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Severn Trent Morningstar® Document Research℠ FORM 10-KCADIZ INC - CDZIFiled: March 26, 1998 (period: December 31, 1997)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KMARK ONE [1] [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Dectember 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from............to............ ------------------------------ Commission File Number 0-12114 CADIZ LAND COMPANY, INC. (Exact name of registrant specified in its charter) DELAWARE 77-0313235 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Wilshire Boulevard, Suite 1600 Santa Monica, CA 90401 (Address of principal executive offices) (Zip Code)Registrant's telephone number, including area code: (310) 899-4700Securities Registered Pursuant to Section 12(b) of the Act: None Name of each exchange Title of each class on which registered -------------------- ----------------------- None None Securities registered pursuant to Section 12(g) of the Act: Common Stock (Title of Class)Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of regulation S-K (Sec. 220.405 of this chapter) is not containedherein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/As of March 23, 1998, the registrant had 33,069,161 shares of Common Stockoutstanding. The aggregate market value of the Common Stock held by nonaffiliates as of March 23, 1998, was approximately $237,543,000based on the average of the closing bid and asked prices on that date.========================================================================== Documents Incorporated by ReferenceCertain portions of Registrant's proxy statement for the annual meeting tobe held on May 13, 1998, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after theclose of the Registrant's fiscal year, are incorporated by referenceunder Part II of this Form 10-K. PART ISource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 1. Business The long-term strategy of Cadiz Land Company, Inc. (the "Company") isto acquire and develop water-related land and agricultural assets, as wellas selected water-related technologies. The Company has created anintegrated and complementary portfolio of landholdings, water resources,and agricultural operations located throughout central and southernCalifornia which either possess sizable assured supplies of water or can,in future years, utilize water supplied from other Company properties. Management therefore believes that, with both the increasing scarcity ofwater supplies in California and the increasing demand for water, theCompany's access to water will provide it with a competitive advantageboth as a major agricultural concern and as a supplier of water, whichwill lead to continued appreciation in the value of the Company'sportfolio. In September 1996, the Company significantly enhanced this portfoliothrough its acquisition of Sun World International, Inc. ("Sun World"). The Sun World acquisition has made the Company one of the largest fullyintegrated agricultural companies in California by adding to the Company'sportfolio more than 17,200 acres of prime agricultural land, packingfacilities, marketing expertise, proprietary agricultural products and thehighly regarded Sun World brand name. The acquisition of Sun World alsoadded valuable water rights to the Company's existing water resourcedevelopment operations. In addition to its Sun World properties, the Company holds more than39,000 acres of land in eastern San Bernardino County which are underlainby excellent groundwater resources with demonstrated potential for futureapplications, including water storage and supply programs, andagricultural, municipal, recreational and industrial development. All ofthe Company's properties are located in close proximity to California'smajor aqueduct systems. The Company expects to utilize its resources toparticipate in a broad variety of water storage and supply programs,including the storage and supply of surplus water for public agencieswhich require supplemental sources of water. The Company has entered intoan interim Agreement with the Metropolitan Water District of SouthernCalifornia ("MWD") to develop principles and terms for a long-termagreement at its Cadiz, California property. The program (the"Cadiz/Fenner Water Storage and Supply Program") will provide storagecapacity of approximately 500,000 acre-feet and a dry-year source of up to100,000 acre-feet per year of high quality water. The Company continually seeks to develop and manage its land, waterand agricultural resources for their highest and best uses. Agriculturaldevelopment enables the Company to maximize the value of its landholdingswhile generating cash flow. The Company also continues to evaluateacquisition opportunities which are complementary to its current portfolioof landholdings, water resources and agricultural operations.(a) GENERAL DEVELOPMENT OF BUSINESS As part of its current business plan, the Company's land acquisition,development activities and agricultural operations are conducted for thepurpose of enhancing the long-term appreciation of its properties. See"Narrative Description of Business," below. As the most populous state in the nation, California's population isprojected to swell to nearly 50 million people by the year 2020. Thisincreasing population is placing great demands on California'sinfrastructure, particularly its limited water resources. According tothe California Department of Water Resources, shortfalls of approximately7 million acre-feet are forecasted in a dry year by the year 2020. Management therefore believes that, with both the increasing scarcity ofwater supplies in California and the increasing demand for water, theCompany's access to water will provide it with a competitive advantageboth as a major agricultural concern and as a supplier of water which willlead to continued appreciation in the value of the Company's portfolio. On September 13, 1996, the Company acquired all of the stock of areorganized Sun World pursuant to a consensual plan of reorganization fora net purchase price of approximately $179 million (the "Sun WorldAcquisition"). Sun World and certain subsidiaries of Sun World had filedSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. voluntary petitions for relief under Chapter 11 of the Bankruptcy Code onOctober 3, 1994 after debt restructuring negotiations with its existinglenders failed. The Company's Sun World Acquisition was an integral part of theCompany's business strategy. Sun World has added to the Company'sportfolio approximately 17,200 acres of prime agricultural land primarilyin the San Joaquin and Coachella Valleys, increasing the Company's totallandholdings to approximately 56,200 acres. See Item 2, "Properties."(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS During the year ended December 31, 1997, the Company operated in oneindustry segment: resource development. See Consolidated FinancialStatements. Also, see Item 7, "Management's Discussion and Analysis".(c) NARRATIVE DESCRIPTION OF BUSINESS Pursuant to its business strategy, the Company continually seeks todevelop and manage its portfolio of land, water and agricultural resourcesfor their highest and best uses. The development and managementactivities of the Company are currently focused on agricultural operations(primarily through its wholly-owned Sun World subsidiary) and waterresource development. Agricultural development enables the Company tomaximize the use of its landholdings while generating cash flow. TheCompany also continues to evaluate acquisition opportunities which arecomplementary to its current portfolio of landholdings, water resources,and agricultural operations.WATER RESOURCE DEVELOPMENT The Company's portfolio of water resources, located in closeproximity to the major aqueduct systems of central and southern Californiasuch as the State Water Project, the Colorado River Aqueduct, and theColorado River, provides the Company with the opportunity to participatein a variety of water banking, exchange and storage and supply programsin partnership with regional public water agencies. CADIZ/FENNER WATER STORAGE AND SUPPLY PROGRAM. The Company's 27,400acres in the Cadiz and Fenner Valleys of eastern California (the"Cadiz/Fenner Property") are underlain by a substantial high-qualitygroundwater basin. This groundwater is recharged by rain and snowfallwithin a catchment area of nearly 1,300 square miles. Average annualrecharge is estimated by independent experts to be in the range of 20,000to 30,000 acre-feet. See Item 2, "Properties - The Cadiz/FennerProperty." Pursuant to an Environmental Impact Report ("EIR") and land useapprovals by San Bernardino County, the Company is authorized to pumpapproximately 30,000 acre-feet of groundwater per year for irrigation ofits Cadiz Valley property. An acre-foot is 326,000 gallons, or enough forapproximately two families for one year. The Company uses onlyapproximately 6,000 acre-feet per year to irrigate its Cadiz Valleyagricultural development. As a result, the Company has the ability tosupply groundwater - surplus to its present and near-term needs - topublic agencies which require supplemental sources of water. Additionally, independent geotechnical and engineering studies confirmthat the Company's Cadiz Valley properties are well suited for temporarystorage of water which could be imported from the Colorado River duringperiods of excess supply. During wet years or periods of excess supply, the Company would storewater from the Colorado River in its groundwater basin. During periods ofregional drought or reduced allocations from the Colorado River, thepreviously imported water, together with additional indigenousgroundwater, could be extracted and conveyed to the Colorado RiverAqueduct. On December 23, 1997, the Company entered into an interim Agreementwith MWD to develop principles and terms for a long-term agreement inwhich the Company would provide storage capacity of approximately 500,000acre-feet and a dry-year source of up to 100,000 acre-feet per year ofhigh quality water. The interim Agreement calls for the development ofprinciples and terms, such as a fee structure, delivery schedule andenvironmental compliance, and final verification of feasibility for aSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. water storage and supply program. The program would involve theconstruction of groundwater spreading and recovery facilities, a pumpingplant, power facilities, and a pipeline that would convey the water to andfrom the Cadiz property from the Colorado River Aqueduct. The programcould be fully operational by the year 2000. The interim Agreement also calls for the Company and MWD to exploretwo potential future additions to the water storage and supply program,including the construction of a dual pipeline at the Cadiz/Fenner propertyand/or the development of an additional program at the Company's nearbyDanby Lake property. Either addition would increase the storage and/orsupply capacity. In addition, once operational, the Cadiz/Fenner Water Storage andSupply Program will be conducted in accordance with a comprehensive,independent basin management program to ensure long-term protection of thegroundwater basin. PIUTE. The Company's water development operations at its 7,300 acrePiute property are located in eastern San Bernardino County approximately15 miles from the resort community of Laughlin, Nevada and about 12 milesfrom the Colorado River town of Needles, California. Hydrological studiesand testing of a full scale production well have demonstrated that thislandholding is underlain by groundwater of excellent quality. Averageannual recharge is estimated by independent experts to be in the range of10,000 to 20,000 acre-feet. See Item 2, "Properties - The PiuteProperty." Additional technical and environmental investigations are currentlyunderway for a water development program anticipated to transfer approximately 10,000 to 15,000 acre feet per year. DANBY LAKE AND OTHER. The Company currently owns or controlsadditional acreage located throughout other areas of the Mojave Desert,such as Danby Lake. This area is located approximately 30 miles southeastof the Company's Cadiz/Fenner Valley property and 10 miles north of theColorado River Aqueduct. As discussed above, the interim Agreement with MWD identifies theCompany's Danby Lake property as a potential addition to the Cadiz/FennerWater Storage and Supply Program. SUN WORLD WATER RESOURCES. The Sun World Acquisition brought to theCompany valuable water rights in various parts of central and southernCalifornia. The Company believes with increasing water shortages inCalifornia, land with prime water rights will increase substantially invalue. Sun World's landholdings and associated water resources are locatedadjacent to the major aqueduct systems of central and southern California,and in close proximity to the Colorado River. These holdings complementthe Company's other groundwater resources, and will enhance the Company'sopportunities to participate in a broad variety of water storage, supply,exchange or banking programs.AGRICULTURAL OPERATIONS With the Sun World Acquisition, the Company has become one ofCalifornia's largest vertically integrated agricultural companiescombining an extensive research and development program, year-roundsourcing, farming and packing activities and strong marketingcapabilities. For the twelve months ended December 31, 1997, Sun Worldrecorded revenues of $99.9 million. PRODUCT LINE. Sun World ships 75 different varieties of fresh fruitsand vegetables to all 50 States and to more than 30 foreign countries. Sun World is a leading grower and marketer of table grapes, seedlesswatermelons, colored sweet peppers, plums, peaches, nectarines, apricotsand lemons. It is also one of California's largest independent marketersof grapefruit, tangerines, mandarins, and dates. The breadth and diversity of the product line helps to minimize theimpact of individual crop earnings fluctuations. Further, the breadth anddiversity of its product offering provides Sun World with greater presenceand influence with its grocery and food service customers.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Although many fruits and vegetables are fungible commodities, SunWorld has adopted a strategy of developing or acquiring specialty producevarieties with unique characteristics which differentiate them fromcommodity produce varieties. Most of these varieties are harvested duringfavorable marketing windows when available supply from competitors islimited. These specialty varieties typically command a price premium andare less subject to the same price volatility than the commodityvarieties. They also provide Sun World with a dominant position in anumber of product categories. Examples of the branded produce grown andmarketed by Sun World include Superior Seedless(TM) table grapes, BlackDiamond(TM) plums, Sun World Seedless(R) watermelons, Honeycot(R)apricots, Amber Crest(R) peaches and Sun World sweet colored peppers. These products evolved through a combination of internal development andacquisition. Sun World's research and development center is dedicated todeveloping additional high value proprietary varieties. See "ProprietaryProduct Development," below. FARMING OPERATIONS. Sun World's farming operations producedapproximately 8 million units of fruits and vegetables during the yearended December 31, 1997. Its principal agricultural lands are located inthe San Joaquin and Coachella valleys of California. See Item 2,"Properties." Sun World properties are primarily dedicated to producing permanentcommercial crops and, to a lesser extent, annual (or row) crops. Additionally, over 1,600 acres are currently utilized for developing crops(e.g. vines and trees that have not yet reached a commercial maturity). Subsequent to the Sun World acquisition, the Company implemented a cropdevelopment plan that provides for the planting of certain proprietaryvarieties of grapes and treefruit (approximately 1,100 acres) as well asthe removal of approximately 1,400 acres of certain under-performingpermanent crops. Given the Company's current crop allocation plan, it isnow redeploying marginally productive acreage to produce more varieties ofcrops which are available for delivery at peak pricing windows throughoutthe year. PACKING AND MARKETING OPERATIONS. In addition to merchandising itsown products, Sun World provides marketing and packing services to thirdparty growers. For third party growers, Sun World provides three keybenefits: (i) Sun World's brand name, proprietary products and reputationwith wholesalers resulting in a significant pull through effect; (ii) afull complement of handling services that include harvest, cooling,packing and shipping; and (iii) an internal sales and marketing forceservicing over 650 customers throughout the world. Sun World's packing facilities handled approximately 9 million unitsof produce during the year ended December 31, 1997. These facilitiesprovide harvesting, packing, cooling and shipping services for Sun Worldproduction, as well as for other commercial clients. Currently, Sun Worldowns four facilities, three of which are located in the Coachella Valleyand one of which is located in the San Joaquin Valley. See Item 2, "Properties." Sun World's vertically integrated operations enable it to offer themarket a continuous stream of new, specialty products which receive amarket premium. As a large grower, Sun World is able to manage thequality of its own product line, and as a significant packer/marketer, SunWorld works with other growers to ensure product quality through packingand distribution. As a result, on average, the Company sells 12 to 13million units annually with wholesale value of approximately $120 million. This amount includes sale proceeds received for units sold on behalf ofthird party growers for which only the sales commission and packingrevenues received by Sun World are included in Sun World's reportedrevenues for 1997 of $99.9 million. Sun World's sourcing, both external and internal, is diversifiedgeographically. Sun World's owned and leased farming operations arelocated throughout California from the Coachella Valley in the south tocentral California's San Joaquin Valley as well as operations near thecoast. Sun World sources externally produced product from throughoutCalifornia, from other areas of the United States, and from internationalsources. This geographic diversification not only reduces the impact thatunfavorable weather conditions and infestations could have on Sun World'soperations, but also provides Sun World with a longer selling season forSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. many crops since the harvests occur at different times. In addition,geographic diversification also allows Sun World the ability to providethe quality and breadth of product throughout the year which is beingdemanded by retailers. Sun World's customer base consists of more than 650 accountsincluding supermarket retailers, food service entities, warehouse clubs,and international trading companies located in approximately 30 countries. Domestic customers include national retailers such as Safeway Stores andAmerican Stores; club stores, including PriceCostco and Sam's; and foodservice distributors, including Sysco and Alliant. Approximately 11% ofSun World's products are marketed outside of the United States in Canada,Europe, Australia, Japan, Hong Kong, Singapore, Malaysia and Taiwan. Onlyone national retailer, Safeway Stores, (representing approximately 14%)accounted for more than 10% of Sun World's revenues in 1997. As isconsistent with industry practice, Sun World does not maintain writtenagreements with this or its other significant customers. PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a long history ofproduct innovation, and its research and development center maintains afruit breeding program that has introduced dozens of proprietary fruitvarieties in the last five years. Recent product successes include theBlack Diamond(TM) plum, the Amber Crest(R) peach and the Honeycot(R)apricot. There are several other promising grape and treefruit varietieswhich are scheduled for commercial planting and production in the nearfuture. Sun World utilizes approximately 235 acres for its research anddevelopment center and crop experimentation. The research and developmentcenter facility houses tissue culture rooms, growth rooms, fourgreenhouses, and over 200 acres of experimental growing crops. Theamounts expended by Sun World on its research and development activitiessince the Sun World Acquisition amounted to $809,000 for the year endedDecember 31, 1997 and $120,000 for the period from September 14, 1996 toDecember 31, 1996. Management expects to maintain at least its 1997 levelof expenditures in the future. As a result of over 20 years of research and development, Sun Worldholds rights to more than 600 patents and trademarks around the world. The patent registrations exist in most major fruit producing countries andthe trademarks are held in both fruit producing and consuming regions. Sun World's patents have varying expiration dates occurring within thenext several years through 2017; however, the expiration of any individualpatent will not have a material effect upon Sun World's operations. Additionally, Sun World has a 50% ownership interest in AmericanSunmelon, a partnership engaged in the proprietary development, productionand marketing of seedless watermelon seed. Sun World's share of netincome generated by American Sunmelon was approximately $1.4 million forcalendar year 1997.SEASONALITY In connection with the water resource development activities of theCompany, revenues are not expected to be seasonal in nature. Sun World's agricultural operations are impacted by the generalseasonal trends that are characteristic of the agricultural industry. SunWorld has historically received the majority of its net income during themonths of June to October following the harvest and sale of its tablegrape and treefruit crops. Due to this concentrated activity, the Companyhas, therefore, historically incurred a loss with respect to itsagricultural operations in the other months during the year.COMPETITION The Company faces competition for the acquisition, development andsale of its properties from a number of competitors, some of which havegreater resources than the Company. The Company may also face competitionin the development of water resources associated with its properties. Since California has scarce water resources and an increasing demand foravailable water, the Company believes that price and reliability ofdelivery are the principal competitive factors affecting transfers ofwater in California.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The agricultural business is highly competitive. Sun World'scompetitors include a limited number of large international foodcompanies, as well as a large number of smaller independent growers andgrower cooperatives. No single competitor has a dominant market share inthis industry due to the regionalized nature of these businesses. Inaddition to drawing from its proprietary base of products, Sun Worldutilizes brand recognition, product quality, harvesting in favorableproduction windows, effective customer service and consumer marketingprograms to enhance its position within the highly competitive fresh foodindustry. Consumer and institutional recognition of the Sun Worldtrademark and related brands and the association of these brands with highquality food products contribute to Sun World's ability to compete in themarket for fresh fruit and vegetables.EMPLOYEES As of December 31, 1997, the Company employed a total of 843full-time employees. Sun World throughout the year engages various parttime and seasonal employees, with a seasonal high of approximately 2,500part time employees. Approximately 119 of the Company's employees arerepresented by a labor union pursuant to a contract that expires in 1999. Generally, the Company believes that its employee relations are good.REGULATION Certain areas of the Company's operations are subject to varyingdegrees of federal, state and local laws and regulations. The Company'sagricultural operations are subject to a broad range of evolvingenvironmental laws and regulations. These laws and regulations includethe Clean Air Act, the Clean Water Act, the Resource Conservation andRecovery Act, the Federal Insecticide, Fungicide and Rodenticide Act andthe Comprehensive Environmental Response, Compensation and Liability Act. Compliance with these foreign and domestic laws and related regulations isan ongoing process which is not currently expected to have a materialeffect on the Company's capital expenditures, earnings or competitiveposition. Environmental concerns are, however, inherent in most majoragricultural operations, including those conducted by the Company, andthere can be no assurance that the cost of compliance with environmentallaws and regulations in the future will not be material. However, neitherthe Company nor Sun World expects to incur any material capitalexpenditures for environmental control facilities during 1998. The Company's food operations are also subject to regulationsenforced by, among others, the U.S. Food and Drug Administration andstate, local and foreign equivalents and to inspection by the U.S.Department of Agriculture and other federal, state, local and foreignenvironmental and health authorities. Among other things, the U.S. Foodand Drug Administration enforces statutory standards regarding the safetyof food products, establishes ingredients and manufacturing procedures forcertain foods, establishes standards of identity for foods and determinesthe safety of food substances in the United States. Similar functions areperformed by state, local and foreign governmental entities with respectto food products produced or distributed in their respectivejurisdictions. Existing environmental regulations have not, in the past,had a materially adverse effect upon the operations of the Company, andthe Company believes that existing environmental regulations will not, inthe future, have a materially adverse effect upon its operations. Therecan be no assurances, however, as to the effect of any environmentalregulations which may be adopted in the future. As the Company proceeds with the development of its properties,including related infrastructure, the Company will be required to satisfyvarious regulatory authorities that it is in compliance with the laws,regulations and policies enforced by such authorities. Groundwaterdevelopment, and the export of surplus groundwater for sale to singleentities such as public water agencies, are not subject to regulation byexisting statutes, other than general environmental statutes applicable toall development projects. Although applicable laws, regulations andpolicies have not had a materially adverse effect upon the ability of theCompany to develop its Cadiz or other properties to date, managementcannot predict with certainty what requirements, if any, may be imposed byregulators upon future development. In addition, the time and costsassociated with obtaining regulatory approvals for resource developmentare significant, and there can be no assurance that the Company willreceive desired approvals for future development plans.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 2. PROPERTIES The Company currently leases its executive offices in Santa Monica,California. The Company also maintains a development office in SanBernardino, California. Sun World owns its main packing facility(including sales and administrative offices) in Bakersfield, Californiaand owns three packing facilities (including sales offices) in Coachella,California. The Company and each of its subsidiaries believe that theirproperty and equipment are generally well maintained, in good operatingcondition and adequate for their present needs. The following is a description of the Company's significantproperties.THE CADIZ/FENNER PROPERTY In 1984, the Company conducted an investigation of the feasibility ofthe agricultural development of land located in the Mojave desert nearCadiz, California, and confirmed the availability of prime quality waterin commercial quantities appropriate for agricultural development. Since1985, the Company has acquired over 27,000 acres in the Cadiz and Fennervalleys of eastern San Bernardino County. Since 1990, the Company hasbeen pumping an average of approximately 6,000 acre-feet of groundwater annually from its well operations for agricultural purposes. Additional independent geotechnical and engineering studies conductedsince 1985 have confirmed that the Cadiz/Fenner property is well suitedfor temporary storage of water which could be imported from the ColoradoRiver during periods of excess supply and alternatively the transfer ofstored water from the Company's property and conveyed back to the ColoradoRiver Aqueduct. In December 1997, the Company entered into an interim Agreement withMWD to develop principles and terms for a long-term agreement in which theCompany would provide storage capacity of approximately 500,000 acre-feetand a dry-year source of up to 100,000 acre-feet per year in connectionwith this property. See Item 1, "Business-Narrative Description ofBusiness - Water Resource Development." In November 1993, the San Bernardino County Board of Supervisorsunanimously approved a General Plan Amendment establishing an agriculturalland use designation for 9,600 acres at Cadiz for which 1,600 acres havebeen developed and are leased to Sun World. This Board action representedthe largest land use approval on behalf of a single property holder in theCounty's known history. This action also approved permits to constructinfrastructure and facilities to house as many as 1,150 seasonal workersand 170 permanent residents (employees and their families) and allows forthe withdrawal of more than 1,000,000 acre-feet of groundwater from theCompany's underground water basin. Substantially all Cadiz/Fenner acreage is held in fee directly by theCompany.THE SUN WORLD PROPERTIES FARM PROPERTIES. Sun World owns approximately 17,200 acres andleases approximately 2,100 acres of improved land in central and southernCalifornia. The majority of this land is used for the cultivation ofpermanent and annual crops and support activities, including packingfacilities. Sun World owned farming property is divided between five distinctgeographic regions: Madera, Bakersfield and Arvin (located within the SanJoaquin Valley), Coachella (located in the state's southeastern cornernear Palm Springs) and Blythe (located approximately 100 miles east of theCoachella Valley adjoining the Colorado River). PACKING AND HANDLING FACILITIES. Sun World owns four packing andhandling facilities, three of which are located in the Coachella Valleyand one of which is located in the San Joaquin Valley at Kimberlina, nearBakersfield. The Kimberlina facility, located on an 83 acre parcel owned by SunSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. World, consists of two highly automated production lines for packingtreefruit and citrus, cold storage areas, and office space. Sun World's primary Coachella Valley facility consists of twoindependent buildings located on 22 acres of industrial commercial zonedland in Coachella, California, two miles south of Indio. The 22 acresconsists of 5 acres of buildings and improvements, 6 acres of packing, and11 acres of open land. One building is used primarily for packing citrus,receiving table grapes, cold storage and office space. The other buildingis used primarily for receiving, cooling and storing table grapes. Sun World's other operating facility in Coachella consists of onebuilding on 4 acres of land and is used primarily for packing watermelonsand citrus and for storage. All of the Sun World properties are subject to encumbrances in favorof the holders of the Series B First Mortgage Notes issued by Sun Worldwith an aggregate outstanding balance of $115.0 million as of December 31,1997. See Item 7, "Management's Discussion and Analysis of FinancialCondition and Results of Operations - Liquidity and Capital Resources -Current Financing Arrangements."THE PIUTE PROPERTY The Piute property consists of approximately 7,300 acres and islocated approximately 60 miles northeast of Cadiz and approximately 15miles west of the Colorado River and Laughlin, Nevada, a small, fastgrowing town with hotels, casinos and water recreation facilities. ThePiute property was identified for acquisition by the Company by acombination of satellite imaging and geological techniques which were usedby the Company to identify water at Cadiz. The Piute acreage adjoins Highway 95, which is a direct route to LasVegas, approximately 60 miles north. The Santa Fe Railroad passes throughthe land and Interstate 40 is approximately 12 miles to the south. Theproperty is held by the Company in fee title as to approximately 3,600acres, with the remaining acreage under option. The Company has commenced the development of the water resources ofthis property. See Item 1, "Business - Narrative Description of Business- - Water Resource Development."OTHER PROPERTIES In addition to the Cadiz and Piute properties, the Company ownsapproximately 4,300 additional acres in the Mojave Desert as to whichdevelopment has not yet commenced. These properties include the DanbyLake property which has been identified as a potential future addition fora water storage and supply program under the Company's interim agreementwith MWD. See Item 1, "Business - Narrative Description of Business -Water Resource Development." The Company will continue to seek to acquire additional properties both in Southern California desert regions and elsewhere which are believed to be suitable for development. All of the Company's non-Sun World fee property is subject toencumbrances in favor of Cadiz' primary lender as security for loans withoutstanding balances aggregating approximately $14.8 million as ofDecember 31, 1997. See Item 7, "Management's Discussion and Analysis ofFinancial Condition and Results of Operations - Liquidity and CapitalResources - Current Financing Arrangements."ITEM 3. LEGAL PROCEEDINGS In November 1995, the San Bernardino County Board of Supervisorscertified an Environmental Impact Report/Environmental Impact Statement("EIR/EIS"), and approved a Conditional Use Permit for the proposedconstruction and operation of a substantial landfill on the shore ofBristol Lake near Amboy, California (the "Rail Cycle" Project). Thegeneral partner of Rail Cycle is controlled by Waste Management, Inc.("WMI"). The Rail Cycle Project would be located within a few miles ofland owned by the Company at Cadiz, California, which the County of SanBernardino has designated for agricultural use in its General Plan.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company has vigorously opposed the Rail Cycle Project on a numberof grounds. In December 1995, an action styled CADIZ LAND COMPANY, INC.VS. COUNTY OF SAN BERNARDINO, ET. AL. CASE NO. BCV 02341 was filed by theCompany in Superior Court in San Bernardino County. The action challengesthe various decisions by the County of San Bernardino relative to theRail Cycle Project. Named in this action, in addition to the County ofSan Bernardino, were the Board of Supervisors of the County of SanBernardino, three individual members of the Board of Supervisors, anemployee of the County, and Rail Cycle, L.P. whose general partner iscontrolled by WMI. The Company alleges that the actions of the County ofSan Bernardino did not comply with the guidelines prescribed by theCalifornia Environmental Quality Act and violated state planning andzoning laws. The action seeks to set aside the county certification ofthe EIR/EIS and approval of the proposed Rail Cycle Project. The Companycontinues to believe the proposed Rail Cycle Project, if constructed andoperated as currently designed, poses environmental risks both to theCompany's agricultural operations at Cadiz and to the groundwater basinunderlying the Cadiz property. Accordingly, the Company intends to pursuea claim for damages against the County of San Bernardino and Rail Cycleand the action seeks compensatory damages. On November 6, 1997, the SanBernardino Superior Court denied the Company's application for a Writ ofMandate to set aside the County of San Bernardino's certification of the("EIR/EIS"). The Company intends to continue prosecuting its claim formonetary damages. No trial date has yet been set. On October 24, 1997, the Company filed suit in the United StatesDistrict Court, for the Central District of California, against WMI,certain key executives and consultants of WMI, and certain other partiesin interest as to the Rail Cycle Project. The Complaint as originallyfiled asserted the following claims arising under federal law: Violationsof the Racketeer Influenced and Corrupt Organization Act (RICO),Conspiracy to Violate the Racketeer Influenced and Corrupt OrganizationAct (RICO), violations of Section 10(b) of the Securities Exchange Act of1934, and Interception of Wire Communications. Additionally, theComplaint asserted the following claims arising under state law: Conspiracy, Misappropriation of Trade Secrets, Conversion, Defamation,Trade Libel, Wiretapping, Interference with Existing BusinessRelationship, and Unfair Business Practices. On December 9, 1997, thefederal district court severed the eight state law claims from thecomplaint and dismissed them without prejudice. Those claims have beenreasserted in a state proceeding filed on January 8, 1998 in Los AngelesSuperior Court (West Division). Prior to the acquisition of Sun World, the Internal Revenue Service(IRS) had filed claims against Sun World and certain of its subsidiaries(collectively "the Sun World Claimants") for taxes refunded for workersthat the IRS claims were employees. The Sun World Claimants contend thatthe workers are excluded from the definition of employment under theInternal Revenue Code. On January 21, 1998, the District court ruled infavor of one of the Sun World Claimants. Management believes that thelikelihood of an unfavorable future outcome with regard to this matter isremote. Accordingly, the Company released $3,780,000 of reserves relatedto this matter at December 31, 1997 which are reported on the ConsolidatedStatement of Operations as Litigation Benefit. The Company is involved in other legal and administrative proceedingsand claims. In the opinion of management, the ultimate outcome of eachproceeding or all such proceedings combined will not have a materialadverse impact on the financial position of the Company.ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The results of the Company's Annual Meeting of Stockholders held June12, 1997 were reported in the Company's Quarterly Report on Form 10-Q forthe quarterly period ended June 30, 1997. PART IIITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the Nasdaq National StockMarket under the symbol "CLCI". The following table reflects actual salesSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. transactions. The high and low range of the sales price of the commonstock for the dates indicated have been provided by Nasdaq. High LowQuarter Ended Sales Price Sales Price --------- ----------- 1995: March 31 $5.438 $4.125 June 30 $4.875 $4.000 September 30 $5.500 $3.688 December 31 $6.250 $4.063 1996: March 31 $6.375 $5.250 June 30 $6.500 $5.219 September 30 $6.000 $3.875 December 31 $5.625 $3.875 1997: March 31 $ 6.063 $4.838 June 30 $ 6.250 $4.813 September 30 $ 8.063 $5.000 December 31 $ 9.375 $6.125 On March 23, 1998, the high, low and last sales prices for theshares, as reported by Nasdaq, were $9.7344, $9.7344 and $9.7344respectively. In January 1998, options in the Company's stock began trading on theAmerican Stock Exchange, The Chicago Board Options Exchange and thePacific Stock Exchange under the symbol "QAZ." The Company also has an authorized class of 100,000 shares ofpreferred stock ("Preferred Stock"). To date the Board of Directors hasdesignated three series of Preferred Stock for issuance, including (i) upto 60,000 shares of Series A Preferred, of which 27,631 shares have beenissued and no shares remain outstanding; (ii) up to 1,000 shares of SeriesB Preferred, of which 1,000 shares have been issued and no shares remainoutstanding; and (iii) up to 365 shares of Series C Preferred, of which340 shares have been issued and no shares remain outstanding. The Boardof Directors has no present plans or arrangements for the issuance ofadditional shares of Preferred Stock. The estimated number of beneficial owners of the Company's CommonStock is approximately 2,700, and the number of stockholders of record onMarch 23, 1998, was 276. To date, the Company has never paid a cash dividend on Common Stock. The Company's ability to pay such dividends is subject to certaincovenants pursuant to agreements with the Company's lenders. During the year ended December 31, 1997, the Company sold thefollowing securities which were not registered under the Securities Act of1933, as amended (the "Securities Act"). The Company believes that thetransactions described below were all exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof astransactions not involving any public offerings. In each transaction, thenumber of investors was limited, the investors confirmed to the Companytheir investment intent, the investors were provided with informationabout the Company and/or access to such information, and restrictions wereplaced on resales of the securities. In each transaction involving theissuance of stock options or warrants, the exercise price was equal to thefair market value of the Company's common stock as of the date of grant ofsuch options or warrants. No underwriters were used or commissions paidon connection with any such sales. In March, June, and September 1997, prior to the registration inSeptember 1997 of options issuable under the Company's 1996 Stock OptionPlan, the Company issued a total of 317,500 options to purchase commonstock to employees of the Company under the Plan. All such options vestthree years from issuance and are exercisable until five years from dateof grant. 280,000 options granted in March and 27,500 options granted inJune are exercisable at $5.00 per share; 5,000 options granted in June areexercisable at $5.25 per share; and 5,000 options granted in September areexercisable at $6.00 per share. In January 1997, the Company issuedSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 50,000 options to purchase common stock to a consultant in considerationof consulting services rendered to the Company. These options areexercisable for three years at an exercise price of $5.50 per share. InMay 1997, the Company issued 75,000 warrants to ING Baring (U.S.) CapitalCorporation ("ING") in consideration of the assumption and extension byING of the Company's outstanding term loan. These warrants areexercisable for five years at an exercise price of $5.03 per share. InNovember 1997, the Company issued 200,000 warrants to ING in considerationof the issuance by ING of a revolving credit facility to the Company. Thewarrants have a term of seven years and an exercise price of $7.00 pershare. In April 1997, 50,000 shares were granted to the Company's ChiefExecutive Officer at no cost as a bonus for extraordinary servicesrendered. In May 1997, 65,000 shares valued at $5.00 per share wereissued to a single investor in connection with the settlement ofobligations assumed in connection with the Sun World Acquisition. In June1997, 240,000 shares were issued to Rabobank for total consideration of$12,000 upon the exercise of warrants previously granted in connectionwith the Company's credit facilities with Rabobank.ITEM 6. SELECTED FINANCIAL DATA The following selected financial data insofar as it relates to theyear ended December 31, 1997, the nine months ended December 31, 1996 andto each of the years ended March 31, 1996, 1995, and 1994 has been derivedfrom financial statements audited by Price Waterhouse LLP, independentaccountants. The information that follows should be read in conjunctionwith the audited consolidated financial statements and notes thereto forthe year ended December 31, 1997, the nine months ended December 31, 1996and for the year ended March 31, 1996 included elsewhere herein. See alsoItem 7, "Management's Discussion and Analysis". CADIZ LAND COMPANY, INC. Selected Financial Data ($ in thousands, except for per share data) Year Nine Months Ended Ended December 31, December 31, Year Ended March 31, ----------------------- 1997 1996(1) 1996 1995 1994 ---- ------ ---- ---- ----Statement of Operations Data: Revenues $ 100,157 $ 23,780 $ 1,441 $ 543 $ 190 Loss from continuing operations before extraordinary items (8,538) (5,997) (8,487) (4,706) (4,239) Gain from disposal of discontinued segment(2) -0- -0- -0- -0- 145 Extraordinary items -0- -0- -0- 115 343 Net loss (8,538) (5,997) (8,487) (4,591) (3,751) Less: Preferred stock dividends (1,213) (674) -0- -0- -0- Imputed dividend on preferred stock -0- (2,451) -0- -0- -0- ------- -------- -------- ------- ------- Net loss applicable to common stock $ (9,751) $ (9,122) $ (8,487) $ (4,591) $(3,751) ========= ========= ========= ========= ========Per Share: Net loss from continuing operations before extraordinary items $ (0.33) $ (0.44) $ (0.48) $ (0.29) $ (0.33)Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Net income from operations of discounted segment segment and disposal of discontinued segment(2) -0- -0- -0- -0- 0.01 Extraordinary items -0- -0- -0- 0.01 0.03 -------- -------- -------- ------- ------ Net loss $ (0.33) $ (0.44) $ (0.48) $ (0.28) $ (0.29) ========= ========= ======== ======== ========Weighted average common shares and equivalents 29,485 20,500 17,700 16,500 12,800 ======== ======== ======== ======= ======= December 31, December 31, March 31, -------------------------- 1997 1996 1996 1995 1994 ---- ----- ---- ---- -----Balance Sheet Data: Total assets $ 203,049 $ 230,790 $ 38,663 $ 34,888 $ 34,058 Long-term debt $ 131,689 $ 149,111 $ 68 $ 16,827 $ 13,833 Redeemable preferred stock $ -0- $ 27,431 $ -0- $ -0- $ -0- Preferred stock, common stock and additional paid-in-capital $ 121,199 $ 88,808 $ 73,149 $ 62,857 $ 60,044 Accumulated deficit $ (70,818) $ (61,067) $(54,396) $(45,909) $(41,318) Stockholders' Equity $ 50,381 $ 27,741 $ 18,753 $ 16,948 $ 18,726 - -----------------------------(1) Subsequent to the Company's September 13, 1996 acquisition of Sun World, the Company changed its fiscal year end from March 31 to December 31 in order to align the Company's year end with that of Sun World. Additionally, as a result of the Sun World Acquisition, the operations for the nine months ended December 31, 1996 include the results of operations of Sun World for the period September 14, 1996 through December 31, 1996.(2) In December 1990, the Company committed to a plan to eliminate all agribusiness operations acquired as part of its 1988 merger with Pacific Agricultural Services, Inc. