-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Ci0/HatM152sHTd08IHIuhB/AbJmZpJf0t3PBQdYuwrXwRZkM0jqxLg+O4T+Tc0a WTfhmml4F+Bf3Xr7bxl7lA== 0000950146-95-000077.txt : 19950612 0000950146-95-000077.hdr.sgml : 19950612 ACCESSION NUMBER: 0000950146-95-000077 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19950307 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ERLY INDUSTRIES INC CENTRAL INDEX KEY: 0000030966 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 952312900 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-03507 FILM NUMBER: 95519069 BUSINESS ADDRESS: STREET 1: 10990 WILSHIRE BLVD STREET 2: STE 1800 CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 2138791480 MAIL ADDRESS: STREET 1: 10990 WILSHIRE BOULEVARD STREET 2: SUITE 1800 CITY: LOS ANGELES STATE: CA ZIP: 90024 FORMER COMPANY: FORMER CONFORMED NAME: EARLY CALIFORNIA INDUSTRIES INC DATE OF NAME CHANGE: 19851202 FORMER COMPANY: FORMER CONFORMED NAME: EARLY CALIFORNIA FOODS INC DATE OF NAME CHANGE: 19700114 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONALE NEDERLANDEN CAPITAL CORP CENTRAL INDEX KEY: 0000939812 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 135 EAST 57TH STREET CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212-446-1500 MAIL ADDRESS: STREET 1: MURPHY WEIR & BUTLER STREET 2: 101 CALIFORNIA STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94111 SC 13D 1 ING CAPITAL FORM SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment )* ERLY INDUSTRIES INC. (Name of Issuer) Common Stock, par value $.01 per share (Title of Class of Securities) 268839 10 7 (CUSIP Number) N. Dwight Cary, Esq. Murphy, Weir & Butler 2049 Century Park East, 21st floor Los Angeles, CA 90067 310-788-3700 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 1, 1995 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ] Check the following box if a fee is being paid with this statement /x/ (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendments subsequent thereto reporting beneficial ownership of less than five percent of such class. See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosure provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP No. 268839 10 7 1. NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Internationale Nederlanden (U.S.) Capital Corporation 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / X / 3. SEC USE ONLY 4. SOURCE OF FUNDS* WC 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / / 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF 7. SOLE VOTING POWER 515,358 SHARES BENEFICIALLY 8. SHARED VOTING POWER 0 OWNED BY EACH 9. SOLE DISPOSITIVE POWER 515,358 REPORTING PERSON WITH 10. SHARED DISPOSITIVE POWER 0 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 515,358 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.2% 14. TYPE OF REPORTING PERSON* CO *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. Item 1. Security and Issuer. This statement relates to the Common Stock, par value $.01 per share (the "Common Stock"), of Erly Industries Inc., a California corporation (the "Issuer"). The Issuer's principal executive offices are located at 10990 Wilshire Boulevard, #1800, Los Angeles, California 90024. Item 2. Identity and Background. This statement is being filed on behalf of Internationale Nederlanden (U.S.) Capital Corporation, a Delaware corporation ("Holder"). Holder is engaged principally in the lending and financial services business. The principal place of business and principal office of Holder is located at 135 East 57th Street, New York, New York 10022. Holder is a wholly owned subsidiary of Internationale Nederlanden (U.S.) Capital Holdings Corporation ("U.S. Holdings"), a holding company with subsidiaries engaged principally in the financial services business. U.S. Holdings is organized under the laws of the State of Delaware and its principal executive office is located at 135 East 57th Street, New York, New York 10022. U.S. Holdings is a wholly owned subsidiary of Internationale Nederlanden Bank N.V. ("INB"). INB is organized under the laws of The Netherlands and has its principal executive offices at De Amsterdamse Poort, 1102 MG, Amsterdam Zuid - Oost, Postbus 1800, 1000 AV, Amsterdam, The Netherlands. INB is engaged principally in the financial services business. INB is a wholly owned subsidiary of Internationale Nederlanden Groep N.V. ("ING"), a holding company with subsidiaries engaged principally in the financial services business and organized under the laws of The Netherlands. ING's principal executive office is located at Strawinskylaan 2631, Postbus 810, 1000 AV Amsterdam, The Netherlands. Schedule 1 attached hereto and incorporated herein by reference sets forth certain additional information with respect to each executive officer and director of (i) Holder, (ii) U.S. Holdings, (iii) INB and (iv) ING. During the last five years, none of (i) Holder, (ii) U.S. Holdings, (iii) INB, (iv) ING and, (v) to the best knowledge of Holder, the persons identified in Schedule 1, has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. References in this Item 3 and in Items 4 and 6 to Holder shall include Holder and, as appropriate, its predecessors in interest: Nederlandsche Middenstandsbank NV, New York Branch; NMB Postbank Groep, NV, New York Branch; and Internationale Nederlanden Bank, N.V., New York Branch, each organized under the laws of The Netherlands. In connection with a financing in April 1988 of Comet Rice, Inc., at such time a Texas corporation and a wholly owned subsidiary of Issuer ("Comet"), Issuer granted Holder an option to purchase up to 54,000 shares of Common Stock at an exercise price of $7.25 per share (the "First ERLY Stock Option"). Holder's right to acquire any shares of Common Stock under the First ERLY Stock Option expired in full on November 26, 1993 as a result of the repayment of the Comet financing. On September 26, 1988, Holder and ERLY Juice Inc., a California corporation and a wholly owned subsidiary of Issuer ("ERLY Juice") entered into a Loan Agreement pursuant to which Holder agreed to lend up to $24,250,000 to ERLY Juice (the "ERLY Juice Loan Agreement"). As an inducement and condition to Holder's entering into the ERLY Juice Loan Agreement, Issuer and Holder concurrently entered into a Stock Option Agreement, pursuant to which Issuer granted Holder an option to purchase up to 43,000 shares of Common Stock, at an exercise price of $7.00 per share (the "Second ERLY Stock Option"). The Second ERLY Stock Option contained standard registration rights and antidilution provisions. In connection with a subsequent restructuring of the ERLY Juice Loan Agreement, Holder's right to acquire any shares of Common Stock under the Second ERLY Stock Option were terminated in full. As a result of certain defaults under the ERLY Juice Loan Agreement, including but not limited to the failure to make payments of principal, Holder and Issuer entered into a letter agreement, dated as of March 16, 1993, pursuant to which, among other things, as consideration and in exchange for Holder's forbearance from accelerating the loans under the ERLY Juice Loan Agreement, Issuer would issue to Holder additional rights to acquire Common Stock. Pursuant to such letter agreement, Issuer granted to Holder on October 22, 1993 (a) a Warrant to purchase 186,511 shares of Common Stock representing 5% of the number of then issued and outstanding shares of Common Stock, which option became exercisable after April 30, 1994 at an exercise price of $.01 per share (such warrant, including any amendments thereto, the "A Warrant"), and (b) a Warrant to purchase 186,511 shares of Common Stock, representing 5% of the number of then issued and outstanding shares of Common Stock, which option will be exercisable after April 30, 1995 at an exercise price of $.01 per share (such warrant, including any amendments thereto, the "B Warrant", and together with the A Warrant, the "Warrants"). The Warrants provided that if certain amounts owing to Holder by ERLY Juice were repaid as scheduled, the Warrants would be terminated or adjusted to reduce the number of shares of Common Stock for which they were exercisable. The Warrants contain standard registration rights, as well as antidilution provisions. The Warrants also include "put options", under which Holder may require Issuer to redeem the Warrants at a price based on the market value of the Common Stock. As a result of certain additional defaults under the ERLY Juice Loan Agreement, including but not limited to the failure to make payments of principal, on February 16, 1995, Holder and Issuer entered into a Loan Extension Agreement pursuant to which, among other things, Holder (a) extended the maturity and adjusted the interest rate of the ERLY Juice Loan Agreement, (b) agreed to document the cancellation of the Second ERLY Stock Option, (c) granted Issuer a "call" right to repurchase the Warrants at $8.75 per share if all obligations owing under the ERLY Juice Loan Agreement were repaid by April 1, 1996, and (d) permitted early termination of certain warrants issued to Holder by Issuer's subsidiaries, if all obligations owing under the ERLY Juice Loan Agreement were repaid before specified dates, all as consideration and in exchange for (i) a Warrant to purchase 51,536 shares of Common Stock, representing 1.2% of the number of issued and outstanding shares of Common Stock (assuming exercise in full of all rights of Holder to acquire Common Stock), which option is exercisable after April 1, 1996 for an exercise price of $.01 per share (the "C Warrant"), (ii) a Warrant to purchase 206,143 shares of Common Stock, representing 4.6% of the number of issued and outstanding shares of Common Stock (assuming exercise in full of all rights of Holder to acquire Common Stock), which option is exercisable after April 1, 1996 for an exercise price of $.01 per share (the "D Warrant"), and (iii) an amendment and restatement of each of the A Warrant and B Warrant, providing that each such warrant is exercisable for 257,679 shares of Common Stock, each warrant representing 5% of the Common Stock on a fully diluted basis. The C Warrant and the D Warrant contain standard registration rights, as well as antidilution provisions. The C Warrant and the D Warrant also include "put options", under which Holder may require Issuer to redeem such warrants at a price based on the market value of the Common Stock. The descriptions of the A Warrant, B Warrant, C Warrant and D Warrant contained herein are qualified in their entirety by reference to such Warrants, copies of which are attached hereto as Exhibits 1, 2, 3 and 4, respectively. It is currently anticipated that the consideration required to purchase the shares of Common Stock pursuant to the Warrants will be provided from Holder's working capital or through the forgiveness of an equal amount of indebtedness under the ERLY Juice Loan Agreement. Item 4. Purpose of Transaction. The purposes for the acquisition of the Warrants were as an inducement and condition to certain loans and financial accomodations described herein, made by Holder for the benefit of Issuer and several of its subsidiaries, as well as for general investment purposes. Except as set forth above and in Item 6 and the exhibits hereto, Holder has no plans or proposals relating to any matters specified in paragraphs (a) through (j) of Item 4 of Schedule 13D. However, Holder reserves the right to adopt such plans or proposals in the future, subject to applicable regulatory requirements, if any. Item 5. Interest in Securities of the Issuer. (a) Holder may be deemed to own beneficially (as that term is defined in Rule 13d-3 ("Rule 13d-3") under the Act) the shares of Common Stock which it has a right to acquire pursuant to the Warrants (the "Warrant Shares"). According to the Issuer's Form 10-Q for the quarterly period ended December 31, 1994, there were 3,695,547 shares of Common Stock outstanding as of December 31, 1994. Based on such number and assuming exercise of the Warrants in full, the Warrant Shares that Holder may be deemed to own beneficially (as that term is defined in Rule 13d-3) represent approximately 12.2% of the outstanding Common Stock. Except as described herein, none of (i) Holder, (ii) U.S. Holdings, (iii) INB, (iv) ING and, (v) to the best knowledge of Holder, the persons identified in Schedule 1 hereto, presently beneficially own any Common Stock. (b) Upon exercise of the Warrants, Holder will have sole power to vote or to direct the vote of, and to dispose or to direct the disposition of, the Warrant Shares which Holder may be deemed to own beneficially (as that term is defined in Rule 13d-3). (c) Except as indicated herein, no transactions in the shares of Common Stock have been effected by (i) Holder, (ii) U.S. Holdings, (iii) INB, (iv) ING or, (v) to the best knowledge of Holder, by any of the persons listed on Schedule 1 hereto, during the past 60 days. (d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Warrant Shares. (e) Not applicable. Item 6. Contracts, Understandings or Relationships with Respect to Securities of the Issuer. From time to time, as further inducements and conditions to certain loans and financial accomodations made by Holder for the benefit of Issuer and several of its subsidiaries, Holder has received pledges from Issuer of the capital stock of some of its subsidiaries, as well as options and warrants to purchase shares of capital stock from some of Issuer's subsidiaries. In connection with the ERLY Juice Loan Agreement, on September 26, 1988, ERLY Juice granted Holder an option to purchase shares of its common stock up to a number representing 5% of the common stock of ERLY Juice on a fully diluted basis, for an aggregate exercise price of $3.75 (the "First ERLY Juice Option"). The First ERLY Juice Option includes a "put option", under which Holder may require ERLY Juice to redeem the stock option at a price equal to the greatest of an amount based on (1) market value, (2) earnings multiples or (3) book value. In connection with an asset acquisition by ERLY Juice, and a loan of $2,500,000 to Issuer by ERLY Juice, on April 13, 1989, ERLY Juice granted Holder an option to purchase shares of a class of its nonvoting common stock up to a number representing 1% of the capital stock of ERLY Juice on a fully diluted basis, for an aggregate exercise price of $.75 (the "Second ERLY Juice Option"). The Second ERLY Juice Option included a "put option", under which Holder may require ERLY Juice to redeem the stock option at a price equal to the greatest of an amount based on (1) market value, (2) earnings multiples or (3) book value. Holder's right to acquire any shares of stock under the Second ERLY Juice Option expired in full on January 27, 1994. On December 1, 1989, Holder and Chemonics Industries, Inc., an Arizona corporation and a wholly owned subsidiary of Issuer ("Chemonics") entered into a loan agreement (the "Chemonics Loan Agreement") pursuant to which Holder made a bridge loan to Chemonics in the amount of $5,100,000. On December 29, 1989, Chemonics and Holder amended the Chemonics Loan Agreement to convert the bridge loan into a term loan in the amount of $3,200,000 and a revolving credit facility in the amount of $8,000,000. As an inducement and a condition to entering into such loans, (a) Issuer granted to Holder a first priority pledge of all the capital stock of Chemonics to secure the obligations of Chemonics to Holder under the Chemonics Loan Agreement (the "First Chemonics Pledge") and (b) Chemonics issued to Holder a warrant to purchase shares of its Class B Nonvoting Convertible Common Stock up to a number representing 15% of the capital stock of Chemonics on a fully diluted basis, at an exercise price of $.01 per share (the "Chemonics Warrant"). The Chemonics Warrant includes a "put option" for Holder and a "call option" for Issuer, each at prices based on the higher of (1) market value and (2) book value. Holder's right to acquire stock under the Chemonics Warrant terminates in full if the obligations owing under the ERLY Juice Loan Agreement are repaid by April 1, 1996. In connection with certain defaults by ERLY Juice under the ERLY Juice Loan Agreement, on January 27, 1992, ERLY Juice and Holder (a) amended the First ERLY Juice Option to increase the number of shares subject to such option to a number representing 17% of ERLY Juice's common stock on a fully diluted basis. The exercise price for such option remains $.01 per share. In connection with certain increases in, and defaults under, the ERLY Juice Loan Agreement, on March 6, 1992, Issuer granted to Holder a second priority pledge of all the capital stock of Chemonics to secure Issuer's guaranty of the obligations of ERLY Juice under the ERLY Juice Loan Agreement (the "Second Chemonics Pledge"). On September 22, 1993, Holder, Issuer and ERLY Juice entered into a letter agreement, pursuant to which, among other things, (a) Holder forgave $6,000,000 of ERLY Juice's obligations under the ERLY Juice Loan Agreement and (b) Issuer entered into a recourse guaranty of ERLY Juice's obligations to Holder under the ERLY Juice Loan Agreement. In November 1994, all the obligations owing to Holder under both the Chemonics Loan Agreement and the ERLY Juice Loan Agreement, totalling approximately $18,200,000, were due and payable. In connection with a restructuring of such debt, the parties arranged a refinancing by another lender of the Chemonics obligations and an extension by Holder of the ERLY Juice obligations. Among other things, the conditions to such restructuring included (a) reorganizing Chemonics' international consulting business as Chemonics International, Inc., a California corporation and a wholly owned subsidiary of Chemonics ("Chemonics International"), (b) Holder and Chemonics amending the Chemonics Loan Agreement, (c) Holder and Chemonics entering into the non-recourse guaranty and pledge agreement, under which Chemonics pledged the stock of Chemonics International to secure ERLY Juice's obligations under the ERLY Juice Loan Agreement, (d) Holder and Issuer amending the First Chemonics Pledge and the Second Chemonics Pledge, (e) Chemonics and Holder amending the Chemonics Warrant to grant Holder the right to purchase shares of its class of voting common stock up to a number representing 15% of the common stock of Chemonics on a fully diluted basis, and (f) Chemonics International issuing to Holder a warrant to purchase shares of its common stock up to a number representing 15% of the common stock of Chemonics International on a fully diluted basis, at an exercise price of $.01 per share (the "Chemonics International Warrant") . The Chemonics International Warrant includes a "put option" for Holder and a "call option" for Issuer, each at prices based on the higher of (1) market value and (2) book value. Holder's right to acquire stock under the Chemonics International Warrant terminates in full if the obligations owing under the ERLY Juice Loan Agreement are repaid by December 31, 1995. In addition, as part of such restructuring, Holder released certain guaranties of the ERLY Juice obligations, previously executed by two of Issuer's principal shareholders. In May 1993, American Rice, Inc., a Texas corporation ("ARI") acquired substantially all the assets of Comet and assumed all Comet's liabilities. In exchange for the assets acquired from Comet, ARI issued to Comet 14,000,000 shares of its Series B preferred stock, $1 par value, each share convertible into two shares of common stock of ARI (the "ARI Preferred"). Comet thereupon was liquidated. As a result of the foregoing, Issuer increased its ownership interests in ARI from 48% to 81% of ARI's voting power. As part of the reorganization of ARI and Comet, ARI refinanced the outstanding indebtedness of both entities. ARI arranged for borrowings of $47,500,000 in revolving credit loans and $65,300,000 in term loans. As collateral for the term loans, Issuer pledged 13,000,000 shares of the ARI Preferred to the term lenders, and ARI pledged the stock of its subsidiaries to the term lenders. Holder's participation in such term loans to ARI in the approximate amount of $28,333,000 entitles Holder to the benefit of such pledges according to its proportionate share of the term loans. It is possible from time to time in the future that an affiliate of Holder, Internationale Nederlanden (U.S.) Securities Corporation, a registered broker-dealer, could provide advisory or other financial services to Issuer or its subsidiaries. Except as described herein, there are no contracts, arrangements, understandings or relationships among the persons named in Item 2 hereof or between such persons and any other person with respect to any securities of the Issuer. Item 7. Material to be Filed as Exhibits. Exhibit 1 - "A" Warrant Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation, amending and restating warrant dated as of October 22, 1993. Exhibit 2 - "B" Warrant Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation, amending and restating warrant dated as of October 22, 1993 and amended as of November 18, 1994. Exhibit 3 - "C" Warrant Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 4 - "D" Warrant Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 5 - Registration Rights Agreement dated February 16, 1995, between Internationale Nederlanden (U.S.) Capital Corporation and Erly Industries Inc. Exhibit 6 - Securities Purchase Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 7 - Loan Extension Agreement dated February 16, 1995, among Internationale Nederlanden (U.S.) Capital Corporation, Erly Industries Inc., Erly Juice Inc., Chemonics Industries, Inc. and Chemonics International, Inc. Exhibit 8 - Amended and Restated Guaranty and Pledge Agreement dated November 18, 1994, by Erly Industries Inc. in favor of Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 9 - First Amendment, dated February 16, 1995, to Amended and Restated Guaranty and Pledge Agreement, by Erly Industries Inc. in favor of Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 10- Letter Agreement dated March 16, 1993, between Internationale Nederlanden Bank, N.V. and Erly Industries Inc., relating to A Warrant and B Warrant. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: March 7, 1995 INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By: /s/ Michael W. Adler ---------------------- Name: Michael W. Adler Title: Vice President SCHEDULE 1 Set forth below are the name and position of each of the executive officers and directors of (i) Holder, (ii) U.S. Holdings, (iii) INB and (iv) ING. Except as otherwise indicated, the principal occupation of each person listed below is as a Senior Officer of Holder, U.S. Holdings, INB and/or ING, as the case may be. Unless otherwise indicated, each person listed below is a citizen of The Netherlands. The business address of each person at Holder and U.S. Holdings is 135 East 57th Street, New York, New York 10022. The business address of each person at INB is De Amsterdamse Poort, 1102 MG, Amsterdam Zuid - Oost, Postbus 1800, 1000 AV, Amsterdam, The Netherlands. The business address of each person at ING is Strawinskylaan 2631, Postbus 810, 1000 AV Amsterdam, The Netherlands. Executive Officers of Holder Name Position - ----- -------- L.C. Grijns Chairman H.D. Bartges President (U.S.) Directors of Holder Principal Occupation Name (if other than as indicated above) - ----- ------------------------------------ L.C. Grijns, Chairman H.D. Bartges (U.S.) J.C. Gray Treasurer of Holder (U.S.) Executive Officers of U.S. Holdings Name Position - ----- -------- L.C. Grijns Chairman H.D. Bartges President (U.S.) P. Geraghty Senior Managing Director (U.S.) Directors of U.S. Holdings Principal Occupation Name (if other than as indicated above) - ----- ------------------------------------ L.C. Grijns, Chairman G.J. Tammes Retired J. Kemp General Manager of INB P. Geraghty Managing Director and Chief Executive Officer of (U.S.) Internationale Nederlanden (U.K.) Capital Ltd., 55 Basinghall Street, London EC2, U.K. H.D. Bartges (U.S.) H.H. Idzerda General Manager of INB Executive Officers of INB Name Position - ----- -------- G.J.A. van der Lugt Chairman J.H.M. Lindenbergh C. Maas M. Minderhoud Directors of INB Principal Occupation Name (if other than as indicated above) - ----- ------------------------------------ J.W. Berghuis Vice Chairman, Executive Board, Koninklijke Pakhoed N.V. J. Kamminga Chairman of the Board, MKB Nederland; director of Makelaarskantoor J. Kamminga & Zonen B.V. O.H.A. van Royen Retired G. Verhagen Retired J.J.A. Vollebergh Retired Executive Officers of ING Name Position - ----- -------- A.G. Jacobs Chairman G.J.A. van der Lugt Vice Chairman J.H. Holsboer H. Huizinga E. Kist J.H.M. Lindenbergh C. Maas M. Minderhoud Directors of ING Principal Occupation Name (if other than as indicated above) - ---- ---------------------------------- J.H. Choufoer, Retired Chairman T.C. Braakman, Retired Vice Chairman P.A.J.M. Steenkamp, Retired Vice Chairman L.A.A. van den Berghe Professor at Erasmus University of Rotterdam, (Belgium) The Netherlands (Economics and management of insurance companies) J.W. Berghuis Vice Chairman, Executive Board, Koninklijke Pakhoed N.V. J.P. Erbe Retired V. Halberstadt Professor at Leyden University, The Netherlands (Faculty of Law, Public Finance) J. Kamminga Chairman of the Board, MKB Nederland; director of Makelaarskantoor J. Kamminga & Zonen B.V. O.H.A. van Royen Retired J.J. van Rijn Retired G. Verhagen Retired M. Ververs Chairman of Executive Board, Wolters Kluwer N.V. J.J.A. Vollebergh Retired EXHIBIT INDEX Exhibit 1 -- "A" Warrant Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation, amending and restating warrant dated as of October 22, 1993. Exhibit 2 -- "B" Warrant Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation, amending and restating warrant dated as of October 22, 1993 and amended as of November 18, 1994. Exhibit 3 -- "C" Warrant Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 4 -- "D" Warrant Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 5 -- Registration Rights Agreement dated February 16, 1995, between Internationale Nederlanden (U.S.) Capital Corporation and Erly Industries Inc. Exhibit 6 -- Securities Purchase Agreement dated February 16, 1995, between Erly Industries Inc. and Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 7 -- Loan Extension Agreement dated February 16, 1995, among Internationale Nederlanden (U.S.) Capital Corporation, Erly Industries Inc., Erly Juice Inc., Chemonics Industries, Inc. and Chemonics International, Inc. Exhibit 8 -- Amended and Restated Guaranty and Pledge Agreement dated November 18, 1994, by Erly Industries Inc. in favor of Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 9 -- First Amendment, dated February 16, 1995, to Amended and Restated Guaranty and Pledge Agreement, by Erly Industries Inc. in favor of Internationale Nederlanden (U.S.) Capital Corporation. Exhibit 10-- Letter Agreement dated March 16, 1993, between Internationale Nederlanden Bank, N.V. and Erly Industries Inc., relating to A Warrant and B Warrant. EX-99.1 2 A WARRANT 3.7 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER OF THIS WARRANT A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE. ["A Warrant"] No. of Stock Units: 257,679 AMENDED AND RESTATED WARRANT to Purchase Common Stock of ERLY INDUSTRIES INC. a California corporation TABLE OF CONTENTS
Page 1. Certain Definitions.................................................................................... 1 2. Exercise of Warrant.................................................................................... 6 3. Transfer, Division and Combination..................................................................... 8 4. Adjustment of Stock Unit or Exercise Price............................................................. 8 A. Stock Dividends, Subdivisions and Combinations.................................................... 9 B. Certain Other Dividends and Distributions......................................................... 9 C. Issuance of Additional Shares of Common Stock or Convertible Securities................................................................................... 10 D. Other Provisions Applicable to Adjustments Under this Section..................................... 11 (1) Treasury Stock ........................................................................... 11 (2) When Adjustments to Be Made.................................................................. 11 (3) Fractional Interests......................................................................... 11 (4) When Adjustment Not Required................................................................. 11 E. Merger, Consolidation or Disposition of Assets.................................................... 11 F. Other Action Affecting Common Stock............................................................... 12 G. General ......................................................................................... 12 5. Notices to the Holder.................................................................................. 13 6. Reservation and Authorization of Common Stock; Registration with or Approval of any Governmental Authority............................................................. 13 7. Taking of Record; Stock and Warrant Transfer Books..................................................... 14 8. Transfer Taxes......................................................................................... 14 9. No Voting Rights....................................................................................... 14 10. Restrictions on Transferability........................................................................ 14 A. Certain Conditions................................................................................ 14 B. Restrictive Legend................................................................................ 15 C. Notice of Proposed Transfers...................................................................... 15 D. Termination of Restrictions....................................................................... 16 11. Warranties and Representations of the Issuer........................................................... 16 A. Equity Capitalization, etc........................................................................ 16 B. Governmental Consent.............................................................................. 17 C. Survival of Representations....................................................................... 17 12. Limitation of Liability................................................................................ 17 13. Loss, Destruction of Warrant Certificates.............................................................. 18 14. Furnish Information.................................................................................... 18 15. Amendments............................................................................................. 18 16. Office of the Issuer................................................................................... 18 17. Notices Generally...................................................................................... 18 18. Successors and Assigns................................................................................. 19 19. Indemnification........................................................................................ 20 20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE....................................................... 20 21. MUTUAL WAIVER OF JURY TRIAL............................................................................ 20 22. No Waiver; Cumulative Remedies......................................................................... 21 23. Specific Performance................................................................................... 21 24. Modification and Severability.......................................................................... 21 25. Put Option............................................................................................. 21 A. Issuer's Obligation to Repurchase Warrants........................................................ 21 B. Determination of the Put Price.................................................................... 22 26. Call Option............................................................................................ 22 A. ......................................................................................... 22 B. Notice and Exercise of Call Option................................................................ 22 C. Requirement That Issuer Concurrently Exercise Call Option Under B Warrant..................................................................................... 23 D. Call Price........................................................................................ 23 E. No Restriction on Holder's Right to Exercise Warrant; Certain Restrictions on Transferability............................................................... 23 27. Amendment and Restatement of the Existing A Warrant.................................................... 23
["A Warrant"] No. of Stock Units: 257,679 AMENDED AND RESTATED WARRANT to Purchase Common Stock of ERLY INDUSTRIES INC. a California corporation THIS IS TO CERTIFY THAT Internationale Nederlanden (U.S.) Capital Corporation, a Delaware corporation ("INCC"), or registered assigns, is entitled to purchase from ERLY Industries Inc., a California corporation (the "Issuer"), at any time prior to the Expiration Date (as defined below), Two Hundred Fifty Seven Thousand Six Hundred Seventy Nine (257,679) Stock Units, in whole or in part, at a purchase price of $0.01 per Stock Unit (adjusted as provided below), all on the terms and conditions provided in this warrant (this "Warrant"). 1. Certain Definitions. As used in this Warrant, unless the context otherwise requires: "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Issuer after the date of this Warrant, other than the Warrant Stock. "Affiliate" shall mean, with respect to a specified Person, any other Person directly or indirectly controlling or controlled by or under common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Appraisal" shall have the meaning given to such term in the definition of Appraised Value. "Appraised Value" shall mean the fair market value of all outstanding Common Stock, as determined by a written appraisal (the "Appraisal") prepared by an appraiser selected by the Approving Holders and acceptable to the Issuer. "Fair market value" is defined for this purpose as the price for one hundred percent (100%) of the equity capital of the Issuer (determined on a going-concern basis and without giving effect to any discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or the fact that the Issuer may have no class of equity registered under the Exchange Act) on the basis of a sale between a willing seller and buyer, neither acting under any compulsion. In the event that the Issuer and Approving Holders cannot, in good faith, agree upon an appraiser, then the Issuer, on the one hand, and Approving Holders, on the other hand, shall each select an appraiser, the two appraisers so selected shall select a third appraiser who shall be directed to prepare the Appraisal, and the term Appraised Value shall mean the appraised value set forth in the appraisal prepared in accordance with this definition. "Approving Holders" shall mean the holders of Warrants evidencing more than fifty percent (50%) in number of the total number of Stock Units at the time purchasable upon the exercise of all then outstanding Warrants. "B Warrant" means any "Warrant," as such term is defined in that certain Amended and Restated Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "B Warrant," issued by the Issuer in favor of INCC of even date herewith. "B Warrant Stock" means any "Warrant Stock," as such term is defined in the B Warrant. "Book Value" shall mean, on any date herein specified, the consolidated book value of the Issuer applicable to Common Stock as of the last day of any fiscal month immediately preceding such date, as determined by independent accountants of recognized national standing selected by the Issuer and acceptable to the Approving Holders. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in Los Angeles, California. "Call Closing Date" shall have the meaning ascribed to that term in Section 26.B. "Call Cutoff Date" means the earlier to occur of (i) Maturity and (ii) April 1, 1996. "Call Option" shall have the meaning ascribed to that term in Section 26.A. "Call Period" shall mean the period, if any, that commences on the Termination Date and ends on the Call Cutoff Date (it being understood that the Call Cutoff Date could occur prior to the Termination Date, in which case there shall be no Call Period). "Call Price" shall have the meaning ascribed to that term in Section 26.D. "Call Price Credit" means, as of the Call Closing Date, if any, 100% of the ING Securities Fees as of such Call Closing Date, it being understood and agreed that the aggregate amount of the Call Price Credit hereunder and the "Call Price Credit" under, and as defined in, the B Warrant as of such Call Closing Date shall in no event be less than 200% of the ING Securities Fees as of such date, and if for any reason the "Call Price Credit" under, and as defined in, the B Warrant shall be less than 100% of the ING Securities Fees as of such date, the Call Price Credit hereunder shall be adjusted accordingly until the sum thereof and of the "Call Price Credit" under, and as defined in, the B Warrant is 200% of the ING Securities Fees as of such date. "Call Share Price" shall have the meaning ascribed to that term in Section 26.D. "Closing Date" is as defined in the Loan Agreement. "Commission" shall mean the Securities and Exchange Commission or any other similar or successor agency of the United States government administering the Securities Act. "Common Stock" shall mean the Issuer's authorized Common Stock, par value $0.01 per share, as constituted on the date of this Warrant, and (i) any stock into which such Common Stock may subsequently be changed or any other capital stock that is not preferred as to dividends or distribution of assets over any other class of stock of the Issuer, and which is not subject to redemption, that may be authorized by the Issuer and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Common Stock in the circumstances contemplated by Section 4.E. "Convertible Securities" shall mean evidences of indebtedness, shares of stock, warrants, rights or other securities which are convertible into or exchangeable for Additional Shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event; provided that Convertible Securities shall not mean the Warrants. "Current Market Price" per share of Common Stock, for the purposes of any provision of this Warrant at the date specified in such provision, shall be deemed to be the price determined pursuant to the first applicable of the following methods: (i) If the Common Stock is traded on a national securities exchange or is traded in the over-the-counter market, the Current Market Price per share of Common Stock shall be deemed to be the average of the daily market prices for thirty (30) consecutive Trading Days commencing forty-five (45) Trading Days before such date. The market price for each such Trading Day shall be, (a) if the Common Stock is traded on a national securities exchange, its last sale price on the preceding Trading Day on such national securities exchange or, if there was no sale on that day, the last reported sale price on such national exchange on the next preceding Trading Day on which there was a sale, or (b) if the principal market for the Common Stock is the over-the-counter market, and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), the last sale price reported on NASDAQ on the preceding Trading Day or, if the Common Stock is an issue for which last sale prices are not reported on NASDAQ, the average of the closing bid and asked quotations on such day, but, in each of the immediately preceding two cases, if the relevant NASDAQ price or quotations did not exist on such day, then the price or quotations on the next preceding Trading Day in which there was such a price or quotations. (ii) If the Current Market Price per share of Common Stock cannot be ascertained by any of the methods set forth in paragraph (i) immediately above, the Current Market Price per share of outstanding Common Stock shall be deemed to be the price equal to the quotient determined by dividing the higher of (i) Book Value or (ii) Appraised Value, by the number of shares (including any fractional shares) of Fully Diluted Outstanding Common Stock. "Current Warrant Price" per share of Common Stock, for the purpose of any provision of this Warrant at the date specified in this Warrant, shall mean the amount equal to the quotient resulting from dividing the Exercise Price in effect on such date by the number of shares (including any fractional share) of Common Stock comprising a Stock Unit on such date. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Exercise Price" shall mean the purchase price per Stock Unit as set forth on the first page of this Warrant on the date of original issue of this Warrant and thereafter shall mean such dollar amount as shall result from the adjustments specified in Section 4, if any. "Existing A Warrant" means the Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "A Warrant," issued by the Issuer in favor of INCC and dated as of October 22, 1993. "Expiration Date" shall mean April 30, 1998. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding at such date and all shares of Common Stock issuable in respect of this Warrant, and any other options, warrants or other rights to purchase or receive Common Stock outstanding on such date. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Holder" shall mean the holder of this Warrant. "ING Securities Fees" means, as of any time of determination, the aggregate net advisory fees actually received by Internationale Nederlanden (U.S.) Securities Corporation during the period from the Closing Date through and including such time of determination with respect to or in connection with financings with respect to the Issuer and/or American Rice, Inc., a Texas corporation. "Loan Agreement" shall mean that certain Amended and Restated Loan Agreement dated as of the issue date hereof between ERLY Juice Inc. and INCC, as amended from time to time. "Maturity" is as defined in the Loan Agreement. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Issuer or any Subsidiary thereof, and shall include all shares issuable in respect of any certificates representing fractional interests in shares of Common Stock. "Person" shall mean a corporation, an association, a trust, a partnership, a joint venture, an organization, a business, an individual, a government, a political subdivision or a governmental body. "Put Price" shall have the meaning ascribed to that term in Section 25(B). "Restricted Certificate" shall mean a Warrant or a certificate representing Common Stock bearing the restrictive legend set forth in Section 10. "Restricted Securities" shall mean Restricted Stock and Restricted Warrants. "Restricted Stock" shall mean Warrant Stock represented by a Restricted Certificate. "Restricted Warrant" shall mean a Warrant evidenced by a Restricted Certificate. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission under such act, all as the same shall be in effect at the time. "Subsidiary" shall mean, with respect to any Person, any corporation of which an aggregate of more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person. "Stock Unit" shall constitute one share of Common Stock, as such Common Stock was constituted on the date of this Warrant and thereafter shall constitute such number of shares (including any fractional shares) of Common Stock as shall result from the adjustments specified in Section 4, if any. "Subscription" shall mean a subscription form in the form set out in Annex I hereto. "Termination Date" is as defined in the Loan Agreement. "Trading Day" shall mean any day on which trading occurs on the New York Stock Exchange. "Warrant Stock" shall mean the shares of Common Stock purchasable by the holder of a Warrant upon the exercise of such Warrant. "Warrants" shall mean this Warrant, and all additional or new warrants issued upon transfer, division or combination of, or in substitution for, this Warrant or any such additional or new warrant. All such additional or new warrants shall at all times be identical as to terms and conditions and date, except as to the number of Stock Units for which they may be exercised. 2. Exercise of Warrant. The Holder may, at any time prior to the Expiration Date, exercise this Warrant in whole at any time or in part from time to time for the number of Stock Units which such holder is then entitled to purchase under this Warrant. In order to exercise this Warrant, in whole or in part, the Holder shall deliver to the Issuer at its office maintained for such purpose pursuant to Section 16 (i) a written notice of the Holder's election to exercise this Warrant, which notice shall specify the number of Stock Units to be purchased, (ii) this Warrant and (iii) a sum equal to the Exercise Price for the number of Stock Units to be purchased in the manner specified below. Such notice shall be in the form of Subscription set out at the end of this Warrant. Upon delivery of one or more Subscriptions, the Issuer shall cause to be executed and delivered to the Holder within five (5) Business Days a certificate or certificates representing the aggregate number of fully paid and nonassessable shares of Common Stock issuable upon such exercise. At the option of the Holder, payment of the Exercise Price shall be made (a) by wire transfer of funds to an account in a bank located in the United States designated by the Issuer for such purpose, (b) by certified or official bank check payable to the order of the Issuer and drawn on a member of the New York Clearing House, (c) by application of all or any part of the principal amount of the Obligations (as defined in the Loan Agreement) if such Holder is INCC or an Affiliate of INCC, or (d) by any combination of such methods. The stock certificate or certificates for Warrant Stock so delivered shall be in such denominations as may be specified in such notice and shall be registered in the name of the Holder or such other name or names as shall be designated in such notice. Such certificate or certificates shall be deemed to have been issued and the Holder or any other Person so designated to be named in such certificate or certificates shall be deemed to have become a holder of record of such shares, including, to the extent permitted by law, the right to vote such shares or to consent or to receive notice as a stockholder, as of the date the notice is delivered to the Issuer as set forth above. If this Warrant shall have been exercised only in part, the Issuer shall, within five (5) Business Days of delivery of such certificate or certificates, deliver to the Holder a new Warrant dated the date it is issued, evidencing the rights of the Holder to purchase the remaining Stock Units called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. Except as otherwise provided in Section 8, the Issuer shall pay all expenses, transfer taxes and other charges payable in connection with the preparation, issue and delivery of stock certificates under this Section 2, except that, if such stock certificates shall be registered in a name or names other than the name of the Holder, funds sufficient to pay all stock transfer taxes which shall be payable upon the issuance of such stock certificate or certificates shall be paid by the Holder prior to the issuance of such stock certificate or certificates. All shares of Common Stock issuable upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable, and free from all liens and other encumbrances on such shares. The Issuer will not close its books against the transfer of this Warrant or of any share of Warrant Stock in any manner which interferes with the timely exercise of this Warrant. The Issuer shall not be obligated to issue certificates for fractional shares of stock upon any exercise of this Warrant. 3. Transfer, Division and Combination. Subject to Section 10, this Warrant is, and all rights under this Warrant are, transferable, in whole or in part, on the books of the Issuer to be maintained for such purpose, upon surrender of this Warrant at the office of the Issuer maintained for such purpose pursuant to Section 16, together with a written assignment of this Warrant in substantially the form of Annex II hereto duly executed by the Holder or its agent or attorney and payment of funds sufficient to pay any stock transfer taxes payable upon the making of such transfer. Upon such surrender and payment the Issuer shall, subject to Section 10, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant shall promptly be canceled. This Warrant, if properly assigned in compliance with this Section 3 and Section 10, may be exercised by an assignee for the purchase of shares of Common Stock without having a new Warrant issued. This Warrant may, subject to Section 10, be divided or combined with other Warrants upon presentation at the office of the Issuer referenced above, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the preceding paragraph and with Section 10, as to any transfer which may be involved in such division or combination, the Issuer shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Issuer shall pay all expenses, taxes (other than stock transfer taxes excluded by the previous provision of this Section 3) and other charges incurred by the Issuer in the performance of its obligations in connection with the preparation, issue and delivery of Warrants under this Section 3. The Issuer agrees to maintain at its office described in Section 16 books for the registration and transfer of the Warrants. 4. Adjustment of Stock Unit or Exercise Price. The number of shares of Common Stock comprising a Stock Unit, or the Exercise Price, shall be subject to adjustment from time to time as set forth in this Section 4 and in Section 5. A. Stock Dividends, Subdivisions and Combinations. If at any time or from time to time the Issuer shall: (1) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Common Stock, or (2) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (3) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then the number of shares of Common Stock comprising a Stock Unit immediately after the happening of any such event shall be adjusted so as to consist of the number of shares of Common Stock which a record holder of the number of shares of Common Stock comprising a Stock Unit immediately prior to the happening of such event would own or be entitled to receive after the happening of such event. B. Certain Other Dividends and Distributions. If at any time or from time to time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (1) cash (other than a cash distribution made as a dividend and payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer, to the extent, but only to the extent, that the aggregate of all such dividends paid or declared after the date of this Warrant, does not exceed the consolidated net income of the Issuer earned subsequent to the date of this Warrant determined in accordance with GAAP, consistently applied), or (2) any evidence of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock) or any other securities or property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), or (3) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock) or any other securities or property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), then the number of shares of Common Stock comprising a Stock Unit from such time shall be adjusted to that number determined by multiplying the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment by a fraction (i) the numerator of which shall be the Current Market Price per share of Common Stock at the date of taking such record, and (ii) the denominator of which shall be such Current Market Price per share minus the portion applicable to one share of Common Stock of any such cash so distributable and of the fair value of any and all such evidences of indebtedness, shares of stock, other securities or property, or warrants or other subscription or purchase rights, so distributable. Such fair value shall be determined in good faith by the board of directors of the Issuer, provided that if such determination is objected to by Approving Holders, such determination shall be made by an independent appraiser chosen in the manner specified in the definition of Appraised Value. A reclassification of the Common Stock into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Subsection B and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Subsection A of this Section 4. C. Issuance of Additional Shares of Common Stock or Convertible Securities. If at any time or from time to time the Issuer shall (except as provided below) issue, whether in connection with the merger of a corporation into the Issuer or otherwise, any Additional Shares of Common Stock or Convertible Securities, then the number of shares of Common Stock comprising a Stock Unit from such time shall be adjusted to be that number determined by multiplying the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Fully Diluted Outstanding Common Stock plus the number of such Additional Shares of Common Stock so issued (or the number of shares of Common Stock into which such Convertible Securities are convertible or exchangeable, as the case may be), and (y) the denominator of which shall be the number of shares of Fully Diluted Outstanding Common Stock. Upon any subsequent adjustment in the number of shares of Common Stock into which any Convertible Securities are convertible or exchangeable, the number of shares of Common Stock comprising a Stock Unit shall be recalculated in accordance with the preceding sentence. No further adjustments of the number of shares of Common Stock comprising a Stock Unit shall be made upon the actual issuance of Common Stock upon the conversion or exchange of any Convertible Securities. The foregoing provisions of this Subsection C shall not apply to any issuance of Additional Shares of Common Stock for which an adjustment is provided under Subsection A or B of this Section 4. D. