thereto; provided that the Company shall not be required to pay
any additional amount pursuant to this subsection (c) to any Bank that (i) is
not, on the date this Agreement is executed by such Bank or, if later, the
date such Bank became a Bank hereunder, either (x) entitled to submit Form
1001 relating to such Bank and entitling it to a complete exemption from
withholding on all amounts to be received by such Bank, including fees,
pursuant to this Agreement and the Loans and Reimbursement Obligations or Form
4224 relating to all amounts to be received by such Bank, including fees,
pursuant to this Agreement and the Loans and Reimbursement Obligations or (y)
a U.S. person (as such term is defined in Section 7701(a)(30) of the Code), or
(ii) has failed to submit any form or certificate that it was required to file
pursuant to subsection (a) of this Section 12.16 and entitled to file under
applicable law, or (iii) is no longer entitled to submit Form 1001 or Form
4224 as a result of any change in circumstances other than a change in
applicable law, regulation or treaty or in any official application or
interpretation thereof. Within 30 days after the Company's payment of any
such U.S. Taxes, the Company shall deliver to the Agent, for the account of
the relevant Bank(s), originals or certified copies of official tax receipts
evidencing such payment. The obligations of the Company under this subsection
(c) shall survive the payment in full of the Loans and Reimbursement
Obligations and the termination of the Revolving Credit Commitments. If any
Bank or the Agent determines it has received or been granted a credit against
or relief or remission for, or repayment of, any taxes paid or payable by it
because of any U.S. Taxes paid by the Company and evidenced by such a tax
receipt, such Bank or Agent shall, to the extent it can do so without
prejudice to the retention of the amount of such credit, relief, remission or
repayment, pay to the Company such amount as such Bank or Agent determines is
attributable to such deduction or withholding and which will leave such Bank
or Agent (after such payment) in no better or worse position than it would
have been in if the Company had not been required to make such deduction or
withholding. Nothing in this Agreement shall interfere with the right of each
Bank and the Agent to arrange its tax affairs in whatever manner it thinks fit
nor oblige any Bank or the Agent to disclose any information relating to its
tax affairs or any computations in connection with such taxes.
Section 12.17. Jurisdiction; Venue. THE COMPANY AND EACH GUARANTOR
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF ILLINOIS AND OF ANY ILLINOIS COURT SITTING
IN CHICAGO FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE COMPANY AND EACH
GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 12.18. Lawful Rate. All agreements between the Company, the
Agent and each of the Banks, whether now existing or hereafter arising and
whether written or oral, are expressly limited so that in no contingency or
event whatsoever, whether by reason of demand or acceleration of the maturity
of any of the indebtedness hereunder or otherwise, shall the amount contracted
for, charged, received, reserved, paid or agreed to be paid to the Agent or
each Bank for the use, forbearance, or detention of the funds advanced
hereunder or otherwise, or for the performance or payment of any covenant or
obligation contained in any document executed in connection herewith (all such
documents being hereinafter collectively referred to as the "Credit
Documents"), exceed the highest lawful rate permissible under applicable law
(the "Highest Lawful Rate"), it being the intent of the Company, the Agent and
each of the Banks in the execution hereof and of the Credit Documents to
contract in strict accordance with applicable usury laws. If, as a result of
any circumstances whatsoever, fulfillment by the Company of any provision
hereof or of any of such documents, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
applicable usury law or result in the Agent or any Bank having or being deemed
to have contracted for, charged, reserved or received interest (or amounts
deemed to be interest) in excess of the maximum, lawful rate or amount of
interest allowed by applicable law to be so contracted for, charged, reserved
or received by the Agent or such Bank, then, ipso facto, the obligation to be
fulfilled by the Company shall be reduced to the limit of such validity, and
if, from any such circumstance, the Agent or such Bank shall ever receive
interest or anything which might be deemed interest under applicable law which
would exceed the Highest Lawful Rate, such amount which would be excessive
interest shall be refunded to the Company or, to the extent (i) permitted by
applicable law and (ii) such excessive interest does not exceed the unpaid
principal balance of the Notes and the amounts owing on other obligations of
the Company to the Agent or any Bank under any Loan Document applied to the
reduction of the principal amount owing on account of the Notes or the amounts
owing on other obligations of the Company to the Agent or any Bank under any
Loan Document and not to the payment of interest. All interest paid or agreed
to be paid to the Agent or any Bank shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full period of the indebtedness hereunder until payment in full of the
principal of the indebtedness hereunder (including the period of any renewal
or extension thereof) so that the interest on account of the indebtedness
hereunder for such full period shall not exceed the highest amount permitted
by applicable law. This paragraph shall control all agreements between the
Company, the Agent and the Banks.
