<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1999
REGISTRATION NO. 333-72141
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
SEMINIS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------------
<TABLE>
<S> <C> <C>
DELAWARE 0181 36-0769130
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1905 LIRIO AVENUE
SATICOY, CALIFORNIA 93004-4206
ATTN: ALEJANDRO RODRIGUEZ GRAUE
(805) 647-1572
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
IT IS REQUESTED THAT COPIES OF COMMUNICATIONS BE SENT TO:
<TABLE>
<S> <C>
HOWARD S. KELBERG, ESQ. GERALD S. TANENBAUM, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY LLP CAHILL GORDON & REINDEL
ONE CHASE MANHATTAN PLAZA 80 PINE STREET
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10005
(212) 530-5000 (212) 701-3000
</TABLE>
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act, check
the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1)(2) REGISTRATION FEE(3)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock........................ $339,968,750 $94,520
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- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) The shares of Class A Common Stock are not being registered for the purpose
of sales outside of the United States.
(3) $94,520 of which was previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion. Dated June 21, 1999.
13,750,000 Shares
SEMINIS, INC.
[SEMINIS LOGO]
Class A Common Stock
----------------------
This is an initial public offering of shares of Class A common stock of
Seminis, Inc. This prospectus relates to an offering of 11,000,000 shares in the
United States. In addition, 2,750,000 shares are being offered outside the
United States in an international offering.
Prior to the offering, there has been no public market for the common
stock. It is currently estimated that the initial offering price will be between
$17.50 and $21.50 per share. The shares of Class A common stock have been
approved for listing on the Nasdaq National Market under the symbol "SMNS".
See "Risk Factors" on page 8 to read about factors you should consider
before buying shares of the Class A common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discounts...................................... $ $
Proceeds, before expenses, to Seminis....................... $ $
</TABLE>
The U.S. underwriters may, under certain circumstances, purchase up to an
additional 1,650,000 shares from Seminis at the initial public offering price
less the underwriting discount. The international underwriters may similarly
purchase up to an aggregate of an additional 412,500 shares.
----------------------
GREENHILL & CO., LLC
has acted as financial advisor to Seminis in connection with the offering.
----------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
GOLDMAN, SACHS & CO. J.P. MORGAN & CO.
ING BARING FURMAN SELZ LLC
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
VECTORMEX INCORPORATED
----------------------
Prospectus dated , 1999.
<PAGE> 3
[INSIDE FRONT COVER
Collage of pictures with black background. Larger picture of the globe with
other pictures laying on top. Other pictures include:
- Three open cans of seeds
- Person reviewing illuminated research material above which is the
caption "RESEARCH"
- Person examining vegetables and fruits in laboratory above which is the
caption "NUTRITION"
- Person examining seeds, with farm equipment in background, upon which is
superimposed a pair of hands holding an onion above which is the caption
"GLOBAL SUPPLY"
- Person in greenhouse, upon which is superimposed a person looking
through a microscope along the side of which is the word "DEVELOPING" and
along the bottom at which is the word "SOLUTIONS"
- Two people in field of growing produce along the side of which is the
caption "CREATING VALUE"
- Collection of vegetables and fruits along the side of which is the word
"QUALITY" and along the bottom of which is the word "CONVENIENCE"
- Three infant faces along the side of which is the caption "SUSTENANCE"
Along the bottom of page is the word "SEMINIS".]
<PAGE> 4
[Inside Front Cover Folds Out
Fold out page will have a map of the world. Countries in which Seminis does
business will be highlighted with a color different from all other countries.
The map includes a series of different colored circles indicating the
approximate location of each production, research and distribution/sales sites.
The map contains a legend detailing the following:
Red Circle -- Production Sites
Yellow Circle -- Research Sites
Blue Circle -- Distribution Center/Sales Sites
Circled Number -- Reflects Multiple Sites
Darker Green Square -- Country with Sales
Lighter Green Square -- Unpenetrated Market
Along the bottom of the map is the word "Seminis".]
<PAGE> 5
PROSPECTUS SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus, including the consolidated financial
statements and related notes, before making a decision to purchase our Class A
common stock offered through this prospectus. Please note that the meanings of
certain technical words relating to our business are provided in the glossary
located on page G-1 of this prospectus. All of the brand names and trademarks
appearing in this prospectus are our property, except Asgrow(R), which we have a
license to use, Roundup Ready(R) and SAP/R3(R).
THE COMPANY
Seminis is the largest developer, producer and marketer of vegetable and
fruit seeds in the world. We use seeds as the delivery vehicle for innovative
agricultural technology. We develop seeds designed to do one or more of the
following:
- - reduce the need for chemicals;
- - increase crop yield;
- - reduce spoilage;
- - offer longer shelf life;
- - create tastier foods; and
- - create foods with better nutritional content.
We produce more than 8,000 distinct products covering most species of
vegetables and fruits. We market our seeds through three international brands
with broad product offerings -- Asgrow, Petoseed and Royal Sluis -- and nine
specialty regional brands.
We have established a worldwide presence and a global distribution system.
We market our seeds in over 120 countries and have 70 research and development
stations in 19 countries and production sites in 32 countries. This allows us to
remain close to local markets around the world, adapt our products to any local
climate and meet the preferences of local consumers. In fiscal 1998, we had
approximately $383.8 million in net seed sales. This represents an approximate
19% share of the global commercial vegetable and fruit seed market, which is
generally highly fragmented.
We focus our research and development activities on products that are
likely to have practical market uses, create significant market value, command
premium pricing and capture leading local market share. Our product development
effort focuses on input traits, such as resistance to pests and adverse weather
conditions, and output traits, such as crop yield, color, texture, flavor and
ready-to-eat convenience. Information on these traits is contained in our
germplasm, our key technology asset. Over the last three fiscal years, we have
spent approximately 11% of our net sales, or approximately $132.8 million, on
research and development.
We augment our internal product development efforts with technology
alliances with more than 100 companies, including the Monsanto Company, research
institutions and universities. In the United States and Europe, we currently own
or have pending over 60 patents and patent applications and have protected more
than 360 varieties under plant variety protection laws.
The development of seeds that produce pest-resistant, higher yielding
vegetables and fruits with better nutritional value is of growing importance
because of expected increases in consumption of vegetables and fruits, increased
health consciousness and a steady decline in available arable land. By using
vegetable and fruit seeds that resist diseases and insects, growers will
increase their yield and save significant costs by reducing pesticide use.
Processors and distributors benefit from products with longer shelf-lives which
reduce spoilage. Consumers benefit from healthier, tastier vegetables and fruits
that last longer and offer ready-to-eat convenience. We attempt to enhance our
profitability by expanding the global vegetable and fruit market and capturing a
premium price for the benefit our products create throughout this production and
distribution chain.
3
<PAGE> 6
HISTORY
Seminis was formed in 1994 to consolidate various industry-leading
vegetable and fruit seed brands into one consumer-oriented, agrobiotechnology
company. Our core business was created through the acquisition of the Asgrow
seed business from the Upjohn Company in December 1994 and the subsequent
combination of the Asgrow business with the Petoseed and Royal Sluis businesses
in October 1995. Each of these full-line brands has a long history--Asgrow for
143 years, Petoseed for 49 years and Royal Sluis for 172 years.
We have been at the forefront of the consolidation of the vegetable and
fruit seed industry and have completed nine acquisitions since our formation in
1994. We have historically used acquisitions as a cost efficient way to gain
access to or ownership of key technologies, patents and germplasm collections,
to add developed and proven products to our portfolio and to enter new and
established markets. In fiscal 1998, we completed four acquisitions, including
the purchase of a 50% stake in LSL PlantScience LLC to add a new line of tomato
varieties, the acquisition of two South Korean companies, Hungnong Seed Co.,
Ltd. and Choong Ang Seed Co., Ltd., to enhance our product lines for the Asian
market, and the acquisition of Nath Sluis to broaden our product lines in India.
In November 1998, we completed the acquisition of the vegetable seed business of
Sementes Agroceres S.A., a Brazilian company, to strengthen our presence and
product lines in South America.
Our principal executive offices are located at 1905 Lirio Avenue, Saticoy,
California 93004. Our telephone number is (805)647-1572.
4
<PAGE> 7
THE OFFERING
The following information is based on no shares of Class A common stock
outstanding and 46,074,386 shares of Class B common stock outstanding on the
date of this prospectus. This excludes the 267,181 shares of Class A common
stock issuable upon the exercise of stock options outstanding on the date of
this prospectus and an additional 3,409,969 shares of Class A common stock
reserved as of that date for future issuance under our employee benefit plans.
<TABLE>
<S> <C>
Common Stock Offered by Seminis.............. 13,750,000 shares of Class A common stock
Common Stock to be Outstanding After the
Offering................................... 13,750,000 shares of Class A common stock;
46,074,386 shares of Class B common stock;
59,824,386 total shares of Class A common
stock and Class B common stock; 61,886,886
shares if the underwriters' over-allotment
option is exercised in full
Over-Allotment Option........................ 2,062,500 shares of Class A common stock from
Seminis
Use of Proceeds.............................. To redeem preferred stock and repay certain
indebtedness
Voting Rights................................ Holders of Class B common stock are entitled
to three votes per share and holders of Class
A common stock are entitled to one vote per
share
Nasdaq National Market Symbol................ "SMNS"
</TABLE>
5
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
Income (loss) from continuing operations available for common stockholders
in fiscal 1998 reflects the optional repurchase by Seminis of a portion of its
mandatorily redeemable common stock at an amount in excess of the redemption
value. Seminis is required to deduct this difference, which totalled $134.3
million, from income (loss) from continuing operations for purposes of
determining income (loss) from continuing operations available for common
stockholders and related per share amounts. The loss from operations in fiscal
1996 includes the write-off of acquired research in-process of $36.7 million in
connection with the Petoseed acquisition. Gross profit in fiscal 1996 includes
the effects of the purchase accounting step-up of the Petoseed and Royal Sluis
inventories in excess of historical value of $60.0 million. Gross profit in
fiscal 1995 includes the effects of the purchase accounting step-up of the
Asgrow inventories in excess of historical value of $11.8 million.
Supplemental pro forma summary consolidated results of operations data for
fiscal 1998 and for the six months ended March 31, 1999 assume the following
transactions occurred effective October 1, 1997:
- - the acquisition of Hungnong;
- - the conversion of $35.9 million of convertible subordinated debt due our
majority stockholder Savia, S.A. de C.V., or Savia, to 1,916,462 shares of
Class B common stock, and the assumed related reduction in interest expense;
- - the application of net proceeds of $250.0 million from the offering of
13,750,000 shares of Class A common stock by Seminis, assuming an initial
public offering price of $19.50 per share, the midpoint of the range set forth
on the cover page of this prospectus, and borrowings of $266.5 million under
Seminis' new $350.0 million credit facility to redeem preferred stock and
repay indebtedness, and the assumed related reduction in preferred stock
dividends and interest expense; and
- - the conversion of 6,771,500 shares of Class B redeemable common stock of
Seminis, Inc., an Illinois corporation and predecessor to Seminis, into
3,385,750 shares of Class B common stock, followed immediately by a
one-for-one stock dividend, and the assumed elimination of both the related
accretion of redemption value and the related excess of repurchase price over
the redemption value for the repurchase of the Class B redeemable common
stock.
Historical data for income (loss) from continuing operations available for
common stockholders reflect deductions for dividends on mandatorily redeemable
preferred stock, for accretion of the redemption value of mandatorily redeemable
common stock and, in fiscal 1998, for the excess of purchase price over
redemption value of the mandatorily redeemable common stock repurchased. These
deductions are not reflected in supplemental pro forma data.
Supplemental pro forma as adjusted summary consolidated balance sheet data
as of March 31, 1999 assume that the application of net proceeds from the
offering and borrowings under the new credit facility, the recapitalization as
described in the third and fourth bulleted items above and the automatic
conversion of Class A preferred stock into Class B preferred stock, occurred
effective March 31, 1999. This data also give effect to borrowings by Seminis of
$473.0 million under its current credit agreement and the repayment of the
current credit agreement from the proceeds of the offering and borrowings under
the new credit facility.
6
<PAGE> 9
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
---------------------------------------------- SUPPLEMENTAL ------------------- SUPPLEMENTAL
PRO FORMA SIX MONTHS PRO FORMA
NINE MONTHS FISCAL YEAR ENDED FISCAL YEAR ENDED SIX MONTHS
ENDED SEPTEMBER 30, ENDED MARCH 31, ENDED
SEPTEMBER 30, ------------------------------ SEPTEMBER 30, ------------------- MARCH 31,
1995 1996 1997 1998 1998 1998 1999 1999
------------- ---- ---- ---- ------------- ---- ---- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales................... $101,833 $381,398 $379,544 $428,423 $455,987 $222,339 $282,311 $282,311
Gross profit................ 48,916 167,267 229,437 265,617 278,153 137,681 175,700 175,700
Research and development
expenses.................. 14,250 42,300 41,039 49,416 51,700 21,117 31,225 31,225
Selling, general and
administrative expenses... 34,822 134,990 136,438 158,588 169,328 69,966 100,113 100,113
Management fees paid to
Savia..................... -- -- 6,200 8,465 8,465 4,422 -- --
Amortization of intangible
assets.................... 350 14,785 12,394 14,457 21,985 6,115 13,657 13,657
Income (loss) from
operations................ (506) (61,508) 33,366 34,691 26,675 36,061 30,705 30,705
Income (loss) from
continuing operations..... (5,315) (56,085) 11,325 6,762 7,569 17,312 4,086 11,340
Income (loss) from
continuing operations
available for common
stockholders.............. (5,315) (64,418) 2,089 (133,367) 4,569 (119,685) 1,224 9,790
Income (loss) from
continuing operations
available for common
stockholders per common
share, basic and
diluted................... $ (0.18) $ (2.15) $ 0.07 $ (4.23) $ 0.08 $ (3.99) $ 0.03 $ 0.16
Weighted average shares
outstanding, basic and
diluted................... 30,000 30,000 30,000 31,536 58,264 30,000 38,025 59,824
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL
PRO FORMA
HISTORICAL AS ADJUSTED
------------------------------------------------------ ------------
AS OF SEPTEMBER 30, AS OF AS OF
------------------------------------------ MARCH 31, MARCH 31,
1995 1996 1997 1998 1999 1999
---- ---- ---- ---- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)....................... $ (22,940) $158,467 $200,792 $272,097 $334,601 $389,976
Total assets.................................... 349,769 632,463 519,673 862,189 983,097 980,189
Intercompany advance from Savia................. -- -- -- -- 20,000 --
Long-term debt.................................. 20 234,356 80,331 394,446 442,572 276,697
Subordinated debt due Savia..................... -- -- -- 35,857 -- --
Mandatorily redeemable stock
Common........................................ -- 114,875 122,111 48,416 49,940 --
Preferred..................................... -- 25,000 25,000 25,000 25,000 25,000
Total stockholders' equity...................... 174,241 112,772 159,681 160,421 230,310 503,022
</TABLE>
7
<PAGE> 10
RISK FACTORS
Before you invest in the shares, you should be aware that there are various
risks, including those described below. You should consider carefully these risk
factors together with all of the other information included in the prospectus
before you decide to purchase the Class A common stock.
COMPANY RISKS
OUR RESEARCH AND DEVELOPMENT MAY NOT BE SUCCESSFUL
Our success is based, in part, upon our ability to discover and develop
new products which customers will want. As a result, we continue to invest in
research and development in order to enable us to identify and develop new
products to meet consumer demands. In fiscal 1998, our investment in research
and development represented 12% of net sales. Despite investments in this area,
our research and development may not result in the discovery or successful
development of new products which will be accepted by our customers.
LOSS OF THE BENEFITS OF LICENSE AND TECHNOLOGY AGREEMENTS COULD HARM OUR
BUSINESS
We have the benefit of license and technology agreements through Savia.
Generally, Savia has the right to provide technology to us as long as we are
controlled by Savia. In the event that Savia no longer controls us, or loses the
right to give technology to us, and we fail to obtain similar technology on our
own, the loss of such technology could have a material adverse effect on our
business, results of operations or financial condition.
SAVIA WILL EFFECTIVELY CONTROL OUR COMPANY
Following the offering, Savia will own approximately 67.9% of our
outstanding common stock and control 80.2% of the vote of our common stock.
Accordingly, Savia will control us and have the power to approve all actions
requiring the approval of our stockholders, including the power to elect all of
our directors. Therefore, Savia will effectively control our management.
SAVIA COLLATERIZED ITS RECENT BORROWINGS WITH SHARES OF OUR COMMON STOCK
Savia recently borrowed money from some financial institutions and pledged
as collateral shares of our common stock which it owns. These pledged shares
constitute 49% of our issued and outstanding common stock prior to the offering.
Savia also placed additional shares of our common stock that it owns into a
trust, which shares constitute 2% of our issued and outstanding shares of common
stock prior to the offering. Upon completion of the offering, Savia will be
required to pledge and put into trust additional shares of common stock to
maintain these percentages. If Savia defaults on its obligations, the lenders
could sell the pledged shares to recover the borrowed money. Upon the
foreclosure of the pledged shares, the shares will automatically convert to
Class A common stock, which only have one vote per share. The sale of the
foreclosed stock could depress the market price of the Class A common stock and
could result in there being a new controlling stockholder.
THE INABILITY TO IDENTIFY AND COMPLETE ACQUISITIONS COULD HARM OUR BUSINESS
We have historically grown through acquisitions and may continue to grow
through strategic acquisitions. We may not be able to identify or acquire
additional businesses, or do so on acceptable terms, to meet our acquisition
strategy.
USING COMMON STOCK FOR FUTURE ACQUISITIONS MAY CAUSE DILUTION OF OUR COMMON
STOCK
The availability of financing for our acquisition efforts cannot be
readily predicted. If we use common stock for future acquisitions, the
purchasers of shares of Class A common stock in the offering may experience
dilution.
8
<PAGE> 11
OUR FAILURE TO ACCURATELY FORECAST AND MANAGE INVENTORY COULD RESULT IN AN
UNEXPECTED SHORTFALL OR SURPLUS OF SEEDS WHICH COULD HARM OUR BUSINESS
We monitor our inventory levels based on our own projections of future
demand. Because of the length of time necessary to produce commercial quantities
of seed, we must make production decisions well in advance of sales. An
inaccurate forecast of demand for any seed variety can result in the
unavailability of seeds in high demand. This may depress sales volumes and
adversely affect customer relationships. Conversely, an inaccurate forecast can
result in an over-supply of seeds which may increase costs, negatively impact
cash flow, reduce the quality of inventory and ultimately create write-offs of
inventory, any of which could have a material adverse effect on our business,
results of operations or financial condition.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY
A substantial portion of our products are hybrid seed varieties which may
be copied through the acquisition of very small quantities of germplasm. A
competitor could obtain our germplasm or information identifying the origin of
our seeds and produce seeds with similar or identical characteristics to those
of our products. Attempting to protect our intellectual property, through
litigation or otherwise, can be time consuming and expensive, have uncertain
results and, in some countries, be ineffective.
A CHANGE IN UNITED STATES LAW PROTECTING PLANT PATENTS COULD TAKE AWAY PATENT
PROTECTION FOR OUR PATENTED SEEDS
In a recent lawsuit in a United States federal court, a party challenged
whether utility patents could cover living plants and seeds. If the court rules
that plants and seeds cannot be protected by patents, we could lose patent
protection for many of our patented seeds, which could have a material adverse
effect on our business, results of operations or financial condition.
WE MAY NOT BE ABLE TO OBTAIN INTELLECTUAL PROPERTY RIGHTS FROM THIRD PARTIES
Our ability to commercialize seed products may depend on whether we have
the right to use applicable technologies. We often use a large number of
technologies to develop a single product. Obtaining the right to use the
technologies can be complicated because:
- - technologies may be subject to proprietary intellectual property rights, many
of which have been patented;
- - pending patent applications, overlapping patent claims and litigation over
issued patents means ownership of technologies is uncertain; and
- - licenses for proprietary technologies may be unavailable on terms acceptable
to us or because exclusive rights to use are given to other companies.
IMPLEMENTATION OF OUR NEW BUSINESS INFORMATION SYSTEM MAY DELAY THE COLLECTION
OF FINANCIAL AND OPERATIONAL INFORMATION
We are currently implementing a new business information system to manage
our financial reporting and operating systems on a worldwide basis. While our
main facilities in California and The Netherlands have been using this system
since July 1998, we are still integrating our other subsidiaries and units. The
collection of operational information on a worldwide basis takes more time and
effort than we formerly experienced, which may delay management decisions on
operational matters.
INDUSTRY RISKS
TECHNOLOGICAL ADVANCES BY OUR COMPETITORS COULD HARM OUR BUSINESS
We face substantial competition due to technological advances by
competitors such as other seed companies, pharmaceutical and chemical companies
and biotechnology companies. Many of these companies have substantially greater
resources than we. If a competitor introduces a competitively successful
product, it could take us a number of years to develop a competitive seed
variety, which could have a material adverse
9
<PAGE> 12
effect on our business, results of operations or financial condition.
BETTER PRICING AND FINANCIAL TERMS OFFERED BY OUR COMPETITORS COULD HARM OUR
BUSINESS
We compete on the basis of pricing and financial terms. From time to time,
our competitors may offer better pricing and financial terms causing our market
share or profitability to decline, which could have a material adverse effect on
our business, results of operations or financial condition.
EXTREME WEATHER CONDITIONS, DISEASE AND PESTS COULD HARM OUR BUSINESS
Seed production is subject to a variety of agricultural risks. Extreme
weather conditions, disease and pests can materially and adversely affect the
quality and quantity of seeds produced. There can be no assurance that these
factors will not affect a substantial portion of our production facilities in
any year and have a material adverse effect on our business, results of
operations or financial condition.
DEFECTIVE SEEDS COULD RESULT IN WARRANTY CLAIMS AND NEGATIVE PUBLICITY
Seeds may contain adverse characteristics that are difficult to detect
prior to their sale and use. The large number of varieties that we produce can
result in deliveries of the wrong type of seed or contamination of one type of
seed by another. Any defects that may be found in our seeds in the future could
result in losses to growers. Losses claimed by growers may include the value of
lost crops, which could greatly exceed the value of the seeds we sell. If we
sell defective or contaminated seeds, large numbers of growers may experience
crop failures during the same growing season. Further, growers may attribute
poor crop yields or crop failure to perceived seed defects that may not exist,
which could still result in claims against us. Any claims, whether valid or not,
could result in negative publicity, which could have a material adverse effect
on our business, results of operations or financial condition.
INSURANCE COVERING WARRANTY CLAIMS MAY BECOME UNAVAILABLE OR BE INADEQUATE
We maintain third-party seedsmen's errors and omissions insurance covering
warranty claims. However, these policies are subject to annual renewal and
revision and have deductibles and coverage limits. As a result, we may not be
offered continued coverage in the future. Even if coverage is offered, it may be
at a price and on terms not acceptable to us. If claims exceed coverage limits,
or insurance is not available to us, the occurrence of significant claims could
have a material adverse effect on our business, results of operations or
financial condition.
GENETICALLY ENGINEERED PRODUCTS MAY NOT BE ACCEPTED BY THE PUBLIC
While less than 1% of our existing products are genetically engineered, we
expect that these products will represent a larger percentage of our sales in
the future. The commercial success of our genetically engineered products will
depend, in part, on public acceptance of the growth and consumption of
genetically engineered plants and plant products. Recently, there has been
much-publicized opposition in Europe to the sale of genetically engineered
products. Claims that genetically engineered plant products are unsafe or pose a
danger to the environment may cause additional negative publicity and influence
public attitudes and governmental regulation, which could have a material
adverse effect on our business, results of operations or financial condition.