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock comprising a Stock Unit provided for above in this Section 4: (1) Treasury Stock. The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Issuer shall be deemed an issuance of such stock for purposes of this Section 4. (2) When Adjustments to Be Made. The adjustments required by the preceding Subsections of this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur (including upon any adjustment in the number of shares of Common Stock into which any Convertible Securities are convertible or exchangeable), except that no adjustment shall be made except pursuant to Subsection A of this Section 4 if it would decrease the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (3) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. (4) When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, after taking such record and before the distribution of such dividend, distribution, subscription or purchase rights to shareholders, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then no adjustment shall be required by reason of the taking of such record, and any such adjustment previously made in respect of the taking of such record shall be rescinded and annulled. E. Merger, Consolidation or Disposition of Assets. In the event the Issuer (1) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (2) shall permit any other corporation or entity to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving corporation but, in connection with such consolidation or merger, the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property, or (3) shall transfer all or substantially all of its properties or assets to any other corporation or entity, or (4) shall effect a capital reorganization or reclassification of the Common Stock (other than a change from par to no-par value stock or from no-par to par value stock, or a capital reorganization or reclassification resulting in the issue of Additional Shares of Common Stock for which adjustment in the number of shares comprising a Stock Unit is provided in Subsection C of this Section 4), then, and in each such event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Subsection E, the Holder, upon the conversion of all or any part of this Warrant at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive, in lieu of the shares of Common Stock issuable upon such conversion prior to such consummation, the stock and other securities, cash and property to which such Holder would have been entitled upon such consummation if such Holder had converted the Warrant immediately prior to such consummation, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for in this Section 4. Anything contained in this Warrant to the contrary notwithstanding, the Issuer will not effect any of the transactions described in clauses (1) through (4) above unless, prior to the consummation of such transaction, each corporation (other than the Issuer) which may be required to deliver any stock, securities, cash or property upon the conversion of this Warrant shall assume, by written instrument delivered to the Holder, the obligation to deliver to the Holder such shares of stock, securities, cash or property as the Holder may be entitled to receive upon such conversion. The foregoing provisions of this Subsection E shall similarly apply to successive mergers, consolidations or dispositions of assets. In addition to any other requirements under this Subsection E, the Issuer shall give notice to the Holder of this Warrants of any merger, consolidation or disposition at least thirty (30) days before the occurrence of such merger, consolidation or disposition. F. Other Action Affecting Common Stock. In case at any time or from time to time the Issuer shall take any action affecting its Common Stock, other than an action described in any of the foregoing Subsections A to E inclusive, of this Section 4, then, unless in the opinion of the Holder such action will not have a materially adverse effect upon the rights of the Holder, the number of shares of Common Stock or other stock comprising a Stock Unit, or the purchase price of such shares, shall be adjusted in such manner and at such time as the Issuer and the Holder may in good faith agree to be equitable in the circumstances. G. General. The Issuer hereby warrants and represents that, on the date of issuance of this Warrant, this Warrant is exercisable (after giving effect to the exercise in full of this Warrant) for not less than 5% of the number of shares of Fully Diluted Outstanding Common Stock. The Issuer agrees that it will at all times cause this Warrant to be exercisable (after giving effect to the exercise in full of this Warrant) for not less than 5% of the number of shares of Fully Diluted Outstanding Common Stock (or such lesser percentage as may result solely from one or more partial exercises of this Warrant). 5. Notices to the Holder. Whenever the number of shares of Common Stock comprising a Stock Unit, or the price at which a Stock Unit may be purchased upon exercise of this Warrant, shall be adjusted pursuant to Section 4, the Issuer shall forthwith obtain a certificate signed by the principal financial officer of the Issuer or, if the Approving Holders request, by independent accountants of recognized national standing selected by the Issuer and acceptable to the Approving Holders, setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a statement of the fair value, as determined by the board of directors of the Issuer or by appraisal (if applicable), of any evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights referred to in Section 4.B(3) or Section 4.E) and specifying the number of shares of Common Stock comprising a Stock Unit, and any change in the Exercise Price of a Stock Unit, after giving effect to such adjustment or change. The Issuer shall promptly, and in any case within three (3) Business Days after the making of such adjustment, cause a signed copy of such certificate to be delivered to the Holder. The Issuer shall keep at its office or agency, maintained for the purpose pursuant to Section 16, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by the Holder or any prospective purchaser of a Warrant designated by the Holder. 6. Reservation and Authorization of Common Stock; Registration with or Approval of any Governmental Authority. The Issuer shall at all times reserve and keep available for issue upon the exercise of this Warrant such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. All shares of Common Stock that shall be issued upon exercise of this Warrant and payment of the Exercise Price relating to such shares to the Issuer, shall be duly and validly issued and fully paid and nonassessable. Before taking any action which would cause an adjustment reducing the Current Warrant Price per share of Common Stock below the then par value, if any, of the shares of Common Stock issuable upon exercise of this Warrant, the Issuer shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Current Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock comprising a Stock Unit or in the Current Warrant Price per share of Common Stock, the Issuer shall obtain all such authorizations or exemptions of, or consents to, such action as may be necessary from any public regulatory body or bodies having jurisdiction over it by virtue of such action. 7. Taking of Record; Stock and Warrant Transfer Books. In the case of all dividends or other distributions by the Issuer to the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Issuer will in each such case take such a record and will take such record as of the close of business on a Business Day. The Issuer will not at any time, except upon dissolution, liquidation or winding up, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of this Warrant. 8. Transfer Taxes. The Issuer will pay any and all transfer taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on exercise of this Warrant. The Issuer shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which this Warrant is registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Issuer the amount of any such tax, or has established, to the satisfaction of the Issuer, that such tax has been paid. 9. No Voting Rights. Except as expressly provided in this Warrant, this Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Issuer. 10. Restrictions on Transferability. A. Certain Conditions. To the extent that this Warrant or the Warrant Stock covered by the Warrant constitute Restricted Securities, such Restricted Securities shall not be transferable except upon the conditions specified in this Section 10; provided that, notwithstanding any other provisions of this Section 10, the Holder (and each other person mentioned below in this clause) shall have the right to transfer all Restricted Securities or any Restricted Security to any Affiliate of the Holder, in each case free of the restrictions imposed by this Section 10 other than the requirement as to the legending of the certificates for such Restricted Securities specified in Section 10.B. Each such transferee shall be subject to the same transfer restrictions imposed on the Warrant holder by this Warrant. B. Restrictive Legend. Unless and until otherwise permitted by this Section 10, each Warrant issued upon transfer, division or combination of, or in substitution for, this Warrant, each certificate for any Warrant Stock issued upon exercise of this Warrant and each certificate for any Warrant Stock issued to any subsequent transferee of any such certificate shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. "THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE." C. Notice of Proposed Transfers. Prior to any transfer or attempted transfer of any Restricted Securities not covered by the proviso contained in Subsection A of this Section 10, the Holder shall give written notice to the Issuer of the Holder's intention to effect a transfer of such Restricted Securities. Each such notice shall describe the manner and circumstances of the proposed transfer in material detail. Upon receipt of such notice, the Issuer may request an opinion of Murphy, Weir & Butler or such other counsel of the Holder (which counsel shall be reasonably satisfactory to the Issuer) to the effect that such proposed transfer may be effected without registration under the Securities Act. Upon receipt of such opinion, the Issuer shall, as promptly as practicable, so notify the Holder. Upon such notice or if the Issuer has not requested such an opinion, within ten (10) days after the Issuer's receiving notice of the proposed transfer, the Holder shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Issuer. Each Warrant or certificate evidencing the Restricted Securities thus to be transferred (and each Warrant or certificate evidencing any untransferred balance of the Restricted Securities evidenced by such Restricted Certificate) shall bear the restrictive legend set forth in Section 10.B, unless in the opinion of the Issuer or the opinion of such counsel, if requested, such legend is not required in order to insure compliance with the Securities Act. D. Termination of Restrictions. Notwithstanding the foregoing provisions of Section 10, the restrictions imposed upon the transferability of the Restricted Securities shall cease and terminate as to any particular Restricted Security when such Restricted Security shall have been effectively registered under the Securities Act, including, without limitation, any registration pursuant to the Registration Rights Agreement between the Issuer and INCC dated as of the issue date hereof. Whenever such restrictions imposed shall terminate as to any Restricted Certificate, as provided in this Section 10.D, the Holder shall be entitled to receive from the Issuer, without expense, a new Warrant of like tenor and date and representing the right to purchase the same number of aggregate number of shares of Common Stock or a new certificate representing the same number of shares of Warrant Stock (as the case may be), but not bearing the restrictive legend otherwise required by this Warrant. 11. Warranties and Representations of the Issuer. The Issuer represents and warrants to the Holder that as of the date of this Warrant: A. Equity Capitalization, etc. (1) Upon the issuance of this Warrant, the total number of shares of capital stock which the Issuer has authority to issue is 5,006,000 shares, consisting of 5,000,000 shares of Common Stock, par value $0.01 per share, and 6,000 shares of preferred stock, $100.00 par value per share. The Issuer has the power and authority and has taken all actions (corporate or otherwise) necessary to authorize it to enter into and perform its obligations and undertakings under this Warrant. Except as set forth on Exhibit 11.A hereto, upon the issuance of this Warrant, the Issuer will not have outstanding any stock or securities convertible into or exchangeable for any shares of its capital stock nor does it have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or stock or securities convertible into or exchangeable for any of its capital stock other than the Warrants. (2) When issued and delivered, the Warrants will have been duly executed, issued and delivered and will constitute legal, valid and binding obligations of the Issuer, enforceable by the Holder in accordance with their terms. (3) None of the issuance of any Warrant, the consummation of the transactions contemplated in any Warrant, or compliance with the terms and provisions of this Warrant will conflict with or result in a breach of, or require any consent under, the certificate of incorporation or the by-laws of the Issuer, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Issuer is a party or by which it is bound or to which it or its property is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any lien upon any of the revenues or assets of the Issuer pursuant to the terms of any such agreement or instrument. (4) There is not in effect on the date of this Warrant any agreement by the Issuer (other than registration agreements copies of each of which have been furnished by the Issuer to INCC) pursuant to which any holders of securities of the Issuer have a right to cause the Issuer to register such securities under the Securities Act. (5) The Issuer is a corporation duly organized and validly existing in good standing under the laws of the State of California and has the corporate power and authority to execute and deliver this Warrant and to perform its terms, including, without limitation, the issuance of Warrant Stock upon exercise of this Warrant. The Issuer has taken all action necessary to authorize the execution, delivery and performance of this Warrant and the issuance of the Warrant Stock upon exercise of this Warrant. B. Governmental Consent. Neither the nature of the Issuer or of any of its businesses or properties, nor any relationship between the Issuer and any other Person, nor (except as expressly provided for in this Warrant) any circumstance in connection with the offer, issue or sale of this Warrant or the Warrant Stock is such as to require consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Issuer as a condition to the execution and delivery of this Warrant or the execution and filing of any certificate of amendment of the certificate of incorporation of the Issuer required in connection with the authorization or issuance of Warrant Stock or the offer, issue or sale of this Warrant or the Warrant Stock. C. Survival of Representations. All representations set forth in this Section 11 shall survive the issuance and delivery of this Warrant. 12. Limitation of Liability. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration in this Warrant of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of the Warrant Stock or as a stockholder of the Issuer, whether such liability is asserted by the Issuer or by creditors of the Issuer. 13. Loss, Destruction of Warrant Certificates. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer (the original Warrant holder's or any other institutional Warrant holder's indemnity being satisfactory indemnity in the event of loss, theft or destruction of this Warrant), or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of the lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock. 14. Furnish Information. The Issuer will file with the Commission on or before the due date all regular or periodic reports required to be filed pursuant to the Exchange Act, and will deliver to the holder of record of this Warrant promptly after their becoming available copies of all financial statements, reports and proxy statements which the Issuer shall have sent to its stockholders generally, and of each regular or periodic report (including, without limitation, reports on Form 8-K) filed by it pursuant to the Exchange Act, and any Registration Statement, prospectus or written communication (other than transmittal letters and other communications not publicly available) filed or delivered by it pursuant to the Securities Act. 15. Amendments. The terms of this Warrant and all other Warrants may be amended, and the observance of any term in such Warrant may be waived, but only with the written consent of the Approving Holders, provided that no such amendment or waiver may change the number of shares of stock comprising a Stock Unit or the Exercise Price, without the written consent of the Holders. For the purposes of determining whether the Approving Holders have taken any action authorized by this Warrant, any Warrants owned by the Issuer or any Affiliate of the Issuer (other than an institutional investor which may be deemed an Affiliate solely by reason of the ownership of Warrants) shall be deemed not to be outstanding. 16. Office of the Issuer. So long as this Warrant remains outstanding, the Issuer shall maintain an office in Los Angeles, California where this Warrant may be presented for exercise, transfer, division or combination as in this Warrant provided. Such office shall be at 10990 Wilshire Boulevard, Los Angeles, California 90024 unless and until the Issuer shall designate and maintain some other office for such purposes and deliver written notice of the address of such other office to the Holders. 17. Notices Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered (i) in person with receipt acknowledged, (ii) by facsimile transmission, with receipt electronically confirmed during normal business hours of recipient, and that is confirmed by sending, no later than one (1) Business Day following such transmission, a copy of such facsimile, by registered or certified mail, return receipt requested, postage prepaid, or (iii) by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (1) If to any Holder or holder of Warrant Stock, at its last known address or facsimile transmission number appearing on the books of the Issuer maintained for such purpose. (2) If to the Issuer at: Erly Industries Inc. 10990 Wilshire Boulevard Los Angeles, California 90024 Attention: Kurt Grey Facsimile: (310) 473-8890 with a copy to: Magnus, Epman & Dwyer 300 Corporate Pointe, Suite 310 Culver City, California 90230-7614 Attention: Ronald J. Epman, Esq. Facsimile: (310) 216-0701 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged or sent by facsimile with receipt electronically confirmed during normal business hours of recipient, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration, delivery or other communication to the person designated above to receive a copy shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, delivery or other communication. 18. Successors and Assigns. This Warrant shall bind and inure to the benefit of and, be enforceable by the parties to this Warrant and their respective successors and assigns, and, without limiting the generality of the foregoing, shall inure to the benefit of and be enforceable by each person who shall from time to time be the Holder of this Warrant. 19. Indemnification. The Issuer agrees to indemnify and hold harmless Holder, its officers, directors, employees, agents, and attorneys from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against Holder relating to or arising out of (i) Holder's exercise of this Warrant and/or ownership of any shares of Warrant Stock issued in consequence thereof, or (ii) any litigation to which Holder is made a party in its capacity as a stockholder or warrant holder of the Issuer; provided, however, that the Issuer will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are found in a final non-appealable judgment by a court to have resulted from either (i) Holder's gross negligence or willful misconduct, (ii) actions or omissions taken or not taken by Holder in any capacity other than as a stockholder or warrant holder of the Issuer, or (iii) any knowing violation of federal or state securities laws by Holder. 20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE ISSUER AND HOLDER CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. SERVICE OF PROCESS ON THE ISSUER OR HOLDER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS WARRANT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN ACCORDANCE WITH THE PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 17. NOTHING HEREIN SHALL PRECLUDE HOLDER OR THE ISSUER FROM BRINGING SUIT OR TAKING LEGAL ACTION IN ANY OTHER JURISDICTION. 21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE ISSUER AND HOLDER HEREOF WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE ISSUER AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE ISSUER AND HOLDER HEREOF WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS WARRANT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. 22. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Holder, any right, remedy, power or privilege under this Warrant, shall operate as a waiver of any such right, remedy power or privilege; nor shall any single or partial exercise of any right, remedy, power or privilege under this Warrant preclude any other or further exercise of any such right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Warrant are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 23. Specific Performance. The Issuer and the Holder agree that irreparable damage would occur in the event that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Holder shall be entitled to an injunction or injunctions to prevent breaches of this Warrant and to enforce specifically the terms and provisions of this Warrant in any court of the United States or any states of the United States having jurisdiction, this being in addition to any other remedy to which it may be entitled at law or in equity. 24. Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained in this Warrant, any provision of this Warrant is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained in this Warrant. 25. Put Option. A. Issuer's Obligation to Repurchase Warrants. Upon written notice from the Holder from time to time prior to the Expiration Date, the Issuer shall, on the date designated in such notice (which date shall be at least thirty (30) Business Days after the date of such notice), repurchase from such Holder all or the portion of this Warrant designated in such notice for an amount determined by multiplying (i) the Put Price per Stock Unit in effect on the date of such notice by (ii) the number of Stock Units that are designated for repurchase in such notice. Upon such designated repurchase date, the Holder shall surrender this Warrant to the Issuer, without being required to make any representation or warranty (other than that the Holder has good and valid title to this Warrant), against payment for such repurchase by (at the option of the Holder) (i) wire transfer to an account in a bank located in the United States designated by the Holder for such purposes or (ii) delivery of a certified or official bank check drawn on a member of the New York Clearing House. If less than all of this Warrant is being repurchased, the Issuer shall cancel this Warrant and issue in the name of, and deliver to, the Holder a new Warrant for the portion of the number of Stock Units not being repurchased. B. Determination of the Put Price. The Put Price per Stock Unit as of a date specified shall be equal to the Current Market Price per share of Common Stock as of the date of such determination, multiplied by the number of shares of Common Stock constituting a Stock Unit on such date, minus the Exercise Price. 26. Call Option. A. Option to Repurchase Warrant and Issued Warrant Stock. During the Call Period, the Issuer shall have the right, subject to the terms and conditions of this Section 26, to repurchase from Holders all (but not less than all) of the Warrant and any Warrant Stock held by all Holders as of the Call Closing Date (such right shall be referred to as the "Call Option"). B. Notice and Exercise of Call Option. In order to exercise the Call Option, the Issuer must give written notice to all Holders during the Call Period, which notice must (i) specify the date of the repurchase of the Warrant and Warrant Stock pursuant to the Call Option (the "Call Closing Date"), which date shall be no less than three (3) and no more than ten (10) Business Days after the date such notice is given, (ii) state the Call Share Price applicable as of the Call Closing Date, (iii) state the Call Price as calculated without deduction for the Call Price Credit, if any, and (iv) indicate the methods by which the Call Share Price and the portion of the Call Price specified in such notice were calculated. Prior to the Call Closing Date, if there have been any ING Securities Fees, INCC shall, after consultation with Issuer, specify in writing to Issuer the amount of the Call Price Credit as of the Closing Date, which amount so specified shall be conclusive and binding for all purposes absent manifest error or bad faith. On the Call Closing Date, at the offices of INCC or such other location as is designated by INCC, (A) each Holder shall surrender any Warrants held by it to the Issuer, without being required to make any representation or warranty, and (B) each Holder shall deliver to the Issuer any certificates representing Warrant Stock held by it, duly endorsed for transfer to the Issuer, without being required to make any representation or warranty, all against payment of the Call Price by wire transfer of immediately available funds to an account designated by each such Holder for such purpose. Upon the surrender of the Warrants and delivery of the Warrant Stock to the Issuer pursuant to this Section 26.B, the Issuer shall immediately cancel the Warrants and any such Warrant Stock. C. Requirement That Issuer Concurrently Exercise Call Option Under B Warrant. No Holder shall have any obligations under this Section 26, and the Issuer shall have no right to exercise the Call Option, unless, concurrently with the consummation of the Issuer's repurchase of the Warrant and Warrant Stock pursuant to the Call Option, the Issuer also consummates the repurchase of the B Warrant and any B Warrant Stock pursuant to the "Call Option" provided for in Section 26 of the B Warrant. D. Call Price. The purchase price payable for the repurchase of the Warrant and any Warrant Stock pursuant to the Call Option (the "Call Price"), is, as of any time of determination, (i) an amount equal to the then applicable Call Share Price multiplied by a number equal to the sum of (A) the number of shares of Warrant Stock purchasable upon exercise of the Warrant and (B) the number of shares of issued Warrant Stock held by all Holders, if any, plus (ii) if any Warrant Stock has been issued, the aggregate Exercise Price that was paid by Holders to the Issuer for such Warrant Stock pursuant to the Warrant, less (iii) the Call Price Credit as of the Call Closing Date (but the Call Price shall in no event be less than zero). As of the date hereof, the "Call Share Price" is $8.75. Upon the making of any of the adjustments provided for in Section 4.A(2) or 4.A(3) above, the Call Share Price shall be adjusted to the amount obtained by multiplying the Call Share Price in effect immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of Common Stock constituting a Stock Unit immediately prior to the relevant adjustment provided for in Section 4.A(2) or 4.A(3), as the case may be, and the denominator of which shall be the number of shares of Common Stock constituting a Stock Unit immediately thereafter. E. No Restriction on Holder's Right to Exercise Warrant; Certain Restrictions on Transferability. Nothing in this Section 26 restricts or otherwise limits Holder's right to exercise the Warrant in whole or in part at any time prior to the commencement of or during the Call Period; provided, however, that Holder hereby agrees that (i) it shall not sell or otherwise transfer the Warrant, other than to an Affiliate of Holder which agrees to be bound by the terms hereof, prior to the Call Cutoff Date, and (ii) if it does exercise or partially exercise the Warrant prior to the Call Cutoff Date, it shall not sell or otherwise transfer any issued Warrant Stock obtained upon such exercise, other than to an Affiliate of Holder which agrees to be bound by the terms hereof, prior to the Call Cutoff Date. 27. Amendment and Restatement of the Existing A Warrant. This Warrant amends and restates the Existing A Warrant in full. IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary. Dated as of February 16, 1995 ERLY INDUSTRIES INC., a California corporation By: /s/ KURT GREY Name: Kurt Grey Title: Vice President ATTEST: /s/ KURT GREY [attestor] THE UNDERSIGNED, AS THE SOLE HOLDER OF THE EXISTING A WARRANT, CONSENTS TO THE FOREGOING AMENDMENT AND RESTATEMENT OF THE EXISTING A WARRANT INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation By: /s/ MICHAEL W. ADLER Name: Michael W. Adler Title: Vice President EXHIBIT 11.A As of the Closing Date, the Issuer has the following outstanding capital stock: 1. TOTAL SHARES OF COMMON STOCK OUTSTANDING: 3,695,547 2. TOTAL SHARES OF PREFERRED STOCK OUTSTANDING: 0 As of the Closing Date, the Issuer has no outstanding stock or securities convertible into or exchangeable for any shares of capital stock, nor does it have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or stock or securities convertible into or exchangeable for any of its capital stock other than the following:
================================================================================================================== Convertible Issue/Grant Into/Exercisable Date For (as of the Instrument/Agreement/Other In Favor of Closing Date)* ================================================================================================================== Amended and Restated Warrant 2/16/95 INCC 257,679 shares of to Purchase Common Stock of Common Stock ERLY Industries (denominated the "A Warrant") - ------------------------------------------------------------------------------------------------------------------ Amended and Restated Warrant 2/16/95 INCC 257,679 shares of to Purchase Common Stock of Common Stock ERLY Industries (denominated the "B Warrant") - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Common 2/16/95 INCC 51,536 shares of Stock of ERLY Industries Common Stock (denominated the "C Warrant") - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Common 2/16/95 INCC 206,143 shares of Stock of ERLY Industries Common Stock (denominated the "D Warrant") - ------------------------------------------------------------------------------------------------------------------ Common Stock Purchase Warrant 5/30/90 BT Commercial aggregate 277,157 Corporation shares of Common Stock - ------------------------------------------------------------------------------------- Common Stock Purchase Warrant 5/30/90 StanChart Business Credit - ------------------------------------------------------------------------------------- Common Stock Purchase Warrant 5/30/90 Union Bank - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Shares of 9/5/93 ABC Capital 10,000 shares of Common Stock Markets Group Common Stock - ------------------------------------------------------------------------------------------------------------------ Convertible Promissory Note 4/1/94 Douglas Murphy 266,596 shares of Common Stock - ------------------------------------------------------------------------------------------------------------------ Stock Options Awarded pursuant 1985 Bill J. McFarland 8,053 shares of to Issuer's 1982 Incentive Stock Common Stock Option Plan, as adjusted to date ------------------------------------------------------------------------ 1988 Douglas A. 115,132 shares of Murphy, Bill J. Common Stock McFarland, John Poole and Lolan M. Pullen - ------------------------------------------------------------------------------------------------------------------ ================================================================================================================== * All figures shown are as calculated after taking into account all adjustments necessary upon the issuance of the four warrants (denominated the A Warrant, the B Warrant the C Warrant, and the D Warrant) being issued to INCC on the Closing Date.
ANNEX I SUBSCRIPTION FORM (to be executed only upon exercise of Warrant) The undersigned registered owner of this Warrant irrevocably exercises this Warrant for and purchases _________ Stock Units of ______________________________, a _________________, purchasable with this Warrant, and herewith makes payment for such Stock Units (by check in the amount of $__________), all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________________ whose address is ____________________ and, if such Stock Units shall not include all of the Stock Units issuable as provided in this Warrant that a new Warrant of like tenor and date for the balance of the Stock Units issuable thereunder be delivered to the undersigned. Dated: ________________________________ (Signature of Registered Owner) ________________________________ (Street Address) ________________________________ (City) (State) (Zip Code) NOTICE: The signature to the subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. The signature to this subscription must be guaranteed by a bank or trust company having an office or correspondent in Los Angeles, California or New York, New York, or by a firm having membership on the New York Stock Exchange. ANNEX II ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of Stock Units set forth below: No. of Stock Name and Address of Assignee Units ---------------------------- ------------- and does hereby irrevocably constitute and appoint ___________ Attorney to make sure transfer on the books of ERLY Industries Inc., a California corporation, maintained for the purpose, with full power of substitution in the premises. Dated: _____________________________ Signature _____________________________ Witness NOTICE: The signature to the subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. The signature to this subscription must be guaranteed by a bank or trust company having an office or correspondent in Los Angeles, California or New York, New York, or by a firm having membership on the New York Stock Exchange. EX-99.1 3 B WARRANT 3.8 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER OF THIS WARRANT A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE. ["B Warrant"] No. of Stock Units: 257,679 AMENDED AND RESTATED WARRANT to Purchase Common Stock of ERLY INDUSTRIES INC. a California corporation TABLE OF CONTENTS
Page 1. Certain Definitions.................................................................................... 1 2. Exercise of Warrant.................................................................................... 6 3. Transfer, Division and Combination..................................................................... 8 4. Adjustment of Stock Unit or Exercise Price............................................................. 8 A. Stock Dividends, Subdivisions and Combinations.................................................... 8 B. Certain Other Dividends and Distributions......................................................... 9 C. Issuance of Additional Shares of Common Stock or Convertible Securities.................................................................................... 10 D. Other Provisions Applicable to Adjustments Under this Section..................................... 10 (1) Treasury Stock .......................................................................... 11 (2) When Adjustments to Be Made................................................................. 11 (3) Fractional Interests........................................................................ 11 (4) When Adjustment Not Required................................................................ 11 E. Merger, Consolidation or Disposition of Assets.................................................... 11 F. Other Action Affecting Common Stock............................................................... 12 G. General ......................................................................................... 12 5. Notices to the Holder.................................................................................. 12 6. Reservation and Authorization of Common Stock; Registration with or Approval of any Governmental Authority.............................................................. 13 7. Taking of Record; Stock and Warrant Transfer Books..................................................... 13 8. Transfer Taxes......................................................................................... 14 9. No Voting Rights....................................................................................... 14 10. Restrictions on Transferability........................................................................ 14 A. Certain Conditions............................................................................... 14 B. Restrictive Legend............................................................................... 14 C. Notice of Proposed Transfers..................................................................... 15 D. Termination of Restrictions...................................................................... 15 11. Warranties and Representations of the Issuer.......................................................... 16 A. Equity Capitalization, etc....................................................................... 16 B. Governmental Consent............................................................................. 17 C. Survival of Representations...................................................................... 17 12. Limitation of Liability............................................................................... 17 13. Loss, Destruction of Warrant Certificates............................................................. 17 14. Furnish Information................................................................................... 17 15. Amendments............................................................................................ 18 16. Office of the Issuer.................................................................................. 18 17. Notices Generally..................................................................................... 18 18. Successors and Assigns................................................................................ 19 19. Indemnification....................................................................................... 19 20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE...................................................... 19 21. MUTUAL WAIVER OF JURY TRIAL........................................................................... 20 22. No Waiver; Cumulative Remedies........................................................................ 20 23. Specific Performance.................................................................................. 20 24. Modification and Severability......................................................................... 21 25. Put Option............................................................................................ 21 A. Issuer's Obligation to Repurchase Warrants....................................................... 21 B. Determination of the Put Price................................................................... 21 26. Call Option........................................................................................... 21 A. Option to Repurchase Warrant and Issued Warrant Stock............................................ 21 B. Notice and Exercise of Call Option............................................................... 22 C. Requirement That Issuer Concurrently Exercise Call Option Under A Warrant.................................................................................... 22 D. Call Price....................................................................................... 22 E. No Restriction on Holder's Right to Exercise Warrant; Certain Restrictions on Transferability.............................................................. 23 27. Amendment and Restatement of the Existing B Warrant................................................... 23
["B Warrant"] No. of Stock Units: 257,679 AMENDED AND RESTATED WARRANT to Purchase Common Stock of ERLY INDUSTRIES INC. a California corporation THIS IS TO CERTIFY THAT Internationale Nederlanden (U.S.) Capital Corporation, a Delaware corporation ("INCC"), or registered assigns, is entitled to purchase from ERLY Industries Inc., a California corporation (the "Issuer"), at any time after April 30, 1995 but prior to the Expiration Date (as defined below), Two Hundred Fifty Seven Thousand Six Hundred Seventy Nine (257,679) Stock Units, in whole or in part, at a purchase price of $0.01 per Stock Unit (adjusted as provided below), all on the terms and conditions provided in this warrant (this "Warrant"). 1. Certain Definitions. As used in this Warrant, unless the context otherwise requires: "A Warrant" means any "Warrant," as such term is defined in that certain Amended and Restated Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "A Warrant," issued by the Issuer in favor of INCC of even date herewith. "A Warrant Stock" means any "Warrant Stock," as such term is defined in the A Warrant. "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Issuer after the date of this Warrant, other than the Warrant Stock. "Affiliate" shall mean, with respect to a specified Person, any other Person directly or indirectly controlling or controlled by or under common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Appraisal" shall have the meaning given to such term in the definition of Appraised Value. "Appraised Value" shall mean the fair market value of all outstanding Common Stock, as determined by a written appraisal (the "Appraisal") prepared by an appraiser 1 selected by the Approving Holders and acceptable to the Issuer. "Fair market value" is defined for this purpose as the price for one hundred percent (100%) of the equity capital of the Issuer (determined on a going-concern basis and without giving effect to any discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or the fact that the Issuer may have no class of equity registered under the Exchange Act) on the basis of a sale between a willing seller and buyer, neither acting under any compulsion. In the event that the Issuer and Approving Holders cannot, in good faith, agree upon an appraiser, then the Issuer, on the one hand, and Approving Holders, on the other hand, shall each select an appraiser, the two appraisers so selected shall select a third appraiser who shall be directed to prepare the Appraisal, and the term Appraised Value shall mean the appraised value set forth in the appraisal prepared in accordance with this definition. "Approving Holders" shall mean the holders of Warrants evidencing more than fifty percent (50%) in number of the total number of Stock Units at the time purchasable upon the exercise of all then outstanding Warrants. "Book Value" shall mean, on any date herein specified, the consolidated book value of the Issuer applicable to Common Stock as of the last day of any fiscal month immediately preceding such date, as determined by independent accountants of recognized national standing selected by the Issuer and acceptable to the Approving Holders. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in Los Angeles, California. "Call Closing Date" shall have the meaning ascribed to that term in Section 26.B. "Call Cutoff Date" means the earlier to occur of (i) Maturity and (ii) April 1, 1996. "Call Option" shall have the meaning ascribed to that term in Section 26.A. "Call Period" shall mean the period, if any, that commences on the later to occur of the Termination Date and April 30, 1995, and ends on the Call Cutoff Date (it being understood that the Call Cutoff Date could occur prior to the later to occur of the Termination Date and April 30, 1995, in which case there shall be no Call Period). "Call Price" shall have the meaning ascribed to that term in Section 26.D. "Call Price Credit" means, as of the Call Closing Date, if any, 100% of the ING Securities Fees as of such Call Closing Date, it being understood and agreed that the aggregate amount of the Call Price Credit hereunder and the "Call Price Credit" under, and as defined in, the A Warrant as of such Call Closing Date shall in no event be less 2 than 200% of the ING Securities Fees as of such date, and if for any reason the "Call Price Credit" under, and as defined in, the A Warrant shall be less than 100% of the ING Securities Fees as of such date, the Call Price Credit hereunder shall be adjusted accordingly until the sum thereof and of the "Call Price Credit" under, and as defined in, the A Warrant is 200% of the ING Securities Fees as of such date. "Call Share Price" shall have the meaning ascribed to that term in Section 26.D. "Closing Date" is as defined in the Loan Agreement. "Commission" shall mean the Securities and Exchange Commission or any other similar or successor agency of the United States government administering the Securities Act. "Common Stock" shall mean the Issuer's authorized Common Stock, par value $0.01 per share, as constituted on the date of this Warrant, and (i) any stock into which such Common Stock may subsequently be changed or any other capital stock that is not preferred as to dividends or distribution of assets over any other class of stock of the Issuer, and which is not subject to redemption, that may be authorized by the Issuer and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Common Stock in the circumstances contemplated by Section 4.E. "Convertible Securities" shall mean evidences of indebtedness, shares of stock, warrants, rights or other securities which are convertible into or exchangeable for Additional Shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event; provided that Convertible Securities shall not mean the Warrants. "Current Market Price" per share of Common Stock, for the purposes of any provision of this Warrant at the date specified in such provision, shall be deemed to be the price determined pursuant to the first applicable of the following methods: (i) If the Common Stock is traded on a national securities exchange or is traded in the over-the-counter market, the Current Market Price per share of Common Stock shall be deemed to be the average of the daily market prices for thirty (30) consecutive Trading Days commencing forty-five (45) Trading Days before such date. The market price for each such Trading Day shall be, (a) if the Common Stock is traded on a national securities exchange, its last sale price on the preceding Trading Day on such national securities exchange or, if there was no sale on that day, the last reported sale price on such national exchange on the next preceding Trading Day on which there was a sale, or (b) if the principal market for the Common Stock is the over-the-counter market, and the Common Stock is quoted on the National 3 Association of Securities Dealers Automated Quotations System ("NASDAQ"), the last sale price reported on NASDAQ on the preceding Trading Day or, if the Common Stock is an issue for which last sale prices are not reported on NASDAQ, the average of the closing bid and asked quotations on such day, but, in each of the immediately preceding two cases, if the relevant NASDAQ price or quotations did not exist on such day, then the price or quotations on the next preceding Trading Day in which there was such a price or quotations. (ii) If the Current Market Price per share of Common Stock cannot be ascertained by any of the methods set forth in paragraph (i) immediately above, the Current Market Price per share of outstanding Common Stock shall be deemed to be the price equal to the quotient determined by dividing the higher of (i) Book Value or (ii) Appraised Value, by the number of shares (including any fractional shares) of Fully Diluted Outstanding Common Stock. "Current Warrant Price" per share of Common Stock, for the purpose of any provision of this Warrant at the date specified in this Warrant, shall mean the amount equal to the quotient resulting from dividing the Exercise Price in effect on such date by the number of shares (including any fractional share) of Common Stock comprising a Stock Unit on such date. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Exercise Price" shall mean the purchase price per Stock Unit as set forth on the first page of this Warrant on the date of original issue of this Warrant and thereafter shall mean such dollar amount as shall result from the adjustments specified in Section 4, if any. "Existing B Warrant" means the Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "B Warrant," issued by the Issuer in favor of INCC and dated as of October 22, 1993, as the same has been amended pursuant to Amendment No. 1 to B Warrant dated as of November 18, 1994. "Expiration Date" shall mean April 30, 1998; provided, however, that if the Termination Amount (as such term is defined below) shall be fully and finally repaid on or before April 30, 1995, then the Expiration Date shall be the date of such payment. For the purposes hereof, the "Termination Amount" shall be, as of any date of determination, the sum of (i) the amount of the Obligations (as such term is defined in the Loan Agreement) as of such date of determination, plus (ii) the $6,000,000 in indebtedness of ERLY Juice Inc. that was forgiven pursuant to that certain letter agreement dated as of September 22, 1993 between Issuer, ERLY Juice Inc. and INCC's predecessor in interest International Nederlanden Bank N.V. (formerly known 4 as NMB Postbank Groep nv (formerly known as Nederlandsche Middenstandsbank nv)), New York Branch. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding at such date and all shares of Common Stock issuable in respect of this Warrant, and any other options, warrants or other rights to purchase or receive Common Stock outstanding on such date. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Holder" shall mean the holder of this Warrant. "ING Securities Fees" means, as of any time of determination, the aggregate net advisory fees actually received by Internationale Nederlanden (U.S.) Securities Corporation during the period from the Closing Date through and including such time of determination with respect to or in connection with financings with respect to the Issuer and/or American Rice, Inc., a Texas corporation. "Loan Agreement" shall mean that certain Amended and Restated Loan Agreement dated as of the issue date hereof between ERLY Juice Inc. and INCC, as amended from time to time. "Maturity" is as defined in the Loan Agreement. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Issuer or any Subsidiary thereof, and shall include all shares issuable in respect of any certificates representing fractional interests in shares of Common Stock. "Person" shall mean a corporation, an association, a trust, a partnership, a joint venture, an organization, a business, an individual, a government, a political subdivision or a governmental body. "Put Price" shall have the meaning ascribed to that term in Section 25(B). "Restricted Certificate" shall mean a Warrant or a certificate representing Common Stock bearing the restrictive legend set forth in Section 10. "Restricted Securities" shall mean Restricted Stock and Restricted Warrants. 5 "Restricted Stock" shall mean Warrant Stock represented by a Restricted Certificate. "Restricted Warrant" shall mean a Warrant evidenced by a Restricted Certificate. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission under such act, all as the same shall be in effect at the time. "Subsidiary" shall mean, with respect to any Person, any corporation of which an aggregate of more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person. "Stock Unit" shall constitute one share of Common Stock, as such Common Stock was constituted on the date of this Warrant and thereafter shall constitute such number of shares (including any fractional shares) of Common Stock as shall result from the adjustments specified in Section 4, if any. "Subscription" shall mean a subscription form in the form set out in Annex I hereto. "Termination Date" is as defined in the Loan Agreement. "Trading Day" shall mean any day on which trading occurs on the New York Stock Exchange. "Warrant Stock" shall mean the shares of Common Stock purchasable by the holder of a Warrant upon the exercise of such Warrant. "Warrants" shall mean this Warrant, and all additional or new warrants issued upon transfer, division or combination of, or in substitution for, this Warrant or any such additional or new warrant. All such additional or new warrants shall at all times be identical as to terms and conditions and date, except as to the number of Stock Units for which they may be exercised. 