EXHIBIT 10.16
EXECUTION VERSION
Dated 10/13/03
SUN WORLD-BONDHOLDER-CADIZ TERM SHEET AND AGREEMENT IN PRINCIPLE
This Term Sheet and Agreement in Principle sets forth the principal
terms and conditions for an overall settlement of outstanding issues among (a)
Sun World International, Inc. and its debtor affiliates (collectively, "Sun
World"), (b) Cadiz Inc. ("Cadiz"), and (c) Black Diamond Capital Management,
L.L.C. and CFSC Wayland Advisers, Inc. and their respective affiliates
(collectively, the "Majority Bondholders"), who are the holders of not less than
70% in dollar amount of Sun World's senior secured Notes due 2004 (in the
aggregate, the "Notes"; holders of the Notes are referred to herein as
"Bondholders"). This Term Sheet and Agreement in Principle contains a binding
and enforceable agreement among the parties. The parties hereto further agree to
use their good faith efforts to complete and execute, by November 6, 2003, final
transactional documentation for the implementation of the agreements contained
herein, but any failure to do so shall not affect the enforceability of the
agreements contained herein. Nothing herein shall constitute an admission or
waiver of any kind by any party, except as expressly provided herein.
I. INITIAL SETTLEMENT
A. Sun World will seek and obtain approval from the
Bankruptcy Court in which its current chapter 11 case is pending (the "Court"),
pursuant to Bankruptcy Rule 9019, of a settlement of claims by and against Cadiz
(the "Initial Settlement").(1) The Initial Settlement shall be binding on Sun
World's estates and creditors and shall provide that, in full and final
settlement of all Sun World estates claims and causes of action against Cadiz
(including without limitation any possible avoidance actions under Chapter 5 of
the Bankruptcy Code) and all of Cadiz's claims
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(1) The Initial Settlement will be sought to be approved by a motion by Sun
World which shall be filed and noticed no later than October 14, 2003,
and shall be scheduled for hearing at the earliest feasible date, but
in no event later than November 7, 2003. Sun World and the Majority
Bondholders shall each support the Initial Settlement and use their
respective reasonable efforts in good faith to have the Initial
Settlement approved by the Court and upheld in connection with any
possible appeal.
and causes of action against the Sun World estates (including without limitation
claims for rejection damages) (the "Cadiz Claim"), Cadiz shall be granted an
allowed, general unsecured claim against Sun World in an amount not less than
$13 million(2) (the "Allowed Cadiz Claim").
B. As part of the Initial Settlement and effective only
upon the Closing (as defined below), (i) Cadiz shall agree that it will
affirmatively support a plan of reorganization for Sun World that provides no
recovery on account of any equity interest in Sun World that Cadiz holds and
that is otherwise consistent with this Term Sheet and Agreement in Principle,
thus eliminating potential valuation litigation cost and expense for Sun World's
estate which would otherwise result from a Cadiz objection to confirmation in
its capacity as the equity holder of Sun World, and (ii) the parties shall
consent to the termination/rejection of all contracts and agreements between
Cadiz and Sun World except as provided in section 1.D. below.
C. The motion to approve the Initial Settlement shall
provide full disclosure of the terms of the agreement among Cadiz, Sun World,
and the Majority Bondholders.
D. The parties' respective rights and obligations under
the Agricultural Lease between Cadiz, as lessor, and Sun World, as lessee,
previously assumed (as amended) by Sun World pursuant to an order of the Court,
shall not be affected by the Initial Settlement or anything else contained
herein.
2. TRANSFER OF CADIZ CLAIM AND EQUITY INTEREST TO BONDHOLDER
TRUST
A. Cadiz agrees that, at a closing (the "Closing") to
occur on or before the fifth business day after the Court's order approving the
Initial Settlement becomes final and non-appealable (or prior thereto if so
agreed by Cadiz and the Majority Bondholders in their discretion), Cadiz shall
assign to a trust or similar legal entity formed for the benefit of all
Bondholders (the "Bondholder Trust") (i) the Allowed Cadiz Claim and (ii)
Cadiz's equity interest in Sun World (provided that the
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(2) To be the largest amount Sun World reasonably and in good faith
believes can be allowed based upon the facts, but at a reduced level in
accordance with the compromise: the current estimate of the Cadiz Claim
is approximately $17.5 million.
Bondholder Trust shall not be permitted to vote such shares to exercise control
over Sun World prior to confirmation of a Sun World plan of reorganization or
consummation of a sale of substantially all Sun World assets), in exchange for
the consideration set forth below. The Bondholder Trust shall be administered by
the Majority Bondholders.