GENETICALLY ENGINEERED PRODUCTS MAY BECOME SUBJECT TO ADDITIONAL FUTURE
REGULATION
The field testing, production and marketing of genetically engineered
seeds by us is subject to federal, state, local and foreign governmental
regulation. Regulatory agencies administering existing or future laws may not
allow us to produce and market our genetically engineered products in a timely
manner or under technically or commercially feasible conditions. Regulatory
action or private litigation could result in expenses, delays or other
impediments to our product development programs or the commercial
10
<PAGE> 13
sale of resulting products which could have a
material adverse effect on our business, results of operations or financial
condition.
FAILURE TO COMPLY WITH GOVERNMENT REGULATIONS AND CONTROLS COULD HARM OUR
BUSINESS
Our products are subject to government regulations and controls such as:
- - national certification requirements;
- - import approval requirements;
- - plant or seed health certifications;
- - labeling regulations; and
- - trade regulations and changes in tariffs.
Governmental agricultural programs that encourage or discourage the
planting of crops may also affect seed demand. Failure to comply with such
regulations could adversely affect our ability to deliver our products on a
competitive and timely basis and have a material adverse effect on our business,
results of operations or financial condition.
OFFERING RISKS
FUTURE SALES OF COMMON STOCK COULD DEPRESS THE PRICE OF OUR CLASS A COMMON STOCK
After this offering, Savia will own 40,615,619 of the outstanding shares
of common stock and our other stockholders owning stock prior to the offering
will own 5,458,767 shares of common stock. A decision by Savia or our other
stockholders to sell this stock could depress the market price of the Class A
common stock.
PURCHASERS OF SHARES OF CLASS A COMMON STOCK IN THE OFFERING WILL EXPERIENCE
SUBSTANTIAL DILUTION
Purchasers of shares of Class A common stock will experience immediate and
substantial dilution of $14.56 in net tangible book value per share, or
approximately 74.7% of the offering price, assuming an initial public offering
price of $19.50 per share, the midpoint of the range set forth on the cover page
of this prospectus. In contrast, existing stockholders paid an average price of
$8.57 per share.
-------------------------
This prospectus contains certain forward-looking statements that involve
risks and uncertainties. These statements relate to our future plans,
objectives, expectations and intentions. These statements may be identified by
the use of words such as "expects," "anticipates," "intends" and "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to such differences
include, but are not limited to, those discussed above and elsewhere in this
prospectus.
11
<PAGE> 14
USE OF PROCEEDS
The net proceeds to Seminis from the offering are estimated to be
approximately $250.0 million, $287.9 million if the underwriters' over-allotment
option is exercised in full, assuming an initial public offering price of $19.50
per share, the midpoint of the range set forth on the cover page of this
prospectus.
Seminis has entered into a commitment letter with the Bank of Montreal and
Harris Trust and Savings Bank providing for an underwritten credit facility for
up to $350.0 million. Seminis anticipates that the funds under the new credit
facility will be available at the time the offering is consummated. Seminis
intends to use the net proceeds of the offering and funds available under the
new credit facility to redeem outstanding shares of preferred stock, repay
indebtedness of Seminis and pay $3.5 million of fees and expenses relating to
its new credit facility.
- - Seminis will redeem 2,000 shares of its Class C preferred stock, which shares
are owned by Savia, for an aggregate redemption price of $20.0 million, plus
accrued dividends.
- - Seminis will repay the following indebtedness:
-- borrowings of $473.0 million under its current credit agreement
comprised of a $28.0 million secured revolving credit note, bearing
interest at the rate of 9.8% per annum as of May 7, 1999 and due June
30, 2000, and a $445.0 million secured term loan, bearing interest at a
rate of 9.8% per annum as of May 7, 1999 and due June 30, 2000, and
-- an intercompany advance of $20.0 million from Savia accruing interest
at the rate of 10.0% per annum.
Seminis entered into its current credit agreement on April 30, 1999. The
proceeds of the current credit agreement were used to repay Seminis' old credit
agreement, to repay a $10.0 million bank demand note and to finance working
capital. The proceeds of the old credit agreement were used to repurchase Class
B mandatorily redeemable common stock of Seminis' predecessor, Seminis, Inc., an
Illinois corporation, acquire the South Korean seed companies Hungnong and
Choong Ang, acquire assets and distribution rights of LSL PlantScience and
acquire assets comprising the Agroceres brand vegetable seed business in Brazil.
The proceeds from the Savia intercompany advance and the bank demand note were
used to finance working capital requirements.
Pending such uses, Seminis may invest the net proceeds in U.S. government
obligations, short-term debt securities and other money market instruments.
DIVIDEND POLICY
Seminis intends to retain future earnings for use in Seminis' business and
does not anticipate declaring or paying any cash dividends on its common stock
in the foreseeable future. Further, any determination to declare and pay cash
dividends will be made by the board of directors of Seminis in light of Seminis'
earnings, financial condition, capital requirements and contractual agreements,
and other factors deemed relevant by the board of directors at that time. In
addition, Seminis' old credit agreement contains, and its new credit facility is
expected to contain, certain restrictive covenants, including covenants that
directly or indirectly prohibit Seminis' ability to pay dividends and make other
distributions.
12
<PAGE> 15
CAPITALIZATION
The following table sets forth, as of March 31, 1999, the consolidated pro
forma capitalization of Seminis giving effect to the recapitalization referred
to in note 16 of the notes to consolidated financial statements of Seminis. The
consolidated supplemental pro forma capitalization of Seminis gives effect to
borrowings by Seminis of $473.0 million under the current credit agreement and
the repayment of its old credit agreement and the bank demand note. Unamortized
loan fees of $4.0 million, net of tax, relating to the old credit agreement were
charged to accumulated deficit. The consolidated supplemental pro forma as
adjusted capitalization of Seminis shows the capitalization after the sale by
Seminis of 13,750,000 shares of Class A common stock offered hereby, assuming an
initial public offering price of $19.50 per share, the midpoint of the range set
forth on the cover page of this prospectus, and borrowings of $266.5 million
under Seminis' new $350.0 million credit facility and the application of the net
proceeds therefrom, as described in "Use of Proceeds," the charge to accumulated
deficit of the unamortized loan fees of $3.3 million, net of tax, relating to
the current credit agreement and the automatic conversion of Class A preferred
stock into Class B preferred stock as if these transactions had occurred on
March 31, 1999.
The unamortized loan fees of $6.4 million relating to the old credit
agreement were charged to results of operations as an extraordinary item of $4.0
million, net of tax, on April 30, 1999. The unamortized loan fees of $5.3
million relating to the current credit agreement will be charged to results of
operations as an extraordinary item of $3.3 million, net of tax, upon repayment
of the current credit agreement using the net proceeds of the offering and
borrowings under the new credit facility.
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------------------------
SUPPLEMENTAL
PRO SUPPLEMENTAL PRO FORMA
FORMA PRO FORMA AS ADJUSTED
----- ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C>
SHORT-TERM DEBT:
Demand note due bank........................ $ 10,000 $ -- $ --
Intercompany advance from Savia............. 20,000 20,000 --
Other short-term borrowings................. 16,869 16,869 16,869
Current maturities of long-term debt........ 24,246 12,396 17,396
--------- --------- ---------
Total short-term debt............... $ 71,115 $ 49,265 $ 34,265
========= ========= =========
LONG-TERM DEBT:
Old credit agreement........................ $ 427,375 $ -- $ --
Current credit agreement.................... -- 473,000 --
New credit facility......................... -- -- 261,500
Other long-term debt........................ 15,197 15,197 15,197
--------- --------- ---------
Total long-term debt................ 442,572 488,197 276,697
--------- --------- ---------
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------------------------
SUPPLEMENTAL
PRO SUPPLEMENTAL PRO FORMA
FORMA PRO FORMA AS ADJUSTED
----- ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C>
MANDATORILY REDEEMABLE STOCK:
Class A redeemable preferred stock, $.01 par
value; 25 shares authorized; 25 shares
issued and outstanding pro forma, 25
shares issued and outstanding
supplemental pro forma and no shares
issued and outstanding supplemental pro
forma as adjusted........................ $ 25,000 $ 25,000 $ --
--------- --------- ---------
Class B redeemable preferred stock, $.01 par
value; 25 shares authorized; no shares
issued and outstanding pro forma, no
shares issued and outstanding
supplemental pro forma and 25 shares
issued and outstanding supplemental pro
forma as adjusted........................ -- -- 25,000
--------- --------- ---------
STOCKHOLDERS' EQUITY:
Class C preferred stock, $.01 par value; 6
shares authorized; 3 shares issued and
outstanding pro forma, 3 shares issued
and outstanding supplemental pro forma
and 1 shares issued and outstanding
supplemental pro forma as adjusted....... 1 1 1
Class A common stock, $.01 par value; 91,000
shares authorized; no shares issued and
outstanding pro forma, no shares issued
and outstanding supplemental pro forma
and 13,750 shares issued and outstanding
supplemental pro forma as adjusted....... -- -- 138
Class B common stock, $.01 par value; 67,000
shares authorized; 46,074 shares issued
and outstanding pro forma, 46,074 shares
issued and outstanding supplemental pro
forma and 46,074 shares issued and
outstanding supplemental pro forma as
adjusted................................. 461 461 461
Additional paid-in capital.................. 433,873 433,873 663,735
Accumulated deficit......................... (143,215) (147,188) (150,443)
Accumulated other comprehensive loss........ (10,870) (10,870) (10,870)
--------- --------- ---------
Total stockholders' equity.......... 280,250 276,277 503,022
--------- --------- ---------
Total capitalization........... $ 747,822 $ 789,474 $ 804,719
========= ========= =========
</TABLE>
14
<PAGE> 17
DILUTION
Pro forma net tangible book value per share is determined by dividing the
pro forma tangible net book value of Seminis, its total assets less intangible
assets and total liabilities, by the aggregate number of shares of common stock
outstanding after giving effect to the recapitalization and the conversion of
subordinated debt due to Savia referred to in note 16 of the consolidated
financial statements of Seminis. After giving effect to the sale of 13,750,000
shares of Class A common stock by Seminis hereby at an assumed initial public
offering price of $19.50 per share, the midpoint of the range set forth on the
cover page of this prospectus, pro forma net tangible book value of Seminis as
of March 31, 1999 would have been approximately $295.3 million, or $4.94 per
share. This represents an immediate increase in pro forma net tangible book
value of $3.37 per share to the current stockholders of Seminis and an immediate
dilution in pro forma net tangible book value of $14.56 per share to purchasers
of Class A common stock in the offering. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $19.50
Pro forma net tangible book value per share of common stock
at March 31, 1999......................................... $1.57
Increase in pro forma net tangible book value per share of
common stock attributable to purchasers in the offering... 3.37
-----
Pro forma net tangible book value per share of common stock
after the offering........................................ 4.94
------
Dilution in pro forma net tangible book value per share to
purchasers of Class A common stock in the offering........ $14.56
======
</TABLE>
The following table summarizes, on the pro forma basis described above, as
of March 31, 1999, the number of shares purchased, the total consideration paid
or to be paid and the average price per share paid or to be paid by the existing
stockholders and the purchasers of Class A common stock in the offering, at an
assumed initial public offering price of $19.50 per share, the midpoint of the
range set forth on the cover page of this prospectus, before the deduction of
underwriting discounts and estimated expenses payable by Seminis:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
----------------- ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------ ------- ------ ------- -------
(in thousands, except percentages and per share data)
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 46,074 77.0% $394,686 59.5% $ 8.57
Purchasers of Class A common stock
in the offering................. 13,750 23.0 268,125 40.5 19.50
------ ----- -------- -----
Total........................... 59,824 100.0% $662,811 100.0%
====== ===== ======== =====
</TABLE>
15
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated results of operations and consolidated balance
sheet data of Seminis as of and for each of the years in the three-year period
ended September 30, 1998 were derived from the audited consolidated financial
statements of Seminis, including the notes thereto, appearing elsewhere in this
prospectus. The selected consolidated results of operations and balance sheet
data of Seminis as of and for the nine months ended September 30, 1995 were
derived from audited financial statements which do not appear in this
prospectus. The selected financial data as of and for the six months ended March
31, 1998 and 1999 are derived from unaudited financial statements of Seminis,
which in the opinion of management includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
information set forth therein. Selected financial data for periods prior to
January 1, 1995 and the beginning of Seminis' operations has not been presented,
as such information is not available and cannot be reliably determined. The data
presented below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements, including the notes thereto, and unaudited pro forma data
appearing elsewhere in this prospectus.
Income (loss) from continuing operations available for common stockholders
in fiscal 1998 reflects the optional repurchase by Seminis of a portion of its
mandatorily redeemable common stock at an amount in excess of the redemption
value. Seminis is required to deduct this difference, which totalled $134.3
million, from income (loss) from continuing operations for purposes of
determining income (loss) from continuing operations available for common
stockholders and related per share amounts. The loss from operations in fiscal
1996 includes the write-off of acquired research in-process of $36.7 million in
connection with the Petoseed acquisition. Gross profit in fiscal 1996 includes
the effects of the purchase accounting step-up of the Petoseed and Royal Sluis
inventories in excess of historical value of $60.0 million. Gross profit in
fiscal 1995 include the effects of the purchase accounting step-up of the Asgrow
inventories in excess of historical value of $11.8 million.
Supplemental pro forma summary consolidated results of operations data for
fiscal 1998 and the six months ended March 31, 1999 assume that the following
transactions occurred effective October 1, 1997:
- - the acquisition of Hungnong;
- - the conversion of $35.9 million of convertible subordinated debt due to Savia
to 1,916,462 shares of Class B common stock, and the assumed related reduction
in interest expense;
- - the application of net proceeds of $250.0 million from the offering of
13,750,000 shares of Class A common stock by Seminis assuming an initial
public offering price of $19.50 per share, the midpoint of the range set forth
on the cover page of this prospectus, and borrowings of $266.5 million under
Seminis' new $350.0 million credit facility to redeem preferred stock and
repay indebtedness and the assumed related reduction in preferred stock
dividends and interest expense; and
- - the conversion, of 6,771,500 shares of Class B redeemable common stock of
Seminis, Inc., an Illinois corporation and predecessor to Seminis, into
3,385,750 shares of Class B common stock, followed immediately by a
one-for-one stock dividend, and the assumed elimination of both the related
accretion of redemption value and the related excess of repurchase price over
the redemption value for the repurchase of the Class B redeemable common
stock.
Historical data for income (loss) from continuing operations available for
common stockholders reflect deductions for dividends on preferred stock,
mandatorily redeemable preferred stock, for accretion of the redemption value of
mandatorily redeemable common stock and, in fiscal 1998, for the
16
<PAGE> 19
excess of purchase price over redemption value of the mandatorily redeemable
common stock repurchased. These deductions are not reflected in supplemental pro
forma data.
Supplemental pro forma as adjusted summary consolidated balance sheet data
as of March 31, 1999 assume that the application of net proceeds from the
offering and borrowings under the new credit facility, the recapitalization
described in the third and fourth bulleted items above, and the automatic
conversion of Class A preferred stock into Class B preferred stock, occurred
effective March 31, 1999. This data also give effect to borrowings by Seminis of
$473.0 million under its current credit agreement and the repayment of the
current credit agreement from the proceeds of the offering and borrowings under
the new credit facility.
ACQUISITIONS AND EFFECTS OF PURCHASE ACCOUNTING. Seminis was formed in 1994 to
consolidate various industry-leading vegetable and fruit seed brands into one
consumer-oriented, agrobiotechnology company. Seminis' core business was created
through the acquisition of the Asgrow seed business from the Upjohn Company in
December 1994 and the subsequent combination of the Asgrow vegetable and fruit
seed business with the Petoseed and Royal Sluis businesses in October 1995. In
fiscal 1998, Seminis completed four acquisitions, including the purchase of a
50% stake in LSL PlantScience, the acquisition of two South Korean companies,
Hungnong and Choong Ang, and the acquisition of Nath Sluis. In November 1998,
Seminis completed the acquisition of the vegetable seed business of Agroceres, a
Brazilian company. As a result of these transactions, the results of operations
and consolidated financial position reflect the effects of purchase accounting,
as more fully described above.
17
<PAGE> 20
<TABLE>
<CAPTION>
SUPPLEMENTAL SUPPLEMENTAL
HISTORICAL
HISTORICAL --------------------
----------------------------------------------- PRO FORMA SIX MONTHS PRO FORMA
NINE MONTHS FISCAL YEAR ENDED SIX MONTHS
ENDED FISCAL YEAR ENDED SEPTEMBER 30, ENDED MARCH 31, ENDED
SEPTEMBER 30, ------------------------------- SEPTEMBER 30, -------------------- MARCH 31,
1995 1996 1997 1998 1998 1998 1999 1999
------------- ---- ---- ---- ------------- ---- ---- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales................. $101,833 $381,398 $379,544 $ 428,423 $455,987 $ 222,339 $282,311 $282,311
Gross profit.............. 48,916 167,267 229,437 265,617 278,153 137,681 175,700 175,700
Research and development
expenses................. 14,250 42,300 41,039 49,416 51,700 21,117 31,225 31,225
Selling, general and
administrative expenses.. 34,822 134,990 136,438 158,588 169,328 69,966 100,113 100,113
Management fees paid to
Savia.................... -- -- 6,200 8,465 8,465 4,422 -- --
Amortization of intangible
assets................... 350 14,785 12,394 14,457 21,985 6,115 13,657 13,657
Income (loss) from
operations............... (506) (61,508) 33,366 34,691 26,675 36,061 30,705 30,705
Income (loss) from
continuing operations.... (5,315) (56,085) 11,325 6,762 7,569 17,312 4,086 11,340
Income (loss) from
continuing operations
available for common
stockholders............. (5,315) (64,418) 2,089 (133,367) 4,569 (119,685) 1,224 9,790
Income (loss) from
continuing operations
available for common
stockholders per common
share, basic and
diluted.................. $ (0.18) $ (2.15) $ 0.07 $ (4.23) $ 0.08 $ (3.99) $ 0.03 $ 0.16
Weighted average shares
outstanding, basic and
diluted.................. 30,000 30,000 30,000 31,536 58,264 30,000 38,025 59,824
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL
PRO FORMA
HISTORICAL AS ADJUSTED
------------------------------------------------------ ------------
AS OF SEPTEMBER 30, AS OF AS OF
------------------------------------------ MARCH 31, MARCH 31,
1995 1996 1997 1998 1999 1999
---- ---- ---- ---- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................. $ (22,940) $158,467 $200,792 $272,097 $334,601 $389,976
Total assets.............................................. 349,769 632,463 519,673 862,189 983,097 980,189
Intercompany advance from Savia........................... -- -- -- -- 20,000 --
Long-term debt............................................ 20 234,356 80,331 394,446 442,572 276,697
Subordinated debt due Savia............................... -- -- -- 35,857 -- --
Mandatorily redeemable stock
Common................................................... -- 114,875 122,111 48,416 49,940 --
Preferred................................................ -- 25,000 25,000 25,000 25,000 25,000
Total stockholders' equity................................ 174,241 112,772 159,681 160,421 230,310 503,022
</TABLE>
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Selected Consolidated Financial Data and consolidated financial statements,
including the notes thereto, appearing elsewhere in this prospectus. The
following discussion and analysis contains certain "forward-looking statements"
which are subject to certain risks, uncertainties and contingencies, including,
but not limited to, those set forth under the heading "Risk Factors", which
could cause Seminis' actual business, results of operations or financial
condition to differ materially from those expressed in, or implied by, such
statements.
OVERVIEW
Seminis is the largest developer, producer and marketer of vegetable and
fruit seeds in the world. Seminis uses seeds as the delivery vehicle for its
innovative agricultural technology. Seminis develops seeds designed to do one or
more of the following: reduce the need for chemicals, increase crop yield,
reduce spoilage, offer longer shelf life and create tastier foods with better
nutritional content. As a result, Seminis is creating the foundation to obtain
premium pricing at all steps of the vegetable and fruit production and
distribution chain: growers, distributors, processors, retailers and end-
consumers.
Seminis produces more than 60 species and 8,000 distinct varieties of
vegetable and fruit seeds. Seminis markets its seeds through three full-line
brands -- Asgrow, Petoseed and Royal Sluis -- and nine specialty brands.
Seminis was formed in 1994 to consolidate various industry-leading
vegetable and fruit seed brands into one consumer-oriented, agrobiotechnology
company. Its core business was created through the acquisition of the Asgrow
seed business from the Upjohn Company in December 1994 and the subsequent
combination of the Asgrow business with the Petoseed and Royal Sluis businesses
in October 1995. Each of these full-line brands has a long history -- Asgrow for
143 years, Petoseed for 49 years and Royal Sluis for 172 years. In January 1997,
in order to focus on more profitable vegetable and fruit seed production,
Seminis sold its Asgrow agronomics business to Monsanto. In the summer of 1998,
Seminis acquired, for an aggregate of approximately $163.1 million, a 50%
interest in LSL PlantScience and the distribution rights for specific varieties
of long shelf life tomatoes and 70% of Hungnong and 100% of Choong Ang, both
South Korean organizations. Seminis' consolidated financial statements include
the results of operations of these companies since their acquisition.
In order to achieve its position as the premier vegetable and fruit seed
company, Seminis has completed nine acquisitions since its formation in 1994 and
has incurred significant expenses related to the development of its
infrastructure, including its human resource capability, information systems and
brand marketing teams, and its research and development capability. Seminis
expenses its investments in research and development and in the creation of its
worldwide sales capability. The comparability of Seminis' results of operations
from year to year has also been affected by the impact of acquisition accounting
under purchase accounting principles, write-offs of in-process research and
development projects acquired through acquisitions, interest expense
attributable to acquisition financings, exposure to foreign currency
fluctuations and charges for management fees paid to Savia.
RESULTS OF OPERATIONS
The table below sets forth Seminis' results of operations data expressed
as a percentage of net sales. In fiscal 1996, gross profit before the effects of
purchase accounting would have been 59.6% of net sales.
19
<PAGE> 22
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
----------------------- --------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Gross profit.................................... 43.9 60.5 62.0 61.9 62.2
Research and development expenses............... 11.1 10.8 11.5 9.5 11.1
Selling, general and administrative expenses.... 35.4 35.9 37.0 31.5 35.5
Management fees paid to Savia................... -- 1.6 2.0 2.0 --
Amortization of intangible assets............... 3.9 3.4 3.4 2.7 4.7
Write-off of acquired research in-process....... 9.6 -- -- -- --
----- ----- ----- ----- -----
Income (loss) from operations................... (16.1) 8.8 8.1 16.2 10.9
Interest expense, net........................... (6.3) (2.8) (6.3) (4.1) (8.4)
Other non-operating income (loss), net.......... (0.5) (2.0) 0.6 (0.1) (0.1)
----- ----- ----- ----- -----
Income (loss) from continuing operations before
income taxes.................................. (22.9) 4.0 2.4 12.0 2.4
Income tax benefit (expense).................... 8.2 (1.0) (0.8) (4.2) (1.0)
----- ----- ----- ----- -----
Income (loss) from continuing operations........ (14.7) 3.0 1.6 7.8 1.4
Income from and gain on disposal of discontinued
operations.................................... 1.6 13.4 -- -- --
----- ----- ----- ----- -----
Net income (loss)............................... (13.1)% 16.4% 1.6% 7.8% 1.4%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED MARCH 31, 1999 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1998
NET SALES
Net sales increased 27.0% to $282.3 million for the six months ended March
31, 1999 from $222.3 million for the six months ended March 31, 1998. The sales
increase was primarily due to $33.7 million in sales generated by the newly
acquired South Korean subsidiaries, Hungnong and Choong Ang, which were acquired
in July 1998. The balance of the increase reflected higher net sales mainly
through increases in volume in all geographic regions and for each of our major
brands -- Asgrow, Petoseed and Royal Sluis.