2. Exercise of Warrant. The Holder may, at any time after April 30, 1995 but prior to the Expiration Date, exercise this Warrant in whole at any time or in part from time to time for the number of Stock Units which such holder is then entitled to purchase under this Warrant. If the Expiration Date shall occur on or prior to April 30, 1995, then this Warrant shall thereupon terminate and shall be returned by the Holder 6 to the Issuer. In order to exercise this Warrant, in whole or in part, the Holder shall deliver to the Issuer at its office maintained for such purpose pursuant to Section 16 (i) a written notice of the Holder's election to exercise this Warrant, which notice shall specify the number of Stock Units to be purchased, (ii) this Warrant and (iii) a sum equal to the Exercise Price for the number of Stock Units to be purchased in the manner specified below. Such notice shall be in the form of Subscription set out at the end of this Warrant. Upon delivery of one or more Subscriptions, the Issuer shall cause to be executed and delivered to the Holder within five (5) Business Days a certificate or certificates representing the aggregate number of fully paid and nonassessable shares of Common Stock issuable upon such exercise. At the option of the Holder, payment of the Exercise Price shall be made (a) by wire transfer of funds to an account in a bank located in the United States designated by the Issuer for such purpose, (b) by certified or official bank check payable to the order of the Issuer and drawn on a member of the New York Clearing House, (c) by application of all or any part of the principal amount of the Obligations (as defined in the Loan Agreement) if such Holder is INCC or an Affiliate of INCC, or (d) by any combination of such methods. The stock certificate or certificates for Warrant Stock so delivered shall be in such denominations as may be specified in such notice and shall be registered in the name of the Holder or such other name or names as shall be designated in such notice. Such certificate or certificates shall be deemed to have been issued and the Holder or any other Person so designated to be named in such certificate or certificates shall be deemed to have become a holder of record of such shares, including, to the extent permitted by law, the right to vote such shares or to consent or to receive notice as a stockholder, as of the date the notice is delivered to the Issuer as set forth above. If this Warrant shall have been exercised only in part, the Issuer shall, within five (5) Business Days of delivery of such certificate or certificates, deliver to the Holder a new Warrant dated the date it is issued, evidencing the rights of the Holder to purchase the remaining Stock Units called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. Except as otherwise provided in Section 8, the Issuer shall pay all expenses, transfer taxes and other charges payable in connection with the preparation, issue and delivery of stock certificates under this Section 2, except that, if such stock certificates shall be registered in a name or names other than the name of the Holder, funds sufficient to pay all stock transfer taxes which shall be payable upon the issuance of such stock certificate or certificates shall be paid by the Holder prior to the issuance of such stock certificate or certificates. All shares of Common Stock issuable upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable, and free from all liens and other encumbrances on such shares. 7 The Issuer will not close its books against the transfer of this Warrant or of any share of Warrant Stock in any manner which interferes with the timely exercise of this Warrant. The Issuer shall not be obligated to issue certificates for fractional shares of stock upon any exercise of this Warrant. 3. Transfer, Division and Combination. Subject to Section 10, this Warrant is, and all rights under this Warrant are, transferable, in whole or in part, on the books of the Issuer to be maintained for such purpose, upon surrender of this Warrant at the office of the Issuer maintained for such purpose pursuant to Section 16, together with a written assignment of this Warrant in substantially the form of Annex II hereto duly executed by the Holder or its agent or attorney and payment of funds sufficient to pay any stock transfer taxes payable upon the making of such transfer. Upon such surrender and payment the Issuer shall, subject to Section 10, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant shall promptly be canceled. This Warrant, if properly assigned in compliance with this Section 3 and Section 10, may be exercised by an assignee for the purchase of shares of Common Stock without having a new Warrant issued. This Warrant may, subject to Section 10, be divided or combined with other Warrants upon presentation at the office of the Issuer referenced above, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the preceding paragraph and with Section 10, as to any transfer which may be involved in such division or combination, the Issuer shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Issuer shall pay all expenses, taxes (other than stock transfer taxes excluded by the previous provision of this Section 3) and other charges incurred by the Issuer in the performance of its obligations in connection with the preparation, issue and delivery of Warrants under this Section 3. The Issuer agrees to maintain at its office described in Section 16 books for the registration and transfer of the Warrants. 4. Adjustment of Stock Unit or Exercise Price. The number of shares of Common Stock comprising a Stock Unit, or the Exercise Price, shall be subject to adjustment from time to time as set forth in this Section 4 and in Section 5. A. Stock Dividends, Subdivisions and Combinations. If at any time or from time to time the Issuer shall: 8 (1) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Common Stock, or (2) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (3) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then the number of shares of Common Stock comprising a Stock Unit immediately after the happening of any such event shall be adjusted so as to consist of the number of shares of Common Stock which a record holder of the number of shares of Common Stock comprising a Stock Unit immediately prior to the happening of such event would own or be entitled to receive after the happening of such event. B. Certain Other Dividends and Distributions. If at any time or from time to time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (1) cash (other than a cash distribution made as a dividend and payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer, to the extent, but only to the extent, that the aggregate of all such dividends paid or declared after the date of this Warrant, does not exceed the consolidated net income of the Issuer earned subsequent to the date of this Warrant determined in accordance with GAAP, consistently applied), or (2) any evidence of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock) or any other securities or property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), or (3) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock) or any other securities or property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), then the number of shares of Common Stock comprising a Stock Unit from such time shall be adjusted to that number determined by multiplying the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment by a fraction (i) the numerator of which shall be the Current Market Price per share of Common Stock at the date of taking such record, and (ii) the denominator of which 9 shall be such Current Market Price per share minus the portion applicable to one share of Common Stock of any such cash so distributable and of the fair value of any and all such evidences of indebtedness, shares of stock, other securities or property, or warrants or other subscription or purchase rights, so distributable. Such fair value shall be determined in good faith by the board of directors of the Issuer, provided that if such determination is objected to by Approving Holders, such determination shall be made by an independent appraiser chosen in the manner specified in the definition of Appraised Value. A reclassification of the Common Stock into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Subsection B and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Subsection A of this Section 4. C. Issuance of Additional Shares of Common Stock or Convertible Securities. If at any time or from time to time the Issuer shall (except as provided below) issue, whether in connection with the merger of a corporation into the Issuer or otherwise, any Additional Shares of Common Stock or Convertible Securities, then the number of shares of Common Stock comprising a Stock Unit from such time shall be adjusted to be that number determined by multiplying the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Fully Diluted Outstanding Common Stock plus the number of such Additional Shares of Common Stock so issued (or the number of shares of Common Stock into which such Convertible Securities are convertible or exchangeable, as the case may be), and (y) the denominator of which shall be the number of shares of Fully Diluted Outstanding Common Stock. Upon any subsequent adjustment in the number of shares of Common Stock into which any Convertible Securities are convertible or exchangeable, the number of shares of Common Stock comprising a Stock Unit shall be recalculated in accordance with the preceding sentence. No further adjustments of the number of shares of Common Stock comprising a Stock Unit shall be made upon the actual issuance of Common Stock upon the conversion or exchange of any Convertible Securities. The foregoing provisions of this Subsection C shall not apply to any issuance of Additional Shares of Common Stock for which an adjustment is provided under Subsection A or B of this Section 4. D. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the making of adjustments of the 10 number of shares of Common Stock comprising a Stock Unit provided for above in this Section 4: (1) Treasury Stock. The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Issuer shall be deemed an issuance of such stock for purposes of this Section 4. (2) When Adjustments to Be Made. The adjustments required by the preceding Subsections of this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur (including upon any adjustment in the number of shares of Common Stock into which any Convertible Securities are convertible or exchangeable), except that no adjustment shall be made except pursuant to Subsection A of this Section 4 if it would decrease the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (3) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. (4) When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, after taking such record and before the distribution of such dividend, distribution, subscription or purchase rights to shareholders, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then no adjustment shall be required by reason of the taking of such record, and any such adjustment previously made in respect of the taking of such record shall be rescinded and annulled. E. Merger, Consolidation or Disposition of Assets. In the event the Issuer (1) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (2) shall permit any other corporation or entity to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving corporation but, in connection with such consolidation or merger, the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property, or (3) shall transfer all or substantially all of its properties or assets to any other corporation or entity, or (4) shall effect a capital reorganization or reclassification of the Common Stock (other than a change from par to no-par value stock or from no-par to par value stock, or a capital reorganization or reclassification resulting in the issue of Additional Shares of Common Stock for which adjustment in the number of shares comprising a Stock Unit is provided in Subsection C of this Section 4), then, and in each such event, proper provision shall be made so that, 11 upon the basis and the terms and in the manner provided in this Subsection E, the Holder, upon the conversion of all or any part of this Warrant at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive, in lieu of the shares of Common Stock issuable upon such conversion prior to such consummation, the stock and other securities, cash and property to which such Holder would have been entitled upon such consummation if such Holder had converted the Warrant immediately prior to such consummation, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for in this Section 4. Anything contained in this Warrant to the contrary notwithstanding, the Issuer will not effect any of the transactions described in clauses (1) through (4) above unless, prior to the consummation of such transaction, each corporation (other than the Issuer) which may be required to deliver any stock, securities, cash or property upon the conversion of this Warrant shall assume, by written instrument delivered to the Holder, the obligation to deliver to the Holder such shares of stock, securities, cash or property as the Holder may be entitled to receive upon such conversion. The foregoing provisions of this Subsection E shall similarly apply to successive mergers, consolidations or dispositions of assets. In addition to any other requirements under this Subsection E, the Issuer shall give notice to the Holder of this Warrants of any merger, consolidation or disposition at least thirty (30) days before the occurrence of such merger, consolidation or disposition. F. Other Action Affecting Common Stock. In case at any time or from time to time the Issuer shall take any action affecting its Common Stock, other than an action described in any of the foregoing Subsections A to E inclusive, of this Section 4, then, unless in the opinion of the Holder such action will not have a materially adverse effect upon the rights of the Holder, the number of shares of Common Stock or other stock comprising a Stock Unit, or the purchase price of such shares, shall be adjusted in such manner and at such time as the Issuer and the Holder may in good faith agree to be equitable in the circumstances. G. General. The Issuer hereby warrants and represents that, on the date of issuance of this Warrant, this Warrant is exercisable (after giving effect to the exercise in full of this Warrant) for not less than 5% of the number of shares of Fully Diluted Outstanding Common Stock. The Issuer agrees that it will at all times cause this Warrant to be exercisable (after giving effect to the exercise in full of this Warrant) for not less than 5% of the number of shares of Fully Diluted Outstanding Common Stock (or such lesser percentage as may result solely from one or more partial exercises of this Warrant). 5. Notices to the Holder. Whenever the number of shares of Common Stock comprising a Stock Unit, or the price at which a Stock Unit may be purchased upon exercise of this Warrant, shall be adjusted pursuant to Section 4, the Issuer shall 12 forthwith obtain a certificate signed by the principal financial officer of the Issuer or, if the Approving Holders request, by independent accountants of recognized national standing selected by the Issuer and acceptable to the Approving Holders, setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a statement of the fair value, as determined by the board of directors of the Issuer or by appraisal (if applicable), of any evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights referred to in Section 4.B(3) or Section 4.E) and specifying the number of shares of Common Stock comprising a Stock Unit, and any change in the Exercise Price of a Stock Unit, after giving effect to such adjustment or change. The Issuer shall promptly, and in any case within three (3) Business Days after the making of such adjustment, cause a signed copy of such certificate to be delivered to the Holder. The Issuer shall keep at its office or agency, maintained for the purpose pursuant to Section 16, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by the Holder or any prospective purchaser of a Warrant designated by the Holder. 6. Reservation and Authorization of Common Stock; Registration with or Approval of any Governmental Authority. The Issuer shall at all times reserve and keep available for issue upon the exercise of this Warrant such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. All shares of Common Stock that shall be issued upon exercise of this Warrant and payment of the Exercise Price relating to such shares to the Issuer, shall be duly and validly issued and fully paid and nonassessable. Before taking any action which would cause an adjustment reducing the Current Warrant Price per share of Common Stock below the then par value, if any, of the shares of Common Stock issuable upon exercise of this Warrant, the Issuer shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Current Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock comprising a Stock Unit or in the Current Warrant Price per share of Common Stock, the Issuer shall obtain all such authorizations or exemptions of, or consents to, such action as may be necessary from any public regulatory body or bodies having jurisdiction over it by virtue of such action. 7. Taking of Record; Stock and Warrant Transfer Books. In the case of all dividends or other distributions by the Issuer to the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Issuer will in each such case take such a record and will take such record as of the close of business on a Business Day. The Issuer will not at any time, except upon dissolution, liquidation or winding up, close its stock transfer books or Warrant 13 transfer books so as to result in preventing or delaying the exercise or transfer of this Warrant. 8. Transfer Taxes. The Issuer will pay any and all transfer taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on exercise of this Warrant. The Issuer shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which this Warrant is registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Issuer the amount of any such tax, or has established, to the satisfaction of the Issuer, that such tax has been paid. 9. No Voting Rights. Except as expressly provided in this Warrant, this Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Issuer. 10. Restrictions on Transferability. A. Certain Conditions. To the extent that this Warrant or the Warrant Stock covered by the Warrant constitute Restricted Securities, such Restricted Securities shall not be transferable except upon the conditions specified in this Section 10; provided that, notwithstanding any other provisions of this Section 10, the Holder (and each other person mentioned below in this clause) shall have the right to transfer all Restricted Securities or any Restricted Security to any Affiliate of the Holder, in each case free of the restrictions imposed by this Section 10 other than the requirement as to the legending of the certificates for such Restricted Securities specified in Section 10.B. Each such transferee shall be subject to the same transfer restrictions imposed on the Warrant holder by this Warrant. B. Restrictive Legend. Unless and until otherwise permitted by this Section 10, each Warrant issued upon transfer, division or combination of, or in substitution for, this Warrant, each certificate for any Warrant Stock issued upon exercise of this Warrant and each certificate for any Warrant Stock issued to any subsequent transferee of any such certificate shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. 14 "THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE." C. Notice of Proposed Transfers. Prior to any transfer or attempted transfer of any Restricted Securities not covered by the proviso contained in Subsection A of this Section 10, the Holder shall give written notice to the Issuer of the Holder's intention to effect a transfer of such Restricted Securities. Each such notice shall describe the manner and circumstances of the proposed transfer in material detail. Upon receipt of such notice, the Issuer may request an opinion of Murphy, Weir & Butler or such other counsel of the Holder (which counsel shall be reasonably satisfactory to the Issuer) to the effect that such proposed transfer may be effected without registration under the Securities Act. Upon receipt of such opinion, the Issuer shall, as promptly as practicable, so notify the Holder. Upon such notice or if the Issuer has not requested such an opinion, within ten (10) days after the Issuer's receiving notice of the proposed transfer, the Holder shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Issuer. Each Warrant or certificate evidencing the Restricted Securities thus to be transferred (and each Warrant or certificate evidencing any untransferred balance of the Restricted Securities evidenced by such Restricted Certificate) shall bear the restrictive legend set forth in Section 10.B, unless in the opinion of the Issuer or the opinion of such counsel, if requested, such legend is not required in order to insure compliance with the Securities Act. D. Termination of Restrictions. Notwithstanding the foregoing provisions of Section 10, the restrictions imposed upon the transferability of the Restricted Securities shall cease and terminate as to any particular Restricted Security when such Restricted Security shall have been effectively registered under the Securities Act, including, without limitation, any registration pursuant to the Registration Rights Agreement between the Issuer and INCC dated as of the issue date hereof. Whenever such restrictions imposed shall terminate as to any Restricted Certificate, as provided in this Section 10.D, the Holder shall be entitled to receive from the Issuer, without expense, a new Warrant of like tenor and date and representing the right to purchase the same number of aggregate number of shares of Common Stock or a new certificate representing the same number of shares of Warrant Stock (as the case may be), but not bearing the restrictive legend otherwise required by this Warrant. 15 11. Warranties and Representations of the Issuer. The Issuer represents and warrants to the Holder that as of the date of this Warrant: A. Equity Capitalization, etc. (1) Upon the issuance of this Warrant, the total number of shares of capital stock which the Issuer has authority to issue is 5,006,000 shares, consisting of 5,000,000 shares of Common Stock, par value $0.01 per share, and 6,000 shares of preferred stock, $100.00 par value per share. The Issuer has the power and authority and has taken all actions (corporate or otherwise) necessary to authorize it to enter into and perform its obligations and undertakings under this Warrant. Except as set forth on Exhibit 11.A hereto, upon the issuance of this Warrant, the Issuer will not have outstanding any stock or securities convertible into or exchangeable for any shares of its capital stock nor does it have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or stock or securities convertible into or exchangeable for any of its capital stock other than the Warrants. (2) When issued and delivered, the Warrants will have been duly executed, issued and delivered and will constitute legal, valid and binding obligations of the Issuer, enforceable by the Holder in accordance with their terms. (3) None of the issuance of any Warrant, the consummation of the transactions contemplated in any Warrant, or compliance with the terms and provisions of this Warrant will conflict with or result in a breach of, or require any consent under, the certificate of incorporation or the by-laws of the Issuer, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Issuer is a party or by which it is bound or to which it or its property is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any lien upon any of the revenues or assets of the Issuer pursuant to the terms of any such agreement or instrument. (4) There is not in effect on the date of this Warrant any agreement by the Issuer (other than registration agreements copies of each of which have been furnished by the Issuer to INCC) pursuant to which any holders of securities of the Issuer have a right to cause the Issuer to register such securities under the Securities Act. (5) The Issuer is a corporation duly organized and validly existing in good standing under the laws of the State of California and has the corporate power and authority to execute and deliver this Warrant and to perform its 16 terms, including, without limitation, the issuance of Warrant Stock upon exercise of this Warrant. The Issuer has taken all action necessary to authorize the execution, delivery and performance of this Warrant and the issuance of the Warrant Stock upon exercise of this Warrant. B. Governmental Consent. Neither the nature of the Issuer or of any of its businesses or properties, nor any relationship between the Issuer and any other Person, nor (except as expressly provided for in this Warrant) any circumstance in connection with the offer, issue or sale of this Warrant or the Warrant Stock is such as to require consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Issuer as a condition to the execution and delivery of this Warrant or the execution and filing of any certificate of amendment of the certificate of incorporation of the Issuer required in connection with the authorization or issuance of Warrant Stock or the offer, issue or sale of this Warrant or the Warrant Stock. C. Survival of Representations. All representations set forth in this Section 11 shall survive the issuance and delivery of this Warrant. 12. Limitation of Liability. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration in this Warrant of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of the Warrant Stock or as a stockholder of the Issuer, whether such liability is asserted by the Issuer or by creditors of the Issuer. 13. Loss, Destruction of Warrant Certificates. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer (the original Warrant holder's or any other institutional Warrant holder's indemnity being satisfactory indemnity in the event of loss, theft or destruction of this Warrant), or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of the lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock. 14. Furnish Information. The Issuer will file with the Commission on or before the due date all regular or periodic reports required to be filed pursuant to the Exchange Act, and will deliver to the holder of record of this Warrant promptly after their becoming available copies of all financial statements, reports and proxy statements which the Issuer shall have sent to its stockholders generally, and of each regular or periodic report (including, without limitation, reports on Form 8-K) filed by it pursuant to the Exchange Act, and any Registration Statement, prospectus or written 17 communication (other than transmittal letters and other communications not publicly available) filed or delivered by it pursuant to the Securities Act. 15. Amendments. The terms of this Warrant and all other Warrants may be amended, and the observance of any term in such Warrant may be waived, but only with the written consent of the Approving Holders, provided that no such amendment or waiver may change the number of shares of stock comprising a Stock Unit or the Exercise Price, without the written consent of the Holders. For the purposes of determining whether the Approving Holders have taken any action authorized by this Warrant, any Warrants owned by the Issuer or any Affiliate of the Issuer (other than an institutional investor which may be deemed an Affiliate solely by reason of the ownership of Warrants) shall be deemed not to be outstanding. 16. Office of the Issuer. So long as this Warrant remains outstanding, the Issuer shall maintain an office in Los Angeles, California where this Warrant may be presented for exercise, transfer, division or combination as in this Warrant provided. Such office shall be at 10990 Wilshire Boulevard, Los Angeles, California 90024 unless and until the Issuer shall designate and maintain some other office for such purposes and deliver written notice of the address of such other office to the Holders. 17. Notices Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered (i) in person with receipt acknowledged, (ii) by facsimile transmission, with receipt electronically confirmed during normal business hours of recipient, and that is confirmed by sending, no later than one (1) Business Day following such transmission, a copy of such facsimile, by registered or certified mail, return receipt requested, postage prepaid, or (iii) by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (1) If to any Holder or holder of Warrant Stock, at its last known address or facsimile transmission number appearing on the books of the Issuer maintained for such purpose. (2) If to the Issuer at: Erly Industries Inc. 10990 Wilshire Boulevard Los Angeles, California 90024 Attention: Kurt Grey Facsimile: (310) 473-8890 with a copy to: 18 Magnus, Epman & Dwyer 300 Corporate Pointe, Suite 310 Culver City, California 90230-7614 Attention: Ronald J. Epman, Esq. Facsimile: (310) 216-0701 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged or sent by facsimile with receipt electronically confirmed during normal business hours of recipient, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration, delivery or other communication to the person designated above to receive a copy shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, delivery or other communication. 18. Successors and Assigns. This Warrant shall bind and inure to the benefit of and, be enforceable by the parties to this Warrant and their respective successors and assigns, and, without limiting the generality of the foregoing, shall inure to the benefit of and be enforceable by each person who shall from time to time be the Holder of this Warrant. 19. Indemnification. The Issuer agrees to indemnify and hold harmless Holder, its officers, directors, employees, agents, and attorneys from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against Holder relating to or arising out of (i) Holder's exercise of this Warrant and/or ownership of any shares of Warrant Stock issued in consequence thereof, or (ii) any litigation to which Holder is made a party in its capacity as a stockholder or warrant holder of the Issuer; provided, however, that the Issuer will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are found in a final non-appealable judgment by a court to have resulted from either (i) Holder's gross negligence or willful misconduct, (ii) actions or omissions taken or not taken by Holder in any capacity other than as a stockholder or warrant holder of the Issuer, or (iii) any knowing violation of federal or state securities laws by Holder. 20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER 19 SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE ISSUER AND HOLDER CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. SERVICE OF PROCESS ON THE ISSUER OR HOLDER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS WARRANT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN ACCORDANCE WITH THE PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 17. NOTHING HEREIN SHALL PRECLUDE HOLDER OR THE ISSUER FROM BRINGING SUIT OR TAKING LEGAL ACTION IN ANY OTHER JURISDICTION. 21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE ISSUER AND HOLDER HEREOF WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE ISSUER AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE ISSUER AND HOLDER HEREOF WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS WARRANT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. 22. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Holder, any right, remedy, power or privilege under this Warrant, shall operate as a waiver of any such right, remedy power or privilege; nor shall any single or partial exercise of any right, remedy, power or privilege under this Warrant preclude any other or further exercise of any such right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Warrant are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 23. Specific Performance. The Issuer and the Holder agree that irreparable damage would occur in the event that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Holder shall be entitled to an injunction or injunctions to prevent breaches of this Warrant and to enforce specifically the terms and provisions of this Warrant in any court of the United States or any states of the United States 20 having jurisdiction, this being in addition to any other remedy to which it may be entitled at law or in equity. 24. Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained in this Warrant, any provision of this Warrant is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained in this Warrant. 25. Put Option. A. Issuer's Obligation to Repurchase Warrants. Upon written notice from the Holder from time to time after April 30, 1995 but prior to the Expiration Date, the Issuer shall, on the date designated in such notice (which date shall be at least thirty (30) Business Days after the date of such notice), repurchase from such Holder all or the portion of this Warrant designated in such notice for an amount determined by multiplying (i) the Put Price per Stock Unit in effect on the date of such notice by (ii) the number of Stock Units that are designated for repurchase in such notice. Upon such designated repurchase date, the Holder shall surrender this Warrant to the Issuer, without being required to make any representation or warranty (other than that the Holder has good and valid title to this Warrant), against payment for such repurchase by (at the option of the Holder) (i) wire transfer to an account in a bank located in the United States designated by the Holder for such purposes or (ii) delivery of a certified or official bank check drawn on a member of the New York Clearing House. If less than all of this Warrant is being repurchased, the Issuer shall cancel this Warrant and issue in the name of, and deliver to, the Holder a new Warrant for the portion of the number of Stock Units not being repurchased. B. Determination of the Put Price. The Put Price per Stock Unit as of a date specified shall be equal to the Current Market Price per share of Common Stock as of the date of such determination, multiplied by the number of shares of Common Stock constituting a Stock Unit on such date, minus the Exercise Price. 26. Call Option. A. Option to Repurchase Warrant and Issued Warrant Stock. During the Call Period, the Issuer shall have the right, subject to the terms and conditions of this Section 26, to repurchase from Holders all (but not less than all) of the Warrant and any Warrant Stock held by all Holders as of the Call Closing Date (such right shall be referred to as the "Call Option"). 21 B. Notice and Exercise of Call Option. In order to exercise the Call Option, the Issuer must give written notice to all Holders during the Call Period, which notice must (i) specify the date of the repurchase of the Warrant and Warrant Stock pursuant to the Call Option (the "Call Closing Date"), which date shall be no less than three (3) and no more than ten (10) Business Days after the date such notice is given, (ii) state the Call Share Price applicable as of the Call Closing Date, (iii) state the Call Price as calculated without deduction for the Call Price Credit, if any, and (iv) indicate the methods by which the Call Share Price and the portion of the Call Price specified in such notice were calculated. Prior to the Call Closing Date, if there have been any ING Securities Fees, INCC shall, after consultation with Issuer, specify in writing to Issuer the amount of the Call Price Credit as of the Closing Date, which amount so specified shall be conclusive and binding for all purposes absent manifest error or bad faith. On the Call Closing Date, at the offices of INCC or such other location as is designated by INCC, (A) each Holder shall surrender any Warrants held by it to the Issuer, without being required to make any representation or warranty, and (B) each Holder shall deliver to the Issuer any certificates representing Warrant Stock held by it, duly endorsed for transfer to the Issuer, without being required to make any representation or warranty, all against payment of the Call Price by wire transfer of immediately available funds to an account designated by each such Holder for such purpose. Upon the surrender of the Warrants and delivery of the Warrant Stock to the Issuer pursuant to this Section 26.B, the Issuer shall immediately cancel the Warrants and any such Warrant Stock. C. Requirement That Issuer Concurrently Exercise Call Option Under A Warrant. No Holder shall have any obligations under this Section 26, and the Issuer shall have no right to exercise the Call Option, unless, concurrently with the consummation of the Issuer's repurchase of the Warrant and Warrant Stock pursuant to the Call Option, the Issuer also consummates the repurchase of the A Warrant and any A Warrant Stock pursuant to the "Call Option" provided for in Section 26 of the A Warrant. D. Call Price. The purchase price payable for the repurchase of the Warrant and any Warrant Stock pursuant to the Call Option (the "Call Price"), is, as of any time of determination, (i) an amount equal to the then applicable Call Share Price multiplied by a number equal to the sum of (A) the number of shares of Warrant Stock purchasable upon exercise of the Warrant and (B) the number of shares of issued Warrant Stock held by all Holders, if any, plus (ii) if any Warrant Stock has been issued, the aggregate Exercise Price that was paid by Holders to the Issuer for such Warrant Stock pursuant to the Warrant, less (iii) the Call Price Credit as of the Call Closing Date (but the Call Price shall in no event be less than zero). As of the date hereof, the "Call Share Price" is $8.75. Upon the making of any of the adjustments provided for in Section 4.A(2) or 4.A(3) above, the Call Share Price shall be adjusted to the amount obtained by multiplying the Call Share Price in effect immediately prior to such adjustment by a fraction, the numerator of which shall be the number of 22 shares of Common Stock constituting a Stock Unit immediately prior to the relevant adjustment provided for in Section 4.A(2) or 4.A(3), as the case may be, and the denominator of which shall be the number of shares of Common Stock constituting a Stock Unit immediately thereafter. E. No Restriction on Holder's Right to Exercise Warrant; Certain Restrictions on Transferability. Nothing in this Section 26 restricts or otherwise limits Holder's right to exercise the Warrant in whole or in part at any time prior to the commencement of or during the Call Period; provided, however, that Holder hereby agrees that (i) it shall not sell or otherwise transfer the Warrant, other than to an Affiliate of Holder which agrees to be bound by the terms hereof, prior to the Call Cutoff Date, and (ii) if it does exercise or partially exercise the Warrant prior to the Call Cutoff Date, it shall not sell or otherwise transfer any issued Warrant Stock obtained upon such exercise, other than to an Affiliate of Holder which agrees to be bound by the terms hereof, prior to the Call Cutoff Date. 27. Amendment and Restatement of the Existing B Warrant. This Warrant amends and restates the Existing B Warrant in full. 23 IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary. Dated as of February 16, 1995 ERLY INDUSTRIES INC., a California corporation By: /s/ KURT GREY Name: Kurt Grey Title: Vice President ATTEST: /s/ KURT GREY [attestor] THE UNDERSIGNED, AS THE SOLE HOLDER OF THE EXISTING B WARRANT, CONSENTS TO THE FOREGOING AMENDMENT AND RESTATEMENT OF THE EXISTING B WARRANT INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation By: /s/ MICHAEL W. ADLER Name: Michael W. Adler Title: Vice President 24 EXHIBIT 11.A As of the Closing Date, the Issuer has the following outstanding capital stock: 1. TOTAL SHARES OF COMMON STOCK OUTSTANDING: 3,695,547 2. TOTAL SHARES OF PREFERRED STOCK OUTSTANDING: 0 As of the Closing Date, the Issuer has no outstanding stock or securities convertible into or exchangeable for any shares of capital stock, nor does it have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or stock or securities convertible into or exchangeable for any of its capital stock other than the following:
================================================================================================================== Convertible Issue/Grant Into/Exercisable Date For (as of the Instrument/Agreement/Other In Favor of Closing Date)* ================================================================================================================== Amended and Restated Warrant 2/16/95 INCC 257,679 shares of to Purchase Common Stock of Common Stock ERLY Industries (denominated the "A Warrant") - ------------------------------------------------------------------------------------------------------------------ Amended and Restated Warrant 2/16/95 INCC 257,679 shares of to Purchase Common Stock of Common Stock ERLY Industries (denominated the "B Warrant") - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Common 2/16/95 INCC 51,536 shares of Stock of ERLY Industries Common Stock (denominated the "C Warrant") - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Common 2/16/95 INCC 206,143 shares of Stock of ERLY Industries Common Stock (denominated the "D Warrant") - ------------------------------------------------------------------------------------------------------------------ Common Stock Purchase Warrant 5/30/90 BT Commercial aggregate 277,157 Corporation shares of Common Stock - ------------------------------------------------------------------------------------- Common Stock Purchase Warrant 5/30/90 StanChart Business Credit - ------------------------------------------------------------------------------------- Common Stock Purchase Warrant 5/30/90 Union Bank - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Shares of 9/5/93 ABC Capital 10,000 shares of Common Stock Markets Group Common Stock - ------------------------------------------------------------------------------------------------------------------ Convertible Promissory Note 4/1/94 Douglas Murphy 266,596 shares of Common Stock 25 - ------------------------------------------------------------------------------------------------------------------ Stock Options Awarded pursuant 1985 Bill J. McFarland 8,053 shares of to Issuer's 1982 Incentive Stock Common Stock Option Plan, as adjusted to date ------------------------------------------------------------------------ 1988 Douglas A. 115,132 shares of Murphy, Bill J. Common Stock McFarland, John Poole and Lolan M. Pullen - ------------------------------------------------------------------------------------------------------------------ ==================================================================================================================
* All figures shown are as calculated after taking into account all adjustments necessary upon the issuance of the four warrants (denominated the A Warrant, the B Warrant the C Warrant, and the D Warrant) being issued to INCC on the Closing Date. 26 ANNEX I SUBSCRIPTION FORM (to be executed only upon exercise of Warrant) The undersigned registered owner of this Warrant irrevocably exercises this Warrant for and purchases _________ Stock Units of ______________________________, a _________________, purchasable with this Warrant, and herewith makes payment for such Stock Units (by check in the amount of $__________), all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________________ whose address is ____________________ and, if such Stock Units shall not include all of the Stock Units issuable as provided in this Warrant that a new Warrant of like tenor and date for the balance of the Stock Units issuable thereunder be delivered to the undersigned. Dated: -------------------------------- (Signature of Registered Owner) -------------------------------- (Street Address) -------------------------------- (City) (State) (Zip Code) NOTICE: The signature to the subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. The signature to this subscription must be guaranteed by a bank or trust company having an office or correspondent in Los Angeles, California or New York, New York, or by a firm having membership on the New York Stock Exchange. 27 ANNEX II ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of Stock Units set forth below: No. of Stock Name and Address of Assignee Units and does hereby irrevocably constitute and appoint ___________ Attorney to make sure transfer on the books of ERLY Industries Inc., a California corporation, maintained for the purpose, with full power of substitution in the premises. Dated: ----------------------------- Signature ----------------------------- Witness NOTICE: The signature to the subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. The signature to this subscription must be guaranteed by a bank or trust company having an office or correspondent in Los Angeles, California or New York, New York, or by a firm having membership on the New York Stock Exchange. 28 EX-99.1 4 C WARRANT 3.9 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER OF THIS WARRANT A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE. ["C Warrant"] No. of Stock Units: 51,536 WARRANT to Purchase Common Stock of ERLY INDUSTRIES INC. a California corporation TABLE OF CONTENTS
Page 1. Certain Definitions.................................................................................... 1 2. Exercise of Warrant.................................................................................... 5 3. Transfer, Division and Combination..................................................................... 7 4. Adjustment of Stock Unit or Exercise Price............................................................. 8 A. Stock Dividends, Subdivisions and Combinations..................................................... 8 B. Certain Other Dividends and Distributions.......................................................... 8 C. Issuance of Additional Shares of Common Stock or Convertible Securities.................................................................................... 9 D. Other Provisions Applicable to Adjustments Under this Section...................................... 10 (1) Treasury Stock ............................................................................. 10 (2) When Adjustments to Be Made.................................................................... 10 (3) Fractional Interests........................................................................... 10 (4) When Adjustment Not Required................................................................... 10 E. Merger, Consolidation or Disposition of Assets..................................................... 10 F. Other Action Affecting Common Stock................................................................ 11 G. General .......................................................................................... 12 5. Notices to the Holder.................................................................................. 12 6. Reservation and Authorization of Common Stock; Registration with or Approval of any Governmental Authority................................................................. 12 7. Taking of Record; Stock and Warrant Transfer Books..................................................... 13 8. Transfer Taxes......................................................................................... 13 9. No Voting Rights....................................................................................... 13 10. Restrictions on Transferability........................................................................ 13 A. Certain Conditions................................................................................. 13 B. Restrictive Legend................................................................................. 14 C. Notice of Proposed Transfers....................................................................... 14 D. Termination of Restrictions........................................................................ 15 11. Warranties and Representations of the Issuer........................................................... 15 A. Equity Capitalization, etc......................................................................... 15 B. Governmental Consent............................................................................... 16 C. Survival of Representations........................................................................ 16 12. Limitation of Liability................................................................................ 17 13. Loss, Destruction of Warrant Certificates.............................................................. 17 14. Furnish Information.................................................................................... 17 15. Amendments............................................................................................. 17 16. Office of the Issuer................................................................................... 17 17. Notices Generally...................................................................................... 18 18. Successors and Assigns................................................................................. 19 19. Indemnification........................................................................................ 19 20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE....................................................... 19 21. MUTUAL WAIVER OF JURY TRIAL............................................................................ 20 22. No Waiver; Cumulative Remedies......................................................................... 20 23. Specific Performance................................................................................... 20 24. Modification and Severability.......................................................................... 20 25. Put Option............................................................................................. 20 A. Issuer's Obligation to Repurchase Warrants......................................................... 20 B. Determination of the Put Price..................................................................... 21