B. The Bondholder Trust shall receive all distributions
from the Sun World estate (under a plan of reorganization or otherwise) on
account of the Allowed Cadiz Claim. Each Bondholder shall have the right to
receive its ratable share of the assets in the Bondholder Trust if either (i)
such Bondholder executes a form (the "Opt-In Form") that provides for the things
set forth below or (ii) a reorganization plan for Sun World that is accepted by
the class of Bondholders and that contains the provisions set forth in section
3.A below is confirmed and becomes effective. The Opt-In Form shall:
(i) provide for such Bondholder to waive any
rights to recovery from Cadiz on account of
the Cadiz guaranty of such Bondholder's
claim against Sun World (the "Guaranty");
(ii) provide that such Bondholder will
permanently refrain from exercising any
rights or remedies against Cadiz on account
of either the Guaranty or the existence of
such Bondholder's claim against Sun World;
(iii) provide that, in the event of a Cadiz
bankruptcy, such Bondholder shall
affirmatively support any plan or sale
transaction proposed by Cadiz whether or not
it provides any recovery on account of the
Guaranty; and
(iv) provide that any transferee of, or other
successor in interest to, such Bondholder's
claim will be bound by all provisions of the
Opt-In Form and that such Bondholder will
condition any transfer of its claim upon the
transferee's agreement to be bound by all of
the provisions of the Opt-In Form.
C. The Majority Bondholders shall, at Closing, execute
the Opt-In Form. In addition, the Majority Bondholders shall, at Closing, (i)
execute an
irrevocable instruction to the Indenture Trustee to take no action against Cadiz
on behalf of Bondholders or on account of the Guaranty, and (ii) execute a
consent to the amendment of the indenture deleting substantially all covenants
and other provisions relating to the Guaranty or remedies against Cadiz as
guarantor that may be amended pursuant to the terms of the indenture by the
Majority Bondholders, subject to any applicable provisions of the Trust
Indenture Act.
3. SUN WORLD PLAN RELEASE
A. If the Initial Settlement is approved by the
Bankruptcy Court and the Closing occurs, any plan of reorganization filed or
supported by Sun World and/or the Majority Bondholders shall provide (i) that
the consideration to Bondholders contemplated under such plan is in full
satisfaction and settlement of all claims of Bondholders under the indenture,
including the Guaranty, (ii) that the indenture for the bonds (including the
Guaranty thereunder) shall be deemed cancelled and extinguished as of the
effective date of the plan, and (iii) for all Bondholders to be deemed to
release their Guaranty claims against Cadiz in exchange for the consideration to
be distributed to the Bondholder Trust.
B. Sun World and the Majority Bondholders shall each use
their respective reasonable efforts in good faith to have the provisions set
forth in 3A above approved by the Court as part of any plan.
4. EXTENSION OF PLAN FILING DEADLINE/EXCLUSIVITY
A. The parties consent to Sun World's filing of a motion
on shortened notice to be heard by the Court before October 31, 2003 and to the
granting of the following relief: (i) modifying the "2003 RETENTION AND
SEVERANCE PROGRAM FOR KEY EMPLOYEES" ("Retention Plan") to (x) extend the dates
specified in paragraph 2(a) of the Retention Plan by twenty-four days, and (y)
change paragraph 2(b) of the Retention Plan to provide as follows:
"Notwithstanding subsection (a) above, no such stay bonus will be payable to key
executives in the event that a plan of reorganization is not filed by Sun World
with the Bankruptcy Court on or prior to 11/24/03"; and (ii) extending to
November 24, 2003 and January 23, 2004, respectively, Sun World's exclusivity
periods under Bankruptcy Code sections 1121(b) and 1121(c)(3), provided that if
on or before November 24, 2003 Sun World does not file a plan of reorganization
that is supported by the Majority Bondholders,
then Sun World's exclusivity periods shall be automatically terminated. In the
event that the Court does not approve the relief set forth in clause (ii) above,
and Sun World files a plan of reorganization that is not supported by the
Majority Bondholders, then upon such filing Sun World shall be deemed to have
stipulated with the Majority Bondholders to an automatic termination of Sun
World's exclusivity periods and waived the right to seek further extensions of
the exclusivity periods. In addition, the parties hereby clarify that
notwithstanding anything to the contrary in the Retention Plan, if (2) the
Majority Bondholders file a plan of reorganization that is not subsequently
modified in any material respect and is accepted by two-thirds in amount and
more than one-half in number of the Bondholders that cast valid votes to accept
or reject the plan and is supported by the Official Creditors' Committee (such
that if confirmed such plan would be a "Successful Plan of Reorganization," as
defined in the Retention Plan), and (ii) Sun World has opposed confirmation of
such plan, then such plan shall not be deemed a "Successful Plan of
Reorganization" for purposes of the Retention Plan.
B. Counsel for Sun World will circulate a discussion
draft of a plan of reorganization to counsel for the Majority Bondholders on or
before October 17, 2003.
Accepted and Agreed:
Black Diamond, Capital Management, L.L.C. Cadiz Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Its:____________________________ Its: President & CEO
CFSC Wayland Advisors, Inc. Sun World International, Inc.
and its debtor affiliates
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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Its:____________________________ Its: CEO