Section 12.19. Governing Law. (a) THIS AGREEMENT AND THE RIGHTS AND
DUTIES OF THE PARTIES HERETO, SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT PROVIDED
IN SECTION 12.19(B) HEREOF AND TO THE EXTENT THAT THE FEDERAL LAWS OF THE
UNITED STATES OF AMERICA MAY OTHERWISE APPLY.
(b)NOTWITHSTANDING ANYTHING IN SECTION 12.19(A) HEREOF TO THE CONTRARY,
NOTHING IN THIS AGREEMENT, THE NOTES, OR THE OTHER LOAN DOCUMENTS SHALL BE
DEEMED TO CONSTITUTE A WAIVER OF ANY RIGHTS WHICH THE COMPANY, THE AGENT OR
ANY OF THE BANKS MAY HAVE UNDER THE NATIONAL BANK ACT OR OTHER APPLICABLE
FEDERAL LAW.
Section 12.20. Limitation of Liability. NO CLAIM MAY BE MADE BY THE
COMPANY, ANY SUBSIDIARY OR ANY GUARANTOR AGAINST ANY BANK OR ITS AFFILIATES,
DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT
OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER
THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN
CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS
CONTEMPLATED AND RELATIONSHIPS ESTABLISHED BY THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH. THE COMPANY, EACH SUBSIDIARY AND EACH GUARANTOR HEREBY WAIVE,
RELEASE AND AGREE NOT TO SUE UPON SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR
NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
Section 12.21. Nonliability of Lenders. The relationship between the
Company and the Banks is, and shall at all times remain, solely that of
borrower and lenders, and the Banks and the Agent neither undertake nor assume
any responsibility or duty to the Company to review, inspect, supervise, pass
judgment upon, or inform the Company of any matter in connection with any
phase of the Company's business, operations, or condition, financial or
otherwise. The Company shall rely entirely upon its own judgment with respect
to such matters, and any review, inspection, supervision, exercise of
judgment, or information supplied to the Company by any Bank or the Agent in
connection with any such matter is for the protection of the Bank and the
Agent, and neither the Company nor any third party is entitled to rely
thereon.
Section 12.22. No Oral Agreements. THIS WRITTEN AGREEMENT, TOGETHER
WITH THE OTHER LOAN DOCUMENTS EXECUTED CONTEMPORANEOUSLY HEREWITH AND ANY
PRIOR AGREEMENTS RELATING TO FEES PAYABLE TO HARRIS TRUST AND SAVINGS BANK,
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
[THIS PAGE INTENTIONALLY LEFT BLANK.]
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall be a contract between us for the purposes hereinabove set
forth.
Dated as of June 28, 1996.
AMERICAN RICE, INC.
By___________________________
Its_______________________
COMET VENTURES, INC.
By___________________________
Its_______________________
Address:
10990 Wilshire Boulevard
Suite 1800
Los Angeles, California 90024
Attention: _____________
COMET RICE OF PUERTO RICO, INC.
By___________________________
Its_______________________
Address:
_________________________
_________________________
Attention: _____________
BARGECARIB, INC.
By___________________________
Its_______________________
Address:
16825 Northchase Drive
Suite 1600
Houston, Texas 77060
Attention: __________________
COMPANIA ENVASADORA LORETO, S.A.
By___________________________
Its_______________________
Address:
_________________________
_________________________
_________________________
Attention: _____________
Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
Each of the Banks hereby agrees with each other Bank that if it should
receive or obtain any payment (whether by voluntary payment, by realization
upon collateral, by the exercise of rights of setoff or banker's lien, by
counterclaim or cross action, or by the enforcement of any rights under the
Credit Agreement, Notes or Security Documents or otherwise) in respect of the
obligations of the Company under the Credit Agreement, Notes and Security
Documents in a greater amount than such Bank would have received had such
payment been made to the Agent and been distributed among the Banks as
contemplated by Section 3.6 hereof then in that event the Bank receiving such
disproportionate payment shall purchase for cash without recourse from the
other Banks an interest in the obligations of the Company to such Banks rising
under the Credit Agreement and Notes in such amount as shall result in a
distribution of such payment as contemplated by Section 3.6 hereof. In the
event any payment made to a Bank and shared with the other Banks pursuant to
the provisions hereof is ever recovered from such Bank, the Banks receiving a
portion of such payment hereunder shall restore the same to the payor Bank,
but without interest.