3 ["C Warrant"] No. of Stock Units: 51,536 WARRANT to Purchase Common Stock of ERLY INDUSTRIES INC. a California corporation THIS IS TO CERTIFY THAT Internationale Nederlanden (U.S.) Capital Corporation, a Delaware corporation ("INCC"), or registered assigns, is entitled to purchase from ERLY Industries Inc., a California corporation (the "Issuer"), at any time after April 1, 1996 but prior to the Expiration Date (as defined below), Fifty One Thousand Five Hundred Thirty Six (51,536) Stock Units, in whole or in part, at a purchase price of $0.01 per Stock Unit (adjusted as provided below), all on the terms and conditions provided in this warrant (this "Warrant"). 1. Certain Definitions. As used in this Warrant, unless the context otherwise requires: "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Issuer after the date of this Warrant, other than the Warrant Stock. "Affiliate" shall mean, with respect to a specified Person, any other Person directly or indirectly controlling or controlled by or under common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Appraisal" shall have the meaning given to such term in the definition of Appraised Value. "Appraised Value" shall mean the fair market value of all outstanding Common Stock, as determined by a written appraisal (the "Appraisal") prepared by an appraiser selected by the Approving Holders and acceptable to the Issuer. "Fair market value" is defined for this purpose as the price for one hundred percent (100%) of the equity capital of the Issuer (determined on a going-concern basis and without giving effect to any discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or the fact that the Issuer may have no class of equity registered under the Exchange Act) on the basis of a sale between a willing seller and buyer, neither acting under any compulsion. In the event that the Issuer and Approving Holders cannot, in good faith, 1 agree upon an appraiser, then the Issuer, on the one hand, and Approving Holders, on the other hand, shall each select an appraiser, the two appraisers so selected shall select a third appraiser who shall be directed to prepare the Appraisal, and the term Appraised Value shall mean the appraised value set forth in the appraisal prepared in accordance with this definition. "Approving Holders" shall mean the holders of Warrants evidencing more than fifty percent (50%) in number of the total number of Stock Units at the time purchasable upon the exercise of all then outstanding Warrants. "Book Value" shall mean, on any date herein specified, the consolidated book value of the Issuer applicable to Common Stock as of the last day of any fiscal month immediately preceding such date, as determined by independent accountants of recognized national standing selected by the Issuer and acceptable to the Approving Holders. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in Los Angeles, California. "Closing Date" is as defined in the Loan Agreement. "Commission" shall mean the Securities and Exchange Commission or any other similar or successor agency of the United States government administering the Securities Act. "Common Stock" shall mean the Issuer's authorized Common Stock, par value $0.01 per share, as constituted on the date of this Warrant, and (i) any stock into which such Common Stock may subsequently be changed or any other capital stock that is not preferred as to dividends or distribution of assets over any other class of stock of the Issuer, and which is not subject to redemption, that may be authorized by the Issuer and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Common Stock in the circumstances contemplated by Section 4.E. "Convertible Securities" shall mean evidences of indebtedness, shares of stock, warrants, rights or other securities which are convertible into or exchangeable for Additional Shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event; provided that Convertible Securities shall not mean the Warrants. "Current Market Price" per share of Common Stock, for the purposes of any provision of this Warrant at the date specified in such provision, shall be deemed to be the price determined pursuant to the first applicable of the following methods: 2 (i) If the Common Stock is traded on a national securities exchange or is traded in the over-the-counter market, the Current Market Price per share of Common Stock shall be deemed to be the average of the daily market prices for thirty (30) consecutive Trading Days commencing forty-five (45) Trading Days before such date. The market price for each such Trading Day shall be, (a) if the Common Stock is traded on a national securities exchange, its last sale price on the preceding Trading Day on such national securities exchange or, if there was no sale on that day, the last reported sale price on such national exchange on the next preceding Trading Day on which there was a sale, or (b) if the principal market for the Common Stock is the over-the-counter market, and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), the last sale price reported on NASDAQ on the preceding Trading Day or, if the Common Stock is an issue for which last sale prices are not reported on NASDAQ, the average of the closing bid and asked quotations on such day, but, in each of the immediately preceding two cases, if the relevant NASDAQ price or quotations did not exist on such day, then the price or quotations on the next preceding Trading Day in which there was such a price or quotations. (ii) If the Current Market Price per share of Common Stock cannot be ascertained by any of the methods set forth in paragraph (i) immediately above, the Current Market Price per share of outstanding Common Stock shall be deemed to be the price equal to the quotient determined by dividing the higher of (i) Book Value or (ii) Appraised Value, by the number of shares (including any fractional shares) of Fully Diluted Outstanding Common Stock. "Current Warrant Price" per share of Common Stock, for the purpose of any provision of this Warrant at the date specified in this Warrant, shall mean the amount equal to the quotient resulting from dividing the Exercise Price in effect on such date by the number of shares (including any fractional share) of Common Stock comprising a Stock Unit on such date. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Exercise Price" shall mean the purchase price per Stock Unit as set forth on the first page of this Warrant on the date of original issue of this Warrant and thereafter shall mean such dollar amount as shall result from the adjustments specified in Section 4, if any. "Expiration Date" shall mean October 31, 2004; provided, however, that if the Termination Date shall occur on or before April 1, 1996, then the Expiration Date shall be the date of such Termination Date. 3 "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding at such date and all shares of Common Stock issuable in respect of this Warrant, and any other options, warrants or other rights to purchase or receive Common Stock outstanding on such date. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Holder" shall mean the holder of this Warrant. "Loan Agreement" shall mean that certain Amended and Restated Loan Agreement dated as of the issue date hereof between ERLY Juice Inc. and INCC, as amended from time to time. "Maturity" is as defined in the Loan Agreement. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Issuer or any Subsidiary thereof, and shall include all shares issuable in respect of any certificates representing fractional interests in shares of Common Stock. "Person" shall mean a corporation, an association, a trust, a partnership, a joint venture, an organization, a business, an individual, a government, a political subdivision or a governmental body. "Put Price" shall have the meaning ascribed to that term in Section 25(B). "Restricted Certificate" shall mean a Warrant or a certificate representing Common Stock bearing the restrictive legend set forth in Section 10. "Restricted Securities" shall mean Restricted Stock and Restricted Warrants. "Restricted Stock" shall mean Warrant Stock represented by a Restricted Certificate. "Restricted Warrant" shall mean a Warrant evidenced by a Restricted Certificate. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission under such act, all as the same shall be in effect at the time. 4 "Subsidiary" shall mean, with respect to any Person, any corporation of which an aggregate of more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person. "Stock Unit" shall constitute one share of Common Stock, as such Common Stock was constituted on the date of this Warrant and thereafter shall constitute such number of shares (including any fractional shares) of Common Stock as shall result from the adjustments specified in Section 4, if any. "Subscription" shall mean a subscription form in the form set out in Annex I hereto. "Termination Date" is as defined in the Loan Agreement. "Trading Day" shall mean any day on which trading occurs on the New York Stock Exchange. "Warrant Stock" shall mean the shares of Common Stock purchasable by the holder of a Warrant upon the exercise of such Warrant. "Warrants" shall mean this Warrant, and all additional or new warrants issued upon transfer, division or combination of, or in substitution for, this Warrant or any such additional or new warrant. All such additional or new warrants shall at all times be identical as to terms and conditions and date, except as to the number of Stock Units for which they may be exercised. 2. Exercise of Warrant. The Holder may, at any time after April 1, 1996 but prior to the Expiration Date, exercise this Warrant in whole at any time or in part from time to time for the number of Stock Units which such holder is then entitled to purchase under this Warrant. If the Expiration Date is the date of the Termination Date pursuant to the proviso to the definition of Expiration Date, then this Warrant shall thereupon terminate and shall be returned by the Holder to the Issuer. In order to exercise this Warrant, in whole or in part, the Holder shall deliver to the Issuer at its office maintained for such purpose pursuant to Section 16 (i) a written notice of the Holder's election to exercise this Warrant, which notice shall specify the number of Stock Units to be purchased, (ii) this Warrant and (iii) a sum equal to the Exercise Price for the number of Stock Units to be purchased in the manner specified below. Such notice shall be in the form of Subscription set out at the end of this Warrant. Upon delivery of one or more Subscriptions, the Issuer shall cause to be executed and delivered to the Holder within five (5) Business Days a certificate or certificates 5 representing the aggregate number of fully paid and nonassessable shares of Common Stock issuable upon such exercise. At the option of the Holder, payment of the Exercise Price shall be made (a) by wire transfer of funds to an account in a bank located in the United States designated by the Issuer for such purpose, (b) by certified or official bank check payable to the order of the Issuer and drawn on a member of the New York Clearing House, (c) by application of all or any part of the principal amount of the Obligations (as defined in the Loan Agreement) if such Holder is INCC or an Affiliate of INCC, or (d) by any combination of such methods. The stock certificate or certificates for Warrant Stock so delivered shall be in such denominations as may be specified in such notice and shall be registered in the name of the Holder or such other name or names as shall be designated in such notice. Such certificate or certificates shall be deemed to have been issued and the Holder or any other Person so designated to be named in such certificate or certificates shall be deemed to have become a holder of record of such shares, including, to the extent permitted by law, the right to vote such shares or to consent or to receive notice as a stockholder, as of the date the notice is delivered to the Issuer as set forth above. If this Warrant shall have been exercised only in part, the Issuer shall, within five (5) Business Days of delivery of such certificate or certificates, deliver to the Holder a new Warrant dated the date it is issued, evidencing the rights of the Holder to purchase the remaining Stock Units called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. Except as otherwise provided in Section 8, the Issuer shall pay all expenses, transfer taxes and other charges payable in connection with the preparation, issue and delivery of stock certificates under this Section 2, except that, if such stock certificates shall be registered in a name or names other than the name of the Holder, funds sufficient to pay all stock transfer taxes which shall be payable upon the issuance of such stock certificate or certificates shall be paid by the Holder prior to the issuance of such stock certificate or certificates. All shares of Common Stock issuable upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable, and free from all liens and other encumbrances on such shares. The Issuer will not close its books against the transfer of this Warrant or of any share of Warrant Stock in any manner which interferes with the timely exercise of this Warrant. The Issuer shall not be obligated to issue certificates for fractional shares of stock upon any exercise of this Warrant. 6 3. Transfer, Division and Combination. Subject to Section 10, this Warrant is, and all rights under this Warrant are, transferable, in whole or in part, on the books of the Issuer to be maintained for such purpose, upon surrender of this Warrant at the office of the Issuer maintained for such purpose pursuant to Section 16, together with a written assignment of this Warrant in substantially the form of Annex II hereto duly executed by the Holder or its agent or attorney and payment of funds sufficient to pay any stock transfer taxes payable upon the making of such transfer. Upon such surrender and payment the Issuer shall, subject to Section 10, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant shall promptly be canceled. This Warrant, if properly assigned in compliance with this Section 3 and Section 10, may be exercised by an assignee for the purchase of shares of Common Stock without having a new Warrant issued. This Warrant may, subject to Section 10, be divided or combined with other Warrants upon presentation at the office of the Issuer referenced above, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the preceding paragraph and with Section 10, as to any transfer which may be involved in such division or combination, the Issuer shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Issuer shall pay all expenses, taxes (other than stock transfer taxes excluded by the previous provision of this Section 3) and other charges incurred by the Issuer in the performance of its obligations in connection with the preparation, issue and delivery of Warrants under this Section 3. The Issuer agrees to maintain at its office described in Section 16 books for the registration and transfer of the Warrants. 4. Adjustment of Stock Unit or Exercise Price. The number of shares of Common Stock comprising a Stock Unit, or the Exercise Price, shall be subject to adjustment from time to time as set forth in this Section 4 and in Section 5. A. Stock Dividends, Subdivisions and Combinations. If at any time or from time to time the Issuer shall: (1) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Common Stock, or (2) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or 7 (3) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then the number of shares of Common Stock comprising a Stock Unit immediately after the happening of any such event shall be adjusted so as to consist of the number of shares of Common Stock which a record holder of the number of shares of Common Stock comprising a Stock Unit immediately prior to the happening of such event would own or be entitled to receive after the happening of such event. B. Certain Other Dividends and Distributions. If at any time or from time to time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (1) cash (other than a cash distribution made as a dividend and payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer, to the extent, but only to the extent, that the aggregate of all such dividends paid or declared after the date of this Warrant, does not exceed the consolidated net income of the Issuer earned subsequent to the date of this Warrant determined in accordance with GAAP, consistently applied), or (2) any evidence of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock) or any other securities or property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), or (3) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock) or any other securities or property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), then the number of shares of Common Stock comprising a Stock Unit from such time shall be adjusted to that number determined by multiplying the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment by a fraction (i) the numerator of which shall be the Current Market Price per share of Common Stock at the date of taking such record, and (ii) the denominator of which shall be such Current Market Price per share minus the portion applicable to one share of Common Stock of any such cash so distributable and of the fair value of any and all such evidences of indebtedness, shares of stock, other securities or property, or warrants or other subscription or purchase rights, so distributable. Such fair value shall be determined in good faith by the board of directors of the Issuer, provided that if such determination is objected to by Approving Holders, such determination shall be made by an independent appraiser chosen in the manner specified in the definition of 8 Appraised Value. A reclassification of the Common Stock into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Subsection B and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Subsection A of this Section 4. C. Issuance of Additional Shares of Common Stock or Convertible Securities. If at any time or from time to time the Issuer shall (except as provided below) issue, whether in connection with the merger of a corporation into the Issuer or otherwise, any Additional Shares of Common Stock or Convertible Securities, then the number of shares of Common Stock comprising a Stock Unit from such time shall be adjusted to be that number determined by multiplying the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Fully Diluted Outstanding Common Stock plus the number of such Additional Shares of Common Stock so issued (or the number of shares of Common Stock into which such Convertible Securities are convertible or exchangeable, as the case may be), and (y) the denominator of which shall be the number of shares of Fully Diluted Outstanding Common Stock. Upon any subsequent adjustment in the number of shares of Common Stock into which any Convertible Securities are convertible or exchangeable, the number of shares of Common Stock comprising a Stock Unit shall be recalculated in accordance with the preceding sentence. No further adjustments of the number of shares of Common Stock comprising a Stock Unit shall be made upon the actual issuance of Common Stock upon the conversion or exchange of any Convertible Securities. The foregoing provisions of this Subsection C shall not apply to any issuance of Additional Shares of Common Stock for which an adjustment is provided under Subsection A or B of this Section 4. D. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock comprising a Stock Unit provided for above in this Section 4: (1) Treasury Stock. The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Issuer shall be deemed an issuance of such stock for purposes of this Section 4. 9 (2) When Adjustments to Be Made. The adjustments required by the preceding Subsections of this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur (including upon any adjustment in the number of shares of Common Stock into which any Convertible Securities are convertible or exchangeable), except that no adjustment shall be made except pursuant to Subsection A of this Section 4 if it would decrease the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (3) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. (4) When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, after taking such record and before the distribution of such dividend, distribution, subscription or purchase rights to shareholders, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then no adjustment shall be required by reason of the taking of such record, and any such adjustment previously made in respect of the taking of such record shall be rescinded and annulled. E. Merger, Consolidation or Disposition of Assets. In the event the Issuer (1) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (2) shall permit any other corporation or entity to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving corporation but, in connection with such consolidation or merger, the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property, or (3) shall transfer all or substantially all of its properties or assets to any other corporation or entity, or (4) shall effect a capital reorganization or reclassification of the Common Stock (other than a change from par to no-par value stock or from no-par to par value stock, or a capital reorganization or reclassification resulting in the issue of Additional Shares of Common Stock for which adjustment in the number of shares comprising a Stock Unit is provided in Subsection C of this Section 4), then, and in each such event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this Subsection E, the Holder, upon the conversion of all or any part of this Warrant at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive, in lieu of the shares of Common Stock issuable upon such conversion prior to such consummation, the stock and other securities, cash and property to which such Holder would have been entitled upon such consummation if such Holder had converted the Warrant immediately prior to 10 such consummation, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for in this Section 4. Anything contained in this Warrant to the contrary notwithstanding, the Issuer will not effect any of the transactions described in clauses (1) through (4) above unless, prior to the consummation of such transaction, each corporation (other than the Issuer) which may be required to deliver any stock, securities, cash or property upon the conversion of this Warrant shall assume, by written instrument delivered to the Holder, the obligation to deliver to the Holder such shares of stock, securities, cash or property as the Holder may be entitled to receive upon such conversion. The foregoing provisions of this Subsection E shall similarly apply to successive mergers, consolidations or dispositions of assets. In addition to any other requirements under this Subsection E, the Issuer shall give notice to the Holder of this Warrants of any merger, consolidation or disposition at least thirty (30) days before the occurrence of such merger, consolidation or disposition. F. Other Action Affecting Common Stock. In case at any time or from time to time the Issuer shall take any action affecting its Common Stock, other than an action described in any of the foregoing Subsections A to E inclusive, of this Section 4, then, unless in the opinion of the Holder such action will not have a materially adverse effect upon the rights of the Holder, the number of shares of Common Stock or other stock comprising a Stock Unit, or the purchase price of such shares, shall be adjusted in such manner and at such time as the Issuer and the Holder may in good faith agree to be equitable in the circumstances. G. General. The Issuer hereby warrants and represents that, on the date of issuance of this Warrant, this Warrant is exercisable (after giving effect to the exercise in full of this Warrant) for not less than 1% of the number of shares of Fully Diluted Outstanding Common Stock. The Issuer agrees that it will at all times cause this Warrant to be exercisable (after giving effect to the exercise in full of this Warrant) for not less than 1% of the number of shares of Fully Diluted Outstanding Common Stock (or such lesser percentage as may result solely from one or more partial exercises of this Warrant). 5. Notices to the Holder. Whenever the number of shares of Common Stock comprising a Stock Unit, or the price at which a Stock Unit may be purchased upon exercise of this Warrant, shall be adjusted pursuant to Section 4, the Issuer shall forthwith obtain a certificate signed by the principal financial officer of the Issuer or, if the Approving Holders request, by independent accountants of recognized national standing selected by the Issuer and acceptable to the Approving Holders, setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a statement of the fair value, as determined by the board of directors of the Issuer or by appraisal (if applicable), of any evidences of indebtedness, shares of stock, other securities or property or warrants or other 11 subscription or purchase rights referred to in Section 4.B(3) or Section 4.E) and specifying the number of shares of Common Stock comprising a Stock Unit, and any change in the Exercise Price of a Stock Unit, after giving effect to such adjustment or change. The Issuer shall promptly, and in any case within three (3) Business Days after the making of such adjustment, cause a signed copy of such certificate to be delivered to the Holder. The Issuer shall keep at its office or agency, maintained for the purpose pursuant to Section 16, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by the Holder or any prospective purchaser of a Warrant designated by the Holder. 6. Reservation and Authorization of Common Stock; Registration with or Approval of any Governmental Authority. The Issuer shall at all times reserve and keep available for issue upon the exercise of this Warrant such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. All shares of Common Stock that shall be issued upon exercise of this Warrant and payment of the Exercise Price relating to such shares to the Issuer, shall be duly and validly issued and fully paid and nonassessable. Before taking any action which would cause an adjustment reducing the Current Warrant Price per share of Common Stock below the then par value, if any, of the shares of Common Stock issuable upon exercise of this Warrant, the Issuer shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Current Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock comprising a Stock Unit or in the Current Warrant Price per share of Common Stock, the Issuer shall obtain all such authorizations or exemptions of, or consents to, such action as may be necessary from any public regulatory body or bodies having jurisdiction over it by virtue of such action. 7. Taking of Record; Stock and Warrant Transfer Books. In the case of all dividends or other distributions by the Issuer to the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Issuer will in each such case take such a record and will take such record as of the close of business on a Business Day. The Issuer will not at any time, except upon dissolution, liquidation or winding up, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of this Warrant. 8. Transfer Taxes. The Issuer will pay any and all transfer taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on exercise of this Warrant. The Issuer shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue and delivery of 12 shares of Common Stock in a name other than that in which this Warrant is registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Issuer the amount of any such tax, or has established, to the satisfaction of the Issuer, that such tax has been paid. 9. No Voting Rights. Except as expressly provided in this Warrant, this Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Issuer. 10. Restrictions on Transferability. A. Certain Conditions. To the extent that this Warrant or the Warrant Stock covered by the Warrant constitute Restricted Securities, such Restricted Securities shall not be transferable except upon the conditions specified in this Section 10; provided that, notwithstanding any other provisions of this Section 10, the Holder (and each other person mentioned below in this clause) shall have the right to transfer all Restricted Securities or any Restricted Security to any Affiliate of the Holder, in each case free of the restrictions imposed by this Section 10 other than the requirement as to the legending of the certificates for such Restricted Securities specified in Section 10.B. Each such transferee shall be subject to the same transfer restrictions imposed on the Warrant holder by this Warrant. B. Restrictive Legend. Unless and until otherwise permitted by this Section 10, each Warrant issued upon transfer, division or combination of, or in substitution for, this Warrant, each certificate for any Warrant Stock issued upon exercise of this Warrant and each certificate for any Warrant Stock issued to any subsequent transferee of any such certificate shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. "THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A 13 NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE." C. Notice of Proposed Transfers. Prior to any transfer or attempted transfer of any Restricted Securities not covered by the proviso contained in Subsection A of this Section 10, the Holder shall give written notice to the Issuer of the Holder's intention to effect a transfer of such Restricted Securities. Each such notice shall describe the manner and circumstances of the proposed transfer in material detail. Upon receipt of such notice, the Issuer may request an opinion of Murphy, Weir & Butler or such other counsel of the Holder (which counsel shall be reasonably satisfactory to the Issuer) to the effect that such proposed transfer may be effected without registration under the Securities Act. Upon receipt of such opinion, the Issuer shall, as promptly as practicable, so notify the Holder. Upon such notice or if the Issuer has not requested such an opinion, within ten (10) days after the Issuer's receiving notice of the proposed transfer, the Holder shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Issuer. Each Warrant or certificate evidencing the Restricted Securities thus to be transferred (and each Warrant or certificate evidencing any untransferred balance of the Restricted Securities evidenced by such Restricted Certificate) shall bear the restrictive legend set forth in Section 10.B, unless in the opinion of the Issuer or the opinion of such counsel, if requested, such legend is not required in order to insure compliance with the Securities Act. D. Termination of Restrictions. Notwithstanding the foregoing provisions of Section 10, the restrictions imposed upon the transferability of the Restricted Securities shall cease and terminate as to any particular Restricted Security when such Restricted Security shall have been effectively registered under the Securities Act, including, without limitation, any registration pursuant to the Registration Rights Agreement between the Issuer and INCC dated as of the issue date hereof. Whenever such restrictions imposed shall terminate as to any Restricted Certificate, as provided in this Section 10.D, the Holder shall be entitled to receive from the Issuer, without expense, a new Warrant of like tenor and date and representing the right to purchase the same number of aggregate number of shares of Common Stock or a new certificate representing the same number of shares of Warrant Stock (as the case may be), but not bearing the restrictive legend otherwise required by this Warrant. 11. Warranties and Representations of the Issuer. The Issuer represents and warrants to the Holder that as of the date of this Warrant: A. Equity Capitalization, etc. 14 (1) Upon the issuance of this Warrant, the total number of shares of capital stock which the Issuer has authority to issue is 5,006,000 shares, consisting of 5,000,000 shares of Common Stock, par value $0.01 per share, and 6,000 shares of preferred stock, $100.00 par value per share. The Issuer has the power and authority and has taken all actions (corporate or otherwise) necessary to authorize it to enter into and perform its obligations and undertakings under this Warrant. Except as set forth on Exhibit 11.A hereto, upon the issuance of this Warrant, the Issuer will not have outstanding any stock or securities convertible into or exchangeable for any shares of its capital stock nor does it have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or stock or securities convertible into or exchangeable for any of its capital stock other than the Warrants. (2) When issued and delivered, the Warrants will have been duly executed, issued and delivered and will constitute legal, valid and binding obligations of the Issuer, enforceable by the Holder in accordance with their terms. (3) None of the issuance of any Warrant, the consummation of the transactions contemplated in any Warrant, or compliance with the terms and provisions of this Warrant will conflict with or result in a breach of, or require any consent under, the certificate of incorporation or the by-laws of the Issuer, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Issuer is a party or by which it is bound or to which it or its property is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any lien upon any of the revenues or assets of the Issuer pursuant to the terms of any such agreement or instrument. (4) There is not in effect on the date of this Warrant any agreement by the Issuer (other than registration agreements copies of each of which have been furnished by the Issuer to INCC) pursuant to which any holders of securities of the Issuer have a right to cause the Issuer to register such securities under the Securities Act. (5) The Issuer is a corporation duly organized and validly existing in good standing under the laws of the State of California and has the corporate power and authority to execute and deliver this Warrant and to perform its terms, including, without limitation, the issuance of Warrant Stock upon exercise of this Warrant. The Issuer has taken all action necessary to authorize the execution, delivery and performance of this Warrant and the issuance of the Warrant Stock upon exercise of this Warrant. 15 B. Governmental Consent. Neither the nature of the Issuer or of any of its businesses or properties, nor any relationship between the Issuer and any other Person, nor (except as expressly provided for in this Warrant) any circumstance in connection with the offer, issue or sale of this Warrant or the Warrant Stock is such as to require consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Issuer as a condition to the execution and delivery of this Warrant or the execution and filing of any certificate of amendment of the certificate of incorporation of the Issuer required in connection with the authorization or issuance of Warrant Stock or the offer, issue or sale of this Warrant or the Warrant Stock. C. Survival of Representations. All representations set forth in this Section 11 shall survive the issuance and delivery of this Warrant. 12. Limitation of Liability. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration in this Warrant of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of the Warrant Stock or as a stockholder of the Issuer, whether such liability is asserted by the Issuer or by creditors of the Issuer. 13. Loss, Destruction of Warrant Certificates. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer (the original Warrant holder's or any other institutional Warrant holder's indemnity being satisfactory indemnity in the event of loss, theft or destruction of this Warrant), or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of the lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock. 14. Furnish Information. The Issuer will file with the Commission on or before the due date all regular or periodic reports required to be filed pursuant to the Exchange Act, and will deliver to the holder of record of this Warrant promptly after their becoming available copies of all financial statements, reports and proxy statements which the Issuer shall have sent to its stockholders generally, and of each regular or periodic report (including, without limitation, reports on Form 8-K) filed by it pursuant to the Exchange Act, and any Registration Statement, prospectus or written communication (other than transmittal letters and other communications not publicly available) filed or delivered by it pursuant to the Securities Act. 15. Amendments. The terms of this Warrant and all other Warrants may be amended, and the observance of any term in such Warrant may be waived, but only 16 with the written consent of the Approving Holders, provided that no such amendment or waiver may change the number of shares of stock comprising a Stock Unit or the Exercise Price, without the written consent of the Holders. For the purposes of determining whether the Approving Holders have taken any action authorized by this Warrant, any Warrants owned by the Issuer or any Affiliate of the Issuer (other than an institutional investor which may be deemed an Affiliate solely by reason of the ownership of Warrants) shall be deemed not to be outstanding. 16. Office of the Issuer. So long as this Warrant remains outstanding, the Issuer shall maintain an office in Los Angeles, California where this Warrant may be presented for exercise, transfer, division or combination as in this Warrant provided. Such office shall be at 10990 Wilshire Boulevard, Los Angeles, California 90024 unless and until the Issuer shall designate and maintain some other office for such purposes and deliver written notice of the address of such other office to the Holders. 17. Notices Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered (i) in person with receipt acknowledged, (ii) by facsimile transmission, with receipt electronically confirmed during normal business hours of recipient, and that is confirmed by sending, no later than one (1) Business Day following such transmission, a copy of such facsimile, by registered or certified mail, return receipt requested, postage prepaid, or (iii) by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (1) If to any Holder or holder of Warrant Stock, at its last known address or facsimile transmission number appearing on the books of the Issuer maintained for such purpose. (2) If to the Issuer at: Erly Industries Inc. 10990 Wilshire Boulevard Los Angeles, California 90024 Attention: Kurt Grey Facsimile: (310) 473-8890 with a copy to: Magnus, Epman & Dwyer 300 Corporate Pointe, Suite 310 Culver City, California 90230-7614 Attention: Ronald J. Epman, Esq. Facsimile: (310) 216-0701 17 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged or sent by facsimile with receipt electronically confirmed during normal business hours of recipient, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration, delivery or other communication to the person designated above to receive a copy shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, delivery or other communication. 18. Successors and Assigns. This Warrant shall bind and inure to the benefit of and, be enforceable by the parties to this Warrant and their respective successors and assigns, and, without limiting the generality of the foregoing, shall inure to the benefit of and be enforceable by each person who shall from time to time be the Holder of this Warrant. 19. Indemnification. The Issuer agrees to indemnify and hold harmless Holder, its officers, directors, employees, agents, and attorneys from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against Holder relating to or arising out of (i) Holder's exercise of this Warrant and/or ownership of any shares of Warrant Stock issued in consequence thereof, or (ii) any litigation to which Holder is made a party in its capacity as a stockholder or warrant holder of the Issuer; provided, however, that the Issuer will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are found in a final non-appealable judgment by a court to have resulted from either (i) Holder's gross negligence or willful misconduct, (ii) actions or omissions taken or not taken by Holder in any capacity other than as a stockholder or warrant holder of the Issuer, or (iii) any knowing violation of federal or state securities laws by Holder. 20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE ISSUER AND HOLDER CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR 18 VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. SERVICE OF PROCESS ON THE ISSUER OR HOLDER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS WARRANT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN ACCORDANCE WITH THE PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 17. NOTHING HEREIN SHALL PRECLUDE HOLDER OR THE ISSUER FROM BRINGING SUIT OR TAKING LEGAL ACTION IN ANY OTHER JURISDICTION. 21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE ISSUER AND HOLDER HEREOF WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE ISSUER AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE ISSUER AND HOLDER HEREOF WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS WARRANT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. 22. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Holder, any right, remedy, power or privilege under this Warrant, shall operate as a waiver of any such right, remedy power or privilege; nor shall any single or partial exercise of any right, remedy, power or privilege under this Warrant preclude any other or further exercise of any such right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Warrant are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 23. Specific Performance. The Issuer and the Holder agree that irreparable damage would occur in the event that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Holder shall be entitled to an injunction or injunctions to prevent breaches of this Warrant and to enforce specifically the terms and provisions of this Warrant in any court of the United States or any states of the United States having jurisdiction, this being in addition to any other remedy to which it may be entitled at law or in equity. 24. Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained in this Warrant, any provision of this Warrant is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or 19 agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained in this Warrant. 25. Put Option. A. Issuer's Obligation to Repurchase Warrants. Upon written notice from the Holder, from time to time after Maturity but prior to the Expiration Date, the Issuer shall, on the date designated in such notice (which date shall be at least thirty (30) Business Days after the date of such notice), repurchase from such Holder all or the portion of this Warrant designated in such notice for an amount determined by multiplying (i) the Put Price per Stock Unit in effect on the date of such notice by (ii) the number of Stock Units that are designated for repurchase in such notice. Upon such designated repurchase date, the Holder shall surrender this Warrant to the Issuer, without being required to make any representation or warranty (other than that the Holder has good and valid title to this Warrant), against payment for such repurchase by (at the option of the Holder) (i) wire transfer to an account in a bank located in the United States designated by the Holder for such purposes or (ii) delivery of a certified or official bank check drawn on a member of the New York Clearing House. If less than all of this Warrant is being repurchased, the Issuer shall cancel this Warrant and issue in the name of, and deliver to, the Holder a new Warrant for the portion of the number of Stock Units not being repurchased. B. Determination of the Put Price. The Put Price per Stock Unit as of a date specified shall be equal to the Current Market Price per share of Common Stock as of the date of such determination, multiplied by the number of shares of Common Stock constituting a Stock Unit on such date, minus the Exercise Price. IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary. Dated as of February 16, 1995 ERLY INDUSTRIES INC., a California corporation By: /s/ KURT GREY Name: Kurt Grey Title: Vice President 20 ATTEST: /s/ KURT GREY [attestor] 21 EXHIBIT 11.A As of the Closing Date, the Issuer has the following outstanding capital stock: 1. TOTAL SHARES OF COMMON STOCK OUTSTANDING: 3,695,547 2. TOTAL SHARES OF PREFERRED STOCK OUTSTANDING: 0 As of the Closing Date, the Issuer has no outstanding stock or securities convertible into or exchangeable for any shares of capital stock, nor does it have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or stock or securities convertible into or exchangeable for any of its capital stock other than the following:
================================================================================================================== Convertible Issue/Grant Into/Exercisable Date For (as of the Instrument/Agreement/Other In Favor of Closing Date)* ================================================================================================================== Amended and Restated Warrant 2/16/95 INCC 257,679 shares of to Purchase Common Stock of Common Stock ERLY Industries (denominated the "A Warrant") - ------------------------------------------------------------------------------------------------------------------ Amended and Restated Warrant 2/16/95 INCC 257,679 shares of to Purchase Common Stock of Common Stock ERLY Industries (denominated the "B Warrant") - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Common 2/16/95 INCC 51,536 shares of Stock of ERLY Industries Common Stock (denominated the "C Warrant") - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Common 2/16/95 INCC 206,143 shares of Stock of ERLY Industries Common Stock (denominated the "D Warrant") - ------------------------------------------------------------------------------------------------------------------ Common Stock Purchase Warrant 5/30/90 BT Commercial aggregate 277,157 Corporation shares of Common Stock - ------------------------------------------------------------------------------------- Common Stock Purchase Warrant 5/30/90 StanChart Business Credit - ------------------------------------------------------------------------------------- Common Stock Purchase Warrant 5/30/90 Union Bank - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Shares of 9/5/93 ABC Capital 10,000 shares of Common Stock Markets Group Common Stock - ------------------------------------------------------------------------------------------------------------------ Convertible Promissory Note 4/1/94 Douglas Murphy 266,596 shares of Common Stock 22 - ------------------------------------------------------------------------------------------------------------------ Stock Options Awarded pursuant 1985 Bill J. McFarland 8,053 shares of to Issuer's 1982 Incentive Stock Common Stock Option Plan, as adjusted to date ------------------------------------------------------------------------ 1988 Douglas A. 115,132 shares of Murphy, Bill J. Common Stock McFarland, John Poole and Lolan M. Pullen - ------------------------------------------------------------------------------------------------------------------ ==================================================================================================================
* All figures shown are as calculated after taking into account all adjustments necessary upon the issuance of the four warrants (denominated the A Warrant, the B Warrant the C Warrant, and the D Warrant) being issued to INCC on the Closing Date. 23 ANNEX I SUBSCRIPTION FORM (to be executed only upon exercise of Warrant) The undersigned registered owner of this Warrant irrevocably exercises this Warrant for and purchases _________ Stock Units of ______________________________, a _________________, purchasable with this Warrant, and herewith makes payment for such Stock Units (by check in the amount of $__________), all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________________ whose address is ____________________ and, if such Stock Units shall not include all of the Stock Units issuable as provided in this Warrant that a new Warrant of like tenor and date for the balance of the Stock Units issuable thereunder be delivered to the undersigned. Dated: -------------------------------- (Signature of Registered Owner) -------------------------------- (Street Address) -------------------------------- (City) (State) (Zip Code) NOTICE: The signature to the subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. The signature to this subscription must be guaranteed by a bank or trust company having an office or correspondent in Los Angeles, California or New York, New York, or by a firm having membership on the New York Stock Exchange. 24 ANNEX II ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of Stock Units set forth below: No. of Stock Name and Address of Assignee Units and does hereby irrevocably constitute and appoint ___________ Attorney to make sure transfer on the books of ERLY Industries Inc., a California corporation, maintained for the purpose, with full power of substitution in the premises. Dated: ----------------------------- Signature ----------------------------- Witness NOTICE: The signature to the subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. The signature to this subscription must be guaranteed by a bank or trust company having an office or correspondent in Los Angeles, California or New York, New York, or by a firm having membership on the New York Stock Exchange. 25 EX-99.1 5 D WARRANT 3.10 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER OF THIS WARRANT A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE. ["D Warrant"] No. of Stock Units: 206,143 WARRANT to Purchase Common Stock of ERLY INDUSTRIES INC. a California corporation TABLE OF CONTENTS
Page 1. Certain Definitions.................................................................................... 1 2. Exercise of Warrant.................................................................................... 6 3. Transfer, Division and Combination..................................................................... 7 4. Adjustment of Stock Unit or Exercise Price............................................................. 8 A. Stock Dividends, Subdivisions and Combinations.................................................... 8 B. Certain Other Dividends and Distributions......................................................... 8 C. Issuance of Additional Shares of Common Stock or Convertible Securities.................................................................................... 9 D. Other Provisions Applicable to Adjustments Under this Section..................................... 10 (1) Treasury Stock ........................................................................... 10 (2) When Adjustments to Be Made.................................................................. 10 (3) Fractional Interests......................................................................... 10 (4) When Adjustment Not Required................................................................. 10 E. Merger, Consolidation or Disposition of Assets.................................................... 11 F. Other Action Affecting Common Stock............................................................... 12 G. General ......................................................................................... 12 5. Notices to the Holder.................................................................................. 12 6. Reservation and Authorization of Common Stock; Registration with or Approval of any Governmental Authority................................................................. 12 7. Taking of Record; Stock and Warrant Transfer Books..................................................... 13 8. Transfer Taxes......................................................................................... 13 9. No Voting Rights....................................................................................... 13 10. Restrictions on Transferability........................................................................ 13 A. Certain Conditions................................................................................. 14 B. Restrictive Legend................................................................................. 14 C. Notice of Proposed Transfers....................................................................... 14 D. Termination of Restrictions........................................................................ 15 11. Warranties, Representations and Covenants of the Issuer................................................ 15 A. Equity Capitalization, etc......................................................................... 15 B. Governmental Consent............................................................................... 17 C. Survival of Representations........................................................................ 17 2 12. Limitation of Liability................................................................................ 17 13. Loss, Destruction of Warrant Certificates.............................................................. 17 14. Furnish Information.................................................................................... 17 15. Amendments............................................................................................. 18 16. Office of the Issuer................................................................................... 18 17. Notices Generally...................................................................................... 18 18. Successors and Assigns................................................................................. 19 19. Indemnification........................................................................................ 19 20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE....................................................... 20 21. MUTUAL WAIVER OF JURY TRIAL............................................................................ 20 22. No Waiver; Cumulative Remedies......................................................................... 20 23. Specific Performance................................................................................... 21 24. Modification and Severability.......................................................................... 21 25. Put Option............................................................................................. 21 A. Issuer's Obligation to Repurchase Warrants......................................................... 21 B. Determination of the Put Price..................................................................... 21