GROSS PROFIT
Gross profit increased 27.6% to $175.7 million for the six months ended
March 31, 1999 from $137.7 million for the six months ended March 31, 1998.
Gross margin increased to 62.2% for the six months ended March 31, 1999 from
61.9% for the six months ended March 31, 1998. This increase in gross margin was
primarily due to an increase in sales of higher margin, long shelf-life tomato
seeds and a decrease in sales of lower margin varieties to food processors in
North America.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased 47.9% to $31.2 million for the
six months ended March 31, 1999 from $21.1 million for the six months ended
March 31, 1998. This increase was primarily due to $3.2 million of expenses
incurred by the newly acquired South Korean subsidiaries and a $2.1 million
charge as the first of three equal planned installments of Seminis' research
incentive program, the next two installments of which are due in the fourth
20
<PAGE> 23
quarter of fiscal 1999 and the first quarter of fiscal 2000. This incentive
program is a part of Seminis' continuing efforts to attract and retain industry
leading breeders and research personnel.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 43.1% to $100.1
million for the six months ended March 31, 1999 from $70.0 million for the six
months ended March 31, 1998. Selling expenses increased primarily due to
acquisitions, establishment of a worldwide marketing force, the implementation
of a multi-brand sales strategy in the Middle East and the addition of new
direct sales programs in both South America and Eastern Europe. General and
administrative expenses increased due to the expensing of costs of the SAP/R3(R)
management information system, acquisitions and increased investment in our
management information systems infrastructure. Management believes that the
increase of selling, general and administrative expenses as a percentage of net
sales for the six months ended March 31, 1999 as compared with the prior period
was necessary to enhance Seminis' future growth and organizational efficiency.
MANAGEMENT FEES PAID TO SAVIA
The management fee paid to Savia was $4.4 million for the six months ended
March 31, 1998. This fee was discontinued effective October 1, 1998.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets increased 123.3% to $13.7 million for
the six months ended March 31, 1999 from $6.1 million for the six months ended
March 31, 1998. This increase was due to amortization of goodwill and intangible
assets relating to the acquisitions of Hungnong, Choong Ang and LSL PlantScience
in July 1998 and the acquisition of Agroceres in November 1998.
INTEREST EXPENSE, NET
Interest expense, net, increased 155.2% to $23.7 million for the six
months ended March 31, 1999 from $9.3 million for the six months ended March 31,
1998. This increase was primarily due to increased borrowings used to finance
the repurchase of shares of common stock in January 1998 for $211.8 million, to
finance acquisitions and to support working capital requirements, and due to
higher interest rates under Seminis' existing credit facility.
OTHER NON-OPERATING INCOME (LOSS), NET
Seminis had other non-operating loss, net, of $0.2 million for both the
six months ended March 31, 1999 and March 31, 1998. Non-operating loss, net,
recorded in the six months ended March 31, 1999 includes a foreign currency gain
of $1.7 million which was more than offset by a minority interest provision of
$1.6 million, reflecting primarily the minority interest in Hungnong, and other
non-operating losses of $0.3 million. The foreign currency gain is primarily due
to a gain on an intercompany loan to Hungnong.
INCOME TAX BENEFIT (EXPENSE)
Income tax expense decreased 70.1% to $2.8 million for the six months
ended March 31, 1999 from $9.3 million for the six months ended March 31, 1998.
Seminis' effective tax rate was 40.4% for the six months ended March 31, 1999
compared to 34.9% for the six months ended March 31, 1998. The increase in the
effective tax rate was primarily due to increased minority interest expense,
which is not deductible for tax purposes.
NET INCOME (LOSS)
Net income decreased 76.4% to $4.1 million for the six months ended March
31, 1999 from $17.3 million for the six months ended March 31, 1998. This
decrease was primarily due to increased operating expenses, including a
significant increase in the amortization of intangible assets, and interest
expense, net.
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<PAGE> 24
YEAR ENDED SEPTEMBER 30, 1998 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1997
NET SALES
Net sales increased 12.9% to $428.4 million in fiscal 1998 from $379.5
million in fiscal 1997. Of the $48.9 million increase, $17.2 million was due to
sales generated by companies acquired during fiscal 1998. The balance of the
increase was primarily due to increased Petoseed brand sales in all geographic
regions and increased Asgrow brand sales to food processors in North America.
GROSS PROFIT
Gross profit increased 15.8% to $265.6 million in fiscal 1998 from $229.4
million in fiscal 1997. Gross margin increased to 62.0% in fiscal 1998 from
60.5% in fiscal 1997. The increase in gross profit was primarily due to
increased gross profit in Brazil that resulted from the replacement of an
independent distributor with Seminis' own direct sales force and lower
provisions for seed claims because of improved quality assurance and expanded
seedsman's errors and omissions insurance coverage worldwide. The increase in
gross margin was partially offset by an increase in sales to food processors in
North America and wholesalers in Northern Europe, which bear lower margins.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased 20.4% to $49.4 million in
fiscal 1998 from $41.0 million in fiscal 1997. This increase was due to
expansion of breeding programs to support Seminis' brand marketing strategy and
increased biotechnology costs including increased expenditures in Seminis'
molecular marker program and increased costs associated with third-party
technology. The increase was, to a lesser extent, associated with increased
costs to support new research stations in Spain and Turkey, as well as newly
acquired research stations in South Korea and India.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 16.2% to $158.6
million in fiscal 1998 from $136.4 million in fiscal 1997. This increase was
part of our continuing investment in building Seminis' infrastructure, including
costs associated with brand marketing, implementation of the SAP/R3(R)
management information system, creation of a human resources function and
expansion of quality assurance programs. The increase was also, to a lesser
extent, due to specific allowances for receivables from Eastern Europe, Jordan
and South Korea. The allowance for doubtful accounts increased to 8.4% of gross
receivables in 1998 from 6.9% of gross receivables in 1997. Based on Seminis'
ongoing evaluations of its customers' financial condition, the increase in
allowance is not expected to continue.
MANAGEMENT FEES PAID TO SAVIA
The management fee paid to Savia increased 36.5% to $8.5 million in fiscal
1998 from $6.2 million in fiscal 1997. The management fee was discontinued
effective October 1, 1998.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets increased 16.6% to $14.5 million in
fiscal 1998 from $12.4 million in fiscal 1997. This increase was due to the
amortization of goodwill and other intangibles relating to the July 1998
Hungnong and Choong Ang acquisitions.
INTEREST EXPENSE, NET
Interest expense, net, increased 157.0% to $27.1 million in fiscal 1998
from $10.5 million in fiscal 1997. This increase was primarily due to higher
interest rates and increased borrowings used to fund the repurchase of shares of
mandatorily redeemable common stock in January 1998 for $211.8 million, to
finance acquisitions and to support working capital requirements.
OTHER NON-OPERATING INCOME (LOSS), NET
Seminis had other non-operating income, net, of $2.6 million in fiscal
1998 as
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<PAGE> 25
compared to other non-operating loss, net, of $7.7 million in fiscal 1997. The
other non-operating income, net, in fiscal 1998 was primarily due to currency
gains on intercompany loans to Seminis' subsidiaries. The other non-operating
loss, net, in fiscal 1997 was primarily due to currency losses on intercompany
loans to Seminis' subsidiaries.
INCOME TAX BENEFIT (EXPENSE)
Seminis' income tax expense decreased 10.5% to $3.4 million in fiscal 1998
from $3.8 million in fiscal 1997 due to lower taxable income. Seminis' effective
tax rate was 33.7% in fiscal 1998 compared to 25.3% in fiscal 1997. The increase
in the effective tax rate was primarily due to an increase in goodwill
amortization which is non-deductible for tax purposes.
INCOME (LOSS) FROM CONTINUING OPERATIONS
Income from continuing operations decreased to $6.8 million in fiscal 1998
from $11.3 million in fiscal 1997. This decrease was primarily due to an
increase in the net interest expense of $16.5 million and an increase in the
management fee paid to Savia of $2.3 million.
NET INCOME (LOSS)
Net income decreased to $6.8 million in fiscal 1998 from $62.2 million in
fiscal 1997. This decrease was principally due to the $48.3 million after-tax
gain on the sale of the Seminis' agronomics business in January 1997.
YEAR ENDED SEPTEMBER 30, 1997 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1996
NET SALES
Net sales decreased by 0.5% to $379.5 million in fiscal 1997 from $381.4
million in fiscal 1996. Net sales, excluding the effect of currency
translations, increased 4.0% during this period, largely as a result of
increased sales to the Middle East region and also increased Incotec sales in
Northern Europe. Incotec is a Seminis subsidiary that provides seed enhancement
technology to the seed industry. This increase was more than offset by the
effects of currency translation in fiscal 1997 when the U.S. dollar was stronger
relative to fiscal 1996.
GROSS PROFIT
Gross profit increased 37.2% to $229.4 million in fiscal 1997 from $167.3
million in fiscal 1996. Gross margin increased to 60.5% in fiscal 1997 from
43.9% in fiscal 1996. Fiscal 1996 results were adversely impacted by purchase
accounting adjustments of $60.0 million relating to inventories acquired in the
Petoseed acquisition. Excluding the effects of purchase accounting, gross profit
in fiscal 1996 would have been $227.3 million. The slight increase in gross
profit is primarily due to the increase in higher margin Incotec sales.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased 3.0% to $41.0 million in
fiscal 1997 from $42.3 million in fiscal 1996 primarily due to Seminis'
consolidation of its European research facilities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 1.1% to $136.4
million in fiscal 1997 from $135.0 million in fiscal 1996. This increase was
primarily due to expanded quality assurance testing programs.
MANAGEMENT FEES PAID TO SAVIA
The management fee paid to Savia in fiscal 1997 was $6.2 million and no
management fee was paid in fiscal 1996.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets decreased 16.2% to $12.4 million in
fiscal 1997 from $14.8 million in fiscal 1996. This decrease was due to use of a
declining balance amortization method.
WRITE-OFF OF ACQUIRED RESEARCH IN-PROCESS
In connection with the Petoseed and Royal Sluis acquisitions in 1996,
$36.7 million of the purchase price was allocated to in-process research and
development projects that had not reached technological feasibility
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<PAGE> 26
and had no probable alternative future uses, which the Company expensed at the
date of acquisition. There were no acquisitions in 1997 which resulted in
write-offs of acquired research in-process.
INTEREST EXPENSE, NET
Interest expense, net, decreased 56.2% to $10.5 million in fiscal 1997
from $24.1 million in fiscal 1996. This decrease was primarily due to the
repayment of debt using the proceeds from the January 1997 sale of Seminis'
agronomics business.
OTHER NON-OPERATING INCOME (LOSS), NET
Other non-operating loss, net, increased 302.8% to $7.7 million in fiscal
1997 from $1.9 million in fiscal 1996. This increase was primarily due to
currency losses on intercompany loans to Seminis' subsidiaries.
INCOME TAX BENEFIT (EXPENSE)
For continuing operations Seminis' income tax expense increased to $3.8
million in fiscal 1997 from a benefit of $31.4 million in fiscal 1996. Seminis'
effective tax rate was 25.3% in fiscal 1997. In fiscal 1996, Seminis realized a
tax benefit from its pre-tax loss from continuing operations.
INCOME (LOSS) FROM CONTINUING OPERATIONS
Seminis had income from continuing operations of $11.3 million in fiscal
1997 as compared to a loss from continuing operations of $56.1 million in fiscal
1996. This change was due primarily as a result of the previously described
purchase accounting adjustments combined with reduced interest expense.
NET INCOME (LOSS)
Net income was $62.2 million in fiscal 1997 as compared to a net loss of
$50.0 million in fiscal 1996. This change was due to the application of purchase
accounting adjustments of $60.0 million and a write-off of $36.7 million for
acquired research in-process relating to the acquisition of Petoseed and Royal
Sluis in the first quarter of fiscal 1996 and a gain of $48.3 million on the
sale of Seminis' agronomics business in the second quarter of fiscal 1997.
SEASONALITY
The seed business is highly seasonal. Generally, net sales are highest in
the second fiscal quarter due to increased demand from northern hemisphere
growers who plant seed in the early spring. Seminis recorded 35.2% of its fiscal
1998 net sales during its second fiscal quarter. Seminis has historically
operated at a loss the first and third fiscal quarters due to lower sales during
such quarters and Seminis expects to incur a net loss in the third quarter of
fiscal 1999. Seminis' results in any particular quarter should not be considered
indicative of those to be expected for a full year.
The following table sets forth results of operations data for the last ten
fiscal quarters. Income (loss) from continuing operations includes management
fees paid to Savia which began in the second quarter of fiscal 1997 and
continued through the quarter ended September 30, 1998.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------------------
FISCAL 1997 FISCAL 1998 FISCAL 1999
-------------------------------------- --------------------------------------- -------------------
DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $63,459 $139,654 $81,129 $95,302 $71,395 $150,944 $92,817 $113,267 $ 84,861 $197,450
Gross profit............ 39,237 86,671 44,942 58,587 44,045 93,636 55,341 72,595 53,010 122,690
Income (loss) from
continuing operations.. (6,943) 18,561 (3,797) 3,504 (6,112) 23,424 (5,790) (4,760) (18,399) 22,485
</TABLE>
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<PAGE> 27
LIQUIDITY AND CAPITAL RESOURCES
Seminis has historically relied on commercial bank borrowings to finance
its operations and internal infrastructure, on commercial bank borrowings and
equity investments by its stockholders to finance its acquisition and internal
investment program and loans from Savia to finance working capital requirements.
Net cash used in operating activities increased to $25.7 million in fiscal
1998 from $3.0 million in fiscal 1997 mainly to support increased inventory
levels. Capital expenditures increased to $28.5 million in fiscal 1998 from
$19.3 million in fiscal 1997. The increase was due to increased investment in
greenhouse production facilities and research equipment technologies and
facilities.
Seminis has budgeted capital expenditures for fiscal 1999 of approximately
$50.0 million, including $16.0 million for a new office and operating facility
in Oxnard, California, and $11.0 million for investments in research and
development facilities and equipment. While Seminis is always exploring
acquisition opportunities, it has not designated any of its capital budget for
acquisitions. Although not part of its capital budget, Seminis paid $19.5
million for the November 1998 Agroceres acquisition and $8.6 million for the
December 1998 purchase of 5% of the shares of Hungnong.
In January 1997, Seminis sold its Asgrow agronomics business for $240.0
million to provide greater focus on its core vegetable and fruit seed business.
The proceeds of the sale were used to repay long-term debt. In January 1998,
Seminis repurchased shares of mandatorily redeemable common stock for $211.8
million. Seminis entered into its old credit agreement in order to finance the
repurchase. In July 1998, Savia and two of its affiliates made additional equity
investments of $138.2 million. The proceeds of the stock issuance and the
proceeds from an additional $75.0 million borrowing provided by an amendment to
the term-loan provisions of the old credit agreement were used to finance the
acquisition of Hungnong and Choong Ang, to advance working capital to the
acquired companies, to purchase a 50% interest in LSL PlantScience and to reduce
outstanding revolving debt borrowings.
As part of the acquisition of its 70% interest in Hungnong, Seminis gave
Savia a convertible subordinated note in exchange for a loan of approximately
$35.9 million to provide financing for an unrelated company, Young Il Chemical
Company, owned by the minority shareholders of Hungnong. Seminis received a note
receivable for $35.6 million from Young Il Chemical, which is secured by common
stock owned by the minority shareholders representing a 25% interest in
Hungnong. The convertible note to Savia was converted by Savia into 1,916,462
shares of Class B common stock on February 1, 1999.
Seminis' total indebtedness as of September 30, 1998 was $456.9 million,
of which $384.5 million was borrowings under the old credit agreement, $35.9
million was the subordinated debt borrowing from Savia, $18.3 million was
borrowings by the newly acquired South Korean subsidiaries and $18.2 million was
borrowings primarily by other foreign subsidiaries. The old credit agreement
consisted of a $75.0 million revolver portion and term credits of $370.5 million
as of September 30, 1998. As of September 30, 1998, Seminis had borrowed $14.0
million under the revolver, leaving $61.0 million in available borrowings.
In December 1998, Savia made an equity investment in Seminis of $10.0
million in exchange for 1,000 shares of Class C preferred stock to finance the
purchase of shares of Hungnong which Seminis was obligated to purchase from the
minority shareholders of Hungnong in connection with the acquisition of
Hungnong. In March 1999, Savia made an additional equity investment of $20.0
million in exchange for 2,000 shares of Class C preferred stock to finance
working capital requirements.
Seminis borrowed an additional $20.0 million from Savia in January 1999 as
an intercompany advance. The intercompany advance was used to finance working
capital requirements. Seminis entered into its current credit agreement on April
30, 1999, which
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<PAGE> 28
includes a $445.0 million term loan and a
$28.0 million revolving credit facility. The proceeds of the current credit
agreement were used to repay the old credit agreement, to repay a $10.0 million
bank demand note and to finance working capital.
Seminis' total indebtedness as of March 31, 1999 was $513.7 million, of
which $439.2 million was borrowings under the old credit agreement, $20.0
million was an intercompany advance from Savia, $10.0 million was borrowings
under a bank demand note, $20.7 million was borrowings by the newly acquired
South Korean subsidiaries and $23.8 million was borrowings primarily by other
foreign subsidiaries. Seminis incurred additional indebtedness of $23.8 million
as a result of entering into the current credit agreement on April 30, 1999.
The old credit agreement placed and the current credit agreement places
limits on dividends, foreign debt, leasing, capital expenditures and
acquisitions and also required Seminis to meet quarterly financial ratio
covenants including fixed charge coverage and minimum net worth. In February
1999, Seminis and the lenders under the old credit agreement entered into a
waiver and amendment of the old credit agreement to waive compliance with the
debt coverage ratio covenant for the periods ended December 31, 1998 and March
31, 1999. In March 1999, Seminis and the same lenders entered into a waiver and
amendment of the fixed charge coverage ratio covenant for the periods ended
December 31, 1998 and March 31, 1999. The borrowings under the old credit
agreement and the bank demand note were repaid on April 30, 1999 with the
proceeds of the current credit agreement. The current credit agreement will be
repaid with the proceeds of this offering and borrowings under the new credit
facility.
On May 6, 1999, Seminis entered into a commitment letter with Bank of
Montreal and Harris Trust and Savings Bank providing for an underwritten credit
facility. Seminis anticipates that the new credit facility will be for $350.0
million, consisting of a term loan in the amount of $200.0 million and a
revolving line of credit in the amount of $150.0 million. The term loan will
amortize semi-annually with the balance due on June 30, 2004 and the revolving
line of credit will mature on June 30, 2004. Seminis anticipates that the new
credit facility will bear interest in accordance with a grid pricing formula
based on the achievement of a specific debt ratio, with such interest ranging
from the prime rate to the prime rate plus 0.5%, or, at the option of Seminis,
ranging from LIBOR plus 1.25% to LIBOR plus 2.0%. Seminis will also pay
commitment fees quarterly on the unused amount of the revolver.
Seminis expects the new credit facility to contain a number of financial
covenants, including net worth and indebtedness tests, and limitations on its
ability to make acquisitions, transfer or sell assets, create liens, pay
dividends, enter into transactions with its affiliates or enter into a merger,
consolidation or sale of substantially all of its assets or take other actions.
The new credit facility may be secured, depending upon the amount of net
proceeds of the offering and Seminis' debt ratio after the offering. Seminis
also expects that its new credit facility will provide for events of default
typical of facilities of its type, as well as an event of default if Pulsar
Internacional, S.A. de C.V., together with its affiliates, which includes Savia,
fails to hold a majority of the board of directors or direct the management of
Seminis or control at least 51% of the voting rights of Seminis.
Under Seminis' new $350.0 million credit facility, Seminis anticipates
borrowings of $266.5 million as of the closing of this offering. Seminis
currently believes that the cash proceeds from the offering, together with
existing cash balances and available borrowings under the new credit facility,
will be sufficient to meet anticipated cash requirements for the foreseeable
future based on Seminis' current level of operations. There can be no assurance
that additional capital beyond the amounts currently forecasted by Seminis will
not be required or that any such required additional capital will be available
on reasonable terms, if at all, at such time as required by Seminis.
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<PAGE> 29
Seminis' exposure to foreign currency fluctuations is primarily foreign
currency gains or losses that occur from intercompany loans between Seminis and
its foreign subsidiaries. The only material hedging contract to which Seminis or
any of its subsidiaries is a party is a contract executed in December 1998 to
hedge approximately $31.3 million of a $48.0 million loan taken by SVS Holland
B.V., a subsidiary of Seminis, which loan was in United States dollars. SVS
Holland B.V. entered into the hedging contract in order to reduce the exposure
to foreign currency fluctuations because SVS Holland's functional currency is
the Dutch Guilder.
IMPACT OF YEAR 2000 ISSUE
The Year 2000 issue involves the potential for system and processing
failures of date-related information resulting from computer-controlled systems
using two digits rather than four to define the applicable year. Any computer
programs that have date-sensitive software may recognize a date using '00' as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, an inability to process transactions, send invoices or engage in similar
normal business activities.
Seminis is currently installing a new corporate-wide management
information system to coordinate all aspects of sales, marketing, distribution,
production and finance, which is Year 2000 compliant. Seminis is focusing its
effort for Year 2000 compliance on the verification of existing systems.
Seminis' business applications will be compliant by July 1999 in its two main
facilities in the United States and The Netherlands. Seminis' remaining
subsidiaries will be Year 2000 compliant by November 1999, with its worldwide
telecommunications systems compliant by August 1999 and its office software
compliant by November 1999. Seminis' computer hardware, such as servers for
business applications, are also currently Year 2000 compliant in the United
States. Seminis will not be required to make any major equipment upgrades or
system replacements in its compliance effort.
Seminis expects that costs to implement new software as well as to become
Year 2000 compliant will be approximately $25.0 million upon completion, of
which approximately $21.0 million has been spent as of March 31, 1999.
Seminis' most critical vendors are growers who produce seed, often located
in developing countries. Such vendors are not highly reliant on information
technology and therefore will only be minimally affected by the Year 2000 issue.
The vendors are able to accept contracts, produce, harvest and ship seeds
without the use of information systems. If a few growers in developed countries
are unable to produce seed, production will shift to unaffected growers,
resulting in only limited shortages. In the case of our non-seed vendors,
supplies can be substituted with other products if necessary. For example,
although Seminis uses cans to package products, they can be replaced with pouch
packaging if needed without affecting Seminis' customers.
If Year 2000 problems arise in chips that are embedded in Seminis
processing equipment, then the equipment can be disconnected from automatic
control and run manually. In this event, the impact on Seminis operations would
be minor at most. If some of the subsidiaries cannot use their information
systems, invoicing and inventory management can be done manually.
27
<PAGE> 30
BUSINESS
OVERVIEW
Seminis is the largest developer, producer and marketer of vegetable and
fruit seeds in the world. Seminis uses seeds as the delivery vehicle for
innovative agricultural technology. For example, Seminis develops seeds designed
to do one or more of the following: reduce the need for chemicals, increase crop
yield, reduce spoilage, offer longer shelf life and create tastier foods with
better nutritional content. Seminis focuses its research and development
activities on products that are likely to have practical market uses, create
significant market value, command premium pricing and capture leading local
market share. As a result, Seminis is creating and setting the foundation to
capture value through premium pricing at all steps of the vegetable and fruit
production and distribution chain: growers, distributors, processors, retailers
and end-consumers.