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL On September 13, 1996, the Company acquired all of the outstandingcapital stock of Sun World. The Company's acquisition of Sun World wasaccounted for using the purchase method of accounting. The ConsolidatedFinancial Statements include Sun World from the date of acquisition. Inaddition, in 1996, the Company changed its fiscal year end from March 31to December 31 in order to align the Company's year end with that of SunWorld.RESULTS OF OPERATIONS The consolidated financial statements set forth herein for the yearended December 31, 1997, the nine months ended December 31, 1996, and theyear ended March 31, 1996, reflect the results of operations of theCompany and its wholly owned subsidiaries, Sun World (since September 14,1996), and Southwest Fruit Growers ("SWFG") in which the Company is thegeneral partner and has an approximate 66.3 percent partnership interest. As a result of the Sun World Acquisition and the change in fiscalyear end, direct comparisons of the Company's consolidated results ofSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. operations for the year ended December 31, 1997 to the nine months endedDecember 31, 1996 will not, in the view of management of the Company,prove meaningful. Instead, a summary of the Sun World elements whichmanagement of the Company believes is essential to an analysis of theresults of operations for such periods is presented below. For purposesof this summary, the term Sun World will be used, when the context sorequires, with respect to the operations and activities of the Company'sSun World subsidiary, and the term Cadiz will be used, when the context sorequires, with respect to those operations and activities of the Companynot involving Sun World. The Company's net income or loss in future fiscal periods will belargely reflective of (a) the operations of the Cadiz/Fenner Water Storageand Supply Program and (b) the operations of Sun World. Sun Worldconducts its operations through four operating divisions: farming,packing, marketing and proprietary product development. Net income fromfarming operations varies from year to year primarily due to yield andpricing fluctuations which can be significantly influenced by weatherconditions, and are, therefore, generally subject to greater annualvariation than Sun World's other divisions. However, the geographicdistribution of Sun World's farming operations and the diversity of itscrop mix makes it unlikely that adverse weather conditions would affectall of Sun World's properties or all of its crops in any single year. Nevertheless, net profit from Sun World's packing, marketing andproprietary product development operations tends to be more consistentfrom year to year than net profit from Sun World's farming operations. Assuch, Sun World continues to strategically add volume in the packing andmarketing areas that will compliment Sun World's in-house production orfill in contra-seasonal marketing windows. Sun World is also activelyexploring various domestic and international opportunities to licenseselected proprietary fruit varieties. The following discussion contains trend analysis and other forward-looking statements within the meaning of Section 27A of the Securities Actof 1933, as amended, and Section 21E of the Securities Exchange Act of1934, as amended. Actual results could differ materially from thoseprojected in the forward-looking statements throughout this document.YEAR ENDED DECEMBER 31, 1997 COMPARED TO NINE MONTHS ENDED DECEMBER 31,- ----------------------------------------------------------------------- 1996- ----- The Company's agricultural operations are impacted by the generalseasonal trends that are characteristic of the agricultural industry. SunWorld has historically received the majority of its net income during themonths of June to October following the harvest and sale of its tablegrape and treefruit crops. Due to this concentrated activity, Sun World has, therefore, historically incurred a loss with respect to itsagricultural operations in the other months during the year. During 1997, atypical weather conditions resulted in much higherthan normal crop yields for table grapes and treefruit crops, thereforeresulting in lower prices throughout the industry. However, Sun World'sproprietary products, such as Superior Seedless(TM) table grapes and BlackDiamond(TM) plums, allowed Sun World to continue to command a pricepremium to the overall market which has helped mitigate the difficultmarket conditions industry-wide. The table below sets forth, for the periods indicated, the resultsof operations for the Company's four main operating divisions (beforeelimination of any interdivisional charges) as well as the categories ofcosts and expenses incurred by the Company which are not included withinthe divisional results (in thousands): Nine Months Year Ended Ended December 31, December 31, 1997 1996 ---- ---- Divisional net income: Farming $ 7,839 $ 3,867 Packing 8,017 726 Marketing 4,126 666 Proprietary product development 1,568 718Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ------- ------- 21,550 5,977 Landfill prevention activities 683 394 General and administrative 9,832 5,979 Litigation benefit (3,780) - Depreciation and amortization 7,745 1,039 Interest expense, net 15,608 5,203 Income tax benefit - (641) -------- ------- Net loss $ (8,538) $ (5,997) ======== ======== FARMING OPERATIONS. The Company farms over 19,000 acres ofagricultural properties, which are primarily dedicated to producingpermanent commercial crops. Revenues during the year ended December 31,1997 resulted primarily from the harvest of table grapes, treefruit, sweetred and yellow peppers and seedless watermelons from the San JoaquinValley; table grapes, sweet red and yellow peppers and seedlesswatermelons from the Coachella Valley; lemons from the Cadiz and Blytheranches; as well as sweet red and yellow peppers from the Californiacoastal operations. Although yields for these crops were higher thannormal, similar high crop yields throughout the industry resulted in lowerprices. As Sun World is able to command a premium price for itsproprietary products such as Superior Seedless(TM) table grapes and BlackDiamond(TM) plums, the impact of the industry-wide lower prices have beensomewhat mitigated. Net income from farming operations totaled $7.8million for the year ended December 31, 1997 based upon revenues of $77.3million offset by farming expenses of $69.5 million. Net income fromfarming operations for the nine months ended December 31, 1996, whichincluded the operations of Sun World subsequent to the acquisition fromSeptember 14, 1996 to December 31, 1996, totaled $3.9 million on revenuesof $16.5 million and expenses of $12.6 million. PACKING OPERATIONS. During 1997, Sun World's four packing andhandling facilities contributed $23.1 million in revenues offset by $15.1million in expenses resulting in $8.0 million in net income. During theyear, Sun World packed 4.1 million units and moved an additional 5.1million units through the cold storage facilities for a total of 9.2million units processed through the packing operations. Products packedor handled during the year primarily consisted of Sun World-grown tablegrapes, treefruit, sweet red and yellow peppers, seedless watermelons andlemons as well as table grapes and citrus products packed for third partygrowers. The 1996 net income of $0.7 million from packing operationsrelated to the results of Sun World from September 14, 1996 to December31, 1996 in which Sun World generated packing revenues of $4.7 million andexpenses of $4.0 million. MARKETING OPERATIONS. Sun World's marketing operations includeselling, merchandising and promoting Sun World grown products, as well asproviding these services for third party growers. During the year endedDecember 31, 1997, approximately 12.2 million units were sold primarilyconsisting of Sun World-grown table grapes, treefruit, sweet red andyellow peppers, seedless watermelons and lemons; and table grapes,seedless watermelon, and citrus from domestic third party growers. Theseunit sales resulted in marketing revenue of $9.0 million while marketingexpenses totaled $4.9 million for the year ended December 31, 1997resulting in a net income from marketing operations of $4.1 million. The1996 net income from marketing operations related to the results of SunWorld from September 14, 1996 to December 31, 1996 in which Sun Worldgenerated marketing revenues of $2.5 million offset by expenses of $1.8million resulting in net profits of $0.7 million. PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a long history ofproduct innovation, and its research and development center maintains afruit breeding program that has introduced dozens of proprietary fruitvarieties during the past five years. In addition, Sun World has a 50%interest in American Sunmelon, a partnership engaged in proprietarydevelopment, production and marketing of seedless watermelon seed. Duringthe year ended December 31, 1997, net income from proprietary productdevelopment was $1.6 million consisting of revenues of $2.4 million ($1.3million from American Sunmelon) offset by expenses of $0.8 million. TheSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. net income of $0.7 million for the nine months ended December 31, 1996related primarily to the operations of American Sunmelon from September14, 1996 to December 31, 1996. LANDFILL PREVENTION ACTIVITIES. The Company is engaged inopposition to the proposed construction and operation of a landfill to belocated adjacent to its Cadiz/Fenner Valley properties, and has filedthree lawsuits seeking, among other things, to set aside approvals for thelandfill project and monetary damages. See Item 3, "Legal Proceedings." During the year ended December 31, 1997, expenses incurred in connectionwith activities in opposition to the project, such as litigation costs andprofessional fees and expenses totaled $0.7 million as compared to $0.4million during the nine months ended December 31, 1996. GENERAL AND ADMINISTRATIVE. General and administrative expensesduring the year ended December 31, 1997 and the nine months ended December31, 1996 consisted primarily of corporate operating expenses, professionalfees and salaries. These expenses increased by $3.9 million in 1997 ascompared to the nine months ended December 31, 1996 period primarily dueto the inclusion of a full year of operations for Sun World in 1997. LITIGATION BENEFIT. Prior to the acquisition of Sun World by theCompany, the Internal Revenue Service (IRS) had filed claims against SunWorld and certain of its subsidiaries, (collectively "the Sun WorldClaimants") for taxes refunded for workers that the IRS claims wereemployees. The Sun World Claimants contend that the workers are excludedfrom the definition of employment under the Internal Revenue Code. OnJanuary 21, 1998, the District Court ruled in favor of the Sun WorldClaimant who had the largest outstanding claim. Management believes thatthe likelihood of an unfavorable future outcome with regard to this matteris remote. Accordingly, Sun World released $3.8 million of reservesrelated to this matter at December 31, 1997. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expensefor the year ended December 31, 1997 totaled $7.7 million compared to $1.0million for the nine months ended December 31, 1996. The increase isattributable to depreciation relating to the acquired Sun World assets. INTEREST EXPENSE. As a result of the acquisition of Sun World, netinterest expense totaled $15.6 million during the year ended December 31,1997 compared to $5.2 million during the nine months ended December 31,1996. The following table summarizes the components of net interestexpense for the two periods (in thousands): Year Nine Months Ended Ended December 31, December 31, 1997 1996 ---- ----- Interest on outstanding debt - Sun World $ 13,446 $ 4,411 Interest on outstanding debt - Cadiz 875 782 Amortization of financing costs 1,879 746 Interest income (592) (736) -------- ------- $ 15,608 $ 5,203 ======== ======= The increase in interest on outstanding debt during 1997 isattributable to the long-term debt acquired as part of the Sun Worldacquisition. Financing costs, which include legal fees and extensionfees, are amortized over the life of the debt agreement.NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1996 During the nine months ended December 31, 1996, the Company incurreda net loss of $6.0 million compared to a loss of $8.5 million during theyear ended March 31, 1996. The following table summarizes the net lossfor both periods (dollars in thousands): Nine Months Year Ended Ended December 31, March 31, 1996 1996Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ---- ---- Revenues $ 23,780 $ 1,441 -------- ------- Costs and expenses: Cost of sales 17,725 1,649 Landfill prevention activities 394 1,919 General and administrative 6,057 3,506 Depreciation and amortization 1,039 1,067 Interest expense, net 5,203 1,787 Income tax benefit (641) - --------- ------- Net loss $ (5,997) $ (8,487) ========= ======== The operations of Sun World for the period September 14 throughDecember 31, 1996 are included above; however, due to the seasonality ofthe operations of Sun World, this is not indicative of the results ofoperations should a full fiscal year of activity be included. REVENUES. During the nine months ended December 31, 1996, theCompany recorded revenues of $23.8 million, of which $22.5 millionresulted from Sun World operations, all of which were recognized fromSeptember 14, 1996 (the date subsequent to the Sun World Acquisition)through December 31, 1996. The balance of the Company's revenues wererecognized from the development activities of Cadiz, consisting primarilyof crop proceeds from the Cadiz ranch. COST OF SALES. Cost of sales for the nine months ended December 31,1996 of $17.7 million consisted of all direct costs and an allocation ofindirect costs related to revenue generated by the Company, $16.4 millionof which related to Sun World activities, for the period September 14,1996 through December 31, 1996 as compared to $1.7 million for Cadizduring the year ended March 31, 1996. LANDFILL PREVENTION ACTIVITIES. During the nine months endedDecember 31, 1996, expenses incurred in connection with activities inopposition to the proposed landfill, such as litigation costs andprofessional fees and expenses totaled $0.4 million as compared to $1.9million during the fiscal year ending March 31, 1996. GENERAL AND ADMINISTRATIVE. General and administrative expensesduring both the nine months ended December 31, 1996 and the fiscal yearended March 31, 1996 consisted primarily of corporate operating expenses,professional fees and salaries as well as expenses incurred in the landand water resource development of the Company's landholdings. Theseexpenses increased by $2.6 million during the nine months ended December31, 1996 as compared to the year ended March 31, 1996 primarily as aresult of the Sun World Acquisition and the addition of corporate andadministrative costs related to Sun World in the amount of $2.5 millionfor the period September 14, 1996 through December 31, 1996. During theperiod ended December 31, 1996, Cadiz was awarded and receivedapproximately $0.4 million as final payment toward full reimbursement ofits legal fees and costs incurred in defending a legal action which wasnetted against the related legal fees incurred. DEPRECIATION AND AMORTIZATION. Depreciation and amortization totaled$1.0 million for the nine months ended December 31, 1996 as compared to$1.1 million for the year ended March 31, 1996. The decrease is primarilyattributable to reduced amortization for Cadiz. INTEREST EXPENSE. Net interest expense totaled $5.2 million duringthe nine months ended December 31, 1996 as compared to $1.8 million duringthe year ended March 31, 1996. The following table summarizes thecomponents of net interest expense for the nine months ended December 31,1996 and the fiscal year ended March 31, 1996 (dollars in thousands): Nine Months Year Ended Ended December 31, March 31, 1996 1996 ---- ----- Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Interest expense on outstanding debt $ 5,193 $ 1,000 Amortization of financing costs 746 841 Interest income (736) (54) ------- ------- 5,203 $ 1,787 ======= ======= The increase in interest expense on outstanding debt during theperiod ended December 31, 1996 is attributable to the long-term debtacquired as part of the Sun World Acquisition. Interest income increaseddue to the average Sun World cash balance of over $30 million maintainedduring the fourth calendar quarter of 1996. INCOME TAX BENEFIT. An income tax benefit of $0.6 million aroseduring the nine months ended December 31, 1996 as a result of utilizationof net operating loss carryforwards.LIQUIDITY AND CAPITAL RESOURCES GENERAL DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES. With thecompletion of the offering by Sun World of $115.0 million in secured notesand the issuance of revolving credit facilities for both Sun World andCadiz, as further discussed below, the Company believes it will be able tomeet its working capital needs without looking to additional outsidefunding sources, although no assurances can be made. See "CurrentFinancing Arrangements" below. In order to provide additional availability of working capital at theparent level and to provide a readily available funding mechanism for add-on acquisition opportunities, Cadiz entered into a three year $15 millionrevolving credit facility with ING Baring (U.S.) Capital Corporation("ING") (the "Cadiz ING Revolver") in November 1997. As of December 31,1997, $5.0 million was outstanding under the Cadiz ING Revolver. On April 16, 1997, Sun World completed a private placement of $115.0million in secured 11-1/4% Series A First Mortgage Notes (the "Sun WorldNotes"). The notes have subsequently been exchanged for Series B FirstMortgage Notes registered under the Securities Act of 1933 which arepublicly traded. The proceeds from the Sun World Notes, when combined withSun World's existing cash and cash made available under a one year $30million revolving credit facility with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. ("Rabobank") (the "Sun World Revolver") entered intoby Sun World concurrently with the issuance of the Sun World Notes, wereused to retire Sun World's existing indebtedness to John Hancock MutualLife Insurance Company and Caisse Nationale de Credit Agricole, actingthrough its Grand Cayman branch, as well as Cadiz' existing indebtednessto Rabobank (referred to hereinafter as the "Debt Refinancing" ). Management believes that the terms of Sun World's debt facilitiesfollowing the issuance of the Sun World Notes are more favorable to SunWorld than the terms of the retired debt facilities. See "Outlook,"below. Under Sun World's historical working capital cycle, working capitalis required primarily to finance the costs of growing and harvestingcrops, which occurs from January through September with a peak need inJune. Sun World harvests and sells the majority of its crops during theperiod from June through October, when it receives the majority of itsrevenues. In order to bridge the gap between incurrence of expendituresand receipt of revenues, large cash outlays are required each year. Priorto its Debt Refinancing, Sun World's cash balance was sufficient toprovide for these seasonal working capital requirements without the needfor additional outside funding. However, Sun World determined thatutilizing a substantial portion of its cash on hand to pay down long-termdebt and concurrently entering into the Sun World Revolver to meet its seasonal working capital needs was a more effective use of its financial resources. Peak borrowings under the Sun World Revolver during the 1997 season were $18.2 million. As of December 31, 1997, no amount was outstanding under the Sun World Revolver. Sun World has replaced the Sun World Revolver with a $25 million one year facility which, in management's view, provides more favorable terms. See "Current Financing Arrangements - Sun World Obligations" below. As of December 31, 1997, Cadiz had approximately $14.8 million ofSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. indebtedness outstanding and $10.0 million borrowing availability underthe Cadiz ING Revolver. Sun World had $118.3 million of indebtednessoutstanding and $30.0 million of borrowing availability under the SunWorld Revolver. CURRENT FINANCING ARRANGEMENTS. - -------------------------------- CADIZ OBLIGATIONS As Cadiz has not received significant revenues from its waterresource activity to date, Cadiz has been required to obtain financing tobridge the gap between the time water resource development expenses areincurred and the time that revenue will commence. Historically, Cadiz hasaddressed these needs primarily through secured debt financingarrangements with its lenders, private equity placements and the exerciseof outstanding stock options. As of December 31, 1997, Cadiz was obligated to ING for approximately$9.8 million under a senior term loan facility. The maturity date of theING obligation is April 30, 1998 (with the interest rate LIBOR plus 200basis points, payable at LIBOR only semi-annually, with the remainingaccrued interest added to principal). ING also granted to Cadiz the rightto obtain two additional one-year extensions. Upon exercise of the firstand second extension, Cadiz would be required to issue certain warrants toING and the interest rate would be further adjusted. Currently, ING holdsa senior deed of trust on substantially all of Cadiz' non-Sun Worldrelated property. Cadiz expects to exercise the first one-year extensionunder the senior term loan facilities. In November 1997, the Company entered into the Cadiz ING Revolver toprovide additional availability of working capital at the parent level andto provide a readily available funding mechanism for add-on acquisitionopportunities. The Cadiz ING Revolver is secured by a second lien onall of the non-Sun World assets of the Company. Principal is due onDecember 31, 2000. Interest is payable semi-annually at 8% if paid incash and at 10% if paid in common stock of the Company. The Company had$5.0 million outstanding under the Cadiz ING Revolver at December 31,1997. The Company issued 200,000 warrants in connection with the initialborrowings at $7.00, the market price at issuance. The agreement callsfor the issuance of certain additional warrants if and when the remaining$10.0 million is drawn. As the Company continues to actively pursue its business strategy,additional financing specifically in connection with the Company's waterprograms will be required. The nature of such additional financing forthe water storage and supply programs (including the Cadiz/Fenner WaterStorage and Supply Program - see Item 2 - Water Resource Development) willdepend upon how the development and ownership of each project isultimately structured, and how much of each project's funding will be theCompany's responsibility. Should the Company determine that it will beable to maximize its profit potential through construction and ownershipof the water storage and/or delivery systems used in the program, theCompany will obtain appropriate long-term financing. Based upon theresults of analyses performed by an investment banking firm retained bythe Company, management believes that several alternative long-termfinancing arrangements are available to the Company which will be furtherevaluated once funding responsibility and ownership alternatives aredetermined.SUN WORLD OBLIGATIONS The Sun World Notes, which were issued in the principal amount of$115.0 million on April 16, 1997 and will mature on April 15, 2004, accrueinterest at the rate of 11-1/4% per annum. Interest only is payable semi-annually on April 15 and October 15 of each year, commencing October 15,1997. The Sun World Notes are secured by a first lien (subject to certainpermitted liens) on substantially all of the assets of Sun World and itssubsidiaries, other than growing crops, crop inventories and accountsreceivable and proceeds thereof, which secure the Sun World Revolver, andcertain real property pledged to third parties. The Sun World Notes arealso secured by the guarantee of Cadiz and the pledge by Cadiz of all ofthe stock of Sun World. Commencing October 14, 1997, Sun World offered to exchange (the"Exchange Offer") up to $115.0 million aggregate principal amount of itsSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 11-1/4% Series B First Mortgage Notes (the "Exchange Notes") for $115.0million aggregate principal amount of the Sun World Notes. The ExchangeNotes are registered under the Securities Act of 1933 and have the sameterms as the Sun World Notes. The exchange of all of the Sun World Noteswas completed on November 12, 1997. In April, 1997, Sun World entered into the Sun World Revolver whichis guaranteed by Cadiz. Amounts borrowed under the Sun World Revolveraccrue interest at either prime plus 1.50% or LIBOR plus 2.50%, at SunWorld's election, with an additional .50% payable for advances on eligibleinventory above specified levels. As of December 31, 1997, no amount wasoutstanding under the Sun World Revolver. To meet working capital needsfor 1998, Sun World has replaced the existing Sun World Revolver with aone year $25 million revolving credit facility (the "New Revolver") thatprovides more favorable terms than the existing Sun World Revolver. Interest on the New Revolver will accrue at either prime plus 1% or LIBORplus 2.50% at Sun World's election. CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES. Cash provided byoperating activities totaled $0.2 million for the year ended December 31,1997 as compared to cash used for continuing operating activities of $0.2million for the nine months ended December 31, 1996. The increase in cashgenerated from operating activities primarily resulted from the inclusionof Sun World's operations in the entire 1997 period. Significant workingcapital changes included a decrease in accounts receivable of $1.6 millionprimarily attributable to the lower FOB prices experienced due to atypicalweather conditions resulting in higher than normal crop yields industrywide offset by an increase in accounts payable of $0.7 million and accruedliabilities of $1.3 million (primarily related to accrued interest on theSun World Notes). CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES. Cash used for investing activities totaled $2.9 million during the year ended December31, 1997 as compared to cash provided by investing activities of $6.7million during the nine months ended December 31, 1996. The Companyinvested $4.7 million in developing crops and $2.7 million in the purchaseof land, property, plant and equipment and in furtherance of its waterstorage and supply programs. Additionally, the Company received proceedsof $2.8 million from the disposal of underproducing Sun World assetsthrough an asset disposal program. In addition, partnership distributionsreceived by Sun World totaled $1.2 million and other assets decreased by$0.5 million. CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES. Cash used forfinancing activities totaled $25.3 million for the year ended December 31,1997 as compared to cash provided by financing activities of $21.7 millionduring the nine months ended December 31, 1996. Principal payments onlong-term debt of $141.2 million were made from the proceeds from the DebtRefinancing. Costs related to debt issuances totaled approximately $5.8million. Net proceeds from the issuance of stock including the exerciseof stock options and warrants totaled $1.7 million during the year endedDecember 31, 1997.OUTLOOK The Company is actively pursuing the development of its waterresources. Specifically, on December 23, 1997, the Company announced aninterim agreement with the Metropolitan Water District of SouthernCalifornia ("MWD") to develop principles and terms for a water storage andsupply program on the Company's land in the Cadiz and Fenner valleys ofeastern San Bernardino County (the "Cadiz/Fenner Water Storage and SupplyProgram"). The proposed long-term program will involve the conveyance ofwater from MWD's Colorado River Aqueduct, during periods of excess supply,for storage in the aquifers underlying the Company's properties. Thewater will be delivered through a 35-mile transmission pipeline having acapacity of 100,000 acre-feet per year. Total storage capacity isexpected to be approximately 500,000 acre-feet. During periods ofshortage, the stored water will be extracted by wells and returned to theColorado River Aqueduct by gravity flow through the transmission pipeline. The program will also have the ability to transfer high quality indigenousgroundwater for distribution throughout MWD's service area. The program,which is subject to regulatory approvals, could be operational by the year2000. The Company anticipates that the revenue stream generated by theprogram will be sufficient to meet the then existing operatingrequirements of the Company, although no assurances can be given.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition to the development of its water resources, the Company isactively involved in further agricultural development and reinvestment inits landholdings. Such development will be systematic and in furtheranceof the Company's business strategy to provide for maximization of thevalue of its assets. The Company also continually evaluates acquisitionopportunities which are complimentary to its current portfolio oflandholdings, water resources and agricultural operations. The Company believes that, based upon current levels of operationsand anticipated growth, Sun World can adequately service its indebtednessand meet its seasonal working capital needs utilizing available internalcash, the New Revolver and, if necessary, through an intercompany revolverwith Cadiz. Cadiz expects to be able to meet its ordinary working capitalneeds, in the short-term, through a combination of quarterly management fee payments from Sun World, payments from Sun World under an agricultural lease whereby Sun World now operates the Company's 1,600 acres of developed agricultural property at Cadiz, California, draws from the Cadiz ING Revolver, and the possible exercise of outstanding stock options. Exceptfor the foregoing, additional intercompany cash payments between Sun World and Cadiz are subject to certain restrictions under its current lendingarrangements. Since the Company's inception, inflation has not had a materialimpact either on the costs of materials required in the development ofproperty and/or on labor costs. Similarly, the value of the Company'sreal property has not been materially impacted by inflation. In the eventthe rate of inflation should accelerate in the future, the Companybelieves the increase in value of its real property will exceed anyincreases in costs attributable to inflation.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is submitted in response toPart IV hereof. See the Index to Consolidated Financial Statements.ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which the Company intends to file with the Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934 not later than 120 days afterDecember 31, 1997.ITEM 11. EXECUTIVE COMPENSATION The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which the Company intends to file with the Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days after December 31, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for by this item is incorporated herein by referenceto the definitive proxy statement involving the election of directors which the Company intends to file with the Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days after December 31, 1997.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The information called for by this item is incorporated herein by reference to the definitive proxy statement involving the election of directors which the Company intends to file with the Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days after December 31, 1997. PART IVITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements. See Index to Consolidated Financial Statements. 2. Financial Statement Schedules. See Index to Consolidated Financial Statements. 3. Exhibits. The following exhibits are filed or incorporated by reference as part of this Annual Report: 3.1 Certificate of Incorporation of the Company, as amended(2) 3.2 Amendment to Certificate of Incorporation dated November 8, 1996(3) 3.3 Bylaws of the Company, as amended to date(4) 3.4 Amended and Restated Certificate of Incorporation of Sun World, Inc.(12) 3.5 Certificate of Merger of Sun World International, Inc. into Sun World, Inc.(12) 3.6 Agreement and Plan of Merger of Sun World, Inc. and Sun World International, Inc.(12) 3.7 Amended and Restated Bylaws of Sun World International, Inc.(12) 4.1 Specimen Form of Stock Certificate for the Company's registered stock(4) 4.2 Certificate of Designations of 6% Convertible Series A Preferred Stock(1) 4.3 Certificate of Designations of 6% Convertible Series B Preferred Stock(5) 4.4 Certificate of Designations of 6% Convertible Series C Preferred Stock(1) 4.5 Indenture dated as of April 16, 1997 among Sun World as issuer, Sun World and certain subsidiaries of Sun World as guarantors, and IBJ Schroder Bank & Trust Company as Trustee, for the benefit of holders of 11-1/4% First Mortgage Notes due 2004 (including as Exhibit A to the Indenture, the form of the Global Note and the form of each Guarantee)(10) 4.6 Form of Amendment to Indenture dated as of October 9, 1997(14) 4.7 Form of Amendment to Indenture dated as of January 23, 1998 10.1 Pacific Agricultural Holdings, Inc. 1988 Nonstatutory Stock Option Plan(6) 10.2 The Company's 1996 Stock Option Plan(8) 10.3 Form of Limited Partnership Agreement of Southwest Fruit Growers, L.P.(7) 10.4 Farm Management Agreement dated as of March 28, 1990 between the Company and Southwest Fruit Growers, L.P.(7) 10.5 Promissory Note in the amount of $3,486,868 dated as of Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. March 28, 1990 issued by Southwest Fruit Growers, L.P. in favor of the Company (Hyder Note)(7) 10.6 Promissory Note in the amount of $4,934,922 dated as of March 28, 1990 issued by Southwest Fruit Growers, L.P. in favor of the Company (Cadiz Note)(7) 10.7 Promissory Note in the amount of $3,141,344 dated as of March 28, 1990 issued by Southwest Fruit Growers, L.P. in favor of the Company (Farming Note)(7) 10.8 Amended and Restated Credit Agreement between Sun World International, Inc. and Caisse Nationale de Credit Agricole dated September 13, 1996(3) 10.9 Promissory Note between Sun World International, Inc. and Caisse Nationale de Credit Agricole dated September 13, 1996(3) 10.10 New Hancock Credit Agreement between Sun World International, Inc. and John Hancock Mutual Life Insurance Company dated September 13, 1996(3) 10.11 Secured Promissory Note between Sun World International, Inc. and John Hancock Mutual Life Insurance Company dated September 13, 1996(3) 10.12 Form of Employment Agreement dated September 13, 1996 between Sun World, the Company and Timothy J. Shaheen(9) 10.13 Form of Employment Agreement dated September 13, 1996 between Sun World, the Company and Stanley E. Speer(9) 10.14 Form of Sun World Executive Officer Employment Agreement(11) 10.15 Credit Agreement between the Company and ING Baring (U.S.) Capital Corporation dated November 25, 1997 10.16 Revolving Credit Note between the Company and ING Baring (U.S.) Capital Corporation dated November 25, 1997 10.17 Agreement between Metropolitan Water District of Southern California and Cadiz Land Company, Inc. to Develop Principles and Terms for Agreement and to verify Program Feasibility 10.18 Employment Agreement between Cadiz Land Company, Inc. and Keith Brackpool dated February 1, 1998 21.1 Subsidiaries of the Registrant 23.1 Consent of Independent Accountants (included in Part IV of the Form 10-K) 27.1 Financial Data Schedule- ------------------------ (1) Previously filed as Exhibit to the Company's Report on Form 8-K dated September 13, 1996 (2) Previously filed as Exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-75642) declared effective May 16, 1994 (3) Previously filed as Exhibit to the Company's Report on Form 10-Q for the quarter ended September 30, 1996 (4) Previously filed as Exhibit to the Company's Report on Form 8-K dated May 6, 1992 (5) Previously filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 (6) Previously filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1988Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (7) Previously filed as Exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1990 (8) Previously filed as Exhibit A to the Company's Proxy Statement relating to the Annual Meeting of Stockholders held on November 8, 1996 (9) Previously filed as Exhibit to Cadiz' Transition Report on Form 10-K for the nine months ended December 31, 1996 (10) Previously filed as Exhibit to Amendment No. 1 to Cadiz' Form S-1 Registration Statement No. 333-19109 (11) Previously filed as Exhibit to Cadiz' Report on Form 10-Q for the quarter ended March 31, 1997 (12) Previously filed as Exhibit to Sun World's Form S-4 Registration Statement No. 333-31103 (13) Previously filed as Exhibit to Amendment No. 1 to Sun World's Form S-4 Registration Statement No. 333-31103 (14) Previously filed as Exhibit to Amendment No. 2 to Sun World's Form S-4 Registration Statement No. 333-31103(b) Reports on Form 8-K 1. Report on Form 8-K dated December 23, 1997 providing a Press Release issued by the Company announcing the signing of an interim Agreement with the Metropolitan Water District of Southern California. SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereto duly authorized.CADIZ LAND COMPANY, INC.By: /s/ Keith Brackpool By: /s/ Stanley E. Speer ---------------------------- -------------------------- Keith Brackpool, President & Stanley E. Speer, Chief Executive Officer and Director Chief Financial Officer Date: March 26, 1998 Date: March 26, 1998Pursuant to the requirements of the Securities Exchange Act of 1934, thisreport has been signed by the following persons in the capacities and on thedates indicated. Name and Position Date /s/ Dwight Makins Date: March 26, 1998 ------------------------------------ Dwight Makins, Chairman of the Board and Director /s/ Keith Brackpool Date: March 26, 1998 ------------------------------------ Keith Brackpool, President & Chief Executive Officer and Director (Principal Executive Officer) /s/ Stanley E. Speer Date: March 26, 1998 -------------------------------------- Stanley E. Speer, Chief Financial OfficerSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (Principal Financial and Accounting Officer) /s/ Russ Hammond Date: March 26, 1998 -------------------------------- Russ Hammond, Director /s/ Murray H. Hutchison Date: March 26, 1998 -------------------------------- Murray Hutchison, Director /s/ Mitt Parker Date: March 26, 1998 -------------------------------- Mitt Parker, Director CADIZ LAND COMPANY, INC. Index to Consolidated Financial Statements Page ------FINANCIAL STATEMENTS: Report of Independent Accountants. . . . . . . . . . . . . . . 28 Consolidated Statement of Operations for the year ended December 31, 1997, the nine months ended December 31, 1996 and the year ended March 31, 1996 . . . . . . . . . . . . . . . 29 Consolidated Balance Sheet at December 31, 1997 and 1996 . . . 30 Consolidated Statement of Cash Flows for the year ended December 31, 1997, the nine months ended December 31, 1996 and the year ended March 31, 1996 . . . . 32 Consolidated Statement of Stockholders' Equity for the year ended December 31, 1997, the nine months ended December 31, 1996 and the year ended March 31, 1996 . . . . . . . . . . . . . . . . . 33 Notes to the Consolidated Financial Statements . . . . . . . . 35FINANCIAL STATEMENT SCHEDULES: Schedule I - Condensed Financial Information of Registrant for the year ended December 31, 1997 and the nine months ended December 31, 1996 . . . . . . . . . . 52 Schedule II - Valuation and Qualifying Accounts For the year ended December 31, 1997, the nine months ended December 31, 1996 and the year ended March 31, 1996 . . . . . . . . . . . . . . . . . 55(Schedules other than those listed above have been omitted since they areeither not required, inapplicable, or the required information is includedon the financial statements or notes thereto.) REPORT OF INDEPENDENT ACCOUNTANTSSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. To the Board of Directors and Stockholders ofCadiz Land Company, Inc.In our opinion, the consolidated financial statements listed in theaccompanying index present fairly, in all material respects, thefinancial position of Cadiz Land Company, Inc. and its subsidiaries atDecember 31, 1997 and 1996, and the results of their operations andtheir cash flows for the year ended December 31, 1997, the nine monthsended December 31, 1996 and for the year ended March 31, 1996, inconformity with generally accepted accounting principles. Thesefinancial statements are the responsibility of the Company's management;our responsibility is to express an opinion on these financialstatements based on our audits. We conducted our audits of thesestatements in accordance with generally accepted auditing standardswhich require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates madeby management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis forthe opinion expressed above./s/ Price Waterhouse LLP- --------------------------PRICE WATERHOUSE LLPLos Angeles, CaliforniaFebruary 13, 1998 CADIZ LAND COMPANY, INC. CONSOLIDATED STATEMENT OF OPERATIONS Year Nine Months Year Ended Ended Ended December 31, December 31, March 31,(In thousands except per share data) 1997 1996 1996 ------ ------ ------Revenues $100,157 $ 23,780 $ 1,441 -------- --------- -------- Costs and expenses: Cost of sales 76,566 17,725 1,649 Landfill prevention activities 683 394 1,919 General and administrative 11,873 6,057 3,506 Litigation benefit (3,780) - - Depreciation and amortization 7,745 1,039 1,067 -------- ------ ------ Total costs and expenses 93,087 25,215 8,141 ------- ------ ------Operating profit (loss) 7,070 (1,435) (6,700)Interest expense, net 15,608 5,203 1,787 -------- ------ ------Loss before income taxes (8,538) (6,638) (8,487)Income tax benefit - (641) - ------ ------ ------Net loss (8,538) (5,997) (8,487)Less: Preferred stock dividends (1,213) (674) - Imputed dividend on preferred stock - (2,451) - ------ ------ -------Net loss applicable to common stock $ (9,751) $ (9,122) $ (8,487) ======== ========= =========Net loss per common share $ (.33) $ (.44) $ (.48) ======== ========= =========Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Weighted average shares outstanding 29,485 20,500 17,700 ========= ========= ======== See accompanying notes to the consolidated financial statements. CADIZ LAND COMPANY, INC. CONSOLIDATED BALANCE SHEET December 31,Assets ($ in thousands): 1997 1996 ---- ----Current assets: Cash and cash equivalents $ 5,298 $ 33,307 Accounts receivable, net 5,881 7,533 Inventories 13,838 14,121 Prepaid expenses and other 1,161 1,225 Assets held for sale - 6,534 ------- -------- Total current assets 26,178 62,720Investment in partnerships 6,327 6,104Property, plant, equipment and water programs, net 160,193 155,453Other assets 10,351 6,513 ------- -------- $ 203,049 $ 230,790 ========= =========See accompanying notes to the consolidated financial statements. CADIZ LAND COMPANY, INC. CONSOLIDATED BALANCE SHEET (CONTINUED)Liabilities and Stockholders' Equity December 31,($ in thousands): 1997 1996 ------ ------ Current liabilities: Accounts payable $ 8,517 $ 7,845 Accrued liabilities 6,114 4,762 Long-term debt, current portion 519 4,753 Other current liabilities - 591 ------- -------- Total current liabilities 15,150 17,951Long-term debt 131,689 149,111Deferred income taxes 5,447 4,347 Other liabilities 382 4,209Commitments and contingenciesSeries A redeemable preferred stock - $.01 par value($1,000 liquidation value); 60,000 shares authorized; shares issued and outstanding - none at December 31, 1997 and 27,431 at December 31, 1996 - 27,431Stockholders' equity: Preferred stock - $.01 par value; 40,000 shares authorized; shares issued and outstanding - Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. none at December 31, 1997 and 340 shares at December 31, 1996 - - Common stock - $.01 par value; 45,000,000 shares authorized; shares issued and outstanding - 32,646,661 at December 31, 1997 and 23,445,868 at December 31, 1996 326 234 Additional paid-in capital 120,873 88,574 Accumulated deficit (70,818) (61,067) -------- -------- Total stockholders' equity 50,381 27,741 ------- ------- $ 203,049 $ 230,790 ========== =========See accompanying notes to the consolidated financial statements. CADIZ LAND COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS Year Nine Months Year Ended Ended Ended December 31, December 31, March 31,($ in thousands) 1997 1996 1996 ---- ---- ----Cash flows from operating activities: Net loss $ (8,538) $ (5,997) $ (8,487) Adjustments to reconcile net loss to cash provided by (used for) operating activities: Depreciation and amortization 9,227 1,654 1,909 Litigation benefit (3,780) - - Issuance of shares for service 470 - - Interest capitalized to debt 315 481 474 Loss on disposal of assets 99 - - Share of partnership operations (1,388) (838) - Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 1,652 11,367 (379) Decrease in inventories 570 1,000 - Decrease (increase) in prepaid expenses and other 64 (428) 13 Increase (decrease) in accounts payable 672 (6,798) 734 Increase in accrued liabilities 1,332 68 - Decrease in other current liabilities (591) - - Increase (decrease) in other liabilities 54 (674) - ------- ------- ------ Net cash provided by (used for) operating activities 158 (165) (5,736)Cash flows from investing activities: Additions to property, plant and equipment (2,114) (895) (932) Additions to water programs (551) (343) (732) Additions to developing crops (4,725) (187) - Proceeds from disposal of property, plant and equipment 2,817 12,415 - Partnership distributions 1,165 140 - Acquisition of Sun World, net of cash acquired - (4,474) (693) Decrease in other assets 509 - - ------- ------- ------ Net cash (used for) provided by investing activities (2,899) 6,656 (2,357) ------- ------- -------Cash flows from financing activities: Net proceeds from issuance of stock 1,690 37,761 10,292 Proceeds from issuance of long-term debt 120,089 - - Principal payments on long-term debt (141,248) (16,428) (177)Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Proceeds from short-term borrowings, net - 330 677 Debt issuance costs (5,799) - - ------- ------- ------- Net cash (used for) provided by financing activities (25,268) 21,663 10,792 ------- ------- ------Net (decrease) increase in cash and cash equivalents (28,009) 28,154 2,699Cash and cash equivalents, beginning of period 33,307 5,153 2,454 ------- ------- ------Cash and cash equivalents, end of period $ 5,298 $ 33,307 $ 5,153 ======= ======= ====== See accompanying notes to the consolidated financial statements. CADIZ LAND COMPANY, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITYFor the Year Ended December 31, 1997, the Nine Months Ended December31, 1996 and the Year Ended March 31, 1996($ in thousands) Total Additional Accumu- Share- Preferred Stock Common Stock Paid-in