Amount and Percentage of
Commitments:
Revolving Commitment HARRIS TRUST AND SAVINGS BANK
Credit One Percentage
Commitment
By_______________________
$47,500,000 55.8823529% Its Vice President
Address: 111 W. Monroe Street
Chicago, Illinois 60690
Attention: Agribusiness
Division
Revolving Commitment FBS AG CREDIT, INC.
Credit Percentage
Commitment
By___________________________
$37,500,000 44.1176471% Its______________________
Address:_____________________
Attention:
Total Revolving Credit Commitments: $85,000,000
EXHIBIT A
AMERICAN RICE, INC.
SECURED REVOLVING CREDIT NOTE
Chicago, Illinois
$________________June 28, 1996
On the Termination Date (as defined in the Credit Agreement hereinafter
mentioned), for value received, the undersigned, American Rice, Inc., a Texas
corporation (the "Company"), promises to pay to the order of
___________________ ______________ (the "Bank"), at the principal office of
Harris Trust and Savings Bank in Chicago, Illinois, the principal sum of (i)
_____________________ Dollars ($________________), or (ii) such lesser amount
as may at the time of the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of all Loans owing from
the Company to the Bank under the Revolving Credit One provided for in the
Credit Agreement hereinafter mentioned.
This Note evidences indebtedness consisting of a "Base Rate Portion" and
"LIBOR Portions" as such terms are defined in that certain Amended and
Restated Secured Credit Agreement dated as of June 28, 1996 by and between the
Company, Harris Trust and Savings Bank individually and as Agent and certain
Banks which may from time to time become parties thereto (the "Credit
Agreement") made and to be made to the Company by the Bank under the Revolving
Credit provided for under the Credit Agreement and the Company hereby promises
to pay accrued and unpaid interest at the office specified above on each Loan
evidenced hereby at the rates and times specified therefor in the Credit
Agreement.
Each Loan made under the Revolving Credit provided for in the Credit
Agreement by the Bank to the Company against this Note, any repayment of
principal hereon, the status of each such Loan from time to time as part of
the Base Rate Portion or a LIBOR Portion and the interest rates and interest
periods applicable thereto shall be endorsed by the holder hereof on the
reverse side of this Note or recorded on the books and records of the holder
hereof (provided that such entries shall be endorsed on the reverse side
hereof prior to any negotiation hereof) and the Company agrees that in any
action or proceeding instituted to collect or enforce collection of this Note,
the entries so endorsed on the reverse side hereof or recorded on the books
and records of the Bank shall, absent manifest error, be prima facie evidence
of the unpaid balance of this Note and the status of each Loan from time to
time as part of a Base Rate Portion or a LIBOR Portion and the interest rates
and interest periods applicable thereto.
This Note is issued by the Company under the terms and provisions of the
Credit Agreement and is secured, inter alia, by certain Security Agreements
and other instruments and documents from the Company, and this Note and the
holder hereof are entitled to all of the benefits and security provided for
thereby or referred to therein, equally and ratably with all other
indebtedness thereby secured, to which reference is hereby made for a
statement thereof. This Note may be declared to be, or be and become, due
prior to its expressed maturity upon the occurrence of an event of default
specified in the Credit Agreement, voluntary prepayments may be made hereon,
and certain prepayments are required to be made hereon, all in the events, on
the terms and with the effects provided in the Credit Agreement.