Seminis produces more than 60 species and 8,000 distinct varieties of
vegetable and fruit seeds. Seminis markets its seeds through three full-line
brands -- Asgrow, Petoseed and Royal Sluis -- and nine specialty brands. The
product lines marketed under these brands cover most species of vegetables and
fruits, including beans, broccoli, cabbage, carrots, cauliflower, celery,
Chinese cabbage, cucumbers, eggplant, leeks, lettuce, melons, onions, peas,
peppers, pumpkin, radish, spinach, squash, sweet corn, tomatoes, and watermelon.
Seminis has established a worldwide presence and a global distribution
system. Seminis markets seeds in over 120 countries and has 70 research and
development stations in 19 countries and production sites in 32 countries. This
allows Seminis to remain close to local markets around the world, adapt its
products to any microclimate and meet the preferences of local consumers. In
fiscal 1998, Seminis had approximately $383.8 million in net seed sales. This
represents an approximate 19% share of the global commercial vegetable and fruit
seed market, which is generally highly fragmented.
The total worldwide vegetable and fruit commercial seed sales in 1998 are
estimated at $2.0 billion. However, given new advances in agricultural
technology, Seminis believes that the achievable market for vegetable and fruit
seeds, as well as its share of the market, can be expanded. These technological
advances, such as Roundup Ready(R) Weed Control, virus resistance, Bt based
insect control and fungal disease resistance, enable Seminis to price its
products based on the incremental benefit they provide to growers, distributors,
processors, retailers and end-consumers.
INDUSTRY OVERVIEW
Over the past several decades, improvements in farm productivity have
allowed the agricultural industry to keep pace with growing food demand. While
many of the steps in agriculture -- tilling, planting and harvesting -- have
remained the same for centuries, yield-enhancing technologies such as
mechanization and the use of hybrid seed and crop protection chemicals have
allowed farmers to meet the ever-growing demand for food. More recently, the
application of genetic improvements to crop plants has provided greater value to
growers which can be captured by the seed industry through higher prices and
greater demand.
One of the biggest challenges of the 21st century will be to further
develop sustainable agricultural production systems that can meet the food and
nutritional requirements of the world's growing population. The United Nations
is projecting that world population will increase by 35% to 7.7 billion from
1995 to 2020, with 95% of the population increase expected in developing
countries. Given the limited amount of arable land, which is decreasing,
increases in agricultural production must come from improvements in agricultural
productivity through technology. In addition, there is significant resistance,
particularly in developed countries, to agricultural production growth achieved
through increases in chemical inputs such as pesticides. Consequently, the
burden of meeting
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<PAGE> 31
increased demand for food rests primarily on the emergence of new technologies
and farming methods that facilitate improvements in crop yields and replace
existing agricultural chemicals.
In developing countries, which have a relatively large vegetarian
population, vegetable and fruit consumption has grown over 75% from 1985 to
1996. Consumption of vegetables and fruits worldwide has increased approximately
50% in the same time period. However, vegetable and fruit yields have not kept
pace with consumption increases, growing only 18% per hectare since 1985. Given
current population estimates and consumption rates, consumption of vegetables
and fruits is expected to increase by 60% from 1996 to 2010. World production of
vegetables and fruits must increase to meet expected demand.
Two breakthroughs in plant science occurred in the 1980's that may
facilitate increased productivity and higher quality vegetables and fruits. The
first was the understanding of how genes, the fundamental components of the
genetic code, work in plants to produce traits such as disease resistance or
higher nutritional content. The second was the development of transformation
technology, which is a process to introduce new genes into plants. By using
developments in plant breeding, biotechnology and genomics, leading vegetable
and fruit seed companies are creating the changes in productivity and quality
necessary to provide sustainable vegetable and fruit production growth.
In addition, vegetables and fruits are proven to be valuable in meeting
basic nutritional needs and in preventing disease. They also have very little
fat, are low in calories and contain vitamins and other nutritional compounds.
Diets high in vegetables and fruits protect against obesity and, thus, against
the risk of cardiovascular disease and stroke, and can also protect against
diabetes, iron-deficiency anemia and cataracts. According to the World Cancer
Research Fund and the American Institute for Cancer Research, there is also a
strong and consistent pattern showing that diets high in vegetables and fruits
can significantly reduce the risk of cancer. Seminis believes that vegetables
and fruits represent nature's most direct delivery mechanism for improved health
and nutrition.
The world's vegetable and fruit seed industry, with its unique combination
of nutritional benefits, local market adaptability, yield enhancing
technologies, year-round availability and streamlined production and
distribution system, is positioned to meet the world's growing need for healthy
and nutritious food products. Seminis' development of seeds that produce
disease-resistant, higher-yielding and healthier vegetables and fruits are of
growing importance for regional and global markets because of expected
increasing consumption of vegetables and fruits, along with a steady decline in
arable land.
THE VEGETABLE AND FRUIT SEED MARKET OPPORTUNITY
Total worldwide vegetable and fruit commercial seed sales in 1998 are
estimated at $2.0 billion, of which $409.5 million represented sales in the
United States. Given new advances in agricultural technology, such as Roundup
Ready(R) weed control, virus resistance, Bt based insect control and fungal
disease resistance, Seminis believes that the achievable market for vegetable
and fruit seeds, as well as its share of the market, can be expanded. These
technological advances enable Seminis to develop new products which provide
benefits throughout the vegetable and fruit production and distribution
chain -- growers, distributors, processors, retailers and end-consumers -- by,
for instance, reducing growers' costs, reducing spoilage or having better
appearance and taste. As a result, Seminis prices its products based on the
incremental value they provide to growers, distributors, processors, retailers
and end-consumers.
GROWERS
Grower sales of vegetables and fruits in the United States in 1997 were
estimated at $9.2 billion. Seed costs to growers represented approximately 4% of
their sales.
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<PAGE> 32
Reducing growers non-seed costs is a means for Seminis to increase its
profitability. New seed products with enhanced input traits -- including
herbicide tolerance and disease and insect resistance -- are already displacing
other farm input costs, such as fertilizers, pesticides and labor, resulting in
higher seed prices.
The model for pricing seeds to reflect the displacement of the farmer's
input costs is one that has been well established in agronomic crops in recent
years. Because seed products with genetic enhancements can substantially reduce
other input costs, as well as the chemical load on the environment, they are
able to drive a reallocation of grower spending. Insect resistant corn seed
eliminated $15 to $20 of agrochemical costs per acre. As a result, these seeds
are sold, on average, at a 21% premium to traditional corn seed and still
provide the grower with a 26% overall savings of input costs. Similarly,
herbicide tolerant soybean seeds eliminated approximately $12 of agrochemical
costs per acre. These seeds are sold, on average, at a 33% premium to
traditional soybean seed, but provide the grower with a 26% overall input cost
savings. In 1998, approximately 20% of the total corn and 35% of the total
soybean acreage, or over 40 million acres in the United States, was planted with
corn and soybeans genetically resistant to insects and/or herbicides.
The chemical cost-displacement potential in vegetable and fruit crops may
be more attractive than in agronomic crops. Whereas agronomic crops occupy much
larger planted acreage in the United States, vegetables and fruits typically
require higher expenditures on crop protection chemicals and fertilizers given
their relatively high end-market value. In fact, the average tomato grower in
Florida spends $1,500 per acre on chemicals and $3,800 per acre on all
production inputs, versus $73 and $160, respectively, for a typical acre of
corn. In the United States, chemical costs represent between 20% and 35% of
vegetable and fruit grower's total production expenditures, with labor and water
representing the two other largest components of the cost structure. The
vegetable and fruit grower's input intensive cost structure makes growers
particularly receptive to new products, like genetically improved seeds, which
reduce input costs and improve the economics of growing vegetables and fruits.
DISTRIBUTION
Vegetable and fruit sales by distributors in the United States in 1996
were estimated at $30.0 billion. The production and distribution chain for fresh
vegetables and fruits in the United States is relatively simple. Products move
from the grower to the packer/shipper to the distributor and, ultimately, to the
retailer. Alternatively, products move directly from the grower to the
processor. Cost is added at each stage in the chain, reflecting both the profit
margin and product shrinkage due primarily to spoilage. On average, shrinkage
across the entire production and distribution chain accounts for approximately
25% of the cost of fresh vegetables and fruits to the retailer -- or more than
$7.0 billion annually.
Reducing spoilage presents a clear opportunity for seed companies to
achieve premium pricing. Through traditional breeding and biotechnology, Seminis
has developed new seed varieties with enhanced shelf life characteristics. These
new seed varieties sell at a significant premium to traditional offerings and,
in most cases, capture a substantial portion of the savings from reduced
spoilage. For example, Seminis' long shelf life tomato seeds sell for $5,200 per
pound versus $1,400 per pound for a traditional variety. Because these product
enhancements can increase profitability at each step in the production and
distribution chain, demand for these products is driven by all production and
distribution chain participants, not just growers.
PROCESSORS
Processor sales in the United States were greater than $13.0 billion in
1992. Processors of vegetables and fruits freeze, dehydrate, make into paste or
can fresh vegetables and fruits into shelf-stable containers. Processors either
produce their
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own vegetables and fruits or contract for their production with growers.
In many cases, processors either purchase seeds directly from seed
companies or approve the seed purchases of their contract growers. A large
portion of costs associated with processing fresh vegetables and fruits is the
vegetable and fruit itself and the energy costs to freeze or heat the vegetable
or fruit or to evaporate water. During processing, flavor components can be lost
or inactivated. Developing new varieties for processors with higher yield or
which require less processing time or heat required to process vegetables and
fruits or which conserve flavor are important objectives for seed companies.
Seminis has focused its efforts on improving the processing
characteristics of vegetables and fruits. For example, Seminis has an agreement
with Zeneca to develop tomatoes which can be made into an improved paste. This
genetically modified product is the top selling tomato paste in the United
Kingdom. Similarly, Seminis' collaboration with carrot growers and processors
has pioneered the development of a carrot suitable for processing into ready-to-
eat baby carrots.
RETAIL
Retail sales of fresh and frozen vegetables and fruits in the United
States in 1996 are estimated at $50.0 billion. Seminis is developing new seed
varieties with enhanced output or quality traits to expand the grocery market
for vegetables and fruits and capture a larger portion of consumer spending.
Seminis continuously emphasizes the development of new vegetable and fruit seed
products with desirable consumer qualities, including enhanced color, texture,
sweetness and taste, which may command a premium price on the grocery store
shelf. In addition, Seminis is producing seeds for ready-to-eat products, such
as baby carrots and prepackaged lettuce.
Direct consumption of vegetables and fruits by the end-consumer in the
form that the farmer produces them facilitates premium pricing for higher
quality products. In contrast, agronomic crops typically undergo a variety of
processing steps prior to their use as ingredients in the commoditized animal
feed sector.
The trend toward healthier lifestyles and emphasis on nutrition is further
expanding the market potential for vegetable and fruit seeds. Vegetables and
fruits with enhanced nutritional content will likely command a premium at the
grocery store. The challenge for the vegetable and fruit seed industry will be
to develop an integrated grower-packaging-distribution-marketing system that
allows the seed producer to benefit from pricing increases at each step of the
production and distribution chain.
SEMINIS BUSINESS STRATEGY
Seminis' vision is to apply technology to vegetable and fruit seeds to
enhance profitability throughout the vegetable and fruit production and
distribution chain. To realize this vision, Seminis expects to capitalize on its
competitive strengths, which include its ability to consistently introduce new
technology through product innovation, a strong germplasm bank, well established
brand names and a worldwide distribution system. Seminis distinguishes itself
from its competitors by having a global strategy that addresses local needs.
Seminis intends to enhance its leadership position in the global vegetable and
fruit seed industry by expanding its existing product lines and introducing
high-quality, technologically innovative seeds tailored to local preferences.
- - Enhance leadership position in worldwide vegetable and fruit seed
market -- Seminis is the global leader in the vegetable and fruit seed
business with $383.8 million in net seed sales during fiscal 1998. Seminis has
achieved its premier global position through its high-quality seeds, its
innovative technology, its multi-brand marketing strategy and its world-wide
distribution capabilities. Seminis' full-line brands--Asgrow, Petoseed and
Royal Sluis--have been available in their home markets for at least 45 years
and, collectively, enjoy an approximate 19% share of the global commercial
vegetable
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and fruit seed market. Seminis intends to enhance its position as leader in
the vegetable and fruit seed industry through the production and supply of
current products, expansion of existing product lines and introduction of
high-quality, technologically innovative seeds tailored to local preferences.
- - Expand technology leadership position through continuous new product
innovations -- Seminis' new product development efforts utilize traditional
breeding, proprietary technology, biotechnology, biochemistry, genomics and
plant pathology to introduce innovative products to the marketplace in an
efficient and cost-effective manner. Seminis has more than 4,500 products in
its development pipeline. Seminis augments its internal product development
efforts with more than 100 technological agreements and arrangements with
leading companies, research institutions and universities. Seminis intends to
remain at the forefront of seed innovation by coupling its internal product
development capability, technology alliances and extensive germplasm bank with
its intimate knowledge of the evolving demands and preferences of growers,
distributors, processors and end-consumers.
- - Further consolidate the vegetable and fruit seed industry -- Seminis has led
the consolidation of the vegetable and fruit seed industry and has consummated
nine mergers or acquisitions to date. Seminis expects to augment its market
position through continued strategic acquisitions to expand its business and
further internal growth. Seminis will target strategic acquisitions that
provide it with access to new technology, supplement its product line or
improve its market position.
- - Capture enhanced value created by proprietary seeds -- As a result of its
innovative product development efforts, Seminis expects to introduce products
which will reduce input costs to growers and provide enhanced consumer value.
Seminis' seeds can increase yields and crop uniformity, reduce the grower's
dependence on chemicals and fertilizers and improve the appearance, taste and
nutritional value of foods. By expanding the global vegetable and fruit market
through premium pricing along the production and distribution chain, Seminis
can enhance its profitability.
PRODUCTS
Seminis develops and produces vegetable and fruit seeds adapted to the
local conditions in which they will be grown. Local requirements are largely
dictated by environmental conditions, such as temperature or rainfall, retail
demand for traits, such as shelf life, and consumer preferences for flavor,
ready-to-eat convenience and quality. Seminis' depth of product lines enables
growers to meet local market demands.
DEVELOPED COUNTRIES
In developed countries, the growth of the vegetable and fruit seed market
is primarily driven by a demand for foods with enhanced nutritive qualities and
increased consumer awareness of the health benefits of vegetables and fruits.
According to a 1996 consumer survey in the United States, 89% of consumers cited
nutritional reasons as to why they eat vegetables and 73% said that they would
pay more for healthier versions of the foods they eat. Seeds for the production
of vegetables and fruits in developed countries are predominantly hybrids to
ensure crop uniformity and productivity. Seminis estimates that, in the United
States, 85% of all vegetable and fruit seeds are hybrids.
DEVELOPING COUNTRIES
In developing countries the growth of the vegetable and fruit seed market
is largely driven by rapidly expanding population growth and conversion from the
use of open-pollinated seed to hybrid seed varieties. Growers are realizing the
value of hybrids and are increasingly converting to hybrid seeds to obtain
higher yields per acre, greater uniformity, greater resistance to pests,
diseases and environmental conditions and improved quality, flavor and nutrition
for
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consumers. Seminis develops and sells new hybrids specifically designed for the
local markets in developing countries. Given the benefits of hybrid seeds,
growers are often willing to pay a substantially higher price for hybrid seeds
than for open-pollinated seeds.
MULTI-BRAND STRATEGY
Through its customer-focused, multi-brand strategy, Seminis provides
choices to growers with respect to product, price, promotion and service. It
also furthers Seminis' goal of providing growers with information to enable
growers to anticipate change in consumer trends rather than react to them.
Seminis has three full-line brands, Asgrow, Petoseed and Royal Sluis, each with
its own identity and positioning. Each brand features independent products with
varying strengths and market fit. Seminis also markets nine specialized brands,
which enables it to respond quickly to changing market needs, dietary
preferences or regional growing practices. These brands may focus on specialized
growing practices, such as greenhouse or protected culture, specific customer
segments within a sub-market, such as large lettuce growers in the southwestern
United States, or regional and cultural preferences, such as Asian vegetables or
fruited crops for the Middle East. With differentiated Seminis brands, growers
can exercise their options for choice while staying within the Seminis family.
Seminis believes that it can maintain and reinforce its competitive advantage
through the careful positioning of its brands.
FULL-LINE BRANDS
Seminis markets a full-line of seeds under its Asgrow, Petoseed and Royal
Sluis brands. These brands are well recognized for consistently developing and
marketing high quality seeds for most major vegetable and fruit species. Seminis
believes that its brands rank among the leading brands worldwide in the
vegetable and fruit seed market.
Asgrow and Petoseed enjoy high brand awareness in the United States
vegetable and fruit seed industry. According to a 1996 study, Asgrow has a 99%
brand-awareness rating among growers, while 88% of growers and dealers have a
high awareness of the Petoseed brand. In Europe, growers and dealers also have
high brand awareness of Seminis' brands. According to a 1997 independent
industry study of over 1,000 growers and distributors, there is a "high" to
"very high" awareness of Royal Sluis in many European countries, including
France, Italy, The Netherlands, the United Kingdom and Turkey. Similarly, Asgrow
and Petoseed have high brand awareness in many European markets, including
Asgrow in Italy and Petoseed in Spain.
ASGROW -- Asgrow was established in 1856 and was acquired by Seminis in
December 1994 from the Upjohn Company for $304.0 million. After the acquisition,
Seminis sold the Asgrow agronomics seed business for $240.0 million. Asgrow is
known for providing seeds that possess traits satisfying end-user demands such
as flavor, ready-to-eat convenience and quality. Its strong reputation has been
enhanced through its success with hybrids such as carrots and onions. Asgrow is
also strong in large seed varieties such as green beans, where Seminis believes
it has a U.S. market share of over 70%. Asgrow also has a strong presence in
many European countries.
PETOSEED -- Petoseed was established in 1950 and was combined with the
Asgrow seed business in 1995 for $133.5 million. Petoseed has built its
reputation through pioneering work in hybrid tomato development, but expanded
its presence in the industry through its full-line of market-driven, innovative
products. This brand has strengths in many areas, including hot peppers. Seminis
believes that, worldwide, growers currently plant more Petoseed hybrid jalapeno
peppers than all other hybrid jalapeno brands combined. Petoseed is known for
consistently introducing new hybrids with multiple disease resistance enhanced
traits and increased field productivity.
ROYAL SLUIS -- Royal Sluis was established in 1827 and was acquired by
Seminis in 1995 along with Petoseed. The acquisition of Royal Sluis, one of
Europe's
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largest vegetable seed companies, expanded Seminis' European presence. Royal
Sluis focuses on high-quality, cool season crops such as beans, broccoli,
cabbage, carrots, cauliflower, leeks, lettuce and spinach. In addition to its
strong reputation for service and quality, Royal Sluis pioneered new seed
technology to improve seed quality and germination.
As shown in the table below, each of Seminis' full-line brands is distinct
in terms of leading species, brand strategy, pricing strategy and brand
identity.
<TABLE>
<CAPTION>
BRAND LEADING SPECIES BRAND STRATEGY PRICING STRATEGY BRAND IDENTITY
----- ---------------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Asgrow Beans Maintain strong Price at premium Focus on desirable
Broccoli links to growers, to market output (quality)
Carrots distributors and traits
Fresh Market Tomatoes retailers
Melons
Onions
Peas
Pickling Cucumbers
Squash
Sweet Peppers
Petoseed Broccoli Focus on extending Price for value Enhance grower
Cucumbers the product line success through
Fresh Market Tomatoes through additional innovative hybrids
Hot Peppers disease resistance
Lettuce and hybrid
Melons conversion in new
Processing Tomatoes markets
Squash
Sweet Peppers
Royal Sluis Beans Provide service/ Price at premium Provide service
Cabbage expertise to enhance to market through knowledge
Lettuce grower benefits about local growing
Radish and market
Spinach conditions
</TABLE>
REGIONAL OR SPECIALTY BRANDS
In addition to its full-line brands, Seminis markets seeds through
regional or specialty brands, which are targeted to respond to the needs of
local markets. These needs are driven by dietary preferences, desire for local
products, specialized farm growing practices and local environmental and
climatic conditions.
BRUINSMA -- Bruinsma was established in 1934 and was acquired by Seminis
in December 1994 along with Asgrow. Bruinsma's reputation was built on its high-
quality, protected crop varieties. Protected farming is a practice in which
crops are grown from high-value seed in greenhouses or tunnels. This practice
continues to expand worldwide and is particularly reflected in European markets,
where protected growing is an effective means of meeting consumer demand for
vegetables and fruits with premium appearance. Bruinsma focuses on the
development and marketing of cucumber, eggplant, pepper and tomato varieties.
CALIFORNIA -- California was established in 1972 by Petoseed. California
is best known for seeds bred to meet the consumer preferences and farming
practices of the Middle East. The California brand concentrates on cucumber,
melon, pepper varieties, squash and tomato.
CHOONG ANG -- Choong Ang was established in 1946 and was acquired by
Seminis in 1998 for $20.5 million. Choong Ang is one of the top vegetable and
fruit seed brands in South Korea. This brand has
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market strength in Chinese cabbage, hot peppers, oriental melon, radish and
watermelon.
GENECORP -- Genecorp was established in 1982 and was acquired along with
Asgrow in December 1994. Genecorp is a lettuce seed specialist with a
significant market share in the western United States, a region that contains
95% of domestic lettuce acreage.
HORTICERES -- Horticeres, as a brand of the Agroceres vegetable seed
business, was acquired by Seminis in 1998 for $19.5 million. Horticeres is a
leading brand in Brazil where it is known for beans, lettuce, okra, tomato and
tropical cauliflower.
HUNGNONG -- Hungnong was established in 1936 and was acquired by Seminis
in 1998 for $120.6 million. Hungnong is a leading vegetable seed brand in South
Korea. Hungnong is known for its strength in broccoli, cabbage, Chinese cabbage,
hot peppers and oriental radishes. Twenty-five percent of Hungnong's sales occur
outside of South Korea, with five percent outside Asia, primarily in the United
States.
LSL PLANTSCIENCE -- LSL PlantScience was formed in 1998 through an
alliance between Seminis and LSL Biotechnologies with an investment by Seminis
of $22.0 million. LSL PlantScience is known for its DiVine Ripe brand of
tomatoes which offer delayed ripening characteristics for vine-ripened flavor
and increased shelf-life. In addition to marketing LSL PlantScience's tomato
varieties, Seminis obtained access to LSL PlantScience's existing research and
technology agreements. LSL PlantScience varieties are marketed worldwide.
NATH SLUIS -- Seminis acquired a 90% equity interest in Nath Sluis in 1998
for $2.0 million. Nath Sluis breeds, produces and markets vegetables and fruits
specifically for the Indian market.
SENECA -- Seneca was acquired by Seminis in 1997 for $1.7 million. Seneca
focuses on hybrid sweet corn for the United States and Canadian markets.
YATES -- In 1997, Seminis acquired a 20% interest in the Yates Vegetable
Seed Company for $1.7 million. This company breeds cauliflower, lettuce and
onions for the Australian, European and North American markets. Yates also
distributes the Asgrow and Genecorp brands in Australia.
SALES AND MARKETING
Seminis' product sales are widely diversified geographically, with Europe
representing the largest percentage of total sales outside of North America. The
table below illustrates the breadth of Seminis' products and sales for each
geographic region.
FISCAL 1998 NET SEED SALES BY REGION
<TABLE>
<CAPTION>
FISCAL 1998
FISCAL 1998 NET SEED SALES
NET SEED SALES GROWTH VS.