lated holders' Shares Amount Shares Amount Capital Deficit Equity ------- ------- ------- ------- -------- ------- ------ Balance as of March 31, 1995 - $ - 16,988,454 $ 170 $ 62,687 $ (45,909) $ 16,948Issuance of shares in connection with private placements 2,114,157 21 9,911 9,932Exercise of stock options 145,000 1 359 360Net loss (8,487) (8,487) ------ ----- ---------- ------ -------- -------- --------Balance as of March 31, 1996 - - 19,247,611 192 72,957 (54,396) 18,753Exercise of stock options and warrants 335,000 3 939 942Common stock issued for acquisition of Sun World 1,153,908 12 3,576 3,588Net proceeds from private placements of preferred stock 1,300 10,688 10,688Cash dividends paid on conversion of preferred stock (99) (99)Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Dividends paid in common stock on conversion of preferred stock 28,777 127 (127) - Accrued dividends on preferred stock (448) (448)Conversion of redeemable preferred stock to common stock 53,332 1 199 200Conversion of preferred stock to common stock (960) 2,627,240 26 (26) - Issuance of stock warrants for services 114 114Net loss (5,997) (5,997) ------ ----- ---------- ------ -------- -------- -------- Balance as of December 31, 1996 340 $ - 23,445,868 $ 234 $ 88,574 $ (61,067) $ 27,741 ====== ==== ========== ======= ========= ========= ========= See accompanying notes to the consolidated financial statements. CADIZ LAND COMPANY, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)For the Year Ended December 31, 1997, the Nine Months Ended December31, 1996 and the Year Ended March 31, 1996($ in thousands) Total Additional Accumu- Share- Preferred Stock Common Stock Paid-in lated holders' Shares Amount Shares Amount Capital Deficit Equity ------- ----- -------- ------ --------- ---------- -------- Balance as of December 31, 1996 340 $ - 23,445,868 $ 234 $ 88,574 $ (61,067) $ 27,741Conversion of redeemable preferred stock to common stock 7,314,917 73 27,358 27,431Exercise of stock options and warrants 588,500 7 1,358 1,365Common stock issued to satisfy Sun World purchase liability 65,000 1 324 325Preferred dividends Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. paid with common stock 361,251 3 1,714 1,717Issuance of warrants to a lender 1,083 1,083Stock issued for services 75,000 1 329 330Issuance of stock for refinancing 30,000 140 140Conversion of preferred stock to common stock (340) 766,125 7 (7) - Accrued dividends on preferred stock (1,213) (1,213)Net loss (8,538) (8,538) ----- ---- ---------- ------ --------- ---------- --------Balance as of December 31, 1997 - $ - 32,646,661 $ 326 $ 120,873 $ (70,818) $ 50,381 ===== ==== =========== ====== ========= =========== ========See accompanying notes to the consolidated financial statements. CADIZ LAND COMPANY, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF BUSINESS The primary business of Cadiz Land Company, Inc. (the "Company") isto acquire and develop water-related land and agricultural assets. TheCompany has created an integrated and complementary portfolio oflandholdings, water resources, and agricultural operations locatedthroughout central and southern California which either possess sizableassured supplies of water or can, in future years, utilize watersupplied from other Company properties. Management believes that, withboth the increasing scarcity of water supplies in California and theincreasing demand for water, the Company's access to water will provideit with a competitive advantage both as a major agricultural concern andas a supplier of water, which will lead to continued appreciation in thevalue of the Company's portfolio. On September 13, 1996, the Company significantly enhanced thisportfolio through its acquisition of Sun World International, Inc. andits wholly-owned subsidiaries, collectively referred to as "Sun World",and became a vertically integrated agricultural company. Sun Worldfarms more than 19,000 acres, primarily located in two major growingareas of California, the San Joaquin Valley and the Coachella Valley. Fresh produce, including table grapes, treefruit, peppers andwatermelons is marketed, packed and shipped to food wholesalers andretailers throughout the United States and to more than 30 foreigncountries. As of December 31, 1997, Sun World owned and operated fourcold storage and/or packing facilities in California. In addition, the acquisition of Sun World provided the Company withvaluable water rights throughout central and southern California. TheCompany's landholdings, which now total approximately 56,200 acres, arelocated adjacent to the major aqueduct systems of central and southernCalifornia. The Company expects to utilize its resources to participateSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. in a broad variety of water storage and supply projects, including thestorage and supply of surplus water for public agencies which requiresupplemental sources of water. On December 23, 1997, the Company signedan interim agreement with the Metropolitan Water District of SouthernCalifornia to develop principles and terms for a long-term storage andsupply agreement at its Cadiz, California property. The program (the"Cadiz/Fenner Water Storage and Supply Program") will provide storagecapacity of approximately 500,000 acre-feet and a dry-year source of upto 100,000 acre-feet per year of high-quality water. Although the development and management activities of the Companyare currently focused on agricultural operations (primarily through itswholly-owned subsidiary, Sun World) and water resource development, theCompany will continue to develop and manage its land, water andagricultural resources for their highest and best uses.NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of theCompany and its wholly-owned subsidiaries, Sun World (since September14, 1996), and Southwest Fruit Growers Limited Partnership, a limitedpartnership ("SWFG") in which the Company is the general partner and hasan approximate 66.3 percent partnership interest. Allocable lossesincurred through the year ended March 31, 1991 served to eliminate theminority interest in SWFG for accounting purposes. All materialintercompany balances and activity have been eliminated from theconsolidated financial statements.NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ContinuedCHANGE IN YEAR END AND RECLASSIFICATIONS In 1996, the Company changed its fiscal year end from March 31 toDecember 31 in order to align the Company's year end with that of SunWorld. These financial statements reflect certain reclassificationsmade to the prior period balances to conform with the current yearpresentation.USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity withgenerally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could differfrom those estimates.REVENUE RECOGNITION The Company recognizes crop sale revenue after harvest and shipmentto customers. Packing revenues are recognized as units are packed. Marketing commission revenues are recognized at the time of productshipment. RESEARCH AND DEVELOPMENT Sun World incurs costs to research and develop new varieties ofproprietary products. Research and development costs are expensed asincurred. Such costs were approximately $809,000 for the year endedDecember 31, 1997 and $120,000 for the period from September 14, 1996 toDecember 31, 1996.NET LOSS PER COMMON SHARE As of December 31, 1997, the Company adopted and appliedretroactively the new accounting standard for computing earnings pershare (EPS). This standard replaces primary EPS with basic EPS andrequires the dual presentation of basic and diluted EPS whereappropriate. Because the Company had a net loss for all periodspresented, basic EPS equals diluted EPS. Basic EPS is computed bySource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. dividing the net loss, after deduction for preferred dividends eitheraccrued or imputed, if any, by the weighted average common sharesoutstanding. As described in Note 13, the terms for conversion of theSeries B and C preferred stock issued during the nine months endedDecember 31, 1996 afforded the holders a conversion price lower than themarket price of the common stock at the time of issuance in order torecognize the sales and other market restrictions of the unregisteredcommon stock to be issued upon conversion. The difference between theconversion price and market price has been reported as an imputeddividend for purposes of calculating basic EPS, although no assets ofthe Company will ever be expended. The imputed dividend of $2,451,000had the effect of increasing the loss per share for the nine monthsended December 31, 1996 by $0.11. It should be noted that the imputeddividend has been given no other accounting recognition in the financialstatements of the Company for that period and any subsequent period. All shares for all series of preferred stock had been converted tocommon stock as of December 31, 1997.CASH AND CASH EQUIVALENTS The Company considers all short-term deposits with an originalmaturity of three months or less to be cash equivalents. The Companyinvests its excess cash in deposits with major international banks andshort-term commercial paper and, therefore, bears minimal risk. Suchinvestments are stated at cost, which approximates fair value, and areconsidered cash equivalents for purposes of reporting cash flows. INVENTORIES Growing crops, pepper seed, and materials and supplies are statedat the lower of cost or market, on a first-in, first-out (FIFO) basis. Growing crops inventory includes direct costs and an allocation ofindirect costs.INVESTMENT IN PARTNERSHIPS Sun World, through a wholly-owned subsidiary, owns a 50% interestin American Sunmelon. American Sunmelon is engaged in proprietarydevelopment, production, and marketing of seedless watermelon seed. SunWorld accounts for its partnership investment in American Sunmelon usingthe equity method. During 1997, Sun World sold its 50% interest in theSun Date partnership. PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS Property, plant, equipment and water programs are stated at cost. The Company capitalizes direct and certain indirect costs ofplanting and developing orchards and vineyards during the developmentperiod, which varies by crop and ranges from three to seven years. Depreciation commences in the year commercial production is achieved. Permanent land development costs, such as acquisition costs,clearing, initial leveling costs and other costs required to bring theland into a suitable condition for general agricultural use, arecapitalized and not depreciated since these costs have an indeterminateuseful life. Depreciation is provided using the straight-line method over theestimated useful lives of the assets, generally ten to forty-five yearsfor land improvements and buildings, three to twenty-five years formachinery and equipment, and five to thirty years for permanent crops. Water rights and water storage and supply programs are stated atcost. All costs directly attributable to the development of suchprograms are being capitalized by the Company. These costs, which areexpected to be recovered through future revenues, consist of directlabor, drilling costs, consulting fees for various engineering,hydrological, environmental and feasibility studies, and otherprofessional and legal fees. IMPAIRMENT OF LONG-LIVED ASSETS The Company annually evaluates its long-lived assets, includingintangibles, for potential impairment. When circumstances indicate thatSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. the carrying amount of the asset may not be recoverable, as demonstratedby estimated future cash flows, an impairment loss would be recordedbased on fair value.OTHER ASSETS As a result of a merger in May 1988 between two companies whicheventually became known as Cadiz Land Company, Inc., an excess ofpurchase price over net assets acquired in the amount of $7,006,000 wasrecorded. This amount is being amortized on a straight-line basis overthirty years. Accumulated amortization was $2,259,000 and $2,026,000 atDecember 31, 1997 and December 31, 1996, respectively. Capitalized loan fees represent costs incurred to obtain debtfinancing. Such costs are amortized over the life of the related loan. At December 31, 1997, the majority of capitalized loan fees relate tothe issuance of the First Mortgage Notes described in Note 10.INCOME TAXES Income taxes are provided for using an asset and liability approachwhich requires the recognition of deferred tax assets and liabilitiesfor the expected future tax consequences of temporary differencesbetween the financial statement and tax bases of assets and liabilitiesat the applicable enacted tax rates. A valuation allowance is providedwhen it is more likely than not that some portion or all of the deferredtax assets will not be realized.SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest during the year ended December 31, 1997, thenine months ended December 31, 1996 and the fiscal year ended March 31,1996 was $12,452,000, $3,892,000 and $455,000, respectively. NOTE 3 - ACQUISITION OF SUN WORLD INTERNATIONAL, INC. On September 13, 1996, the Company acquired all of the stock of areorganized Sun World. Sun World and certain subsidiaries had filedvoluntary petitions for relief under Chapter 11 of the Bankruptcy Codeon October 3, 1994. The acquisition of Sun World was accounted forunder the purchase method of accounting. Accordingly, the results ofoperations of Sun World have been included in the consolidated financialstatements since the date of acquisition. The total purchase priceconsisted of the following: (i) $179 million of assumed bankruptcyrelated obligations, including $156 million of restructured secured debtwith Sun World's existing lenders (of which $5.5 million was paid byCadiz concurrent with the acquisition), (ii) $11 million of ongoingtrade and other accrued liabilities which were assumed by Cadiz, (iii)$3.2 million of direct acquisition costs, including 1,500 shares ofRedeemable Series A Preferred Stock valued at $1,000 per share; and (iv)cash and stock of approximately $40 million, including a $15 millioncapital contribution to Sun World which was made with the intent ofeliminating the requirement for Sun World to have any additional debtfacilities beyond those owed to its existing secured creditors. Thefinal effect of allocating the total purchase price to the net assetsacquired based on their estimated fair values is summarized as follows(dollars in thousands): Cash $32,113 Assets held for sale 18,049 Other current assets 44,997 Investments in partnerships 5,424 Property, plant and equipment 130,885 Other assets 3,409 ------- Total assets 234,877 ------- Prepetition bankruptcy claims payable (13,164) Other current liabilities (16,477) Long-term debt (151,783) Other liabilities (10,170) -------Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Total liabilities (191,594) -------- Net assets acquired $43,283 ======= No goodwill was recognized as a result of the acquisition. Theabove purchase price allocation reflects certain changes made in 1997 toestimated fair values used in the initial accounting for the acquisitionof Sun World. The net effect of these changes resulted in approximately$5.7 million of permanent crops being reclassified to land based onfinal appraisals received in 1997.NOTE 4 - ACCOUNTS RECEIVABLE Accounts receivable consist of the following (dollars inthousands): December 31, 1997 1996 ---- ---- Trade receivables $ 4,131 $ 4,200 Due from unaffiliated growers 535 1,153 Other 1,502 2,660 ------- ------- 6,168 8,013 Less allowance for doubtful accounts (287) (480) ------- ------- $ 5,881 $ 7,533 ======= ======= Substantially all domestic receivables are from large national andregional supermarket chain stores and produce brokers and are unsecured. Amounts due from unaffiliated growers represent receivables for harvestadvances and for services (harvest, haul and pack) provided on behalf ofgrowers under agreement with Sun World and are recovered from proceedsof product sales. Other receivables primarily include wine grape salesand other miscellaneous receivables. Approximately $13.6 and $3.8 million of sales made by Sun World forthe year ended December 31, 1997 and for the period September 14, 1996through December 31, 1996, respectively, are attributable to onenational retailer. Export sales accounted for approximately 11.4% and20.6% of the Company's sales for the year ended December 31, 1997 andfor the period September 14, 1996 to December 31, 1996, respectively.NOTE 5 - INVENTORIES Inventories consist of the following (dollars in thousands): December 31, 1997 1996 ---- ----- Growing crops $10,124 $10,299 Pepper seed 1,648 2,018 Harvested product 169 267 Materials and supplies 1,897 1,537 ------- ------- $13,838 $14,121 ======= =======NOTE 6 - PROPERTY, PLANT, EQUIPMENT AND WATER PROGRAMS Property, plant, equipment and water programs consist of thefollowing (dollars in thousands): December 31, 1997 1996 Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ---- ---- Land $ 64,005 $ 54,029 Permanent crops 62,660 67,754 Developing crops 6,422 1,671 Water programs 5,435 4,885 Buildings 20,667 18,968 Machinery and equipment 14,262 13,573 ------- ------- 173,451 160,880 Less accumulated depreciation (13,258) (5,427) ------- ------- $ 160,193 $155,453 ======= =======NOTE 7 - OTHER ASSETS Other assets consist of the following (dollars in thousands): December 31, 1997 1996 ---- ---- Capitalized loan fees, net $ 4,785 $ 150 Excess of purchase price over assets acquired, net 4,747 4,980 Capitalized trademark development, net 732 76 Deposits - 1,180 Other 87 127 ------ ------- $10,351 $ 6,513 ======= ========NOTE 8 - ACCRUED LIABILITIES Accrued liabilities consist of the following (dollars inthousands): December 31, 1997 1996 ---- ---- Interest $ 2,989 $ 1,084 Payroll and benefits 2,433 2,801 Preferred dividends - 448 Other 692 429 ------- ------- $ 6,114 $ 4,762 ======= =======NOTE 9 - REVOLVING CREDIT FACILITY In April 1997, in connection with Sun World's debt restructuringdescribed in Note 10, Sun World entered into a one year $30 millionRevolving Credit Facility. The Revolving Credit Facility is secured byeligible accounts receivable and inventory, and is guaranteed by theCompany. Amounts borrowed under the facility will accrue interest ateither prime plus 1.50% or LIBOR plus 2.50% at the Company's electionwith an additional .50% payable for advances on eligible inventory abovespecified levels. No amounts were outstanding under the RevolvingCredit Facility at December 31, 1997.NOTE 10 - LONG-TERM DEBT Management estimates that the fair value of the Company's long-termdebt approximates the carrying value for all debt instruments except forthe Series B First Mortgage Notes ("First Mortgage Notes"). The fairvalue of the First Mortgage Notes is estimated to be approximately $106million based on quoted market prices as of December 31, 1997. AtDecember 31, 1997 and December 31, 1996, the carrying amount of theSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Company's outstanding debt is summarized as follows (dollars inthousands): December 31, 1997 1996 ---- ---- Cadiz obligations: Senior term bank loan, interest payable monthly, variable interest rate based upon LIBOR plus 2% (7.78% at December 31, 1997 and 6.34% at December 31, 1996) $ 9,752 $ 9,446 Subordinated term bank loan, interest payable monthly, interest at 4.81% - 9,100 $15 million revolving line of credit, interest payable semi-annually at 8% if paid in cash and 10% if paid in stock 5,000 - Other 49 88 Debt discount (935) (124) ------ ------ 13,866 18,510 Sun World obligations: ------ ------ Series B First Mortgage Notes, interest payable semi-annually with principal due in April 2004, interest at 11.25% 115,000 - Term insurance company loan due in variable installments through September 13, 2006, interest at 10.60% - 77,092 Term bank loan, interest payable monthly with principal due in variable installments through September 13, 2006, variable interest rate based upon prime or LIBOR - 53,284 Note payable to insurance company, quarterly installments of $93 (including interest), due September 13, 2006, interest at 7.75% 2,306 2,531 Note payable to supplier, monthly installments of $104 (including interest), due March 1, 1998, interest at 10.00% 205 1,458 Note payable to finance company, monthly installments of $18 (including interest), due July 1, 2002, interest at 7.50% 831 989 -------- -------- 118,342 135,354 -------- --------Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 132,208 153,864 Less current portion (519) (4,753) -------- --------- $ 131,689 $ 149,111 ========= ========= Annual maturities of long-term debt outstanding, excluding $935,000representing the unamortized portion of warrants, on December 31, 1997are as follows: 1998 - $519,000; 1999 - $391,000; 2000 - $15,184,000;2001 - $445,000; 2002 - $384,000; 2003 and thereafter - $116,220,000.Cadiz Obligations As of December 31, 1996, the Company's obligations to CooperatieveCentrale Raiffeisen-Boerenleenbank B.A. ("Rabobank") and Henry Ansbacher& Co. Limited ("Ansbacher") were approximately $9.1 million and $9.4million, respectively. ING Baring (U.S.) Capital Corporation ("ING") purchased the $9.4million senior term bank loan effective March 31, 1997. The loan issecured by substantially all of the Company's non-Sun World relatedproperty. The maturity date of the obligation is April 30, 1998 withinterest at a rate of LIBOR plus 200 basis points payable at LIBOR semi-annually, with the remaining accrued interest added to principal. ING granted to the Company the right to two one-year extensions in May 1997. In connection with this transaction, ING received warrantsto purchase 75,000 shares of the Company's common stock at $5.03, the market price at issuance. The Company also issued 30,000 shares of stock to Ansbacher in connection with the refinancing. The total fair value of the warrants was $163,000 and has been recorded as a debt discount and is being amortized over one year. If the Company elects to exercise the first or second extension, the interest rate will be further adjusted and the Company will be required to issue additionalwarrants to ING. Additionally, as part of the Sun World debt refinancing described below, the Company repaid its $9.1 million subordinated term bank loan. In November 1997, the Company entered into a three year $15 millionRevolving Credit Facility with ING. The Revolving Credit Facility issecured by a second lien on all of the non-Sun World assets of theCompany. Principal is due in 2000. Interest is payable semi-annuallyat 8% if paid in cash and at 10% if paid in stock. The Company had $5million outstanding under the Revolving Credit Facility at December 31,1997. The Company issued 200,000 warrants in connection with theinitial borrowings at $7.00, the market price at issuance. Theagreement calls for the issuance of certain additional warrants if andwhen the remaining $10 million is drawn. The total fair value of thewarrants was $920,000 and has been recorded as a debt discount and isbeing amortized over the three-year remaining term of the revolver.Sun World Obligations In April 1997, Sun World restructured its long-term debt by issuing$115 million of Series A First Mortgage Notes through a privateplacement. The notes have subsequently been exchanged for Series BFirst Mortgage Notes which are registered under the Securities Act of1933 and publicly traded. Sun World utilized the proceeds from the debtoffering and existing cash on hand to repay the term insurance companyloan and the term bank loan, totaling approximately $130 million. The First Mortgage Notes are secured by a first lien (subject tocertain permitted liens) on substantially all of the assets of Sun Worldand its subsidiaries, other than growing crops, crop inventories andaccounts receivable and proceeds thereof, which secure the RevolvingCredit Facility. The First Mortgage Notes include covenants which restrict theCompany's ability to receive distributions from Sun World. The Sun World Notes are also secured by the guarantees of CoachellaGrowers, Inc., Sun Desert, Inc., Sun World Brands, Sun World ManagementCorporation and Sun World/Rayo (collectively, the "Sun World SubsidiaryGuarantors") and by the Company. The Company also pledged all of theSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. stock of Sun World. Effective December 31, 1997, Agri-Land Realty,Inc., Big Valley Leasing, Inc., Dinuba Packing Corporation, Pacific FarmService, Inc., SFC Marketing Corporation, Sun Harvest, Inc., Sun WorldAvocado and Sun World Export, Inc., were dissolved and are no longer SunWorld Subsidiary Guarantors. Sun World and the Sun World SubsidiaryGuarantors are all direct and indirect wholly-owned subsidiaries of theCompany. The guarantees by the Sun World Subsidiary Guarantors arefull, unconditional, and joint and several. Sun World and the Sun WorldSubsidiary Guarantors comprise all of the direct and indirectsubsidiaries of the Company other than inconsequential subsidiaries. Additionally, management believes that the direct and indirect non-guarantor subsidiaries of Cadiz are inconsequential, both individuallyand in the aggregate, to the financial statements of the Company for allperiods presented.SUMMARIZED FINANCIAL INFORMATION Summarized consolidated financial information for Sun World is asfollows (in thousands): December 31, 1997 December 31, 1996 ----------------- ----------------- Current assets $ 22,483 $ 60,651 Noncurrent assets 145,318 136,344 Current liabilities 13,635 14,920 Noncurrent liabilities 123,623 139,615 For the Period Year Ended September 14, 1996 December 31, 1997 to December 31, 1996 ----------- ------------------ Revenues $ 99,929 $ 22,580 Cost of sales (76,535) (16,396) Operating income 11,091 2,989 Net income (loss) (2,817) (823) Combined summarized financial information for the Sun WorldSubsidiary Guarantors is as follows (in thousands): December 31, 1997 December 31, 1996 ------------------ ------------------- Current assets $ - $ - Noncurrent assets 8,833 7,439 Current liabilities 27 4 Noncurrent liabilities 107 107 For the Period Year Ended September 14, 1996 December 31, 1997 to December 31, 1996 ------------------ -------------------- Share of net income of equity investee $ 1,388 $ 820 Separate financial statements for Sun World and each of the SunWorld Subsidiary Guarantors are not presented as management hasdetermined that they would not be material to investors.NOTE 11 - INCOME TAXES Deferred taxes are recorded based upon differences between thefinancial statement and tax basis of assets and liabilities andavailable carryforwards. Temporary differences and carryforwards whichgave rise to a significant portion of deferred tax assets andliabilities as of December 31, 1997 and 1996 are as follows (inthousands): December 31, December 31, 1997 1996 ---- ---- Deferred tax liabilities: Net fixed asset basis difference $ 4,841 $ 5,786 Net basis difference in partnership investments 3,886 4,734 Other 1,268 444Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ------ ------- Total deferred tax liabilities 9,995 10,964 ------- ------- Deferred tax assets: Net operating losses 25,815 23,943 Reserve for notes receivable 1,178 1,239 State taxes 1,779 1,142 Other 1,097 1,228 ------ ------- Total deferred tax assets 29,869 27,552 Valuation allowance for deferred tax assets (25,321) (20,935) ------- ------- Net deferred tax assets 4,548 6,617 ------- ------- Net deferred tax liability $ 5,447 $ 4,347 ======= ======= As of December 31, 1997, the Company has net operating loss (NOL)carryforwards of approximately $71.1 million for federal income taxpurposes. Such carryforwards expire in varying amounts through the year2013. In accordance with the Tax Reform Act of 1986, NOL utilizationmay be subject to an annual limitation. When there is a change ofownership, of more than 50% (as defined) of a corporation, the use ofany NOL is limited annually to an amount defined by law. As of December31, 1997, $26.2 million of NOL carryforwards are limited to utilizationof $4.5 million per year. The remaining NOLs are not limited on anannual basis. The Company has state NOLs as of December 31, 1997 of $18.4million. Of these, $14.2 million are not subject to limitations andexpire in varying amounts through the year 2002. The remaining $4.2million of NOLs relate to Sun World prior to the acquisition. TheseNOLs are limited to annual utilization of $400,000 plus any built-ingains and expire in varying amounts through the year 2000. A reconciliation of the income tax benefit for income taxes to thestatutory federal income tax rate is as follows (dollars in thousands): Nine Year Months Year Ended Ended Ended December 31, December 31, March 31, 1997 1996 1996 ---- ---- ---- Expected federal income tax benefit at 34% $(2,903) $ (2,257) $ (2,886) Loss with no tax benefit 2,981 1,790 2,405 Amortization 79 60 80 Utilization of net operating losses - (696) - Other nondeductible expenses (157) 462 401 ------- ------- ------- Income tax benefit $ - $ (641) $ - ======= ======== ========NOTE 12 - EMPLOYEE BENEFIT PLANS In December 1994, the Company established a 401(k) Plan for allemployees of Cadiz. This plan contains no eligibility requirements andcontributions by the Company are at the option of the Company on a year-to-year basis. No contributions by the Company to this plan have beenmade to-date. Sun World established a 401(k) Plan for its salaried employees onJanuary 1, 1996. Employees must work 1,000 hours and have completed oneyear of service to be eligible to participate in this plan. Sun Worldmatches 75% of the first four percent deferred by an employee up to$1,500 per year. In addition, Sun World maintains a definedSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. contribution pension plan covering substantially all of its employeeswho (i) are not covered by a collective bargaining agreement, (ii) haveat least one year of service and (iii) have worked at least 1,000 hours. Contributions are 2% of each covered employee's salary. For thosehourly employees covered under a collective bargaining agreement,contributions are made to a multi-employer pension plan in accordancewith negotiated labor contracts and are generally based on the number ofhours worked. NOTE 13 - PREFERRED AND COMMON STOCK During the nine months ended December 31, 1996, the Company issued(i) 27,431 shares totaling $27.6 million of newly authorized ConvertibleSeries A Redeemable Preferred Stock; (ii) $10.0 million of newlyauthorized 6% Convertible Series B Preferred Stock; and (iii) $3.0million of newly authorized 6% Convertible Series C Preferred Stock. All preferred stock was converted to common stock as of December 31,1997. During 1997, the Company paid $1,717,000 of preferred stockdividends with common stock. On October 1, 1997, the Company agreed to issue 375,000 shares ofcommon stock to a hydrological research company in order to acquiretitle to substantially all of its assets. This transaction wascompleted in February 1998.NOTE 14 - STOCK-BASED COMPENSATION PLANS AND WARRANTSSTOCK OPTIONS AND WARRANTS The Company issues options pursuant to its 1996 Stock Option Plan(the "Plan") as well as options which are not pursuant to a plan. ThePlan provides for the granting of up to 3,000,000 shares. All options,whether under the Plan or not, are granted at a price approximating fairmarket value at the date of grant, have vesting periods ranging fromissuance date to three years, have maximum terms ranging from three tofive years and are issued to directors, officers, consultants andemployees of the Company. During the year ended December 31, 1997, theCompany granted options to purchase 527,500 shares of the Company'scommon stock at a weighted average exercise price of $5.61 per share. Compensation cost for stock options is measured as the excess, ifany, of the quoted market price of the Company's stock at the date ofthe grant over the amount an employee must pay to acquire the stock. Had compensation cost for these plans been determined using fair value,as explained below, rather than the quoted market price, the Company'snet loss and net loss per common share would have increased to thefollowing pro forma amounts (dollars in thousands): Nine Year Months Year Ended Ended Ended December 31, December 31, March 31 1997 1996 1996 ---- ---- ---- Net loss: As reported $ (8,538) $ (5,997) $ (8,487) Pro forma $ (10,203) $ (6,655) $ (8,665) Net loss per common share: As reported $ (.33)(a) $ (.44)(a) $ (.48) Pro forma $ (.35)(a) $ (.48)(a) $ (.49) (a) After adjustment for preferred dividends during the year ended December 31, 1997 and the nine months ended December 31, 1996 of $1,213 and $3,125, respectively. The fair value of each option granted during the periods reportedwas estimated on the date of grant using the Black-Scholes optionpricing model. The following table summarizes stock option activity for theperiods noted. All options listed below were issued to officers,directors, employees and consultants. Weighted-Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Options Average Outstanding Exercise Number Price ----------- ------- Outstanding at March 31, 1995 2,335,500 $3.95 Granted 607,500 $5.19 Expired or canceled (7,000) $4.89 Exercised (145,000) $2.50 ----------- ----- Outstanding at March 31, 1996 2,791,000 $4.29 Granted 1,800,000 $4.62 Expired or canceled (400,000) $5.50 Exercised (325,000) $2.79 ---------- ----- Outstanding at December 31, 1996 3,866,000 $4.44 Granted 527,500 $5.61 Expired or canceled (120,000) $4.80 Exercised (348,500) $4.17 ---------- ----- Outstanding at December 31, 1997 3,925,000(a) $4.61 ========== ===== Options exercisable at March 31, 1996 2,116,000 $4.34 ========== ===== Options exercisable at December 31, 1996 1,966,000 $4.30 ========== ===== Options exercisable at December 31, 1997 2,297,500 $4.40 ========== ===== Weighted-average fair value of options grantedduring the year ended December 31, 1997 $ 2.55 ========== Weighted-average remaining contractual life of options outstanding at December 31, 1997 2.7 ========== (a) Exercise prices vary from $3.00 to $7.00 and expiration dates vary from February 1998 to October 2002. During the year ended December 31, 1997, the nine months endedDecember 31, 1996 and the year ended March 31, 1996, the Company issued275,000, 30,000 and 10,000 warrants with weighted-average exerciseprices of $6.45, $3.55 and $0.05, respectively. During the year endedDecember 31, 1997 and the nine months ended December 31, 1996, 240,000warrants with a weighted-average exercise price of $0.05 and 10,000warrants with a weighted-average exercise price of $3.55 were exercised,respectively. No warrants expired or were canceled during any of thethree periods discussed. At December 31, 1997 there were 275,000warrants outstanding at a weighted average exercise price of $6.45 pershare which expire in 2004. See Note 10 for further discussion of thesewarrants.RESTRICTED STOCK AWARD Following the Sun World acquisition in 1996, the Company's ChiefExecutive Officer was awarded a stock bonus of 125,000 shares ofrestricted common stock at no cost. 75,000 of these shares were issuedduring the year ended December 31, 1997. The remaining 50,000 sharesare issuable in equal annual installments over the next two years.Compensation expense is being recognized as earned over the period ofservice.NOTE 15 - CONTINGENCIES In December 1995, the Company filed an action relative to theproposed construction and operation of a landfill (the "Rail CycleProject") to be located adjacent to the Company's Cadiz property withthe Superior Court in San Bernardino County, California. The actionSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. challenges the various decisions by the County of San Bernardinorelative to the proposed Rail Cycle Project. Named in this action, inaddition to the County of San Bernardino, were the Board of Supervisorsof the County of San Bernardino, three individual members of the Boardof Supervisors, an employee of the County and Rail Cycle, L.P.("Rail Cycle") whose general partner is controlled by Waste Management,Inc. ("WMI"). The Company alleges that the actions of the County of SanBernardino did not comply with the guidelines prescribed by theCalifornia Environmental Quality Act and violated state planning andzoning laws. The action seeks to set aside the county certification ofRail Cycle's EIR/EIS and approval of the proposed Rail Cycle Project. The Company continues to believe the proposed Rail Cycle project, ifconstructed and operated as currently designed, poses environmentalrisks both to the Company's agricultural operations at Cadiz and to thegroundwater basin underlying the Cadiz property. Accordingly, theCompany intends to pursue its claims including compensatory damagesagainst the County of San Bernardino and Rail Cycle. On November 6,1997, the San Bernardino Superior Court denied the Company's applicationfor a Writ of Mandate to set aside the County of San Bernardino'scertification of the EIR/EIS. The Company intends to continueprosecuting its claim for monetary damages. No trial date has yet beenset. On October 24, 1997, the Company filed suit in the United StatesDistrict Court, for the Central District of California, against WMI, andcertain key executives and consultants of WMI, and certain other partiesin interest as to the proposed Rail Cycle Project. The Complaint asoriginally filed asserted the following claims arising under federallaw: Violations of the Racketeer Influenced and Corrupt Organization Act(RICO), Conspiracy to Violate the Racketeer Influenced and CorruptOrganization Act (RICO), violations of Section 10(b) of the SecuritiesExchange Act of 1934 and Interception of Wire Communications. Additionally, the Complaint asserted the following claims arising understate law: Conspiracy, Misappropriation of Trade Secrets, Conversion,Defamation, Trade Libel, Wiretapping, Interference with ExistingBusiness Relationship, and Unfair Business Practices. On December 9,1997, the federal district court severed the eight state law claims fromthe complaint and dismissed them without prejudice. Those claims havebeen reasserted in a state proceeding filed on January 8, 1998 in LosAngeles Superior Court (West Division). Prior to the acquisition of Sun World, the Internal Revenue Service(IRS) had filed claims against Sun World, and certain of itssubsidiaries (collectively "the Sun World Claimants"), for taxesrefunded for workers that the IRS claims were employees. The Sun WorldClaimants contend that the workers are excluded from the definition ofemployment under the Internal Revenue Code. On January 21, 1998, theDistrict Court ruled in favor of one of the Sun World Claimants. Management believes that the likelihood of an unfavorable future outcomewith regard to this matter is remote. Accordingly, the Company released$3,780,000 of reserves related to this matter at December 31, 1997 whichare reported on the Consolidated Statement of Operations as LitigationBenefit. In the normal course of its agricultural operations, the Companyhandles, stores, transports and dispenses products identified ashazardous materials. Regulatory agencies periodically conductinspections and, currently, there are no pending claims with respect tohazardous materials. The Company is involved in other legal and administrativeproceedings and claims. In the opinion of management, the ultimateoutcome of each proceeding or all such proceedings combined will nothave a material adverse impact on the Company's financial statements. NOTE 16 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarter Ended ----------------------------------------------- June 30, September 30, December 31, March 31, 1995 1995 1995 1996 ---- ---- ---- ----Revenues $ 54 $ 596 $ 470 $ 321Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Gross profit (loss) 16 178 140 (542)Net loss (1,851) (1,835) (1,660) (3,141)Net loss per common share (0.11) (0.10) (0.10) (0.17) Quarter Ended ------------------------------------ June 30, September 30, December 31, 1996 1996 1996 ---- ---- ----Revenues $ 82 $ 4,738 $ 18,960Gross (loss) profit (426) 258 6,223Net loss (1,987) (2,442) (1,568)Preferred stock dividends - - (3,125)Net loss per common share (0.10) (0.12) (0.23) Quarter Ended -------------------------------------------------- March 31, June 30, September 30, December 31, 1997 1997 1997 1997 ---- ---- ---- ----Revenues $ 4,805 $ 25,656 $ 52,949 $ 16,747Gross (loss) profit (213) 5,503 14,633 3,668Net (loss) income (7,396) (3,569) 3,618 (1,191)Preferred stock dividends (438) (766) (9) - Net (loss) income per common share (0.33) (0.15) 0.11 (0.04) CADIZ LAND COMPANY, INC.SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT December 31,BALANCE SHEET ($ in thousands): 1997 1996 ---- ----ASSETS Current assets: Cash and cash equivalents $ 3,590 $ 2,132 Accounts receivable, net 18 31 Inventories - 7 Due from subsidiary 86 332 Prepaid expenses and other 130 274 ------- --------Total current assets 3,824 2,776Investment in subsidiary 30,543 42,460Property, plant, equipment and water programs, net 26,769 26,595Other assets 4,740 5,131 -------- ------- $65,876 $76,962 ======= =======LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable 710 1,332 Accrued liabilities 870 1,513 Deferred revenue - 375 Long-term debt, current portion 20 518 ------ ------- Total current liabilities 1,600 3,738Long-term debt 13,846 17,992Other Liabilities 49 60Commitments and contingencies Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Series A redeemable preferred stock - $.01 par value; ($1,000 liquidation value); 60,000 shares authorized; shares issued and outstanding - none at December 31, 1997 and 27,431 at December 31, 1996 - 27,431Stockholders' equity:Preferred stock - $.01 par value; 40,000 shares authorized; shares issued and outstanding - none at December 31, 1997 and 340 shares at December 31, 1996 - - Common stock - $.01 par value; 45,000,000 shares authorized; shares issued and outstanding - 32,646,661 at December 31, 1997 and 23,445,868 at December 31,1996 326 234 Additional paid-in capital 120,873 88,574Accumulated deficit (70,818) (61,067) -------- -------- Total stockholders' equity: 50,381 27,741 -------- -------- $ 65,876 $ 76,962 ======== ======== CADIZ LAND COMPANY, INC.SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANTSTATEMENT OF OPERATIONS Year Nine Months Ended Ended December 31, December 31,(In thousands except per share data): 1997 1996 ---- ----Revenues $ 1,968 $ 1,278 -------- --------Costs and expenses: Cost of sales 270 1,329 Landfill prevention activities 683 394 General and administrative 4,042 3,206 Depreciation and amortization 994 773 ------ ----- Total costs and expenses 5,989 5,702 ------ ------Operating loss (4,021) (4,424)Loss from subsidiaries (2,817) (823) Interest expense, net 1,700 1,391 ------- -------Net loss before income taxes (8,538) (6,638)Income tax benefit - 641 ------- ------Net Loss (8,538) (5,997)Less: Preferred stock dividends (1,213) (674) Imputed dividend on Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. preferred stock - (2,451) ------ -------Net loss applicable to common stock $ (9,751) $ (9,122) ======= ======Net loss per common share $ (.33) $ (.44) ======= =======Weighted average shares outstanding 29,485 20,500 ======= =======SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANTSTATEMENT OF CASH FLOWS ($ in thousands): Year Nine Months Ended Ended December 31, December 31, 1997 1996 ---- ----Cash flows from operating activities: Net loss $ (8,538) $ (5,997) Adjustments to reconcile net loss to cash used for operating activities: Depreciation and amortization 1,462 1,388 Issuance of shares for services 470 - Loss from subsidiaries 2,817 823 Provisions for loss on disposal of assets 138 - Changes in operating assets and liabilities: Interest capitalized to debt 315 481 Decrease in accounts receivable 192 411 Decrease in inventories 7 259 Decrease (increase) in due from subsidiary 131 (923) Increase in prepaid expenses and other (56) (317) Decrease in accounts payable (667) (441) Increase in accrued liabilities 506 219 Increase in deferred revenue - 375 Decrease in other liabilities (1,006) - ------ ------- Net cash used for operating activities (4,229) (3,722)Cash flows from investing activities: Additions to property, plant and equipment (638) (27) Land purchase and development - (490) Additions to water programs (466) (187) Proceeds from disposal of property, plant and equipment 33 - Acquisition of Sun World - (36,587) Decrease in other assets 153 - ------- ------- Net cash used for investing activities (918) (37,291) ------- -------Cash flows from financing activities: Net proceeds from issuance of stock 1,690 37,761 Proceeds from short-term debt, net - 330 Proceeds from issuance of long-term debt 5,084 - Principal payments on long-term debt (9,231) - Debt issuance costs (38) - Dividends paid on conversion of preferred stock - (99) Return of capital from subsidiary 9,100 - ------- ------- Net cash provided by financing activities 6,605 37,992 ------- -------Net increase (decrease) in cash and cash equivalents 1,458 (3,021)Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Cash and cash equivalents, beginning of period 2,132 5,153 ------ ------Cash and cash equivalents, end of period $ 3,590 $ 2,132 ======= =======SCHEDULE II - VALUATION & QUALIFYING ACCOUNTSFor the year ended December 31, 1997, the nine months ended December 31,1996 and the year ended March 31, 1996 ($ in thousands) Additions ------------------ Charged Balance at to Charged Beginning Costs to Balance of and Other at End Period Expenses Accounts Deductions of Period --------- -------- -------- ---------- ---------Year ended December 31, 1997 Allowance for doubtful accounts $ 480 $ - $ - $ 193 $ 287 Amortization of excess of purchase price over net assets acquired 2,026 233 - - 2,259 ------ ------ ------ ------ ------ $ 2,506 233 - 193 2,546 ======= ====== ====== ====== =====Nine months ended December 31, 1996 Allowance for doubtful accounts $ - $ 107 $ 373 $ - $ 480 Amortization of excess of purchase price over net assets acquired 1,851 175 - - 2,026 ------ ------- ------- ------ ------ $ 1,851 $ 282 $ 373 $ - $ 2,506 ======== ======= ======= ====== ======= Year ended March 31, 1996 Allowance for doubtful accounts $ - $ - $ - $ - $ - Amortization of excess of purchase price over net assets acquired 1,617 234 - - 1,851 -------- ------- ------- ------ -------- $ 1,617 $ 234 $ - $ - $ 1,851 ======= ====== ======= ======= ======= CONSENT OF INDEPENDENT ACCOUNTANTSWe hereby consent to the incorporation by reference in the RegistrationStatement on Form S-8 (Nos. 33-73936, 33-83360, 33-63065, 33-63667, 333-34911,333-35491, 333-41367 and 333-47057) of Cadiz Land Company, Inc. of ourreport dated February 13, 1998, appearing on page 28 of this Form 10-K. Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Price Waterhouse LLPLos Angeles, CaliforniaMarch 26, 1998Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 4.7 ----------- AMENDMENT TO INDENTURE This AMENDMENT TO INDENTURE ("Amendment") is entered into as ofJanuary 23, 1998 by and between Sun World International, Inc.