3 ["D Warrant"] No. of Stock Units: 206,143 WARRANT to Purchase Common Stock of ERLY INDUSTRIES INC. a California corporation THIS IS TO CERTIFY THAT Internationale Nederlanden (U.S.) Capital Corporation, a Delaware corporation ("INCC"), or registered assigns, is entitled to purchase from ERLY Industries Inc., a California corporation (the "Issuer"), at any time after April 1, 1996 but prior to the Expiration Date (as defined below), Two Hundred Six Thousand One Hundred Forty Three (206,143) Stock Units, in whole or in part, at a purchase price of $0.01 per Stock Unit (adjusted as provided below), all on the terms and conditions provided in this warrant (this "Warrant"). 1. Certain Definitions. As used in this Warrant, unless the context otherwise requires: "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Issuer after the date of this Warrant, other than the Warrant Stock. "Affiliate" shall mean, with respect to a specified Person, any other Person directly or indirectly controlling or controlled by or under common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Appraisal" shall have the meaning given to such term in the definition of Appraised Value. "Appraised Value" shall mean the fair market value of all outstanding Common Stock, as determined by a written appraisal (the "Appraisal") prepared by an appraiser selected by the Approving Holders and acceptable to the Issuer. "Fair market value" is defined for this purpose as the price for one hundred percent (100%) of the equity capital of the Issuer (determined on a going-concern basis and without giving effect to any discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or the fact that the Issuer may have no class of equity registered under the Exchange Act) on the basis of a sale between a willing seller and buyer, neither acting under any compulsion. In the event that the Issuer and Approving Holders cannot, in good faith, 1 agree upon an appraiser, then the Issuer, on the one hand, and Approving Holders, on the other hand, shall each select an appraiser, the two appraisers so selected shall select a third appraiser who shall be directed to prepare the Appraisal, and the term Appraised Value shall mean the appraised value set forth in the appraisal prepared in accordance with this definition. "Approving Holders" shall mean the holders of Warrants evidencing more than fifty percent (50%) in number of the total number of Stock Units at the time purchasable upon the exercise of all then outstanding Warrants. "Book Value" shall mean, on any date herein specified, the consolidated book value of the Issuer applicable to Common Stock as of the last day of any fiscal month immediately preceding such date, as determined by independent accountants of recognized national standing selected by the Issuer and acceptable to the Approving Holders. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in Los Angeles, California. "Closing Date" is as defined in the Loan Agreement. "Commission" shall mean the Securities and Exchange Commission or any other similar or successor agency of the United States government administering the Securities Act. "Common Stock" shall mean the Issuer's authorized Common Stock, par value $0.01 per share, as constituted on the date of this Warrant, and (i) any stock into which such Common Stock may subsequently be changed or any other capital stock that is not preferred as to dividends or distribution of assets over any other class of stock of the Issuer, and which is not subject to redemption, that may be authorized by the Issuer and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Common Stock in the circumstances contemplated by Section 4.E. "Convertible Securities" shall mean evidences of indebtedness, shares of stock, warrants, rights or other securities which are convertible into or exchangeable for Additional Shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event; provided that Convertible Securities shall not mean the Warrants. "Current Market Price" per share of Common Stock, for the purposes of any provision of this Warrant at the date specified in such provision, shall be deemed to be the price determined pursuant to the first applicable of the following methods: 2 (i) If the Common Stock is traded on a national securities exchange or is traded in the over-the-counter market, the Current Market Price per share of Common Stock shall be deemed to be the average of the daily market prices for thirty (30) consecutive Trading Days commencing forty-five (45) Trading Days before such date. The market price for each such Trading Day shall be, (a) if the Common Stock is traded on a national securities exchange, its last sale price on the preceding Trading Day on such national securities exchange or, if there was no sale on that day, the last reported sale price on such national exchange on the next preceding Trading Day on which there was a sale, or (b) if the principal market for the Common Stock is the over-the-counter market, and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), the last sale price reported on NASDAQ on the preceding Trading Day or, if the Common Stock is an issue for which last sale prices are not reported on NASDAQ, the average of the closing bid and asked quotations on such day, but, in each of the immediately preceding two cases, if the relevant NASDAQ price or quotations did not exist on such day, then the price or quotations on the next preceding Trading Day in which there was such a price or quotations. (ii) If the Current Market Price per share of Common Stock cannot be ascertained by any of the methods set forth in paragraph (i) immediately above, the Current Market Price per share of outstanding Common Stock shall be deemed to be the price equal to the quotient determined by dividing the higher of (i) Book Value or (ii) Appraised Value, by the number of shares (including any fractional shares) of Fully Diluted Outstanding Common Stock. "Current Warrant Price" per share of Common Stock, for the purpose of any provision of this Warrant at the date specified in this Warrant, shall mean the amount equal to the quotient resulting from dividing the Exercise Price in effect on such date by the number of shares (including any fractional share) of Common Stock comprising a Stock Unit on such date. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Exercise Price" shall mean the purchase price per Stock Unit as set forth on the first page of this Warrant on the date of original issue of this Warrant and thereafter shall mean such dollar amount as shall result from the adjustments specified in Section 4, if any. "Expiration Date" shall mean October 31, 2004; provided, however, that if the Termination Date shall occur on or before April 1, 1996, then the Expiration Date shall be the date of such Termination Date. 3 "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding at such date and all shares of Common Stock issuable in respect of this Warrant, and any other options, warrants or other rights to purchase or receive Common Stock outstanding on such date. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Holder" shall mean the holder of this Warrant. "Loan Agreement" shall mean that certain Amended and Restated Loan Agreement dated as of the issue date hereof between ERLY Juice Inc. and INCC, as amended from time to time. "Maturity" is as defined in the Loan Agreement. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Issuer or any Subsidiary thereof, and shall include all shares issuable in respect of any certificates representing fractional interests in shares of Common Stock. "Person" shall mean a corporation, an association, a trust, a partnership, a joint venture, an organization, a business, an individual, a government, a political subdivision or a governmental body. "Put Price" shall have the meaning ascribed to that term in Section 25(B). "Restricted Certificate" shall mean a Warrant or a certificate representing Common Stock bearing the restrictive legend set forth in Section 10. "Restricted Securities" shall mean Restricted Stock and Restricted Warrants. "Restricted Stock" shall mean Warrant Stock represented by a Restricted Certificate. "Restricted Warrant" shall mean a Warrant evidenced by a Restricted Certificate. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission under such act, all as the same shall be in effect at the time. 4 "Share Availability Date" shall mean the first date upon which the Issuer has sufficient shares authorized under its certificate of incorporation to permit the issuance of all the shares of Common Stock required for the satisfaction of the rights under this Warrant and all other option or conversion rights granted on or prior to the date of issuance of this Warrant or granted hereafter pursuant to Issuer's 1982 Incentive Stock Option Plan as in effect on the Closing Date. "Subsidiary" shall mean, with respect to any Person, any corporation of which an aggregate of more than 50% of the outstanding stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person. "Stock Unit" shall constitute one share of Common Stock, as such Common Stock was constituted on the date of this Warrant and thereafter shall constitute such number of shares (including any fractional shares) of Common Stock as shall result from the adjustments specified in Section 4, if any. "Subscription" shall mean a subscription form in the form set out in Annex I hereto. "Termination Date" is as defined in the Loan Agreement. "Trading Day" shall mean any day on which trading occurs on the New York Stock Exchange. "Warrant Stock" shall mean the shares of Common Stock purchasable by the holder of a Warrant upon the exercise of such Warrant. "Warrants" shall mean this Warrant, and all additional or new warrants issued upon transfer, division or combination of, or in substitution for, this Warrant or any such additional or new warrant. All such additional or new warrants shall at all times be identical as to terms and conditions and date, except as to the number of Stock Units for which they may be exercised. 2. Exercise of Warrant. The Holder may, at any time after April 1, 1996, but prior to the Expiration Date, exercise this Warrant in whole at any time or in part from time to time for the number of Stock Units which such holder is then entitled to purchase under this Warrant. If the Expiration Date is the date of the Termination Date pursuant to the proviso to the definition of Expiration Date, then this Warrant shall thereupon terminate and shall be returned by the Holder to the Issuer. In order to exercise this Warrant, in whole or in part, the Holder shall deliver to the Issuer at its 5 office maintained for such purpose pursuant to Section 16 (i) a written notice of the Holder's election to exercise this Warrant, which notice shall specify the number of Stock Units to be purchased, (ii) this Warrant and (iii) a sum equal to the Exercise Price for the number of Stock Units to be purchased in the manner specified below. Such notice shall be in the form of Subscription set out at the end of this Warrant. Upon delivery of one or more Subscriptions, the Issuer shall cause to be executed and delivered to the Holder within five (5) Business Days a certificate or certificates representing the aggregate number of fully paid and nonassessable shares of Common Stock issuable upon such exercise. At the option of the Holder, payment of the Exercise Price shall be made (a) by wire transfer of funds to an account in a bank located in the United States designated by the Issuer for such purpose, (b) by certified or official bank check payable to the order of the Issuer and drawn on a member of the New York Clearing House, (c) by application of all or any part of the principal amount of the Obligations (as defined in the Loan Agreement) if such Holder is INCC or an Affiliate of INCC, or (d) by any combination of such methods. The stock certificate or certificates for Warrant Stock so delivered shall be in such denominations as may be specified in such notice and shall be registered in the name of the Holder or such other name or names as shall be designated in such notice. Such certificate or certificates shall be deemed to have been issued and the Holder or any other Person so designated to be named in such certificate or certificates shall be deemed to have become a holder of record of such shares, including, to the extent permitted by law, the right to vote such shares or to consent or to receive notice as a stockholder, as of the date the notice is delivered to the Issuer as set forth above. If this Warrant shall have been exercised only in part, the Issuer shall, within five (5) Business Days of delivery of such certificate or certificates, deliver to the Holder a new Warrant dated the date it is issued, evidencing the rights of the Holder to purchase the remaining Stock Units called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. Except as otherwise provided in Section 8, the Issuer shall pay all expenses, transfer taxes and other charges payable in connection with the preparation, issue and delivery of stock certificates under this Section 2, except that, if such stock certificates shall be registered in a name or names other than the name of the Holder, funds sufficient to pay all stock transfer taxes which shall be payable upon the issuance of such stock certificate or certificates shall be paid by the Holder prior to the issuance of such stock certificate or certificates. From and after the Share Availability Date, all shares of Common Stock issuable upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable, and free from all liens and other encumbrances on such shares. 6 The Issuer will not close its books against the transfer of this Warrant or of any share of Warrant Stock in any manner which interferes with the timely exercise of this Warrant. The Issuer shall not be obligated to issue certificates for fractional shares of stock upon any exercise of this Warrant. 3. Transfer, Division and Combination. Subject to Section 10, this Warrant is, and all rights under this Warrant are, transferable, in whole or in part, on the books of the Issuer to be maintained for such purpose, upon surrender of this Warrant at the office of the Issuer maintained for such purpose pursuant to Section 16, together with a written assignment of this Warrant in substantially the form of Annex II hereto duly executed by the Holder or its agent or attorney and payment of funds sufficient to pay any stock transfer taxes payable upon the making of such transfer. Upon such surrender and payment the Issuer shall, subject to Section 10, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant shall promptly be canceled. This Warrant, if properly assigned in compliance with this Section 3 and Section 10, may be exercised by an assignee for the purchase of shares of Common Stock without having a new Warrant issued. This Warrant may, subject to Section 10, be divided or combined with other Warrants upon presentation at the office of the Issuer referenced above, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the preceding paragraph and with Section 10, as to any transfer which may be involved in such division or combination, the Issuer shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Issuer shall pay all expenses, taxes (other than stock transfer taxes excluded by the previous provision of this Section 3) and other charges incurred by the Issuer in the performance of its obligations in connection with the preparation, issue and delivery of Warrants under this Section 3. The Issuer agrees to maintain at its office described in Section 16 books for the registration and transfer of the Warrants. 4. Adjustment of Stock Unit or Exercise Price. The number of shares of Common Stock comprising a Stock Unit, or the Exercise Price, shall be subject to adjustment from time to time as set forth in this Section 4 and in Section 5. A. Stock Dividends, Subdivisions and Combinations. If at any time or from time to time the Issuer shall: 7 (1) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Common Stock, or (2) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (3) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then the number of shares of Common Stock comprising a Stock Unit immediately after the happening of any such event shall be adjusted so as to consist of the number of shares of Common Stock which a record holder of the number of shares of Common Stock comprising a Stock Unit immediately prior to the happening of such event would own or be entitled to receive after the happening of such event. B. Certain Other Dividends and Distributions. If at any time or from time to time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (1) cash (other than a cash distribution made as a dividend and payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer, to the extent, but only to the extent, that the aggregate of all such dividends paid or declared after the date of this Warrant, does not exceed the consolidated net income of the Issuer earned subsequent to the date of this Warrant determined in accordance with GAAP, consistently applied), or (2) any evidence of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock) or any other securities or property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), or (3) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock) or any other securities or property of any nature whatsoever (other than cash and other than Convertible Securities or Additional Shares of Common Stock), then the number of shares of Common Stock comprising a Stock Unit from such time shall be adjusted to that number determined by multiplying the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment by a fraction (i) the numerator of which shall be the Current Market Price per share of Common Stock at the date of taking such record, and (ii) the denominator of which 8 shall be such Current Market Price per share minus the portion applicable to one share of Common Stock of any such cash so distributable and of the fair value of any and all such evidences of indebtedness, shares of stock, other securities or property, or warrants or other subscription or purchase rights, so distributable. Such fair value shall be determined in good faith by the board of directors of the Issuer, provided that if such determination is objected to by Approving Holders, such determination shall be made by an independent appraiser chosen in the manner specified in the definition of Appraised Value. A reclassification of the Common Stock into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Subsection B and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Subsection A of this Section 4. C. Issuance of Additional Shares of Common Stock or Convertible Securities. If at any time or from time to time the Issuer shall (except as provided below) issue, whether in connection with the merger of a corporation into the Issuer or otherwise, any Additional Shares of Common Stock or Convertible Securities, then the number of shares of Common Stock comprising a Stock Unit from such time shall be adjusted to be that number determined by multiplying the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Fully Diluted Outstanding Common Stock plus the number of such Additional Shares of Common Stock so issued (or the number of shares of Common Stock into which such Convertible Securities are convertible or exchangeable, as the case may be), and (y) the denominator of which shall be the number of shares of Fully Diluted Outstanding Common Stock. Upon any subsequent adjustment in the number of shares of Common Stock into which any Convertible Securities are convertible or exchangeable, the number of shares of Common Stock comprising a Stock Unit shall be recalculated in accordance with the preceding sentence. No further adjustments of the number of shares of Common Stock comprising a Stock Unit shall be made upon the actual issuance of Common Stock upon the conversion or exchange of any Convertible Securities. The foregoing provisions of this Subsection C shall not apply to any issuance of Additional Shares of Common Stock for which an adjustment is provided under Subsection A or B of this Section 4. D. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the making of adjustments of the 9 number of shares of Common Stock comprising a Stock Unit provided for above in this Section 4: (1) Treasury Stock. The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Issuer shall be deemed an issuance of such stock for purposes of this Section 4. (2) When Adjustments to Be Made. The adjustments required by the preceding Subsections of this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur (including upon any adjustment in the number of shares of Common Stock into which any Convertible Securities are convertible or exchangeable), except that no adjustment shall be made except pursuant to Subsection A of this Section 4 if it would decrease the number of shares of Common Stock comprising a Stock Unit immediately prior to such adjustment. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (3) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. (4) When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, after taking such record and before the distribution of such dividend, distribution, subscription or purchase rights to shareholders, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then no adjustment shall be required by reason of the taking of such record, and any such adjustment previously made in respect of the taking of such record shall be rescinded and annulled. E. Merger, Consolidation or Disposition of Assets. In the event the Issuer (1) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (2) shall permit any other corporation or entity to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving corporation but, in connection with such consolidation or merger, the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property, or (3) shall transfer all or substantially all of its properties or assets to any other corporation or entity, or (4) shall effect a capital reorganization or reclassification of the Common Stock (other than a change from par to no-par value stock or from no-par to par value stock, or a capital reorganization or reclassification resulting in the issue of Additional Shares of Common Stock for which adjustment in the number of shares comprising a Stock Unit is provided in Subsection C of this Section 4), then, and in each such event, proper provision shall be made so that, 10 upon the basis and the terms and in the manner provided in this Subsection E, the Holder, upon the conversion of all or any part of this Warrant at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive, in lieu of the shares of Common Stock issuable upon such conversion prior to such consummation, the stock and other securities, cash and property to which such Holder would have been entitled upon such consummation if such Holder had converted the Warrant immediately prior to such consummation, subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for in this Section 4. Anything contained in this Warrant to the contrary notwithstanding, the Issuer will not effect any of the transactions described in clauses (1) through (4) above unless, prior to the consummation of such transaction, each corporation (other than the Issuer) which may be required to deliver any stock, securities, cash or property upon the conversion of this Warrant shall assume, by written instrument delivered to the Holder, the obligation to deliver to the Holder such shares of stock, securities, cash or property as the Holder may be entitled to receive upon such conversion. The foregoing provisions of this Subsection E shall similarly apply to successive mergers, consolidations or dispositions of assets. In addition to any other requirements under this Subsection E, the Issuer shall give notice to the Holder of this Warrants of any merger, consolidation or disposition at least thirty (30) days before the occurrence of such merger, consolidation or disposition. F. Other Action Affecting Common Stock. In case at any time or from time to time the Issuer shall take any action affecting its Common Stock, other than an action described in any of the foregoing Subsections A to E inclusive, of this Section 4, then, unless in the opinion of the Holder such action will not have a materially adverse effect upon the rights of the Holder, the number of shares of Common Stock or other stock comprising a Stock Unit, or the purchase price of such shares, shall be adjusted in such manner and at such time as the Issuer and the Holder may in good faith agree to be equitable in the circumstances. G. General. The Issuer hereby warrants and represents that, on the date of issuance of this Warrant, this Warrant is exercisable (after giving effect to the exercise in full of this Warrant) for not less than 4% of the number of shares of Fully Diluted Outstanding Common Stock. The Issuer agrees that it will at all times cause this Warrant to be exercisable (after giving effect to the exercise in full of this Warrant) for not less than 4% of the number of shares of Fully Diluted Outstanding Common Stock (or such lesser percentage as may result solely from one or more partial exercises of this Warrant). 5. Notices to the Holder. Whenever the number of shares of Common Stock comprising a Stock Unit, or the price at which a Stock Unit may be purchased upon exercise of this Warrant, shall be adjusted pursuant to Section 4, the Issuer shall 11 forthwith obtain a certificate signed by the principal financial officer of the Issuer or, if the Approving Holders request, by independent accountants of recognized national standing selected by the Issuer and acceptable to the Approving Holders, setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a statement of the fair value, as determined by the board of directors of the Issuer or by appraisal (if applicable), of any evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights referred to in Section 4.B(3) or Section 4.E) and specifying the number of shares of Common Stock comprising a Stock Unit, and any change in the Exercise Price of a Stock Unit, after giving effect to such adjustment or change. The Issuer shall promptly, and in any case within three (3) Business Days after the making of such adjustment, cause a signed copy of such certificate to be delivered to the Holder. The Issuer shall keep at its office or agency, maintained for the purpose pursuant to Section 16, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by the Holder or any prospective purchaser of a Warrant designated by the Holder. 6. Reservation and Authorization of Common Stock; Registration with or Approval of any Governmental Authority. The Issuer shall, at all times on and after the Share Availability Date, reserve and keep available for issue upon the exercise of this Warrant such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant. From and after the Share Availability Date, all shares of Common Stock that shall be issued upon exercise of this Warrant and payment of the Exercise Price relating to such shares to the Issuer, shall be duly and validly issued and fully paid and nonassessable. Before taking any action which would cause an adjustment reducing the Current Warrant Price per share of Common Stock below the then par value, if any, of the shares of Common Stock issuable upon exercise of this Warrant, the Issuer shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Current Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock comprising a Stock Unit or in the Current Warrant Price per share of Common Stock, the Issuer shall obtain all such authorizations or exemptions of, or consents to, such action as may be necessary from any public regulatory body or bodies having jurisdiction over it by virtue of such action. 7. Taking of Record; Stock and Warrant Transfer Books. In the case of all dividends or other distributions by the Issuer to the holders of its Common Stock with respect to which any provision of Section 4 refers to the taking of a record of such holders, the Issuer will in each such case take such a record and will take such record as of the close of business on a Business Day. The Issuer will not at any time, except 12 upon dissolution, liquidation or winding up, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of this Warrant. 8. Transfer Taxes. The Issuer will pay any and all transfer taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on exercise of this Warrant. The Issuer shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which this Warrant is registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Issuer the amount of any such tax, or has established, to the satisfaction of the Issuer, that such tax has been paid. 9. No Voting Rights. Except as expressly provided in this Warrant, this Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Issuer. 10. Restrictions on Transferability. A. Certain Conditions. To the extent that this Warrant or the Warrant Stock covered by the Warrant constitute Restricted Securities, such Restricted Securities shall not be transferable except upon the conditions specified in this Section 10; provided that, notwithstanding any other provisions of this Section 10, the Holder (and each other person mentioned below in this clause) shall have the right to transfer all Restricted Securities or any Restricted Security to any Affiliate of the Holder, in each case free of the restrictions imposed by this Section 10 other than the requirement as to the legending of the certificates for such Restricted Securities specified in Section 10.B. Each such transferee shall be subject to the same transfer restrictions imposed on the Warrant holder by this Warrant. B. Restrictive Legend. Unless and until otherwise permitted by this Section 10, each Warrant issued upon transfer, division or combination of, or in substitution for, this Warrant, each certificate for any Warrant Stock issued upon exercise of this Warrant and each certificate for any Warrant Stock issued to any subsequent transferee of any such certificate shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER 13 FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. "THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED BELOW, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE." C. Notice of Proposed Transfers. Prior to any transfer or attempted transfer of any Restricted Securities not covered by the proviso contained in Subsection A of this Section 10, the Holder shall give written notice to the Issuer of the Holder's intention to effect a transfer of such Restricted Securities. Each such notice shall describe the manner and circumstances of the proposed transfer in material detail. Upon receipt of such notice, the Issuer may request an opinion of Murphy, Weir & Butler or such other counsel of the Holder (which counsel shall be reasonably satisfactory to the Issuer) to the effect that such proposed transfer may be effected without registration under the Securities Act. Upon receipt of such opinion, the Issuer shall, as promptly as practicable, so notify the Holder. Upon such notice or if the Issuer has not requested such an opinion, within ten (10) days after the Issuer's receiving notice of the proposed transfer, the Holder shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Issuer. Each Warrant or certificate evidencing the Restricted Securities thus to be transferred (and each Warrant or certificate evidencing any untransferred balance of the Restricted Securities evidenced by such Restricted Certificate) shall bear the restrictive legend set forth in Section 10.B, unless in the opinion of the Issuer or the opinion of such counsel, if requested, such legend is not required in order to insure compliance with the Securities Act. D. Termination of Restrictions. Notwithstanding the foregoing provisions of Section 10, the restrictions imposed upon the transferability of the Restricted Securities shall cease and terminate as to any particular Restricted Security when such Restricted Security shall have been effectively registered under the Securities Act, including, without limitation, any registration pursuant to the Registration Rights Agreement between the Issuer and INCC dated as of the issue date hereof. Whenever such restrictions imposed shall terminate as to any Restricted Certificate, as provided in this Section 10.D, the Holder shall be entitled to receive from the Issuer, without expense, a new Warrant of like tenor and date and representing the right to purchase the same number of aggregate number of shares of Common Stock or a 14 new certificate representing the same number of shares of Warrant Stock (as the case may be), but not bearing the restrictive legend otherwise required by this Warrant. 11. Warranties, Representations and Covenants of the Issuer. The Issuer represents, warrants and covenants to the Holder that as of the date of this Warrant: A. Equity Capitalization, etc. (1) Upon the issuance of this Warrant, the total number of shares of capital stock which the Issuer has authority to issue is 5,006,000 shares, consisting of 5,000,000 shares of Common Stock, par value $0.01 per share, and 6,000 shares of preferred stock, $100.00 par value per share. The Issuer and Holder acknowledge that as of the Closing Date, and until the Share Availability Date shall have occurred, the Issuer does not and will not have sufficient shares authorized under its certificate of incorporation to permit the issuance of all the shares of Common Stock required for the satisfaction of the rights under this Warrant and all other option or conversion rights granted on or prior to the date of issuance of this Warrant (it being understood that this Warrant is not exercisable until April 1, 1996). The Issuer covenants that it will take all actions (corporate or otherwise) necessary to cause the Share Availability Date to occur before April 1, 1996. The Issuer has the power and authority and has taken all actions (corporate or otherwise) necessary to authorize it to enter into this Warrant and to perform its obligations and undertakings under this Warrant. No later than thirty days after the Share Availability Date, Issuer shall deliver to Holder such officer's certificates, board resolutions, and other documents deemed necessary or appropriate by Holder and its counsel with respect to the performance by Issuer of its obligations hereunder, including, without limitation, (i) Issuer's due authorization to issue shares of Common Stock upon exercise of this Warrant and (ii) the due reservation by Issuer of such number of Issuer's authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant). Except as set forth on Exhibit 11.A hereto, upon the issuance of this Warrant, the Issuer will not have outstanding any stock or securities convertible into or exchangeable for any shares of its capital stock nor does it have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or stock or securities convertible into or exchangeable for any of its capital stock other than the Warrants. (2) When issued and delivered, the Warrants will have been duly executed, issued and delivered and will constitute legal, valid and binding obligations of the Issuer, enforceable by the Holder in accordance with their terms. (3) Except as set forth in Section 11.A(1), none of the issuance of any Warrant, the consummation of the transactions contemplated in any Warrant, or 15 compliance with the terms and provisions of this Warrant will conflict with or result in a breach of, or require any consent under, the certificate of incorporation or the by-laws of the Issuer, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Issuer is a party or by which it is bound or to which it or its property is subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any lien upon any of the revenues or assets of the Issuer pursuant to the terms of any such agreement or instrument. (4) There is not in effect on the date of this Warrant any agreement by the Issuer (other than registration agreements copies of each of which have been furnished by the Issuer to INCC) pursuant to which any holders of securities of the Issuer have a right to cause the Issuer to register such securities under the Securities Act. (5) The Issuer is a corporation duly organized and validly existing in good standing under the laws of the State of California and has the corporate power and authority to execute and deliver this Warrant and, except as set forth in Section 11.A(1), to perform its terms, including, without limitation, the issuance of Warrant Stock upon exercise of this Warrant. Except as set forth in Section 11.A(1), the Issuer has taken all action necessary to authorize the execution, delivery and performance of this Warrant and the issuance of the Warrant Stock upon exercise of this Warrant. B. Governmental Consent. Neither the nature of the Issuer or of any of its businesses or properties, nor any relationship between the Issuer and any other Person, nor (except as expressly provided for in this Warrant) any circumstance in connection with the offer, issue or sale of this Warrant or the Warrant Stock is such as to require consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Issuer as a condition to the execution and delivery of this Warrant or the execution and filing of any certificate of amendment of the certificate of incorporation of the Issuer required in connection with the authorization or issuance of Warrant Stock or the offer, issue or sale of this Warrant or the Warrant Stock. C. Survival of Representations. All representations set forth in this Section 11 shall survive the issuance and delivery of this Warrant. 12. Limitation of Liability. No provision of this Warrant, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration in this Warrant of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of the Warrant Stock or as a stockholder of the Issuer, whether such liability is asserted by the Issuer or by creditors of the Issuer. 16 13. Loss, Destruction of Warrant Certificates. Upon receipt of evidence satisfactory to the Issuer of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the Issuer (the original Warrant holder's or any other institutional Warrant holder's indemnity being satisfactory indemnity in the event of loss, theft or destruction of this Warrant), or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of the lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Common Stock. 14. Furnish Information. The Issuer will file with the Commission on or before the due date all regular or periodic reports required to be filed pursuant to the Exchange Act, and will deliver to the holder of record of this Warrant promptly after their becoming available copies of all financial statements, reports and proxy statements which the Issuer shall have sent to its stockholders generally, and of each regular or periodic report (including, without limitation, reports on Form 8-K) filed by it pursuant to the Exchange Act, and any Registration Statement, prospectus or written communication (other than transmittal letters and other communications not publicly available) filed or delivered by it pursuant to the Securities Act. 15. Amendments. The terms of this Warrant and all other Warrants may be amended, and the observance of any term in such Warrant may be waived, but only with the written consent of the Approving Holders, provided that no such amendment or waiver may change the number of shares of stock comprising a Stock Unit or the Exercise Price, without the written consent of the Holders. For the purposes of determining whether the Approving Holders have taken any action authorized by this Warrant, any Warrants owned by the Issuer or any Affiliate of the Issuer (other than an institutional investor which may be deemed an Affiliate solely by reason of the ownership of Warrants) shall be deemed not to be outstanding. 16. Office of the Issuer. So long as this Warrant remains outstanding, the Issuer shall maintain an office in Los Angeles, California where this Warrant may be presented for exercise, transfer, division or combination as in this Warrant provided. Such office shall be at 10990 Wilshire Boulevard, Los Angeles, California 90024 unless and until the Issuer shall designate and maintain some other office for such purposes and deliver written notice of the address of such other office to the Holders. 17. Notices Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered (i) in person with receipt acknowledged, (ii) by facsimile transmission, with receipt electronically confirmed during normal business hours of recipient, and that is confirmed by sending, no later than one (1) Business Day following such transmission, 17 a copy of such facsimile, by registered or certified mail, return receipt requested, postage prepaid, or (iii) by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (1) If to any Holder or holder of Warrant Stock, at its last known address or facsimile transmission number appearing on the books of the Issuer maintained for such purpose. (2) If to the Issuer at: Erly Industries Inc. 10990 Wilshire Boulevard Los Angeles, California 90024 Attention: Kurt Grey Facsimile: (310) 473-8890 with a copy to: Magnus, Epman & Dwyer 300 Corporate Pointe, Suite 310 Culver City, California 90230-7614 Attention: Ronald J. Epman, Esq. Facsimile: (310) 216-0701 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged or sent by facsimile with receipt electronically confirmed during normal business hours of recipient, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration, delivery or other communication to the person designated above to receive a copy shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, delivery or other communication. 18. Successors and Assigns. This Warrant shall bind and inure to the benefit of and, be enforceable by the parties to this Warrant and their respective successors and assigns, and, without limiting the generality of the foregoing, shall inure to the benefit of and be enforceable by each person who shall from time to time be the Holder of this Warrant. 18 19. Indemnification. The Issuer agrees to indemnify and hold harmless Holder, its officers, directors, employees, agents, and attorneys from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against Holder relating to or arising out of (i) Holder's exercise of this Warrant and/or ownership of any shares of Warrant Stock issued in consequence thereof, or (ii) any litigation to which Holder is made a party in its capacity as a stockholder or warrant holder of the Issuer; provided, however, that the Issuer will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are found in a final non-appealable judgment by a court to have resulted from either (i) Holder's gross negligence or willful misconduct, (ii) actions or omissions taken or not taken by Holder in any capacity other than as a stockholder or warrant holder of the Issuer, or (iii) any knowing violation of federal or state securities laws by Holder. 20. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE ISSUER AND HOLDER CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. SERVICE OF PROCESS ON THE ISSUER OR HOLDER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS WARRANT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN ACCORDANCE WITH THE PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 17. NOTHING HEREIN SHALL PRECLUDE HOLDER OR THE ISSUER FROM BRINGING SUIT OR TAKING LEGAL ACTION IN ANY OTHER JURISDICTION. 21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE ISSUER AND HOLDER HEREOF WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE ISSUER AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE ISSUER AND HOLDER HEREOF WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR 19 DEFEND ANY RIGHTS UNDER THIS WARRANT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. 22. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Holder, any right, remedy, power or privilege under this Warrant, shall operate as a waiver of any such right, remedy power or privilege; nor shall any single or partial exercise of any right, remedy, power or privilege under this Warrant preclude any other or further exercise of any such right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Warrant are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 23. Specific Performance. The Issuer and the Holder agree that irreparable damage would occur in the event that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Holder shall be entitled to an injunction or injunctions to prevent breaches of this Warrant and to enforce specifically the terms and provisions of this Warrant in any court of the United States or any states of the United States having jurisdiction, this being in addition to any other remedy to which it may be entitled at law or in equity. 24. Modification and Severability. If, in any action before any court or agency legally empowered to enforce any provision contained in this Warrant, any provision of this Warrant is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Warrant, but this Warrant shall be construed as if such unenforceable provision had never been contained in this Warrant. 25. Put Option. A. Issuer's Obligation to Repurchase Warrants. Upon written notice from the Holder, from time to time after Maturity but prior to the Expiration Date, the Issuer shall, on the date designated in such notice (which date shall be at least thirty (30) Business Days after the date of such notice), repurchase from such Holder all or the portion of this Warrant designated in such notice for an amount determined by multiplying (i) the Put Price per Stock Unit in effect on the date of such notice by (ii) the number of Stock Units that are designated for repurchase in such notice. Upon such designated repurchase date, the Holder shall surrender this Warrant to the Issuer, without being required to make any representation or warranty (other than that the Holder has good and valid title to this Warrant), against payment for such repurchase by (at the option of the Holder) (i) wire transfer to an account in a bank located in the United States designated by the Holder for such purposes or (ii) delivery 20 of a certified or official bank check drawn on a member of the New York Clearing House. If less than all of this Warrant is being repurchased, the Issuer shall cancel this Warrant and issue in the name of, and deliver to, the Holder a new Warrant for the portion of the number of Stock Units not being repurchased. B. Determination of the Put Price. The Put Price per Stock Unit as of a date specified shall be equal to the Current Market Price per share of Common Stock as of the date of such determination, multiplied by the number of shares of Common Stock constituting a Stock Unit on such date, minus the Exercise Price. IN WITNESS WHEREOF, the Issuer has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary. Dated as of February 16, 1995 ERLY INDUSTRIES INC., a California corporation By: /s/ KURT GREY Name: Kurt Grey Title: Vice President ATTEST: /s/ KURT GREY [attestor] 21 EXHIBIT 11.A As of the Closing Date, the Issuer has the following outstanding capital stock: 1. TOTAL SHARES OF COMMON STOCK OUTSTANDING: 3,695,547 2. TOTAL SHARES OF PREFERRED STOCK OUTSTANDING: 0 As of the Closing Date, the Issuer has no outstanding stock or securities convertible into or exchangeable for any shares of capital stock, nor does it have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, any of its capital stock or stock or securities convertible into or exchangeable for any of its capital stock other than the following:
================================================================================================================== Convertible Issue/Grant Into/Exercisable Date For (as of the Instrument/Agreement/Other In Favor of Closing Date)* ================================================================================================================== Amended and Restated Warrant 2/16/95 INCC 257,679 shares of to Purchase Common Stock of Common Stock ERLY Industries (denominated the "A Warrant") - ------------------------------------------------------------------------------------------------------------------ Amended and Restated Warrant 2/16/95 INCC 257,679 shares of to Purchase Common Stock of Common Stock ERLY Industries (denominated the "B Warrant") - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Common 2/16/95 INCC 51,536 shares of Stock of ERLY Industries Common Stock (denominated the "C Warrant") - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Common 2/16/95 INCC 206,143 shares of Stock of ERLY Industries Common Stock (denominated the "D Warrant") - ------------------------------------------------------------------------------------------------------------------ Common Stock Purchase Warrant 5/30/90 BT Commercial aggregate 277,157 Corporation shares of Common Stock - ------------------------------------------------------------------------------------- Common Stock Purchase Warrant 5/30/90 StanChart Business Credit - ------------------------------------------------------------------------------------- Common Stock Purchase Warrant 5/30/90 Union Bank - ------------------------------------------------------------------------------------------------------------------ Warrant to Purchase Shares of 9/5/93 ABC Capital 10,000 shares of Common Stock Markets Group Common Stock - ------------------------------------------------------------------------------------------------------------------ Convertible Promissory Note 4/1/94 Douglas Murphy 266,596 shares of Common Stock 22 - ------------------------------------------------------------------------------------------------------------------ Stock Options Awarded pursuant 1985 Bill J. McFarland 8,053 shares of to Issuer's 1982 Incentive Stock Common Stock Option Plan, as adjusted to date ------------------------------------------------------------------------ 1988 Douglas A. 115,132 shares of Murphy, Bill J. Common Stock McFarland, John Poole and Lolan M. Pullen - ------------------------------------------------------------------------------------------------------------------ ==================================================================================================================
* All figures shown are as calculated after taking into account all adjustments necessary upon the issuance of the four warrants (denominated the A Warrant, the B Warrant the C Warrant, and the D Warrant) being issued to INCC on the Closing Date. 23 ANNEX I SUBSCRIPTION FORM (to be executed only upon exercise of Warrant) The undersigned registered owner of this Warrant irrevocably exercises this Warrant for and purchases _________ Stock Units of ______________________________, a _________________, purchasable with this Warrant, and herewith makes payment for such Stock Units (by check in the amount of $__________), all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________________ whose address is ____________________ and, if such Stock Units shall not include all of the Stock Units issuable as provided in this Warrant that a new Warrant of like tenor and date for the balance of the Stock Units issuable thereunder be delivered to the undersigned. Dated: -------------------------------- (Signature of Registered Owner) -------------------------------- (Street Address) -------------------------------- (City) (State) (Zip Code) NOTICE: The signature to the subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. The signature to this subscription must be guaranteed by a bank or trust company having an office or correspondent in Los Angeles, California or New York, New York, or by a firm having membership on the New York Stock Exchange. 24 ANNEX II ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of Stock Units set forth below: No. of Stock Name and Address of Assignee Units and does hereby irrevocably constitute and appoint ___________ Attorney to make sure transfer on the books of ERLY Industries Inc., a California corporation, maintained for the purpose, with full power of substitution in the premises. Dated: ----------------------------- Signature ----------------------------- Witness NOTICE: The signature to the subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. The signature to this subscription must be guaranteed by a bank or trust company having an office or correspondent in Los Angeles, California or New York, New York, or by a firm having membership on the New York Stock Exchange. 25 EX-99.2 6 REGISTRATION RIGHTS AGREEMENT 3.12 REGISTRATION RIGHTS AGREEMENT (ERLY Industries) This Registration Rights Agreement (ERLY Industries), dated as of February 16, 1995, is made by and between ERLY INDUSTRIES INC., a California corporation having an office at 10990 Wilshire Boulevard, Los Angeles, California 90024 (the "Company"), and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation having an office at 333 South Grand Avenue, Suite 3000, Los Angeles, California 90071 (the "Purchaser"). W I T N E S S E T H: WHEREAS, Company and Purchaser have entered into a Securities Purchase Agreement (ERLY Industries), dated as of the date hereof (the "Purchase Agreement"), pursuant to which Company agreed to issue and sell to Purchaser, and Purchaser agreed to purchase from Company, (i) the C Warrant (as defined below), which is initially exercisable for a number of shares equal to 1% of the common stock, $0.01 par value, of Company ("Common Stock") on a fully diluted basis (subject to adjustment as provided in the C Warrant), and (ii) the D Warrant (as defined below), which is initially exercisable for a number of shares equal to 4% of Common Stock on a fully diluted basis (subject to adjustment as provided in the D Warrant), in exchange for, among other things, Purchaser's agreement to enter into the Loan Extension Agreement, the transactions referenced therein, and the Related Documents as defined therein; and WHEREAS, in order to induce Purchaser to enter into the Purchase Agreement and to purchase such C Warrant and D Warrant, Company agreed to provide registration rights with respect to all warrants to purchase Common Stock held by Purchaser. NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it is agreed as follows: 1. Definitions. Unless otherwise defined herein, terms defined in the C Warrant are used herein as therein defined, and the following shall have the following respective meanings (such meanings being equally applicable to both the singular and plural form of the terms defined): "A Warrant" shall mean (i) the Amended and Restated Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "A Warrant," issued by Company to Purchaser dated as of the date hereof, as the same may be amended from time to time, and (ii) all additional or new warrants issued upon transfer, division or combination of, or in substitution for, the A Warrant or any such additional or new warrants. "Agreement" shall mean this Registration Rights Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative. "B Warrant" shall mean (i) the Amended and Restated Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "B Warrant," issued by Company to Purchaser dated as of the date hereof, as the same may be amended from time to time, and (ii) all additional or new warrants issued upon transfer, division or combination of, or in substitution for, the B Warrant or any such additional or new warrants. "C Warrant" shall mean (i) that certain Warrant to Purchase Common Stock of ERLY Industries Inc, denominated the "C Warrant," issued by Company to Purchaser dated the date hereof, as the same may be amended from time to time, and (ii) all additional or new warrants issued upon transfer, division or combination of, or in substitution for, the C Warrant or any such additional or new warrants. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "D Warrant" shall mean (i) that certain Warrant to Purchase Common Stock of ERLY Industries Inc, denominated the "D Warrant," issued by Company to Purchaser dated the date hereof, as the same may be amended from time to time, and (ii) all additional or new warrants issued upon transfer, division or combination of, or in substitution for, the D Warrant or any such additional or new warrants. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Loan Extension Agreement" shall mean that certain Loan Extension Agreement of even date herewith among the Company, ERLY Juice Inc., Chemonics Industries, Inc., Chemonics International, Inc., and the Purchaser, together with all amendments, modifications and supplements thereto. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "Registrable Securities" shall mean the Warrants and the Warrant Stock. 2 "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Warrants" shall mean the A Warrant, the B Warrant, the C Warrant and the D Warrant. "Warrant Stock" shall mean the shares of Common Stock purchased or purchasable by the holders of the Warrants upon the exercise thereof. 2. Required Registration. At any time after the Closing Date, (i) upon receipt of a written request from the holders of Registrable Securities representing at least an aggregate of fifty percent (50%) of the total of (A) all shares of Warrant Stock then subject to purchase upon exercise of the A Warrant and (B) all then outstanding shares of Warrant Stock that have been purchased pursuant to the A Warrant, or (ii) upon receipt of a written request from the holders of Registrable Securities representing at least an aggregate of fifty percent (50%) of the total of (A) all shares of Warrant Stock then subject to purchase upon exercise of the B Warrant and (B) all then outstanding shares of Warrant Stock that have been purchased pursuant to the B Warrant, or (iii) upon receipt of a written request from the holders of Registrable Securities representing at least an aggregate of fifty percent (50%) of the total of (A) all shares of Warrant Stock then subject to purchase upon exercise of the C Warrant, (B) all shares of Warrant Stock then subject to purchase upon exercise of the D Warrant, (C) all then outstanding shares of Warrant Stock that have been purchased pursuant to the C Warrant, and (D) all then outstanding shares of Warrant Stock that have been purchased pursuant to the D Warrant, requesting that Company effect the registration of such Registrable Securities under the Securities Act and specifying the intended method or methods of disposition thereof, Company shall promptly notify all holders of Registrable Securities in writing of the receipt of such request and each such holder, in lieu of exercising its rights under Section 3, may elect (by written notice sent to Company within ten (10) Business Days from the date of such holder's receipt of the aforementioned Company's notice) to have its Registrable Securities included in such registration thereof pursuant to this Section 2. Thereupon Company shall, as expeditiously as is possible, use its best efforts to effect the registration under the Securities Act of all such Registrable Securities which Company has been so requested to register by such holders for sale, all to the extent required to permit the disposition (in accordance with the intended 3 method or methods thereof, as aforesaid) of such Registrable Securities so registered; provided, however, that Company shall not be required to effect more than (A) two (2) registrations of any Registrable Securities pursuant to a request made pursuant to Section 2(i), (B) two (2) registrations of any Registrable Securities pursuant to a request made pursuant to Section 2(ii), and (C) two (2) registrations of any Registrable Securities pursuant to a request made pursuant to Section 2(iii). 