AS A PERCENTAGE FISCAL 1997
FISCAL 1998 OF TOTAL NET SEED SALES
GEOGRAPHIC REGION NET SEED SALES NET SALES AS A PERCENTAGE
- ----------------- -------------- --------------- ---------------
(in millions)
<S> <C> <C> <C>
North America........................... $155.2 36.2% 11.0%
Southern Europe......................... 88.1 20.6 5.8
Northern & East Europe.................. 50.2 11.7 21.6
Middle East/North Africa................ 35.5 8.3 19.6
South America........................... 24.9 5.8 34.2
Asia/Rest of World...................... 29.9 7.0 67.7
</TABLE>
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Seminis reinforces its brands' market positions through strategic
planning, pricing and communications. Seminis believes that, with its strong
brands, it has an advantage in the marketplace when introducing new products.
The reliability and trust associated with its brands can lend credibility to new
product claims.
Seminis' strategy of providing differentiated products and services to its
customers through its multiple brands is reflected in its approach to sales and
marketing. Each brand has its own separate and distinct sales force, product
managers and marketing team. Along with separate breeding and product
development, each brand team focuses on offering differentiated products and
services to meet the needs of a wide range of customers.
Seminis sells its brands worldwide by using a multi-level distribution
strategy involving direct sales, dealers, distributors and importers. Largely
driven by local market needs, Seminis' distribution strategy for each geographic
region is designed to maximize the market penetration of its brands. Seminis'
North American sales are mainly concentrated in the Asgrow and Petoseed brands.
The Petoseed brand is sold primarily through dealers and the Asgrow brand is
sold primarily direct to growers. Each brand has a distinct North American sales
force. In Europe, Royal Sluis, Petoseed and Asgrow are typically sold through
direct sales groups. In the Middle East, Petoseed is Seminis' top brand and is
sold through distributors.
While the majority of its sales are direct to growers, Seminis also
fosters close relationships with dealers and distributors. Where there is a
market need, Seminis uses these dealers as an outside direct sales force.
Dealers extend the Seminis brands' ability to reach growers in areas where there
are geographic or other limitations to direct sales efforts. Seminis is highly
selective in the dealers and distributors chosen to represent its brands.
Dealers are selected based on shared vision, technical expertise, local market
knowledge and financial stability. In addition, Seminis builds
dealer/distributor loyalty through an emphasis on service, access to breeders,
joint trials, ongoing training and extensive promotional material support.
Seminis' marketing communications department coordinates all advertising,
public relations and publicity activities for Seminis and its brands and
provides highly targeted promotional support to its sales and marketing efforts
worldwide.
ACQUISITIONS
All of the sectors of the agricultural industry have experienced
significant consolidation during the past several years. Consolidation at the
upstream end of the production chain--among chemical, seed and biotechnology
companies--has been driven primarily by developments in agricultural technology
and the need to secure access to the best available seed germplasm.
In agronomic crops such as corn, cotton, soybeans, wheat and rice, the
consolidation has been led by major agrochemical/ biotechnology companies such
as Monsanto, Dow, DuPont and Hoechst (AgrEvo). These companies have invested in
the seed industry to access delivery systems for their biotechnology products.
Access to the best available germplasm has become a key competitive priority in
the industry. In vegetable and fruit crops, access to germplasm is an equally
important competitive issue. The company with access to the best available
germplasm will have the strongest position in the delivery system for future
generations of biotechnology products.
Seminis has been at the forefront of the consolidation of the vegetable
and fruit seed industry and has completed nine acquisitions to date. Seminis has
historically used acquisitions as a cost-efficient means of adding developed and
proven products to its portfolio, gaining access to or ownership of key
technology, patents and germplasm collections and entering new and established
markets. The transactions completed in fiscal 1998 exemplify this point. First,
the purchase of a 50% stake in LSL PlantScience added a new line of tomato
varieties. Similarly in fiscal 1998, the acquisition of two South Korea-based
companies, Hungnong and Choong
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<PAGE> 39
Ang, strongly enhanced Seminis' line of products for the Asian market and
provides products to meet the growing worldwide demand for Asian vegetables and
fruits. Also in 1998, Seminis' purchase of 90% of the equity of Nath Sluis
significantly increased Seminis' presence in India. Finally, in November 1998,
the acquisition of the Agroceres vegetable seed business strengthened Seminis'
presence and product lines in Brazil, a region that requires special varieties
developed for tropical and subtropical climates.
As the leading vegetable and fruit seed company, Seminis believes it is
well positioned to benefit from continued consolidation of the vegetable and
fruit seed industry. In order to expand the breadth and depth of its product
line, Seminis expects to continue targeting strategic acquisitions and alliances
that supplement its product line and expand its customer base.
NEW PRODUCT DEVELOPMENT
Seminis utilizes both traditional breeding and biotechnology to create
continuous new product innovations. Seminis focuses its internal product
development activities on products that are likely to have practical market
applications, create significant market value, command premium pricing and
capture leading local market share.
Seminis currently owns or has pending over 60 patents in such areas as
virus resistance, product quality, breeding technology, gene expression, cell
selection and resistance genes. In addition, Seminis has protected more than 360
varieties under plant variety protection laws.
Principal new products are listed in the following table.
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<PAGE> 40
PRINCIPAL NEW PRODUCTS INTRODUCED IN THE LAST THREE FISCAL YEARS
<TABLE>
<CAPTION>
SPECIES TARGET REGION DIRECT BENEFICIARY BENEFIT/ADDED TRAIT
------- ------------- ------------------ -------------------
<S> <C> <C> <C>
Bean Europe Grower/consumer Darker color, better uniformity
Europe Grower/consumer Darker color, disease resistance
USA/Italy Trader/consumer Improved appearance
Broccoli CA/Europe Grower/trader Improved export quality
CA/Mexico Grower/trader Better export quality
Carrot CA Consumer Better taste for consumer
Fresh Market Tomato Europe Grower Disease resistance
Mexico Grower Higher yield
South Europe/Spain Grower Disease resistance
Florida Trader Fruit firmness-shippability
Middle East Trader Longer shelf life
West Africa/East Africa Trader Longer shelf life
Hot Pepper Mexico Grower/trader Early maturity of jumbo size fruit
Mexico Grower Larger fruit, higher yield
Lettuce CA/AZ Grower Disease resistance
Italy/France Grower Disease resistance, larger size
Long Cucumber Northwest Europe Grower/trader/consumer Better vigor, higher quality fruit
Long Day Onion Northwest USA Trader/consumer Longer storability
Pea USA/Italy/France Trader/consumer Improved color/appearance
USA/UK/Italy/France Trader Improved processor traits
Pickling Cucumber Eastern Europe Trader/consumer Improved fruity quality
USA Trader Better size
USA Trader Improved processing traits
USA/Brazil/Mexico Trader/consumer Improved fruit quality
USA/Mexico/North Africa Grower Higher yield
Processing Tomato Spain Trader Improved peeling/dicing capabilities
Short Day Onion Texas/Mexico/South America Grower/consumer Higher yield, lower pungency
Spinach Europe Grower Disease resistance
Europe Grower/trader Disease resistance, higher quality leaf
Sweet Corn USA/Canada Consumer Improved taste
Sweet Pepper Florida Grower Bacterial disease resistance
Florida Grower Disease resistance
Watermelon USA/South America/Italy Consumer Seedless
</TABLE>
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The following table outlines selected products under development for
production over the next two to three years.
SELECTED PRODUCTS IN DEVELOPMENT
<TABLE>
<CAPTION>
SPECIES FEATURE EXPECTED BENEFIT DIRECT BENEFICIARY
- ------- ------- ---------------- ------------------
<S> <C> <C> <C>
Broccoli Cytoplasmic male sterility Lower production costs; increased product uniformity Grower
Cabbage Cytoplasmic male sterility Increased yield; lower production costs; increased
product uniformity Grower
Fungal disease resistance Increased yield; lower production costs; increased
product quality Grower
Carrot Disease resistance Increased yield; lower production costs Grower
Improved flavor Consumer benefit Consumer
Lettuce Fungal disease resistance Increased yield; lower production costs Grower
Melon Multiple virus resistance Increased yield; lower production costs; increased
product uniformity Grower
Extended shelf-life Consumer benefit; reduced spoilage Consumer/trader
Onion Disease resistance Increased yield; lower production costs Grower
Pea High sugar Better taste Consumer
Pepper Bacterial disease resistance Increased yield; lower production costs Grower
Spinach Tolerance to yellowing and New market opportunity Grower
over-wintering
Squash Multiple virus resistance Increased yield of marketable quality fruit Grower/trader/consumer
Tomato Virus resistance Increased yield; market expansion Grower
Multiple disease resistance Increased yield; lower production costs Grower
High (Beta)-carotene Consumer health benefit Consumer
High lycopene Consumer health benefit Consumer
Watermelon Genetic male sterility Increased product uniformity Grower/trader/consumer
</TABLE>
PRODUCT DEVELOPMENT STRATEGY
Seminis' new product development efforts utilize traditional breeding,
proprietary technology, biotechnology, genomics and plant pathology to introduce
innovative products to the marketplace in an efficient and cost-effective
manner. Seminis augments its internal product development efforts through
technological alliances with leading companies, research institutions and
universities. Seminis believes that its internal research and development
capability and access to innovative technology, coupled with its extensive
germplasm bank, position it to best meet the changing demands and preferences of
growers and end-consumers and increase its market share and global reach.
PRODUCT DEVELOPMENT PLATFORM
Seminis conducts research and development activities in 70 locations
throughout the world, including 20 in North America, 16 in Europe, three in the
Middle East, three in South America and 28 in Asia. By diversifying its research
and development geographically, Seminis is able to take advantage of local
breeding characteristics and many different microclimates. It is also better
able to tailor its products to local tastes and preferences.
Each region of the world has unique requirements for the production of
vegetables and fruits. These requirements are driven by local environmental
conditions such as temperature or rainfall as well as local consumer preference
such as that for very sweet pink tomatoes in Japan or more acidic red tomatoes
in Italy. Seminis maintains an internally developed, proprietary database that
contains information on local production and local consumer needs. Seminis has
compiled the information in this database to enable its plant breeders and
marketing and sales personnel to design new products to meet the needs of the
local market.
Seminis believes it has the largest research and development staff in the
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vegetable and fruit seed industry, with over 850 people employed in research and
development functions, including over 150 professionals with Ph.D. or M.S.
degrees, with 114 plant breeders, 22 biotechnologists and 21 pathologists.
Seminis' plant breeding staff is structured by brand and, within each brand, by
species, to maintain brand focus and adequately respond to changing consumer
demands and preferences. All plant breeders regardless of their brand
affiliation have access to technology developed from Seminis' biotechnology,
biochemistry and pathology laboratories. Seminis fosters competition among its
brands and breeders to ensure that new product development is achieved in an
aggressive timeframe.
GERMPLASM
Seminis owns what it believes is the largest vegetable and fruit germplasm
bank in the world. Seminis' germplasm bank is its key strategic asset.
Germplasm, Seminis' bank of genetic information, is contained in millions of
seeds. These seeds capture the characteristics of vegetables and fruits grown
for Seminis' customers in different regions of the world, including input
traits, such as resistance to pests and adverse weather conditions, and output
traits, such as crop yield, color, texture, flavor and ready-to-eat convenience.
This extensive germplasm bank is extremely difficult to replicate, having been
developed through more than 100 years of intense research and development
effort.
The merger of the Petoseed, Asgrow and Royal Sluis germplasm, plus the
additions of germplasm from Bruinsma, Seneca, Hungnong, Choong Ang, Nath Sluis,
LSL PlantScience and the Agroceres vegetable seed business, has created a very
diverse germplasm bank. The strength of Seminis' germplasm bank is its diversity
of materials available and the gene characteristics contained in the materials.
Seminis' breeders utilize its germplasm, as well as its proprietary
technologies, to develop innovative products suitable to the needs of different
markets and conditions. Seminis' extensive germplasm bank is the basis for its
continued growth.
TECHNOLOGY
Seminis' product development technology positions it as one of the leaders
in agricultural innovation. The time and capital required for the development of
new products represent the most formidable barrier to entry in the vegetable and
fruit seed industry. On average, it takes five to twelve years for a proprietary
variety to reach commercial viability. Seminis works to minimize failure in the
market by focusing on identifiable market needs, while reducing time-to-market
and development costs. Seminis employs biotechnology, biochemistry, tissue
culture, dihaploids, cytoplasmic male sterility and molecular markers to enhance
its traditional breeding programs and improve the efficiency of its new product
development efforts.
BREEDING -- Seminis maintains significant breeding programs for over 60
major vegetable and fruit species that yield over 300 different varieties each
year. No other company produces as many products in the vegetable and fruit
line. Seminis' breeding strategy is to create vegetable and fruit hybrids and
varieties with combinations of traits that are superior to principal competitor
hybrids and varieties and that meet or anticipate the changing demands of the
market. These improved traits include varieties that are economical to produce,
have high field and marketable yields, possess superior disease resistance,
environmental tolerance and nutritional content and have long shelf lives,
superior processing characteristics and consumer benefits such as improved
taste, appearance and nutrition and ready-to-eat convenience.
PLANT AND GENETIC TECHNOLOGY -- Through the use of its proprietary
processes, Seminis enhances the efficiency of its breeding programs by enabling
its breeders to identify and incorporate important traits into the breeding
line, while significantly reducing the lead-time necessary to introduce
commercially viable products. These proprietary processes include the use of
tissue culture, dihaploid breeding, cytoplasmic male sterility, molecular
markers and biotechnology and genomics.
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- - Tissue Culture -- Tissue culture is a laboratory technique that enables plants
to be grown from plant tissue, such as a leaf or bud, rather than a seed.
Tissue culture reduces the loss of plants, speeds up breeding cycles, reduces
costs and allows the maintenance of parental inbreds that have difficulty in
producing seeds. Tissue culture is used in the following breeding programs:
broccoli, brussel sprouts, cabbage, carrots, cauliflower, celery, cucumbers,
leeks, lettuce, melon, onions and squash.
- - Dihaploid Breeding -- Plants with two identical sets of chromosomes --
dihaploids -- are highly desirable in plant breeding due to the uniformity of
their genetic information. The formation of dihaploids typically occurs only
under laboratory conditions. When dihaploids are used in a breeding program,
all future progeny will be genetically identical, thereby increasing the
uniformity of the crop. Using dihaploids in a breeding program reduces the
breeding cycle by up to 50%. For example, a dihaploid breeding program for
biennial crops can reduce breeding from 16 years to 8 years; with annual
crops, a dihaploid program reduces a normal breeding program from 11 years to
7 years. Seminis currently utilizes dihaploids in the commercial development
of its hybrid products including broccoli, cabbage, cauliflower, Chinese
cabbage, eggplant, lettuce, melon, onion, pepper and radish.
- - Cytoplasmic Male Sterility -- Cytoplasmic male sterility is a genetic feature
that blocks development of the male (pollen) part of flowers. The resulting
plants are only female fertile, which allow them to be efficiently crossed
with pollen from another plant ensuring the proper cross is made. The use of
cytoplasmic male sterility technology during commercial seed production
increases hybrid purity, accelerates the production time for a seed crop and
improves product uniformity. The grower also benefits by having a more
consistent and uniform crop. Seminis currently utilizes cytoplasmic male
sterility technology commercially to produce broccoli, cauliflower and hot
pepper hybrids. Since the hybrids are usually sterile, this technology also
protects Seminis' germplasm by preventing its reproduction in second
generations.
- - Molecular Markers -- Molecular marker technology integrates molecular biology
and information systems with plant breeding to identify important genetic
sequences and "tag" them so that they can be readily found in seeds or plant
tissue without growing the plant itself. Molecular markers are used for
genetic identification of proprietary products and verification that the
correct product was produced. They are also used to increase the precision and
speed of developing superior varieties through selection. Seminis employs
molecular markers in five species.
- - Biotechnology and Genomics -- Biotechnology, or genetic engineering, allows
for the identification and direct transfer of a specific gene into a plant. An
individual company's competitive position in biotechnology is reflected in its
ability to access genes that determine specific characteristics and to develop
efficient gene transfer systems to create transgenic plants.
Seminis has focused its initial biotechnology efforts in Roundup Ready(R), or
herbicide tolerant, weed control, virus resistance, insect resistance, fungal
disease resistance and quality traits, such as long shelf life. Seminis'
principal sources of genes, or traits, are technology licensing agreements or
research collaborations with private companies, research institutions and
universities.
Given the large number of different species of vegetables and fruits in
Seminis' product line, Seminis has focused its efforts in biotechnology on
developing rapid and reliable methods to introduce new genes into a wide array
of species. Seminis employs scientists with expertise in biology,
biochemistry, molecular biology and plant sciences to develop techniques to
introduce new genes into plants and produce viable progeny. Seminis believes
that it has the world's leading capability in gene transfer techniques in
vegetables and fruits.
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Genomics, the next wave of biotechnology, allows for the expansion of
biotechnology's application from single genes to families of genes. Many
important traits involve gene families such as yield, fruit development and
flavor. Genomics integrates knowledge about a gene family structure and its
function or trait, thereby allowing for the trait to be more easily bred into
related plant species or transferred by way of genetic engineering to other
plant species. Seminis' activity in genomics is largely concentrated in its
molecular markers program.
PLANT PATHOLOGY -- Vegetables and fruits are susceptible to diseases that
can affect yield as well as quality of the final product. In order for Seminis'
plant breeders to develop vegetable and fruit varieties resistant to diseases,
Seminis believes it has established the largest plant pathology group in the
industry to identify and understand diseases important in vegetables and fruits.
With 18 scientists in a network of laboratories throughout the world, Seminis is
currently working on more than 100 different diseases, targeting those that have
the greatest impact on commercial vegetable and fruit production.
As a result of these efforts, Seminis leads the industry with the widest
range of disease resistant hybrids that require reduced or no chemical
applications while enhancing growers' yield potential. Its plant pathology
resources also enable Seminis to maintain rigorous quality control standards.
All seed-lots are screened for a wide variety of diseases that could be carried
on the seed. Lots that may be contaminated are treated to destroy the disease
organisms or are destroyed.
STRATEGIC RELATIONSHIPS
Seminis actively seeks access to technology applicable to vegetables and
fruits from companies, research institutions and leading universities. Either
directly or through Savia, Seminis has over 100 technology agreements providing
it access to germplasm, genes, technology, patents and proprietary knowledge.
Seminis' major strategic relationships include technology agreements with
Monsanto, the John Innes Center, Bionova Holding Corporation, an affiliate of
Savia, and Mendel Biotechnology, Inc. As a result of its broad technology
alliances, Seminis has relative freedom to operate in the vegetable and fruit
seed market.
MONSANTO TECHNOLOGY COLLABORATION AGREEMENT. Monsanto is a worldwide
manufacturer and seller of a diversified line of agricultural products,
nutrition and consumer products and pharmaceuticals, with leading agricultural
biotechnology. Monsanto has made significant investments in the development of
technologies useful in the identification, transfer and expression of genes in
plants. Monsanto and Savia executed a worldwide, non-exclusive agreement in
January 1997 which provides Seminis access to Monsanto biotechnology applied to
vegetables and fruits. Seminis gains early insight into new technologies being
developed by Monsanto for agronomic crops that can also improve the input and
quality characteristics of vegetables and fruits.
Through the agreement, Seminis has access to numerous Monsanto patents and
pending patents covering the use of selectable markers, a range of promoters
which control gene expression and the agrobacterium transformation system, a
common means of transferring genes into plants. It also has access to a range of
valuable traits such as Roundup Ready(R) weed control, Bt insect resistance and
genes for disease control and quality traits. By partnering with Seminis,
Monsanto is able to leverage its research and development investment across the
broadest spectrum of crops.
JOHN INNES CENTER TECHNOLOGY AGREEMENT. The John Innes Center and
Sainsbury Laboratory are premier agricultural research institutions located in
Norwich, England. John Innes has built a substantial technology position for
traits involved in improving plant yield, quality and growth characteristics of
vegetable crops. On December 1, 1997, John Innes and Savia entered a five-year
agreement which provides Savia and its affiliates with access to
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significant plant disease control technology that will improve its capability to
develop broad fungal disease resistance and enhanced nutritional and health
benefits from vegetables.
BIONOVA HOLDING CORPORATION RESEARCH AGREEMENT. Bionova, an affiliate of
Savia, is a biotechnology company focused on developing novel genes for seed and
vegetatively propagated plants like strawberries, bananas and grapes. Under the
research agreement between Bionova and Seminis, Seminis funds research at
Bionova for specific vegetable and fruit crop projects, principally in early
stage molecular biology research related to the introduction of Monsanto genes
into vegetables and fruits. The agreement also provides access to other genes
and technologies including transwitch technology, pea and pepper transformation
and agrobacterium transformation. The results of this funded research are the
exclusive property of Seminis. Under the terms of the agreement, Seminis pays
royalties on all products that are commercialized using Bionova technology.
MENDEL BIOTECHNOLOGY EQUITY PARTICIPATION AND RESEARCH AGREEMENT. Mendel
Biotechnology studies the structure and function of genes using a mustard plant
species, Arabidopsis thaliana. This plant is particularly well suited for basic
discovery research due to its small size and simple genetic structure. Seminis
has a license agreement with Mendel Biotechnology to access genes for the
improvement of plant growth and development. In conjunction with Savia's equity
stake in Mendel Biotechnology, Savia and Mendel Biotechnology have a technology
agreement which provides Seminis access to genes and technology developed by
Mendel Biotechnology's genomics effort in vegetables and fruits.
OTHER TECHNOLOGY AGREEMENTS AND COLLABORATIONS. Seminis actively develops
collaborations and acquires technologies from private corporations, research
institutions and leading universities. Seminis believes that its investment in
technology agreements and collaborations reduces the cost and risk normally
associated with new product development, as Seminis utilizes collaborators for
most of its basic research. Seminis typically shares the value created as a
result of its agreements and collaborations with its partners once a product
reaches commercialization.
PRODUCTION AND OPERATIONS
Seminis typically contracts with seed growers to produce its seeds. It
also produces seed on company-owned farms. Seminis provides the producer with
male and female "parent" lines, which are multiplied into commercial quantities
of hybrid seed. The producer returns the hybrid seed to Seminis for cleaning and
packaging prior to sale to the customer.
Seminis' seeds are produced both domestically and internationally in over
30 countries in the Northern and Southern Hemispheres to mitigate growing risks
associated with weather or disease in any one region. In the United States,
Seminis produces seed in Arizona, California, Idaho, Oregon and Washington
through contract production with high-quality, dependable growers. Seeds are
produced internationally through subsidiaries in Argentina, Canada, Chile,
China, Ecuador, France, Germany, Guatemala, Hungary, Italy, Latvia, Mexico, New
Zealand, Peru, South Africa, South Korea, Thailand and The Netherlands, and
through exclusive agents using proprietary Seminis technology in Australia,
China, Czech Republic, Denmark, France, Germany, Hungary, India, Israel, Italy,
Japan, Moldova, New Zealand, Romania, Slovakia, South Africa, Taiwan, Tanzania,
Thailand, Turkey and Vietnam.
By geographically diversifying its production facilities, Seminis can
schedule its planting on a year-round basis, maximize yield, reduce inventory
requirements and ensure adequate supplies. In addition, Seminis ensures
availability of quality products throughout the world by maintaining production
capabilities for each variety in two locations in each hemisphere. For example,
a new variety with strong, unanticipated demand in the Northern Hemisphere can
be supplied by using additional production from
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the Southern Hemisphere. Alternatively, acreage that was planned to produce
tomato seed could be switched into pepper seed production if excess tomato seed
enters the marketplace.
Seminis controls contract production by providing on-site management and
technical personnel to oversee the production process. Seminis also supplies
producers with stock seed, specialized hybridizing techniques and specialized
sowing and harvesting equipment to ensure product quality. Production is split
among numerous species, ranging from hand-labor intensive hybrid crops such as
peppers and tomatoes, to machine planted and harvested seed crops such as peas,
beans and corn. Product quantities are determined by a three-year sales
forecast, product safety stock in inventory and the production history for the
region and product.