("Issuer"), Cadiz Land Company, Inc. ("Parent Guarantor"), Sun WorldManagement Corporation, Sun World Brands, Sun World/Rayo, Sun Desert,Inc., and Coachella Growers (collectively, "Subsidiary Guarantors"), andIBJ Schroder Bank & Trust Company (the "Trustee"). The parties to thisAmendment are hereinafter sometimes referred to collectively as the"Parties." RECITALS: ---------- WHEREAS, the Parties have entered into an Indenture dated as ofApril 16, 1997, as amended (the "Indenture"); and WHEREAS, pursuant to Section 12.03(a) of the Indenture, Agri-LandRealty, Inc., Big Valley Leasing, Inc., Dinuba Packing Corporation,Pacific Farm Service, Inc., SFC Marketing Corporation, Sun WorldAvocado, Sun World Export, Inc., and SW Harvest, Inc. (formerly SunHarvest, Inc.), each of which was originally a party to the Indenture,have merged with and into the Issuer effective as of December 31, 1997,as a consequence of which the Guarantees of such entities automaticallyterminated and such entities are no longer Subsidiary Guarantors underthe Indenture; and WHEREAS, the Parties wish to amend the Indenture in order tocorrect certain ambiguities, inconsistencies and defects within theIndenture; and WHEREAS, this Amendment will serve to accurately reflect the intentof the parties and will not adversely affect the legal rights of anyHolder of a Note (as defined in the Indenture); and WHEREAS, pursuant to Section 9.01 of the Indenture, this Amendmentmay be entered into by the Parties without the consent of any Holder ofa Note; NOW THEREFORE, in consideration of the above recitals, the promisesand the mutual representations, warranties, covenants and agreementsherein contained, the Parties hereby agree as follows: 1. AMENDMENT OF INDENTURE. The Indenture is hereby amended as set forth below: a. INVESTMENTS. The definition of the term "Investments" in Section 1.01 of the Indenture is hereby amended in full as follows: "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. Without limitation of the foregoing, any acquisition by a Person of assets which do not constitute an Investment under the preceding sentence and which are not classified as an investment on a balance sheet prepared by such Person in accordance with GAAP shall not be deemed an Investment hereunder. If the Issuer or any Subsidiary of the Issuer sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Issuer such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Issuer, the Issuer shall be deemed to have made an InvestmentSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in Section 4.07." b. SECTION 12.03 (b). The initial paragraph of Section 12.03(b) of the Indenture is hereby amended by the addition, at the beginning ofsuch paragraph, of the following language: "(b) Except for transactions completed in furtherance of the requirements of Section 4.16(a) hereof,." 2. EXISTING INDENTURE. Except as otherwise amended or modifiedherein or hereby, the provisions of the Indenture are hereby reaffirmedand shall remain in full force and effect. IN WITNESS WHEREOF, each of the Parties has caused this Amendmentto Indenture to be executed and deliverd by their duly authorized officersas of the date first above written.SUN WORLD INTERNATIONAL, INC.By: /s/ Stanley E. Speer ------------------------------- Name: Stanley E. Speer Title: Chief Financial Officer CADIZ LAND COMPANY, INC.By: /s/ Stanley E. Speer -------------------------------- Name: Stanley E. Speer Title: Chief Financial OfficerSUN WORLD MANAGEMENT CORPORATIONSUN WORLD BRANDSSUN WORLD/RAYOSUN DESERT, INC.COACHELLA GROWERSBy: /s/ Stanley E. Speer ---------------------------------- Name: Stanley E. Speer Title: Chief Financial OfficerIBJ SCHRODER BANK & TRUST COMPANY,as TrusteeBy: /s/ Luis Perez ---------------------------------- Name: Luis Perez Title: Assistant Vice President Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.15 ------------- CREDIT AGREEMENT dated as of November 25, 1997 among CADIZ LAND COMPANY, INC., The Lenders Party Hereto and ING BARING (U.S.) CAPITAL CORPORATION, as Administrative Agent _________________________================================================================TABLE OF CONTENTS Page ARTICLE I Definitions SECTION 1.01. Defined Terms. . . . . . . . . . . . . . . . . . 1 SECTION 1.02. [Intentionally Omitted]. . . . . . . . . . . . . 15 SECTION 1.03. Terms Generally. . . . . . . . . . . . . . . . . 15 SECTION 1.04. Accounting Terms; GAAP . . . . . . . . . . . . . 16 ARTICLE II The Credits SECTION 2.01. Commitments. . . . . . . . . . . . . . . . . . . 16 SECTION 2.02. Loans and Borrowings . . . . . . . . . . . . . . 16 SECTION 2.03. Requests for Borrowings. . . . . . . . . . . . . 17 SECTION 2.04. Initial Borrowing. . . . . . . . . . . . . . . . 18 SECTION 2.05. [Intentionally Omitted]. . . . . . . . . . . . . 18 SECTION 2.06. Funding of Borrowings. . . . . . . . . . . . . . 18 SECTION 2.07. [Intentionally Omitted]. . . . . . . . . . . . . 18 SECTION 2.08. Security . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.09. Termination and Reduction of Commitments . . . . 19 SECTION 2.10. Repayment of Loans; Evidence of Debt . . . . . . 20 SECTION 2.11. Prepayment of Loans; Reborrowings. . . . . . . . 21 SECTION 2.12. Fees . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.13. Interest . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.14. Stock Payment Election . . . . . . . . . . . . . 23 SECTION 2.15. Increased Costs. . . . . . . . . . . . . . . . . 24 SECTION 2.16. [Intentionally Omitted]. . . . . . . . . . . . . 25 SECTION 2.17. Taxes. . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. . . . . . . . . . . . . . . 27 SECTION 2.19. Mitigation Obligations; Replacement of Lenders. . . . . . . . . . . . . . . . . . . . . 29 ARTICLE III Representations and Warranties SECTION 3.01. Organization; Powers . . . . . . . . . . . . . . 30 SECTION 3.02. Authorization; Enforceability. . . . . . . . . . 30 SECTION 3.03. Governmental Approvals; No Conflicts . . . . . . 30 SECTION 3.04. Financial Condition; No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . 31Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 3.05. Properties . . . . . . . . . . . . . . . . . . . 31 SECTION 3.06. Litigation and Environmental Matters . . . . . . 31 SECTION 3.07. Compliance with Laws and Agreements. . . . . . . 32 SECTION 3.08. Investment and Holding Company Status. . . . . . 32 SECTION 3.09. Taxes. . . . . . . . . . . . . . . . . . . . . . 32 SECTION 3.10. ERISA. . . . . . . . . . . . . . . . . . . . . . 32 SECTION 3.11. Disclosure . . . . . . . . . . . . . . . . . . . 33 SECTION 3.12. Security Interests . . . . . . . . . . . . . . . 33 SECTION 3.13. Participating Subsidiaries . . . . . . . . . . . 34 SECTION 3.14. Inactive Subsidiaries. . . . . . . . . . . . . . 34 SECTION 3.15. Solvency.. . . . . . . . . . . . . . . . . . . . 34 SECTION 3.16. Excluded Items.. . . . . . . . . . . . . . . . . 34 SECTION 3.17. Equity Acquisition Assets. . . . . . . . . . . . 35 SECTION 3.18. Rolling Stock. . . . . . . . . . . . . . . . . . 35 ARTICLE IV Conditions SECTION 4.01. Effective Date . . . . . . . . . . . . . . . . . 35 SECTION 4.02. Each Credit Event. . . . . . . . . . . . . . . . 37 ARTICLE V Affirmative Covenants SECTION 5.01. Financial Statements and Other Information . . . 38 SECTION 5.02. Notices of Material Events . . . . . . . . . . . 39 SECTION 5.03. Existence; Conduct of Business . . . . . . . . . 40 SECTION 5.04. Payment of Obligations . . . . . . . . . . . . . 40 SECTION 5.05. Maintenance of Properties; Insurance . . . . . . 40 SECTION 5.06. Books and Records; Inspection Rights . . . . . . 40 SECTION 5.07. Compliance with Laws . . . . . . . . . . . . . . 41 SECTION 5.08. Use of Proceeds. . . . . . . . . . . . . . . . . 41 SECTION 5.09. New Subsidiaries.. . . . . . . . . . . . . . . . 41 SECTION 5.10. Acquisitions by Borrower.. . . . . . . . . . . . 41 SECTION 5.11. Acquisitions with Proceeds of Loans. . . . . . . 43 SECTION 5.12. Warrants.. . . . . . . . . . . . . . . . . . . . 43 SECTION 5.13. Stock Payment Common Stock.. . . . . . . . . . . 43 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness . . . . . . . . . . . . . . . . . . 44 SECTION 6.02. Liens. . . . . . . . . . . . . . . . . . . . . . 45 SECTION 6.03. Fundamental Changes. . . . . . . . . . . . . . . 46 SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions . . . . . . . . . . . . . . . . 47 SECTION 6.05. Hedging Agreements . . . . . . . . . . . . . . . 48 SECTION 6.06. Restricted Payments. . . . . . . . . . . . . . . 48 SECTION 6.07. Transactions with Affiliates . . . . . . . . . . 48 SECTION 6.08. Restrictive Agreements . . . . . . . . . . . . . 49 SECTION 6.09. Use of Proceeds. . . . . . . . . . . . . . . . . 49 SECTION 6.10. Management Fees from Sun World . . . . . . . . . 49 ARTICLE VII Events of Default. . . . . . . . . . . . . . . . 50 ARTICLE VIII The Administrative Agent. . . . . . . . . . . . 54 SECTION 8.01. Appointment, Powers and Immunities.. . . . . . . 54 SECTION 8.02. Administrative Agent in its Individual Capacity . . . . . . . . . . . . . . . . . . . . 54 SECTION 8.03. Nature of Duties of Administrative Agent.. . . . 55 SECTION 8.04. Certain Rights of Administrative Agent.. . . . . 56 SECTION 8.05. Reliance by Administrative Agent.. . . . . . . . 56 SECTION 8.06. Sub-Agents.. . . . . . . . . . . . . . . . . . . 56 SECTION 8.07. Resignation by Administrative Agent. . . . . . . 57 SECTION 8.08. Non-Reliance on Administrative Agent and Other Lenders. . . . . . . . . . . . . . . . . . 57 SECTION 8.09. Security Documents.. . . . . . . . . . . . . . . 57Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ARTICLE IX Miscellaneous SECTION 9.01. Notices. . . . . . . . . . . . . . . . . . . . . 58 SECTION 9.02. Waivers; Amendments. . . . . . . . . . . . . . . 60 SECTION 9.03. Expenses; Indemnity; Damage Waiver . . . . . . . 61 SECTION 9.04. Successors and Assigns . . . . . . . . . . . . . 62 SECTION 9.05. Survival . . . . . . . . . . . . . . . . . . . . 65 SECTION 9.06. Counterparts; Integration; Effectiveness . . . . 66 SECTION 9.07. Severability . . . . . . . . . . . . . . . . . . 66 SECTION 9.08. Right of Setoff. . . . . . . . . . . . . . . . . 66 SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process . . . . . . . . . . . . . . . 67 SECTION 9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . 68 SECTION 9.11. Headings . . . . . . . . . . . . . . . . . . . . 68 SECTION 9.12. Confidentiality. . . . . . . . . . . . . . . . . 68 SECTION 9.13. Foreclosure of Cadiz/Sun World Lease . . . . . . 69 SECTION 9.14. Waiver of Anti-Deficiency Protection . . . . . . 69 SECTION 9.15. Costs Borne by Non-Prevailing Party. . . . . . . 70 SECTION 9.16. Interest Rate Limitation . . . . . . . . . . . . 70 SECTION 9.17. Registration under the Securities Act of 1933. . 70 SECTION 9.18. Status of ING. . . . . . . . . . . . . . . . . . 74 SECTION 9.19. Amendments to Sun World Indenture. . . . . . . . 75SCHEDULES:Schedule 2.01 -- CommitmentsSchedule 2.04 -- Borrower's Wire Instructions for Initial BorrowingSchedule 3.13 -- Borrower's Participating SubsidiariesSchedule 3.14 -- Borrower's Inactive SubsidiariesSchedule 6.01 -- Existing IndebtednessSchedule 6.02 -- Existing LiensSchedule 6.08 -- Existing RestrictionsEXHIBITS:Exhibit A -- Form of Assignment and AcceptanceExhibit B -- Cadiz Reaffirmation AgreementExhibit C -- Form of MortgageExhibit D -- Form of NoteExhibit E -- Form of Pledge and Security Agreement Exhibit F -- Form of Purchaser CertificateExhibit G -- Forms of WarrantsExhibit H -- Form of Opinion of Borrower's Counsel CREDIT AGREEMENT dated as of November 25, 1997, among CADIZLAND COMPANY, INC., the LENDERS party hereto, and ING BARING (U.S.)CAPITAL CORPORATION, as Administrative Agent. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. DEFINED TERMS. As used in this Agreement, thefollowing terms have the meanings specified below: "Administrative Agent" means ING Baring (U.S.) CapitalCorporation, in its capacity as administrative agent for the Lendershereunder. "Administrative Questionnaire" means an AdministrativeQuestionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person,another Person that directly, or indirectly through one or moreintermediaries, Controls or is Controlled by or is under commonControl with the Person specified. "Agreement" means this Credit Agreement, dated as of the dateset forth above, among Borrower, the Lenders party hereto, and theAdministrative Agent.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "Applicable Percentage" means, with respect to any Lender,the percentage of the total Commitments represented by such Lender'sCommitment. If the Commitments have terminated or expired, theApplicable Percentages shall be determined based upon theCommitments most recently in effect, giving effect to anyassignments. "Assignment and Acceptance" means an assignment andacceptance entered into by a Lender and an assignee (with theconsent of any party whose consent is required by Section 9.04), andaccepted by the Administrative Agent, in the form of Exhibit A orany other form approved by the Administrative Agent. "Availability Period" means the period from and including theEffective Date to but excluding the earlier of the Maturity Date andthe date of termination of the Commitments. "Board" means the Board of Governors of the Federal ReserveSystem of the United States of America. "Borrower" means Cadiz Land Company, Inc., a Delawarecorporation. "Borrowing" means Loans of made, converted or continued onthe same date. "Borrowing Request" means a request by the Borrower for aBorrowing in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sundayor other day on which commercial banks in New York City areauthorized or required by law to remain closed. "Cadiz Reaffirmation Agreement" means the agreementevidencing Borrower's assumption and reaffirmation of allliabilities and obligations of Cadiz Valley Development Corporationin the form as attached hereto in Exhibit B. "Cadiz/Sun World Lease" means that certain Agricultural Leaseby and between Southwest Fruit Growers, L.P. and the Borrower (bothin its own capacity and as successor by merger to Cadiz ValleyDevelopment Corporation), the lessors, and Sun World, as lessee,dated as of September 13, 1996, as amended by that certain Amendmentto Lease with Lender Cure Rights between Southwest Fruit Growers,L.P., Cadiz, Sun World and Credit Agricole, dated as of September13, 1996, as further amended by that certain Amendment toAgricultural Lease, dated as of April 16, 1997, as further amendedfrom time to time. "Cadiz/Sun World Services Agreement" means that certainServices Agreement between Borrower and Sun World, dated September13, 1996, as amended by that certain Amendment dated as of April 16,1997, as further amended from time to time. "Capital Lease Obligations" of any Person means theobligations of such Person to pay rent or other amounts under anylease of (or other arrangement conveying the right to use) real orpersonal property, or a combination thereof, which obligations arerequired to be classified and accounted for as capital leases on abalance sheet of such Person under GAAP, and the amount of suchobligations shall be the capitalized amount thereof determined inaccordance with GAAP. "Cash Equivalent" has the meaning assigned to such term inthe Sun World Indenture. "Cash Payment Rate" means 8% per annum, computed inaccordance with Section 2.13. "Change in Control" means (a) the acquisition of ownership,directly or indirectly, beneficially or of record, by any Person orgroup (within the meaning of the Securities Exchange Act of 1934 andthe rules of the Commission thereunder as in effect on the datehereof), of shares representing more than 35% of the aggregateordinary voting power represented by the issued and outstandingSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. capital stock of the Borrower; (b) occupation of a majority of theseats (other than vacant seats) on the board of directors of theBorrower by Persons who were neither (i) nominated by the board ofdirectors of the Borrower nor (ii) appointed by directors sonominated; or (c) the acquisition of direct or indirect Control ofthe Borrower by any Person or group. "Change in Law" means (a) the adoption of any law, rule orregulation after the date of this Agreement, (b) any change in anylaw, rule or regulation or in the interpretation or applicationthereof by any Governmental Authority after the date of thisAgreement or (c) compliance by any Lender (or, for purposes ofSection 2.15(b), by any lending office of such Lender or by suchLender's holding company, if any) with any request, guideline ordirective (whether or not having the force of law) of anyGovernmental Authority made or issued after the date of thisAgreement. "Closing Price", means the last sale price per share ofCommon Stock regular way or, in the case no such reported sale takesplace on such day, the average of the last reported bid and askedprices regular way, in either case on the principal nationalsecurities exchange on which the Common Stock is admitted to tradingon such exchange, the average of the last reported bid and askedprices as reported by Nasdaq, or other similar organization ifNasdaq is no longer reporting such information, or if not soavailable, the fair market price, as determined in good faith by theAdministrative Agent. "Code" means the Internal Revenue Code of 1986, as amendedfrom time to time. "Commission" means the Securities and Exchange Commission. "Commitment" means, with respect to each Lender, thecommitment of such Lender to make Revolving Loans, expressed as anamount representing the maximum aggregate amount of such Lender'sRevolving Credit Exposure hereunder, as such commitment may be (a)reduced from time to time pursuant to Section 2.09 and (b) reducedor increased from time to time pursuant to assignments by or to suchLender pursuant to Section 9.04. The initial amount of eachLender's Commitment is set forth on Schedule 2.01, or in theAssignment and Acceptance pursuant to which such Lender shall haveassumed its Commitment, as applicable. The initial aggregate amountof the Commitments is $15,000,000. "Common Stock" means authorized common stock, $0.01 parvalue, of the Borrower. "Control" means the possession, directly or indirectly, ofthe power to direct or cause the direction of the management orpolicies of a Person, whether through the ability to exercise votingpower, by contract or otherwise. "Controlling" and "Controlled"have meanings correlative thereto. "Default" means any event or condition which constitutes anEvent of Default or which upon notice, lapse of time or both would,unless cured or waived, become an Event of Default. "Disclosed Matters" means the actions, suits and proceedingsand the environmental matters disclosed in any periodic and otherreports, proxy statements and other materials filed by the Borroweror any Subsidiary with the Commission that are publicly available. "dollars" or "$" refers to lawful money of the United Statesof America. "Effective Date" means the date on which the conditionsspecified in Section 4.01 are satisfied (or waived in accordancewith Section 9.02). "Environmental Laws" means all laws, rules, regulations,codes, ordinances, orders, decrees, judgments, injunctions, noticesor binding agreements issued, promulgated or entered into by anyGovernmental Authority, relating in any way to the environment,Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. preservation or reclamation of natural resources, the management,release or threatened release of any Hazardous Material or to healthand safety matters. "Environmental Liability" means any liability, contingent orotherwise (including any liability for damages, costs ofenvironmental remediation, fines, penalties or indemnities), of theBorrower or any Subsidiary directly or indirectly resulting from orbased upon (a) violation of any Environmental Law, (b) thegeneration, use, handling, transportation, storage, treatment ordisposal of any Hazardous Materials, (c) exposure to any HazardousMaterials, (d) the release or threatened release of any HazardousMaterials into the environment or (e) any contract, agreement orother consensual arrangement pursuant to which liability is assumedor imposed with respect to any of the foregoing. "Equity Acquisition Asset" has the meaning set forth inSection 5.10(c) hereof. "Equity Acquisition Threshold" has the meaning set forth inSection 5.10(c) hereof. "ERISA" means the Employee Retirement Income Security Act of1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or notincorporated) that, together with the Borrower, is treated as asingle employer under Section 414(b) or (c) of the Code or, solelyfor purposes of Section 302 of ERISA and Section 412 of the Code, istreated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined inSection 4043 of ERISA or the regulations issued thereunder withrespect to a Plan (other than an event for which the 30-day noticeperiod is waived); (b) the existence with respect to any Plan of an"accumulated funding deficiency" (as defined in Section 412 of theCode or Section 302 of ERISA), whether or not waived; (c) the filingpursuant to Section 412(d) of the Code or Section 303(d) of ERISA ofan application for a waiver of the minimum funding standard withrespect to any Plan; (d) the incurrence by the Borrower or any ofits ERISA Affiliates of any liability under Title IV of ERISA withrespect to the termination of any Plan; (e) the receipt by theBorrower or any ERISA Affiliate from the PBGC or a planadministrator of any notice relating to an intention to terminateany Plan or Plans or to appoint a trustee to administer any Plan;(f) the incurrence by the Borrower or any of its ERISA Affiliates ofany liability with respect to the withdrawal or partial withdrawalfrom any Plan or Multiemployer Plan; or (g) the receipt by theBorrower or any ERISA Affiliate of any notice, or the receipt by anyMultiemployer Plan from the Borrower or any ERISA Affiliate of anynotice, concerning the imposition of Withdrawal Liability or adetermination that a Multiemployer Plan is, or is expected to be,insolvent or in reorganization, within the meaning of Title IV ofERISA. "Event of Default" has the meaning assigned to such term inArticle VII. "Exchange Act" has the meaning set forth in Section 9.17hereof. "Excluded Item" has the meaning set forth in Section 5.10(b)hereof. "Excluded Items/Rolling Stock Threshold" has the meaning setforth in Section 5.10(b) hereof. "Excluded Taxes" means, with respect to the AdministrativeAgent, any Lender, any other recipient of any payment to be made byor on account of any obligation of the Borrower hereunder, (a)income or franchise taxes imposed on (or measured by) its net incomeby the United States of America, or by the jurisdiction under thelaws of which such recipient is organized or in which its principaloffice is located or, in the case of any Lender, in which itsapplicable lending office is located, (b) any branch profits taxesSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. imposed by the United States of America or any similar tax imposedby any other jurisdiction in which the Borrower is located and (c)in the case of a Foreign Lender (other than an assignee pursuant toa request by the Borrower under Section 2.19(b)), any withholdingtax that is imposed on amounts payable to such Foreign Lender at thetime such Foreign Lender becomes a party to this Agreement (ordesignates a new lending office) or is attributable to such ForeignLender's failure to comply with Section 2.17(e), except to theextent that such Foreign Lender (or its assignor, if any) wasentitled, at the time of designation of a new lending office (orassignment), to receive additional amounts from the Borrower withrespect to such withholding tax pursuant to Section 2.17(a). "Federal Funds Effective Rate" means, for any day, theweighted average (rounded upwards, if necessary, to the next 1/100of 1%) of the rates on overnight Federal funds transactions withmembers of the Federal Reserve System arranged by Federal fundsbrokers, as published on the next succeeding Business Day by theFederal Reserve Bank of New York, or, if such rate is not sopublished for any day that is a Business Day, the average (roundedupwards, if necessary, to the next 1/100 of 1%) of the quotationsfor such day for such transactions received by the AdministrativeAgent from three Federal funds brokers of recognized standingselected by it. "Financial Officer" means the chief financial officer,principal accounting officer, treasurer or controller of theBorrower. "Fixed Rate" means, with respect to any Borrowing for anyInterest Period, either (a) if the Borrower does not elect the StockPayment Option, the Cash Payment Rate or (b) if the Borrower electsthe Stock Payment Option, the Stock Payment Rate. "Foreign Lender" means any Lender that is organized under thelaws of a jurisdiction other than that in which the Borrower islocated. For purposes of this definition, the United States ofAmerica, each State thereof and the District of Columbia shall bedeemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in theUnited States of America. "Global Amendment Agreement" means that certain GlobalAmendment Agreement, dated as of March 31, 1997, between Borrowerand Cadiz Valley Development Corporation, as borrowers, and ING, asLender. "Governmental Authority" means the government of the UnitedStates of America, any other nation or any political subdivisionthereof, whether state or local, and any agency, authority,instrumentality, regulatory body, court, central bank or otherentity exercising executive, legislative, judicial, taxing,regulatory or administrative powers or functions of or pertaining togovernment. "Guarantee" of or by any Person (the "guarantor") means anyobligation, contingent or otherwise, of the guarantor guaranteeingor having the economic effect of guaranteeing any Indebtedness orother obligation of any other Person (the "primary obligor") in anymanner, whether directly or indirectly, and including any obligationof the guarantor, direct or indirect, (a) to purchase or pay (oradvance or supply funds for the purchase or payment of) suchIndebtedness or other obligation or to purchase (or to advance orsupply funds for the purchase of) any security for the paymentthereof, (b) to purchase or lease property, securities or servicesfor the purpose of assuring the owner of such Indebtedness or otherobligation of the payment thereof, (c) to maintain working capital,equity capital or any other financial statement condition orliquidity of the primary obligor so as to enable the primary obligorto pay such Indebtedness or other obligation or (d) as an accountparty in respect of any letter of credit or letter of guarantyissued to support such Indebtedness or obligation; provided, thatthe term Guarantee shall not include endorsements for collection ordeposit in the ordinary course of business.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "Hazardous Materials" means all explosive or radioactivesubstances or wastes and all hazardous or toxic substances, wastesor other pollutants, including petroleum or petroleum distillates,asbestos or asbestos containing materials, polychlorinatedbiphenyls, radon gas, infectious or medical wastes and all othersubstances or wastes of any nature regulated pursuant to anyEnvironmental Law. "Hedging Agreement" means any interest rate protectionagreement, foreign currency exchange agreement, commodity priceprotection agreement or other interest or currency exchange rate orcommodity price hedging arrangement. "Inactive Subsidiaries" means all Subsidiaries of theBorrower, excluding Sun World Entities, that (a) do not conduct anybusiness activities and (b) hold no assets or properties (eithertangible or intangible). "Indebtedness" of any Person means, without duplication, (a)all obligations of such Person for borrowed money or with respect todeposits or advances of any kind, (b) all obligations of such Personevidenced by bonds, debentures, notes or similar instruments, (c)all obligations of such Person upon which interest charges arecustomarily paid, (d) all obligations of such Person underconditional sale or other title retention agreements relating toproperty acquired by such Person, (e) all obligations of such Personin respect of the deferred purchase price of property or services(excluding current accounts payable incurred in the ordinary courseof business), (f) all Indebtedness of others secured by (or forwhich the holder of such Indebtedness has an existing right,contingent or otherwise, to be secured by) any Lien on propertyowned or acquired by such Person, whether or not the Indebtednesssecured thereby has been assumed, (g) all Guarantees by such Personof Indebtedness of others, (h) all Capital Lease Obligations of suchPerson, (i) all obligations, contingent or otherwise, of such Personas an account party in respect of letters of credit and letters ofguaranty and (j) all obligations, contingent or otherwise, of suchPerson in respect of bankers' acceptances. The Indebtedness of anyPerson shall include the Indebtedness of any other entity (includingany partnership in which such Person is a general partner) to theextent such Person is liable therefor as a result of such Person'sownership interest in or other relationship with such entity, exceptto the extent the terms of such Indebtedness provide that suchPerson is not liable therefor. "Indemnified Taxes" means Taxes other than Excluded Taxes. "ING" means ING Baring (U.S.) Capital Corporation, a DelawareCorporation. "ING Collateral" means the collateral security granted,pledged or hypothecated to the Administrative Agent or the Lendersunder the Security Documents to secure the payment and satisfactionof the obligations hereunder and under the other Loan Documents. "Initial Borrowing" means the Fixed Rate Borrowing made onthe Effective Date in accordance with section 2.04. "Interest Payment Date" means the last day of the InterestPeriod applicable to the Borrowing of which such Loan is a part. "Interest Period" means each period commencing on the date ofsuch Borrowing or the last day of the next preceding Interest Periodfor such Borrowing and ending thereafter on the first to occur ofApril 15 or October 15 in each year, provided, that (i) except asprovided in clauses (ii) and (iii) below, if any Interest Periodwould end on a day other than a Business Day, such Interest Periodshall be extended to the next succeeding Business Day, (ii) anyInterest Period that commences on the last Business Day of acalendar month (or on a day for which there is no numericallycorresponding day in the last calendar month of such InterestPeriod) shall end on the last Business Day of the last calendarmonth of such Interest Period, and (iii) if any Interest PeriodSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. would end after the Maturity Date, such Interest Period shall end onthe Maturity Date. For purposes hereof, the date of a Borrowinginitially shall be the date on which such Borrowing is made. "Lenders" means the Person or Persons, as the case may be,listed on Schedule 2.01 and any other Person that shall have becomea party hereto pursuant to an Assignment and Acceptance, other thanany such Person that ceases to be a party hereto pursuant to anAssignment and Acceptance. "Lien" means, with respect to any asset, (a) any mortgage,deed of trust, lien, pledge, hypothecation, encumbrance, charge orsecurity interest in, on or of such asset, (b) the interest of avendor or a lessor under any conditional sale agreement, capitallease or title retention agreement (or any financing lease havingsubstantially the same economic effect as any of the foregoing)relating to such asset and (c) in the case of securities, anypurchase option, call or similar right of a third party with respectto such securities. "Loan Documents" means this Agreement, each SecurityDocument, each Note and any other document, instrument or agreementdelivered, executed or to be executed under or in connection withany of the foregoing. "Loans" means the loans made by the Lenders to the Borrowerpursuant to this Agreement. "Material Adverse Effect" means a material adverse effect on(a) the business, assets, operations, prospects or condition,financial or otherwise, of the Borrower and the Subsidiaries takenas a whole, (b) the ability of the Borrower to perform any of itsobligations under this Agreement or any other Loan Document, (c) therights of or benefits available to the Lenders under this Agreementor any other Loan Document, or (d) the Transactions. "Material Indebtedness" means Indebtedness (other than theLoans), or obligations in respect of one or more Hedging Agreements,of any one or more of the Borrower and its Subsidiaries, butexcluding SWFG and PSWRI, in an aggregate principal amount exceeding$500,000. For purposes of determining Material Indebtedness, the"principal amount" of the obligations of the Borrower or anySubsidiary in respect of any Hedging Agreement at any time shall bethe maximum aggregate amount (giving effect to any nettingagreements) that the Borrower or such Subsidiary would be requiredto pay if such Hedging Agreement were terminated at such time. "Maturity Date" means December 29, 2000. "Moody's" means Moody's Investors Service, Inc. "Mortgages" means, collectively, (a) any mortgage agreementor deed of trust dated as of the Effective Date for the benefit ofMortgagee pursuant to section 2.08 and (b) each other mortgagegranted to Mortgagee pursuant to Sections 2.08, 5.10 and 5.11, eachsubstantially in the form of Exhibit C. "Mortgagee" means, with respect to any Mortgage, theAdministrative Agent as mortgagee or beneficiary thereof, for itselfand on behalf of the Lenders, under such Mortgage. "Multiemployer Plan" means a multiemployer plan as defined inSection 4001(a)(3) of ERISA. "Non-Adverse Amendment" has the meaning set forth in Section9.19 hereof. "Notes" means the Revolving Loan Notes issued by Borrower andpayable to the order of the Lenders, as evidence of the RevolvingLoans, each in the form of Exhibit D hereto, and any extensions,renewals, modifications or replacements thereof or therefor. "Obligors" has the meaning assigned to such term in thePledge and Security Agreement attached hereto as Exhibit E.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "Other Taxes" means any and all present or future stamp ordocumentary taxes or any other excise or property taxes, charges orsimilar levies arising from any payment made hereunder or from theexecution, delivery or enforcement of, or otherwise with respect to,this Agreement. "Participating Subsidiaries" means the Subsidiaries excluding(a) the Inactive Subsidiaries, (b) the Sun World Entities, and (c)SWFG. "PBGC" means the Pension Benefit Guaranty Corporationreferred to and defined in ERISA and any successor entity performingsimilar functions. "Permitted Encumbrances" means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Participating Subsidiary; (f) Liens arising out of any judgment awarded against the Borrower which have been discharged, vacated, reversed or execution thereof stayed pending appeal; (g) any other Lien with respect to which the Borrower or related lessee shall have provided a bond or other security in an amount and under terms reasonably satisfactory to the Required Lenders and which does not involve any material risk of the sale, forfeiture or loss of any interest in Borrower's real or personal property; and (h) the Liens of the Security Documents;provided that the term "Permitted Encumbrances" shall not includeany Lien securing Indebtedness. "Permitted Investments" means: (a) Cash Equivalents; and (b) transactions permitted pursuant to the provisions of Sections 5.10 and 5.11 hereof. "Person" means any natural person, corporation, limitedliability company, trust, joint venture, association, company,partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than aMultiemployer Plan) subject to the provisions of Title IV of ERISAor Section 412 of the Code or Section 302 of ERISA, and in respectof which the Borrower or any ERISA Affiliate is (or, if such planwere terminated, would under Section 4069 of ERISA be deemed to be)an "employer" as defined in Section 3(5) of ERISA.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "Pledge and Security Agreements" means, collectively, (a) anysecurity agreement dated as of the Effective Date for the benefit ofthe Administrative Agent , for itself and on behalf of the Lenders,pursuant to Section 2.08, (b) any stock pledge agreement pursuant towhich the shares of capital stock of each Participating Subsidiaryare pledged to the Administrative Agent, and (c) each other securityagreement executed pursuant to Sections 2.08, 5.10 and 5.11, eachsubstantially (to the extent applicable) in the form of Exhibit E. "Prepayment Date" has the meaning set forth in Section 2.11hereof. "PSWRI" means P.S.W.R.I. Limited, a Guernsey corporation. "Purchaser Certificates" means the purchaser certificatesrelating to the Warrants in the form as attached hereto in ExhibitF. "Register" has the meaning set forth in Section 9.04. "Registrable Common Stock" means (a) Stock Payment CommonStock and (b) any additional shares of Common Stock issued ordistributed by way of dividend, stock split or other distribution inrespect of the Stock Payment Common Stock, or acquired by way of anyrights offering or similar offering made in respect of the StockPayment Common Stock or any of the foregoing. "Related Parties" means, with respect to any specifiedPerson, such Person's Affiliates and the respective directors,officers, employees, agents and advisors of such Person and suchPerson's Affiliates. "Required Lenders" means, at any time, Lenders havingRevolving Credit Exposures and unused Commitments representing atleast 66 2/3% of the sum of the total Revolving Credit Exposures andunused Commitments at such time. "Restricted Payment" means any dividend or other distribution(whether in cash, securities or other property) with respect to anyshares of any class of capital stock of the Borrower or anySubsidiary, or any payment (whether in cash, securities or otherproperty), including any sinking fund or similar deposit, on accountof the purchase, redemption, retirement, acquisition, cancellationor termination of any such shares of capital stock of the Borroweror any option, warrant or other right to acquire any such shares ofcapital stock of the Borrower. "Revolving Credit Exposure" means, with respect to any Lenderat any time, the sum of the outstanding principal amount of suchLender's Revolving Loans. "Rolling Stock": has the meaning assigned to such term inthe Pledge and Security Agreement attached hereto as Exhibit E. "Revolving Loan" means a Loan made pursuant to Section 2.03or 2.04 hereof. "S&P" means Standard & Poor's. "Securities Act" has the meaning set forth in Section 9.17hereof. "Security Documents" means, collectively, the Mortgages andthe Pledge and Security Agreement. "Stock Payment" has the meaning set forth in Section 2.14hereof. "Stock Payment Common Stock" has the meaning set forth inSection 5.13 hereof. "Stock Payment Rate" means 10% per annum, computed inaccordance with Section 2.13. "Stock Payment Election" has the meaning set forth in SectionSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2.14 hereof. "Stock Payment Election Deadline" has the meaning set forthin Section 2.14 hereof. "Stock Payment Election Request" means a request by Borrowerto make a payment of accrued interest for a Borrowing through theremittance of the Stock Payment in accordance with Section 2.14. "subsidiary" means, with respect to any Person (the "parent")at any date, any corporation, limited liability company,partnership, association or other entity the accounts of which wouldbe consolidated with those of the parent in the parent'sconsolidated financial statements if such financial statements wereprepared in accordance with GAAP as of such date, as well as anyother corporation, limited liability company, partnership,association or other entity (a) of which securities or otherownership interests representing more than 50% of the equity or morethan 50% of the ordinary voting power or, in the case of apartnership, more than 50% of the general partnership interests are,as of such date, owned, controlled or held, or (b) that is, as ofsuch date, otherwise Controlled, by the parent or one or moresubsidiaries of the parent or by the parent and one or moresubsidiaries of the parent. "Subsidiary" means any subsidiary of the Borrower. "Sun World" means Sun World International, Inc., a Subsidiaryof the Borrower. "Sun World Documents" has the meaning assigned to such termin the Global Amendment Agreement. "Sun World Entities" means Sun World and its subsidiaries. "Sun World Indenture" means that certain Indenture, dated asof April 16, 1997, among Sun World, Borrower, the SubsidiaryGuarantors thereto, and the Sun World Trustee, as amended by thatcertain Amendment to Indenture, dated as of October 9, 1997, asfurther amended by any Non-Adverse Amendments. "Sun World Notes" means the $115,000,000 of 11 1/4% FirstMortgage Notes due April 15, 2004 issued pursuant to the Sun WorldIndenture. "Sun World Trustee" means IBJ Schroder Bank & Trust Companyin its capacity as the trustee under the Sun World Indenture. "SWFG" means Southwest Fruit Growers, L.P., a Delawarelimited partnership. "Taxes" means any and all present or future taxes, levies,imposts, duties, deductions, charges or withholdings imposed by anyGovernmental Authority. "Threshold" has the meaning assigned to such term in section2.11(c). "Transactions" means the execution, delivery and performanceby the Borrower of this Agreement, the other Loan Documents, thetransactions contemplated herein and therein, the borrowing ofLoans, and the use of the proceeds thereof. "Warrants" means the warrant certificates entitling theholder thereof to purchase shares of Borrower's Common Stock on theterms and conditions set forth therein in the forms as attachedhereto as Exhibit G. "Withdrawal Liability" means liability to a MultiemployerPlan as a result of a complete or partial withdrawal from suchMultiemployer Plan, as such terms are defined in Part I of SubtitleE of Title IV of ERISA. SECTION 1.02. [Intentionally Omitted]Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 1.03. TERMS GENERALLY. The definitions of termsherein shall apply equally to the singular and plural forms of theterms defined. Whenever the context may require, any pronoun shallinclude the corresponding masculine, feminine and neuter forms. Thewords "include", "includes" and "including" shall be deemed to befollowed by the phrase "without limitation". The word "will" shallbe construed to have the same meaning and effect as the word"shall". Unless the context requires otherwise (a) any definitionof or reference to any agreement, instrument or other documentherein shall be construed as referring to such agreement, instrumentor other document as from time to time amended, supplemented orotherwise modified (subject to any restrictions on such amendments,supplements or modifications set forth herein), (b) any referenceherein to any Person shall be construed to include such Person'ssuccessors and assigns, (c) the words "herein", "hereof" and"hereunder", and words of similar import, shall be construed torefer to this Agreement in its entirety and not to any particularprovision hereof, (d) all references herein to Articles, Sections,Exhibits and Schedules shall be construed to refer to Articles andSections of, and Exhibits and Schedules to, this Agreement and (e)the words "asset" and "property" shall be construed to have the samemeaning and effect and to refer to any and all tangible andintangible assets and properties, including cash, securities,accounts and contract rights. SECTION 1.04. ACCOUNTING TERMS; GAAP. Except as otherwiseexpressly provided herein, all terms of an accounting or financialnature shall be construed in accordance with GAAP, as in effect fromtime to time; provided that, if the Borrower notifies theAdministrative Agent that the Borrower requests an amendment to anyprovision hereof to eliminate the effect of any change occurringafter the date hereof in GAAP or in the application thereof on theoperation of such provision (or if the Administrative Agent notifiesthe Borrower that the Required Lenders request an amendment to anyprovision hereof for such purpose), regardless of whether any suchnotice is given before or after such change in GAAP or in theapplication thereof, then such provision shall be interpreted on thebasis of GAAP as in effect and applied immediately before suchchange shall have become effective until such notice shall have beenwithdrawn or such provision amended in accordance herewith. ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS. Subject to the terms andconditions set forth herein, each Lender severally agrees, uponBorrower's request, to make Revolving Loans to the Borrower fromtime to time during the Availability Period in an aggregateprincipal amount that will not result in such Lender's RevolvingCredit Exposure exceeding such Lender's Commitment. Within theforegoing limits and subject to the terms and conditions set forthherein, the Borrower may borrow, prepay and reborrow RevolvingLoans. SECTION 2.02. LOANS AND BORROWINGS. (a) Each Revolving Loan shall be made as part of a Borrowingconsisting of Revolving Loans made by the Lenders ratably inaccordance with their respective Commitments. The failure of anyLender to make any Loan required to be made by it shall not relieveany other Lender of its obligations hereunder; provided that theCommitments of the Lenders are several and no Lender shall beresponsible for any other Lender's failure to make Loans asrequired. (b) Each Borrowing shall be comprised entirely of Fixed RateLoans as the Borrower may request in accordance herewith. Exceptfor the Initial Borrowing (which shall be in an amount in accordancewith Section 2.04), each Borrowing shall be in an aggregate amountequal to $2,500,000 or a larger multiple of $100,000 (provided thata Borrowing may be in an aggregate amount that is equal to theentire unused balance of the total Commitments).Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) The Borrower shall not be entitled to request, or toelect to convert or continue, any Borrowing if the Interest Periodrequested with respect thereto would end after the Maturity Date. SECTION 2.03. REQUESTS FOR BORROWINGS. Except for the InitialBorrowing, to request a Borrowing, the Borrower shall notify theAdministrative Agent of such request by telephone not later than 1p.m., New York City time, three Business Days before the date of theproposed Borrowing. Any such notices received after 1 p.m., NewYork time, shall be deemed received on the next Business Day, Eachsuch telephonic Borrowing Request shall be irrevocable and shall beconfirmed promptly by hand delivery or telecopy to theAdministrative Agent of a written Borrowing Request in a formapproved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify thefollowing information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) the location and number of the Borrower's account to which funds are to be disbursed.Promptly following receipt of a Borrowing Request in accordance withthis Section 2.03, the Administrative Agent shall (a) advise eachLender of the details thereof and of the amount of such Lender'sLoan to be made as part of the requested Borrowing and (b) advisethe Borrower of the number of shares of the Borrower's Common Stockthat may be purchased as a result of the requested Borrowing throughthe exercise of the Warrants. SECTION 2.04. INITIAL BORROWING. As of the Effective Date,the Borrower shall be deemed to have requested a Borrowing in theaggregate amount of $5,000,000, with the Effective Date being thedate of such Borrowing. The location and number of the Borrower'saccount to which these funds are to be disbursed are set forth inSchedule 2.04 hereto. SECTION 2.05. [Intentionally Omitted] SECTION 2.06. FUNDING OF BORROWINGS. (a) Each Lender shall make each Loan to be made by ithereunder on the proposed date thereof by wire transfer ofimmediately available funds by 1 p.m., New York City time, to theaccount of the Administrative Agent most recently designated by itfor such purpose by notice to the Lenders. The Administrative Agentwill make such Loans available to the Borrower by promptly creditingthe amounts so received, in like funds, to an account maintained anddesignated by the Borrower in the applicable Borrowing Request (orin the case of the Initial Borrowing, as set forth in Schedule 2.04hereof). (b) Unless the Administrative Agent shall have receivednotice from a Lender prior to the proposed date of any Borrowingthat such Lender will not make available to the Administrative Agentsuch Lender's share of such Borrowing, the Administrative Agent mayassume that such Lender has made such share available on such datein accordance with paragraph (a) of this Section and may, inreliance upon such assumption, make available to the Borrower acorresponding amount. In such event, if a Lender has not in factmade its share of the applicable Borrowing available to theAdministrative Agent, then the applicable Lender hereby agrees topay to the Administrative Agent forthwith on demand suchcorresponding amount with interest thereon, for each day from andincluding the date such amount is made available to the Borrower tobut excluding the date of payment to the Administrative Agent, atthe interest rate applicable to that Loan. If such Lender pays suchamount to the Administrative Agent, then such amount shallconstitute such Lender's Loan included in such Borrowing. SECTION 2.07. [Intentionally Omitted]Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 2.08. SECURITY. The Borrower's obligations under thisAgreement shall be secured in accordance with and/or have thebenefit of the Pledge and Security Agreement, the Mortgages, anyother Security Document, and each other mortgage, security interest,pledge agreement or other document granted pursuant to Sections5.09, 5.10 and 5.11. SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS. (a) Unless previously terminated, the Commitments shallterminate on the Maturity Date. (b) The Borrower may at any time terminate, or from time totime reduce, the Commitments; provided that (i) each reduction ofthe Commitments shall be in an amount that is an integral multipleof $500,000 and not less than $2,500,000 and (ii) the Borrower shallnot terminate or reduce the Commitments if, after giving effect toany concurrent prepayment of the Loans in accordance with Section2.11, the sum of the Revolving Credit Exposures would exceed thetotal Commitments. (c) The Borrower shall notify the Administrative Agent ofany election to terminate or reduce the Commitments under paragraph(b) of this Section at least six Business Days prior to theeffective date of such termination or reduction, specifying suchelection and the effective date thereof. Promptly following receiptof any notice, the Administrative Agent shall advise the Lenders ofthe contents thereof. Each notice delivered by the Borrowerpursuant to this Section 2.09 shall be irrevocable; provided that anotice of termination of the Commitments delivered by the Borrowermay state that such notice is conditioned upon the effectiveness ofother credit facilities, in which case such notice may be revoked bythe Borrower (by notice to the Administrative Agent on or prior tothe specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among theLenders in accordance with their respective Commitments. (d) If at any time the aggregate outstanding principal amountof all of the Revolving Loans made by any Lender shall exceed theamount of the Commitment of such Lender, the Borrower shallimmediately upon receipt of notice thereof from the AdministrativeAgent or such Lender, or immediately upon the Borrower's acquiringactual knowledge thereof, prepay the Revolving Loans of such Lenderto the extent necessary to eliminate such excess. (e) Notwithstanding anything herein to the contrary, the sumof the aggregate outstanding principal balance of all Loans made byall Lenders at any one time shall not exceed the aggregate amount ofall Commitments as then in effect. If at any time the aggregateoutstanding principal balance of the Loans exceeds the applicablelimit stated in the immediately preceding sentence, the Borrowershall immediately upon receipt of notice thereof from theAdministrative Agent or such Lender, or immediately upon theBorrower's acquiring actual knowledge thereof, prepay the RevolvingLoans to the extent necessary to eliminate such excess. (f) Any reduction of the Commitments under this Section 2.09shall apply as a proportional and permanent reduction of theCommitments of each of the Lenders. If the aggregate outstandingprincipal balance of the Loans exceeds any applicable limitspecified hereunder after giving effect to any such reduction of theCommitments, Borrower shall immediately prepay such Loans to theextent necessary to eliminate such excess. (g) In the event any reduction in the Commitments is made inaccordance with this Section 2.09, the Administrative Agent willissue to the Borrower and each Lender a revised Schedule 2.01 tothis Agreement reflecting such reduction, which revised Schedule2.01 shall supersede and replace the prior version thereof and shallbe substituted by each party in lieu thereof. SECTION 2.10. REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby unconditionally promises to pay toSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. the Administrative Agent for the account of each Lender the thenunpaid principal amount of each Revolving Loan on the Maturity Date. (b) Each Lender shall maintain in accordance with its usualpractice an account or accounts evidencing the indebtedness of theBorrower to such Lender resulting from each Loan made by suchLender, including the amounts of principal and interest payable andpaid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts inwhich it shall record (i) the amount of each Loan made hereunder andthe Interest Period applicable thereto, (ii) the amount of anyprincipal or interest due and payable or to become due and payablefrom the Borrower to each Lender hereunder and (iii) the amount ofany sum received by the Administrative Agent hereunder for theaccount of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant toparagraph (b) or (c) of this Section shall be prima facie evidenceof the existence and amounts of the obligations recorded therein;provided that the failure of any Lender or the Administrative Agentto maintain such accounts or any error therein shall not in anymanner affect the obligation of the Borrower to repay the Loans inaccordance with the terms of this Agreement. (e) To further evidence the existence and amounts of theBorrower's obligations to pay principal and interest on eachRevolving Loan made by a Lender hereunder, the Borrower shallexecute and deliver to that Lender a Note payable to the Lender. The Borrower shall prepare, execute and deliver the Note payable tothe order of such Lender (or, if requested by such Lender, to suchLender and its registered assigns). Thereafter, the Loans evidencedby such Note and interest thereon shall at all times (includingafter assignment pursuant to Section 9.04) be represented by one ormore Notes payable to the order of the payee named therein (or, ifsuch Note is a registered note, to such payee and its registeredassigns). SECTION 2.11. PREPAYMENT OF LOANS; REBORROWINGS. (a) The Borrower shall have the right at any time and fromtime to time to prepay any Borrowing in whole or in part, subject toprior notice in accordance with paragraph (b) of this Section;provided that unless all outstanding amounts are being repaid, eachprepayment of Borrowing shall be in an amount that is an integralmultiple of $100,000 and not less than $2,500,000.00. (b) The Borrower shall notify the Administrative Agent bytelephone (confirmed by telecopy) of any prepayment hereunder notlater than 1 p.m., New York City time, six Business Days before thedate of prepayment (the "Prepayment Date"). Each such notice shallbe irrevocable and shall specify the prepayment date and theprincipal amount of each Borrowing or portion thereof to be prepaid;provided that, if a notice of prepayment is given in connection witha conditional notice of termination of the Commitments ascontemplated by Section 2.09, then such notice of prepayment may berevoked if such notice of termination is revoked in accordance withSection 2.09. Promptly following receipt of any such noticerelating to a Borrowing, the Administrative Agent shall advise theLenders of the contents thereof. Each partial prepayment of anyBorrowing shall be in an amount that would be permitted in the caseof an advance of a Borrowing as provided in Section 2.02. Eachprepayment of a Borrowing shall be applied ratably to the Loansincluded in the prepaid Borrowing. Prepayments shall be accompaniedby accrued interest to the extent required by Section 2.13 andSection 2.14. At its discretion, Borrower may elect to make suchpayment of accrued interest on the date of a prepayment through aStock Payment in accordance with Section 2.14 hereof. (c) Notwithstanding any other provision of this Agreement,until $15,000,000 of Loans are made to the Borrower (without takinginto account any repayments thereof) pursuant to the terms of thisAgreement (the "Threshold"), the Borrower may not reborrow anyamounts prepaid pursuant to this Section 2.11. After the Thresholdis satisfied, and provided that the Borrower can satisfy theSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. requirements for obtaining a Loan set forth in Section 4.02 hereof,the Borrower may reborrow any principal amount repaid under thisSection 2.11 in accordance with the provisions of this Article II. Each such reborrowing shall be treated as a Borrowing for allpurposes hereunder. SECTION 2.12. FEES. (a) As a fee for this facility and the Loans to Borrowerhereunder, on the Effective Date, the Borrower shall execute anddeliver to the Administrative Agent for the account of each Lender(i) the Warrants and (ii) the Purchaser Certificate, each in formand substance satisfactory to the Administrative Agent (inAdministrative Agent's absolute discretion). (b) All fees payable hereunder shall be paid on the date dueto the Administrative Agent for distribution to the Lenders. Feespaid shall not be refundable under any circumstances. SECTION 2.13. INTEREST. (a) The Loans comprising each Borrowing shall bear interestat the Fixed Rate. (b) Notwithstanding the foregoing, if any principal of orinterest on any Loan or any fee or other amount payable by theBorrower hereunder is not paid when due, whether at stated maturity,upon acceleration or otherwise, such overdue amount shall bearinterest, after as well as before judgment, at a rate per annumequal to (i) in the case of overdue principal of any Loan, 2% plusthe rate otherwise applicable to such Loan as provided in thepreceding paragraph of this Section or (ii) in the case of any otheramount, 2% plus the rate applicable to Loans as provided inparagraph (a) of this Section. (c) Accrued interest on each Loan shall be payable in arrearson each Interest Payment Date for such Loan and upon termination ofthe Commitments; provided that (i) interest accrued pursuant toparagraph (b) of this Section shall be payable on demand and (ii) inthe event of any repayment or prepayment of any Loan, accruedinterest on the principal amount repaid or prepaid shall be payableon the date of such repayment or prepayment. (d) All interest hereunder shall be computed on the basis ofa year of 360 days, and shall be payable for the actual number ofdays elapsed (including the first day but excluding the last day). SECTION 2.14. STOCK PAYMENT ELECTION. (a) In its sole discretion, as provided in this section,Borrower may elect to pay accrued interest on a Borrowing on anInterest Payment Date (or, in the case of a prepayment under Section2.11, on the Prepayment Date) for such Borrowing through theremittance of the Stock Payment (instead of immediately availablefunds) (such election a "Stock Payment Election"). (b) To make a Stock Payment Election pursuant to this Section2.14 with respect to any Borrowing for any Interest Period (or inthe case of a prepayment under Section 2.11, the portion of anInterest Period ending on the Prepayment Date), the Borrower shallnotify the Administrative Agent of such election by telephone notlater than 1:00 p.m., New York time, six (6) Business Days beforethe Interest Payment Date (or, in the case of a prepayment underSection 2.11, six (6) Business Days before the Prepayment Date) forthe current Interest Period for such Borrowing (the "Stock PaymentElection Deadline"). Each telephone Stock Payment Election Requestshall be irrevocable and shall be confirmed promptly by handdelivery or telecopy to the Administrative Agent of a written StockPayment Election Request in a form approved by the AdministrativeAgent and signed by the Borrower. Promptly upon receipt of thewritten Stock Payment Election Request, the Administrative Agentshall give notice of such Stock Payment Election Request to theLenders. (c) Each telegraphic and written Stock Payment ElectionSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Request shall specify the Borrowing to which such Stock PaymentElection Request applies; (d) Following receipt of a Stock Payment Election Request, theAdministrative Agent shall advise each Lender and the Borrower by 11a.m., New York time, on the Interest Payment Date (or, in the caseof a prepayment under Section 2.11, on the Prepayment Date) relatingto such Stock Payment Election Request of the details thereof,including the Administrative Agent's determination of the StockPayment (including its calculation thereof) as determined pursuantto subsection (g) hereof. (e) If the Borrower fails to deliver a timely Stock PaymentElection Request with respect to any Borrowing prior to the StockPayment Election Deadline applicable thereto and in accordance withrequirements of this section, then (a) the Borrower shall be deemedto have decided not to elect the Stock Payment Option for thatBorrowing for that Interest Period and (b) the Fixed Rate for thatBorrowing for that Interest Period shall be the Cash Payment Rate. (f) Notwithstanding any other provision of this Agreement, theBorrower shall not be entitled to make the Stock Payment Election ornotify the Administrative Agent of a Stock Payment Election Requestif a Default or an Event of Default has occurred and is continuing(unless this requirement is waived by the Required Lenders). (g) With respect to any Borrowing for which a Stock PaymentElection has been made in accordance with this Section 2.14, theStock Payment shall mean the quantity of shares of the Borrower'sCommon Stock (with any fractional amount rounded to the next highestinteger) that has a value at least equal to the amount of accruedinterest at the Stock Payment Rate for that Borrowing for theInterest Period (or, in the case of a prepayment under Section 2.11,the portion of an Interest Period ending on the Prepayment Date) forwhich the Stock Payment Election has been made (the "StockPayment"). For purposes of this Section 2.14, the value of eachshare of Common Stock shall equal the average daily Closing Price ofthe Common Stock over the five (5) Business Days immediately priorto the Interest Payment Date (or, in the case of a prepayment underSection 2.11, over the five (5) Business Days immediately prior tothe Prepayment Date) for the Borrowing for which the Stock PaymentElection has been made. SECTION 2.15. INCREASED COSTS. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender; or (ii) impose on any Lender any other condition affecting this Agreement or Fixed Rate Loans made by such Lender or participation therein;and the result of any of the foregoing shall be to increase the costto such Lender of making or maintaining any Fixed Rate Loan (or ofmaintaining its obligation to make any such Loan) or to increase thecost to such Lender or to reduce the amount of any sum received orreceivable by such Lender hereunder (whether of principal, interestor otherwise), then the Borrower will pay to such Lender suchadditional amount or amounts as will compensate such Lender for suchadditional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Lawregarding capital requirements has or would have the effect ofreducing the rate of return on such Lender's capital or on thecapital of such Lender's holding company, if any, as a consequenceof this Agreement or the Loans made by such Lender to a level belowthat which such Lender or such Lender's holding company could haveachieved but for such Change in Law (taking into consideration suchLender's policies and the policies of such Lender's holding companywith respect to capital adequacy), then from time to time theBorrower will pay to such Lender such additional amount or amountsas will compensate such Lender or such Lender's holding company forSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. any such reduction suffered. (c) A certificate of a Lender setting forth the amount oramounts necessary to compensate such Lender or its holding company,as the case may be, as specified in paragraph (a) or (b) of thisSection shall be delivered to the Borrower and shall be conclusiveabsent manifest error. The Borrower shall pay such Lender theamount shown as due on any such certificate within 10 days afterreceipt thereof. (d) Failure or delay on the part of any Lender to demandcompensation pursuant to this Section 2.15 shall not constitute awaiver of such Lender's right to demand such compensation; providedthat the Borrower shall not be required to compensate a Lenderpursuant to this Section 2.15 for any increased costs or reductionsincurred more than 270 days prior to the date that such Lendernotifies the Borrower of the Change in Law giving rise to suchincreased costs or reductions and of such Lender's intention toclaim compensation therefor; provided further that, if the Change inLaw giving rise to such increased costs or reductions isretroactive, then the 270-day period referred to above shall beextended to include the period of retroactive effect thereof. SECTION 2.16. [Intentionally Omitted] SECTION 2.17. TAXES. (a) Any and all payments by or on account of any obligationof the Borrower hereunder shall be made free and clear of andwithout deduction for any Indemnified Taxes or Other Taxes; providedthat if the Borrower shall be required to deduct any IndemnifiedTaxes or Other Taxes from such payments, then (i) the sum payableshall be increased as necessary so that after making all requireddeductions (including deductions applicable to additional sumspayable under this Section) the Administrative Agent or Lender (asthe case may be) receives an amount equal to the sum it would havereceived had no such deductions been made, (ii) the Borrower shallmake such deductions and (iii) the Borrower shall pay the fullamount deducted to the relevant Governmental Authority in accordancewith applicable law. (b) In addition, the Borrower shall pay any Other Taxes tothe relevant Governmental Authority in accordance with applicablelaw. (c) The Borrower shall indemnify the Administrative Agentand each Lender, within 10 days after written demand therefor, forthe full amount of any Indemnified Taxes or Other Taxes paid by theAdministrative Agent or such Lender, as the case may be, on or withrespect to any payment by or on account of any obligation of theBorrower hereunder (including Indemnified Taxes or Other Taxesimposed or asserted on or attributable to amounts payable under thisSection) and any penalties, interest and reasonable expenses arisingtherefrom or with respect thereto, whether or not such IndemnifiedTaxes or Other Taxes were correctly or legally imposed or assertedby the relevant Governmental Authority. A certificate as to theamount of such payment or liability delivered to the Borrower by aLender, or by the Administrative Agent on its own behalf or onbehalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of IndemnifiedTaxes or Other Taxes by the Borrower to a Governmental Authority,the Borrower shall deliver to the Administrative Agent the originalor a certified copy of a receipt issued by such GovernmentalAuthority evidencing such payment, a copy of the return reportingsuch payment or other evidence of such payment reasonablysatisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption fromor reduction of withholding tax under the law of the jurisdiction inwhich the Borrower is located, or any treaty to which suchjurisdiction is a party, with respect to payments under thisAgreement shall deliver to the Borrower (with a copy to theAdministrative Agent), at the time or times prescribed by applicablelaw, such properly completed and executed documentation prescribedSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. by applicable law or reasonably requested by the Borrower as willpermit such payments to be made without withholding or at a reducedrate. SECTION 2.18. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARINGOF SET-OFFS. (a) The Borrower shall make each payment required to be madeby it hereunder (whether of principal, interest, fees orreimbursements, or of amounts payable under Section 2.15 or 2.17, orotherwise) prior to 2:00 p.m., New York City time, on the date whendue, in immediately available funds (or (a) with respect to accruedinterest for a Borrowing for which the Borrower has made the StockPayment Election in accordance with section 2.14, Common Stock, or(b) with respect to fees under Section 2.12, the Warrants), withoutset-off or counterclaim. Any amounts received after such time onany date may, in the discretion of the Administrative Agent, bedeemed to have been received on the next succeeding Business Day forpurposes of calculating interest thereon. All such payments shallbe made to the Administrative Agent at its offices at c/o ING Baring(U.S.) Capital Corporation, 135 East 57th Street, New York, New York10022 Attention: Joan Chiappe, Vice President, except that paymentspursuant to Sections 2.15, 2.17 and 9.03 shall be made directly tothe Persons entitled thereto. The Administrative Agent shalldistribute any such payments received by it for the account of anyother Person to the appropriate recipient promptly following receiptthereof. If any payment hereunder shall be due on a day that is nota Business Day, the date for payment shall be extended to the nextsucceeding Business Day, and, in the case of any payment accruinginterest, interest thereon shall be payable for the period of suchextension. All payments hereunder shall be made in dollars (or, (a)in the case of a Stock Payment Election, Common Stock, or (b) in thecase of the fees under Section 2.12, the Warrants). (b) If at any time insufficient funds or property arereceived by and available to the Administrative Agent to pay fullyall amounts of principal, interest and fees then due hereunder, suchfunds or property shall be applied (i) first, towards payment ofinterest and fees then due hereunder, ratably among the partiesentitled thereto in accordance with the amounts of interest and feesthen due to such parties, and (ii) second, towards payment ofprincipal then due hereunder, ratably among the parties entitledthereto in accordance with the amounts of principal then due to suchparties. (c) If any Lender shall, by exercising any right of set-offor counterclaim or otherwise, obtain payment in respect of anyprincipal of or interest on any of its Revolving Loans resulting insuch Lender receiving payment of a greater proportion of theaggregate amount of its Revolving Loans and accrued interest thereonthan the proportion received by any other Lender, then the Lenderreceiving such greater proportion shall purchase (for cash at facevalue) participations in the Revolving Loans of other Lenders to theextent necessary so that the benefit of all such payments shall beshared by the Lenders ratably in accordance with the aggregateamount of principal of and accrued interest on their respectiveRevolving Loans; provided that (i) if any such participations arepurchased and all or any portion of the payment giving rise theretois recovered, such participations shall be rescinded and thepurchase price restored to the extent of such recovery, withoutinterest, and (ii) the provisions of this paragraph shall not beconstrued to apply to any payment made by the Borrower pursuant toand in accordance with the express terms of this Agreement or anypayment obtained by a Lender as consideration for the assignment ofor sale of a participation in any of its Loans to any assignee orparticipant, other than to the Borrower or any Subsidiary orAffiliate thereof (as to which the provisions of this paragraphshall apply). The Borrower consents to the foregoing and agrees, tothe extent it may effectively do so under applicable law, that anyLender acquiring a participation pursuant to the foregoingarrangements may exercise against the Borrower rights of set-off andcounterclaim with respect to such participation as fully as if suchLender were a direct creditor of the Borrower in the amount of suchparticipation.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (d) Unless the Administrative Agent shall have receivednotice from the Borrower prior to the date on which any payment isdue to the Administrative Agent for the account of the Lendershereunder that the Borrower will not make such payment, theAdministrative Agent may assume that the Borrower has made suchpayment on such date in accordance herewith and may, in relianceupon such assumption, distribute to the Lenders the amount due. Insuch event, if the Borrower has not in fact made such payment, theneach of the Lenders severally agrees to repay to the AdministrativeAgent forthwith on demand the amount so distributed to such Lenderwith interest thereon, for each day from and including the date suchamount is distributed to it to but excluding the date of payment tothe Administrative Agent, at the greater of the Federal FundsEffective Rate and a rate determined by the Administrative Agent inaccordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required tobe made by it to the Administrative Agent pursuant to the terms ofthis Agreement, then the Administrative Agent may, in its discretion(notwithstanding any contrary provision hereof), apply any amountsthereafter received by the Administrative Agent for the account ofsuch Lender to satisfy such Lender's obligations under such Sectionsuntil all such unsatisfied obligations are fully paid. SECTION 2.19. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS. (a) If any Lender requests compensation under Section 2.15,or if the Borrower is required to pay any additional amount to anyLender or any Governmental Authority for the account of any Lenderpursuant to Section 2.17, then such Lender shall use reasonableefforts to designate a different lending office for funding orbooking its Loans hereunder or to assign its rights and obligationshereunder to another of its offices, branches or affiliates, if, inthe judgment of such Lender, such designation or assignment (i)would eliminate or reduce amounts payable pursuant to Section 2.15or 2.17, as the case may be, in the future and (ii) would notsubject such Lender to any unreimbursed cost or expense and wouldnot otherwise be disadvantageous to such Lender. The Borrowerhereby agrees to pay all reasonable costs and expenses incurred byany Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15,or if the Borrower is required to pay any additional amount to anyLender or any Governmental Authority for the account of any Lenderpursuant to Section 2.17, or if any Lender defaults in itsobligation to fund Loans hereunder, then the Borrower may, at itssole expense and effort, upon notice to such Lender and theAdministrative Agent, require such Lender to assign and delegate,without recourse (in accordance with and subject to the restrictionscontained in Section 9.04), all its interests, rights andobligations under this Agreement to an assignee that shall assumesuch obligations (which assignee may be another Lender, if a Lenderaccepts such assignment); provided that (i) the Borrower shall havereceived the prior written consent of the Administrative Agent,which consent shall not unreasonably be withheld, (ii) such Lendershall have received payment of an amount equal to the outstandingprincipal of its Loans, accrued interest thereon, accrued fees andall other amounts payable to it hereunder, from the assignee (to theextent of such outstanding principal and accrued interest and fees)or the Borrower (in the case of all other amounts) and (iii) in thecase of any such assignment resulting from a claim for compensationunder Section 2.15 or payments required to be made pursuant toSection 2.17, such assignment will result in a reduction in suchcompensation or payments. A Lender shall not be required to makeany such assignment and delegation if, prior thereto, as a result ofa waiver by such Lender or otherwise, the circumstances entitlingthe Borrower to require such assignment and delegation cease toapply. ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that:Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 3.01. ORGANIZATION; POWERS. Each of the Borrower andits Participating Subsidiaries is duly organized, validly existingand in good standing under the laws of the jurisdiction of itsorganization, has all requisite power and authority to carry on itsbusiness as now conducted and, except where the failure to do so,individually or in the aggregate, could not reasonably be expectedto result in a Material Adverse Effect, is qualified to do businessin, and is in good standing in, every jurisdiction where suchqualification is required. SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactionsare within the Borrower's corporate powers and have been dulyauthorized by all necessary corporate and, if required, stockholderaction. This Agreement has been duly executed and delivered by theBorrower and constitutes a legal, valid and binding obligation ofthe Borrower, enforceable in accordance with its terms, subject toapplicable bankruptcy, insolvency, reorganization, moratorium orother laws affecting creditors' rights generally and subject togeneral principles of equity, regardless of whether considered in aproceeding in equity or at law. SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. TheTransactions (a) do not require any consent or approval of,registration or filing with, or any other action by, anyGovernmental Authority, except such as have been obtained or madeand are in full force and effect, (b) will not violate anyapplicable law or regulation or the charter, by-laws or otherorganizational documents of the Borrower or any of its Subsidiariesor any order of any Governmental Authority, (c) will not violate orresult in a default under any indenture, agreement or otherinstrument binding upon the Borrower or any of its Subsidiaries orits assets, or give rise to a right thereunder to require anypayment to be made by the Borrower or any of its Subsidiaries, and(d) will not result in the creation or imposition of any Lien on anyasset of the Borrower or any of its Subsidiaries (except thoseimposed by the Loan Documents). SECTION 3.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE. (a) The Borrower has heretofore furnished to theAdministrative Agent its consolidated balance sheet and statementsof income, stockholders equity and cash flows (i) as of and for thefiscal year ended December 31, 1996, reported on by Price WaterhouseLLP, independent public accountants, and (ii) as of and for thefiscal quarter and the portion of the fiscal year ended September30, 1997, certified by its chief financial officer. Such financialstatements present fairly, in all material respects, the financialposition and results of operations and cash flows of the Borrowerand its consolidated Subsidiaries as of such dates and for suchperiods in accordance with GAAP, subject to year-end auditadjustments and the absence of footnotes in the case of thestatements referred to in clause (ii) above. (b) Since September 30, 1997, there has been no materialadverse change in the business, assets, operations, prospects orcondition, financial or otherwise, of the Borrower and itsSubsidiaries, taken as a whole. SECTION 3.05. PROPERTIES. (a) Each of the Borrower and its Participating Subsidiarieshas good title to, or valid leasehold interests in, all its real andpersonal property material to its business, except for PermittedEncumbrances and minor defects in title that do not interfere withits ability to conduct its business as currently conducted or toutilize such properties for their intended purposes. (b) Each of the Borrower and its Participating Subsidiariesowns, or is licensed to use, all trademarks, tradenames, copyrights,patents and other intellectual property material to its business,and the use thereof by the Borrower and its ParticipatingSubsidiaries does not infringe upon the rights of any other Person,except for any such infringements that, individually or in theaggregate, could not reasonably be expected to result in a MaterialAdverse Effect.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 3.06. LITIGATION AND ENVIRONMENTAL MATTERS. (a) There are no actions, suits or proceedings by or beforeany arbitrator or Governmental Authority pending against or, to theknowledge of the Borrower, threatened against or affecting theBorrower or any of its Subsidiaries (i) as to which there is areasonable possibility of an adverse determination and that, ifadversely determined, could reasonably be expected, individually orin the aggregate, to result in a Material Adverse Effect (other thanthe Disclosed Matters) or (ii) that involve this Agreement or theTransactions. (b) Except for the Disclosed Matters and except with respectto any other matters that, individually or in the aggregate, couldnot reasonably be expected to result in a Material Adverse Effect,neither the Borrower nor any of its Subsidiaries (i) has failed tocomply with any Environmental Law or to obtain, maintain or complywith any permit, license or other approval required under anyEnvironmental Law, (ii) has become subject to any EnvironmentalLiability, (iii) has received notice of any claim with respect toany Environmental Liability or (iv) knows of any basis for anyEnvironmental Liability. (c) Since the date of this Agreement, there has been nochange in the status of the Disclosed Matters that, individually orin the aggregate, has resulted in, or materially increased thelikelihood of, a Material Adverse Effect. SECTION 3.07. COMPLIANCE WITH LAWS AND AGREEMENTS. Each ofthe Borrower and the Participating Subsidiaries is in compliancewith all laws, regulations and orders of any Governmental Authorityapplicable to it or its property and all indentures, agreements andother instruments binding upon it or its property, except where thefailure to do so, individually or in the aggregate, could notreasonably be expected to result in a Material Adverse Effect. NoDefault has occurred and is continuing. SECTION 3.08. INVESTMENT AND HOLDING COMPANY STATUS. Neitherthe Borrower nor any of its Subsidiaries is (a) an "investmentcompany" as defined in, or subject to regulation under, theInvestment Company Act of 1940 or (b) a "holding company" as definedin, or subject to regulation under, the Public Utility HoldingCompany Act of 1935. SECTION 3.09. TAXES. Each of the Borrower and itsParticipating Subsidiaries has timely filed or caused to be filedall tax returns and reports required to have been filed and has paidor caused to be paid all Taxes required to have been paid by it,except (a) Taxes that are being contested in good faith byappropriate proceedings and for which the Borrower or suchParticipating Subsidiary, as applicable, has set aside on its booksadequate reserves or (b) to the extent that the failure to do socould not reasonably be expected to result in a Material AdverseEffect. SECTION 3.10. ERISA. No ERISA Event has occurred or isreasonably expected to occur that, when taken together with allother such ERISA Events for which liability is reasonably expectedto occur, could reasonably be expected to result in a MaterialAdverse Effect. The present value of all accumulated benefitobligations under each Plan (based on the assumptions used forpurposes of Statement of Financial Accounting Standards No. 87) didnot, as of the date of the most recent financial statementsreflecting such amounts, exceed by more than $500,000 the fair market value of the assets of such Plan, and thepresent value of all accumulated benefit obligations of allunderfunded Plans (based on the assumptions used for purposes ofStatement of Financial Accounting Standards No. 87) did not, as ofthe date of the most recent financial statements reflecting suchamounts, exceed by more than $500,000 the fair market value of theassets of all such underfunded Plans. SECTION 3.11. DISCLOSURE. The Borrower has disclosed to theAdministrative Agent all agreements, instruments and corporate orSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. other restrictions to which it or any of its Subsidiaries issubject, and all other matters known to it, that, individually or inthe aggregate, could reasonably be expected to result in a MaterialAdverse Effect. None of the reports, financial statements,certificates or other information furnished by or on behalf of theBorrower to the Administrative Agent or any Lender in connectionwith the negotiation of this Agreement or delivered hereunder (asmodified or supplemented by other information so furnished) containsany material misstatement of fact or omits to state any materialfact necessary to make the statements therein, in the light of thecircumstances under which they were made, not misleading; providedthat, with respect to projected financial information, the Borrowerrepresents only that such information was prepared in good faithbased upon assumptions believed to be reasonable at the time. SECTION 3.12. SECURITY INTERESTS. Except for (a) the filingof UCC financing statements in respect of the collateral covered bythe Security Documents in the States of Delaware and California andsuch other applicable jurisdictions in the United States of Americaand (b) filing and recording of Mortgages in respect of the realproperty collateral in the county in which the real property islocated, which filings shall have been made and be in effect on (orsimultaneously with) the Effective Date, the taking of possession bythe Administrative Agent of the certificates representing the sharesof capital stock of the Participating Subsidiaries and variousinstruments pledged to it pursuant to the Pledge and SecurityAgreement, and the delivery of notice of the security interestsgranted in the accounts covered by the Pledge and Security Agreementto the bank or banks whereat such accounts are maintained andreceipt of acknowledgements of such notices by such banks (whichactions shall be effected as of or promptly following the EffectiveDate), no further filing or recording of any document and no otheraction is necessary or advisable in the States of Delaware orCalifornia or any other applicable jurisdiction in the United Statesof America in order to establish and perfect, under the laws ofDelaware or California or such other applicable jurisdiction in theUnited States of America, the Administrative Agent's securityinterest in such collateral, to the extent required by theapplicable Security Documents, on behalf of the Lenders. SECTION 3.13. PARTICIPATING SUBSIDIARIES. The Borrower has noParticipating Subsidiaries except as set forth on Schedule 3.13hereto. SECTION 3.14. INACTIVE SUBSIDIARIES. The Borrower has noInactive Subsidiaries except as set forth on Schedule 3.14 hereto. The Inactive Subsidiaries (a) do not conduct any business activitiesof any type or nature, and (b) do not own or have any interest inany assets or property of any type or nature. SECTION 3.15. SOLVENCY. After giving effect to theTransactions, (i) the assets of the Borrower, at a fair valuation,will exceed its debts, (ii) the Borrower's capital will not beunreasonably small to conduct its business, (iii) the Borrower willnot have incurred debts, or have intended to incur debts, beyond itsability to pay such debts as they mature, and (iv) the then-currentfair salable value of the Borrower's assets will be greater than theamount that will be required to pay its probable liabilities(including debts) as they become absolute and matured. For purposesof this Section, "debt" means any liability on a claim, and "claim"means (x) the right to payment, whether or not such right is reducedto judgment, liquidated, unliquidated, fixed, contingent, matured,unmatured, disputed, undisputed, legal, equitable, secured orunsecured, or (y) the right to an equitable remedy for breach ofperformance if such breach gives rise to a right to payment, whetheror not such right to an equitable remedy is reduced to judgment,fixed, contingent, matured, unmatured, disputed, undisputed, securedor unsecured. For purposes of this Section, the Borrower may assumethat the Loans will be refinanced on the Maturity Date. SECTION 3.16. EXCLUDED ITEMS. The aggregate acquisition costof (i) all Excluded Items plus (ii) all Rolling Stock (in existenceas of the Effective Date or thereafter acquired) for which theBorrower or other Obligor, as the case may be, has not granted Liensin favor of the Administrative Agent, for itself and on behalf ofSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. the Lenders, is not more than $2,000,000. SECTION 3.17. EQUITY ACQUISITION ASSETS. The aggregateacquisition cost of all Equity Acquisition Assets for which theBorrower or other Obligor, as the case may be, has not granted Liensin favor of the Administrative Agent, for itself and on behalf ofthe Lenders, is not more than $2,000,000. SECTION 3.18. ROLLING STOCK. The aggregate acquisition costof all Rolling Stock for which the Borrower, without the consent ofthe Administratrive Agent, has not granted Liens in favor of theAdministrative Agent, for itself and on behalf of the Lenders, isnot more than $2,000,000. ARTICLE IV CONDITIONS SECTION 4.01. EFFECTIVE DATE. The obligations of the Lendersto make Loans hereunder shall not become effective until the date onwhich each of the following conditions is satisfied (or waived inaccordance with Section 9.02): (a) The Administrative Agent shall have received the following documents, each in form and substance satisfactory to the Administrative Agent, and in the case of the document referred to in clauses (i), (v) and (vii) , duly executed and delivered by all the parties thereto: (i) this Agreement; (ii) the Borrower filed or registered Charter Documents, as amended, modified, restated or supplemented to the date hereof and certified as of the Effective Date as being a true and correct copy thereof by the Secretary of State (or comparable Governmental Authority) of the jurisdiction of its formation; (iii) a copy, certified as of the Effective Date of the resolutions of the board of directors of the Borrower duly authorizing the execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents to which it is a party, and each other document required to be executed and delivered by the Borrower pursuant to this Agreement; (iv) a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (h) and (j) of this Section 4.01; (v) the Pledge and Security Agreement (together with the share certificates representing all of the issued and outstanding shares of the Participating Subsidiaries, endorsed in blank), and the Mortgages; (vi) a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Miller & Holguin, counsel for the Borrower, substantially in the form of Exhibit H, and covering such other matters relating to the Borrower, this Agreement or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion; (vii) the Cadiz Reaffirmation Agreement; and (viii) such other documents relating to the transactions contemplated hereby as the Administrative Agent or any Lender may reasonably request. (b) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization,Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (c) UCC financing statements covering all the security interests created by or pursuant to the Pledge and Security Agreements in the collateral pledged pursuant thereto, shall have been executed and delivered by the Borrower to the Administrative Agent and such financing statements, or other statements or documents to the same purposes, shall have been duly filed or shall be duly filed simultaneously with the Initial Borrowing in all other applicable jurisdictions in the United States of America necessary or desirable to perfect said security interests and there shall have been taken all other action as the Administrative Agent or any Lender through the Administrative Agent may reasonably request or as shall be necessary to perfect such security interests to the extent required by the applicable Security Documents. (d) The Administrative Agent shall have received evidence of the insurance required to be carried pursuant to Section 5.05(b). (e) The representations and warranties of the Borrower set forth in this Agreement and each other Loan Document shall be true and correct on and as of the Effective Date of such Borrowing. (f) No Default shall have occurred and be continuing. (g) The Borrower shall have performed or observed and be continuing to perform each term, covenant or agreement contained in any Loan Document. (h) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (i) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (j) All governmental and third party approvals necessary or, in the discretion of the Administrative Agent, advisable in connection with the Transaction, the financing contemplated hereby and the continuing operations of the Borrower shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Transactions or the financing thereof.The Administrative Agent shall notify the Borrower and the Lendersof the Effective Date, and such notice shall be conclusive andbinding. Notwithstanding the foregoing, the obligations of theLenders to make Loans hereunder shall not become effective unlesseach of the foregoing conditions is satisfied (or waived pursuant toSection 9.02) at or prior to 3:00 p.m., New York City time, onDecember 1, 1997 (and, in the event such conditions are not sosatisfied or waived, the Commitments shall terminate at such time). SECTION 4.02. EACH CREDIT EVENT. The obligation of eachLender to make a Loan on the occasion of any Borrowing is subject tothe satisfaction of the following conditions: (a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing.Each Borrowing shall be deemed to constitute a representation andwarranty by the Borrower on the date thereof as to the mattersspecified in paragraphs (a) and (b) of this Section. ARTICLE V AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and theprincipal of and interest on each Loan and all fees payablehereunder shall have been paid in full, the Borrower covenants andagrees with the Lenders that: SECTION 5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION. TheBorrower will furnish to the Administrative Agent and each Lender: (a) within 15 days following Borrower's filing each Annual Report on Form 10-K with the Commission, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Price Waterhouse LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 15 days following Borrower's filing each Quarterly Report on Form 10-Q with the Commission, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under subsection (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, and (ii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) [Intentionally omitted] (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and (f) promptly following any request therefor, such otherSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02. NOTICES OF MATERIAL EVENTS. The Borrower willfurnish to the Administrative Agent and each Lender prompt writtennotice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.Each notice delivered under this Section 5.02 shall be accompaniedby a statement of a Financial Officer or other executive officer ofthe Borrower setting forth the details of the event or developmentrequiring such notice and any action taken or proposed to be takenwith respect thereto. SECTION 5.03. EXISTENCE; CONDUCT OF BUSINESS. The Borrowerwill, and will cause each of its Subsidiaries (including Sun World,but excluding Borrower's Inactive Subsidiaries and the subsidiariesof Sun World) to, do or cause to be done all things necessary topreserve, renew and keep in full force and effect its legalexistence and the rights, licenses, permits, privileges andfranchises material to the conduct of its business; provided thatthe foregoing shall not prohibit any merger, consolidation,liquidation or dissolution permitted under Section 6.03. SECTION 5.04. PAYMENT OF OBLIGATIONS. The Borrower will, andwill cause each of its Subsidiaries to, pay its obligations,including tax liabilities, that, if not paid, could result in aMaterial Adverse Effect before the same shall become delinquent orin default, except where (a) the validity or amount thereof is beingcontested in good faith by appropriate proceedings, (b) the Borroweror such Subsidiary has set aside on its books adequate reserves withrespect thereto in accordance with GAAP and (c) the failure to makepayment pending such contest could not reasonably be expected toresult in a Material Adverse Effect. SECTION 5.05. MAINTENANCE OF PROPERTIES; INSURANCE. TheBorrower will, and will cause each of its Participating Subsidiariesand SWFG to, (a) keep and maintain all property material to theconduct of its business in good working order and condition,ordinary wear and tear excepted, and (b) maintain, with financiallysound and reputable insurance companies, insurance in such amountsand against such risks as are customarily maintained by companiesengaged in the same or similar businesses operating in the same orsimilar locations. SECTION 5.06. BOOKS AND RECORDS; INSPECTION RIGHTS. TheBorrower will, and will cause each of its Subsidiaries to, keepproper books of record and account in which full, true and correctentries are made of all dealings and transactions in relation to itsbusiness and activities. The Borrower will, and will cause each ofits Subsidiaries (excluding the Sun World Entities) to, permit anyrepresentatives designated by the Administrative Agent or anyLender, upon reasonable prior notice, to visit and inspect itsproperties, to examine and make extracts from its books and records,and to discuss its affairs, finances and condition with its officersand independent accountants, all at such reasonable times and asoften as reasonably requested.