All agreements between the Company, the Agent (as defined in the Credit
Agreement) and each of the Banks (as defined in the Credit Agreement), whether
now existing or hereafter arising and whether written or oral, are expressly
limited so that in no contingency or event whatsoever, whether by reason of
demand or acceleration of the maturity of any of the indebtedness hereunder or
otherwise, shall the amount contracted for, charged, received, reserved, paid
or agreed to be paid to the Agent or each Bank for the use, forbearance, or
detention of the funds advanced hereunder or otherwise, or for the performance
or payment of any covenant or obligation contained in any document executed in
connection herewith (all such documents being hereinafter collectively
referred to as the "Credit Documents"), exceed the highest lawful rate
permissible under applicable law (the "Highest Lawful Rate"), it being the
intent of the Company, the Agent and each of the Banks in the execution hereof
and of the Credit Documents to comply in strict accordance with applicable
usury laws. If, as a result of any circumstances whatsoever, fulfillment by
the Company of any provision hereof or of any of such documents, at the time
performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by applicable usury law or result in the Agent or
any Bank having or being deemed to have contracted for, charged, reserved or
received interest (or amounts deemed to be interest) in excess of the maximum,
lawful rate or amount of interest allowed by applicable law to be so
contracted for, charged, reserved or received by the Agent or such Bank, then,
ipso facto, the obligation to be fulfilled by the Company shall be reduced to
the limit of such validity, and if, from any such circumstance, the Agent or
such Bank shall ever receive interest or anything that might be deemed
interest under applicable law that would exceed the Highest Lawful Rate, such
amount that would be excessive interest shall be refunded to the Company or,
to the extent (i) permitted by applicable law and (ii) such excessive interest
does not exceed the unpaid principal balance of the Notes (as defined in the
Credit Agreement) and the amounts owing on other obligations of the Company to
the Agent or any Bank under any Loan Document (as defined in the Credit
Agreement) applied to the reduction of the principal amount owing on account
of the Notes or the amounts owing on other obligations of the Company to the
Agent or any Bank under any Loan Document and not to the payment of interest.
All interest paid or agreed to be paid to the Agent or any Bank shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full period of the indebtedness hereunder until payment
in full of the principal of the indebtedness hereunder (including the period
of any renewal or extension thereof) so that the interest on account of the
indebtedness hereunder for such full period shall not exceed the highest
amount permitted by applicable law. This paragraph shall control all
agreements between the Company, the Agent and the Banks.
The undersigned hereby expressly waives diligence, presentment, demand,
protest, notice of protest, notice of intent to accelerate, notice of
acceleration, and notice of any other kind.
IT IS AGREED THAT THIS NOTE AND THE RIGHTS AND REMEDIES OF THE HOLDER
HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF ILLINOIS, PROVIDED, HOWEVER, THAT NOTHING IN THIS NOTE SHALL
BE DEEMED TO CONSTITUTE A WAIVER OF ANY RIGHTS WHICH THE COMPANY, THE AGENT OR
ANY OF THE BANKS MAY HAVE UNDER THE NATIONAL BANK ACT OR OTHER APPLICABLE
FEDERAL LAW.
AMERICAN RICE, INC.
By___________________________
Its_______________________
EXHIBIT B
AMERICAN RICE, INC.
BORROWING BASE CERTIFICATE
To the Banks Party to the
June 28, 1996 Amended
and Restated Secured Credit Agreement
with American Rice, Inc.
Pursuant to the terms of that certain Amended and Restated Secured Credit
Agreement (the "Agreement") dated as of June 28, 1996 among the undersigned,
American Rice, Inc. (the "Company"), you, individually and as Agent
thereunder, and the other banks party thereto, the Company delivers to you
the following computation of the Borrowing Base, as defined in the
Agreement, as of the computation date noted above. The Company certifies
that the following computation of the Borrowing Base was made in accordance
with the Agreement and that as of the last day of the preceding computation
period, to the best of its knowledge and belief, no Default or Event of
Default has occurred or, if any such Default or Event of Default has
occurred, a description of such Default or Event of Default and the action,
if any, taken by the Company to remedy the same are specified hereinbelow:
______________________________________________________________________________
______________________________________________________________________________
_____________________________________________________________________________.
I. BORROWING BASE CALCULATION
A. Accounts Receivable
1. Gross Accounts (exclusive of Loreto) _______
2. Less:
a)Owned by an account debtor who
is an Affiliate of Subsidiary _______
b)Owned by an account debtor
who is in an insolvency or
reorganization proceeding _______
c)Unpaid more than 90 days
from invoice date _______
d)Ineligible because of 14%
concentration factor _______
e)Otherwise intangible _______
3. Total Deductions _______
4. Eligible Accounts _______
5. Available Accounts Receivable
(line 4 X .85) _______
B. Credit enhanced Accounts Receivable
a) Amount of Letter of Credit
enhanced A/R _______
b) Amount of Bank Guaranteed
enhanced A/R _______
1. Total Enhanced A/R _______
2. Available Enhanced A/R (line 1 X .90) _______
C. Raw & Milled Bulk Rice (exclusive of Loreto)
1. Gross inventory of raw and milled
bulk rice (supporting detail attached) _______
a) Rice not located at approved
locations _______
b) Obsolete, not merchantable _______
c) Otherwise ineligible _______
2. Total deductions _______
3. Eligible inventory _______
4. Available Raw and Milled Bulk Rice
(line 3 X .75)
D. Finished Goods Inventory
(exclusive of Loreto)
1. Gross finished goods inventory
(supporting detail attached) _______
a) Finished goods not located at
approved locations _______
b) Obsolete, not merchantable _______
c) Otherwise ineligible _______
2. Total Deductions _______
3. Eligible Finished Goods _______
4. Available Finished Goods
(line 3 X .70) _______
E. Loreto accounts receivable _______
1. Gross Loreto accounts _______
2. Less unpaid for more than
90 days past due date _______
3. Eligible Loreto accounts receivable
(Line 2 x .85)
F. Loreto Inventory times .75 _______
G. Secured Grower Payables and outstanding
checks payable to CCC _______
H. Borrowing Base (sum of A5, B2, C4, D4, E3
and F less Line G) _______
I. Loans Outstanding
1. Revolving loans outstanding _______
2. Special Purpose Letters of Credit
outstanding _______
3. Documentary Letters of Credit
outstanding
a) (H3 X .30) _______
4. Total Adjusted Outstanding
Short-term Indebtedness _______
J. Unused Availability (Line G minus Line H4) _______
Accounts Receivable Aging:
GENERAL LEDGER ACTIVITY AGING
A/R at _________ $____________ Current ____________
Add _____ Sales $____________ 30-60 Days ____________
Less ____ Cash (____________) 60-90 Days ____________
Less ____ CM's (____________) Over 90 Days ____________
A/R at _________ $____________ TOTAL ____________
Accounts Payable Aging:
Current____________________
30-60 Days____________________
60-90 Days____________________
Total:____________________
Withholding Taxes have been paid through ________________
Dated as of this ________ day of __________________, 199__.
AMERICAN RICE, INC.
BY:__________________________
ITS:______________________
EXHIBIT C
AMERICAN RICE, INC.
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to Harris Trust and Savings
Bank, as agent (the "Agent"), pursuant to that certain Amended and Restated
Secured Credit Agreement dated as of June 28, 1996 by and among American Rice,
Inc. (the "Company"), Harris Trust and Savings Bank and the other Banks
parties thereto (the "Agreement"). Unless otherwise defined herein, the
initially capitalized terms used in this Compliance Certificate have the
meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ___________________________ of the Company;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Company during the accounting period covered by the
attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have no
knowledge of, the existence of any condition or event which constitutes a
Default or an Event of Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations,
evidencing the Company's compliance with certain covenants of the Agreement,
all of which data and computations are true, complete and correct as of the
date indicated thereon.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action that the Company has taken, is taking or proposes to
take, as applicable, with respect to each such condition or event:
_______________________________________________________
_______________________________________________________
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ________ day of
______________________, 19___.
AMERICAN RICE, INC.
By___________________________
Its_______________________
SCHEDULE I
AMERICAN RICE, INC.