Seminis has its main processing facilities in California, Chile, Idaho and
The Netherlands, and auxiliary processing centers in New Zealand and South
Korea. The location of seed processing centers is intended to facilitate the
flow of seed from production areas to major markets. Seminis has recently
employed a logistics system integrating the planning functions in production,
operations and sales. The implementation of this system is expected to provide
real time information about inventory from crop in ground to finished and
available inventory for sales over a three-year time horizon. Using better
information systems and efficient capacity utilization, Seminis expects to
complete the consolidation and rationalization of its operations over the next
two years.
INCOTEC
Incotec Inc., a subsidiary of Seminis, provides sophisticated seed
enhancement technology to the seed industry. Incotec offers products for precise
sowing, improved seed emergences and germination. Incotec enhances seed
performance by applying fungicides or other chemicals and protective coatings to
protect against disease or improve a seed's germination behavior. Incotec also
pelletizes seeds to make them uniform and, therefore, more suitable for
precision sowing equipment. This technology helps growers worldwide increase
their productivity and profits by allowing them to obtain better crop
uniformity, even under inconsistent climate and field conditions.
Incotec pioneered seed priming -- a technology that accelerates
germination -- nearly 30 years ago. Today, Incotec offers diversified technology
to serve the vegetable and fruit, flower and tobacco seed industries. Incotec
expects to achieve future growth through investment in new seed enhancement
technology and product development, a stronger presence in the agronomic seed
enhancement market and the pursuit of strategic alliances with outside
technology suppliers and the agricultural chemical industry.
QUALITY ASSURANCE
Seminis' extensive quality assurance program provides growers with
confidence in seed performance. Seminis' seeds undergo a rigorous quality
assurance program, which includes extensive field and greenhouse variety
identification trials, physiological and pathology tests and other sophisticated
laboratory techniques using genetic marker technology. Seed quality is monitored
thoroughly through methods ranging from inspection of the parent plants for
health and genetic purity to harvest and sale of only the most vigorous seed.
Once harvested and conditioned, seeds are evaluated and certified by
technicians, pathologists and other scientists for characteristics such as
genetic purity, physical purity, germination, moisture content, vigor and the
absence of seed-borne diseases. This program ensures that Seminis seeds produce
plants that have high yields, are tolerant to drought, insects and diseases and
efficiently use soil and water nutrients.
Seminis has begun an ISO 9000 certification effort, which will result in
standardized quality systems throughout Seminis. ISO 9000 is a series of
international standards for the development and implementation of quality
systems for all types of industries, as issued by the
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International Organization for Standardization in Geneva, Switzerland. These
quality systems are aimed at building quality into the product at each stage of
research, production and operations. Seminis expects to earn ISO 9000
certification for most of its operations in mid-1999.
COMPETITION
Seminis faces substantial competition from technological advances by
competitors such as other seed companies, chemical and pharmaceutical companies
and biotechnology companies, many of which have substantially greater resources
than Seminis. To remain competitive, Seminis expends substantial resources for
research and development and strives to maintain technological alliances.
Seminis also competes on the basis of pricing and financial terms.
INTELLECTUAL PROPERTY
Seminis uses a wide array of technological and proprietary processes to
enhance its germplasm and product development programs. These technologies and
proprietary processes enable Seminis to create novel product concepts and reduce
the time to market by, in many cases, two to five years. Seminis files for
patents on technology that is patentable, although it does not file for patents
on all potentially patentable technologies. Seminis currently owns or has
pending patents in such areas as virus resistance, product quality, breeding
technology, gene expression, cell selection and resistance genes, including 63
issued or allowed patents in Australia, Austria, Belgium, Canada, Denmark,
France, Germany, Great Britain, Italy, Luxembourg, Spain, Sweden, Switzerland,
The Netherlands and the United States. Seminis currently has 135 patent
applications filed, or pending, in Argentina, Australia, Brazil, Canada, Chile,
China, the Czech Republic, the European Union, Hungary, India, Indonesia,
Israel, Japan, Macedonia, Mexico, New Zealand, Norway, Poland, Romania, Russia,
South Korea, Saudi Arabia, Spain, Thailand, Turkey, Ukraine and the United
States.
Intellectual property rights protect Seminis products and technologies
from use by competitors and others. Intellectual property rights of importance
for Seminis include utility patents, registrations under plant variety
protection laws and trade secrets. Intellectual property rights focus on
open-pollinated varieties, parental lines, traits and gene technologies related
to hybrid varieties, novel traits, novel breeding technologies, molecular
markers and disease resistance.
In many countries, including the United States, most of the European Union
and Japan, plant varieties can be protected under laws which grant rights to
plant breeders to protect their seeds, including the right to prevent third
parties from importing or exporting, storing, processing, reproducing or selling
protected varieties within the territory of protection. Seminis has protected
368 plant varieties under plant variety protection certificates or plant variety
right certificates in the United States, the European Union, Kenya and Israel.
Seminis has filed another 75 applications for plant variety protection in the
United States and the European Union.
Seminis intends to continue developing comprehensive intellectual property
and protection through utility patents, including key varieties and parent
lines. Seminis will also aggressively expand protection of its varieties and
parent lines through plant variety rights. Proprietary technologies not
protected under these mechanisms are protected under trade secret laws.
REGULATION
The developing, testing and commercialization of seed products are subject
to legislation and regulation in various countries. These regulations may govern
genetic exclusivity, environmental concerns, product viability, performance and
labeling. While regulation adds a cost of doing business to the industry, it
also provides protection for research and development investment in new
products, thereby encouraging continued new product development.
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REGISTRATION PROCESS
Variety registration varies from country to country, but generally each
variety must be phenotypically unique. That is, the size, color, maturity and
quality must be verifiably different from the varieties that already exist in
the market. Once a variety is registered it cannot be changed. In the United
States, the registration process is voluntary and determination that a variety
is unique is left to the breeder. In Europe the registration process is
regulated and determination of uniqueness is made in official trials.
PHYTOSANITARY CERTIFICATION
The purpose of phytosanitary requirements is to prevent the spread of
plant diseases that can be carried on seed or other plant tissue. Each
seed-producing country has agricultural inspectors that check the seed crops for
the presence of specified diseases. After these crops are harvested, laboratory
tests are also conducted to ensure that the seed is clean. Having passed the
inspection and lab tests, the department or ministry of agriculture of the
producing country issues a phytosanitary certificate stating that the seed is
free of specified diseases. Importing countries then allow the seed to cross
their borders on the basis of these certificates.
LABELING OF GENETICALLY ENGINEERED PRODUCTS
There are no worldwide, accepted regulations for genetically engineered
products. Consequently, Seminis is required to seek and obtain regulatory
approvals in each country where seeds will be sold and where the harvested
produce will be exported. In the European Union and Switzerland, labeling of
genetically engineered products is mandatory, whereas in other countries, such
as Canada and the United States, labeling is required only if there is a
compositional change or a health risk associated with the product. Japan,
Australia and New Zealand are considering labeling requirements. Other regions
where Seminis sells products either have labeling requirements similar to the
United States or have no labeling requirements. Seminis will comply with the
labeling requirements of each country in which it conducts business.
ENVIRONMENTAL REGULATION
Seminis' business is not sensitive to, or highly regulated by,
environmental laws. Seminis uses various equipment which is subject to federal,
state and local clean air and water regulations. Also, Seminis' research and
quality assurance divisions conduct various agricultural growing operations
utilizing chemicals routinely used in any farming operation. Seminis' foreign
operations are also subject to laws of foreign jurisdictions as to environmental
matters. Seminis believes it is in full compliance with these laws.
In its operations, Seminis uses very limited amounts of materials or
matters which have been categorized as "hazardous substances." Seminis believes
that its use has always been in full compliance with all applicable laws, rules
and regulations.
Seminis has no knowledge of any current, pending or threatened citation or
complaint, civil or criminal, relating to any alleged violation of any law, rule
or regulation relating to any environmental matter.
PROPERTIES/FACILITIES
Seminis' principal office is located in a company-owned facility in
Saticoy, California and plans to relocate this facility to Oxnard, California in
1999. Seminis directly controls significant, open-field production capacity in
Chile, Mexico and Peru on land predominantly owned by Seminis. Seminis' main
greenhouse production facilities are located in France and Mexico on sites owned
by Seminis, and in Chile and The Netherlands on sites owned by Seminis and
contracted out to third parties who grow seeds exclusively for Seminis.
Seminis maintains several processing facilities throughout the world,
equipped to handle seed cleaning, sizing, treating, testing and packaging.
Seminis owns and operates processing facilities in California, Idaho,
Washington, Chile, France, New Zealand, South Africa, South Korea, Thailand and
The Netherlands.
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Seminis conducts its research primarily at six company-owned research
centers in France, Italy, South Korea, The Netherlands and the United States.
Seminis owns 49 and leases 21 additional research facilities.
EMPLOYEES
As of December 31, 1998, Seminis had approximately 3,000 employees.
Seminis believes it has good relations with its employees.
LEGAL PROCEEDINGS
Seminis is involved from time to time as a defendant in various lawsuits
arising in the normal course of business. Seminis believes that no current
claims, individually or in the aggregate, will have a material adverse effect on
Seminis' business, results of operations or financial condition.
In November 1998, Seminis received notice from Monsanto of a complaint
filed by Pioneer Hi-Bred International, Inc. in the United States District Court
for the Southern District of Iowa against Asgrow Seed Company LLC. The complaint
alleges violations of the Lanham Act, misappropriation of trade secrets and
other common law causes of action. Monsanto claimed that indemnities provided by
Seminis to Monsanto in connection with Seminis' sale of the Asgrow agronomics
business to Monsanto covered the claims in Pioneer's complaint. Also in November
1998, Seminis provided notice to Pharmacia & Upjohn that in connection with
Seminis' acquisition of the Asgrow Seed Company and the subsequent sale of the
Asgrow agronomics business Upjohn agreed to indemnify Seminis and Monsanto in
connection with the matters asserted in Pioneer's complaint. Seminis is
currently investigating this matter and is in discussion with Pharmacia & Upjohn
and Monsanto. Seminis does not believe that it has any material exposure in
connection with this matter.
As part of the formation of LSL PlantScience, LSL Biotechnologies
contributed certain agreements between LSL Biotechnologies and a third party.
These agreements contain provisions that permanently restrict the third party
from engaging in the development or marketing of open field tomato seeds having
long-shelf-life characteristics in certain areas in the world, including North
America. In addition, these agreements restrict the third party from engaging in
the production of such seeds until the year 2000. Seminis understands that the
staff of the Antitrust Division of the United States Department of Justice has
informed LSL Biotechnologies' counsel that the Department of Justice staff has
recommended the filing of a complaint against LSL Biotechnologies to ask a court
to delete the restrictive provisions in those agreements. Seminis believes that
there will not be a material impact upon its business if the Department of
Justice is successful in deleting the restrictive covenants.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the directors
and executive officers of Seminis as of May 1, 1999.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Alfonso Romo Garza.................. 48 Director and Chairman of the Board
Alejandro Rodriguez Graue........... 48 Director, President and Chief Operating
Officer
Francisco Gonzalez Sebastia......... 67 Director
Bernardo Jimenez Barrera............ 46 Director
G. Carl Ball........................ 77 Director
George Carl Ball, Jr................ 47 Director
Dr. Peter Davis..................... 55 Director
Timothy M. George................... 46 Director
Frank J. Pipp....................... 73 Director
Dr. Eli Shlifer..................... 68 Director
Eugenio Najera Solorzano............ 51 Director
Christopher J. Steffen.............. 57 Director
Octavio Hernandez................... 45 Vice President and Chief Financial Officer
Dr. Allen Stevens................... 63 Vice President -- Research and Development
Jordi Majo.......................... 48 Vice President -- Europe, Middle East, and
North Africa, Sales
James H. Hulbert.................... 44 Vice President -- North America
Dr. Mark D. Stowers................. 42 Vice President -- Business Development
</TABLE>
ALFONSO ROMO GARZA has been the Chairman of the Board of Seminis since
October 1995. Mr. Romo has been Chief Executive Officer of Pulsar Internacional,
S.A. de C.V., an affiliate of Savia, since 1984. Mr. Romo has also been the
Chairman of the Board and Chief Executive Officer of Savia since 1988, the
Chairman of the Board and Chief Executive Officer of Seguros Comercial America,
S.A. de C.V., a majority owned subsidiary of Savia, since 1989 and the Chairman
of the Board of Empaques Ponderosa, S.A. de C.V., a majority owned subsidiary of
Savia, since 1995. Mr. Romo is a director of Cementos Mexicanos, S.A. de C.V.
ALEJANDRO RODRIGUEZ GRAUE has been a director of Seminis since May 1998.
Mr. Rodriguez has been President of Seminis since February 1999. Mr. Rodriguez
has been President and Chief Operating Officer of Seminis Vegetable Seeds, Inc.,
a subsidiary of Seminis, since February 1997. From 1992 to 1997, Mr. Rodriguez
was the General Director (Chief Operating Officer) of Agro Industrias Moderna,
S.A. de C.V., a subsidiary of Savia.
FRANCISCO GONZALEZ SEBASTIA has been a director of Seminis since October
1995. Mr. Gonzalez has served as an advisor to Savia since February 1997. From
October 1995 to February 1997, he served as the Chief Executive Officer of
Seminis. From January 1994 to October 1995, Mr. Gonzalez served as Chief
Executive Officer for the Agrobiotechnology Division of Savia. Mr. Gonzalez is a
director of Savia and Bionova Holding Corporation, a majority owned subsidiary
of Savia and an affiliate of Seminis.
BERNARDO JIMENEZ BARRERA has been a director of Seminis since October
1995. Mr. Jimenez has been the Chief Executive Officer, Chairman of the Board
and a director of Bionova since October 1996. From October
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1995 to October 1996, Mr. Jimenez was Chief Financial Officer of Savia. From
March 1993 to October 1995, Mr. Jimenez served as head of the Industrial Banking
Division of the Vector Group, a financial services company in Mexico which is
affiliated with Savia. Mr. Jimenez is a director of Savia.
G. CARL BALL has been a director of Seminis since October 1995. Mr. Ball
was Chairman of the Board of Geo. J. Ball, Inc. from 1962 until its merger with
Seminis in October 1995. G. Carl Ball is the father of George C. Ball, Jr.
GEORGE C. BALL, JR. has been a director of Seminis since October 1995. Mr.
Ball has been President of Burpee Holding Company since 1993. Mr. Ball was a
director of Geo J. Ball, Inc. from 1989 until its merger with Seminis in October
1995. Mr. Ball also served a two year term as Chairman of the Board of Petoseed.
George C. Ball, Jr. is the son of G. Carl Ball.
DR. PETER DAVIS has been a director of Seminis since October 1995. From
1975 to 1994, Dr. Davis was a member of the faculty of the Wharton School of the
University of Pennsylvania. Dr. Davis has been President of the Family Business
Group Inc., a consulting firm specializing in strategic issues for closely-held
companies, since May 1986. Dr. Davis is a member of the executive committee of
Pulsar and a director of Bionova.
TIMOTHY M. GEORGE has been a director of Seminis since May 1999. Mr.
George has been a Managing Director of Greenhill & Co., LLC since February 1997.
From August 1984 to February 1997, Mr. George served as a Managing Director of
Morgan Stanley Dean Witter, Inc. Mr. George also has a membership interest in
Greenhill & Co., LLC, which has been retained by Seminis to act as financial
advisor in connection with the offering.
FRANK J. PIPP has been a director of Seminis since December 1995. Mr. Pipp
has been a consultant to Xerox Corporation since 1988. From 1980 to 1988, Mr.
Pipp was Corporate Officer, Group Vice President of Xerox responsible for
worldwide product development and manufacturing. Mr. Pipp is a director of
Advanced Hi-Tech, Inc., AAVID Thermal Technologies Inc. and Nypro, Inc.
DR. ELI SHLIFER has been a director of Seminis since January 1997. Dr.
Shlifer is self employed and has served as a consultant for Pulsar for more than
five years. Dr. Shlifer is a director of Bionova.
EUGENIO NAJERA SOLORZANO has been a director of Seminis since May 1998.
Since August 1997, Mr. Najera has been in charge of new business development at
Savia. From November 1992 to September 1997, Mr. Najera was the Chief Operating
Officer of Cigarrera La Moderna, S.A. de C.V. Mr. Najera is a director of Savia
and Bionova.
CHRISTOPHER J. STEFFEN has been a director of Seminis since January 1997.
Since December 1996, Mr. Steffen has been a business consultant. From May 1993
to December 1996, Mr. Steffen was Vice Chairman and a director of Citicorp,
predecessor to CitiGroup, N.A. and its principal subsidiary, Citibank, N.A.
OCTAVIO HERNANDEZ has been Vice President and Chief Financial Officer of
Seminis since April 1999. Mr. Hernandez served as Director of Business
Development of Seminis from October 1997 until the time he took his current
position. For more than three years prior to being with Seminis, Mr. Hernandez
was Director of Business Development for Savia, focusing on the agro-
biotechnology industry.
DR. ALLEN STEVENS has been Vice President -- Research and Development of
Seminis since February 1999. Dr. Stevens has been Vice President of Research of
Seminis Vegetable Seeds since October 1995 when Petoseed was acquired as part of
Seminis' merger into Geo. J. Ball, Inc. Dr. Stevens joined Petoseed as Vice
President of Research in 1989.
JORDI MAJO has been Vice President -- Europe, Middle East and North
Africa, Sales of Seminis Vegetable Seeds since October 1998. Mr. Majo served as
Vice President and General Manager, South Europe, Middle East and North Africa
from 1981 to 1998, General Manager of Petosluis Iberica from 1995 to
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<PAGE> 52
1996 and General Manager of Petoseed Iberica from 1981 to 1995.
JAMES H. HULBERT has been Vice President -- North America of Seminis since
February 1999. Mr. Hulbert has also served as Vice President of Sales and
Marketing for the Americas and Strategic Planning of Seminis Vegetable Seeds
since 1996. From 1993 to 1996, Mr. Hulbert served as Vice President, Sales for
North America and Asia for Seminis and Petoseed which was acquired as part of
Seminis' merger into Geo. J. Ball, Inc.
DR. MARK D. STOWERS has been Vice President -- Business Development of
Seminis since February 1999. From 1996 to 1999 Dr. Stowers was Vice President
World Wide Marketing of Seminis Vegetable Seeds. From 1995 to 1996, Dr. Stowers
served as Vice President of Operations and Information of Gargiulo, Inc., a
wholly-owned subsidiary of Monsanto. Dr. Stowers was Business Director/Business
Development Director for Monsanto Company from 1989 to 1995.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The board of directors is classified into three classes with each class
elected to a term of three years, except during an initial phase-in period. The
terms of Messrs. Gonzalez, Jimenez, Davis and Shlifer will expire at the 2000
annual meeting. The terms of Messrs. G. Carl Ball, George Carl Ball, Pipp and
Steffen will expire at the 2001 annual meeting. The terms of Messrs. Romo,
Najera, Rodriguez and George will expire at the 2002 annual meeting.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has appointed an audit committee and a compensation
committee. The current members of the audit committee are Messrs. George, Pipp
and Steffen, with Mr. George serving as chairman of the committee. The audit
committee makes recommendations concerning the engagement of independent public
accountants, reviews the results of Seminis' annual audit and reviews with
Seminis' independent public accountants Seminis' internal controls and financial
management policies. The current members of the compensation committee are
Messrs. George, Pipp and Steffen, with Mr. George serving as chairman of the
committee. The compensation committee establishes Seminis' general compensation
and benefits policy and recommends to the board of directors compensation for
Seminis' officers and key employees.
COMPENSATION OF DIRECTORS
Seminis anticipates that following the consummation of the offering,
Seminis' outside directors will be paid an annual board membership fee of
$25,000, a fee of $2,500 for each meeting of the board of directors attended and
a fee of $750 for each committee meeting attended. Committee chairmen will be
paid an additional annual fee of $2,000 and an additional fee of $250 for each
committee meeting attended. Outside directors will also be eligible to receive
options under the Seminis stock option plan.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table presents summary information concerning compensation
paid or accrued by Seminis for services rendered in all capacities during the
fiscal year ended September 30, 1998 for (1) the President and Chief Operating
Officer and (2) the four other most highly compensated executive officers of
Seminis who were serving at the end of fiscal 1998. Mr. Larkin retired from
Seminis in April 1999.
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<PAGE> 53
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
----------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
- --------------------------- ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Alejandro Rodriguez Graue......................... 1998 352,910 628,093 35,046
President and Chief Operating Officer
James M. Larkin................................... 1998 249,933 201,940 13,476
Vice President and Chief Financial Officer
Dr. Allen Stevens................................. 1998 222,848 107,182 15,251
Vice President--Research and Development
James H. Hulbert.................................. 1998 187,443 152,303 12,828
Vice President--North America
Jordi Majo........................................ 1998 194,947 99,551 8,095
Vice President--Europe, Middle East and North
Africa, Sales of Seminis Vegetable Seeds, a
subsidiary of Seminis
</TABLE>
OPTIONS GRANTED IN FISCAL 1998
The table below sets forth information regarding stock options granted
pursuant to the Seminis, Inc. 1998 Stock Option Plan during the fiscal year
ended September 30, 1998 to each of the named executive officers.
The percent of total options granted to employees in the last fiscal year
is based on an aggregate of 267,181 options granted, net of forfeitures, to
employees in fiscal 1998, including options granted to the named executive
officers. The exercise price per share of each option was equal to the fair
market value of the Class A common stock on the date of the grant as determined
by the board of directors.
Potential realizable values are computed by:
- - multiplying the number of shares of Class A common stock subject to a given
option by the assumed initial public offering price of $19.50 per share, the
midpoint of the range specified on the cover page of this prospectus;
- - assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the entire term
of the option; and
- - subtracting from that result the aggregate option exercise price.
The 5% and 10% assumed annual rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent Seminis' estimate or projection of future Class A common stock prices.
Actual gain, if any, resulting from stock option exercises and Class A common
stock holdings are dependent on the future performance of the Class A common
stock, overall stock market conditions and the option holder's continued
employment with Seminis through the vesting period. There can be no assurance
that the amounts reflected in the table will be achieved.
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<PAGE> 54
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
---------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES
NUMBER OF TOTAL OPTIONS EXERCISE OF STOCK PRICE
SECURITIES GRANTED TO OR BASE FOR APPRECIATION
UNDERLYING EMPLOYEES PRICE PER FOR OPTION TERM
OPTIONS IN LAST SHARE EXPIRATION ----------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ------------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Alejandro Rodriguez Graue........... 35,046 13.1% 18.71 6/30/08 404,431 955,704
James M. Larkin..................... 13,476 5.0 18.71 6/30/08 155,513 367,491
Dr. Allen Stevens................... 15,251 5.7 18.71 6/30/08 175,997 415,895
James H. Hulbert.................... 12,828 4.8 18.71 6/30/08 148,035 349,820
Jordi Majo.......................... 8,095 3.0 18.71 6/30/08 93,416 220,751
</TABLE>
FISCAL 1998 YEAR END OPTION VALUES
The following table sets forth information concerning unexercised options
held by the named executive officers as of September 30, 1998. The values of
unexercised in-the-money options represent the positive spread between the
respective exercise prices of outstanding stock options and assumed initial
public offering price of $19.50 per share, the midpoint of the range set forth
on the cover page of this prospectus.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alejandro Rodriguez Graue............... 8,762 26,284 6,922 20,764
James M. Larkin......................... 3,369 10,107 2,662 7,985
Dr. Allen Stevens....................... 3,813 11,438 3,012 9,036
James H. Hulbert........................ 3,207 9,621 2,534 7,601
Jordi Majo.............................. 2,024 6,071 1,599 4,796
</TABLE>
THE 1998 STOCK OPTION PLAN
In early 1998, Seminis adopted a stock option plan, the Seminis, Inc. 1998
Stock Option Plan. The plan provides for the issuance of up to 3,677,150 shares
of Class A common stock pursuant to options granted to key employees. If any
options granted under the plan expire or terminate prior to exercise, the shares
subject to the portion of the option not exercised will be available for
subsequent grants. The number of shares and the exercise price per share of
Class A common stock that may be issued pursuant to outstanding stock options
will be subject to adjustment upon the occurrence of events described in the
plan. Individuals eligible for awards under the plan shall be key employees,
consultants, advisors and members of the board of directors or those who will
become key employees, consultants, advisors and members of the board of
directors of Seminis or any subsidiary.