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 5.07. COMPLIANCE WITH LAWS. The Borrower will, andwill cause each of its Subsidiaries to, comply with all laws, rules,regulations and orders of any Governmental Authority applicable toit or its property, except where the failure to do so, individuallyor in the aggregate, could not reasonably be expected to result in aMaterial Adverse Effect. SECTION 5.08. USE OF PROCEEDS. Subject to the terms andrestrictions set forth herein, the proceeds of the Loans will beused solely for the purpose of (a) financing a Permitted Investmentand (b) financing the working capital and general corporate needs ofthe Borrower. No part of the proceeds of any Loan will be used,whether directly or indirectly, for any purpose that entails aviolation of any of the Regulations of the Board, includingRegulations G, U and X. SECTION 5.09. NEW SUBSIDIARIES. In the event that any Personshall become a Participating Subsidiary of Borrower after the datehereof, Borrower shall execute (or cause such other ParticipatingSubsidiary as may be the direct parent company of the newParticipating Subsidiary to execute) a Pledge and SecurityAgreement, as the case may be, sufficient to subject all of thecapital stock of such new or additional Participating Subsidiary toa Lien in favor of the Administrative Agent, on behalf of theLenders, and any other documents as the Administrative Agent mayreasonably request from time to time in order to perfect or maintainthe perfection of the Administrative Agent's Liens thereunder, eachin form and substance reasonably satisfactory to the AdministrativeAgent. SECTION 5.10. ACQUISITIONS BY BORROWER. (a) In the event that after the date of this Agreement theBorrower acquires ownership of any additional real or personalproperty of any type or nature (including, but not limited to, notesor other obligations from a Subsidiary or Affiliate to Borrower),the Borrower shall promptly give written notice of such acquisitionto the Administrative Agent, and if requested by the AdministrativeAgent at the direction of the Required Lenders, Borrower shallexecute and deliver any and all Security Documents or collateralassignments, security agreements, mortgages, deeds of trust, pledgeagreements, financing statements, fixture filings, notice filings orother documents as the Administrative Agent may reasonably requestfrom time to time in order for the Administrative Agent to acquire aLien on the property so acquired by Borrower as additional securityfor the obligations under this Agreement or to perfect or maintainthe perfection of such Lien. (b) Notwithstanding paragraph (a) of this Section 5.10, solong as no Event of Default is then in existence, Borrower shall notbe required to deliver to the Administrative Agent any SecurityDocuments or collateral assignments, security agreements, mortgages,deeds of trust, pledge agreements, financing statements, fixturefilings, notice filings or other documents for any item of real orpersonal property acquired by Borrower on or after the EffectiveDate if both (i) the acquisition cost of each such item of real orpersonal property (including, but not limited to, Rolling Stock) isless than $250,000 and (ii) the aggregate acquisition cost of (A)all such real or personal property (including, but not limited to,Rolling Stock) in which no Lien has been granted in favor of theAdministrative Agent pursuant to this paragraph (b) of this Section(collectively, the "Excluded Items") plus (B) Rolling Stock inexistence as of the Effective Date is not more than $2,000,000. Tothe extent that the aggregate acquisition cost of (i) all ExcludedItems plus (ii) Rolling Stock in existence as of the Effective Dateis more than $2,000,000 (the "Excluded Items/Rolling StockThreshold"), Borrower will, and will cause its Subsidiaries to,grant (and such Liens shall be deemed immediately to have beengranted) Liens on such assets to the extent in excess of theExcluded Items/Rolling Stock Threshold in favor of theAdministrative Agent, for itself and on behalf of the Lenders. (c) Notwithstanding paragraph (a) and (b) of this Section5.10, so long as no Event of Default is then in existence, Borroweralso shall not be required to deliver to the Administrative AgentSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. any Security Documents or collateral assignments, securityagreements, mortgages, deeds of trust, pledge agreements, financingstatements, fixture filings, notice filings or other documents forany item of real or personal property acquired on or after theEffective Date if each of the following conditions are satisfied: (a) each such item of real or personal property is acquired orpurchased on or after the Effective Date solely in exchange for theCommon Stock or other equity interest in the Borrower (an "EquityAcquisition Asset"), (b) no Lien is created, imposed, or permittedto exist on any Equity Acquisition Asset, and (c) the aggregateacquisition value of all Equity Acquisition Assets does not exceed$2,000,000. To the extent that the aggregate acquisition value ofall Equity Acquisition Assets is more than $2,000,000 ("EquityAcquisition Threshold"), Borrower will, and will cause itsSubsidiaries to, grant Liens (and such Liens shall be deemedimmediately to have been granted) on such assets to the extent inexcess of the Equity Acquisition Threshold in favor of theAdministrative Agent, for itself and on behalf of the Lenders. SECTION 5.11. ACQUISITIONS WITH PROCEEDS OF LOANS. In theevent that after the date of this Agreement, a Subsidiary orBorrower's Affiliate utilizes the proceeds of any Loans, which areeither directly or indirectly transferred or otherwise forwarded tosuch Subsidiary or Borrower's Affiliate from Borrower, to acquirereal or personal property of any type or nature, Borrower shallpromptly give written notice of such acquisition to theAdministrative Agent, and if requested by the Administrative Agentat the direction of the Required Lenders, Borrower shall cause suchSubsidiary or Borrower's Affiliate to execute and deliver SecurityDocuments or collateral assignments, security agreements, mortgages,deeds of trust, pledge agreements, financing statements, fixturefilings, notice filings or other documents the Administrative Agentmay reasonably request from time to time in order for theAdministrative Agent to acquire a Lien on the property so acquiredby the Subsidiary or Borrower's Affiliate as the case may be, asadditional security for the obligations under this Agreement or toperfect or maintain the perfection of such Lien. SECTION 5.12. WARRANTS. On the date hereof, the Borrowershall issue the Warrants and the Purchaser Certificate. TheWarrants shall be duly executed and registered in such name or namesand in such denominations as each Lender shall have notified theBorrower and shall be deemed earned in accordance with section 2.12hereof and the terms and conditions of the Warrants. The Borrowershall keep available for issuance upon exercise of the Warrants asufficient quantity of Common Stock to satisfy the exercise in fullof the Warrants from time to time outstanding. The Borrower willcomply in all respects with its obligations under the Warrants andshall take all steps as shall be necessary to insure that theLenders and any subsequent holders of the Warrants receive all ofthe benefits which they are intended to receive thereunder. SECTION 5.13. STOCK PAYMENT COMMON STOCK. On each InterestPayment Date that the Borrower has made a Stock Payment Election onaccount of a Borrowing, the Borrower shall issue Common Stock to theLenders equal to the applicable Stock Payment ("Stock Payment CommonStock"). All shares of Common Stock issued pursuant to a StockPayment shall be duly authorized, validly issued, fully paid, non-assessable, and free and clear of all Liens and other encumbrances. ARTICLE VI NEGATIVE COVENANTS Until the Commitments have expired or terminated and theprincipal of and interest on each Loan and all fees payablehereunder have been paid in full, the Borrower covenants and agreeswith the Lenders that: SECTION 6.01. INDEBTEDNESS. The Borrower will not, and willnot permit any Participating Subsidiary or SWFG to, create, incur,assume or permit to exist any Indebtedness of Borrower, theParticipating Subsidiaries or SWFG, except: (a) Indebtedness created hereunder;Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; (c) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary; (d) Guarantees by the Borrower of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary; (e) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this subsection (e) shall not exceed $135 million at any time outstanding; (f) Indebtedness of the Borrower or any Subsidiary as an account party in respect of trade letters of credit; (g) "Parent Permitted Debt" (as defined in the Sun World Indenture), to the extent such debt may be incurred by Borrower pursuant to the terms of the Sun World Indenture without any action or authorization by the Sun World Trustee under the Sun World Indenture or by the holders of the Sun World Notes; provided, however, no "Parent Permitted Debt" (as defined in the Sun World Indenture) may be created, incurred, assumed or permitted to exist that would have a Material Adverse Effect upon Borrower's ability to satisfy the Borrower's obligations hereunder and under the other Loan Documents. SECTION 6.02. LIENS. The Borrower will not, and will notpermit any Subsidiary (excluding the Sun World Entities) to, create,incur, assume or permit to exist any Lien on any property or assetnow owned or hereafter acquired by it, or assign or sell any incomeor revenues (including accounts receivable) or rights in respect ofany thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower or any Subsidiary (excluding the Sun World Entities) existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (d) Liens on assets acquired, constructed or improved by theSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Borrower or any Subsidiary; provided that (i) such security interests secure Indebtedness permitted by subsection (e) of Section 6.01, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 90% of the cost of acquiring, constructing or improving such assets and (iv) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary; (e) Liens to the extent permitted pursuant to the terms of the Sun World Indenture without any action or authorization by the Sun World Trustee under the Sun World Indenture or by the holders of the Sun World Notes; provided that such Liens do not include any Liens on the ING Collateral; and (f) Liens on the Excluded Items or any portion thereof; notwithstanding the foregoing, the Borrower will not, and will notpermit any Subsidiary to, create, incur, assume or permit to existany Lien on any Equity Acquisition Asset now owned or hereafteracquired, or any proceeds thereof. SECTION 6.03. FUNDAMENTAL CHANGES. (a) The Borrower will not, and will not permit anySubsidiary, excluding the Sun World entities, to, merge into orconsolidate with any other Person, or permit any other Person tomerge into or consolidate with it, or sell, transfer, lease orotherwise dispose of (in one transaction or in a series oftransactions) any substantial part of its assets, or all orsubstantially all of the stock of any of its Subsidiaries (in eachcase, whether now owned or hereafter acquired), or liquidate ordissolve, except that, if at the time thereof and immediately aftergiving effect thereto no Default shall have occurred and becontinuing (i) any Subsidiary/Person may merge into the Borrower ina transaction in which the Borrower is the surviving corporation,(ii) any Subsidiary/Person may merge into any Subsidiary in atransaction in which the surviving entity is a Subsidiary, (iii) anySubsidiary may sell, transfer, lease or otherwise dispose of itsassets to the Borrower or to another Subsidiary and (iv) anySubsidiary may liquidate or dissolve if the Borrower determines ingood faith that such liquidation or dissolution is in the bestinterests of the Borrower and is not materially disadvantageous tothe Lenders; provided that any such merger involving a Person thatis not a wholly owned Subsidiary immediately prior to such mergershall not be permitted unless also permitted by Section 6.04. (b) The Borrower will not, and will not permit any of itsSubsidiaries (excluding the Sun World Entities) to, engage to anymaterial extent in any business other than businesses of the typeconducted by the Borrower and its Subsidiaries on the date ofexecution of this Agreement and businesses reasonably relatedthereto. (c) Notwithstanding the foregoing, the Borrower may sellassets to the extent such sale may be consummated pursuant to theterms of the Sun World Indenture without any action or authorizationby the Sun World Trustee under the Sun World Indenture or theholders of the Sun World Notes; provided that such sales do notinclude or affect in any manner the ING Collateral. (d) Unless an Inactive Subsidiary shall comply with each andevery obligation that Participating Subsidiaries (either directly orindirectly) have hereunder or under any of the Loan Documents, (a)the Borrower will not permit such Inactive Subsidiary to engage inany business of any type or nature, (b) the Borrower will not permitthe Inactive Subsidiaries, and will cause the Inactive Subsidiariesto refrain from, obtaining any assets or properties of any type ornature, (c) the Borrower will not permit any Inactive Subsidiary to,create, incur, assume or permit to exist any Indebtedness, and (d)the Borrower will not permit any Inactive Subsidiary to, create,incur, assume or permit to exist any Lien on any property or assetnow owned or hereafter acquired by it, or assign or sell any incomeor revenues.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SECTION 6.04. INVESTMENTS, LOANS, ADVANCES, GUARANTEES ANDACQUISITIONS. The Borrower will not, and will not permit any of itsSubsidiaries to, purchase, hold or acquire (including pursuant toany merger with any Person that was not a wholly owned Subsidiaryprior to such merger) any capital stock, evidences of indebtednessor other securities (including any option, warrant or other right toacquire any of the foregoing) of, make or permit to exist any loansor advances to, Guarantee any obligations of, or make or permit toexist any investment or any other interest in, any other Person, orpurchase or otherwise acquire (in one transaction or a series oftransactions) any assets of any other Person constituting a businessunit, except: (a) Permitted Investments; (b) investments by the Borrower existing on November 15, 1997 in the capital stock, other securities or equity interests of its Subsidiaries; (c) loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary to the Borrower or any other Subsidiary; (d) Guarantees constituting Indebtedness permitted by Section 6.01; and (e) assets acquired by Borrower solely in exchange for the equity interests of the Borrower. SECTION 6.05. HEDGING AGREEMENTS. The Borrower will not, andwill not permit any of its Subsidiaries (excluding the Sun WorldEntities) to, enter into any Hedging Agreement, other than HedgingAgreements entered into in the ordinary course of business to hedgeor mitigate risks to which the Borrower or any Subsidiary is exposedin the conduct of its business or the management of its liabilities. SECTION 6.06. RESTRICTED PAYMENTS. The Borrower will not, andwill not permit any of its Subsidiaries to, declare or make, oragree to pay or make, directly or indirectly, any RestrictedPayment; except that the Borrower and its Affiliates may make"Restricted Payments" (as defined in the Sun World Indenture) to theextent such payments may be effected pursuant to the terms of theSun World Indenture without any action or authorization by the SunWorld Trustee under the Sun World Indenture or by the holders of theSun World Notes, provided, however, that no such "RestrictedPayments" (as defined in the Sun World Indenture) may be made thatwould have a Material Adverse Effect upon Borrower's ability tosatisfy the Borrower's obligations hereunder and under the otherLoan Documents. SECTION 6.07. TRANSACTIONS WITH AFFILIATES. The Borrower willnot, and will not permit any of its Subsidiaries to, sell, lease orotherwise transfer any property or assets to, or purchase, lease orotherwise acquire any property or assets from, or otherwise engagein any other transactions with, any of its Affiliates, except (a) inthe ordinary course of business at prices and on terms andconditions not less favorable to the Borrower or such Subsidiarythan could be obtained on an arm's-length basis from unrelated thirdparties, (b) transactions between or among the Borrower and itsSubsidiaries not involving any other Affiliate, (c) any RestrictedPayment permitted by Section 6.06, and (d) "Affiliate Transactions"(as defined in the Sun World Indenture), to the extent suchtransactions may be incurred by Borrower and its Subsidiariespursuant to the terms of the Sun World Indenture without any actionor authorization by the Sun World Trustee under the Sun WorldIndenture or by the holders of the Sun World Notes, provided,however, that no such "Affiliate Transactions" (as defined in theSun World Indenture) may be undertaken that would have a MaterialAdverse Effect upon Borrower's ability to satisfy the Borrower'sobligations hereunder and under the other Loan Documents. SECTION 6.08. RESTRICTIVE AGREEMENTS. The Borrower will not,and will not permit any of its Subsidiaries (excluding the Sun WorldEntities) to, directly or indirectly, enter into, incur or permit toexist any agreement or other arrangement that prohibits, restrictsSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. or imposes any condition upon (a) the ability of the Borrower or anySubsidiary (excluding the Sun World Entities) to create, incur orpermit to exist any Lien upon any of its property or assets, or (b)the ability of any Subsidiary (excluding the Sun World Entities) topay dividends or other distributions with respect to any shares ofits capital stock or to make or repay loans or advances to theBorrower or any other Subsidiary or to Guarantee Indebtedness of theBorrower or any other Subsidiary; provided that (i) the foregoingshall not apply to restrictions and conditions imposed by law or bythis Agreement or any other Loan Document, (ii) the foregoing shallnot apply to restrictions and conditions existing on the date hereofidentified on Schedule 6.08 (but shall apply to any amendment ormodification expanding the scope of any such restriction orcondition), (iii) except as may be required pursuant to Section 5.10hereof, the foregoing shall not apply to customary restrictions andconditions contained in agreements relating to the sale of aSubsidiary pending such sale, provided such restrictions andconditions apply only to the Subsidiary that is to be sold and suchsale is permitted hereunder, (iv) except as may be required pursuantto Section 5.10 hereof, subsection (a) of the foregoing shall notapply to restrictions or conditions imposed by any agreementrelating to secured Indebtedness permitted by this Agreement if suchrestrictions or conditions apply only to the property or assetssecuring such Indebtedness and (v) except as may be requiredpursuant to Section 5.10 hereof, subsection (a) of the foregoingshall not apply to customary provisions in leases and othercontracts restricting the assignment thereof. SECTION 6.09. USE OF PROCEEDS. Borrower shall not use theproceeds of any of the Revolving Loans for any purpose other than asand to the extent permitted by Section 5.08 hereof. SECTION 6.10. MANAGEMENT FEES FROM SUN WORLD. Borrower shallnot, and will cause Sun World to refrain from taking any action to,either directly or indirectly, amend, modify, alter or voluntaryterminate or suspend the Cadiz/Sun World Services Agreement in anymanner that would restrict, limit, affect, modify, suspend orterminate Borrower's right to receive at least $1,500,000.00annually for management fees paid by Sun World to Cadiz under theterms of the Cadiz/Sun World Services Agreement. ARTICLE VII EVENTS OF DEFAULT If any of the following events ("Events of Default") shalloccur: (a) the Borrower shall fail to pay any principal of, or interest on, any Loan or any fee or any other amount payable under this Agreement or any other Loan Document when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or waiver hereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or waiver hereunder, shall prove to have been incorrect in any material respect when made or deemed made; (c) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower's existence) or 5.08 or in Article VI; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clauses (a), (b) or (c) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at theSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. request of any Lender); (e) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; provided that this clause (e) shall not apply solely by reason of a failure to make a payment when and as the same shall become due and payable under the Sun World Indenture or other Sun World Documents unless (i) such failure would cause an Event of Default hereunder pursuant to a section other than this section (e), (ii) the Sun World Notes or any of the obligations under the Sun World Documents to the Sun World Trustee or the holders of the Sun World Notes have been accelerated pursuant to the provisions of the Sun World Indenture or otherwise, (iii) the Sun World Trustee and/or any of the holders of the Sun World Notes have instituted legal proceedings to enforce the Sun World Notes, the Sun World Indenture, or any obligations referred to in any of the Sun World Documents, (iv) the Sun World Trustee and/or any of the holders of the Sun World Notes have commenced foreclosure proceedings (judicial or nonjudicial) with respect to any collateral held as security for the obligations under the Sun World Documents, or (v) such failure to make payments has a Material Adverse Effect upon Borrower's ability to satisfy its obligations under this Agreement or any other Loan Document (as determined solely in the Administrative Agent's reasonable judgment); provided further that this clause (e) shall not apply solely by reason of a failure to make a payment when and as the same shall become due and payable under any other Sun World Indebtedness unless (i) such failure would cause an Event of Default hereunder pursuant to a section other than this section (e), (ii) such Sun World Indebtedness have been accelerated pursuant to the terns thereof or otherwise, (iii) the holders of such Sun World Indebtedness or any agent therefor have instituted legal proceedings to enforce such Sun World Indebtedness, (iv) the holders of such Sun World Indebtedness or any agent therefor have commenced foreclosure proceedings (judicial or nonjudicial) with respect to any collateral held as security for such Indebtedness, or (v) such failure to make payments has a Material Adverse Effect upon Borrower's ability to satisfy its obligations under this Agreement or any other Loan Document (as determined solely in the Administrative Agent's reasonable judgment). (f) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; provided further that this clause (f) shall not apply solely by reason of an "Event of Default" under the Sun World Indenture or other Sun World Documents unless (i) such event would cause an Event of Default hereunder regardless of its classification as an "Event of Default" under the Sun World Indenture or other Sun World Documents, (ii) the Sun World Notes or any of the obligations under the Sun World Documents to the Sun World Trustee or the holders of the Sun World Notes have been accelerated pursuant to the provisions of the Sun World Indenture or otherwise, (iii) the Sun World Trustee and/or any of the holders of the Sun World Notes have instituted legal proceedings to enforce the Sun World Notes, the Sun World Indenture, or any obligations referred to in any of the Sun World Documents, (iv) the Sun World Trustee and/or any of the holders of the Sun World Notes have commenced foreclosure proceedings (judicial or nonjudicial) with respect to any collateral held as security for the obligations under the Sun World Documents, or (v) such event has a Material Adverse Effect upon Borrower's ability to satisfy its obligations underSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. this Agreement or any other Loan Document (as determined solely in the Administrative Agent's reasonable judgment); provided further that this clause (f) shall not apply solely by reason of an "Event of Default" under any other Sun World Indebtedness unless (i) such event would cause an Event of Default hereunder regardless of its classification as an "Event of Default" for such other Sun World Indebtedness, (ii) such Sun World Indebtedness has been accelerated pursuant to the terms thereof or otherwise, (iii) the holders of such Sun World Indebtedness or any agent therefor have instituted legal proceedings to enforce the Sun World Indebtedness, (iv) the holders of such Sun World Indebtedness or any agent therefor have commenced foreclosure proceedings (judicial or nonjudicial) with respect to any collateral held as security for such Indebtedness, or (v) such event has a Material Adverse Effect upon Borrower's ability to satisfy its obligations under this Agreement or any other Loan Document (as determined solely in the Administrative Agent's reasonable judgment). (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (i) the Borrower or any Subsidiary (other than PSWRI and SWFG) shall become unable, admit in writing or fail generally to pay its debts as they become due; (j) one or more judgments for the payment of money in excess of insurance coverage in an aggregate amount in excess of $500,000 shall be rendered against the Borrower, any Participating Subsidiary, SWFG or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Participating Subsidiary to enforce any such judgment; (k) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; (l) a Change in Control shall occur; (m) any of the Security Documents shall for any reason cease to be a valid perfected security interest in favor of the Administrative Agent, for itself and on behalf of the Lenders, in the Borrower's right, title and interest in and to the collateral subject thereto (subject only to PermittedSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Encumbrances), to the extent required by such Security Document, and in the case of any Mortgage, such cessation continues unremedied for more than 10 days; or (n) an "Event of Default" shall have occurred and be continuing under any other Loan Document;then, and in every such event (other than an event with respect tothe Borrower described in clause (g) or (h) of this Article), and atany time thereafter during the continuance of such event, theAdministrative Agent may, and at the request of the Required Lendersshall, by notice to the Borrower, take either or both of thefollowing actions, at the same or different times: (i) terminate theCommitments, and thereupon the Commitments shall terminateimmediately, and (ii) declare the Loans then outstanding to be dueand payable in whole (or in part, in which case any principal not sodeclared to be due and payable may thereafter be declared to be dueand payable), and thereupon the principal of the Loans so declaredto be due and payable, together with accrued interest thereon andall fees and other obligations of the Borrower accrued hereunder,shall become due and payable immediately, without presentment,demand, protest or other notice of any kind, all of which are herebywaived by the Borrower; and in case of any event with respect to theBorrower described in clause (g) or (h) of this Article, theCommitments shall automatically terminate and the principal of theLoans then outstanding, together with accrued interest thereon andall fees and other obligations of the Borrower accrued hereunder,shall automatically become due and payable, without presentment,demand, protest or other notice of any kind, all of which are herebywaived by the Borrower. In addition to any other remedies availableto the Administrative Agent and the Lenders hereunder or at law orotherwise, if an Event of Default shall have occurred and so long asthe same shall be continuing unremedied, then and in every suchcase, the Administrative Agent and the Required Lenders may exerciseany or all of the rights and powers and pursue any and all of theremedies set forth in any Security Document in accordance with termsthereof. ARTICLE VIII THE ADMINISTRATIVE AGENT SECTION 8.01. APPOINTMENT, POWERS AND IMMUNITIES. Each of the Lenders hereby irrevocably appoints the AdministrativeAgent as its agent and authorizes the Administrative Agent to takesuch actions on its behalf and to exercise such powers as aredelegated to the Administrative Agent by the terms hereof and by theother Loan Documents, together with such actions and powers as arereasonably incidental thereto. SECTION 8.02. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Lender serving as the Administrative Agent hereunder and underthe other Loan Documents shall have the same rights and powers inits capacity as a Lender as any other Lender and may exercise thesame as though it were not the Administrative Agent, and such Lenderand its Affiliates may lend money to and generally engage in anykind of business with the Borrower or any Subsidiary or otherAffiliate thereof as if it were not the Administrative Agenthereunder. In that regard, the terms "Lenders", "Required Lenders",or any similar terms used herein shall, unless the context clearlyotherwise indicates, include the Administrative Agent in itsindividual capacity. The Administrative Agent may lend money to,and generally engage in any kind of financial, financial advisory orother business with the Borrower or any Affiliate of the Borrower asif it were not performing the duties specified herein, and mayaccept fees and other consideration from the Borrower for servicesin connection with this Agreement and otherwise without having toaccount for the same to the Lenders. SECTION 8.03. NATURE OF DUTIES OF ADMINISTRATIVE AGENT. TheAdministrative Agent shall not have any duties or obligations exceptthose expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing (a) theAdministrative Agent shall not be subject to any fiduciary or otherSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. implied duties, regardless of whether a Default has occurred and iscontinuing, (b) the Administrative Agent shall not have any duty totake any discretionary action or exercise any discretionary powers,except discretionary rights and powers expressly contemplated herebythat the Administrative Agent is required to exercise in writing bythe Required Lenders (or such other number or percentage of theLenders as shall be necessary under the circumstances as provided inSection 9.02), and (c) except as expressly set forth herein or inany other Loan Document, the Administrative Agent shall not have anyduty to disclose, and shall not be liable for the failure todisclose, any information relating to the Borrower or any of itsSubsidiaries that is communicated to or obtained by the Lenderserving as Administrative Agent or any of its Affiliates in anycapacity. The Administrative Agent shall not be liable for anyaction taken or not taken by it with the consent or at the requestof the Required Lenders (or such other number or percentage of theLenders as shall be necessary under the circumstances as provided inSection 9.02) or in the absence of its own gross negligence orwilful misconduct. The Administrative Agent shall be deemed not tohave knowledge of any Default unless and until written noticethereof is given to the Administrative Agent by the Borrower or aLender, and the Administrative Agent shall not be responsible for orhave any duty to ascertain or inquire into (i) any statement,warranty or representation made in or in connection with thisAgreement, (ii) the contents of any certificate, report or otherdocument delivered hereunder or in connection herewith, (iii) theperformance or observance of any of the covenants, agreements orother terms or conditions set forth herein, (iv) the validity,enforceability, effectiveness or genuineness of this Agreement orany other agreement, instrument or document, or (v) the satisfactionof any condition set forth in Article IV or elsewhere herein, otherthan to confirm receipt of items expressly required to be deliveredto the Administrative Agent. SECTION 8.04. CERTAIN RIGHTS OF ADMINISTRATIVE AGENT. If theAdministrative Agent shall request instructions from the RequiredLenders with respect to any act or action (including the failure toact) in connection with this Agreement or any other Credit Document,the Administrative Agent shall be entitled to refrain from such actor taking such action unless and until the Administrative Agentshall have received instructions from the Required Lenders; and theAdministrative Agent shall not incur liability to any Person byreason of so refraining. Without limiting the foregoing, butsubject to the terms of Section 9.02 hereof, no Lender shall haveany right of action whatsoever against the Administrative Agent as aresult of the Administrative Agent acting or refraining from actinghereunder in accordance with the instructions of the RequiredLenders. SECTION 8.05. RELIANCE BY ADMINISTRATIVE AGENT. TheAdministrative Agent shall be entitled to rely upon, and shall notincur any liability for relying upon, any notice, request,certificate, consent, statement, instrument, document or otherwriting believed by it to be genuine and to have been signed or sentby the proper Person. The Administrative Agent also may rely uponany statement made to it orally or by telephone and believed by itto be made by the proper Person, and shall not incur any liabilityfor relying thereon. The Administrative Agent may consult withlegal counsel (who may be counsel for the Borrower), independentaccountants and other experts selected by it, and shall not beliable for any action taken or not taken by it in accordance withthe advice of any such counsel, accountants or experts. TheAdministrative Agent may deem and treat the payee of any Note as theowner thereof for all purposes hereof unless and until a writtennotice of the assignment or transfer thereof shall have been filedwith the Administrative Agent pursuant to Section 9.04 below. Anyrequest, authority or consent of any Person who, at the time ofmaking such request or giving such authority or consent, is theholder of any Note shall be conclusive and binding on any subsequentholder, transferee or assignee of such Note or any Note issued inexchange therefor. SECTION 8.06. SUB-AGENTS. The Administrative Agent mayperform any and all its duties and exercise its rights and powers byor through any one or more sub-agents appointed by theSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Administrative Agent. The Administrative Agent and any suchsub-agent may perform any and all its duties and exercise its rightsand powers through their respective Related Parties. Theexculpatory provisions of the preceding paragraphs shall apply toany such sub-agent and to the Related Parties of the AdministrativeAgent and any such sub-agent, and shall apply to their respectiveactivities in connection with the syndication of the creditfacilities provided for herein as well as activities asAdministrative Agent. SECTION 8.07. RESIGNATION BY ADMINISTRATIVE AGENT. Subject tothe appointment and acceptance of a successor Administrative Agentas provided in this paragraph, the Administrative Agent may resignat any time by notifying the Lenders and the Borrower. Upon anysuch resignation, the Required Lenders shall have the right, inconsultation with the Borrower, to appoint a successor. If nosuccessor shall have been so appointed by the Required Lenders andshall have accepted such appointment within 30 days after theretiring Administrative Agent gives notice of its resignation, thenthe retiring Administrative Agent may, on behalf of the Lenders,appoint a successor Administrative Agent. Upon the acceptance ofits appointment as Administrative Agent hereunder by a successor,such successor shall succeed to and become vested with all therights, powers, privileges and duties of the retiring AdministrativeAgent and the retiring Administrative Agent shall be discharged fromits duties and obligations hereunder and under the other LoanDocuments. The fees payable by the Borrower to a successorAdministrative Agent shall be the same as those payable to itspredecessor unless otherwise agreed between the Borrower and suchsuccessor. After the Administrative Agent's resignation hereunder,the provisions of this Article and Section 9.03 shall continue ineffect for the benefit of such retiring Administrative Agent, itssub-agents and their respective Related Parties in respect of anyactions taken or omitted to be taken by any of them while it wasacting as Administrative Agent. SECTION 8.08. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHERLENDERS. Each Lender acknowledges that it has, independently andwithout reliance upon the Administrative Agent or any other Lenderand based on such documents and information as it has deemedappropriate, made its own credit analysis and decision to enter intothis Agreement. Each Lender also acknowledges that it will,independently and without reliance upon the Administrative Agent orany other Lender and based on such documents and information as itshall from time to time deem appropriate, continue to make its owndecisions in taking or not taking action under or based upon thisAgreement, any related agreement or any document furnished hereunderor thereunder. SECTION 8.09. SECURITY DOCUMENTS. (a) Each Lender hereby authorizes the Administrative Agentto enter into each of the Security Documents and to take all actionscontemplated thereby. All rights and remedies under the SecurityDocuments may be exercised by the Administrative Agent for thebenefit of the Lenders and the other beneficiaries thereof upon theterms thereof. With the consent of the Required Lenders, theAdministrative Agent may assign its rights and obligations asAdministrative Agent under any of the Security Documents to anyAffiliate of the Administrative Agent, and such Affiliate thereaftershall be entitled to (i) all the rights of the Administrative Agentunder the applicable Security Document and (ii) all rights hereunderof the Administrative Agent with respect to the applicable SecurityDocument. (b) In each circumstance where, under any provision of anySecurity Document, the Administrative Agent shall have the right togrant or withhold any consent, exercise any remedy, make anydetermination or direct any action by the Administrative Agent undersuch Security Document, the Administrative Agent shall act inrespect of such consent, exercise of remedies, determination oraction, as the case may be, with the consent of and at the directionof the Required Lenders; provided, however, that no such consent ofthe Required Lenders shall be required with respect to any consent,determination or other matter that is, in the Administrative Agent'sSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. judgment, ministerial or administrative in nature. In eachcircumstance where any consent of or direction from the RequiredLenders is required, the Administrative Agent shall send to theLenders a written notice setting forth a description in reasonabledetail of the matter as to which consent or direction is requestedand the Administrative Agent's proposed course of action withrespect thereto. In the event the Administrative Agent shall nothave received a response from any Lender within five (5) BusinessDays after the giving of such notice, such Lender shall be deemed tohave agreed to the course of action proposed by the AdministrativeAgent. ARTICLE IX MISCELLANEOUS SECTION 9.01. NOTICES. Except in the case of notices andother communications expressly permitted to be given by telephone,all notices and other communications provided for herein shall be inwriting and shall be delivered by hand or overnight courier service,mailed by certified or registered mail or sent by telecopy, asfollows: (a) if to the Borrower, to it at: Cadiz Land Company, Inc. Attn: Chief Financial Officer 100 Wilshire Blvd. Sixteenth Floor Santa Monica, CA 90401-1115 Telephone No.: 310-899-4700 Facsimile No.: 310-899-4747 with a copy to: Howard Unterberger, Esq. Miller & Holguin 1801 Century Park East Seventh Floor Los Angeles, CA 90067 Telephone No.: 310-556-1990 Facsimile No.: 310-557-2205 (b) if to the Administrative Agent, to it at: ING Baring (U.S.) Capital Corporation 135 E. 57th Street New York, NY 10022-2101 Attention: Joan Chiappe, Vice President Reference: Cadiz Telephone No.: 212-409-1742 Facsimile No.: 212-371-9295 with a copy to: Milbank, Tweed, Hadley & McCloy 1 Chase Manhattan Plaza New York, New York 10005 Attention: Michael J. Edelman, Esq. Telephone No.: 212-530-5000 Facsimile No.: 212-530-5219 (c) if to ING, as a Lender, to it at: ING Baring (U.S.) Capital Corporation 135 E. 57th Street New York, NY 10022-2101 Attention: Joan Chiappe, Vice President Reference: Cadiz Telephone No.: 212-409-1742 Facsimile No.: 212-371-9295 with a copy to:Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Milbank, Tweed, Hadley & McCloy 1 Chase Manhattan Plaza New York, New York 10005 Attention: Michael J. Edelman, Esq. Telephone No.: 212-530-5000 Facsimile No.: 212-530-5219 (d) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.Any party hereto may change its address or telecopy number fornotices and other communications hereunder by notice to the otherparties hereto. All notices and other communications given to anyparty hereto in accordance with the provisions of this Agreementshall be deemed to have been given on the date of receipt. SECTION 9.02. WAIVERS; AMENDMENTS. (a) No failure or delay by the Administrative Agent or anyLender in exercising any right or power hereunder shall operate as awaiver thereof, nor shall any single or partial exercise of any suchright or power, or any abandonment or discontinuance of steps toenforce such a right or power, preclude any other or furtherexercise thereof or the exercise of any other right or power. Therights and remedies of the Administrative Agent and the Lendershereunder are cumulative and are not exclusive of any rights orremedies that they would otherwise have. No waiver of any provisionof this Agreement or consent to any departure by the Borrowertherefrom shall in any event be effective unless the same shall bepermitted by paragraph (b) of this Section, and then such waiver orconsent shall be effective only in the specific instance and for thepurpose for which given. Without limiting the generality of theforegoing, the making of a Loan shall not be construed as a waiverof any Default, regardless of whether the Administrative Agent orany Lender may have had notice or knowledge of such Default at thetime. (b) Neither this Agreement nor any provision hereof may bewaived, amended or modified except pursuant to an agreement oragreements in writing entered into by the Borrower and the RequiredLenders or by the Borrower and the Administrative Agent with theconsent of the Required Lenders; provided that no such agreementshall (i) increase the Commitment of any Lender without the writtenconsent of such Lender, (ii) reduce the principal amount of any Loanor reduce the rate of interest thereon, or reduce any fees payablehereunder, without the written consent of each Lender affectedthereby, (iii) postpone the scheduled date of payment of theprincipal amount of any Loan or any interest thereon, or any feespayable hereunder, or reduce the amount of, waive or excuse any suchpayment, or postpone the scheduled date of expiration of anyCommitment, without the written consent of each Lender affectedthereby, (iv) change Section 2.18(b) or (c) in a manner that wouldalter the pro rata sharing of payments required thereby, without thewritten consent of each Lender, (v) change any of the provisions ofthis Section 9.02 or the definition of "Required Lenders" or anyother provision hereof specifying the number or percentage ofLenders required to waive, amend or modify any rights hereunder ormake any determination or grant any consent hereunder, without thewritten consent of each Lender, or (vi) release any securityinterest in any material collateral for the obligations evidenced bythe Loan Documents (except in accordance with the Loan Documents)without the written consent of each Lender; provided further that nosuch agreement shall amend, modify or otherwise affect the rights orduties of the Administrative Agent hereunder without the priorwritten consent of the Administrative Agent. SECTION 9.03. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) The Borrower shall pay (i) all reasonable out-of-pocketexpenses incurred by the Administrative Agent and its Affiliates,including the reasonable fees, charges and disbursements of counselfor the Administrative Agent, in connection with the syndication ofthe credit facilities provided for herein, the preparation andadministration of this Agreement and the other Loan Documents or anySource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. amendments, modifications or waivers of the provisions hereof(whether or not the transactions contemplated hereby or therebyshall be consummated), (ii) all reasonable out-of-pocket expensesincurred by the Administrative Agent or any Lender, including thefees, charges and disbursements of any counsel for theAdministrative Agent or any Lender, in connection with theenforcement or protection of its rights in connection with thisAgreement or any other Loan Document, including its rights underthis Section 9.03, or in connection with the Loans made hereunder,including all such out-of-pocket expenses incurred during anyworkout, restructuring or negotiations in respect of such Loans. (b) The Borrower shall indemnify the Administrative Agentand each Lender, and each Related Party of any of the foregoingPersons (each such Person being called an "Indemnitee") against, andhold each Indemnitee harmless from, any and all losses, claims,damages, liabilities and related expenses, including the fees,charges and disbursements of any counsel for any Indemnitee,incurred by or asserted against any Indemnitee arising out of, inconnection with, or as a result of (i) the execution or delivery ofthis Agreement or any other Loan Document or any agreement orinstrument contemplated therein, the performance by the partieshereto of their respective obligations hereunder or the consummationof the Transactions or any other transactions contemplated hereby,(ii) any Loan or the use of the proceeds therefrom, (iii) any actualor alleged presence or release of Hazardous Materials on or from anyproperty owned or operated by the Borrower or any of itsSubsidiaries, or any Environmental Liability related in any way tothe Borrower or any of its Subsidiaries, or (iv) any actual orprospective claim, litigation, investigation or proceeding relatingto any of the foregoing, whether based on contract, tort or anyother theory and regardless of whether any Indemnitee is a partythereto; provided that such indemnity shall not, as to anyIndemnitee, be available to the extent that such losses, claims,damages, liabilities or related expenses are determined by a courtof competent jurisdiction by final and nonappealable judgment tohave resulted from the gross negligence or wilful misconduct of suchIndemnitee. (c) To the extent that the Borrower fails to pay any amountrequired to be paid by it to the Administrative Agent underparagraph (a) or (b) of this Section, each Lender severally agreesto pay to the Administrative Agent such Lender's ApplicablePercentage (determined as of the time that the applicableunreimbursed expense or indemnity payment is sought) of such unpaidamount; provided that the unreimbursed expense or indemnified loss,claim, damage, liability or related expense, as the case may be, wasincurred by or asserted against the Administrative Agent in itscapacity as such. (d) To the extent permitted by applicable law, the Borrowershall not assert, and hereby waives, any claim against anyIndemnitee, on any theory of liability, for special, indirect,consequential or punitive damages (as opposed to direct or actualdamages) arising out of, in connection with, or as a result of, thisAgreement or any agreement or instrument contemplated hereby, theTransactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section 9.03 shall be payablepromptly after written demand therefor. SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding uponand inure to the benefit of the parties hereto and their respectivesuccessors and assigns permitted hereby, except that the Borrowermay not assign or otherwise transfer any of its rights orobligations hereunder without the prior written consent of eachLender (and any attempted assignment or transfer by the Borrowerwithout such consent shall be null and void). Nothing in thisAgreement, expressed or implied, shall be construed to confer uponany Person (other than the parties hereto, their respectivesuccessors and assigns permitted hereby and, to the extent expresslycontemplated hereby, the Related Parties of each of theAdministrative Agent and the Lenders) any legal or equitable right,Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or aportion of its rights and obligations under this Agreement(including all or a portion of its Commitment and the Loans at thetime owing to it); provided that (i) except in the case of anassignment to a Lender or an Affiliate of a Lender, each of theBorrower and the Administrative Agent must give their prior writtenconsent to such assignment (which consent shall not be unreasonablywithheld), (ii) except in the case of an assignment to a Lender oran Affiliate of a Lender or an assignment of the entire remainingamount of the assigning Lender's Commitment, the amount of theCommitment of the assigning Lender subject to each such assignment(determined as of the date the Assignment and Acceptance withrespect to such assignment is delivered to the Administrative Agent)shall not be less than $2,000,000 unless each of the Borrower andthe Administrative Agent otherwise consents, (iii) each partialassignment shall be made as an assignment of a proportionate part ofall the assigning Lender's rights and obligations under thisAgreement, (iv) the parties to each assignment shall execute anddeliver to the Administrative Agent an Assignment and Acceptance,together with a processing and recordation fee of $1,000, and (v)the assignee, if it shall not be a Lender, shall deliver to theAdministrative Agent an Administrative Questionnaire; providedfurther that any consent of the Borrower otherwise required underthis paragraph shall not be required if an Event of Default underclause (h) or (i) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph(d) of this Section, from and after the effective date specified ineach Assignment and Acceptance the assignee thereunder shall be aparty hereto and, to the extent of the interest assigned by suchAssignment and Acceptance, have the rights and obligations of aLender under this Agreement, and the assigning Lender thereundershall, to the extent of the interest assigned by such Assignment andAcceptance, be released from its obligations under this Agreement(and, in the case of an Assignment and Acceptance covering all ofthe assigning Lender's rights and obligations under this Agreement,such Lender shall cease to be a party hereto but shall continue tobe entitled to the benefits of Sections 2.15, 2.17 and 9.03). Anyassignment or transfer by a Lender of rights or obligations underthis Agreement that does not comply with this paragraph shall betreated for purposes of this Agreement as a sale by such Lender of aparticipation in such rights and obligations in accordance withparagraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as anagent of the Borrower, shall maintain at its offices in The City ofNew York a copy of each Assignment and Acceptance delivered to itand a register for the recordation of the names and addresses of theLenders, and the Commitment of, and principal amount of the Loansowing to, each Lender pursuant to the terms hereof from time to time(the "Register"). The entries in the Register shall be conclusive,and the Borrower, the Administrative Agent and the Lenders may treateach Person whose name is recorded in the Register pursuant to theterms hereof as a Lender hereunder for all purposes of thisAgreement, notwithstanding notice to the contrary. The Registershall be available for inspection by the Borrower and any Lender, atany reasonable time and from time to time upon reasonable priornotice. (d) Upon its receipt of a duly completed Assignment andAcceptance executed by an assigning Lender and an assignee, theassignee's completed Administrative Questionnaire (unless theassignee shall already be a Lender hereunder), the processing andrecordation fee referred to in paragraph (b) of this Section and anywritten consent to such assignment required by paragraph (b) of thisSection, the Administrative Agent shall accept such Assignment andAcceptance and record the information contained therein in theRegister. No assignment shall be effective for purposes of thisAgreement unless it has been recorded in the Register as provided inthis paragraph. (e) Any Lender may, without the consent of the Borrower orthe Administrative Agent, sell participations to one or more banksor other financial institutions (a "Participant") in all or aSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. portion of such Lender's rights and obligations under this Agreement(including all or a portion of its Commitment and the Loans owing toit); provided that (i) such Lender's obligations under thisAgreement shall remain unchanged, (ii) such Lender shall remainsolely responsible to the other parties hereto for the performanceof such obligations and (iii) the Borrower, the Administrative Agentand the other Lenders shall continue to deal solely and directlywith such Lender in connection with such Lender's rights andobligations under this Agreement. Any agreement or instrumentpursuant to which a Lender sells such a participation shall providethat such Lender shall retain the sole right to enforce thisAgreement and to approve any amendment, modification or waiver ofany provision of this Agreement; provided that such agreement orinstrument may provide that such Lender will not, without theconsent of the Participant, agree to any amendment, modification orwaiver described in the first proviso to Section 9.02(b) thataffects such Participant. Subject to paragraph (f) of this Section,the Borrower agrees that each Participant shall be entitled to thebenefits of Sections 2.15 and 2.17 to the same extent as if it werea Lender and had acquired its interest by assignment pursuant toparagraph (b) of this Section. To the extent permitted by law, eachParticipant also shall be entitled to the benefits of Section 9.08as though it were a Lender, provided such Participant agrees to besubject to Section 2.18(c) as though it were a Lender. (f) A Participant shall not be entitled to receive anygreater payment under Section 2.15 or 2.17 than the applicableLender would have been entitled to receive with respect to theparticipation sold to such Participant, unless the sale of theparticipation to such Participant is made with the Borrower's priorwritten consent. A Participant that would be a Foreign Lender if itwere a Lender shall not be entitled to the benefits of Section 2.17unless the Borrower is notified of the participation sold to suchParticipant and such Participant agrees, for the benefit of theBorrower, to comply with Section 2.17(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a securityinterest in all or any portion of its rights under this Agreement tosecure obligations of such Lender, including any pledge orassignment to secure obligations to a Federal Reserve Bank, and thisSection 9.04 shall not apply to any such pledge or assignment of asecurity interest; provided that no such pledge or assignment of asecurity interest shall release a Lender from any of its obligationshereunder or substitute any such pledgee or assignee for such Lenderas a party hereto. SECTION 9.05. SURVIVAL. All covenants, agreements,representations and warranties made by the Borrower herein and inthe certificates or other instruments delivered in connection withor pursuant to this Agreement shall be considered to have beenrelied upon by the other parties hereto and shall survive theexecution and delivery of this Agreement and the making of anyLoans, regardless of any investigation made by any such other partyor on its behalf and notwithstanding that the Administrative Agentor any Lender may have had notice or knowledge of any Default orincorrect representation or warranty at the time any credit isextended hereunder, and shall continue in full force and effect aslong as the principal of or any accrued interest on any Loan or anyfee or any other amount payable under this Agreement is outstandingand unpaid and so long as the Commitments have not expired orterminated. The provisions of Sections 2.15, 2.17 and 9.03 andArticle VIII shall survive and remain in full force and effectregardless of the consummation of the transactions contemplatedhereby, the repayment of the Loans, the expiration of theCommitments or the termination of this Agreement or any provisionhereof. SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. ThisAgreement may be executed in counterparts (and by different partieshereto on different counterparts), each of which shall constitute anoriginal, but all of which when taken together shall constitute asingle contract. This Agreement and any separate letter agreementswith respect to fees payable to the Administrative Agent constitutethe entire contract among the parties relating to the subject matterhereof and supersede any and all previous agreements andSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. understandings, oral or written, relating to the subject matterhereof. Except as provided in Section 4.01, this Agreement shallbecome effective when it shall have been executed by theAdministrative Agent and when the Administrative Agent shall havereceived counterparts hereof which, when taken together, bear thesignatures of each of the other parties hereto, and thereafter shallbe binding upon and inure to the benefit of the parties hereto andtheir respective successors and assigns. Delivery of an executedcounterpart of a signature page of this Agreement by telecopy shallbe effective as delivery of a manually executed counterpart of thisAgreement. SECTION 9.07. SEVERABILITY. Any provision of this Agreementheld to be invalid, illegal or unenforceable in any jurisdictionshall, as to such jurisdiction, be ineffective to the extent of suchinvalidity, illegality or unenforceability without affecting thevalidity, legality and enforceability of the remaining provisionshereof; and the invalidity of a particular provision in a particularjurisdiction shall not invalidate such provision in any otherjurisdiction. SECTION 9.08. RIGHT OF SETOFF. If an Event of Default shallhave occurred and be continuing, each Lender and each of itsAffiliates is hereby authorized at any time and from time to time,to the fullest extent permitted by law, to set off and apply any andall deposits (general or special, time or demand, provisional orfinal) at any time held and other obligations at any time owing bysuch Lender or Affiliate to or for the credit or the account of theBorrower against any of and all the obligations of the Borrower nowor hereafter existing under this Agreement held by such Lender,irrespective of whether or not such Lender shall have made anydemand under this Agreement and although such obligations may beunmatured. The rights of each Lender under this Section 9.08 are inaddition to other rights and remedies (including other rights ofsetoff) which such Lender may have. SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICEOF PROCESS. (a) This Agreement shall be construed in accordance with andgoverned by the law of the State of California. (b) The Borrower hereby irrevocably and unconditionallysubmits, for itself and its property, to the nonexclusivejurisdiction of (i) the Supreme Court of the State of New Yorksitting in New York County, (ii) the United States District Court ofthe Southern District of New York, (iii) any United States federalcourt sitting in the Central District of California, or (iv) anyother court of appropriate jurisdiction sitting in the County of LosAngeles, City of Los Angeles, and any appellate court from anythereof, in any action or proceeding arising out of or relating tothis Agreement, or for recognition or enforcement of any judgment,and each of the parties hereto hereby irrevocably andunconditionally agrees that all claims in respect of any such actionor proceeding may be heard and determined in such New York State orCalifornia Court or, to the extent permitted by law, in such Federalcourt. Each of the parties hereto agrees that a final judgment inany such action or proceeding shall be conclusive and may beenforced in other jurisdictions by suit on the judgment or in anyother manner provided by law. Nothing in this Agreement shallaffect any right that the Administrative Agent or any Lender mayotherwise have to bring any action or proceeding relating to thisAgreement against the Borrower or its properties in the courts ofany jurisdiction. (c) The Borrower hereby irrevocably and unconditionallywaives, to the fullest extent it may legally and effectively do so,any objection which it may now or hereafter have to the laying ofvenue of any suit, action or proceeding arising out of or relatingto this Agreement in any court referred to in paragraph (b) of thisSection. Each of the parties hereto hereby irrevocably waives, tothe fullest extent permitted by law, the defense of an inconvenientforum to the maintenance of such action or proceeding in any suchcourt.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (d) Each party to this Agreement irrevocably consents toservice of process in the manner provided for notices in Section9.01. Nothing in this Agreement will affect the right of any partyto this Agreement to serve process in any other manner permitted bylaw. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBYWAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHTIT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY ORINDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THETRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT ORANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NOREPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HASREPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULDNOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOINGWAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETOHAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHERTHINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10. SECTION 9.11. HEADINGS. Article and Section headings and theTable of Contents used herein are for convenience of reference only,are not part of this Agreement and shall not affect the constructionof, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. CONFIDENTIALITY. Each of the AdministrativeAgent and the Lenders agrees to maintain the confidentiality of theInformation (as defined below), except that Information may bedisclosed (a) to its and its Affiliates' directors, officers,employees and agents, including accountants, legal counsel and otheradvisors (it being understood that the Persons to whom suchdisclosure is made will be informed of the confidential nature ofsuch Information and instructed to keep such Informationconfidential), (b) to the extent requested by any regulatoryauthority, (c) to the extent required by applicable laws orregulations or by any subpoena or similar legal process, (d) to anyother party to this Agreement, (e) in connection with the exerciseof any remedies hereunder or any suit, action or proceeding relatingto this Agreement or the enforcement of rights hereunder, (f)subject to an agreement containing provisions substantially the sameas those of this Section, to any assignee of or Participant in, orany prospective assignee of or Participant in, any of its rights orobligations under this Agreement, (g) with the consent of theBorrower or (h) to the extent such Information (i) becomes publiclyavailable other than as a result of a breach of this Section or (ii)becomes available to the Administrative Agent or any Lender on anonconfidential basis from a source other than the Borrower;provided, however, that such information, to the AdministrativeAgent's or Lender's knowledge, without any duty of inquiry, has notbeen provided in violation of any obligation owed by the sourcethereof to the Borrower. For the purposes of this Section,"Information" means all information received from the Borrowerrelating to the Borrower or its business, other than any suchinformation that is available to the Administrative Agent or anyLender on a nonconfidential basis prior to disclosure by theBorrower; provided that, in the case of information received fromthe Borrower after the date hereof, such information is clearlyidentified at the time of delivery as confidential. Any Personrequired to maintain the confidentiality of Information as providedin this Section shall be considered to have complied with itsobligation to do so if such Person has exercised the same degree ofcare to maintain the confidentiality of such Information as suchPerson would accord to its own confidential information. SECTION 9.13. FORECLOSURE OF CADIZ/SUN WORLD LEASE. If, inenforcing remedies hereunder, the Administrative Agent or a Lenderforecloses on the property subject to that certain Cadiz/Sun WorldLease, whether judicially or non-judicially, or obtains title tosuch property by deed in lieu of foreclosure, by purchase, orotherwise, then (a) so long as Sun World is not in default under theCadiz/Sun World Lease: (i) Sun World and the Sun World Trustee underthe Sun World Indenture shall be named or joined in any foreclosure,trustee's sale or other proceeding only if required by law; and (ii)the enforcement of any remedies hereunder that effects a transfer oftitle to the property subject to the Cadiz/Sun World Lease shall notterminate the Cadiz/Sun World Lease nor terminate nor affect in anySource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. manner the lien of the Sun World Trustee thereon, nor disturb SunWorld in the possession and use of the property subject thereto. SECTION 9.14. WAIVER OF ANTI-DEFICIENCY PROTECTION. Borrowerhereby waives, as to this Agreement and any and all Loan Documentsheretofore or hereafter executed in connection with the Transactionsany defense, protection or right under: (a) California Code of Civil Procedure ("CCP") Section 580(d) concerning the bar against rendition of a deficiency judgment after foreclosure under a power of sale; (b) CCP Section 580(a) purporting to limit the amount of a deficiency judgment which may be obtained following exercise of a power of sale under a deed of trust; and (c) CCP Section 726 concerning exhaustion of collateral, the form of foreclosure proceedings with respect to real property security located in California and otherwise limiting the amount of a deficiency judgment which may be recovered following completion of judicial foreclosure by reference to the "fair value" of the foreclosed collateral. SECTION 9.15. COSTS BORNE BY NON-PREVAILING PARTY. In theevent of any dispute with respect to this Agreement or any otherLoan Document, the prevailing party shall be entitled to recoverfrom the non-prevailing party all costs and attorneys' fees. SECTION 9.16. INTEREST RATE LIMITATION. Notwithstandinganything herein to the contrary, if at any time the interest rateapplicable to any Loan, together with all fees, charges and otheramounts which are treated as interest on such Loan under applicablelaw (collectively the "Charges"), shall exceed the maximum lawfulrate (the "Maximum Rate") which may be contracted for, charged,taken, received or reserved by the Lender holding such Loan inaccordance with applicable law, the rate of interest payable inrespect of such Loan hereunder, together with all Charges payable inrespect thereof, shall be limited to the Maximum Rate and, to theextent lawful, the interest and Charges that would have been payablein respect of such Loan but were not payable as a result of theoperation of this Section shall be cumulated and the interest andCharges payable to such Lender in respect of other Loans or periodsshall be increased (but not above the Maximum Rate therefor) untilsuch cumulated amount, together with interest thereon at the FederalFunds Effective Rate to the date of repayment, shall have beenreceived by such Lender. SECTION 9.17. REGISTRATION UNDER THE SECURITIES ACT OF 1933. (a) The Borrower shall advise the Lenders, as holders of theRegistrable Common Stock (if any) or any then holder of RegistrableCommon Stock (such persons being collectively referred to in thisSection as "holders") by written notice at least four weeks prior tothe filing of any new registration statement under the SecuritiesAct of 1933, as amended, or the Rules and Regulations promulgatedthereunder (such Act and Rules and Regulations being hereinafterreferred to as the "Securities Act") covering securities of theBorrower and will for a period ending on the first anniversary ofthe final Interest Payment Date on which a Stock Payment was madeand commencing as of the date hereof, upon the request of any suchholder, include in any such registration statement such informationas may be required to permit a public offering of the RegistrableCommon Stock which is eligible to be included in such RegistrationStatement. The Borrower shall supply prospectuses, use its bestefforts to cause the registration statement to become effective andto qualify the Registrable Common Stock for sale in such state asany such holder designates and furnish indemnification in the manneras set forth in section (b) of this Section. Such holders shallfurnish information and indemnification as set forth in section (b)of this Section. (b) The Borrower shall bear the entire cost and expense ofSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. any registration of securities initiated by it under section (a) ofthis Section notwithstanding that Registrable Common Stock may beincluded in any such registration. Any holder whose RegistrableCommon Stock is included in any such registration statement pursuantto this Section shall, however, bear the fees of such holder's owncounsel and any registration fees, transfer taxes or underwritingdiscounts or commissions applicable to the Common Stock sold by suchholder pursuant thereto. (c) The Borrower shall indemnify and hold harmless each suchholder and each underwriter, within the meaning of the SecuritiesAct, who may purchase from or sell for any such holder anyRegistrable Common Stock for any such holder (in the case ofindemnification of such underwriter) from and against any and alllosses, claims, damages and liabilities ("Losses") arising out of orbased upon any untrue statement or alleged untrue statement of amaterial fact contained in any registration statement or any post-effective amendment thereto under the Securities Act or anyprospectus included therein required to be filed or furnished byreason of this Section or arising out of or based upon any omissionor alleged omission to state therein a material fact required to bestated therein or necessary to make the statements therein notmisleading, except insofar as such Losses arise out of or are basedupon any such untrue statement or alleged untrue statement oromission or alleged omission based upon information furnished orrequired to be furnished in writing to the Borrower by such holder,or underwriter, in the case of indemnification of such underwriter,expressly for use therein, which indemnification shall include eachperson, if any, who controls any such holder or each person, if any,who controls any such holder or underwriter within the meaning ofsuch Securities Act; provided, however, that the Borrower shall notbe obliged so to indemnify any such holder or underwriter orcontrolling person unless such holder or underwriter shall at thesame time indemnify, severally and not jointly, the Borrower, itsdirectors, each officer signing the related registration statementand each person, if any, who controls the Borrower within themeaning of such Securities Act, from and against any and all Lossesarising out of or based upon any untrue statement or alleged untruestatement of a material fact contained in any registration statementor any prospectus required to be filed or furnished by reason ofthis Section or arising out of or based upon any omission to statetherein a material fact required to be stated therein or necessaryto make the statements therein not misleading, insofar as suchLosses arise out of or are based upon any untrue statement oralleged untrue statement or omission made in conformity withinformation furnished in writing to the Borrower by any such holderor underwriter expressly for use therein. (d) If the indemnify obligation provided for above isunavailable or insufficient to hold harmless an indemnified party inrespect of any Losses, then the indemnifying party shall contributeto the amount paid or payable by the indemnified party as a resultof such Losses in such proportion as is appropriate to reflect therelative fault of the indemnifying party, on the one hand, and theindemnified party, on the other hand, in connection with statementsor omissions which resulted in such Losses, as well as any otherrelevant equitable considerations. The relative fault shall bedetermined by reference to, among other things, whether the untrueor alleged untrue statement of a material fact or the omission oralleged omission to state a material fact relates to informationsupplied by the indemnifying party or the indemnified parties andthe parties' relative intent, knowledge, access to information andopportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable ifcontributions pursuant to this paragraph were to be determined bypro rata allocation or by any other method of allocation which doesnot take account of the equitable considerations referred to in theprevious sentence. (e) Notwithstanding anything herein to the contrary, aholder shall have no rights to have the Registrable Common Stockregistered if in the opinion of either counsel for the Borrower,knowledgeable and experienced in Federal securities matters (saidcounsel to be acceptable to such holder in the reasonable judgementof such holder), or counsel for the holder knowledgeable andSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. experienced in Federal securities matters (said counsel to beacceptable to the Borrower in the Borrower's reasonable judgement),the holder may lawfully sell publicly, at the time and in the mannerthe holder proposes to sell the Registrable Common Stock, all of thesecurities proposed to be sold without registering the sale underthe Securities Act, whether pursuant to an exemption fromregistration available under Section 4(1) of the Securities Act,Rule 144 or Rule 144(k) under the Securities Act, or otherwise. (f) The Borrower will (i) file reports in compliance withthe Securities Exchange Act of 1934, as amended (the "ExchangeAct"), (ii) comply with all rules and regulations of the Commissionapplicable in connection with the use of Rule 144 under theSecurities Act and take such other actions and furnish the holderwith such other information as such holder may request in order toavail itself of such rule or any other rule or regulations of theCommission allowing such holder to sell any Registrable Common Stockwithout registration, and (iii) at its expense, upon the request ofthe holder, deliver to such holder a certificate, signed by theBorrower's principal financial officer, stating (A) the Borrower'sname, address and telephone number (including area code), (B) theBorrower's Internal Revenue Service identification number, (C) theBorrower's Commission file number, (D) the number of shares of eachclass of stock outstanding as shown by the most recent report orstatement published by the Borrower, and (E) whether the Borrowerhas filed the reports required to be filed under the Exchange Actfor a period of at least ninety (90) days prior to the date of suchcertificate and in addition has filed the most recent annual reportrequired to be filed thereunder. If at any time the Borrower is notrequired to file reports in compliance with either Section 13 orSection 15(d) of the Exchange Act, the Borrower at its expense will,upon the written request of the holder, make available adequatecurrent public information with respect to the Borrower within themeaning of paragraph (c)(2) of Rule 144 under the Securities Act. (g) The holders of the Registrable Common Stock and anytransferee thereof, by their acceptance hereof, hereby agree that: (a) the Registrable Common Stock to be being acquired hereunder arebeing purchased for investment purposes only and not with a view todistribution and will not be transferred unless registered or unlessthere is an exemption available from the registration requirement ofthe Securities Act, which exemption has been established to thereasonable satisfaction of the Borrower; (b) no public distributionof the Registrable Common Stock Warrants will be made in violationof the provisions of the Securities Act or any applicable statelaws; and (c) during such period as delivery of a prospectus withrespect to the Registrable Common Stock may be required by theSecurities Act, no public distribution of Registrable Common StockWarrants will be made in a manner or on terms different from thoseset forth in, or without delivery of, a prospectus then meeting therequirements of Section 10 of the Securities Act and in compliancewith all applicable state laws. The Lenders and any such assigneeof the Lenders further agree that if any public distribution of anyof the Registrable Common Stock is proposed to be made by themotherwise than by delivery of a prospectus meeting the requirementsof Section 10 of the Securities Act, which action shall be takenonly after submission to the Borrower of an opinion of counsel,reasonably satisfactory in form and substance to the Borrower'scounsel, to the effect that the proposed distribution will not be inviolation of the Securities Act or of applicable state law. Furthermore, it shall be a condition to the transfer of theRegistrable Common Stock that the transferee thereof deliver to theBorrower such holder's written agreement to accept and be bound byall of the terms and conditions of this Section. SECTION 9.18. STATUS OF ING. ING hereby represents to theBorrower that it is not a Foreign Lender. SECTION 9.19. AMENDMENTS TO SUN WORLD INDENTURE. An amendmentor modification of the Sun World Indenture will be a Non-AdverseAmendment only upon the satisfaction of each and every one of thefollowing conditions (such amendment or modification that satisfiesall of the following requirements, a "Non-Adverse Amendment"): (a) the Borrower, in accordance with section 9.01 of thisSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Credit Agreement, gives notice of, and delivers to, the Administrative Agent, a true and correct copy of such amendment or modification; (b) as determined solely in the Administrative Agent's reasonable judgment, the terms of the amendment or modification of the Sun World Indenture do not, and will not, adversely affect either (i) the ability of the Borrower or the other Obligors to satisfy their respective obligations under this Credit Agreement and/or the other Loan Documents or (ii) the rights of the Administrative Agent or Lenders hereunder or under the other Loan Documents; and (c) such amendment or modification of the Sun World Indenture is validly effected and becomes effective pursuant to the terms of the Sun World Indenture. The failure of the Borrower to notify, and deliver to, theAdministrative Agent any amendment or modification of the Sun WorldIndenture will preclude such amendment or modification from being aNon-Adverse Amendment until each of the requirements set forth inthe previous sentence are satisfied. If, however, (x) the Borrower gives notice of, and delivers to, the Administrative Agent, a true and correct copy of an amendment or modification to the Sun World Indenture; and (y) the Administrative Agent does not notify the Borrower within five (5) Business Days after the Administrative Agent's receipt of the documents set forth in subclause (x) above that the amendment or modification (in the Administrative Agent's reasonable judgment) has or will have an adverse effect upon (i) the ability of the Borrower or the other Obligors to satisfy their respective obligations under this Credit Agreement and/or the other Loan Documents or (ii) the rights of the Administrative Agent or Lenders hereunder or under the other Loan Documents; then such amendment or modification of the Sun World Indenture shallbe deemed to be a Non-Adverse Amendment for all purposes hereunder. Notwithstanding the foregoing, and without requiring any action bythe Borrower or the Administrative Agent, any amendments ormodifications of the Sun World Indenture that may be validlyeffected pursuant to the terms of the Sun World Indenture withoutany action or authorization by the holders of the Sun World Notes(or any portion of such holders) shall also be deemed to be a Non-Adverse Amendment provided that such amendment or modification doesnot, and will not, in the Administrative Agent's reasonablejudgment, adversely affect (i) Borrower's ability to satisfy theBorrower's obligations hereunder and under the other Loan Documentsor (ii) the rights of the Administrative Agent or Lenders hereunderor under the other Loan Documents. IN WITNESS WHEREOF, the parties hereto have caused thisAgreement to be duly executed by their respective authorizedofficers as of the day and year first above written. CADIZ LAND COMPANY, INC., the Borrower by: /s/ Stanley E. Speer ----------------------------- Name: Stanley E. Speer Title: Chief Financial Officer ING BARING (U.S.) CAPITAL CORPORATION, individually and asSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Administrative Agent by /s/ Joan M. Chiappe -------------------------------- Name: Joan M. Chiappe Title: Vice President SCHEDULE 2.01 COMMITMENTS1. Lender: ING Baring (U.S.) Capital Corporation 135 E. 57th Street New York, NY 10022-2101 Attention: Joan Chiappe, Vice President Telephone No.: 212-409-1742 Facsimile No.: 212-371-9295 Commitment: $15,000,000.00 SCHEDULE 2.04 BORROWER'S WIRING INSTRUCTIONS FOR INITIAL BORROWINGBANK ABA #: 121000248 Wells Fargo Bank 10270 Foothill Blvd. Rancho Cucamonga, CAAccount Cadiz Land Company, Inc. Acct. 4896044211 SCHEDULE 3.13 BORROWER'S PARTICIPATING SUBSIDIARIESNone SCHEDULE 3.14 BORROWER'S INACTIVE SUBSIDIARIESPacific Packing, Inc., a California corporation;Pacific Real Estate, Inc., a California corporation;Rancho Cadiz Mutual Water Company, a California mutual watercompany; andPSWRI, a Guernsey corporation. SCHEDULE 6.01 SCHEDULE OF INDEBTEDNESS FOR BORROWER, PARTICIPATING SUBSIDIARIES AND SWFGThe "Term Loan", as defined in the Pledge and Security Agreement. SCHEDULE 6.02 SCHEDULE OF LIENS ON PROPERTY OF BORROWER AND/OR SUBSIDIARIES (Excluding the Sun World Entities)Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Liens granted to secure the "Term Obligations", as defined in thePledge and Security Agreement.Liens described in Title Policy No. 7222428 (the "Title Policy")issued by Chicago Title Insurance Company, insuring priority in theMortgage, and showing Cadiz as owner in fee simple absolute and INGas insured.With respect to property owned of record by Southwest Fruit Growers,a Delaware limited partnership ("SWFG"), (i) Liens arising pursuantto the SWFG-Farming Deed of Trust and the SWFG-Grape Deed of Trust(as such terms are defined in the Pledge and Security Agreement);(ii) such Liens as may be described in the Title Policy which affectsuch property; and (iii) such additional Liens on such property asmay be non-material in effect and amount.Liens on Rolling Stock existing as of the Effective Date.Lien on telephone system at San Bernardino, CA office by MellonFirst United Leasing (monthly payment $164.00).Lien on Mita DC-6590 copier at Santa Monica, CA office by MitaFinancial Services (monthly payment $580.00).Lien on Minolta EP 3050 copier at Santa Monica, CA office by GECapital (monthly payment $254.08).Lien on Mita 4086 copier at San Bernardino, CA office by CapelcoCapital, Inc. (monthly payment $240.00). SCHEDULE 6.08 SCHEDULE OF RESTRICTIVE AGREEMENTS OF BORROWER AND/OR SUBSIDIARIES (Excluding the Sun World Entities)1. Restrictions and conditions arising under and pursuant to theTerm Loan, as defined in the Pledge and Security Agreement.2. Restrictions and conditions arising under and pursuant to theSun World Documents.3. Restrictions and conditions arising under and pursuant to theLimited Partnership Agreement of SWFG. EXHIBIT A [FORM OF] ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of[ ] (as amended and in effect on the date hereof, the"Credit Agreement"), among Cadiz Land Company, Inc., the Lendersnamed therein and ING Baring (U.S.) Capital Corporation, asAdministrative Agent for the Lenders. Terms defined in the CreditAgreement are used herein with the same meanings. The Assignor named on the reverse hereof hereby sells andassigns, without recourse, to the Assignee named on the reversehereof, and the Assignee hereby purchases and assumes, withoutrecourse, from the Assignor, effective as of the Assignment Date setforth on the reverse hereof, the interests set forth on the reversehereof (the "Assigned Interest") in the Assignor's rights andobligations under the Credit Agreement, including, withoutlimitation, the interests set forth herein in the Commitment of theAssignor on the Assignment Date and Revolving Loans owing to theAssignor which are outstanding on the Assignment Date, held by theAssignor on the Assignment Date, but excluding accrued interest andfees to and excluding the Assignment Date. The Assignee herebyacknowledges receipt of a copy of the Credit Agreement. From andafter the Assignment Date (i) the Assignee shall be a party to andbe bound by the provisions of the Credit Agreement and, to theextent of the Assigned Interest, have the rights and obligations ofSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. a Lender thereunder and (ii) the Assignor shall, to the extent ofthe Assigned Interest, relinquish its rights and be released fromits obligations under the Credit Agreement. This Assignment and Acceptance is being delivered to theAdministrative Agent together with (i) if the Assignee is a ForeignLender, any documentation required to be delivered by the Assigneepursuant to Section 2.17(e) of the Credit Agreement, duly completedand executed by the Assignee, and (ii) if the Assignee is notalready a Lender under the Credit Agreement, an AdministrativeQuestionnaire in the form supplied by the Administrative Agent, dulycompleted by the Assignee. The [Assignee/Assignor] shall pay thefee payable to the Administrative Agent pursuant to Section 9.04(b)of the Credit Agreement. This Assignment and Acceptance shall be governed by andconstrued in accordance with the laws of the State of California.Date of Assignment:Legal Name of Assignor:Legal Name of Assignee:Assignee's Address for Notices:Effective Date of Assignment("Assignment Date") (1): Percentage Assigned of Commitment (set forth, to at least 8 decimals, as a percentage of the Principal Amount Commitments of allFacility Assigned Lenders thereunder)Commitment Assigned: $ %The terms set forth above and on the reverse side hereof are herebyagreed to:[Name of Assignor] , as AssignorBy:__________________________________ Name: Title:[Name of Assignee] , as AssigneeBy:__________________________________ Name: Title:- --------------------------(1) Must be at least five Business Days after execution hereof by all required parties.The undersigned hereby consent to the within assignment (2):CADIZ LAND COMPANY, INC., ING BARING (U.S.) CAPITAL the Borrower CORPORATION, as Administrative Agent,By:_________________________ By:_________________________ Name: Name: Title: Title:Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. - -----------------------------(2) Consents to be included to the extent required by Section 9.04(b) of the Credit Agreement.