3. Incidental Registration. If Company at any time proposes to file on its behalf and/or on behalf of any of its security holders (the "demanding security holders") a Registration Statement under the Securities Act (a "Registration Statement") on any form (other than a Registration Statement on Form S-4 or S-8 or any successor form for securities to be offered in a transaction of the type referred to in Rule 145 under the Securities Act or to employees of Company pursuant to any employee benefit plan, respectively) for the general registration of securities to be sold for cash with respect to any class of equity security (as defined in Section 3(a)(11) of the Exchange Act) of Company, it will give written notice to all holders of Registrable Securities at least forty-five (45) days before the initial filing with the Commission of such Registration Statement, which notice shall set forth the intended method of disposition of the securities proposed to be registered by Company. The notice shall offer to include in such filing the aggregate number of Registrable Securities as such holders may request (subject to the immediately following paragraph). Nothing in this Section 3 shall preclude Company from discontinuing the registration of the securities being effected on its behalf or on behalf of the demanding security holders at any time prior to the effective date of the Registration Statement relating thereto. Each holder of any such Registrable Securities desiring to have Registrable Securities registered under this Section 3 shall advise Company in writing within thirty (30) days after the date of receipt of such offer from Company, setting forth the number of such Registrable Securities for which registration is so requested. Company shall thereupon include in such filing the number of shares of Registrable Securities for which registration is so requested, subject to the next sentence, and shall use its best efforts to effect registration under the Securities Act of such securities. If the managing underwriter of a proposed public offering shall advise Company in writing that, in its opinion, the distribution of the Registrable Securities requested to be included in the registration concurrently with the securities being registered by Company or such demanding security holder would materially and adversely affect the distribution of such securities by Company or such demanding security holder, then all selling security holders (other than any demanding security holder who requested such registration) and Company (if such Registration Statement was filed at the request of a demanding security holder) shall reduce the amount of securities each intended to distribute through such offering on a pro rata basis. Except as otherwise provided in Section 5, all expenses of such registration shall be borne by Company. 4 4. Registration Procedures. If Company is required by the provisions of Section 2 or Section 3 to use its best efforts to effect the registration of any of its securities under the Securities Act, Company will, as expeditiously as possible: (a) prepare and file with the Commission a Registration Statement with respect to such securities and use its best efforts to cause such Registration Statement to become and remain effective for a period of time required for the disposition of such securities by the holders thereof; (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such Registration Statement until the earlier of such time as all of such securities have been disposed of in a public offering or the expiration of one hundred eighty (180) days; (c) furnish to such selling security holders such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such selling security holders may reasonably request; (d) use its best efforts to register or qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States and Puerto Rico as each holder of such securities shall request (provided, however, Company shall not be obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified or to file any general consent to service of process), and do such other reasonable acts and things as may be required of it to enable such holder to consummate the disposition in such jurisdiction of the securities covered by such Registration Statement; (e) unless waived in writing by each holder of any Registrable Securities being included in such registration, use its best efforts to obtain from a nationally recognized underwriter or investment banker acceptable to such holder a firm commitment (pursuant to an underwriting agreement in customary form) to underwrite the public offering of the securities covered by such Registration Statement; (f) furnish, at the request of any holder requesting registration of Registrable Securities pursuant to Section 2, on the date that such shares of Registrable Securities are delivered to the underwriters for sale pursuant to such registration or, if such Registrable Securities are not being sold through underwriters, on the date that the Registration Statement with respect to such shares of Registrable Securities becomes effective, (1) a copy of an opinion, in form and substance 5 satisfactory to a majority of the holders of such Registrable Securities, dated such date, of the independent counsel representing Company for the purposes of such registration, addressed to the underwriters, if any, and to the holders making such request, substantially to the effect that such Registration Statement has become effective under the Securities Act and that (i) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (ii) the Registration Statement, the related prospectus, and each amendment or supplement thereto, comply as to form in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder (except that such counsel need express no opinion as to financial statements and data contained therein), (iii) the descriptions in the Registration Statement or the prospectus, or any amendment or supplement thereto, of all legal matters and contracts and other legal documents or instruments are accurate and fairly present the information required to be shown, and (iv) such counsel does not know of any legal or governmental proceedings, pending or contemplated, required to be described in the Registration Statement or prospectus, or any amendment or supplement thereto, which are not described as required, nor of any contracts or documents or instruments of a character required to be described in the Registration Statement or prospectus, or any amendment or supplement thereto, or to be filed as exhibits to the Registration Statement which are not described and filed or incorporated by reference as required; such counsel shall also confirm that it has no reason to believe that either the Registration Statement or the prospectus, or any amendment or supplement thereto (other than financial statements and data as to which such counsel need make no statement) contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which made, not misleading; and (2) a letter dated such date, from the independent certified public accountants of Company, addressed to the underwriters, if any, and to the holders making such request (or if such accountants are unable to deliver such letter to such holders under applicable professional rules or guidelines, then to Company) stating that they are independent certified public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements and other financial data of Company included in the Registration Statement or the prospectus, or any amendment or supplement thereto, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and, if permitted under applicable professional rules or guidelines, that such opinion is rendered for the benefit of the selling security holders and that they have a right to rely thereon. Such opinion of counsel shall additionally cover such other legal matters with respect to the registration in respect of which such opinion is being given as such holders of Registrable Securities may reasonably request. Such letter from the independent certified public accountants shall additionally cover such other financial matters (including information as to the period ending not more than five (5) Business Days prior to the date of such 6 letter) with respect to the registration in respect of which such letter is being given as such holders of Registrable Securities being so registered may reasonably request; (g) enter into customary agreements (including an underwriting agreement in customary form containing standard indemnification provisions) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and (h) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, but not later than eighteen (18) months after the effective date of the Registration Statement, an earnings statement covering the period of at least twelve (12) months beginning with the first full month after the effective date of such Registration Statement, which earnings statements shall satisfy the provisions of Section 11(a) of the Securities Act. It shall be a condition precedent to the obligation of Company to take any action pursuant to this Agreement in respect of the securities which are to be registered at the request of any holder of Registrable Securities that such holder shall furnish to Company such information regarding the securities held by such holder and the intended method of disposition thereof as Company shall reasonably request and as shall be required in connection with the action taken by Company. 5. Expenses. All expenses incurred in complying with this Agreement, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), printing expenses, fees and disbursements of counsel for Company, the reasonable fees and expenses of counsel for the selling security holders (selected by those holding a majority of the shares being registered), expenses of any special audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdictions pursuant to Section 4(d), shall be paid by Company, except that (a) all such expenses in connection with any amendment or supplement to the Registration Statement or prospectus filed more than 180 days after the effective date of such Registration Statement because any holder of Registrable Securities has not effected the disposition of the securities requested to be registered shall be paid by such holder; and (b) Company shall not be liable for any fees, discounts or commissions to any underwriter or any fees or disbursements of counsel for any underwriter in respect of the securities sold by such holder of Registrable Securities. 7 6. Indemnification and Contribution. (a) In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, Company shall indemnify and hold harmless the holder of such Registrable Securities, such holder's directors and officers, and each other Person, if any, who controls such holder within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or controlling Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material fact contained, on the effective date thereof, in any Registration Statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such holder or such director, officer or controlling Person for any legal or any other expenses reasonably incurred by such holder or such director, officer or controlling Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any alleged untrue statement or alleged omission made in such Registration Statement, preliminary prospectus, prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to Company by such holder specifically for use therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or such director, officer or controlling Person, and shall survive the transfer of such securities by such holder. (b) Each holder of any Registrable Securities, by acceptance thereof, agrees to indemnify and hold harmless Company, its directors and officers and each other Person, if any, who controls Company within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which Company or any such director or officer or any such Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon written information provided to Company by such holder of such Registrable Securities specifically for use therein and contained, on the effective date thereof, in any Registration Statement under which securities were registered under the Securities Act at the request of such holder, any final prospectus contained therein, or any amendment or supplement thereto; provided, however, that such holder's obligation under this Section 6(b) to indemnify and hold harmless Company shall in no event exceed, with respect to all such obligations, the lesser of the proceeds received by such selling securityholder from the sale of the Registrable Securities through such offering, or the damage attributable solely to the inclusion of such written information in 8 such Registration Statement, prospectus, or amendment or supplement, suffered by the Person or Persons whose claims gave rise to such losses, claims, damages or liabilities; and further, provided, however, that no such indemnity shall exist with respect to any Person making claims or demands to whom Company or any other Person responsible for delivering a final Prospectus to such claimant failed to deliver such prospectus as amended or supplemented. (c) If the indemnification provided for in this Section 6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 6(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 7. Certain Limitations on Registration Rights. Notwithstanding the other provisions of this Agreement, Company shall not be obligated to register the Registrable Securities of any holder if (x) Company delivers to such holder the written opinion of counsel to Company, which opinion and counsel shall each be satisfactory to such holder, stating that the sale or other disposition of such holder's Registrable Securities, in the manner proposed by such holder (or, if such holder has engaged an investment banking firm, in the manner proposed by such investment banking firm), may be effected without registering such Registrable Securities under the Securities Act, and (y) the failure of Company to register such Registrable Securities will not result in a reduction in the net proceeds to be received by such holder in connection with 9 such sale or other disposition; and Company shall not be obligated to register the Registrable Securities of any holder pursuant to Section 2, if Company has had a Registration Statement, under which such holder had a right to have its Registrable Securities included pursuant to Section 3, declared effective within one year prior to the date of the request pursuant to Section 2; provided, however, that if any holder elected to have any of its Registrable Securities included under such Registration Statement but some or all of such shares were excluded pursuant to the second to last sentence of Section 3, then such one-year period shall be reduced to six (6) months. 8. Selection of Managing Underwriters. The managing underwriter or underwriters for any offering of Registrable Securities to be registered pursuant to Section 2 shall be selected by the holders of a majority of the shares being so registered (other than any shares being registered pursuant to Section 3). 9. Miscellaneous. (a) No Inconsistent Agreements. Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement. Company has not previously entered into any agreement with respect to any of its securities granting to any Person any other registration rights which are in effect as of the date hereof, other than registration rights granted in respect of the Registrable Securities and other than as disclosed in writing to Purchaser. (b) Remedies. Each holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (c) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departure from the provisions hereof may not be given, unless Company has obtained the written consent of holders of at least a majority of the Registrable Securities then outstanding. (d) Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Agreement shall be sufficiently given or made if in writing and either delivered (i) in person with receipt acknowledged, (ii) by facsimile transmission, with receipt electronically confirmed during normal business hours of recipient, and confirmed by sending, no later than one (1) Business Day following such transmission, 10 a copy of such facsimile, by registered or certified mail, return receipt requested, postage prepaid, or (iii) by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to any Holder or holder of Registrable Securities, at its last known address or facsimile transmission number appearing on the books of Company maintained for such purpose. If to Company at: ERLY Industries Inc. 10990 Wilshire Boulevard Los Angeles, California 90024 Attention: Kurt Grey Facsimile: (310) 473-8890 with a copy to: Magnus, Epman & Dwyer 300 Corporate Pointe, Suite 310 Culver City, California 90230-7614 Attention: Ronald J. Epman, Esq. Facsimile: (310) 216-0701 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered with receipt acknowledged or sent by facsimile with receipt electronically confirmed during normal business hours of recipient, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration, delivery or other communication to the person designated above to receive a copy shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, delivery or other communication. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto including any Person to whom Registrable Securities are transferred. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 11 (g) GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. COMPANY AND PURCHASER CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. SERVICE OF PROCESS ON COMPANY OR PURCHASER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS LISTED IN SECTION 9(d). NOTHING HEREIN SHALL PRECLUDE PURCHASER OR COMPANY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. (h) MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. (i) Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (j) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Purchaser shall operate as a waiver of such right or otherwise prejudice Purchaser's rights, powers or remedies. If Company fails to make, when due, any payments provided for hereunder, or fails to comply with any other provision of this Agreement, Company shall pay to Purchaser such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate 12 proceedings, incurred by Purchaser in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. (k) Entire Agreement. This Agreement, together with the Purchase Agreement and the Warrants, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof. (l) Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. IN WITNESS WHEREOF, Company and Purchaser have executed this Agreement as of the date first above written. ERLY INDUSTRIES INC. By /s/ KURT GREY Name: Kurt Grey Title: Vice President [SIGNATURES CONTINUED] 13 [SIGNATURES CONTINUED] INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By /s/ MICHAEL W. ADLER Name: Michael W. Adler Title: Vice President 14 EX-99.3 7 SECURITIES PURCHASE AGREEMENT 3.11 SECURITIES PURCHASE AGREEMENT (ERLY Industries) THIS SECURITIES PURCHASE AGREEMENT (ERLY Industries) ("Agreement"), dated as of February 16, 1995, between ERLY INDUSTRIES INC., a California corporation, with its chief executive office and principal place of business at 10990 Wilshire Boulevard, Los Angeles, California 90024 (the "Company"), and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation, with an office at 333 South Grand Avenue, Suite 3000, Los Angeles, California 90071, successor in interest to Internationale Nederlanden Bank N.V. (formerly known as NMB Postbank Groep NV), New York Branch ("ING Capital"), is made with reference to the following facts: RECITALS WHEREAS, ERLY Juice Inc., a California corporation and a wholly owned subsidiary of the Company ("ERLY Juice") and ING Capital entered into that certain Loan Agreement dated as of September 26, 1988, pursuant to which ING Capital has provided loans and other extensions of credit to ERLY Juice (as amended, the "Loan Agreement," and ERLY Juice's obligations thereunder shall be referred to as the "ERLY Juice Obligations"); WHEREAS, in connection with the Loan Agreement, (i) the Company granted ING Capital an option to purchase up to 43,000 shares (subject to adjustment) of the common stock of Company (the "Stock Option") pursuant to the Stock Option Agreement entered into in September, 1988, and (ii) the Company issued to ING Capital two warrants dated as of October 22, 1993, denominated the "A Warrant" and the "B Warrant" (and referred to herein as the "Existing A Warrant" and the "Existing B Warrant," respectively), each initially exercisable for 186,511 shares (subject to adjustment) of the common stock of the Company; WHEREAS, Chemonics Industries, Inc. ("Chemonics"), an Arizona corporation and a wholly owned subsidiary of the Company, entered into the Amended and Restated Warrant to Purchase Common Stock of Chemonics Industries, Inc. dated as of November 18, 1994 (the "Chemonics Warrant") for the benefit of ING Capital, which amended and restated the Existing Warrant (as defined in the Chemonics Warrant); WHEREAS, Chemonics International, Inc., a wholly owned subsidiary of Chemonics ("Chemonics International"), issued to ING Capital the Warrant to Purchase Common Stock of Chemonics International, Inc., dated as of November 18, 1994 (the "Chemonics International Warrant"); WHEREAS, the Company entered into that certain Amended and Restated Guaranty and Pledge Agreement (the "Existing Parent Guaranty"), pursuant to which the Company, among other things, (a) amended and restated its guaranty of the payment and performance of the ERLY Juice Obligations, enforceable with recourse against the Company on and after December 21, 1994, and (b) amended and restated its pledge of the stock of Chemonics to secure the payment of the ERLY Juice Obligations; WHEREAS, on December 21, 1994 the ERLY Juice Obligations became due and payable and the Company's guaranty under the Existing Parent Guaranty became a full recourse guaranty; WHEREAS, the Company has requested, among other things, that ING Capital (i) agree to extend the due date of the ERLY Juice Obligations and modify certain provisions regarding applicable interest obligations with respect thereto, (ii) amend the Existing A Warrant and Existing B Warrant to grant to the Company an option to repurchase such warrants, and any stock purchased pursuant to such warrants, under certain terms and conditions, (iii) return the Chemonics International Warrant to Chemonics International and the Chemonics Warrant to Chemonics under certain conditions, and (iv) terminate the Stock Option. The Company will derive substantial direct and indirect economic benefit if ING Capital consents to the foregoing transactions; WHEREAS, ING Capital is willing to consent to the transactions in the preceding recital, and in connection therewith is entering into that certain Loan Extension Agreement (the "Loan Extension Agreement") among ING Capital, ERLY Juice, the Company, Chemonics, and Chemonics International of even date hereof and the Related Documents, as defined in the Loan Extension Agreement; WHEREAS, simultaneously with the consummation of the transactions under the Loan Extension Agreement, the Company has agreed to sell to ING Capital that certain Warrant dated the date hereof and denominated the C Warrant (the "C Warrant"), initially exercisable for a number of shares equal to 1% of the Company's common stock, $0.01 par value (the "Common Stock") on a fully diluted basis (subject to adjustment as provided in the C Warrant) and that certain Warrant dated the date hereof and denominated the D Warrant (the "D Warrant"), initially exercisable for a number of shares equal to 4% of Common Stock on a fully diluted basis (subject to adjustment as provided in the D Warrant). The C Warrant and the D Warrant shall be referred to collectively herein as the "Warrants," the Warrant Stock (as such term is defined in the C Warrant) and the Warrant Stock (as such term is defined in the D Warrant) shall be referred to collectively herein as the "Warrant Stock," and the Warrants and Warrant Stock shall be referred to collectively herein as the "Securities." AGREEMENT NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it is agreed as follows: 1. CONSTRUCTION; DEFINITIONS 1.1 Accounting Terms. Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given to such term in accordance with GAAP. 1.2 Certain Matters of Construction. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits hereto, as the same may from time to time be amended or supplemented, and not to any particular section, subsection or clause contained in this Agreement. References to this "Agreement" shall mean this Securities Purchase Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative. The term "including" shall not be limiting or exclusive. 1.3 Definitions. Unless otherwise defined in this Agreement, terms defined in the D Warrant are used herein as therein defined. 2. PURCHASE OF SECURITIES 2.1 Purchase of the C Warrant and D Warrant. ING Capital agrees to subscribe for and purchase, and the Company agrees to authorize as necessary, issue and sell to ING Capital, the C Warrant to purchase up to 51,536 shares of Common Stock (subject to adjustment) and the D Warrant to purchase up to 206,143 shares of Common Stock (subject to adjustment) in consideration of, among other things, ING Capital's agreement (i) to extend the due date of the ERLY Juice Obligations, (ii) to grant the Company an option to repurchase the A Warrant and the B Warrant under certain terms and conditions, (iii) to return the Chemonics International Warrant and the Chemonics Warrant under certain conditions, and (iv) terminate the Stock Option. 2.2 Closing. The closing of the purchase and sale of the Warrants (the "Closing") shall take place at such date and time and place as the closing of the transactions contemplated by the Loan Extension Agreement. At the Closing, subject to satisfaction of the conditions to the Loan Extension Agreement, the Company will deliver the Warrants to ING Capital and ING Capital will enter into the Loan Extension Agreement and Related Documents and terminate the Stock Option. 2.3 Original Issue Discount. ING Capital and the Company hereby acknowledge and agree that there is no original issue discount with respect to the Warrants and, for tax and accounting purposes, each of them shall treat the Warrants in such manner. 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES ING Capital makes the following representations and warranties to the Company, each and all of which shall survive the execution and delivery of this Agreement and the Closing: 3.1 Authorization of Agreement. ING Capital is authorized to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. 3.2 Investment Representations. ING Capital is purchasing the Securities for its own account and not with a view to the distribution thereof. ING Capital agrees that it will not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the Securities (or solicit any offers to buy, purchase, or otherwise acquire or take a pledge of any of the Securities), except in compliance with the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations under the Securities Act. ING Capital acknowledges that it (i) is an institutional "accredited investor" within the meaning of subparagraph (a) of Rule 501 under the Securities Act; (ii) has had an opportunity to investigate the business and financial condition of the Company, and to obtain such information as it requires from the officers and directors, as applicable, of the Company; (iii) in the normal course of its business, invests in or purchases securities similar to the Securities; (iv) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of purchasing the Securities; (v) is aware that it may be required to bear the economic risk of an investment in the Securities for an indefinite period of time and is able to bear such risk for an indefinite period of time; and (vi) is not purchasing any Securities on behalf of any managed accounts. ING Capital understands that, except as otherwise provided in the Warrants, the Warrants and each certificate representing any Warrant Stock shall bear a legend substantially in the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS REGISTERED OR QUALIFIED AS REQUIRED. THE TRANSFER OF AND OTHER TERMS OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY AND SUBJECT TO CONDITIONS SPECIFIED IN THAT CERTAIN WARRANT DATED AS OF FEBRUARY 16, 1995, ORIGINALLY ISSUED BY ERLY INDUSTRIES INC., AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE ABOVE-REFERENCED WARRANT, THE ISSUER HAS AGREED TO DELIVER TO THE HOLDER A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES EVIDENCED HEREBY, REGISTERED IN THE NAME OF SUCH HOLDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THIS CERTIFICATE. 4. COMPANY'S REPRESENTATIONS AND WARRANTIES The Company makes the following representations and warranties to ING Capital, each and all of which shall survive the execution and delivery of this Agreement and the Closing: 4.1 Authorized and Outstanding Shares of Capital Stock. After giving effect to the Closing, the authorized capital stock of the Company consists of (a) 5,000,000 shares of Common Stock, par value $0.01, of which 3,695,547 shares are issued and outstanding, and (b) 6,000 shares of preferred stock, par value $100.00, of which no shares are issued and outstanding. Except for the Securities and the items identified in Exhibit 11.A of each of the Warrants, after giving effect to the Closing and as of the date hereof, there is no commitment, contingent or otherwise, of the Company to issue any shares of any class of capital stock of the Company or securities convertible into such capital stock, warrants, options or other such rights or securities. 4.2 Authorization of Agreement and Issuance of Securities. The Company is authorized to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, including the issuance of the Warrants. Upon delivery of the Warrants to ING Capital, the Warrants will have been duly executed and issued and, when delivered in exchange for the consideration set forth in Section 2.1, will constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms. The issuance of the Warrant Stock has been duly authorized (subject, in the case of the D Warrant, to the occurrence of the Share Availability Date) and when issued upon exercise of, and pursuant to, the Warrants, will have been validly issued and will be fully paid and nonassessable, free and clear of all pledges, liens, encumbrances and preemptive rights. There are 51,536 shares of Common Stock duly reserved for issuance pursuant to the C Warrant and upon the occurrence of the Share Availability Date there shall be 206,143 shares of Common Stock duly reserved for issuance pursuant to the D Warrant. 4.3 Securities Laws. In reliance on, among other things, the investment representations contained in Section 3.2, the offer, issuance, sale and delivery of the Warrants to ING Capital, as provided in this Agreement, and pursuant to, the Warrants, are exempt from the registration requirements of Section 5 of the Securities Act and all applicable state securities laws. 5. COVENANTS The Company covenants and agrees that from and after the date hereof (except as otherwise provided herein, or unless ING Capital has given its prior written consent), so long as ING Capital owns any Securities: 5.1 Maintenance of Existence and Conduct of Business. The Company shall (a) do or cause to be done all things necessary to preserve and keep in full force and effect its (i) corporate existence, and (ii) rights to use trademarks, trade names, service marks, and franchises so that the business carried on in connection therewith may be conducted consistent with current operating practices at all times, and (b) continue to conduct its business substantially as now conducted. 5.2 Transactions with Affiliates. The Company shall not enter into or be a party to any agreement or transaction with any Affiliates of the Company except in the ordinary course of, and pursuant to the reasonable requirements of, the Company's business and upon fair and reasonable terms that are approved by a majority of the disinterested members of the Company's board of directors, fully disclosed to ING Capital and no less favorable to the Company than would be obtained in a comparable arms-length transaction with a Person not an Affiliate of the Company. 5.3 Books and Records. The Company shall keep adequate records and books of account with respect to its business activities in which proper entries, reflecting all of its financial transactions, are made in accordance with GAAP. The Company shall permit ING Capital or its officers, employees, and/or agents, during normal business hours (or at such other times as may reasonably be requested by ING Capital), as frequently as ING Capital deems appropriate, to inspect such records and books of account and the properties and facilities of the Company, and the Company shall provide extracts and/or photocopies of such records and books of account as reasonably requested by ING Capital at no cost to ING Capital. The rights set forth in this Section 5.3 shall not negate any other rights that ING Capital may have under any applicable law. 5.4 Financial and Business Information. (a) Filings. So long as the Company is a Public Company (as hereinafter defined), the Company will file with the Securities and Exchange Commission (the "Commission") on or before the due date all regular or periodic reports required to be filed pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will deliver to each holder of the Securities, promptly upon its becoming available, one copy of each report, notice or proxy statement sent by the Company to its shareholders generally, and one copy of each regular or periodic report (including, without limitation, reports on Form 8-K) pursuant to the Exchange Act or any registration statement, prospectus or written communication (other than transmittal letters and other communications that are not publicly available) pursuant to the Securities Act, filed by the Company with (i) the Commission or (ii) any securities exchange on which shares of the Common Stock are listed. For purposes of this Section 5.4, the term "Public Company" shall mean a company (i) that is subject to the reporting requirements of Section 15(d) of the Exchange Act, or (ii) any of whose securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act. (b) Quarterly Information. During any period in which the Company is not a Public Company, it will deliver to each holder of the Securities as soon as practicable after the end of each Fiscal Quarter (as defined below), and in any event within 45 days after the end of each Fiscal Quarter, on a Consolidated and consolidating basis, a copy of the Company's unaudited income statement and balance sheet as of the close of such Fiscal Quarter and for that portion of the Fiscal Year (as defined below) ending as of the close of such Fiscal Quarter, all prepared in accordance with GAAP (subject to normal year end adjustments and the inclusion of footnotes), together with a certification of the chief executive officer or chief financial officer of the Company that all such financial statements are, to his or her knowledge, after due inquiry, complete and correct and present fairly in accordance with GAAP (subject to normal year end adjustments and the inclusion of footnotes) the financial position and the results of operations of the Company as at the end of such Fiscal Quarter and for the period then ended. For the purposes of this Agreement, (i) "Fiscal Quarter" means any quarter of a Fiscal Year, and (ii) "Fiscal Year" means any period of 12 consecutive calendar months ending on March 31. (c) Annual Information. During any period in which the Company is not a Public Company, it will deliver to each holder of the Securities as soon as practicable after the end of each Fiscal Year of the Company, and in any event within 90 days thereafter, on a Consolidated and consolidating basis, a copy of the Company's audited financial statements, certified (only with respect to the financial statements) without qualification by a firm of independent certified public accountants of recognized national standing, and accompanied by (i) any management letter that may be issued by such accountants, (ii) the annual letter from the Company's chief financial officer to such accountants in connection with their audit examination detailing the Company's contingent liabilities and material litigation matters involving the Company, and (iii) a certification of the chief executive officer or chief financial officer of the Company that all such financial statements are, to his or her knowledge, after due inquiry, complete and correct and present fairly in accordance with GAAP the financial position, the results of operations and the statements of cash flow of the Company as at the end of such Fiscal Year and for the period then ended. 5.5 Tax Compliance. The Company shall pay all transfer, excise or similar taxes (not including income or franchise taxes) in connection with the issuance, sale, delivery or transfer by the Company to ING Capital of the Securities and shall save ING Capital and any other holder of the Securities harmless without limitation as to time against any and all liabilities with respect to such taxes. The Company shall not be responsible for any taxes in connection with the transfer of the Securities by the holder thereof. The obligations of the Company under this Section 5.5 shall survive the payment, prepayment or redemption of the Securities and the termination of this Agreement. 6. CONDITIONS PRECEDENT The obligation of ING Capital to purchase the Warrants pursuant to Section 2.1 is subject to the satisfaction of each of the conditions precedent set forth in Section 3 of the Loan Extension Agreement unless otherwise waived in writing by ING Capital. 7. INDEMNIFICATION The Company agrees to indemnify and hold harmless ING Capital from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees and expenses (including reasonable attorneys' fees and disbursements and other costs of investigations or defense, including those incurred upon any appeal) (each, an "Indemnified Claim") which may be imposed upon, incurred by or asserted against ING Capital in any manner relating to or arising out of any untrue representation, breach of warranty or failure to perform any covenants by the Company contained herein or in any certificate delivered pursuant hereto; provided, that the Company shall not be liable for any indemnification to ING Capital to the extent that any Indemnified Claim results solely from ING Capital's gross negligence or willful misconduct. 8. MISCELLANEOUS 8.1 Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by another, or whenever any of the parties desires to give or serve upon another any such communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and either (i) delivered in person with receipt acknowledged, (ii) sent by facsimile transmission, with receipt electronically confirmed during normal business hours of recipient, and confirmed by sending, no later than one (1) Business Day following such transmission, a copy of such facsimile, by registered or certified mail, return receipt requested, postage prepaid, or (iii) sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company at ERLY Industries Inc. 10990 Wilshire Boulevard Los Angeles, California 90024 Attention: Kurt Grey Facsimile: (310) 473-8890 With a copy to Magnus, Epman & Dwyer 300 Corporate Pointe, Suite 310 Culver City, California 90230-7614 Attention: Ronald J. Epman, Esq. Facsimile: (310) 216-0701 If to ING Capital at 333 South Grand Avenue Suite 3000 Los Angeles, California 90071 Attention: Gil Kirkpatrick Facsimile: (213) 687-7324 With a copy to Murphy, Weir & Butler 2049 Century Park East, Suite 2100 Los Angeles, California 90067 Attention: N. Dwight Cary, Esq. Facsimile: (310) 788-3777 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered with receipt acknowledged or sent by facsimile with receipt electronically confirmed during normal business hours of recipient, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration, or other communication to the persons designated above to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 8.2 Binding Effect; Assignability; Benefits. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or ING Capital without the prior written consent of the other party, which consent shall not unreasonably be withheld. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. 8.3 Waiver. Either party hereto may by written notice to the other: (a) extend the time for the performance of any of the obligations or other actions of the other under this Agreement; (b) waive compliance with any of the conditions or covenants of the other contained in this Agreement; and (c) waive or modify performance of any of the obligations of the other under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any party shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. 8.4 Amendment. This Agreement may be amended, modified or supplemented only by a written instrument executed by ING Capital and the Company. 8.5 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of this Agreement. 8.6 Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 8.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 8.8 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE COMPANY AND ING CAPITAL CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. SERVICE OF PROCESS ON THE COMPANY OR ING CAPITAL IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS LISTED IN SECTION 8.1. NOTHING HEREIN SHALL PRECLUDE ING CAPITAL OR THE COMPANY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. 8.9 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY, RATHER THAN ARBITRATION RULES, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. IN WITNESS WHEREOF, the Company and ING Capital have executed this Securities Purchase Agreement as of the day and year first above written. ERLY INDUSTRIES INC. By /s/ KURT GREY Name: Kurt Grey Its: Vice President INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By: /s/ MICHAEL W. ADLER Name: Michael W. Adler Its: Vice President EX-99.4 8 LOAN EXTENSION AGREEMENT (FEB. 16, 1995) 3.1 LOAN EXTENSION AGREEMENT Dated as of February 16, 1995 Among ERLY JUICE INC., a California corporation, ERLY INDUSTRIES INC., a California corporation, CHEMONICS INDUSTRIES, INC., an Arizona corporation, CHEMONICS INTERNATIONAL, INC., a California corporation, and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation TABLE OF CONTENTS
Page 1. DEFINITIONS............................................................................................ 3 a. Defined Terms..................................................................................... 3 b. Use of Defined Terms.............................................................................. 6 c. Cross-References.................................................................................. 6 d. Certain Matters of Construction................................................................... 7 2. LENDER'S AGREEMENT..................................................................................... 7 a. Extension of Due Date of ERLY Juice Obligations; Modification of Interest Provisions........................................................................... 7 b. Grant of Option to Parent to Repurchase A and B Warrants.......................................... 8 c. Return of Chemonics Warrant and Chemonics International Warrant and Related Stock and Proceeds In Certain Circumstances................................................................................. 8 d. Termination of Parent Stock Option and Parent Stock Option Agreement..................................................................................... 8 3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATIONS........................................................... 8 a Execution and Delivery of This Loan Extension Agreement and Related Documents............................................................................. 9 b. Satisfactory Legal Form........................................................................... 9 c. Intentionally Blank............................................................................... 9 4. REPRESENTATIONS AND WARRANTIES......................................................................... 9 a. Organization, etc................................................................................. 9 b. Validity, etc..................................................................................... 9 5. MISCELLANEOUS.......................................................................................... 10 a. Waivers, Amendments, etc.......................................................................... 10 b. Costs and Expenses................................................................................ 10 c. Severability...................................................................................... 10 d. Further Assurances................................................................................ 10 e. Headings ......................................................................................... 10 f. Counterparts...................................................................................... 10 g. Interpretation.................................................................................... 10 h. Complete Agreement................................................................................ 11 i. Time of the Essence............................................................................... 11 j. Successors and Assigns............................................................................ 11 k. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.................................................. 11 l. MUTUAL WAIVER OF JURY TRIAL....................................................................... 11
ii LOAN EXTENSION AGREEMENT THIS LOAN EXTENSION AGREEMENT (this "Loan Extension Agreement"), dated as of February 16, 1995, is made by ERLY Juice Inc., a California corporation ("ERLY Juice"), ERLY Industries Inc., a California corporation, the owner of 100% of the issued and outstanding shares of capital stock of ERLY Juice ("Parent"), Chemonics Industries, Inc., an Arizona corporation ("Chemonics"), Chemonics International, Inc., a California corporation ("Chemonics International"), and Internationale Nederlanden (U.S.) Capital Corporation, a Delaware corporation, successor in interest to International Nederlanden Bank N.V., New York Branch (formerly known as NMB Postbank Groep nv, New York Branch (formerly known as Nederlandsche Middenstandsbank nv, New York Branch)) ("Lender"). RECITALS A. ERLY Juice and Lender have entered into a Loan Agreement dated as of September 26, 1988 (as amended prior to November 18, 1994, and subject to Recital D below, the "ERLY Juice Loan Agreement"), pursuant to which Lender agreed to make certain loans and financial accommodations to or for the benefit of ERLY Juice. As used in these Recitals, the term "ERLY Juice Obligations" means the "Obligations" as such term is defined in the ERLY Juice Loan Agreement. B. In connection with the ERLY Juice Loan Agreement, Parent (i) granted Lender an option to purchase up to 43,000 (subject to adjustment) shares of the common stock of Parent (the "Parent Stock Option") pursuant to the Stock Option Agreement entered into in September, 1988 (the "Parent Stock Option Agreement") and (ii) issued to Lender two warrants dated as of October 22, 1993, denominated the "A Warrant" and the "B Warrant" (which shall be referred to herein as the "Existing A Warrant" and the "Existing B Warrant," respectively) each initially exercisable for 186,511 (subject to adjustment) shares of the common stock of Parent. C. The ERLY Juice Obligations became due and payable on December 21, 1993. D. ERLY Juice and Lender entered into that certain ERLY Juice Agreement dated as of November 18, 1994 (the "ERLY Juice Agreement"; all references hereafter to the ERLY Juice Loan Agreement shall be to the ERLY Juice Loan Agreement as amended by the ERLY Juice Agreement), which, among other things, (i) amended the ERLY Juice Loan Agreement to extend the due date of the ERLY Juice Obligations to December 21, 1994, and (ii) provided for the forgiveness of $497,284.73 of the ERLY Juice Obligations as of November 18, 1994, subject to the retroactive revocation and rescission of such forgiveness as of such date if the Chemonics Obligations (as defined in Section 3 of the ERLY Juice Agreement) were not satisfied in full on or before March 31, 1995. Such Chemonics Obligations have been timely satisfied. 1 E. Concurrently with the execution of the ERLY Juice Agreement, Lender, ERLY Juice, Parent, Chemonics, Chemonics International, Douglas Murphy and Gerald Murphy entered into that certain Master Agreement dated as of November 18, 1994 (the "Master Agreement") and the Related Documents (as defined therein), pursuant to which, among other things, (i) Lender and ERLY Juice entered into the ERLY Juice Agreement, (ii) Parent entered into the Amended and Restated Guaranty and Pledge Agreement (the "Parent Guaranty"), pursuant to which Parent, among other things, (a) amended and restated its guaranty of the payment and performance of the ERLY Juice Obligations, enforceable with recourse against Parent on and after December 21, 1994, and (b) amended and restated its pledge of the stock of Chemonics, of which Parent is the sole stockholder, to secure the payment of the ERLY Juice Obligations, (iii) Chemonics entered into the Amended and Restated Warrant to Purchase Common Stock of Chemonics Industries, Inc. dated as of November 18, 1994 (the "Chemonics Warrant") for the benefit of Lender, which amended and restated the Existing Warrant (as defined in the Master Agreement), (iv) Chemonics International issued to Lender the Warrant to Purchase Common Stock of Chemonics International, Inc., dated as of November 18, 1994 (the "Chemonics International Warrant") and (v) Chemonics entered into the Non-Recourse Guaranty and Pledge Agreement (ERLY Juice Obligations) (the "Chemonics Pledge"), pursuant to which Chemonics, among other things, pledged the stock of Chemonics International, of which Chemonics is the sole stockholder, to secure the payment of the ERLY Juice Obligations. F. On December 21, 1994, the ERLY Juice Obligations became due and payable and the recourse obligations of Parent to Lender pursuant to the Parent Guaranty became effective. The ERLY Juice Obligations remain due and payable. As of February 16, 1995, the ERLY Juice Obligations are as follows: Principal and Interest $8,943,570.10 Fees and Costs 85,438.00 Total 9,029,008.10 G. ERLY Juice, Parent, Chemonics, and Chemonics International have requested that Lender (i) agree to extend the due date of the ERLY Juice Obligations and modify certain provisions regarding applicable interest obligations with respect thereto, (ii) amend the Existing A Warrant and Existing B Warrant to grant to Parent an option to repurchase such warrants, and any stock purchased pursuant to such warrants, under certain terms and conditions, (iii) return the Chemonics International Warrant to Chemonics International and the Chemonics Warrant to Chemonics under certain conditions specified herein, and (iv) terminate the Parent Stock Option. H. Lender is willing to consent to the requests described in the foregoing paragraph, subject to the terms and conditions hereof and in the Related Documents (as defined below). 2 AGREEMENT NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, the receipt and adequacy of which are hereby acknowledged, it is agreed as follows: 1. DEFINITIONS. a. Defined Terms. The following terms (whether or not underscored) when used in this Loan Extension Agreement, including its Preamble and Recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "A Warrant" means the Amended and Restated Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "A Warrant," of even date herewith, which amends and restates the Existing A Warrant, together with all amendments, modifications and supplements thereto and replacements thereof. "Amended Loan Agreement" means the Amended and Restated Loan Agreement between ERLY Juice and Lender of even date herewith, together with all amendments, modifications and supplements thereto. "Amended Security Agreement" means the Amended and Restated Security Agreement between ERLY Juice and Lender of even date herewith, together with all amendments, modifications and supplements thereto. "Amended Term Note" means the Amended and Restated Term Note of ERLY Juice in favor of Lender of even date herewith, together with all amendments, modifications and supplements thereto. "B Warrant" means the Amended and Restated Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "B Warrant," of even date herewith, which amends and restates the Existing B Warrant, together with all amendments, modifications and supplements thereto and replacements thereof. "Business Day" means any day which is neither a Saturday nor Sunday nor a legal holiday on which banks are authorized or required to be closed in Los Angeles, California. "C Warrant" means the Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "C Warrant," of even date herewith which is initially exercisable for a number of shares equal to 1% of Parent's common stock on a fully diluted basis (subject to adjustment as provided therein), together with all amendments, modifications and supplements thereto. 