The plan is administered by the board of directors, or by a committee of
two or more directors of Seminis, as may be appointed by the board of directors.
The board of directors or the committee has broad powers to administer and
interpret the plan, including the authority:
- to establish rules for the administration of the plan;
- to select the participants in the plan;
- to determine the types of awards to be granted and the number of shares
covered by such awards; and
- to set the terms and conditions of such awards.
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<PAGE> 55
All determinations and interpretations of the board of directors or the
committee are binding on all interested parties.
Options granted under the plan may be either "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or "nonqualified stock options" that do not qualify for special tax
treatment under Section 422 or similar provisions of the Internal Revenue Code.
No stock option may be granted with a per share exercise price less than the
fair market value, as defined below, of a share of the underlying Class A common
stock on the date the stock option is granted. Fair market value of a share of
Class A common stock for a particular day means the fair market value of a share
of Class A common stock, as determined in good faith by the board of directors
in its sole discretion, using the most recent prior annual valuation of Seminis,
as defined in the plan.
In general, unless otherwise provided in the participant's award agreement
or employment agreement, stock options shall become exercisable in four equal
annual installments, commencing on the first anniversary of the date of the
grant. The terms of each option granted under the plan will expire ten years, or
five years for 10% stockholders, after the date immediately preceding the date
on which the option was granted. If a participant's employment with Seminis or
any subsidiary is terminated for cause, any then unexercised options shall be
forfeited and canceled by Seminis. If a participant's employment is terminated
without cause by Seminis or voluntarily by the participant, all options
exercisable on the date of termination may be exercised by the participant for
ninety and thirty days, respectively. If a participant dies or becomes disabled,
all stock options exercisable on the date of death or termination due to
disability may be exercised for six months thereafter. The board of directors
has discretion to lengthen these post-termination exercise periods. All
unexercisable stock options are forfeited upon termination of employment for any
reason. In addition, in the event a participant's employment is terminated for
any reason prior to the closing of the offering, all shares of Class A common
stock acquired by the participant are subject to the right of Seminis to buy
these shares within 270 days after any such employment termination.
In general, awards under the plan may not be transferred by the
participant other than by will or the laws of distribution, and options may be
exercised, during the participant's lifetime, only by the participant. In
addition, prior to the closing of the offering, shares of Class A common stock
acquired upon the exercise of a stock option are transferable only to trust
arrangements established for the benefit of a participant's immediate family
members. Notwithstanding the above, if Savia decides to sell all or
substantially all of its interest in Seminis to a third party, Savia can compel
a participant to sell the participant's Class A common stock to the third party
buyer on the same terms and conditions upon which Savia is selling its interest.
The board of directors may terminate or amend the plan at any time except
that the terms of any option agreements then outstanding may not be materially
adversely affected without the consent of the individual.
Currently, options to acquire approximately 267,181 shares of Class A
common stock have been awarded under the plan with an exercise price of $18.71
per share. Upon the closing of the offering, no additional awards will be made
under the plan on the terms described above. However, after the offering, awards
may be made pursuant to the plan, as amended, as described below.
THE AMENDED AND RESTATED PLAN
Prior and subject to the closing of the offering, the board of directors
approved, and adopted, and Seminis adopted, amendments to and a restatement of
the stock option plan. The primary purposes of the amendment and restatement of
the plan were to eliminate provisions of the plan that would be inappropriate
for a publicly-held corporation, to qualify awards under the plan as "qualified
performance-based compensation" under Section 162(m) of the Internal Revenue
Code and to facilitate obtaining Securities Exchange Act Rule 16b-3 exemptions
for awards made
53
<PAGE> 56
under the plan. The amended and restated plan will, after the closing of the
offering, be administered only by a committee of the board of directors
comprised of non-employee directors. The material terms of the amended and
restated plan are substantially similar to the terms of the plan prior to its
amendment and restatement, except that under the amended and restated plan:
- - The fair market value of the shares of Class A common stock will, in the
normal course, no longer be determined by Seminis' board of directors on an
annual basis or otherwise, but rather by reference to the closing price of the
Class A common stock as reported for the Nasdaq National Market;
- - The amended and restated plan will be administered solely by an administrative
committee of non-employee directors;
- - Annual maximum award limitations have been incorporated into the amended and
restated plan precluding any participant from receiving stock options covering
more than 750,000 shares of the Class A common stock in any one calendar year;
- - The administrative committee will have the discretion to award transferable
stock options;
- - Seminis will no longer have the right to purchase from a terminated
participant the Class A common stock acquired by such participant upon the
exercise of a stock option;
- - The shares of Class A common stock acquired by a participant upon the exercise
of a stock option will no longer be subject to any plan-based transfer or lock
up restrictions;
- - Savia will no longer possess any rights to require a participant to sell his
or her shares of Class A common stock acquired pursuant to the exercise of any
stock option; and
- - In the event of a merger, reorganization or consolidation of Seminis, it will
be able to elect to redeem unexercised stock options in exchange for a cash
payment equal to the excess, if any, of the fair market value of the shares
underlying the stock options over the aggregate exercise price of the stock
options.
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<PAGE> 57
PRINCIPAL STOCKHOLDERS
The table below sets forth information regarding the beneficial ownership
of common stock, as of the date of this prospectus, by each of Seminis'
directors, the President and Chief Operating Officer and the other named
executive officers, each person known to Seminis to own beneficially more than
5% of the outstanding shares of common stock, and all directors and executive
officers of Seminis as a group.
As of the date of this prospectus, there are no shares of Class A common
stock outstanding. The number of shares of Class A common stock reflect options
that are exercisable within 60 days of the date of this prospectus, and the
calculation of percentage beneficial ownership of Class A common stock assumes
the exercise of these options only by the respective named stockholder.
The calculation of percentage beneficial ownership of Class B common stock
is based on 46,074,386 shares of Class B common stock outstanding prior to the
offering. In addition, the number of shares of Class B common stock for each
person in the table assumes such persons do not convert any Class B common stock
into Class A common stock. The number of shares beneficially owned by Alfonso
Romo Garza includes shares beneficially owned by Savia and other entities
controlled by Mr. Romo as well as shares directly owned by Mr. Romo. The number
of shares beneficially owned by Savia includes shares beneficially owned by
entities controlled by Savia as well as shares directly owned by Savia. As of
the date of this prospectus, Seminis had no holders of Class A common stock and
18 holders of Class B common stock.
The persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as those beneficially owned by them.
<TABLE>
<CAPTION>
CLASS A CLASS B TOTAL
COMMON STOCK COMMON STOCK COMMON STOCK
---------------- -------------------- --------------------
NAME AND ADDRESS OF BENEFICIAL OWNERS NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
------------------------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Alfonso Romo Garza............................. -- --% 42,823,515 92.9% 42,823,515 92.9%
Chairman of the Board and Director
c/o Pulsar International, S.A. de C.V
Ave. Roble No. 300
Torre Alta
Col. Valle del Campestre
66265 Garza Garcia, N.L. Mexico
Savia, S.A. de C.V. ........................... -- -- 40,615,619 88.2 40,615,619 88.2
Av. Batallon de San Patricio
No. 111-40 Piso
Colonia Valle Oriente
66269 San Pedro, Garza Garcia, N.L
G. Carl Ball................................... -- -- 1,042,362 2.3 1,042,362 2.3
George C. Ball, Jr. ........................... -- -- 180,131 * 180,131 *
Francisco Gonzalez Sebastia.................... -- -- -- -- -- --
Bernardo Jimenez Barrera....................... -- -- -- -- -- --
Dr. Peter Davis................................ -- -- -- -- -- --
Timothy M. George.............................. -- -- -- -- -- --
Frank J. Pipp.................................. -- -- -- -- -- --
Dr. Eli Shlifer................................ -- -- -- -- -- --
Eugenio Najera Solorzano....................... -- -- -- -- -- --
Christopher J. Steffen......................... -- -- -- -- -- --
Alejandro Rodriguez Graue...................... 8,762 100.0 -- * 8,762 *
James M. Larkin................................ 6,738 100.0 -- * 6,738 *
Dr. Allen Stevens.............................. 3,813 100.0 -- * 3,813 *
James H. Hulbert............................... 3,207 100.0 -- * 3,207 *
Jordi Majo..................................... 2,024 100.0 -- * 2,024 *
All directors and executive officers of
Seminis as a group (16 persons).............. 24,544 100.0 44,046,008 95.6 44,070,552 95.6
</TABLE>
- ---------------
* Less than 1%.
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<PAGE> 58
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement between Seminis and Bionova, Seminis pays Bionova
a minimum fee of $2.5 million per year for access to the results of Bionova's
biotechnology research. This agreement will end pursuant to its terms on January
1, 2007. Savia is the majority stockholder in Bionova.
In connection with the sale of the agronomic segment in fiscal 1997,
Seminis paid $8.0 million in fees to Savia for investment banking and other
professional fees and services provided in connection with the sale.
Seminis paid management fees to Savia of $8.5 million in fiscal 1998 and
$6.2 million in fiscal 1997. This management fee was discontinued as of October
1, 1998.
As part of the financing provided by Savia to Seminis in connection with
the acquisition of Hungnong, Savia loaned Seminis $35.9 million evidenced by a
subordinated convertible note bearing interest at a rate of 10% per annum,
payable quarterly, which was due in annual installments through July 2001. Savia
converted this note into 1,916,462 shares of Class B common stock on February 1,
1999.
In December 1998, Savia made an equity investment in Seminis of $10.0
million in exchange for 1,000 shares of Class C preferred stock. Seminis issued
33.8 shares of Class C preferred stock as required dividend payments through
April 1, 1999. In March 1999, Savia made an additional equity investment in
Seminis of $20.0 million in exchange for 2,000 shares of Class C preferred
stock. These 2,000 shares will be redeemed for $20.0 million, plus accrued and
unpaid dividends, from the proceeds of the offering.
In January 1999, Savia made an intercompany advance to Seminis of $20.0
million for working capital requirements. The advance will be repaid with the
proceeds of the offering and Seminis' new credit facility.
In March 1999, as part of a financing, Savia pledged as collateral shares
of Class B common stock it owns. These shares constitute 49% of the issued and
outstanding common stock of Seminis prior to the offering. Savia also placed
additional shares of Class B common stock into a trust, which shares constitute
2% of the issued and outstanding shares of common stock of Seminis prior to the
offering. Upon completion of the offering, Savia will be required to pledge, or
put into the trust, additional shares of Class B common stock that it owns to
maintain an aggregate collateral deposit of 51%.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, Seminis will have a total of 13,750,000
shares of Class A common stock outstanding. All shares of Class A common stock
sold in the offering will be freely tradable by persons other than "affiliates"
of Seminis without restriction under the Securities Act. All shares of Class B
common stock, and any shares of Class A common stock issued upon conversion of
shares of the Class B common stock or issued upon exercise of outstanding
options, will be "restricted" securities within the meaning of Rule 144 under
the Securities Act and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the
exemption provided by Rule 144.
In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person, or persons whose shares are aggregated, who has
beneficially owned "restricted" shares for at least one year, including a person
who may be deemed an affiliate of Seminis, is entitled to sell within any
three-month period a number of shares of Class A common stock that does not
exceed the greater of 1% of the then-outstanding shares of Class A common stock
of Seminis or the average weekly trading volume of the Class A common stock on
the Nasdaq National Market during the four calendar weeks preceding such sale.
Sales under Rule 144 are subject to restrictions relating to manner of sale,
notice and the availability of current public information about Seminis. A
person who is not an affiliate of Seminis and has not been such at any time
during the 90 days preceding a sale, and who
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<PAGE> 59
has beneficially owned "restricted" shares for
at least two years, would be entitled to sell such shares immediately following
the offering without regard to the volume limitations, manner of sale provisions
or notice or other requirements of Rule 144 of the Securities Act. However, the
transfer agent may require an opinion of counsel that a proposed sale of
"restricted" shares comes within the terms of Rule 144 of the Securities Act
prior to effecting a transfer of such shares. Such opinion would be provided by
and at the cost of the transferor.
Seminis has agreed that it will not sell, offer to sell, contract to sell
or otherwise dispose of any shares of common stock or any securities convertible
into or exchangeable for shares of common stock, without the prior consent of
Goldman, Sachs & Co., for a period of 180 days from the date of this prospectus.
This agreement does not apply to options or shares issued pursuant to its
existing employee benefit plans. In addition, Seminis may issue shares of common
stock to fund future acquisitions, provided that the recipient enters into a
similar lock-up arrangement.
Savia, the directors and executive officers of Seminis and other
stockholders holding in the aggregate 46,074,386 shares of common stock have
agreed that they will not dispose of or hedge any of Seminis' common stock or
any securities convertible into or exchangeable for shares of common stock for a
period of 180 days from the date of this prospectus, without the prior written
consent of Goldman, Sachs & Co. In addition, Savia may pledge additional shares
of common stock to the extent necessary to comply with its recent borrowings.
The other stockholders have agreed in a registration rights agreement between
them and Seminis that they will not sell publicly shares of common stock for 180
days from the date of this prospectus. See the "Underwriting" section for a
detailed description of these agreements.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Seminis' certificate of incorporation provides that it has authority to
issue 10,000,000 shares of preferred stock, par value $.01 per share. Of these
10,000,000 shares, Seminis has authorized 25,000 shares of Class A mandatorily
redeemable preferred stock, 25,000 shares of Class B mandatorily redeemable
preferred stock and 6,000 shares of Class C preferred stock. For the remaining
9,944,000 shares of preferred stock reserved for issuance by Seminis, the board
of directors may fix the relative rights and preferences in a resolution of the
board of directors.
Seminis' certificate of incorporation also provides that it has authority
to issue 158,000,000 shares of common stock, par value $.01 per share. The
common stock is divided into two classes, consisting of 91,000,000 shares of
Class A common stock and 67,000,000 shares of Class B common stock. Upon
consummation of the offering, 13,750,000 shares of Class A common stock and
46,074,386 shares of Class B common stock will be issued and outstanding and,
after the redemption of 2,000 shares of Class C preferred stock, 25,000 shares
of Class B mandatorily redeemable preferred stock and 1,033.8 shares of Class C
preferred stock will be issued and outstanding.
COMMON STOCK
VOTING RIGHTS
Holders of Class B common stock are entitled to three votes per share and
holders of Class A common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders. Class A common stock and Class B
common stock shall vote as a single class on all matters to be voted on by
Seminis' stockholders, including, without limitation, any consolidation or
merger of Seminis into or with any other corporation or the sale or transfer by
Seminis of all or substantially all of its assets. With the approval of a
majority of the shares of the Class B common stock, voting separately as a
class, Seminis may lower the number of votes per share each share of Class B
common stock shall be entitled to vote.
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<PAGE> 60
DIVIDENDS
Holders of common stock are entitled to receive ratably dividends payable
in cash, in stock or otherwise if, as and when declared by the board of
directors out of assets legally available therefor, subject to any preferential
rights of any outstanding preferred stock.
CONVERSION RIGHTS
Each share of Class B common stock shall automatically be converted into
one share of Class A common stock, without any action by Seminis or further
action by the holder thereof, upon the transfer of such share, other than the
following transfers:
- - to any other holder of Class B common stock or an affiliate of a holder of
Class B common stock which holder is a "Business Organization," as defined in
the certificate of incorporation;
- - to a trust for the sole benefit of a holder of Class B common stock who is a
natural person;
- - to a spouse, sibling, parent, grandparent or descendant, whether natural or
adopted, of a holder of Class B common stock;
- - to a trust for the sole benefit of a spouse, sibling, parent, grandparent or
descendant, whether natural or adopted, of a holder of Class B common stock;
- - by will to a spouse, sibling, parent, grandparent or descendant, whether
natural or adopted, of a holder of Class B common stock;
- - pursuant to the laws of descent and distribution to a spouse, sibling, parent,
grandparent or descendant, whether natural or adopted, of a holder of Class B
common stock;
- - to any charitable foundation or other organization qualified under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended; or
- - to Seminis.
Each share of Class B common stock shall, at the option of the holder
thereof, be convertible into one share of Class A common stock at any time. For
purposes of this paragraph, "Affiliate" means, with respect to any Business
Organization, any natural person or Business Organization that, directly or
indirectly through one of more intermediaries, controls, or is controlled by, or
is under common control with, such Business Organization.
OTHER RIGHTS
On liquidation, dissolution or winding up of Seminis, after payment in
full of the amounts required to be paid to the holders of any outstanding
preferred stock, all holders of common stock are entitled to receive ratably any
assets available for distribution to holders of shares of common stock after the
payment of all debts and other liabilities of Seminis. No shares of common stock
have preemptive rights to purchase additional shares of common stock. All the
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are, and the shares
offered by Seminis will be, subject to and may be adversely affected by the
rights of holders of outstanding preferred stock. All shares of Class A common
stock and Class B common stock which are acquired by Seminis shall be available
for reissuance by Seminis at any time.
PREFERRED STOCK
GENERALLY
The board of directors of Seminis is authorized, subject to limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 10,000,000 shares of preferred stock, in one or more
series, and to determine or alter the designations, preferences, rights, and any
qualifications, limitations, or restrictions of the shares of each such series
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, including sinking fund provisions, redemption price
or prices, liquidation preferences and the number of shares constituting any
series or designations of such series. The exercise of this authority eliminates
delays associated with a stockholder vote in specific instances. The ability of
the board of directors to issue preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third
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<PAGE> 61
party from acquiring, a majority of the outstanding voting stock of Seminis.
The voting and other rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of holders of any preferred
stock that may be issued in the future.
CONVERSION
Upon consummation of the offering, the Class A mandatorily redeemable
preferred stock will automatically convert to Class B mandatorily redeemable
preferred stock. Except for the issuance of Class B mandatorily redeemable
preferred stock resulting from this automatic conversion, Seminis has no plans
to issue any shares of preferred stock. See "Use of Proceeds."
DIVIDENDS
The Class A mandatorily redeemable preferred stock and the Class B
mandatorily redeemable preferred stock will accrue dividends at a rate of 8% per
annum and shall be paid on the first day of January, April, July and October of
each year. The Class C preferred stock will accrue dividends at a rate of 10%
per annum and shall be paid on the first day of January, April, July and October
of each year, except that each quarterly payment until and including the
quarterly payment due January 2001 shall be paid by issuing additional shares of
Class C preferred stock.
REDEMPTION
The Class A mandatorily redeemable preferred stock and the Class B
mandatorily redeemable preferred stock may be redeemed, at the option of
Seminis, at any time after the completion of the offering. On the earlier of
October 1, 2005 or the date of a "Company Sale," as defined in the certificate
of designations setting forth the terms of the Class A and Class B preferred
stock, Seminis shall be required to redeem all of the outstanding shares of
Class A and Class B mandatorily redeemable preferred stock. The Class C
preferred stock may be redeemed, at any time, at the option of Seminis.
ANTI-TAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS
Provisions of the certificate of incorporation and by-laws could
discourage potential acquisition proposals and could delay or prevent a change
in control of Seminis. These provisions are intended to enhance the likelihood
of continuity and stability in the composition of the board of directors and in
the policies formulated by the board of directors and to discourage types of
transactions that may involve an actual or threatened change of control of
Seminis.
BOARD OF DIRECTORS
The certificate of incorporation and by-laws of Seminis provide that the
number of directors be fixed by a board of directors resolution and that the
board of directors be divided into three classes of directors, with the classes
to be as nearly equal in number of directors as possible and each class to be
elected to a term of three years, except that during the initial phase-in
period, one class shall be initially elected for a term expiring at the 2000
annual meeting, one class shall be initially elected for a term expiring at the
2001 annual meeting and one class shall be initially elected for a term expiring
at the 2002 meeting. At each annual meeting of stockholders, the class of
directors to be elected at such meeting will be elected for a three-year term
and the directors in the other classes will continue in office.
The classification of directors has the effect of making it more difficult
to change the composition of the board of directors. At least two annual
meetings of stockholders, instead of one, generally will be required to effect a
change in the majority of the board of directors. A director may be removed only
for cause by the vote of holders of at least a majority of the votes cast by the
holders of capital stock of Seminis entitled to vote generally in the election
of directors, voting together as a single class.
The by-laws of Seminis provide that a vacancy in the board of directors
occurring from an increase in the number of directors or otherwise may be filled
by the vote of a majority of directors then in office, though less than a
quorum. This precludes a third party or a majority stockholder from removing
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<PAGE> 62
incumbent directors without cause and simultaneously gaining control of the
board of directors by filling, with its own nominees, the vacancies created by
removal.
STOCKHOLDER ACTION AND SPECIAL MEETINGS
The certificate of incorporation provides that all stockholder action must
be effected at a duly called meeting. The certificate of incorporation also does
not permit stockholders of Seminis to call special meetings of stockholders.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The by-laws establish an advance notice procedure for the nomination,
other than by or at the direction of the board of directors or a committee
thereof, of candidates for election as directors as well as for other
stockholder proposals to be considered at stockholders' meetings. A notice
regarding any nomination must contain, as to each nominee, all information
relating to such person that is required to be disclosed in solicitations of
proxies for the election of directors, or that is otherwise required, in each
case pursuant to Regulation 14A of the Securities Exchange Act of 1934,
including each such person's written consent to serving as a director if
elected. A notice regarding any business, including nomination of directors, to
be brought before an annual meeting must contain the following:
- - a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting;
- - the name and address of the stockholder proposing such business;
- - the class and number of shares of Seminis' stock beneficially owned by the
stockholder; and
- - any material interest of the stockholder in such business.
Although the notice provisions do not give the board of directors any
power to approve or disapprove stockholders' nominations or proposals for action
by Seminis, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the procedures
established by the by-laws of Seminis are not followed and of discouraging or
deterring a third party from conducting a solicitation of proxies to elect its
own slate of directors or to approve its proposal, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to
Seminis and its stockholders. The purpose of requiring advance notice is to
afford the board of directors an opportunity to consider the qualifications of
the proposed nominees or the merits of other stockholder proposals and, to the
extent deemed necessary or desirable by the board of directors, to inform
stockholders about those matters.
STOCKHOLDER RIGHTS
The certificate of incorporation authorizes the board of directors to
create and issue, whether or not in connection with the issuance and sale of any
of its securities or property, rights entitling the holders thereof to purchase
securities of Seminis or any other corporation. The times at which and the terms
upon which such rights are to be issued are to be determined by the board of
directors and set forth in the contracts or other instruments that evidence such
rights. The authority of the board of directors with respect to such rights
shall include, without limitation, the determination of the initial purchase
price, the times and circumstances under which such rights may be exercised,
provisions denying holders of a specified percentage of the outstanding capital
stock of Seminis the right to exercise such rights and provisions to permit
Seminis to redeem or exchange such rights. This provision in the certificate of
incorporation could have the effect of discouraging third parties from seeking,
or impairing their ability to seek, to acquire a significant portion of the
outstanding securities of Seminis, to engage in any transaction which might
result in a change of control of Seminis or to enter into any agreement,
arrangement or understanding with another party to accomplish the foregoing or
for the purpose of acquiring, holding, voting or disposing of any securities of
Seminis.