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Revolving Credit Note EXHIBIT 10.16 ------------- REVOLVING CREDIT NOTE$15,000,000 November 25, 1997 Los Angeles, California FOR VALUE RECEIVED, CADIZ LAND COMPANY, INC., a Delawarecorporation (the "Borrower"), hereby promises to pay to the order of INGBARING (U.S.) CAPITAL CORPORATION, a Delaware corporation (the"Lender"), at the place and currency and manner designated in the CreditAgreement referred to below and in immediately available funds, theprincipal sum of FIFTEEN MILLION Dollars ($15,000,000) (or such lesseramount as shall equal the aggregate unpaid principal amount of theRevolving Loans made by the Lender to the Borrowers under the CreditAgreement), in lawful money of the United States of America and inimmediately available funds, on the dates and in the principal amountsprovided in the Credit Agreement, and to pay interest on the unpaidprincipal amount of each such Revolving Loan, at the place and currencyand manner designated in the Credit Agreement, for the period commencingon the date of such Revolving Loan until such Revolving Loan shall bepaid in full, at the rates per annum and on the dates provided in theCredit Agreement. The date, amount, interest rate and Interest Payment Date of eachRevolving Loan made by the Lender to the Borrower, and each payment madeon account of the principal thereof, shall be recorded by the Lender onits books and, prior to any transfer of this Note, endorsed by theLender on the schedule attached hereto or any continuation thereof,provided that the failure of the Lender to make any such recordation orendorsement shall not affect the obligations of the Borrower to make apayment when due of any amount owing under the Credit Agreement orhereunder in respect of the Revolving Loans made by the Lender. This Note is one of the Notes referred to in the Credit Agreementdated as of November 25, 1997 (as modified and supplemented and ineffect from time to time, the "Credit Agreement") among CADIZ LANDCOMPANY, INC., the LENDERS party hereto, and ING BARING (U.S.) CAPITALCORPORATION, as Administrative Agent, and evidences Revolving Loans madeby the Lender thereunder. Terms used but not defined in this Note havethe respective meanings assigned to them in the Credit Agreement. The Credit Agreement provides for the acceleration of the maturityof this Note upon the occurrence of certain events and for prepaymentsof Loans upon the terms and conditions specified therein. Except as permitted by Section 9.04 of the Credit Agreement, thisNote may not be assigned by the Lender to any other Person. This Note shall be governed by, and construed in accordance with,the law of the State of California. CADIZ LAND COMPANY, INC., the Borrower by: /s/ Stanley E. Speer --------------------- Name: Stanley E. Speer Title: Chief Financial Officer SCHEDULE OF REVOLVING LOANS This Note evidences Revolving Loans made, continued or convertedunder the within-described Credit Agreement to the Borrowers, on thedates, in the principal amounts, bearing interest at the rates andhaving Interest Periods (if applicable) of the durations set forthbelow, subject to the payments, continuations, conversions andprepayments of principal set forth below: Date Amount Paid,Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Made, Principal Prepaid, Unpaid Continued Amount Continued Principal Notation Or Converted of Loan or Converted Amount Made by- -------------- --------- ------------ -------- ----------Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.17 ------------- AGREEMENT BETWEEN METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA AND CADIZ LAND COMPANY, INC. TO DEVELOP PRINCIPLES AND TERMS FOR AGREEMENT AND TO VERIFY PROGRAM FEASIBILITY THIS AGREEMENT TO DEVELOP PRINCIPLES AND TERMS FOR AGREEMENTAND TO VERIFY PROGRAM FEASIBILITY (hereinafter "Agreement") is enteredinto this 23rd day of December, 1997, by Cadiz Land Company, Inc.("CLCI"), a Delaware corporation with its principal office in SantaMonica, California, and Metropolitan Water District of SouthernCalifornia ("Metropolitan"), a public agency formed under theMetropolitan Water District Act, 1969 Cal. Stat. 492, Ch. 209 et seq.,as amended, Water Code Uncodified Act 9129 (b) (the "Act"). CLCI and Metropolitan are sometimes referred to individuallyas a "Party" or collectively as the "Parties". RECITALS A. WHEREAS, CLCI is a publicly-held agricultural companythat owns and manages substantial land and water resources throughoutCentral and Southern California, including more than 27,000 acres (43square miles) of land located in the Cadiz and Fenner valleys of SanBernardino County, California (the "Property"); B. WHEREAS, CLCI, as one of the largest United Statesgrowers and marketers of table grapes, stone fruit, and specialty rowcrops, has developed farming operations at the Property using water-conserving irrigation techniques and has completed an EnvironmentalImpact Report certified by the County of San Bernardino, which approvedthe development of up to 9,600 acres of irrigated agriculture and thewithdrawal of approximately 1,000,000 acre-feet of indigenousgroundwater; C. WHEREAS, Metropolitan was created in 1928 under the Actfor the purpose of providing supplemental water supplies to the citiesand communities of Southern California within its 5,155 square-mileservice area, which includes portions of Los Angeles, Orange, SanDiego, Riverside, San Bernardino and Ventura Counties; D. WHEREAS, Metropolitan has entitlements to Colorado Riverwater pursuant to the 1928 Boulder Canyon Project Act, the UnitedStates Supreme Court 1983 opinion in Arizona v. California andsubsequent decrees, and contracts with the United States and others; E. WHEREAS, Metropolitan owns and operates the ColoradoRiver Aqueduct ("CRA"), which imports water from the Colorado River foruse in Southern California; F. WHEREAS, Metropolitan employs an Integrated ResourcesPlanning process which has identified a full CRA as an integralcomponent to achieving long-term supply reliability required for theregion; G. WHEREAS, Metropolitan's Integrated Resources Plan,California law and water policy all recognize the importance ofgroundwater storage and conjunctive use programs in meeting the watersupply needs of the state; H. WHEREAS, various studies and reports prepared by publicagencies and private companies indicate that the Property overlies alarge groundwater basin that has significant water recharge and storagecapabilities, and which can yield substantial amounts of high-qualitywater in excess of the present and projected agricultural requirementsof CLCI; I. WHEREAS, various hydrological, environmental, andengineering studies and reports, together with empirical data acquiredby CLCI from more than ten years of groundwater pumping, support theproposition that the Property is well suited technically andSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. economically for a conjunctive use and storage program, involving bothstorage of Colorado River water and transfer of indigenous groundwater,subject to Metropolitan's final review and verification of suchstudies, reports, and empirical data; J. WHEREAS, the Parties have discussed and are reviewingthe feasibility of such a program on the Property and therefore desireto commence negotiating an appropriate water management strategy andprogram that achieves reasonable and beneficial conjunctive use ofColorado River water and CLCI's indigenous groundwater by the operationof a conjunctive use and storage program that entails the delivery ofhigh quality, reliable, supplemental water supplies to Metropolitan ona long-term basis for use within its service area, provided mutuallysatisfactory terms and conditions for the storage and extraction ofMetropolitan's Colorado River water and transfer of CLCI's indigenousgroundwater can be reached by the Parties; and K. WHEREAS, the Parties desire to document theirdemonstrated commitment by entering into this Agreement. NOW, THEREFORE, the Parties hereby enter into this Agreementand agree to work jointly and cooperatively to complete the followingtasks by March 31, 1998: (i) verify the feasibility of such a programin accordance with Section 1, (ii) negotiate the material terms of anagreement for a conjunctive use and storage program as described inSection 2 ("Principles and Terms For Agreement") and (iii) explore theviability of implementing certain additions to the program identifiedin Section 3. In negotiating the Principles and Terms For Agreement,the Parties will have the responsibilities and will follow theprocedures set forth in Section 4.SECTION 1: ISSUES FOR VERIFICATION. CLCI has provided to Metropolitan a number of studies, reports,and documents that support the feasibility of a conjunctive use andstorage program on the Property that would result in the ability todeliver high-quality and reliable supplemental water supplies toMetropolitan on a long-term basis for use in Metropolitan's servicearea. Metropolitan has performed a preliminary review of thesestudies, reports and documents and, based on this preliminary review,believes that such a program is technically feasible and merits seriousconsideration by Metropolitan. The Parties agree to cooperate inverifying the findings in the studies, reports and documents, thetechnical feasibility of such a program, the practical and financialfeasibility of such a program, and the Parties' relative legal rightsto enter into the proposed program as the first phase of work underthis Agreement.SECTION 2: PRINCIPLES AND TERMS FOR AGREEMENT. Assuming negotiations result in terms which are acceptable to bothParties, the negotiated Principles and Terms For Agreement will be sentto the respective governing Boards of both Parties for approval and fordirection for the Parties to then draft a comprehensive agreement basedon the Principles and Terms For Agreement and completion of allenvironmental documentation. The Principles and Terms For Agreementwill set forth the significant terms and principles for a comprehensiveagreement for a conjunctive use and storage program at the Property("Core Program") that would provide for the cost-effective andbeneficial storage of Metropolitan's Colorado River water, produce anew and reliable dry-year source of significant water supplies, andimprove the quality of water conveyed through the CRA. The Principles and Terms For Agreement would reflect certainmaterial terms negotiated between the Parties, including but notlimited to the following, which are described below in greater detail:refinement and review of a Core Program proposal, the financing andownership of any Core Program facilities, the duration and appropriatefee structure of a Core Program, a schedule for the implementation ofthe water supply benefits available under a Core Program, and full andcomplete compliance with applicable environmental laws. 2.1. CORE PROGRAM.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2.1.1. The Core Program would provide Metropolitan with a dry-year source for up to 100,000 acre-feet/year of water having a lowconcentration of total dissolved solids ("TDS"). This dry-year sourcewould be made up of a combination of stored imported water andindigenous low-TDS groundwater. The storage operations of the CoreProgram would involve conveyance of Colorado River water via a 35-milepipeline from the CRA to the Property during periods of availablesupply. The imported water would be stored in the groundwater aquifersunderlying the Property. This water and indigenous groundwater wouldbe extracted by wells and conveyed to the CRA according to scheduleddelivery periods as agreed upon by the Parties. 2.1.2. The capabilities of the Core Program would be on the orderof the following: * Put operations ("Put") refer to the conveyance of water from the forebay of the Iron Mountain Pumping Plant ("IMPP") on the CRA to the Property. Put capacity at 100,000 acre-feet/year. * Storage operations ("Storage") refer to the storage of CRA water in the aquifers underlying the Property. Storage capacity at 500,000 acre-feet. * Take operations ("Take") refer to extraction of stored water and conveyance back to the CRA. Take capacity for the Core Program at 100,000 acre-feet/year. * Transfer operations ("Transfer") refer to extraction and conveyance of low-TDS indigenous groundwater to the CRA. Transfer capacity for the Core Program at 100,000 acre-feet/year (such transfers to be consistent with a comprehensive groundwater management plan). Operation of the Core Program would be conducted in accordance with acomprehensive basin management program to ensure long-term protectionof the groundwater basin. 2.2. FINANCING. CLCI is prepared to arrange to privately finance all costs,maintain ownership of, and fully operate the Core Program.Alternatively, the Principles and Terms For Agreement may include thefollowing: * Financial participation and/or ownership by Metropolitan. * Financial participation and/or ownership by other public water agencies. 2.3. FEE STRUCTURE. Metropolitan and CLCI agree to negotiate a fee structure forthe various Core Program elements, examples of which may include thefollowing: * Put, Take, Storage, and Transfer fees. * Minimum standby fees. * Options to purchase indigenous groundwater. * Fee escalation formulas.2.4. CONSTRUCTION SCHEDULE. The Principles and Terms For Agreement would reflectconstruction needs and schedule for the Core Program. 2.5. TIMETABLE AND MILESTONES. The Principles and Terms For Agreement would reflect theParties commitment to establish a timetable for completing the CoreProgram on the Property prior to the year 2000.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 2.6. ENVIRONMENTAL COMPLIANCE. The Parties would cooperate to ensure compliance with allfederal and state environmental laws, including but not limited to theCalifornia Environmental Quality Act ("CEQA"), upon the execution of afinal agreement, including the designation of an appropriate leadagency under CEQA for implementing and operating the Core Program onthe Property and for the transportation of water supplies to theservice area.SECTION 3: POTENTIAL FUTURE ADDITIONS TO CORE PROGRAM. Several engineering additions ("Additions") have beenidentified which could potentially be added to the Core Program in thefuture, based on further investigations and evaluations. PotentialAdditions include, but are not limited to, the following: * "Danby Lake Addition" CLCI controls approximately 7,000 acres (11 square miles) near Danby Lake, approximately 10 miles north of the IMPP. If this property were developed as an addition to the Core Program, total Put, Storage, Take, and Transfer capacities could be significantly increased. * "Dual Pipeline Addition" A second transmission pipeline from the CRA to the Property could be employed to increase Put, Take, and Transfer capacities or to allow continuous cycling for increased water quality benefits to Metropolitan's service area. SECTION 4: RESPONSIBILITIES OF THE PARTIES UNDER THE AGREEMENT. 4.1. REVIEW PROCEDURES. The Parties acknowledge that Metropolitan is developing aprocess for the uniform evaluation of potential storage and watersupply programs that will coincide with the activities contemplated bythis Agreement. This process will include analysis of potentialprograms by a review committee established by Metropolitan. TheParties desire to move forward expeditiously with evaluation of theCore Program as part of Metropolitan's review process. Accordingly,the review committee will be regularly briefed on the progress made inthe activities contemplated by this Agreement and any completedPrinciples and Terms For Agreement will be brought to the reviewcommittee for its consideration. Subject to this process, the Partiesagree to complete their respective review and evaluation procedureswith respect to the Core Program and, as appropriate, negotiate thePrinciples and Terms For Agreement by March 31, 1998. 4.2. NEGOTIATION OF THE PRINCIPLES AND TERMS FOR AGREEMENT. The Parties agree to negotiate and, as appropriate, draft thePrinciples and Terms For Agreement by March 31, 1998, to be brought toMetropolitan's governing Board for direction at the next appropriateBoard meeting. The Principles and Terms For Agreement shall be used asthe basis for drafting a comprehensive agreement. 4.3. MUTUAL UNDERSTANDING. The Parties, by execution of this Agreement, confirm theirmutual understanding and desire to enter into good faith negotiationstoward preparation of the Principles and Terms For Agreement as soon asreasonably practicable for the performance of the responsibilitiesidentified in this Agreement, including those pertaining to therefinement and review of the Core Program proposal, the financing andownership of Core Program facilities, the duration and appropriate feestructure of the Core Program, a schedule for the implementation forthe water supply benefits available under the Core Program, and fulland complete compliance with applicable environmental laws.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 4.4. APPROVAL OF AGREEMENT. This Agreement has been approved by the management of eachParty. 4.5. CONFIDENTIAL INFORMATION. To promote the open exchange of information between theParties necessary to negotiate the Principles and Terms For Agreementand investigate the Additions, each of the Parties will, to the extentallowed by applicable law, execute concurrently with this Agreement aConfidentiality Agreement to preserve the Parties' protected tradesecrets, proprietary information, and confidential business plans. 4.6. NOTICE. Any notice to a Party shall be in writing and effective whendelivered to: METROPOLITAN: --------------------- John R. Wodraska General Manager Metropolitan Water District of Southern California 350 South Grand Avenue Los Angeles, California 90071 CLCI: ------------------------- Keith Brackpool Chief Executive Officer Cadiz Land Company, Inc. 100 Wilshire Boulevard, 16th Floor Santa Monica, California 90401 IN WITNESS WHEREOF, The Parties hereto have executed thisAgreement as of the day and year first above written. Metropolitan Water District of Southern CaliforniaBy: /s/ John R. Wodraska ------------------------------------ John R. Wodraska General Manager Approved as to form: By: /s/ N. Gregory -------------------------------- N. Gregory Taylor General CounselCadiz Land Company, Inc.By: /s/ Keith Brackpool ------------------------------ Keith Brackpool Chief Executive OfficerSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.18 ------------- EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as ofFebruary 1, 1998, by and between Cadiz Land Company, Inc., a Delawarecorporation (the "Company") and Keith Brackpool, an individual ("Brackpool"). WHEREAS, the Company wishes to employ Brackpool and Brackpoolwishes to accept such employment on the terms and conditions set forthherein; NOW, THEREFORE, the parties agree as follows: 1. TERM OF EMPLOYMENT. The Company hereby employs Brackpool andBrackpool accepts such employment for an initial term of three (3) yearscommencing as of the date of this Agreement (the "Commencement Date"),and automatically continuing thereafter upon the same terms andconditions until terminated in accordance with the terminationprovisions of Section 6 below (the "Term"). 2. DUTIES. Brackpool shall be employed as the Chief ExecutiveOfficer of the Company. Brackpool's base of operations shall be at thecorporate headquarters office of the Company in Santa Monica, Californiaunless changed by mutual agreement. However, Brackpool shall alsorender services at such other sites at which the Company's operationsare conducted as necessary to properly perform his duties. Brackpool'sduties and responsibilities shall relate, generally, to the operationalmanagement of the Company. Brackpool shall report to, and takedirection from, the Board of Directors of the Company. Brackpool shallalso perform such other duties pertaining to the operations of theCompany as the Board of Directors of the Company (the "Board") may fromtime to time direct. Brackpool hereby consents to serve in furthercapacities as an officer and/or director of the Company or anysubsidiary or affiliate (including, without limitation, Chairman of theCompany's wholly owned subsidiary, Sun World International, Inc. ("SunWorld")) without any additional salary or compensation. 3. NECESSARY SERVICES. a. PERFORMANCE OF DUTIES. Brackpool agrees that he will atall times faithfully, industriously and to the best of his ability,experience and talents, perform to the reasonable satisfaction of theCompany all of the duties that may be assigned to him hereunder andshall devote such time to the performance of these duties as may benecessary therefor. b. FULL-TIME SERVICE. During the term of theAgreement, Brackpool shall be available on a full-time basis toperform the duties assigned him in accordance with paragraph 2hereof; provided, however, that nothing herein shall precludeBrackpool from spending a reasonable amount of time in themanagement of his personal investments or with any charitable orcivic venture with which Brackpool may be involved as of the datehereof; and provided, further, that such involvement shall notdetract from the performance of Brackpool's duties hereunder. c. EXCLUSIVE SERVICES. Brackpool agrees that duringthe period of his employment, Brackpool shall provide servicesexclusively pursuant to this Agreement, and Brackpool will not,without the prior written consent of the Company (which consentmay be granted or withheld in the sole and absolute discretion ofthe Company), directly or indirectly: (i) engage in the business of, or own or controlany interest in (except as a passive investor owning less than10% of the equity securities of a publicly held company), or actas director, officer of employee of, or consultant to, anyindividual, partnership, joint venture, corporation or otherbusiness entity, directly or indirectly engaged anywhere in theUnited States, its possessions or territories, in any businessSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. competitive with the business then being carried on by theCompany or any affiliate; (ii) plan or organize any business activitycompetitive with the business or planned business of the Companyor its affiliates, or combine, participate, or conspire withother employees of the Company or its affiliates or other personsor entities for the purpose of organizing any such competitivebusiness activity; or (iii) divert or take away, or attempt to divertor take away, any of the customers or potential customers of theCompany or its affiliates, either for himself or for any otherperson, firm, partnership, corporation or other business entity. 4. BASIC COMPENSATION. Brackpool shall be paid an initialbase salary of $500,000 per annum, commencing as of theCommencement Date. Payments shall be made in equal monthlyinstallments in accordance with the normal payroll practices ofthe Company. Such base salary will be subject to annual increaseby the Compensation Committee of the Board, in its sole andabsolute discretion. Brackpool agrees to accept the foregoing, along with anyother compensation to which Brackpool may be entitled underSection 5 below, as payment in full for all services rendered byhim to or for the benefit of the Company and its subsidiaries. Brackpool acknowledges and agrees that a portion of thecompensation payable to him pursuant to this Agreement may bepaid directly by Sun World or any other affiliate of the Company,and that any compensation payments received by Brackpool fromsuch entities shall be credited against and applied to the totalcompensation to which Brackpool is entitled under this Agreement. 5. OTHER COMPENSATION. a. ANNUAL BONUS. Brackpool will be entitled toreceive an annual bonus comprised of an EBITDA Bonus, a WaterDevelopment Bonus and a Discretionary Bonus (in the aggregate notto exceed 120% of the annual base compensation payable toBrackpool pursuant to Section 4 above) as follows: i. EBITDA BONUS. Prior to the commencement of each fiscal year during the term of this Agreement, the Company's budgeted EBITDA Amount for such year shall be established by the Board. For purposes hereof, the term "EBITDA Amount" shall mean the Company's earnings before interest, taxes, depreciation and amortization (subject to such adjustments for extraordinary items as the Board may establish at the time it establishes the budgeted EBITDA Amount), as certificated by the independent outside auditors of the Company. In the event of a change in the fiscal year end of the Company, suitable pro-rata adjustments shall be made to the foregoing EBITDA Amount. If the Company achieves 100% of its budgeted EBITDA Amount for the year, Brackpool will be paid a bonus equal to 20% of Brackpool's annual base salary. The amount of this bonus will be subject to increase if the EBITDA Amount for the year is greater than 100% of budget, up to a maximum of 40% of Brackpool's annual base salary if the EBITDA Amount is 120% of budget. If the EBITDA Amount for the year is greater than 100% of budget, but lower than 120% of budget, the amount of the bonus payable shall be calculated on a pro- rata basis. By way of example only, if the Company achieves 110% of budget, the bonus will equal 30% of Brackpool's annual base salary. Similarly, the amount of this bonus will be subject to decrease if the EBITDA Amount for the year is less than 100% of budget, with no bonus payable unless the EBITDA Amount exceeds 80% of budget. If the EBITDA Amount for the year is greater than 80% of budget, but lower than 100% of budget, the amount of the bonus payable shall be calculated on a pro-rata basis. By way of example only, if the Company achieves 90% of budget, the bonus will equal 10% of Brackpool's annual base salary.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ii. WATER DEVELOPMENT BONUS. Prior to the commencement of each fiscal year during the term of this Agreement, the Board shall establish a set of criteria based on advancements to be made during such year in fulfilling the Company's water development business plan which, if met, will result in the payment to Brackpool of a bonus in an amount not to exceed 40% of Brackpool's annual base salary. In establishing such criteria, the Board shall use 20% of Brackpool's annual base salary as a target bonus; provided, however, that the criteria shall be established by the Board so that the actual amount of the bonus may range anywhere from 0% to 40% of Brackpool's annual base salary depending upon the degree to which such criteria are met during the year. iii. DISCRETIONARY BONUS. Following the conclusion of each fiscal year during the term of this Agreement, the Board shall make a good faith evaluation of the performance of the Company under Brackpool's direction during such year, on the basis of which Brackpool shall receive a bonus in an amount not to exceed 40% of Brackpool's annual base salary for such year. In determining the amount of such bonus, the Board shall use 20% of Brackpool's annual base salary as a target bonus; provided, however, that the actual amount of the bonus may range anywhere from 0% to 40% of Brackpool's annual base salary depending upon the Board's subjective evaluation of the performance of the Company under Brackpool's direction during the year. iv. TIMING AND FORM OF BONUS PAYMENT. Any annual bonus payments payable to Brackpool hereunder shall be paid as soon as possible following the end of the fiscal year to which such bonus relates and the determination of the amounts owed; provided, however, that all such payments shall be made within 90 days of the end of the appropriate fiscal year. Bonus payments payable to Brackpool hereunder shall be paid in cash except that the Board, in its discretion, may pay up to 50% of the aggregate amount of any annual bonus earned in the form of theretofore authorized but unissued common shares of the Company, valued for such purpose at a price equal to the market value of the Company's common stock upon the date of the Board's determination to issue shares in lieu of cash. Upon the issuance of such shares, Brackpool shall provide to the Company such written documentation, including representations and warranties, as the Company may require in order to establish compliance with any applicable state or federal securities laws. v. ADDITIONAL CONDITIONS TO BONUSES. It shall be a further condition to the payment of any bonuses described in this paragraph 5(a) that Brackpool be an employee of the Company at the end of the fiscal year to which such bonuses relate. b. FRINGE BENEFITS. In addition to the compensationset forth above, Brackpool shall be entitled to the followingbenefits: i. Four (4) weeks annual vacation, provided thatno more than two weeks are to be taken consecutively; ii. Sick leave and personal leave with pay inaccordance with the prevailing policies of the Company; iii. Medical coverage under the group medicalinsurance plan of the Company (or COBRA coverage, at the electionof Brackpool); iv. Participation in any life insurance plansgenerally made available by the Company to its employees; v. Additional life insurance through theSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. purchase, by the Company, of a $1,000,000 face-value term lifeinsurance policy for the benefit of Brackpool (or, alternatively,the payment of premiums by the Company with respect to a policyin such amount purchased by Brackpool); vi. Participation in any disability plangenerally made available by the Company to its employees, which,as of the date of this Agreement, provides for 60% of basecompensation after 90 days of disability up to $10,000 per month; vii. Additional individual disability insurancecoverage providing for 75% of Brackpool's base compensation (orsuch greater percentage as the Board may determine); provided,however, that the additional monthly premium payable by theCompany for such coverage shall not exceed $750.00 per month; viii. Participation in any retirement or pensionplan maintained by the Company for the general benefit of itsemployees, including any nonqualified or supplemental retirementplans that are implemented after the effective date of thisAgreement; ix. A fully equipped automobile of Brackpool'schoice but at the Company's expense (with a retail value not toexceed $85,000) for Brackpool's use during the term of thisAgreement; x. Participation in any long term incentiveplans maintained by the Company for the general benefit of itsemployees; provided, however that the terms and conditions of anylong-term incentive awards (including form, amount and vestingconditions) shall be established by the Board in its sole andabsolute discretion; xi. Participation in any other benefit planmaintained by the Company for the general benefit of itsemployees; and xii. Any other benefits not specifically set forthherein as may be granted by the Company in its sole and absolutediscretion. c. VESTING OF RIGHTS UPON CHANGE IN CONTROL. Asfurther consideration for the execution by Brackpool of thisAgreement and the provision of services hereunder, the Companyhereby agrees that if a Change in Control of the Company (asdefined in the Company's 1996 Stock Option Plan) occurs, then anyconditions to (i) the vesting of Brackpool's right to exerciseoutstanding stock options or (ii) the issuance to Brackpool ofshares of the Company's common stock pursuant to outstandingstock bonus plans to which Brackpool is a party shall be deemedto have been satisfied, and any such options shall become fullyexercisable and any such shares shall become immediately issuableas of the date such Change in Control occurred; provided,however, that the acceleration of exercisability or issuanceshall be subject to the imposition of such restrictions ontransferability of the subject shares of the Company's commonstock as are necessary to permit stock issued upon exercise ofsuch options or under such stock bonus plans to continue toqualify for the exception from Section 16(b) of the SecuritiesAct of 1933, as amended, as provided under Rule 16(b)(3). d. DEDUCTION AND REIMBURSEMENT. Brackpool herebyagrees that the Company may deduct and withhold from thecompensation payable to Brackpool hereunder any amounts of moneyrequired to be deducted or withheld by the Company under theprovisions of any and all applicable local, state or federalstatutes or regulations or any amendments thereto hereafterenacted requiring the withholding or deducting of compensation.In the event the Company makes any payments or incurs any chargesfor Brackpool's account, the Company shall have the right, andBrackpool hereby authorizes the Company, to deduct from anycompensation payable to Brackpool hereunder any charges so paidor incurred by the Company, but such right of deduction shall notbe deemed to limit or exclude any other rights of credit orSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. recovery or any other remedies the Company otherwise may have.Nothing hereinabove set forth shall be deemed to obligate theCompany to make any such payments or incur any such charges. Ifit is determined that such deduction is unauthorized, the Companyagrees to reimburse Brackpool promptly, it being understood,however, that notwithstanding the determination that anydeduction was unauthorized, the making of such deductions shallnot be deemed to be a breach by the Company of any of itsobligations to Brackpool hereunder. 6. TERMINATION. a. INITIAL TERM AND AUTOMATIC EXTENSIONS. Except asprovided in subsection (b) below, this Agreement shall terminatethree (3) years from the date of this Agreement (the "InitialTerm"); provided, however, that in the event that neitherBrackpool nor the Company (acting through its Board of Directors)has given the other party written notice at least 30 days priorto the expiration of the Initial Term of such party's desire notto extend this Agreement then, upon the expiration of the InitialTerm (and provided that this Agreement has not otherwise beenterminated pursuant to the provisions of subsection (b) below)this Agreement shall automatically be extended for a period ofone (1) year. This Agreement shall continue thereafter to beautomatically extended for successive one (1) year periods unlessand until (i) Brackpool or the Company gives the other partywritten notice at least 30 days prior to the expiration of anyone (1) year extension period of such party's desire not tofurther extend this Agreement, or (ii) this Agreement isotherwise terminated pursuant to the provisions of subsection (b)below. b. OTHER TERMINATION EVENTS. Notwithstanding theprovisions of subsection (a) above, this Agreement shallterminate: i. At the election of the Company, upon thedeath or permanent disability of Brackpool, "permanentdisability" being defined as any continuous loss of one-half (1/2)or more of the time spent by Brackpool in the usual dailyperformance of his duties as a result of physical or mentalillness for a continuous period in excess of ninety (90) days. ii. At the election of the Company, at such time,if any, as the Company ceases to conduct business for any reasonwhatsoever. iii. At the election of the Company, upon thebreach by Brackpool of any term or condition of this Agreement orupon the dismissal of Brackpool by the Company for cause. Forpurposes of this Agreement, the Company shall have "cause" toterminate Brackpool's employment if he (1) engages in one or moreacts constituting a felony; (2) engages in one or more actsinvolving fraud or serious moral turpitude; (3) misappropriatesCompany assets or engages in gross misconduct materiallyinjurious to the Company or its affiliates or subsidiaries; or(4) willfully fails to comply with the written instructions ofthe Board. iv. At the election of Brackpool, upon a breachby the Company of this Agreement by reason of a material changein Brackpool's job title or a material reduction in Brackpool'sduties and responsibilities hereunder. c. PAYMENTS FOLLOWING TERMINATION. Followingtermination of this Agreement, whether for any of the reasonsspecifically set forth above or for any other reason, the Companyshall have no obligation to make payments to, or bestow benefitsupon, Brackpool after the date of termination (otherwise than asrequired by law), except as follows: i. In the event of termination by the Companypursuant to Section b(ii) as the result of Brackpool's death,payment of the base compensation otherwise payable to Brackpoolpursuant to Section 4 hereof shall continue to be paid toSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Brackpool's estate for a period of 90 days following Brackpool'sdeath (such payments to be in addition to, and not in lieu of,any payments made pursuant to any Company provided death benefitplans). ii. In the event of termination of this Agreementby Brackpool pursuant to Section (b)(iv) above, or in the eventof termination of this Agreement by the Company prior to theexpiration of the term of this Agreement for any reason notspecifically set forth above, Brackpool shall be entitled toreceive for the entire remaining term of this Agreement as thoughBrackpool were continuing to provide services to the Companyunder this Agreement (i) base compensation as set forth inSection 4 above as in effect on the date of termination and (ii)all fringe benefits as described in Section 5(b) above (otherthan use of an automobile) to the extent that such benefits canthen lawfully be made available by the Company to Brackpool. Inaddition, in the event of termination of this Agreement by theCompany prior to the expiration of the term of this Agreement forany reason not specifically set forth above, Brackpool shall beentitled to receive for the entire remaining term of thisAgreement as though Brackpool were continuing to provide servicesto the Company a monthly payment equal to one-twelfth of hisannual bonus target (i.e. 60% of Brackpool's base compensation asset forth in Section 4 above as in effect on the date oftermination). iii. The termination of this Agreement shall notaffect the right of Brackpool to exercise any stock options orother rights to purchase securities of the Company which may havevested in full prior to the date of termination or Brackpool'sright to any as yet unpaid bonus payable under Section 5(a) withrespect to a fiscal year ending prior to the date of termination. d. RETURN OF COMPANY'S PROPERTY. If this Agreementis terminated for any reason, the Company may, at its option,require Brackpool to vacate his offices prior to the effectivedate of a termination and to cease all activities on theCompany's behalf. Brackpool agrees that on the termination ofhis employment in any manner, he will immediately deliver to theCompany all notebooks, brochures, documents, memoranda, reports,price lists, files, invoices, purchase orders, books,correspondence, customer lists, or other written or graphicalrecords, and the like, relating to the business or work of theCompany, which are or have been in his possession or under hiscontrol and which have not been returned to the Company.Brackpool hereby expressly acknowledges that all such materialsreferenced above are the property of the Company. e. PUBLIC IDENTIFICATION. If this Agreement isterminated for any reason, Brackpool shall immediately andforever thereafter cease to hold himself out to any person, firm,partnership, corporation or other entity as an employee, agent,independent contractor or representative of the Company or of anyentity owned by, or affiliated with, the Company. 7. EXPENSES. The Company shall reimburse Brackpool forall out-of-pocket expenses incurred by Brackpool in theperformance of his duties hereunder, including, but not limitedto, telephone, travel, and office expenses, all subject to suchwritten guidelines and/or requirements for verification as theCompany may, in its sole and absolute discretion, establish. 8. CONFIDENTIALITY AND TRADE SECRETS. For purposes ofthis Section 8, the term "Company" shall collectively refer tothe Company and any affiliate thereof. a. CONFIDENTIAL INFORMATION. Brackpool shall keep instrictest confidence all information relating to the business,affairs, customers and suppliers of the Company (collectivelyhereinafter referred to as "Trade Secrets"), including, amongother things but without limitation, the Company's cost ofperforming services, pricing formulae, methods or procedures, andcustomer lists, which Brackpool may acquire during theperformance of his services and duties hereunder and which is notSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. otherwise generally known to the public. Brackpool acknowledgesthat such Trade Secrets are of great value, and have beendeveloped and/or acquired at great expense to the Company, andthe Company would not enter into this contract of employment andsuch information would not be made available to Brackpool inBrackpool's fiduciary capacity unless the Company were assuredthat all such information will be used for the exclusive benefitof the Company. Accordingly, during the term of this Agreement,and at all times thereafter, Brackpool shall not publish,communicate, divulge, disclose or use, whether or not for his ownbenefit, any such information without the prior written consentof the Company. Further, Brackpool agrees that during the periodof his employment, Brackpool will not, directly or indirectly,engage in the business of, or own or control any interest in(except as a passive investor owning less than 10% of the equitysecurities of a publicly held company), or act as a director,officer of employee of, or consultant to, any individual,partnership, joint venture, corporation or other business entity,directly or indirectly engaged anywhere in the United States, itspossessions and territories, in any business competitive with thebusiness then being carried on by the Company; nor will Brackpoolengage in any such activity following the termination of hisemployment hereunder (however and by whomever caused andirrespective or whether or not such termination is for cause), ifthe loyal and complete fulfillment by Brackpool of suchactivities would demand, inherently, that Brackpool reveal TradeSecrets. b. CUSTOMER INFORMATION. Brackpool herebyspecifically agrees that he will not utilize any informationconcerning the customers of the Company which Brackpool acquiresduring the term of this Agreement, whether or not the sameoriginated through Brackpool's efforts, for any purposedetrimental to the business of the Company. Without limitationof the foregoing, Brackpool agrees that he shall not at any timeinterfere with any existing contracts of the Company, and furtheragrees that he shall not engage in business discussions with anyperson or entity with whom he or the Company are in negotiationsat the time he ceases to be an employee of the Company untilafter such negotiations have been concluded. c. SOLICITATION OF EMPLOYEES. Brackpool acknowledgesthat important factors in the Company's business and operationsare the loyalty and good will of its employees and its customers.Accordingly, Brackpool agrees that both during the term of thisAgreement and after the expiration or termination of thisAgreement he will not enter into, and will not participate in,any plan or arrangement to cause any of the Company's employeesto terminate his employment with the Company or hire any of suchemployees in connection with business initiated by Brackpool orany other person, firm or corporation. Brackpool further agreesthat information as to the capabilities of the Company'semployees, their salaries and benefits, and the other terms oftheir employment is confidential and proprietary to the Companyand constitutes its valuable trade secrets. d. ONGOING OBLIGATION. The provisions in thisSection 8 shall be binding during Brackpool's employment and atall times thereafter, regardless of the circumstances or reasonsfor termination of this Agreement. In the event the provisionsin this Section 8 are more restrictive than permitted by the lawsof the jurisdiction in which enforcement of this provision issought, such provisions shall be interpreted to extend only overthe maximum period of time, range of activities or geographicarea as to which it may be enforceable. 9. REMEDY FOR BREACH. Brackpool acknowledges that theservices to be rendered by him hereunder are of a special, uniqueand extraordinary character, which gives this Agreement apeculiar value to the Company, the loss of which cannot bereasonably or adequately compensated in damages in an action atlaw, and a breach by Brackpool of the provisions of thisAgreement will cause the Company irreparable injury. It is,therefore, expressly acknowledged that this Agreement may beenforced by injunction and other equitable remedies, withoutSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. bond. Such relief shall not be exclusive, but shall be inaddition to any other rights or remedies Company may have forsuch breach, and Company shall be entitled to recover all costsand expenses, including reasonably attorneys' fees, incurred byreason of any breach of the covenants of this Agreement. 10. LITIGATION AND ATTORNEYS FEES. In the event of anylitigation between the parties hereto in connection with thisAgreement or to enforce any provision or right hereunder, theunsuccessful party to such litigation shall pay to the successfulparty therein all costs and expenses, including but not limitedto reasonable attorneys' fees incurred therein by such successfulparty, which costs, expenses and attorneys' fees shall beincluded as a part of any judgment rendered in such action inaddition to any other relief to which the successful party may beentitled. 11. BOARD ACTIONS. Any actions required to be taken ordeterminations to be made by the Board under this Agreement may,at the discretion of the Board, be taken or made by theCompensation Committee or any other duly authorized committee ofthe Board. 12. GENERAL PROVISIONS. a. The failure of the Company at any time to enforceperformance by Brackpool of any provisions of this Agreementshall in no way affect the Company's rights thereafter to enforcethe same, nor shall the waiver by the Company of any breach ofany provision hereof be held to be a waiver of any other breachof the same or any other provision. b. This Agreement shall be binding upon and inure tothe benefit of the parties hereto and the successors and assignsof the Company; provided, however, it is understood and agreedthat the services to be rendered and the duties to be performedby Brackpool hereunder are of a special, unique and personalnature and that it would be difficult or impossible to replacesuch services; by reason thereof, Brackpool may not assign eitherthe benefits or the obligations of this Agreement. c. Brackpool shall be considered an employee of theCompany within the meaning of all federal, state and local lawsand regulations governing unemployment insurance, workers'compensation, industrial accident, labor and taxes. d. This Agreement is the entire agreement between theparties hereto with respect to the subject matter hereof andsupersedes all prior oral and written agreements and negotiationsbetween the parties. e. The headings of the several paragraphs in thisAgreement are inserted solely for the convenience of the partiesand are not a part of and are not intended to govern, limit oraid in the construction of any term or provision hereof. f. This Agreement may not be modified except by awritten instrument signed by all parties hereto. g. All clauses and covenants contained in thisAgreement are severable, and in the event any of them shall beheld to be invalid by any court, such clauses or covenants shallbe limited as permitted under applicable law, or, if the same arenot susceptible to such limitation, this Agreement shall beinterpreted as if such invalid clauses or covenants were notcontained herein. h. This Agreement is made with reference to the lawsof the State of California and shall be governed by and construedin accordance therewith. Any litigation concerning or to enforcethe provisions of this Agreement shall be brought in the courtsof the State of California. IN WITNESS WHEREOF, the parties hereto have executed thisAgreement as of the date first above written.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. BRACKPOOL: /s/ Keith Brackpool ------------------------- Keith Brackpool THE COMPANY Cadiz Land Company, Inc. By: /s/ Dwight Makins ------------------------ Dwight Makins ChairmanSource: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 21.1 ------------- CADIZ LAND COMPANY, INC. SUBSIDIARIES OF THE COMPANY Pacific Packing, Inc.Pacific Real Estate, Inc.Rancho Cadiz Mutual Water CompanySouthwest Fruit Growers, LPSun World International, Inc.Source: CADIZ INC, 10-K, March 26, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
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