3 "Chemonics" is defined in the Preamble. "Chemonics International" is defined in the Preamble. "Chemonics International Warrant" is as defined in Recital E, together with all amendments, modifications, and supplements thereto and replacements thereof. "Chemonics International Warrant Stock" means, as of any time of determination, all Warrant Stock (as defined in the Chemonics International Warrant). "Chemonics Pledge" is as defined in Recital E, together with all amendments, modifications, and supplements thereto. "Chemonics Pledge Amendment" means the First Amendment to Non-Recourse Guaranty and Pledge Agreement (ERLY Juice Obligations) of even date herewith, executed by Chemonics in favor of Lender, together with all amendments, modifications and supplements thereto, which amends the Chemonics Pledge. "Chemonics Warrant" is as defined in Recital E, together with all amendments, modifications, and supplements thereto and replacements thereof. "Chemonics Warrant Stock" means, as of any time of determination, all Warrant Stock (as defined in the Chemonics Warrant). "Closing Date" means the Business Day on which all of the conditions precedent set forth in Section 3 have been satisfied, in Lender's sole discretion, or waived in writing by Lender. "D Warrant" means the Warrant to Purchase Common Stock of ERLY Industries Inc., denominated the "D Warrant," of even date herewith which is initially exercisable for a number of shares equal to 4% of Parent's common stock on a fully diluted basis (subject to adjustment as provided therein), together with all amendments, modifications and supplements thereto. "ERLY Juice" is defined in the Preamble. "ERLY Juice Agreement" is as defined in Recital D, together with all amendments, modifications, and supplements thereto. "ERLY Juice Loan Agreement" is as defined in Recital A. "ERLY Juice Obligations" (i) means for purposes of all provisions of this Loan Extension Agreement other than the Recitals, the "Obligations" as such term is 4 defined in the Amended Loan Agreement, and (ii) for purposes of the Recitals, is as defined in Recital A. "Lender" is defined in the Preamble. "Lien" is as defined in the Amended Loan Agreement. "Loan Extension Agreement" is defined in the Preamble, together with all amendments, modifications, and supplements. "Master Agreement" is as defined in Recital E, together with all amendments, modifications, and supplements thereto and replacements thereof. "Maturity" is as defined in the Amended Loan Agreement. "Organic Document" means, relative to ERLY Juice, Parent, Chemonics, or Chemonics International, its certificate of incorporation, its by-laws, and all shareholder agreements, voting trusts, and similar arrangements applicable to any of its authorized shares of stock. "Parent" is defined in the Preamble. "Parent Documents" means the Parent Guaranty Amendment, the A Warrant, the B Warrant, the C Warrant, the Parent Registration Rights Agreement, the Parent Securities Purchase Agreement, and each other document or instrument executed and delivered by Parent to Lender pursuant hereto or in connection herewith. "Parent Guaranty" is as defined in Recital E, together with all amendments, modifications, and supplements thereto. "Parent Guaranty Amendment" means the First Amendment to Amended and Restated Guaranty and Pledge Agreement between Parent and Lender of even date herewith, which amends the Parent Guaranty, together with all amendments, modifications and supplements thereto. "Parent Pledge" means that certain ERLY Pledge Agreement dated as of September 26, 1988, together with all amendments, modifications, and supplements thereto, pursuant to which Parent pledged the stock of ERLY Juice to Lender to secure the ERLY Juice Obligations (as defined in the Recitals). "Parent Registration Rights Agreement" means the Registration Rights Agreement (ERLY Industries) between Parent and Lender of even date herewith, together with all amendments, modifications and supplements thereto. 5 "Parent Securities Purchase Agreement" means the Securities Purchase Agreement (ERLY Industries) between Parent and Lender of even date herewith, together with all amendments, modifications and supplements thereto. "Parent Stock Option" is as defined in Recital B. "Parent Stock Option Agreement" is as defined in Recital B. "Related Documents" means the Amended Loan Agreement, the Amended Note, the Amended Security Agreement, the Parent Documents, the Chemonics Pledge Amendment, and each other agreement executed and delivered to Lender pursuant hereto, whether or not mentioned herein. "Schedule of Documents" means the schedule, including all appendices, exhibits or schedules thereto, listing certain documents to be delivered and information to be provided in connection with this Loan Extension Agreement and the transactions contemplated hereunder, substantially in the form of Annex A hereto. b. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Loan Extension Agreement shall have such meanings when used in any Schedules or Annexes hereto, including the Schedule of Documents, and in each notice and other communication delivered from time to time in connection with this Loan Extension Agreement or any Related Document. c. Cross-References. Unless otherwise specified, references in this Loan Extension Agreement and in each Related Document to any Section are references to such Section of this Loan Extension Agreement or such Related Document, as the case may be, and unless otherwise specified, references in any Section or definition to any clause are references to such clause of such Section or definition. In addition, it is expressly agreed that any reference in any "Other Document" (as defined below) to the ERLY Juice Loan Agreement or any Section or provision thereof shall, unless the context otherwise requires, be deemed to be a reference to the Amended Loan Agreement (and if such reference was a reference to a specific section or provision, it shall be deemed a reference to the comparable provision of the Amended Loan Agreement). If any Other Document refers to or relies upon the ERLY Juice Loan Agreement for purposes of defining a particular term in such Other Loan Document and such term is not defined in the Amended Loan Agreement, the definition of such term that was set forth in the ERLY Juice Loan Agreement shall apply and be used to define such term. For purposes hereof, "Other Document" means and includes any Loan Document (as defined in the ERLY Juice Loan Agreement) that may remain in effect after the Closing Date, including the Parent Pledge, and any other document or agreement that may have been executed in connection with any of the foregoing. 6 d. Certain Matters of Construction. All Schedules or Annexes identified by this Loan Extension Agreement are incorporated herein by reference, and taken together, shall constitute but a single agreement. Unless otherwise expressly set forth herein, or in a written amendment referring to such Schedules, all Schedules referred to herein shall mean the Schedules as in effect as of the Closing Date. The Recitals shall be construed as part of this Loan Extension Agreement. For purposes of this Loan Extension Agreement and the Related Documents, the following additional rules of construction shall apply, unless specifically indicated to the contrary: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter; (b) the term "or" is not exclusive; (c) the term "including" (or any form thereof) shall not be limiting or exclusive; (d) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations; and (e) all references to any instruments or agreements, including references to any of the Related Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof. 2. LENDER'S AGREEMENT. Subject to Section 3 below, Lender hereby agrees as follows: a. Extension of Due Date of ERLY Juice Obligations; Modification of Interest Provisions. As provided in the Amended Loan Agreement, which amends and restates the ERLY Juice Loan Agreement, Lender shall, among other things, (i) extend the due date of the ERLY Juice Obligations to April 1, 1996, and (ii) modify certain provisions regarding applicable interest obligations with respect thereto, all subject to the terms and conditions of the Amended Loan Agreement. b. Grant of Option to Parent to Repurchase A and B Warrants. As provided in the A Warrant and the B Warrant, which amend and restate the Existing A Warrant and Existing B Warrant, respectively, Lender shall grant to Parent an option to repurchase such warrants, or any stock purchased pursuant to such warrants, subject to the terms and conditions set forth in Section 26 of such A Warrant and B Warrant, respectively. c. Return of Chemonics Warrant and Chemonics International Warrant and Related Stock and Proceeds In Certain Circumstances. If the ERLY Juice Obligations are satisfied in full on or before the earlier to occur of December 31, 1995 and Maturity, then Lender shall return to Chemonics or Chemonics International, as the case may be, (A) (1) the Chemonics Warrant and Chemonics International Warrant, (2) any Chemonics Warrant Stock or Chemonics International Warrant Stock then held by Lender (subject to the repayment to Lender of the aggregate Exercise Price (as defined in the relevant warrant) paid by Lender for such stock pursuant to the relevant warrant), and (3) the actual amount of any cash proceeds received by 7 Lender upon the sale by Lender of the Chemonics Warrant, the Chemonics International Warrant, any Chemonics Warrant Stock, or any Chemonics International Warrant Stock, less, in the case of proceeds of any Chemonics Warrant Stock or Chemonics International Warrant Stock, the amount of the aggregate Exercise Price (as defined in the relevant warrant) paid by Lender for such stock pursuant to the relevant warrant. If the ERLY Juice Obligations are satisfied in full after December 31, 1995 but on or before Maturity, then Lender shall return to Chemonics (B) (1) the Chemonics Warrant, (2) any Chemonics Warrant Stock then held by Lender (subject to the repayment to Lender of the amount of the aggregate Exercise Price (as defined in the Chemonics Warrant) paid by Lender for such stock pursuant to the Chemonics Warrant), and (3) the actual amount of any cash proceeds received by Lender upon the sale by Lender of the Chemonics Warrant or any Chemonics Warrant Stock, less, in the case of proceeds of any Chemonics Warrant Stock, the amount of the purchase price paid by Lender for such stock pursuant to the Chemonics Warrant). d. Termination of Parent Stock Option and Parent Stock Option Agreement. As of the Closing Date, the Parent Stock Option shall be terminated, and the Parent Stock Option Agreement shall be of no further force or effect. 3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATIONS. Notwithstanding any other provision of this Loan Extension Agreement or any Related Document, no party other than Lender shall have any rights hereunder or under any Related Document, and Lender shall have no obligations hereunder or thereunder, until the following conditions have been satisfied, in Lender's sole discretion, or waived in writing by Lender: a. Execution and Delivery of This Loan Extension Agreement and Related Documents. This Loan Extension Agreement or counterparts thereof shall have been duly executed by, and delivered to, each of the parties hereto, and Lender shall have received each of the Related Documents, duly executed, and all such documents, instruments and agreements that Lender may reasonably request in connection with the transactions contemplated by this Loan Extension Agreement including all documents, instruments, agreements, listed in the Schedule of Documents, each in form and substance satisfactory to Lender. b. Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of ERLY Juice, Parent, Chemonics or Chemonics International shall be satisfactory in form and substance to Lender and its counsel; Lender and its counsel shall have received all information, and such counterpart originals or such certified or other copies of such materials, as Lender or its counsel may request; and all legal matters incident to the transactions contemplated by this Loan Extension Agreement shall be satisfactory to counsel to Lender. c. Intentionally Blank. 8 4. REPRESENTATIONS AND WARRANTIES. Each of ERLY Juice, Parent, Chemonics and Chemonics International represents and warrants to Lender as follows: a. Organization, etc. Each of ERLY Juice, Parent, Chemonics and Chemonics International is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business makes such qualification necessary, has full power and authority to own, and hold under lease, its property and to conduct its business as presently conducted by it and as proposed to be conducted, and has full power and authority to enter into and perform its obligations under this Loan Extension Agreement and each Related Document to which it is a party. b. Validity, etc. This Loan Extension Agreement constitutes, and all Related Documents to which any such party is a party will, when executed and delivered by such party, constitute, the legal, valid, and binding obligation of such party enforceable in accordance with their terms, subject, as to enforcement, only to bankruptcy, insolvency, reorganization, moratorium, or similar laws at the time in effect affecting the enforceability of the rights of creditors generally. 5. MISCELLANEOUS. a. Waivers, Amendments, etc. The provisions of this Loan Extension Agreement and of each Related Document may from time to time be amended, modified, or waived if such amendment, modification or waiver is in writing and consented to by Lender and the other parties hereto or thereto, as the case may be. No failure or delay on the part of Lender in exercising any power or right under this Loan Extension Agreement or any Related Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. b. Costs and Expenses. Whether or not the transactions hereby contemplated shall be consummated, ERLY Juice and Parent shall pay all reasonable out-of-pocket costs and expenses of Lender incurred in connection with the preparation, execution, delivery, and enforcement of or preservation of any rights under, this Loan Extension Agreement and the Related Documents. c. Severability. Any provision of this Loan Extension Agreement or any Related Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Loan Extension Agreement or such Related Document or affecting the validity or enforceability of such provision in any other jurisdiction. 9 d. Further Assurances. Each of ERLY Juice, Parent, Chemonics, and Chemonics International agrees, upon the written request of Lender, to execute and deliver to Lender, from time to time, any additional instruments or documents reasonably considered necessary by Lender to accomplish the transactions contemplated herein or in any Related Documents. e. Headings. The various headings of this Loan Extension Agreement and of each of the Related Documents are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Loan Extension Agreement or any such Related Document or any provisions hereof or thereof. f. Counterparts. This Loan Extension Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. g. Interpretation. No provision of this Loan Extension Agreement or any of the Related Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party's having or being deemed to have structured, drafted or dictated such provision. h. Complete Agreement. This Loan Extension Agreement constitutes the complete agreement between the parties, and supersedes any prior written or oral agreements, writings, communications or understandings of the parties with respect to the subject matter hereof. i. Time of the Essence. Time is of the essence with respect to this Loan Extension Agreement and each of the Related Documents. j. Successors and Assigns. This Loan Extension Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. k. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS LOAN EXTENSION AGREEMENT AND THE RELATED DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE PARTIES CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR VENUE, AND 10 AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA. l. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY, RATHER THAN ARBITRATION RULES, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS LOAN EXTENSION AGREEMENT, OR ANY RELATED DOCUMENT, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ERLY INDUSTRIES INC. ERLY JUICE INC. By: /s/ KURT GREY By: /s/ KURT GREY Name: Kurt Grey Name: Kurt Grey Its: Vice President Title: Vice President CHEMONICS INDUSTRIES, INC. CHEMONICS INTERNATIONAL, INC. By: /s/ KURT GREY By: /s/ KURT GREY Name: Kurt Grey Name: Kurt Grey Its: Vice President Its: Vice President INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By: /s/ MICHAEL W. ADLER Name: Michael W. Adler Its: Vice President 11 EX-99.5 9 AMENDED AND RESTATED GUARANTY AND PLEDGE AGREEMENT 3.14 AMENDED AND RESTATED GUARANTY AND PLEDGE AGREEMENT THIS AMENDED AND RESTATED GUARANTY AND PLEDGE AGREEMENT (this "Agreement"), dated as of November 18, 1994, is made by ERLY INDUSTRIES INC., a California corporation ("Guarantor"), in favor of INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation, successor in interest to Internationale Nederlanden Bank N.V., New York Branch (formerly known as NMB Postbank Groep nv, New York Branch (formerly known as Nederlandsche Middenstandsbank nv, New York Branch)) ("Lender"). RECITALS A. Guarantor is the record and beneficial owner of all of the issued and outstanding shares of Stock (as defined herein), described in Schedule I attached hereto, as may be amended or supplemented pursuant to the terms hereof (the "Pledged Shares") issued by Chemonics Industries, Inc., an Arizona corporation ("Chemonics"). B. Chemonics and Lender entered into that certain Loan Agreement dated as of December 1, 1989, as amended and restated by that certain Amended and Restated Loan Agreement dated as of December 29, 1989 (as amended, the "Chemonics Loan Agreement"), pursuant to which Lender agreed to make certain loans and financial accommodations to or for the benefit of Chemonics. C. Lender and Guarantor entered into the Stock Pledge Agreement dated as of December 1, 1989 (such agreement, as it has been amended pursuant to the ERLY Agreement of Amendment, Ratification and Confirmation Dated As Of December 29, 1989, the "First Pledge"), pursuant to which Guarantor made a first priority pledge of the Pledged Shares in favor of Lender to secure all of the Obligations of Chemonics to Lender under and as defined in the Chemonics Loan Agreement (the "Chemonics Loan Obligations"). The Chemonics Loan Obligations are currently due and payable. D. ERLY Juice Inc. ("ERLY Juice") and Lender have entered into a Loan Agreement dated as of September 26, 1988 (such agreement, as heretofore amended, shall, subject to Recital L, be referred to as the "ERLY Juice Loan Agreement"), pursuant to which Lender agreed to make certain loans and financial accommodations to or for the benefit of ERLY Juice. E. Lender and Guarantor entered into the Amended and Restated Pledge Agreement dated as of March 31, 1993 (the "Second Pledge"), pursuant to which Guarantor made a second priority pledge of the Pledged Shares in favor of Lender to secure all of the obligations of ERLY Juice to Lender under the ERLY Juice Loan Agreement. F. Guarantor and Lender entered into the Guaranty, dated as of December 21, 1993 (the "ERLY Juice Guaranty"), pursuant to which Guarantor guaranteed the payment and performance by ERLY Juice of its obligations under the ERLY Juice Loan Agreement, provided that the ERLY Juice Guaranty was not enforceable at any time prior to December 21, 1994. G. As of December 21, 1993, ERLY Juice's obligations under the ERLY Juice Loan Agreement were, and still are, due and payable. H. Pursuant to Guaranties dated as of March 31, 1993 (the "Murphy Guaranties"), Douglas Murphy, a Vice President and director of Chemonics and the President and a director of Guarantor, and Gerald Murphy, the Chairman and a director of Chemonics and the Chairman and a director of Guarantor, have guaranteed, subject to the terms and conditions of such Murphy Guaranties, the payment of the ERLY Juice Obligations (as defined herein). I. Chemonics has informed Lender that it has received a financing commitment from NationsBank, N.A. to provide financing with respect to Chemonics International, Inc. ("Chemonics International"), which was formerly a division of Chemonics, subject to the incorporation of Chemonics International (which has taken place) and the transfer of various of Chemonics's assets to Chemonics International, free of Lender's liens and security interests (such incorporation of Chemonics International and transfer of assets from Chemonics to Chemonics International shall be referred to as the "Restructuring"), and that Chemonics intends to use the proceeds of such financing and other funds of Chemonics to pay the Closing Payment Amount (as defined in the Master Agreement, defined below), after which payment the Chemonics Loan Obligation Amount (as defined in the Master Agreement) will have been reduced to $500,000 (the Chemonics Carryover Amount"). J. Guarantor, Chemonics, Chemonics International, ERLY Juice, Gerald Murphy and Douglas Murphy have requested that Lender (i) consent to the Restructuring, (ii) extend the due date of the ERLY Juice Obligations, (iii) reduce the ERLY Juice Obligations in the amount of the Reduction Amount (as defined in the ERLY Juice Agreement (defined below)), subject to reinstatement of such reduction in certain circumstances, (iv) release the Murphy Guaranties, and (v) amend and restate the Chemonics Loan Agreement pursuant to that certain Second Amended and Restated Loan Agreement of even date herewith (the "Amended Chemonics Loan Agreement") to, among other things, provide that the Chemonics Carryover Amount be converted to a term loan having a due date of March 31, 1995. 2 K. Guarantor, as the sole holder of the Pledged Shares and the sole holder of shares of Stock of ERLY Juice, will derive substantial direct and indirect economic benefit if Lender grants the consents and takes the actions set forth in the preceding recital. Lender is willing to do so, subject to, and in reliance upon, among other things, the requirement that Guarantor execute and deliver this Agreement and grant the security interest contemplated hereby to secure Guarantor's obligations to Lender under this Agreement, and in connection with such consent Lender is entering into that certain Master Agreement of even date herewith (the "Master Agreement") and the Related Documents (as defined therein). L. Lender and ERLY Juice are concurrently entering into the ERLY Juice Agreement of even date herewith (the "ERLY Juice Agreement"), pursuant to which, among other things, the ERLY Juice Loan Agreement is being amended (and all further references to the ERLY Juice Loan Agreement shall be to such agreement as amended by the ERLY Juice Agreement or by any subsequent amendment). AGREEMENT NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, the receipt and adequacy of which are hereby acknowledged, to induce Lender (i) to consent to the Restructuring, (ii) to release the Murphy Guaranties, and (iii) to extend the due date of the ERLY Juice Obligations (as defined herein) and reduce the amount of such obligations as set forth in the ERLY Juice Agreement, it is hereby agreed, and the First Pledge, Second Pledge and ERLY Juice Guaranty are hereby amended and restated, as follows: 1. DEFINED TERMS. The following terms shall have the following meanings (such meanings being equally applicable to both the singular and plural form of the terms defined): "Agreement" means this Amended and Restated Guaranty and Pledge Agreement, including all amendments, modifications and supplements and any exhibits and schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative. "Allowed Encumbrances" means the following encumbrances: (i) Liens for Taxes upon or relating to the Pledged Collateral, which Liens either are not yet due and payable or to the extent that nonpayment thereof is permitted by the terms of Section 8.7 hereof; (ii) attachment or judgment Liens (exclusive of (a) any amounts that are duly bonded to the satisfaction of Lender in its sole judgment, or (b) any amount adequately covered by insurance as to which the insurance company has assumed the defense without denying coverage); and (iii) presently existing and hereafter created Liens in favor of Lender. 3 "Amended Chemonics Loan Agreement" is defined in the recitals. "Bankruptcy Code" means title 11, United States Code, as amended from time to time, and any successor statute thereto. "Business Day" means any day which is neither a Saturday nor Sunday nor a legal holiday on which banks are authorized or required to be closed in Los Angeles, California. "Chemonics" is defined in the recitals. "Chemonics Carryover Amount" is defined in the recitals. "Chemonics Guaranteed Obligations" is defined in Section 2.1.a hereof. "Chemonics International" is defined in the recitals. "Chemonics Obligations" means the "Obligations" as such term is defined in the Amended Chemonics Loan Agreement. "Collateral" means anything that is either Collateral as defined in the Amended Chemonics Loan Agreement or Collateral as defined in the ERLY Juice Loan Agreement. "ERLY Juice" is defined in the recitals. "ERLY Juice Guaranteed Obligations" is defined in Section 2.1.b hereof. "ERLY Juice Loan Agreement" is defined in the recitals. "ERLY Juice Obligations" means all obligations of ERLY Juice to pay any amounts to Lender pursuant to the ERLY Juice Loan Agreement or the Notes or Loan Documents (as both such terms are defined in the ERLY Juice Loan Agreement), whether for principal, interest, fees and expenses or otherwise. "Event of Default" is defined in Section 9.1 hereof. "Exchange Act" is defined in Section 7.8 hereof. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, consistently applied. "Guarantor" is defined in the preamble. 4 "Guaranty" is defined in Section 2.1 hereof. "Lender" is defined in the preamble. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease involving substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code as enacted in any state, or comparable law of any jurisdiction). "Loan Documents" means, collectively, (i) the Loan Documents (as defined in the ERLY Juice Loan Agreement), and (ii) the Loan Documents (as defined in the Amended Chemonics Loan Agreement). "Master Agreement" is defined in the recitals. "Notes" means, collectively, (i) the Notes (as defined in the ERLY Juice Loan Agreement) and (ii) the Term Note (as defined in the Amended Chemonics Loan Agreement). "Person" means any natural person, corporation, firm, association, government, governmental agency, trust, partnership, joint venture or any other entity, whether acting in an individual, fiduciary, or other capacity. "Pledge Amendment" is defined in Section 8.4 hereof. "Pledged Collateral" is defined in Section 3 hereof. "Pledged Shares" is defined in the recitals. "Restructuring" is defined in the recitals. "Secured Obligations" means (i) Guarantor's obligation to pay the Chemonics Guaranteed Obligations, (ii) Guarantor's obligation to pay the ERLY Juice Guaranteed Obligations, and (iii) all other obligations of Guarantor hereunder other than those described in clauses (i) and (ii) of this definition. "Securities Act" is defined in Section 7.8 hereof. "Stock" means all shares, options, warrants, general or limited partnership interests, participation or other equivalents (regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, 5 including common stock, preferred stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). "Subsidiary" of any corporation means any other corporation 51% or more of the outstanding shares of Stock of which having ordinary voting power for the election of directors is owned directly or indirectly by such corporation. "Taxes" means taxes, fees or other charges of any nature whatsoever imposed by any taxing authority (whether pursuant to United States Federal or any state or local law or any foreign law), other than taxes imposed on or measured by Lender's net income pursuant to the income tax laws of the jurisdiction wherein Lender's principal or lending office is located. "Termination Date" means the date upon which all Secured Obligations have been paid in full. 2. GUARANTY. 2.1 Subject to Section 4, Guarantor hereby absolutely, unconditionally and irrevocably makes the following guaranty (the "Guaranty"): (a) Guarantor hereby guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all of the Chemonics Obligations now or hereafter existing, whether for principal, interest, fees, expenses, or otherwise, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent or now or hereafter existing or due or to become due (including in all cases all such amounts which would become due but for the operation of the automatic stay under Bankruptcy Code sections 362(a), 502(b) and 506(b) (such obligations guaranteed by Guarantor being hereinafter referred to as the "Chemonics Guaranteed Obligations"). (b) Guarantor hereby guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all of the ERLY Juice Obligations now or hereafter existing, whether for principal, interest, fees, expenses, or otherwise, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent or now or hereafter existing or due or to become due (including in all cases all such amounts which would become due but for the operation of the automatic stay under Bankruptcy Code sections 362(a), 502(b) and 506(b) (such obligations guaranteed by Guarantor being hereinafter referred to as the "ERLY Juice Guaranteed Obligations"). 6 2.2 The Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all of the Chemonics Guaranteed Obligations and ERLY Juice Guaranteed Obligations have been paid in full. 2.3 The Guaranty constitutes a guaranty of payment when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that Lender or any holder of any Notes assert any claim or demand or enforce any remedy whatsoever against Chemonics, ERLY Juice, or any other Person before or as a condition to the obligations of Guarantor under the Guaranty. 2.4 Guarantor hereby indemnifies and holds harmless Lender and each holder of the Term Note (as defined in the Amended Chemonics Loan Agreement) or any Notes (as defined in the ERLY Juice Loan Agreement), for any and all costs and expenses (including reasonable attorney's fees and expenses) incurred by Lender or such holder, as the case may be, in enforcing any right under this Agreement. 3. PLEDGE. In order to secure the prompt payment in full when due, whether at stated maturity, by acceleration, or otherwise, and the performance of all Secured Obligations, Guarantor hereby pledges and grants to Lender a first priority security interest in all of the following (the "Pledged Collateral"): 3.1 the Pledged Shares and the certificates representing such Pledged Shares, and all dividends, cash, instruments, securities, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares of Guarantor; and 3.2 all additional shares of Stock of Chemonics from time to time acquired by Guarantor in any manner (which additional shares shall be deemed to be part of the Pledged Shares), and the certificates representing such additional shares, and all dividends, cash, instruments, securities, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such shares. 4. RECOURSE. Notwithstanding any other provision in this Agreement, at any time before December 21, 1994, Lender's sole recourse against Guarantor with respect to the Secured Obligations and the enforcement of the Guaranty shall be limited to Lender's first priority security interest in the Pledged Collateral. On and after December 21, 1994, in addition to, and without in any way limiting Lender's recourse to, the Pledged Collateral, Lender shall have full recourse against Guarantor with respect to the enforcement of the Guaranty as it relates to all of the Secured Obligations other than the Chemonics Guaranteed Obligations. 5. DELIVERY OF PLEDGED COLLATERAL; GUARANTOR'S RIGHTS. 7 5.1 All certificates representing or evidencing the Pledged Shares shall be delivered to and held by or on behalf of Lender in accordance herewith and accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Lender. Guarantor shall receive all certificates, dividends, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of the Pledged Collateral in trust for Lender and shall immediately upon receipt deliver to Lender such certificates, dividends, cash, instruments, and other property and proceeds, together with any necessary endorsement. All dividends and all other distributions in respect of any of the Pledged Collateral, whenever paid or made, shall be delivered to Lender to hold as Pledged Collateral and shall, if recovered by Guarantor, be received in trust for the benefit of Lender, be segregated from the other property or funds of Guarantor, and be forthwith delivered to Lender as Pledged Collateral in the same form as so received (with any necessary endorsement). 5.2 Unless an Event of Default shall have occurred and be continuing, Guarantor shall have the right, from time to time, to exercise all voting, consensual and other powers of ownership pertaining to the Pledged Collateral for all purposes not inconsistent with the terms of this Agreement, the ERLY Juice Loan Agreement, the Amended Chemonics Loan Agreement, or any of the Loan Documents, provided, however, that Guarantor agrees that it will not vote the Pledged Collateral in any manner that is inconsistent with the terms of any of the foregoing; and provided, further, that no vote shall be cast by Guarantor, and no consent shall be given or action taken by Guarantor, which would have the effect of impairing the position or interest of Lender in respect of the Pledged Collateral or which would authorize or effect: (a) the dissolution, reorganization, or liquidation, in whole or in part, of Chemonics or any of its Subsidiaries; (b) the consolidation or merger of Chemonics or any of its Subsidiaries with any other Person; (c) the sale, disposition, or encumbrance of all or substantially all of the assets of Chemonics or any of its Subsidiaries; or (d) (i) an amendment to Chemonics's charter or by-laws, (ii) any change in the authorized number of shares, the stated capital, or the authorized share capital of Chemonics, (iii) the issuance of any additional shares of Stock of Chemonics, or (iv) the alteration of the voting rights with respect to the Stock of Chemonics (and any action described in this clause (d) that is taken in violation of this Section 5.2 shall be void and of no force or effect). 6. GUARANTOR WAIVERS. Subject to the provisions of Section 4, Guarantor hereby agrees as follows: 6.1 The Secured Obligations are the immediate, direct, primary, and absolute obligations of Guarantor, shall not be subject to any condition precedent, and are independent of and not co-extensive with the Chemonics Obligations and the ERLY Juice Obligations. Guarantor expressly waives any right it may now or in the future have to require Lender to, and Lender shall have no obligation to, first pursue or 8 enforce against Chemonics, ERLY Juice, the Collateral, or any other security, guaranty, or pledge that may now or hereafter be held by Lender for the Chemonics Obligations, the ERLY Juice Obligations, or the Secured Obligations, or to apply such security, guaranty, or pledge to the Chemonics Obligations, the ERLY Juice Obligations, or the Secured Obligations, or to pursue any other remedy in Lender's power that Guarantor may or may not be able to pursue itself and that may lighten Guarantor's burden, before proceeding against the Pledged Collateral or Guarantor. Guarantor shall remain liable for the Secured Obligations, notwithstanding any judgment Lender may obtain against Chemonics or ERLY Juice, or any other guarantor or other Person, and notwithstanding any modification, extension, or renewal with respect thereto. 6.2 Guarantor hereby authorizes and empowers Lender in its sole discretion, without any notice or demand to Guarantor whatsoever and without affecting the liability of Guarantor hereunder, to exercise any right or remedy which Lender may have available to it, including, but not limited to, judicial foreclosure, exercise of rights of power of sale without judicial action, or taking a deed or an assignment in lieu of foreclosure as to any collateral security for the Chemonics Obligations, ERLY Juice Obligations, or Secured Obligations, whether real, personal or intangible property. No election to proceed in one form of action or against any party shall constitute a waiver of Lender's right to proceed in any other form of action or against Guarantor or any other person, or diminish the liability of Guarantor, or affect the right of Lender to proceed against Guarantor for any deficiency, except to the extent that Lender realizes payments by such action, notwithstanding the effect of such action upon Guarantor's rights of subrogation, reimbursement, or indemnity, if any against ERLY Juice, Chemonics, or any other guarantor, maker or endorser, or against any Collateral. Without limiting the generality of the foregoing, Guarantor: (a) expressly waives any defense or benefits that may be available from California Code of Civil Procedure ("CCP") section 580(a) and its subdivisions or section 726, which provide, among other things, that the amount of any deficiency judgment which may be recovered following either a judicial or non-judicial foreclosure is limited to the difference between the amount of any indebtedness owed and the greater of the fair value of the security or the amount for which the security was actually sold, or comparable provisions of the laws of any other state, as well as all suretyship defenses Guarantor would otherwise have under California law or the laws of any other state; (b) expressly waives all rights and benefits, if any, applicable to Guarantor under CCP sections 580(b), providing that no deficiency may be recovered on a real property purchase money obligation, and 580(d), providing that no deficiency may be recovered on a note secured by a deed of trust on real property if the real property is sold under a power of sale contained in the deed of trust, or comparable provisions of the laws of any other state; and (c) specifically agrees that any action maintained by Lender for the appointment of any receiver, trustee or custodian to collect rents, issues or profits or to obtain possession of any property or any setoff shall not 9 constitute an "action" within the meaning of section 726 of the CCP or any other comparable provision of any other state. Guarantor is aware that the ERLY Juice Obligations or the Chemonics Obligations may now or at any future time be secured by a Lien upon real property of ERLY Juice or Chemonics, and in connection therewith, expressly acknowledges that: (i) If ERLY Juice or Chemonics defaults in the payment or performance of the ERLY Juice Obligations or the Chemonics Obligations, as applicable, and Guarantor pays to Lender all or part of such obligations, Guarantor would have a right to proceed against ERLY Juice or Chemonics to the extent of the obligations so paid by Guarantor and to have the benefit of any Lien held by Lender for the obligations to the extent of the obligations so paid by Guarantor. Such right is commonly known as the "right of subrogation." (ii) If ERLY Juice or Chemonics so defaults, Lender, among other things, may enforce any Lien upon any interest in real property ("Real Property Lien") by means of judicial action or by nonjudicial action commonly known as a "nonjudicial foreclosure," "trustee's sale" or "power of sale foreclosure." (iii) If ERLY Juice or Chemonics so defaults and Lender enforces any Real Property Lien by means of a nonjudicial foreclosure, trustee's sale or power of sale foreclosure, Guarantor's right of subrogation to proceed against Borrower would be extinguished by the operation of CCP section 580d or similar laws, and, in such case, Guarantor might have a defense against payment under this Agreement. (iv) If ERLY Juice or Chemonics so defaults and Lender enforces any Real Property Lien by means of judicial action, Guarantor's right to proceed against Borrower might be limited by the operation of CCP section 580a or similar laws, in which case Guarantor might have a complete or partial defense against payment under this Agreement. NEVERTHELESS, GUARANTOR EXPRESSLY, KNOWINGLY AND INTENTIONALLY WAIVES AND RELINQUISHES ANY AND ALL RIGHTS, DEFENSES OR BENEFITS GUARANTOR MIGHT HAVE UNDER CCP SECTIONS 580a OR 580d OR SIMILAR LAWS. IN ADDITION, GUARANTOR ALSO EXPRESSLY, KNOWINGLY AND INTENTIONALLY WAIVES AND RELINQUISHES ANY AND ALL RIGHTS, DEFENSES OR BENEFITS GUARANTOR MAY HAVE BASED UPON AN ELECTION OF REMEDIES BY LENDER WHICH IN ANY MANNER IMPAIRS, AFFECTS, REDUCES, RELEASES, DESTROYS OR EXTINGUISHES GUARANTOR'S SUBROGATION RIGHTS OR GUARANTOR'S RIGHTS TO PROCEED AGAINST ERLY JUICE, CHEMONICS, OR AGAINST ANY OTHER PERSON OR ANY SECURITY FOR THE CHEMONICS OBLIGATIONS, ERLY JUICE OBLIGATIONS, OR SECURED OBLIGATIONS, BY WAY OF SUBROGATION, INDEMNITY, CONTRIBUTION, 10 REIMBURSEMENT OR OTHERWISE. IN PARTICULAR, GUARANTOR AGREES THAT THIS AGREEMENT WILL REMAIN FULLY EFFECTIVE AND GUARANTOR WILL BE LIABLE TO LENDER FOR ANY SECURED OBLIGATIONS EVEN IF LENDER ENFORCES ANY REAL PROPERTY LIEN THAT SECURES THE CHEMONICS OBLIGATIONS OR ERLY JUICE OBLIGATIONS BY MEANS OF A NONJUDICIAL FORECLOSURE, TRUSTEE'S SALE OR POWER OF SALE FORECLOSURE AND THE EFFECT OF SUCH SALE IS TO PREVENT GUARANTOR FROM TAKING ANY ACTION AGAINST ERLY JUICE OR CHEMONICS TO RECOVER ANY AMOUNTS PAID BY GUARANTOR TO LENDER UNDER THIS AGREEMENT OR OTHERWISE LIMITS OR DESTROYS GUARANTOR'S RIGHT OF SUBROGATION. GUARANTOR ALSO AGREES THAT THIS AGREEMENT WILL REMAIN FULLY EFFECTIVE AND GUARANTOR WILL BE LIABLE TO LENDER FOR THE SECURED OBLIGATIONS EVEN IF LENDER SELLS REAL PROPERTY BY JUDICIAL FORECLOSURE ACTION AND GUARANTOR'S RIGHTS AGAINST ERLY JUICE OR CHEMONICS ARE LIMITED BY THE OPERATION OF CCP SECTIONS 580a OR 580d OR SIMILAR LAWS. 6.3 Guarantor acknowledges that this is a continuing guaranty and that the Secured Obligations shall extend to and include each and every extension or renewal of any of the ERLY Juice Obligations or Chemonics Obligations, regardless of whether the ERLY Juice Obligations or the Chemonics Obligations may, in successive transactions, be paid, repaid, advanced, or renewed from time to time. Guarantor has entered into this Agreement based solely upon its independent investigation of Chemonics's and ERLY Juice's financial condition, and Guarantor assumes full responsibility for obtaining any further information with respect to Chemonics and ERLY Juice, the conduct of their respective businesses, or any other guarantor. Guarantor acknowledges and agrees that Lender has not provided to Guarantor any information concerning Chemonics or ERLY Juice, including, without limitation, any information concerning the financial condition of Chemonics or ERLY Juice, Chemonics's or ERLY Juice's value, or Chemonics's or ERLY Juice's future prospects, and Lender has not provided to Guarantor any information concerning any action Lender may take, or may fail to take, with respect to Chemonics, with respect to ERLY Juice, or with respect to the Pledged Collateral at any time. Guarantor represents that it is now, and during the term of this Agreement will be, responsible for ascertaining the financial condition of Chemonics, ERLY Juice, and each other guarantor. Guarantor hereby waives any duty on the part of Lender to disclose to Guarantor, and agrees that it is not relying upon nor expecting Lender to disclose to Guarantor, any fact known or hereafter known by Lender relating to the operation or condition of Chemonics or its business, relating to ERLY Juice, or relating to the existence, liability, or financial condition of any other guarantor of the ERLY Juice Obligations or Chemonics Obligations, notwithstanding any effect that such fact may have upon Guarantor's risk hereunder or Guarantor's right to contribution, subrogation, reimbursement, or indemnity, if any. Guarantor knowingly accepts the full range of 11 risk encompassed in a contract of continuing guaranty, which risk includes, but is not limited to, the possibility that ERLY Juice or Chemonics may incur obligations to Lender after ERLY Juice's or Chemonics's financial condition or ability to pay debts as they mature have deteriorated. 6.4 Lender shall be under no obligation to marshal any assets in favor of Guarantor or in payment of any or all of the ERLY Juice Obligations, Chemonics Obligations, or Secured Obligations. 6.5 Guarantor hereby waives: (a) presentment, demand, and protest, and notice of acceleration, presentment, dishonor, non-payment, or protest, or any delay with respect thereto, with respect to any instruments or documents relating to the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations; (b) notice of any extension, modification, renewal, or amendment of any of the terms of the ERLY Juice Loan Agreement, the Amended Chemonics Loan Agreement, or any other Loan Document, or the Secured Obligations; (c) notice of the occurrence of any Default or Event of Default other than the notice required by Section 9.2 hereof; (d) notice of any exercise or non-exercise by Lender of any right, power, or remedy with respect to the ERLY Juice Obligations, the Chemonics Obligations, the Secured Obligations or the Collateral. 6.6 Guarantor hereby irrevocably waives any and all rights it may have at any time (whether arising directly or indirectly, by operation of law or contract) to assert any claim against ERLY Juice, Chemonics, or any other guarantor or any Person now or hereafter primarily or secondarily liable for any obligations of Chemonics or ERLY Juice on account of payments made under this Agreement, including, without limitation, any and all rights of subrogation, reimbursement, exoneration, contribution or indemnity. Guarantor further hereby irrevocably waives any recourse against, right to, or benefit of any Collateral, any other guaranty, or any security interest or Lien held therefor. 6.7 If, notwithstanding the foregoing waivers or any other waivers herein, pursuant to applicable law, Guarantor, by payment or otherwise, becomes subrogated to all or any of the rights of Lender under the ERLY Juice Loan Agreement, the Amended Chemonics Loan Agreement, or any of the Loan Documents or otherwise, the rights of Lender to which Guarantor shall be subrogated shall be accepted by Guarantor "as is" and without any representation or warranty of any kind by Lender, express or implied, with respect to the legality, value, validity, or enforceability of any of such rights, or the existence, availability, value, merchantability or fitness for any particular purpose of any Collateral, and shall be without recourse to Lender. 6.8 In the event Lender shall, with respect to any Collateral, bid at any foreclosure or trustee's sale or at any public or private sale permitted by law or the 12 ERLY Juice Loan Agreement, the Amended Chemonics Loan Agreement, or any of the Loan Documents, Lender may bid all or less than the amount of the Chemonics Obligations or the ERLY Juice Obligations, as the case may be, and the amount of such bid need not be paid by Lender but shall be credited against such obligations, as appropriate. The amount of the successful bid at any such sale, whether Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral being sold thereunder, and the difference between such bid amount and the remaining balance of the Chemonics Guaranteed Obligations or the ERLY Juice Guaranteed Obligations, as the case may be, shall be conclusively deemed to be the amount of the Chemonics Guaranteed Obligations or the ERLY Juice Guaranteed Obligations, as the case may be, under this Agreement as of such time, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Lender might otherwise be entitled but for such bidding at any such sale. 6.9 A separate action or actions may be brought and prosecuted by Lender against Guarantor whether or not an action is brought against ERLY Juice or Chemonics, as applicable, or whether or not ERLY Juice or Chemonics, or any other guarantor or pledgor is joined in any such action or actions. Without limiting the generality of the foregoing, Guarantor expressly waives the benefit of any statute of limitation affecting the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations and expressly agrees that the running of a period of limitation on, or Lender's delay or omission in, any action by Lender against ERLY Juice, Chemonics, or Guarantor or for the foreclosure of any Lien or the enforcement of any security interest in the Collateral shall not exonerate or affect Guarantor's obligation to pay and perform the Secured Obligations, notwithstanding the effect of the running of any such period of limitation upon Guarantor's right of subrogation, reimbursement, or indemnity, if any, against ERLY Juice, Chemonics, or any other Person. 6.10 Guarantor hereby represents and agrees that none of the ERLY Juice Obligations, Chemonics Obligations or Secured Obligations is consumer debt, or was or shall be incurred by ERLY Juice, Chemonics, or Guarantor primarily for personal, family, or household purposes. Guarantor further agrees and represents that the ERLY Juice Obligations were incurred by ERLY Juice, that the Chemonics Obligations were incurred by Chemonics, and the Secured Obligations are and shall be incurred by Guarantor, for business and commercial purposes. Guarantor agrees that any claim of Lender against Guarantor arising out of this Agreement arises out of the conduct by Guarantor of its trade, business, or profession. 6.11 Guarantor acknowledges that it has been provided with or had an opportunity to review the Amended Chemonics Loan Agreement and the ERLY Juice Loan Agreement (including the ERLY Juice Agreement) and the other Loan Documents existing as of the date hereof, and Guarantor knowingly undertakes all the Secured Obligations as they may be affected by such agreements and such other 13 documents as they may be now or are hereafter agreed upon by Lender and the other parties thereto. ---------- (initialed on behalf of Guarantor) 6.12 Either before or after the Termination Date, Lender, in such manner and upon such terms and at such time as it deems best, and with or without notice to Guarantor, may release, add, or subordinate Guarantor or any guarantor or endorser of Collateral or additional or substituted security for the Chemonics Obligations, the ERLY Juice Obligations or the Secured Obligations, notwithstanding the effect thereof on Guarantor's rights of reimbursement, subrogation, or indemnity, if any. 7. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that: 7.1 Guarantor is the sole holder of record and the sole beneficial owner of the Pledged Collateral, free and clear of any Lien thereon or affecting the title thereto, except for the Lien created by this Agreement and Allowed Encumbrances. 7.2 All of the Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. 7.3 Guarantor has the right and requisite authority to pledge, assign, transfer, deliver, deposit, and set over the Pledged Collateral to Lender as provided herein. 7.4 None of the Pledged Shares has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject. 7.5 No consent, approval, authorization or other order of any Person and no consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority is required either (i) for the pledge of the Pledged Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by Guarantor, or (ii) for the exercise by Lender of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally. 7.6 The pledge, grant of a security interest in, and delivery of the Pledged Collateral pursuant to this Agreement will create a valid first priority Lien on 14 and first priority perfected security interest in the Pledged Collateral and the proceeds thereof, securing the payment of the Secured Obligations. 7.7 This Agreement has been duly executed and delivered by Guarantor and constitutes a legal, valid, and binding obligation of Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, or other similar laws affecting the rights of creditors generally or by the application of general equity principles. 7.8 Guarantor has purchased the Pledged Collateral for its own account, for investment purposes and not with a view to the distribution thereof. Guarantor agrees that it will not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate, or otherwise dispose of any of the Pledged Collateral (or solicit any offers to buy, purchase, or otherwise acquire or take a pledge of any of the Pledged Collateral), except in compliance with the Securities Act of 1933, as amended (or any similar statute then in effect) (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (or any similar statute then in effect) (the "Exchange Act"), and the rules and regulations under the Securities Act and the Exchange Act. The representations and warranties set forth in this Section 7 shall survive the execution and delivery of this Agreement. 8. COVENANTS. Guarantor covenants and agrees that until the Termination Date: 8.1 Without the prior written consent of Lender, Guarantor will not sell, assign, transfer, pledge, or otherwise encumber any of its rights in or to the Pledged Collateral or any unpaid dividends or other distributions or payments with respect thereto or grant a Lien in any thereof. 8.2 Guarantor will, at its own expense, promptly execute, acknowledge, and deliver all such instruments and take all such action as Lender from time to time may request in order to ensure to Lender the benefits of the Liens in and to the Pledged Collateral intended to be created by this Agreement. 8.3 Guarantor will defend the title to the Pledged Collateral and Lender's Liens thereon against the claim of any Person, and Guarantor will maintain and preserve such Liens until such Liens are realized in accordance with the terms hereof or until this Agreement terminates pursuant to the terms of Section 13 hereof. 8.4 Guarantor will, upon obtaining any additional shares of Stock of Chemonics that are not already Pledged Collateral promptly (and in any event within three (3) Business Days) deliver to Lender such Stock, together with a Pledge Amendment, in substantially the form of Schedule II attached hereto (a "Pledge 15 Amendment"), duly executed by Guarantor, in respect of the additional Pledged Shares which are to be pledged pursuant to this Agreement. Guarantor hereby authorizes Lender to attach each Pledge Amendment to this Agreement and agrees that all Pledged Shares listed on any Pledge Amendment delivered to Lender shall for all purposes hereunder be considered Pledged Collateral. The delivery by Guarantor of a Pledge Amendment shall constitute a ratification by Guarantor of the Secured Obligations and of the rights and remedies of Lender under this Agreement. 