COMPLIANCE CALCULATIONS FOR AMENDED AND RESTATED SECURED
CREDIT AGREEMENT DATED AS OF JUNE 28, 1996
CALCULATIONS AS OF _______________, 199__
A. CURRENT RATIO (SECTION 7.25).
1. Consolidated current assets $___________
2. Consolidated current liabilities $___________
3. Ratio of Line A1 to Line A2 ______ to 1.0
4. Line A3 ratio shall not be less than 1.25 to 1.0
Company compliance - circle yes/no
B. ADJUSTED TANGIBLE NET WORTH (SECTION 7.24).
1. Total Shareholders' Equity $___________
2. Intangibles and write-ups $__________
3. Unpaid principal balance of Shareholder Notes $__________
4. Sum of Lines B2 and B3 $__________
5. Line 1 minus Line 4 $__________
6. Line B5 must be greater than or equal to $__________
Company compliance - circle yes/no
C. INTEREST COVERAGE RATIO (SECTION 7.23)
1. Net Income for Measurement Period $_________
2. Interest Expense for Measurement Period $_________
3. Income taxes for Measurement Period $_________
4. Sum of Lines C1 through C3 (EBIT) $_________
5. Ratio of Line C4 to Line C2 ____ to 1.0
6. Line C5 Ratio of this Part I shall not be less than ___ to 1.0
Company compliance - circle yes/no
D. ADJUSTED FUNDED DEBT RATIO (SECTION 7.22)
1. Total Debt (including guarantees of
debts of another and excluding
Revolving Credit) $_________
2. Lowest principal outstanding under
Revolving Credit averaged for 15 days
during most recent 12 months $_________
3. Sum of Lines D1 and D2 (Adjusted Funded Debt) $_________
4. Net Income for past 4 quarters $_________
5. Interest Expense for past 4 quarters $_________
6. Income Taxes for past 4 quarters $_________
7. Depreciation and amortization expense
for past 4 quarters $_________
8. Sum of Lines D4 through D7 (EBITDA) $_________
9. Ratio of Line D3 to Line D8 _____ to 1.0
10. Line D9 ratio shall not exceed _____ to 1.0
Company compliance - circle yes/no
E. CAPITAL EXPENDITURES (SECTION 7.8)
1. Capital expenditures fiscal year to date $_________
2. Permitted Annual Amount
(excluding Carryover Amount) $_________
3. Carryover Amount $_________
4. Sum of Lines E2 and E3 $_________
Compliance - does Line 1 exceed Line 4 - circle yes/no
F. SALES OF INVENTORY TO AFFILIATES AND FOREIGN SUBSIDIARIES (SECTION 7.7)
1. Total inventory sales to Affiliates and Foreign Subs $_________
2. 2% of consolidated revenues $_________
3. Amount of inventory ________ metric tons
4. Inventory by Country:
Country Amount
__________________ ________________
__________________ ________________
__________________ ________________
__________________ ________________
5. Did RMTI receivable exceed $500,000
for any 15 consecutive day period yes/no
6. Compliance with Section 7.7
limitations on inventory sales yes/no
7. Management fees to ERLY $__________
8. Tax sharing payments to ERLY $__________
9. Were Line 7 and Line 8 payments made
pursuant to offset against ERLY 15%
Intercompany Note yes/no
10. Company in compliance with Section 7.7 yes/no
EXHIBIT D
ENVIRONMENTAL CHECKLIST
Company:__________________________________________________
Address:___________________________________________________
Phone:___________________________________________________
NATURE OF ENVIRONMENTAL RISKS FACED BY COMPANY
Does the Company have Corporate Policies and Procedures addressing
Environmental Risks?
What is the main thrust of this policy?
What controls are in place to ensure the Policy and Procedures are
followed?
Who is the corporate officer responsible for environmental issues?
Does this officer report directly to the Board of Directors?
What is the amount of capital expenditures planned for environmental
compliance and rehabilitation?
What contingency plans and financial reserves are in place for an
environmental disaster?
Is the Company currently in compliance with all existing regulatory
requirements?
List those areas where the Company is not in compliance and provide
the Company's plans to rectify and the date to be rectified?
Is the Company aware of new regulatory requirements which may be
enacted?
How does the Company stand in relation to these new requirements?
Is the Company in compliance with all permits and licenses?
List those where the Company is not in compliance, the nature of
the noncompliance, plans and date for corrections?
Are there any outstanding orders or pending environmental
litigation involving the Company? Describe if any.
Level of insurance coverage carried by the Company for
environmental risks?
Questionnaire Completed by:
______________________________________
EXHIBIT E
PERMITTED INVENTORY LOCATIONS
PART I (PERMITTED INVENTORY LOCATIONS):
Location Owner of Premises Estimated
Semi-Annual Rentals
Sutton Warehouse Colusa Glenn Dryer $180,000
49 E. Oak Corporation
Maxwell, CA 95955
Maxwell Plant Colusa Glenn Dryer See above
One Comet Lane Corporation
Maxwell, CA 95955
Biggs Plant Sunwest Foods, Inc. $325,000
507 Bannock Street
Biggs, CA 95917
Greenville Dryer Farmers Grain Terminal $24,000
1715 Theobald
Greenville, MS 38701
Freeport Plant and Port of Freeport $143,411
Warehouse
Freeport, Texas 77541
Stuttgart Plant Company
19th & Elizabeth
Stuttgart, Arkansas 72160
915 Shankling Avenue Marguerite A. Robinson
Jennings, Louisiana 70546
675 Canton St. Barrett Warehouse
Norwood, MA 02062
2702 Holmes Rd. DSI
Houston, TX 77051
2 Colony Rd. Continental Logistics
Jersey City, NJ 07305
2970 North Township Road Kelly Bumpers
Yuba City, California 95991
315 E. Tulare Avenue Company
Visalia, CA 93277
2400 S.E. Mailwell Drive Rudie Wilhelm Warehouse
Milwaukee, OR 97222
18101 E. Colfax Street Acme Warehouse
Denver, CO 80011
1775 Westgate Parkway M&W Distribution
Atlanta, GA 30336
1800 S. Wolf Road LaGroo Distribution
Des Plaines, IL 60018
2900 Holmes Road Distribution Specialists Inc.
Houston, TX 77051
701 24th Avenue Murphy Warehouse
Minneapolis, MN 55440
1215 West Washing St. Hoopeston Foods, Inc.
Hoopeston, IL 60942
PART II (PERMITTED INVENTORY LOCATIONS THROUGH AUGUST 31, 1996):
1800 Isadora St.
Oroville, CA Ehmann Olive Co.
640 Caughlin Rd.
Clyman, WI 53016 Aunt Nellie's Farm Kitchen
Covington, KY Aunt Nellie's Farm Kitchens
6200 Franklin Blvd.
Sacramento, CA 95824 Campbell Soup Company
E. Maimu Street
Maimu Avenue State 110
Napoleon, OH 43545 Campbell Soup Company
7401 Fremont Pike
Perrysburg, OH 43551 Campbell Soup Company
2300 13th Southwest
P.O. Box 9016
Paris, TX 75460 Campbell Soup Company
5917 Dixie Hwy.
Bridgeport, MI 48722-0268 Campbell Soup Company
Box 625
Millsboro, DE 19966-0625 Campbell Soup Company
415 S. Black Corners Road
Imlay City, MI 48444-9761 Campbell Soup Company
204 W. South Street, Ste. 1248
Bonduel, WI 54107 Campbell Soup Company
SCHEDULE 5.2
SUBSIDIARIES
JURISDICTION OF
INCORPORATION OR PERCENTAGE
NAME ORGANIZATION OWNERSHIP
1. Comet Ventures, Inc. California 90%
2. Comet Rice of Puerto
Rico, Inc. Delaware 100%
3. Comet Rice of Jamaica
Limited Jamaica 100%
4. Rice Corporation of
Haiti, S.A. Haiti 100%
5. BargeCarib, Inc. Texas 100%
6. ARI-Vinafood Vietnam 55%
7. ARI-Comet de Mexico,
S.A. de C.V. Mexico 100%
8. Corporation RICA,
S.A. de C.V. El Salvador 50%
9. Compania Envasadora
Loreto, S.A. Spain 100%
SCHEDULE 5.4
LITIGATION
Black Sea Shipping Co. vs. American Rice
Kingwood Lake Estates vs. Murphys, ERLY & ARI
Ibrahim Jabra & Sons vs. Alpha Trading & ARI
Meyers Brothers et al vs. Comet Rice, Inc.
SCHEDULE 5.13
COMPLIANCE WITH LAWS
None
SCHEDULE 7.12
EXISTING LOANS, ADVANCES AND INVESTMENTS IN SUBSIDIARIES
(In Thousands of Dollars)
Loans and
Trade Non-Trade
AccountAccount Equity
SubsidiaryAdvancesAdvancesInvestmentNet Total
Comet Rice of
Puerto Rico, Inc. $8,811 $0 ($8,729) $82
Rice Corporation of
Haiti (2,368) 0 (9,673) 7,305
BargeCarib, Inc. 128 0 (313) (185)
Comet Rice of Jamaica,
Inc. 7,684 0 (4,130) 3,554
Comet Ventures, Inc. 4,132 0 39 4,171
ARI-Vinafood, JV 982 0 2,044 3,026
$19,369 $0 ($1,416) $17,953