8.5 If Guarantor proposes to transfer to any other Person, other than to Chemonics, pursuant to Section 8.6 hereof, any of the Pledged Collateral, Guarantor shall notify Lender in writing of the circumstances and details of such proposed transfer and the identity of the proposed transferee. Any such transferee must be an employee or director of Chemonics. Lender shall take all steps reasonably necessary to allow Guarantor and the proposed transferee, if not already a pledgor hereunder, to effect the proposed transfer; provided, that: (a) before the proposed transfer is effected, the proposed transferee shall deliver to Lender a Pledge Amendment, duly executed by such proposed transferee, or such other amendments or other documents or instruments reasonably required by Lender to make the proposed transferee a Guarantor under this Agreement; and (b) such transfer is effected in a manner reasonably satisfactory to Lender that ensures that Lender's Lien remains a continuously perfected first priority security interest on the Pledged Collateral to be transferred, subject to any Allowed Encumbrances. 8.6 If Guarantor proposes to transfer to Chemonics any of the Pledged Collateral pledged by Guarantor under this Agreement and still subject to Lender's Lien, Guarantor shall notify Lender in writing of the circumstances and details of such proposed transfer. Any transfer to Chemonics by Guarantor of any of such Pledged Collateral shall be subject to all of the following conditions: (a) Any Pledged Collateral that is transferred to Chemonics must be cancelled and retired by Chemonics. If any new shares of Stock are subsequently issued by Chemonics with respect to any Pledged Collateral that is cancelled and retired in accordance with the previous sentence, then such shares of Stock shall be subject to the following restrictions: (i) such Stock may only be issued to an employee or director of Chemonics; and (ii) before such Stock may be issued, the proposed recipient, if not already a Guarantor hereunder, shall execute such amendments or other documents or instruments reasonably required by Lender to make the proposed transferee a Guarantor under this Agreement; and (b) Any such transfer to Chemonics and reissuance by Chemonics of such Pledged Collateral must be effected in a manner reasonably satisfactory to Lender and that ensures that Lender's Lien remains a continuously perfected first priority security interest in the Pledged Collateral, subject to any Allowed Encumbrances. 16 8.7 Guarantor will, and will cause each of its Subsidiaries to, pay and discharge, as the same may become due and payable, all Federal, state, and local taxes, assessments, and other governmental charges or levies against or on any of its property, as well as claims of any kind which, if unpaid, might become a Lien upon any one of its properties; provided, however, that the foregoing shall not require Guarantor or any Subsidiary to pay or discharge any such tax, assessment, charge, levy, or Lien so long as it shall contest the validity thereof in good faith by appropriate proceedings and shall set aside on its books adequate reserves in accordance with GAAP with respect thereto. 9. DEFAULTS AND REMEDIES. 9.1 The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder (regardless of the reason therefor): (a) An Event of Default (as defined in the ERLY Juice Loan Agreement or as defined in the Amended Chemonics Loan Agreement) occurs and is continuing; (b) Any representation or warranty of Guarantor made under this Agreement is breached, or proves to be untrue or incorrect in any material respect as of the date made or deemed made; (c) Guarantor fails or neglects to perform, keep or observe any other provision of this Agreement, the Amended Chemonics Loan Agreement, or of any of the other Loan Documents (as "Loan Documents" is defined in the Amended Chemonics Loan Agreement), and the same shall remain unremedied for a period ending on the first to occur of 30 days after Guarantor, ERLY Juice, and Chemonics shall receive written notice of any such failure from Lender or 30 days after Guarantor shall become aware thereof; (d) Any of the assets of Guarantor are attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian, or assignee for the benefit of creditors of Guarantor, which writ, warrant, or other procedure shall remain unstayed or undismissed for thirty (30) consecutive days; or any Person shall apply for the appointment of a receiver, trustee, or custodian for any of the assets of Guarantor and such application or proceeding shall remain unstayed or undismissed for thirty (30) consecutive days; or Guarantor shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay, or defraud its creditors or any of them, or made or suffered a transfer of any of its property or the incurring of an obligation which would be fraudulent under any bankruptcy, fraudulent conveyance, or other similar law; 17 (e) A case or proceeding shall have been commenced against Guarantor in a court having competent jurisdiction seeking a decree or order in respect of Guarantor (i) under the Bankruptcy Code, or any other applicable Federal, state, or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee, or sequestrator (or similar official) of Guarantor or of any substantial part of its properties, or (iii) ordering the winding-up or liquidation of the affairs of Guarantor, and such case or proceeding shall remain undismissed or unstayed for thirty (30) consecutive days or such court shall enter a decree or order granting the relief sought in such case or proceeding; or (f) Guarantor shall (i) file a petition seeking relief under the Bankruptcy Code, or any other applicable Federal, state, or foreign bankruptcy or other similar law, (ii) consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, or sequestrator (or similar official) of Guarantor or of any substantial part of its properties, or (iii) fail generally to pay its debts as such debts become due. 9.2 Upon the occurrence and during the continuance of an Event of Default, Lender (personally or through an agent) is hereby authorized and empowered to (i) transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral (ii) exchange certificates or instruments representing or evidencing Pledged Shares for certificates or instruments of smaller or larger denominations, (iii) exercise the voting rights with respect thereto, (iv) collect and receive all cash dividends and other distributions made thereon, (v) sell in one or more sales if such notice includes notice of the time and place of any public sale or of the time after which a private sale is to take place (which notice Guarantor agrees is commercially reasonable), but without any previous notice or advertisement, the whole or any part of the Pledged Collateral, and (vi) otherwise act with respect to the Pledged Collateral as though Lender was the outright owner thereof, Guarantor hereby irrevocably constituting and appointing Lender as the proxy and attorney-in-fact of Guarantor, with full power of substitution to do so; provided, that Lender shall not have any duty to exercise any such right or to preserve the same and shall not be liable for any failure to do so or for any delay in doing so. Any sale shall be made at a public or private sale at Lender's place of business, or at any public building in the City of Los Angeles or elsewhere to be named in the notice of sale, either for cash or upon credit or for future delivery at such price as Lender may deem fair, and Lender may be the purchaser of the whole or any part of the Pledged Collateral so sold and hold the same thereafter in its own right free from any claim of Guarantor or any right of redemption. Each sale shall be made to the highest bidder, but Lender reserves the right to reject any and all bids at such sale which, in its discretion, it shall deem inade- quate. Demands of performance, except as otherwise herein specifically provided for, notices of sale, advertisements, and the presence of property at sale are hereby 18 waived and any sale hereunder may be conducted by an auctioneer or any officer or agent of Lender. 9.3 If, at the original time or times appointed for the sale of the whole or any part of the Pledged Collateral, the highest bid shall be inadequate to discharge in full all the Secured Obligations if there be but one sale, or if the Pledged Collateral be offered for sale in lots, if at any of such sales, the highest bid for the lot offered for sale would indicate to Lender, in its discretion, the unlikelihood of the proceeds of the sales of the whole of the Pledged Collateral being sufficient to discharge all the Secured Obligations, Lender may, on one or more occasions and in its discretion, postpone any of said sales by public announcement at the time of sale or the time of previous postponement of sale, and no other notice of such postponement or postponements of sale need be given, any other notice being hereby waived; provided, that any sale or sales made after such postponement shall be after five (5) days' notice to Guarantor. 9.4 If, at any time when Lender in its sole discretion determines, following the occurrence and during the continuance of an Event of Default, that, in connection with any actual or contemplated exercise of its rights (when permitted under this Section 9) to sell the whole or any part of the Pledged Collateral hereunder, it is necessary or advisable to effect a public registration of all or part of the Pledged Collateral pursuant to the Securities Act, Guarantor shall, in an expeditious manner, to the extent Guarantor has authority or the right to, cause Chemonics to take, and if Guarantor cannot cause Chemonics to take, then Guarantor must cooperate with Chemonics in taking, any and all steps necessary to effect a registration of all or any portion of the Pledged Collateral. 9.5 If, at any time when Lender shall determine to exercise its rights to sell the whole or any part of the Pledged Collateral hereunder, such Pledged Collateral or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Act, then Lender may, in its discretion (subject only to applicable requirements of law), sell such Pledged Collateral or part thereof by private sale in such manner and under such circumstances as Lender may deem necessary or advisable, but subject to the other requirements of this Section 9, and shall not be required to effect such registration or cause the same to be effected. Without limiting the generality of the foregoing, in any such event Lender may, in its discretion, (a) in accordance with applicable securities laws, proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Collateral or part thereof could be or shall have been filed under the Securities Act (or similar statute), (b) approach and negotiate with a single possible purchaser to effect such sale, and (c) restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Collateral or part thereof. In addition to a private sale as provided above in this Section 9, if any of 19 the Pledged Collateral shall not be freely distributable to the public without registration under the Securities Act (or similar statute) at the time of any proposed sale pursuant to this Section 9, then Lender shall not be required to effect such registration or cause the same to be effected but, in its discretion (subject only to applicable requirements of law), Lender may require that any sale hereunder (including a sale at auction) be conducted subject to restrictions (i) as to the financial sophistication and ability of any Person permitted to bid or purchase at any such sale, (ii) as to the content of legends to be placed upon any certificates representing the Pledged Collateral sold in such sale, including restrictions on future transfer thereof, (iii) as to the representations required to be made by each Person bidding or purchasing at such sale relating to that Person's access to financial information about Chemonics and Guarantor and such Person's intentions as to the holding of the Pledged Collateral so sold for investment, for its own account, and not with a view to the distribution thereof, and (iv) as to such other matters as Lender may, in its discretion, deem necessary or appropriate in order that such sale (notwithstanding any failure to so register) may be effected in compliance with the Bankruptcy Code and other laws affecting the enforcement of creditors' rights and the Securities Act and all applicable state securities laws. Guarantor agrees that a sale of Pledged Collateral held or to be held in accordance with the foregoing provisions shall be a commercially reasonable disposition of such Pledged Collateral. 9.6 Guarantor acknowledges that, notwithstanding the legal availability of a private sale or a sale subject to the restrictions described above in Section 9.5, Lender may, in its discretion, elect to register any or all of the Pledged Collateral under the Securities Act (or any applicable state securities law) in accordance with Lender's rights hereunder. Guarantor, however, recognizes that Lender may be unable, and in any event shall be under no obligation, to effect a registration or public sale of any or all the Pledged Collateral and may elect, in Lender's sole discretion, to resort to one or more private sales thereof. Guarantor also acknowledges that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. Lender shall not be under any obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit the registrant to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if Chemonics or Guarantor would agree to do so. 9.7 Guarantor agrees that following the occurrence and during the continuance of an Event of Default it will not at any time plead, claim or take the benefit of any appraisal, valuation, stay, extension, moratorium or redemption law now or hereafter in force in order to prevent or delay the enforcement of this Agreement or the absolute sale of the whole or any part of the Pledged Collateral or the possession thereof by any purchaser at any sale hereunder, and Guarantor waives the benefit of all such laws to the extent it lawfully may do so. Guarantor agrees that it will not 20 interfere with any right, power, or remedy of Lender provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by Lender of any one or more of such rights, powers, or remedies. No failure or delay on the part of Lender to exercise any such right, power, or remedy and no notice or demand which may be given to or made upon Guarantor by Lender with respect to any such remedies shall operate as a waiver thereof, or limit or impair Lender's right to take any action or to exercise any power or remedy hereunder, without notice or demand, or prejudice its rights against Guarantor in any respect. 10. APPLICATION OF PROCEEDS. Any cash held by Lender as Pledged Collateral and all cash proceeds received by Lender in respect of any sale of, liquidation of, or other realization upon all or any part of the Pledged Collateral shall be applied by Lender as follows: 10.1 First, to the payment of the costs and expenses of such sale, including reasonable compensation to Lender and its agents and counsel, and all expenses, liabilities, and advances made or incurred by Lender in connection therewith; 10.2 Next, to the payment of the Secured Obligations (and Lender may apply the Pledged Collateral and such proceeds to the Chemonics Guaranteed Obligations, the ERLY Juice Guaranteed Obligations, and the other Secured Obligations in any order in which Lender in its sole discretion shall determine); and 10.3 Finally, after payment in full of all Secured Obligations, and subject to Section 9504(1)(c) of the California Commercial Code, to the payment of Guarantor, or its successors or assigns, or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. 11. WAIVER. No failure or delay on Lender's part in exercising any power of sale, Lien, option or other right, power or remedy hereunder, and no notice or demand which may be given to or made upon Guarantor by Lender with respect to any power of sale, Lien, option or other right, power or remedy hereunder, shall constitute a waiver thereof, or limit or impair Lender's right to take any action or to exercise any power of sale, Lien, option, or any other right, power or remedy hereunder, without notice or demand, or prejudice Lender's rights as against Guarantor in any respect. 12. ASSIGNMENT. Lender may assign, endorse or transfer any instrument evidencing all or any part of the Chemonics Obligations, the ERLY Juice Obligations or the Secured Obligations and the holder of such instrument shall be entitled to the benefits of this Agreement. 21 13. TERMINATION. Immediately following the Termination Date, unless the Pledged Collateral secures other obligations in favor of Lender, Lender shall deliver to Guarantor the Pledged Collateral at the time subject to this Agreement and all instruments of assignment executed in connection therewith, free and clear of the Liens hereof. Except as otherwise provided herein, all of Guarantor's obligations hereunder shall terminate on the Termination Date. Immediately following the Termination Date, unless the Pledged Collateral secures other obligations in favor of Lender, Lender shall deliver to Guarantor the Pledged Collateral at the time subject to this Agreement and all instruments of assignment executed in connection therewith, free and clear of the Liens hereof. Except as otherwise provided herein, all of Guarantor's obligations hereunder shall terminate on the Termination Date. 14. LIEN ABSOLUTE. All rights of Lender hereunder, and all obligations of Guarantor hereunder, shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be impaired or affected by, or deemed to be satisfied by, and neither Guarantor nor any Pledged Collateral shall be exonerated, discharged, or released by, any of the following events: 14.1 Lender's exercise or enforcement of or failure or delay in exercising or enforcing any legal proceedings to collect the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations or any power, right, or remedy with respect to the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations or the Collateral or Pledged Collateral, including, but not limited to, any action or inaction of Lender to perfect, protect, or enforce any security interest in any Collateral, any impairment or suspension of any Collateral, Lender's compromise, exchange, release, settlement, amendment, or waiver with or of ERLY Juice, Chemonics, or any other Person, or the Collateral or Pledged Collateral, or any change in the time, manner, or place of payment of, or in any other term of, all or any part of the ERLY Juice Obligations, Chemonics Obligations, or Secured Obligations, or any other amendment, impairment, renunciation, cancellation, surrender, suspension, or waiver of the ERLY Juice Loan Agreement, the Amended Chemonics Loan Agreement, any other Loan Document, or any other agreement or instrument governing or evidencing any of the ERLY Juice Obligations, Chemonics Obligations, or Secured Obligations; 14.2 Insolvency, bankruptcy, reorganization, arrangement, adjustment, composition, assignment for the benefit of creditors, appointment of a receiver or trustee for all or any significant part of the assets of ERLY Juice, Chemonics or Guarantor, or the liquidation, winding up, or dissolution of ERLY Juice, Chemonics, or Guarantor or any other guarantor of the ERLY Juice Obligations or the Chemonics Obligations; 22 14.3 Any limitation, discharge, cessation, or partial satisfaction of all or any portion of the ERLY Juice Obligations or the Chemonics Obligations, the liability of any other guarantor of all or any portion of the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations, whether by operation of any statute, regulation, or rule of law, or otherwise, regardless of the intervention or omission of Lender, except payment and performance in full of the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations, or any invalidity, voidability, unenforceability, or irregularity, or future change to or amendment of, in whole or in part, this Agreement, the ERLY Juice Loan Agreement, the Amended Chemonics Loan Agreement, any other Loan Document, or any other agreement or instrument evidencing any ERLY Juice Obligations, Chemonics Obligations, or Secured Obligations; 14.4 Any merger, acquisition, consolidation, or change in structure of ERLY Juice or Chemonics; or any sale, lease, transfer, or other disposition of any or all of the assets of ERLY Juice, Chemonics, Guarantor, or any other guarantor of the ERLY Juice Obligations or the Chemonics Obligations; 14.5 Any assignment, endorsement, or other transfer, in whole or in part, of Lender's interest in the ERLY Juice Obligations, the Chemonics Obligations, the Secured Obligations, or the Collateral or Pledged Collateral; 14.6 Any claim, defense, counterclaim, or setoff, other than (i) any defense of prior performance, or (ii) any defense based on any applicable provision of the California Commercial Code requiring that the Collateral and the Pledged Collateral be disposed of in a commercially reasonable manner, which ERLY Juice, Chemonics, Guarantor, or any other guarantor of the ERLY Juice Obligations or Chemonics Obligations may have or assert, including any defense of incapacity, disability, or lack of corporate or other authority to execute any documents relating to the ERLY Juice Obligations, the Chemonics Obligations, the Secured Obligations, the Collateral, the Pledged Collateral or any other guaranty of the ERLY Juice Obligations or the Chemonics Obligations; 14.7 Lender's vote, claim, distribution, election, acceptance, action, or inaction in any bankruptcy or reorganization case related to the Collateral, the ERLY Juice Obligations, the Chemonics Obligations, the Secured Obligations, or the Pledged Collateral; 14.8 Any cancellation, renunciation, or surrender of any pledge or any other debt instrument evidencing the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations; or 23 14.9 Any other action or circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any surety, guarantor, or Guarantor. 15. INDEMNIFICATION. Guarantor agrees to indemnify and hold Lender harmless from and against any taxes, liabilities, claims and damages, including reasonable attorneys' fees and disbursements, and other expenses incurred or arising by reason of the taking or the failure to take action by Lender, in good faith, in respect of any transaction effected under this Agreement or in connection with the Lien provided for herein, including, without limitation, any taxes payable in connection with the delivery or registration of any of the Pledged Collateral as provided herein. The obligations of Guarantor under this Section 15 shall survive the termination of this Agreement but shall be subject to the limitations regarding recourse set forth in Section 4 hereof. 16. REINSTATEMENT. This Agreement shall remain in full force and effect and continue to be effective if at any time payment and performance of the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations, or any part thereof, is, pursuant to applicable law, avoided, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is avoided, rescinded, reduced, restored, or returned, the ERLY Juice Obligations, the Chemonics Obligations, or the Secured Obligations, as the case may be, shall be reinstated and deemed reduced only by such amount paid and not so avoided, rescinded, reduced, restored, or returned. 17. SUBORDINATION. Except as otherwise provided in this Section 17, any Indebtedness (as defined in the Amended Chemonics Loan Agreement) of ERLY Juice or Chemonics or any Subsidiary of either of them now or hereafter owing to Guarantor is hereby subordinated to all obligations of ERLY Juice or Chemonics to Lender heretofore, now or hereafter created, whether before or after notice of termination hereof, and without the prior consent of Lender shall not be paid in whole or in part nor will Guarantor accept any payment of or on account of any such indebtedness at any time while Guarantor remains liable under this Agreement. At the request of Lender, ERLY Juice or Chemonics shall pay to Lender all or any part of such subordinated indebtedness and any amount so paid to Lender at its request shall be applied to payment of the ERLY Juice Obligations or the Chemonics Obligations, as applicable. Any payment to Guarantor received in violation of any of the provisions hereof shall be deemed to have been received by Guarantor as trustee for Lender and shall be paid over to Lender immediately on account of the ERLY Juice Obligations or the Chemonics Obligations, as appropriate, but without otherwise affecting in any manner Guarantor's liability under any of the provisions of this Agreement. Guarantor 24 agrees to file all claims against ERLY Juice or Chemonics in any bankruptcy or other proceeding in which the filing of claims is required by law in respect of any indebtedness of ERLY Juice or Chemonics to Guarantor, and Lender shall be entitled to all of Guarantor's rights thereunder. If for any reason Guarantor fails to file such claim at least thirty (30) days prior to the last date on which such claim should be filed, Lender, as Guarantor's attorney-in-fact, is hereby authorized to do so in Guarantor's name or, in Lender's discretion, to assign such claim to and cause proof of claim to be filed in the name of Lender's nominee. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Lender the full amount payable on the claim in the proceeding, and to the full extent necessary for that purpose Guarantor hereby assigns to Lender all Guarantor's rights to any payments or distributions to which Guarantor otherwise would be entitled. If the amount so paid is greater than Guarantor's liability hereunder, Lender will pay the excess amount to the party entitled thereto. Notwithstanding the foregoing, (i) so long as no Event of Default has occurred and is continuing, Guarantor may, on or before December 15, 1994, be paid up to the aggregate sum of $100,000 by Chemonics on account of Chemonics's now existing Indebtedness to Guarantor, and (ii) from and after the time at which the Chemonics Obligations have been paid in full, this Section 17 shall not apply to payments from Chemonics to Guarantor. 18. MISCELLANEOUS. 18.1 Lender may execute any of its duties hereunder by or through agents or employees and shall be entitled to advice of counsel concerning all matters pertaining to its duties hereunder. 18.2 Neither Lender nor any of its officers, directors, employees, agents, or counsel shall be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own respective gross negligence or willful misconduct. 18.3 This Agreement shall be binding upon Guarantor and the successors and assigns of Guarantor, and shall inure to the benefit of, and be enforceable by, Lender and its successors and assigns, and none of the terms or provisions of this Agreement may be waived, altered, modified, or amended except in writing duly signed on behalf of Lender and Guarantor. 18.4 This Agreement shall constitute the complete agreement between the parties with respect to the subject matter hereof. 19. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. THIS AGREEMENT AND ALL OBLIGATIONS ARISING HEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN 25 ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY LEGAL ACTION OR SUIT TO COLLECT THE SECURED OBLIGATIONS OR TO REALIZE ON THE PLEDGED COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO GUARANTOR AT THE ADDRESS SET FORTH BELOW THE SIGNATURES HERETO AND THAT SERVICE SO MADE SHALL BE DEEDED COMPLETED UPON THE EARLIER OF GUARANTOR'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. 20. SEVERABILITY. If for any reason any provision or provisions hereof are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement which are valid. 21. NOTICES. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give or serve upon any other party any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and two (2) days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile confirmed by telecopy answerback) or by delivery of a copy by personal delivery, (c) one (1) Business Day after deposit with a reputable overnight courier with all charged prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated below or to such other address (or facsimile number) as may be substituted by notice given as provided herein. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to the persons designated below to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 22. FURTHER ASSURANCES. Guarantor agrees, upon the written request of Lender, to execute and deliver to Lender, from time to time, any additional instruments or documents reasonably considered necessary by Lender to cause this 26 Agreement and the Secured Obligations to be, become, or remain valid and effective, and to cause Lender's security interest in the Pledged Collateral to be, become, or remain duly perfected. 23. SECTION TITLES. The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 24. COUNTERPARTS. This Agreement may be executed in any number of identical counterparts which shall, collectively and separately, constitute one agreement. 25. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LENDER AND GUARANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS HEREUNDER. IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Guaranty and Pledge Agreement to be duly executed as of the date first written above. ERLY INDUSTRIES, INC. By: /s/ KURT GREY Name: Kurt Grey Title: Vice President Address: 10990 Wilshire Boulevard Los Angeles, California 90024 Attention: Kurt Grey, Vice President Facsimile No.: (310) 473-8890 27 with a copy to: Magnus, Epman & Dwyer 300 Corporate Pointe, Suite 310 Culver City, CA 90230-7614 Attn: Ronald J. Epman, Esq. Facsimile No.: (310) 216-0701 [SIGNATURES CONTINUED] 28 [SIGNATURES CONTINUED] ACCEPTED AS OF NOVEMBER 18, 1994: INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By: /s/ MICHAEL W. ADLER Name: Michael W. Adler Title: Vice President Address: 333 South Grand Avenue, Suite 3000 Los Angeles, CA 90071 Attention: Gil Kirkpatrick Facsimile No.: (213) 687-7324 with copies to: Murphy, Weir & Butler 2049 Century Park East, 21st Floor Los Angeles, CA 90067 Attention: N. Dwight Cary, Esq. Telecopy No.: (310) 788-3777 29 ACKNOWLEDGMENT BY ERLY JUICE ERLY Juice Inc. acknowledges and agrees to be bound by the terms of this Amended and Restated Guaranty and Pledge Agreement. ERLY JUICE INC. By: /s/ KURT GREY Name: Kurt Grey Title: Vice President Address: 16825 Northchase Drive., Suite 1600 Houston, Texas 77060 Attention: Douglas A. Murphy President & Chief Executive Officer Facsimile No.: (713) 876-3624 ACKNOWLEDGMENT BY CHEMONICS INDUSTRIES, INC. Chemonics Industries, Inc. ("Chemonics") acknowledges and agrees to be bound by the terms of this Amended and Restated Guaranty and Pledge Agreement (the "Agreement"). Without limiting the generality of the foregoing, Chemonics agrees to cancel and retire any and all Pledged Shares which are repurchased or otherwise received from Guarantor, and agrees that any issuance of new shares after the date of the Agreement shall be subject to the restrictions set forth in Section 8.6 hereof. CHEMONICS INDUSTRIES, INC. By: /s/ KURT GREY Name: Kurt Grey Title: Vice President Address: 734 E. Southern Pacific Dr. Phoenix, Arizona 85034 Attention: Gerald Murphy Facsimile No.: (602) 254-9685 30 SCHEDULE I This Schedule I is attached to and forms a part of that certain Amended and Restated Guaranty and Pledge Agreement dated as of November 18, 1994 by ERLY Industries, Inc., as Guarantor, to Internationale Nederlanden (U.S.) Capital Corporation, as Lender and pledgee. Class of Certificate Number Stock No(s) of Shares Common 1 500 31 SCHEDULE II Attached to and forming a part of that certain Amended and Restated Guaranty and Pledge Agreement dated as of November 18, 1994 between ERLY Industries Inc., a California corporation as Guarantor in favor of Internationale Nederlanden (U.S.) Capital Corporation as Lender and pledgee. PLEDGE AMENDMENT This Pledge Amendment, dated ________________, 19__, is delivered pursuant to Section [8.4] [8.5] of the Amended and Restated Guaranty and Pledge Agreement dated as of November 18, 1994 between ERLY Industries Inc., a California corporation in favor of Internationale Nederlanden (U.S.) Capital Corporation (the "Guaranty Agreement"). The undersigned hereby agrees that (a) this Pledge Amendment may be attached to the Guaranty Agreement, (b) by executing this Pledge Amendment it shall become a "Guarantor" under the Guaranty Agreement, and (c) the Pledged Shares listed on this Pledge Amendment shall be and become a part of the Pledged Collateral and shall secure all of the Secured Obligations (as defined in the Guaranty Agreement). The undersigned hereby represents and warrants that it has reviewed the Loan Documents (as defined in the Guaranty Agreement) and agrees to comply with and be bound by all of the terms and conditions of the Guaranty Agreement. [Name of Guarantor] By:______________________________ Title: Name and Address of Class of Certificate Number of Guarantor Stock No(s) Shares 32 EX-99.5 10 FIRST AMENDMENT TO AMENDED AND RESTATED GUARANTY 3.6 FIRST AMENDMENT TO AMENDED AND RESTATED GUARANTY AND PLEDGE AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED GUARANTY AND PLEDGE AGREEMENT (this "Parent Guaranty Amendment"), dated as of February 16, 1995, is made by ERLY INDUSTRIES INC., a California corporation ("Guarantor"), in favor of INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation, successor in interest to Internationale Nederlanden Bank N.V., New York Branch (formerly known as NMB Postbank Groep nv, New York Branch (formerly known as Nederlandsche Middenstandsbank nv, New York Branch)) ("Lender"). RECITALS A. Guarantor and Lender entered into that certain Amended and Restated Guaranty and Pledge Agreement (the "Parent Guaranty"), dated as of November 18, 1994. Capitalized terms used but not defined herein are used as defined in the Parent Guaranty. B. Pursuant to the Parent Guaranty, among other things, Guarantor (i) guarantied the payment and performance of the ERLY Juice Obligations, with full recourse against Guarantor on and after December 21, 1994, (ii) guarantied the payment and performance of the Chemonics Obligations, and (iii) pledged its Stock of Chemonics to secure such guaranties. C. On December 21, 1994, the ERLY Juice Obligations became due and payable and the recourse obligations of Guarantor pursuant to the Parent Guaranty became effective. The ERLY Juice Obligations remain due and payable. D. Guarantor has requested that Lender, among other things, agree to extend the due date of the ERLY Juice Obligations and modify certain provisions regarding applicable interest obligations with respect thereto, and in connection therewith Lender, Guarantor, and ERLY Juice, among others, are entering into that certain Loan Extension Agreement of even date herewith (the "Loan Extension Agreement"), and Lender and ERLY Juice are entering into that certain Amended and Restated Loan Agreement of even date herewith (the "Amended Loan Agreement"), which amends and restates the ERLY Juice Loan Agreement (as defined in the Parent Guaranty). Lender's agreement to enter into such agreements and the other Related Documents (as defined in the Loan Extension Agreement) is subject to, among other things, Guarantor's execution and delivery of this Parent Guaranty Amendment. AGREEMENT NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, the receipt and adequacy of which are hereby acknowledged, and to induce Lender to enter into the Loan Extension Agreement, the Amended Loan Agreement, and the other Related Documents, it is agreed as follows: 1. ACKNOWLEDGEMENT. Guarantor hereby acknowledges, confirms, and ratifies its obligations under the Parent Guaranty, as amended hereunder. 2. AMENDMENT TO THE PARENT GUARANTY. (a) The definition of "ERLY Juice Loan Agreement" in Section 1 of the Parent Guaranty is deleted in its entirety and the following is substituted in its place: "ERLY Juice Loan Agreement" means the Amended and Restated Loan Agreement between ERLY Juice and Lender dated as of February 16, 1995, as the same may be subsequently amended. (b) Section 6.2 of the Parent Guaranty is hereby amended by inserting the following at the end thereof: In addition, Guarantor waives all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor's rights of subrogation and reimbursement against the principal by the operation of CCP Section 580d or otherwise. 3. PRIORITY OF GUARANTIES Guarantor hereby represents, warrants, covenants and agrees that its obligations to Lender under the Parent Guaranty (as amended hereby) (i) are "Senior Indebtedness," as such term is defined in that certain Indenture dated as of December 1, 1978 by and between Guarantor's predecessor in interest ERLY California Industries Inc. and J. Henry Schroder Bank & Trust Company as Trustee, having priority in right of payment to the Debentures (as defined in such Indenture), (ii) are "Senior Indebtedness," as such term is defined in that certain Indenture dated as of December 1, 1993 by and between Guarantor and Trust Company of Texas as Trustee, having priority in right of payment to the Debentures (as defined in such Indenture), and (iii) are and will have priority in right of payment to any other now existing or hereafter incurred subordinated obligations of the Guarantor to any other Person. 2 4. AFFIRMATION OF PARENT PLEDGE. Parent and Lender entered into that certain ERLY Pledge Agreement dated as of September 26, 1988 (the "ERLY Pledge Agreement"), pursuant to which Parent, the sole stockholder of ERLY Juice, pledged its stock of ERLY Juice to secure the Secured Obligations (as defined therein). Parent hereby (i) reaffirms the terms of the ERLY Pledge Agreement, (ii) acknowledges that all references in the ERLY Pledge Agreement to the "Loan Agreement" shall mean the Amended Loan Agreement, as the same may be amended, modified, or supplemented, and (iii) acknowledges that the Secured Obligations, as defined in the ERLY Pledge Agreement, include (a) all obligations of ERLY Juice under the Amended Loan Agreement, as the same may be amended, modified, or supplemented, and (b) all other obligations of Parent under the ERLY Pledge Agreement. 5. ENTIRE AGREEMENT. This Parent Guaranty Amendment, together with the Loan Extension Agreement and the Related Documents (as defined therein), is the entire agreement between the parties hereto with respect to the subject matter hereof. This Parent Guaranty Amendment supersedes all prior and contemporaneous oral and written agreements and discussions with respect to the subject matter hereof. Except as otherwise expressly modified herein, the Parent Guaranty shall remain in full force and effect. 6. MISCELLANEOUS. (a) Counterparts. This Parent Guaranty Amendment may be executed in identical counterpart copies, each of which shall be an original, but all of which shall constitute one and the same agreement. (b) Headings. Section headings used herein are for convenience of reference only, are not part of this Parent Guaranty Amendment, and are not to be taken into consideration in interpreting this Parent Guaranty Amendment. (c) Recitals. The recitals set forth at the beginning of this Parent Guaranty Amendment are true and correct, and such recitals are incorporated into and are a part of this Parent Guaranty Amendment. (d) Governing Law. This Parent Guaranty Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of California applicable to contracts made and performed in such state, without regard to the principles thereof regarding conflict of laws. (e) Effect. Upon the effectiveness of this Parent Guaranty Amendment, on and after the date hereof, each reference in the Parent Guaranty to "this Agreement," "hereunder," "hereof" or words of like import shall mean and be a reference to the Parent Guaranty as amended hereby and each reference in the other 3 Loan Documents to the Parent Guaranty, "thereunder," "thereof," or words of like import shall mean and be a reference to the Parent Guaranty as amended hereby. (f) Conflict of Terms. In the event of any inconsistency between the provisions of this Parent Guaranty Amendment and any provision of the Parent Guaranty, the terms and provisions of this Parent Guaranty Amendment shall govern and control. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Amended and Restated Guaranty and Pledge Agreement to be duly executed as of the date first written above. ERLY INDUSTRIES, INC. By: /s/ KURT GREY Name: Kurt Grey Title: Vice President ACCEPTED AS OF FEBRUARY 16, 1995: INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By: /s/ MICHAEL W. ADLER Name: Michael W. Adler Title: Vice President [SIGNATURES CONTINUED] 4 [SIGNATURES CONTINUED] ACKNOWLEDGMENT BY ERLY JUICE ERLY Juice Inc. acknowledges and agrees to be bound by the terms of the Amended and Restated Guaranty and Pledge Agreement, as amended by the First Amendment to Amended and Restated Guaranty and Pledge Agreement. ERLY JUICE INC. By: /s/ KURT GREY Name: Kurt Grey Title: Vice President ACKNOWLEDGMENT BY CHEMONICS INDUSTRIES, INC. Chemonics Industries, Inc. ("Chemonics") acknowledges and agrees to be bound by the terms of the Amended and Restated Guaranty and Pledge Agreement, as amended by the First Amendment to Amended and Restated Guaranty and Pledge Agreement (the "Agreement"). Without limiting the generality of the foregoing, Chemonics reaffirms its agreement to cancel and retire any and all Pledged Shares which are repurchased or otherwise received from Guarantor, and agrees that any issuance of new shares after the date of the Agreement shall be subject to the restrictions set forth in Section 8.6 thereof. CHEMONICS INDUSTRIES, INC. By: /s/ KURT GREY Name: Kurt Grey Title: Vice President 5 EX-99.6 11 AGREEMENT LETTER March 16, 1993 ERLY Industries Inc. 10990 Wilshire Boulevard Las Angeles, California Re: ERLY Juice Inc. Gentlemen: Please refer to the $24,250,000 loan agreement dated as of September 26, 1988 between ERLY Juice Inc., as the Borrower, and Internationale Nederlanden Bank N.V. (formerly known as Nederlansdsche Middenstandsbank nv), as the Bank, as the same has been amended prior to the date hereof (as so amended, the "Loan Agreement"). Capitalized terms used in this letter and not otherwise defined shall have the meanings ascribed thereto in the Loan Agreement. As you know, various Events of Default now exist under the Loan Agreement. As of the date hereof, no waiver, consent or forbearance of any kind is now in effect with respect to any such Event of Default. The Bank has no obligation to make any further Loans under the Loan Agreement. We have had discussions with you concerning tho Loan Agreement and various related matters, and we have reached an agreement concerning the terms on which the is willing to restructure the Borrower's obligations under the Loan Agreement. After each of the Parties hereto has signed this letter, this letter agreement shall constitute a binding agreement among the parties hereto. Except as modified hereby, the terms of the Loan Agreement and all other Loan Documents shall remain in full force and effect. We have reached an understanding concerning the following matters: 1. The Borrower agrees to execute a definitive asset sale agreement for the sale of the Borrower's juice processing facility in Lakeland, Florida (the "Lakeland Facility") on or before March 31, 1993. On or before April 30, 1993, the Borrower shall receive not less than $12,000,000 in net cash proceeds from the sale of the Lakeland Facility, all of which shall be immediately applied to the repayment of the Obligations. In ERLY Industries Inc. March 16, 1993 Page 2 addition, on or before April 30, 1993, the Borrower shall, subject to ING Bank providing the financing referred to in this paragraph, have consummated a sale of its orange juice concentrate inventory for net cash proceeds of not less than $4,200,000, all of which shall be immediately applied to the repayment of the Obligations, provided that the Bank understands that, in the event Sunray Farms is the purchaser of such concentrate inventory, the Bank will consider providing financing for such purchase on terms acceptable to the Bank (including, without limitation, compliance with any applicable bulk sales laws). 2. You shall cause Chemonics Industries Inc. ("Chemonics") to use its best efforts to consummate, as promptly as possible, a sale of its consulting division for net cash proceeds of not less than $15,000,000, $9,000,000 of which shall immediately be used to repay in full all obligations of Chemonics to the Bank (and to terminate the Banks commitment to Chemonics) and $6,000,000 of which shall immediately be applied to the repayment of the Obligations. 3. The Borrower shall use its best efforts to arrange, as promptly as possible, for a working capital credit facility with a third party lender on terms and conditions reasonably satisfactory to the Bank (the "Working Capital Facility"). The Working Capital Facility may be secured by the Borrower's Accounts and Inventory and shall provide for revolving credit loans to the Borrower in an aggregate principal amount of not less than $5,000,000. Not less than 70% of the maximum amount available under the Working Capital Facility shall be borrowed upon the closing thereof and applied by the Borrower to the repayment of the Obligations. 4. When the Working Capital Facility becomes effective, the Bank will release its lien on all Inventory and Accounts of the Borrower. Upon the sale of the Lakeland Facility and the orange juice concentrate inventory, Bank will release its lien on such assets. Thereafter, all Obligations will be secured by all remaining real and personal property of the Borrower (including, without limitation, all trademarks of the Borrower), as well as all third party collateral pledged to the Bank under the Loan Documents. 5. In addition to the repayments of the Borrower's Obligations to the Bank required to be made pursuant to paragraph 1 of this letter, a further $10,000,000 (or such greater amount as may be necessary to reduce the remaining amount ERLY Industries Inc. March 16, 1993 Page 3 of the Obligations below $10,000,000) of the Borrower's Obligations to the Bank shall be fully and finally paid on or before March 31, 1994, and all of the Borrower's remaining Obligations to the Bank shall be fully and finally paid on or before March 31, 1995. 6. Gerald Murphy and Douglas Murphy (each, a "Guarantor") shall each execute and deliver to the Bank guarantees, in form and substance satisfactory to the Bank, guarantying the repayment of all Obligations of the Borrower to the Bank. The liability of each of the Guarantors would be limited to $5,000,000. If the asset sale described in the first two sentences of paragraph 1 of this letter are completed on or before the date specified in such paragraph in conformity with the terms hereof, the Guarantees would be voided. 7. The pricing for any letter of credit that may be issued by the Bank for the account of American Rice, Inc. to replace up to 50% of the previously existing Rabobank letter of credit will be 4% per annum on the undrawn face amount thereof. The pricing on any unreimbursed drawings under any such letter of credit will be determined by the Bank prior to the issuance thereof. 8. On or before March 31, 1993, the Bank shall receive, for nominal consideration, two separate common stock warrants to acquire up to an aggregate of 10% of the fully diluted common equity of ERLY Industries Inc. ("ERLY") exercisable at any time after March 31, 1994 (in the case of the "A Warrant" described below) or March 31, 1995 (in the case of the as "B Warrant" described below) for a nominal exercise price. One warrant, the "A Warrant," will be exercisable for 5% of the fully diluted common stock of ERLY. The second warrant, the "B Warrant" will be exercisable for 5% of the fully diluted common stock of ERLY. If the $10,000,000 payment of the Obligations of the Borrower to the Bank required pursuant to paragraph 5 of this letter to be made on or before March 31, 1994 is in fact so made an or prior to such date, the "A Warrant" would be voided. If all Obligations of the Borrower to the Bank shall be fully and finally repaid by March 31, 1995, the "B Warrant" would be voided. 9. You shall cause Chemonics to use its best efforts to consummate, as promptly an possible, a sale of its "Firstrol" division for net cash proceeds of not less than $6,000,000 all of which shall be immediately applied to the Obligations. ERLY Industries Inc. March 16, 1993 Page 4 10. If on or before March 31, 1995, all Obligations of the Borrower to the Bank shall be fully and finally repaid and all obligations of Chemonics to the Bank shall be fully and finally repaid in accordance with the terms of such obligations, all existing warrants for common stock of ERLY, the Borrower or Chemonics held by the Bank would be voided. 11. On or before March 31, 1993, that certain Pledge Agreement, dated as of March 6, 1992, between ERLY and the Bank, shall be amended and restated in a manner satisfactory to the Bank. 12. On or before April 30, 1993, the Borrower shall enter into a settlement agreement with Anchor Glass having terms and conditions satisfactory to the Bank. 13. As promptly as possible (but in any event on or before March 31, 1993), the Borrower will deliver to the Bank a business plan giving effect to the asset sales described in paragraph 1 of this letter (including, without limitation, a plan for the resolution of all remaining liabilities of the Borrower), such business plan to be satisfactory in all respects to the Bank. 14. Upon your execution and delivery of this letter, all parties shall immediately undertake to use their best efforts to complete and execute the legal documentation contemplated hereby. This letter is being provided to you on the condition that, except as required by law, neither it nor its contents will be disclosed publicly or privately except to those individuals who are your officers, employees or advisors who have a need to know of them as a result of their being specifically involved in the proposed restructuring and then only on the condition that such matters may not, except as required by law, be further disclosed. Without limiting the generality of the foregoing, none of such persons shall, except as required by law, use or refer to the Bank, or any of its respective affiliates, in any disclosure made in connection with the transactions described above without the prior consent of the Bank. By execution and return of this letter the Borrower agrees (i) to pay (by means of an increase in the outstanding principal amount of the Obligations) all out-of-pocket fees and expenses (up to a maximum of $750,000) which have been or may be incurred by the Bank in connection with the potential sales of the Borrower's assets that have been proposed to the Borrower and the Bank, the formation of TreeSweet Products, Inc., all negotiations ERLY Industries Inc. March 16, 1993 Page 5 with various potential purchasers, investors and managers of the Borrower, the execution and delivery of this letter, and the transactions described herein an in connection with any of the foregoing (including, without limitation, travel expenses and fees and expenses of counsel, consultants, field examiners, and other experts, appraisal fees, environmental analysts fees, and printing, document production and delivery and communication costs), whether or not the restructuring contemplated by this letter is provided, or another restructuring is arranged, (ii) to indemnify and hold harmless the Bank and its affiliates, officers, directors, employees and agents (each an "Indemnified Person") against all losses, claims, damages, liabilities and expenses which may be incurred by or asserted against any of them in connection with the statements contained in this letter or the transactions contemplated hereby and to reimburse each Indemnified Person upon its demand for any reasonable legal or other expense (including allocated costs of internal counsel) incurred in connection with investigating, defending or participating in any such loss, claim, damage, liability or action or other proceeding, whether commenced or threatened (whether or not any such Indemnified Person is a party to any action or proceeding out of which any such expenses arise), or in any way relating to the matters contemplated by this letter, except, in the case of any Indemnified Person, to the extent any such loss, claim, damage or liability is determined by a final judgment of a court of competent jurisdiction to be attributable solely to the gross negligence or willful misconduct of such Indemnified Person and (iii) to provide the Bank with all information required for its due diligence analysis, regardless of when, by whom or for whom prepared. Your obligation to indemnify such Indemnified Person and pay such expenses shall remain effective regardless of whether a definitive financing agreement is executed. None of the Bank or any other Indemnified Person shall be responsible or liable to any other party hereto or any other person for consequential damages which may be alleged as a result of this letter. The foregoing provisions of this paragraph shall be in addition to any rights that the Bank or any other Indemnified Person may have at common law or otherwise, including but not limited to, any right to contribution. Neither this letter nor compliance with any or all of the provisions hereof or of the Loan Agreement or the other Loan Documents by you, the Borrower, any Guarantor or Chemonics shall in any manner require or obligate the Bank to make any further Loans under the Loan Agreement. ERLY Industries Inc. March 16, 1993 Page 6 This letter may be executed in counterparts, each of which shall be deemed an original and all of which counterparts shall constitute one and the same document. This letter shall be governed by, and construed in accordance with, the internal laws of the State of New York without reference to principles of conflicts of law. This letter supersedes any and all discussions, written and oral between us. THIS LETTER MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ACTUAL OR ALLEGED PRIOR, CONTEMPORANEOUS OR SUBSEQUENT UNDERSTANDINGS OR AGREEMENTS OF THE PARTIES, WRITTEN OR ORAL, EXPRESSED OR IMPLIED, OTHER THAN A WRITING WHICH EXPRESSLY AMENDS OR SUPERSEDES THIS LETTER. THERE ARE NO UNWRITTEN ORAL UNDERSTANDINGS OR AGREEMENTS BETWEEN THE PARTIES. To indicate your agreement with the terms of this letter, please sign and return the enclosed copy of this letter by the close of business on March 16, 1993. Sincerely, INTERNATIONALE NEDERLANDEN BANK N.V. By: /s/ JAIME GUBBINS Name: JAIME GUBBINS Title: SVP Agreed to and accepted this 17 day of March, 1993 ERLY INDUSTRIES, INC. By: /s/ RICHARD McCOMBS Name: RICHARD McCOMBS Title: VP Finance ERLY Industries Inc. March 16, 1993 Page 7 ERLY JUICE INC. By: /s/ DOUGLAS MURPHY Name: DOUGLAS MURPHY Title: Chief Executive /s/ GERALD MURPHY Gerald Murphy, in his individual capacity /s/ DOUGLAS MURPHY Douglas Murphy, in his individual capacity -----END PRIVACY-ENHANCED MESSAGE-----