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<PAGE> 63
DELAWARE TAKEOVER STATUTE
Seminis is subject to Section 203 of the General Corporation Law of
Delaware which, subject to exceptions, prohibits a Delaware corporation from
engaging in any "business combination" with any "interested stockholder" for a
period of three years following the time that such stockholder became an
interested stockholder, unless:
- - prior to such time, the board of directors of the corporation approved either
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder;
- - upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by persons who are directors and also
officers, and by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or
- - at or subsequent to such time, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
In general, Section 203 defines as interested stockholder as (x) any
entity or person beneficially owning 15% or more of the outstanding voting stock
of the corporation and (y) any affiliate or associate of the corporation that
beneficially owned 15% or more of the outstanding voting stock of the
corporation at any time within the three year period immediately prior to the
date on which it is sought to determine whether such person or entity is an
interested stockholder. Section 203 defines business combination generally to
include:
- - any merger or consolidation involving the corporation and the interested
stockholder;
- - any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- - subject to exceptions, any transaction which results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder;
- - any transaction involving the corporation which has the effect of increasing
the proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or
- - the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, dated as of October 1,
1995, by and among Seminis and some of its stockholders, if Seminis, at any time
up to the fifth anniversary of such date, proposes to register any of its
securities under the Securities Act solely for its own account, such
stockholders will be entitled, subject to limitations and restrictions, to
include in such registration, on no more than four occasions, up to 3,894,500
shares of common stock held by such stockholders. Seminis will be required to
bear all registration and selling expenses, except for underwriting discounts,
selling expenses and fees and expenses of counsel representing the registering
stockholders, in connection with such registrations. The stockholders who are
parties to the registration rights agreement are prohibited from making,
entering into or participating in a public sale or distribution of common stock
for 180 days following the offering. The foregoing registration rights are
transferable and may be amended or waived only with the written consent of
Seminis, Savia and a representative of the stockholders holding common stock
subject to the registration rights agreement.
LIMITATION ON DIRECTORS' LIABILITY
Seminis' certificate of incorporation contains a provision which limits
the personal
61
<PAGE> 64
liability of each of Seminis' directors for monetary damages for breaches of
fiduciary duty as a director to Seminis or its stockholders, except for
liability of a director for the following:
- - breach of the duty of loyalty to Seminis or its stockholders;
- - acts or omissions not in good faith or involving intentional misconduct or a
knowing violation of law;
- - any transaction from which the director derived an improper personal benefit;
or
- - under Section 174 of the Delaware General Corporation Law, which relates to
unlawful payments of dividends or unlawful stock purchases or redemptions.
The inclusion of this provision in the certificate of incorporation may
have the effect of reducing the likelihood of derivative litigation against
directors, and may discourage or deter stockholders or management from bringing
a lawsuit against directors for breach of their duty of care, even though such
an action, if successful, might otherwise have benefited Seminis and its
stockholders. Seminis' by-laws also contain provisions indemnifying its
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law. Management believes that these provisions will assist Seminis
in attracting and retaining qualified individuals to serve as directors.
INDEMNIFICATION AND INSURANCE
The by-laws provide that Seminis will indemnify each person who was or is
made a party or threatened to be made a party to or is otherwise involved in any
action, suit or proceeding whether civil, criminal, administrative or
investigative, by reason of the fact that he or she or a person of whom he or
she is the legal representative is or was a director or an officer of Seminis,
to the fullest extent allowed by the Delaware General Corporation Law. This
right of indemnification shall include the right to be paid by Seminis the
expenses, including attorneys' fees, incurred in defending any such proceeding
in advance of its final disposition. However, if Delaware law so requires, the
advancement of such expenses will only be made upon the delivery to Seminis of
an undertaking by or on behalf of such person to repay all amounts so advanced
if it shall ultimately be determined by final judicial decision, from which
there is no further right to appeal, that such person is not entitled to be
indemnified for such expenses by Seminis.
In addition, the by-laws provide that Seminis may maintain insurance to
protect itself and any director, officer, employee or agent of Seminis against
any expense, liability or loss, whether or not Seminis would have the power to
indemnify a person against any expense, liability or loss under Delaware law.
The by-laws further provide that Seminis may, to the extent permitted by the
board of directors, grant rights to indemnification, and rights to advancement
to expenses, to any employee or agent of Seminis. Seminis has obtained insurance
through Savia for the benefit of Seminis' officers and directors insuring such
persons against liabilities, including liabilities under the securities laws.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
Seminis pursuant to the foregoing provisions, Seminis has been informed that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LISTING
The shares of Class A common stock have been approved for listing, subject
to official notice of issuance, on the Nasdaq National Market under the symbol
"SMNS."
TRANSFER AGENT
The transfer agent and registrar for the Class A common stock is American
Stock Transfer & Trust Company.
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<PAGE> 65
LEGAL MATTERS
The validity of the Class A common stock offered hereby will be passed
upon for Seminis by Milbank, Tweed, Hadley & McCloy LLP, New York, New York.
Howard S. Kelberg is a partner in the firm of Milbank, Tweed, Hadley & McCloy
LLP and is Secretary to Seminis since 1995. Legal matters in connection with the
offering will be passed upon for the underwriters by Cahill Gordon & Reindel, a
partnership including a professional corporation, New York, New York.
EXPERTS
The consolidated financial statements of Seminis, Inc. as of September 30,
1997 and 1998 and for each of the three years in the period ended September 30,
1998 included in this prospectus have been so included in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The consolidated financial statements of Hungnong Seed Co., Ltd. as of
December 31, 1997 and for the year then ended included in this prospectus have
been so included in reliance on the report of Seonjin Accounting Corporation,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
Seminis has filed with the Securities and Exchange Commission, or the SEC,
a registration statement on Form S-1 for the Class A common stock being offered
by this prospectus. This prospectus does not contain all of the information set
forth in the registration statement and its exhibits and schedules. For more
information regarding Seminis and the shares of Class A common stock offered by
this prospectus, read the registration statement, including the exhibits and
schedules. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete. For each contract which
is an exhibit to the registration statement, any statement regarding such
contract is qualified by the provisions of such exhibit. Interested persons may
read the registration statement and any other document Seminis may file with the
SEC at the SEC's Public Reference Section, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and the SEC's Regional Offices located at 500 West
Madison Street, Suite 1400, Chicago, IL and 7 World Trade Center, 13th Floor,
New York, NY 10048 or on the Internet at http://www.sec.gov. Copies of all or a
portion of the registration statement can be obtained from the Public Reference
Section of the SEC upon payment of a prescribed fee.
As a result of the offering, Seminis will become subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended. Seminis will fulfill its obligations with respect to those
requirements by filing periodic reports, proxy statements and other information
with the SEC. Upon approval of the Class A common stock for listing on the
Nasdaq National Market, such reports, proxy and information statements and other
information concerning Seminis may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three fiscal quarters of each fiscal year.
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<PAGE> 66
SEMINIS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SEMINIS, INC.
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of September 30, 1997 and
1998, and March 31, 1999.................................. F-3
Consolidated Statements of Operations for the Years Ended
September 30, 1996, 1997 and 1998 and for the six months
ended March 31, 1998 and 1999............................. F-5
Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 1996, 1997 and 1998 and for the
six months ended March 31, 1999........................... F-6
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996, 1997 and 1998 and for the six months
ended March 31, 1998 and 1999............................. F-7
Notes to Consolidated Financial Statements.................. F-8
HUNGNONG SEED CO., LTD.
Report of Independent Accountants........................... F-28
Consolidated Balance Sheet as of December 31, 1997.......... F-29
Consolidated Statements of Operations for the Year Ended
December 31, 1997 and the Six Months Ended June 30, 1998
(unaudited)............................................... F-30
Consolidated Statements of Stockholders' Deficit for the
Year Ended December 31, 1997.............................. F-31
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1997 and the Six Months Ended June 30, 1998
(unaudited)............................................... F-32
Notes to Consolidated Financial Statements.................. F-33
PRO FORMA FINANCIAL DATA
Unaudited Pro Forma Consolidated Statement of Operations for
the Year Ended September 30, 1998......................... F-39
</TABLE>
F-1
<PAGE> 67
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Seminis, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Seminis, Inc. and its subsidiaries at September 30, 1997 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
December 18, 1998, except as to Notes 16 and 17,
which are as of June 21, 1999
F-2
<PAGE> 68
SEMINIS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF PRO FORMA AS OF
------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999
---- ---- --------- ---------------
(unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
ASSETS:
Current assets
Cash and cash equivalents................................. $ 30,271 $ 28,895 $ 28,213 $ 28,213
Accounts receivable, less allowance for doubtful accounts
of $8,116, $12,451 and $13,691, respectively............ 109,013 134,701 204,927 204,927
Inventories............................................... 162,145 245,319 269,769 269,769
Current maturities from Young Il Chemical Company note.... -- 7,000 7,000 7,000
Refundable income taxes................................... 8,457 4,376 2,335 2,335
Prepaid expenses and other current assets................. 2,547 5,024 4,870 4,870
-------- --------- --------- ---------
Total current assets................................ 312,433 425,315 517,114 517,114
Note receivable from Young Il Chemical Company.............. -- 28,612 28,612 28,612
Property, plant and equipment, net.......................... 128,180 189,255 202,152 202,152
Intangible assets, net...................................... 69,092 191,272 207,701 207,701
Other assets................................................ 9,968 27,735 27,518 27,518
-------- --------- --------- ---------
$519,673 $ 862,189 $ 983,097 $ 983,097
======== ========= ========= =========
LIABILITIES, MANDATORILY REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY:
Current liabilities
Demand note due bank...................................... $ -- $ -- $ 10,000 $ 10,000
Short-term borrowings..................................... 12,631 6,819 16,869 16,869
Intercompany advance from Savia........................... -- -- 20,000 20,000
Current maturities of long-term debt...................... 1,011 19,825 24,246 24,246
Current maturities of convertible subordinated debt due
Savia................................................... -- 7,000 -- --
Accounts payable.......................................... 47,517 41,049 42,358 42,358
Accrued liabilities....................................... 50,482 78,525 69,040 69,040
-------- --------- --------- ---------
Total current liabilities........................... 111,641 153,218 182,513 182,513
Long-term debt.............................................. 80,331 394,446 442,572 442,572
Convertible subordinated debt due Savia..................... -- 28,857 -- --
Deferred income taxes....................................... 20,585 34,850 35,984 35,984
Minority interest in subsidiaries........................... 324 16,981 16,778 16,778
-------- --------- --------- ---------
Total liabilities................................... 212,881 628,352 677,847 677,847
-------- --------- --------- ---------
Commitments and contingencies (Note 12)
Mandatorily Redeemable Stock
Class A Redeemable Preferred Stock, $.01 par value; 25
shares authorized; 25 shares issued and outstanding..... 25,000 25,000 25,000 25,000
Class B Redeemable Preferred Stock, $.01 par value; 25
shares authorized; none issued and outstanding.......... -- -- -- --
Old Class B Redeemable Common Stock, $.01 par value;
20,000 shares authorized as of September 30, 1997 and
6,772 shares authorized as of September 30, 1998 and
March 31, 1999; 18,091 shares issued and outstanding as
of September 30, 1997, 6,772 shares issued and
outstanding as of September 30, 1998 and March 31, 1999
and none issued and outstanding on a pro forma basis.... 122,111 48,416 49,940 --
-------- --------- --------- ---------
Total mandatorily redeemable stock.................. 147,111 73,416 74,940 25,000
-------- --------- --------- ---------
</TABLE>
F-3
<PAGE> 69
SEMINIS, INC.
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF PRO FORMA AS OF
------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999
---- ---- --------- ---------------
(unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Stockholders' Equity
Class C Preferred Stock, $.01 par value; no shares
authorized as of September 30, 1997 and 0 shares
authorized as of September 30, 1998 and 6 shares
authorized as of March 31, 1999; no shares issued and
outstanding as of September 30, 1997 and September 30,
1998, 3 shares issued and outstanding as of March 31,
1999 and on a pro forma basis........................... $ -- $ -- $ 1 $ 1
Class A Common Stock, $.01 par value; no shares authorized
as of September 30, 1997, 91,000 shares authorized as of
September 30, 1998 and March 31, 1999; none issued and
outstanding............................................. -- -- -- --
Class B Common Stock, $.01 par value; 55,000 shares
authorized as of September 30, 1997 and 60,229 shares
authorized as of September 30, 1998; 30,000 shares
issued and outstanding as of September 30, 1997, 37,386
shares issued and outstanding as of September 30, 1998;
39,302 shares issued and outstanding as of March 31,
1999 and 46,074 shares issued and outstanding on a pro
forma basis............................................. 1 374 393 461
Additional paid-in capital................................ 179,999 317,826 384,001 433,873
Accumulated deficit....................................... (11,072) (144,439) (143,215) (143,215)
Accumulated other comprehensive loss...................... (9,247) (13,340) (10,870) (10,870)
-------- --------- --------- ---------
Total stockholders' equity.......................... 159,681 160,421 230,310 280,250
-------- --------- --------- ---------
$519,673 $ 862,189 $ 983,097 $ 983,097
======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 70
SEMINIS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
--------------------------------- --------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales................................................... $381,398 $379,544 $ 428,423 $ 222,339 $282,311
Cost of goods sold.......................................... 214,131 150,107 162,806 84,658 106,611
-------- -------- --------- --------- --------
Gross profit............................................ 167,267 229,437 265,617 137,681 175,700
-------- -------- --------- --------- --------
Operating expenses
Research and development expenses......................... 42,300 41,039 49,416 21,117 31,225
Selling, general and administrative expenses.............. 134,990 136,438 158,588 69,966 100,113
Management fees paid to Savia............................. -- 6,200 8,465 4,422 --
Amortization of intangible assets......................... 14,785 12,394 14,457 6,115 13,657
Write-off of acquired research in-process................. 36,700 -- -- -- --
-------- -------- --------- --------- --------
Total operating expenses............................ 228,775 196,071 230,926 101,620 144,995
-------- -------- --------- --------- --------
Income (loss) from operations............................... (61,508) 33,366 34,691 36,061 30,705
-------- -------- --------- --------- --------
Other income (expense)
Interest income........................................... 1,147 1,177 1,952 325 2,580
Interest expense.......................................... (25,222) (11,714) (29,034) (9,607) (26,264)
Foreign currency gain (loss).............................. (154) (8,656) 3,205 (213) 1,665
Minority interest......................................... (630) (9) (219) (36) (1,544)
Other, net................................................ (1,119) 1,000 (397) 54 (283)
-------- -------- --------- --------- --------
(25,978) (18,202) (24,493) (9,477) (23,846)
-------- -------- --------- --------- --------
Income (loss) from continuing operations before income
taxes..................................................... (87,486) 15,164 10,198 26,584 6,859
Income tax benefit (expense)................................ 31,401 (3,839) (3,436) (9,272) (2,773)
-------- -------- --------- --------- --------
Income (loss) from continuing operations.................... (56,085) 11,325 6,762 17,312 4,086
-------- -------- --------- --------- --------
Discontinued operations
Income from operations (net of income tax of $3,960 and
$1,558 for 1996 and 1997, respectively)................. 6,060 2,542 -- -- --
Gain on disposal (net of income tax of $29,602)........... -- 48,298 -- -- --
-------- -------- --------- --------- --------
6,060 50,840 -- -- --
-------- -------- --------- --------- --------
Net income (loss)........................................... (50,025) 62,165 6,762 17,312 4,086
Preferred stock dividends................................... (2,000) (2,000) (2,000) (1,000) (1,338)
Accretion of Old Class B Redeemable Common Stock............ (6,333) (7,236) (3,840) (1,708) (1,524)
Excess of repurchase price over redemption value for
repurchase of Old Class B Redeemable Common Stock......... -- -- (134,289) (134,289) --
-------- -------- --------- --------- --------
Net income (loss) available for common stockholders......... $(58,358) $ 52,929 $(133,367) $(119,685) $ 1,224
======== ======== ========= ========= ========
Income (loss) available for common stockholders per common
share, basic and diluted
Income (loss) from continuing operations................ $ (2.15) $ 0.07 $ (4.23) $ (3.99) $ 0.03
Discontinued operations................................. 0.20 1.69 -- -- --
-------- -------- --------- --------- --------
Net income (loss) available for common stockholders..... $ (1.95) $ 1.76 $ (4.23) $ (3.99) $ 0.03
======== ======== ========= ========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 71
SEMINIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS C CLASS B ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL OTHER TOTAL
--------------- ---------------- PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
NUMBER AMOUNT NUMBER AMOUNT CAPITAL DEFICIT LOSS EQUITY
------ ------ ------ ------ ---------- ----------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995..... -- $ -- 30,000 $ 1 $179,999 $ (5,643) $ (116) $ 174,241
Comprehensive loss
Net loss.................... -- -- -- -- -- (50,025) -- (50,025)
Translation adjustment...... -- -- -- -- -- -- (3,111) (3,111)
---------
(53,136)
Dividends on Class A Redeemable
Preferred Stock............... -- -- -- -- -- (2,000) -- (2,000)
Accretion of Old Class B
Redeemable
Common Stock.................. -- -- -- -- -- (6,333) -- (6,333)
--- ---- ------ ------- -------- --------- -------- ---------
Balance, September 30,
1996...................... -- -- 30,000 1 179,999 (64,001) (3,227) 112,772
---------
Comprehensive income
Net income.................. -- -- -- -- -- 62,165 -- 62,165
Translation adjustment...... -- -- -- -- -- -- (6,020) (6,020)
---------
56,145
Dividends on Class A Redeemable
Preferred Stock............... -- -- -- -- -- (2,000) -- (2,000)
Accretion of Old Class B
Redeemable
Common Stock.................. -- -- -- -- -- (7,236) -- (7,236)
--- ---- ------ ------- -------- --------- -------- ---------
Balance, September 30,
1997...................... -- -- 30,000 1 179,999 (11,072) (9,247) 159,681
---------
Comprehensive income
Net income.................. -- -- -- -- -- 6,762 -- 6,762
Translation adjustment...... -- -- -- -- -- -- (4,093) (4,093)
---------
2,669
Dividends on Class A Redeemable
Preferred Stock............... -- -- -- -- -- (2,000) -- (2,000)
Accretion of Old Class B
Redeemable
Common Stock.................. -- -- -- -- -- (3,840) -- (3,840)
Excess of repurchase price over
redemption value for
repurchase of Old Class B
Redeemable Common Stock....... -- -- -- -- -- (134,289) -- (134,289)
Increase in par value following
stock split................... -- -- -- 299 (299) -- -- --
Issuance of shares.............. -- -- 7,386 74 138,126 -- -- 138,200
--- ---- ------ ------- -------- --------- -------- ---------
Balance, September 30,
1998...................... -- -- 37,386 374 317,826 (144,439) (13,340) 160,421
--- ---- ------ ------- -------- --------- -------- ---------
Comprehensive income
Net income.................. -- -- -- -- -- 4,086 -- 4,086
Translation adjustment...... -- -- -- -- -- -- 2,470 2,470
---------
6,556
Dividends on Class C
Preferred Stock............. -- -- -- -- 338 (338) -- --
Dividends on Class A
Redeemable Preferred
Stock..................... -- -- -- -- -- (1,000) -- (1,000)
Accretion of Old Class B
Redeemable Common Stock..... -- -- -- -- -- (1,524) -- (1,524)
Issuance of shares.............. 3 1 -- -- 29,999 -- -- 30,000
Conversion of
Subordinated Debt due
Savia..................... -- -- 1,916 19 35,838 -- -- 35,857
--- ---- ------ ------- -------- --------- -------- ---------
Balance, March 31, 1999..... 3 $ 1 39,302 $ 393 $384,001 $(143,215) $(10,870) $ 230,310
=== ==== ====== ======= ======== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 72
SEMINIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED SEPTEMBER 30, ENDED MARCH 31,
--------------------------------- -------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ (50,025) $ 62,165 $ 6,762 $ 17,312 $ 4,086
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization.................... 29,702 26,746 31,341 14,085 23,177
Write-off of acquired research in process........ 36,700 -- -- -- --
Deferred income tax expense (benefit)............ (39,725) 5,521 (108) (590) (1,722)
Net income from Agronomics Segment............... (6,060) (50,840) -- -- --
Unrealized foreign currency loss................. -- 8,653 -- -- --
Other............................................ 1,944 (1,562) 2,414 435 1,313
Changes in assets and liabilities
Accounts receivable............................ (4,696) (11,907) 125 (50,164) (74,910)
Inventories.................................... 49,181 (27,192) (57,347) (25,678) (25,396)
Prepaid expenses and other assets.............. (4,015) (4,971) (1,591) (10,276) 1,059
Current income taxes........................... (9,453) (4,528) 3,457 17,972 2,419
Accounts payable............................... 6,041 11,746 (10,975) (24,990) 2,274
Other liabilities.............................. 7,405 (16,794) 204 (5,750) (9,608)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities..................................... 16,999 (2,963) (25,718) (67,644) (77,308)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchases of fixed and intangible assets........... (15,192) (19,260) (61,123) (15,058) (19,837)
Proceeds from disposition of assets................ 1,515 3,773 869 -- 992
Discontinued operations, Agronomics Segment........ -- 196,475 -- -- --
Net cash receipts from Agronomics Segment.......... 3,344 -- -- -- --
Acquisition of minority interests in
subsidiaries..................................... (8,500) (7,669) -- -- --
Cash acquired in Ball Merger....................... 48,820 -- -- -- --
Hungnong acquisition, net of cash acquired......... -- -- (33,933) -- --
Loan to Young Il Chemical Company.................. -- -- (35,612) -- --
Choong Ang acquisition, net of cash acquired....... -- -- (19,388) -- --
Pre-acquisition advances to acquired companies..... -- -- (34,975) -- --
Agroceres acquisition, net of cash acquired........ -- -- -- -- (19,455)
Exercise of Hungnong put option.................... -- -- -- -- (8,673)
Other.............................................. (509) (6,425) (136) 1,216 (755)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing
activities..................................... 29,478 166,894 (184,298) (13,842) (47,728)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt....................... 271,981 165,471 402,172 388,888 62,822
Repayments of long-term debt....................... (27,820) (333,319) (109,905) (100,000) (8,951)
Repurchase of Old Class B Redeemable Common
Stock............................................ -- -- (211,824) (211,824) --
Demand note from bank.............................. -- -- -- -- 10,000
Net short-term borrowings (repayments)............. (303,502) 653 (44,048) (8,561) 11,080
Intercompany advance from Savia.................... -- -- -- -- 20,000
Preferred stock dividends.......................... (1,500) (2,000) (2,000) (1,000) (1,000)
Subordinated loan from Savia....................... -- -- 35,857 -- --
Issuance of Class B Common Stock................... -- -- 138,200 -- --
Issuance of Class C Preferred Stock................ -- -- -- -- 30,000
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities..................................... (60,841) (169,195) 208,452 67,503 123,951
--------- --------- --------- --------- ---------
Effect of exchange rate changes on cash.............. (1,710) (3,382) 188 (360) 403
--------- --------- --------- --------- ---------
Decrease in cash and cash equivalents................ (16,074) (8,646) (1,376) (14,343) (682)
Cash and cash equivalents, beginning of period....... 54,991 38,917 30,271 30,271 28,895
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period............. $ 38,917 $ 30,271 $ 28,895 $ 15,928 $ 28,213
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 73
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Seminis, Inc. is the largest developer, producer and marketer of vegetable
and fruit seeds in the world. The Company is a majority-owned subsidiary of
Savia, S.A. de C.V. ("Savia") and effectively began operations when it purchased
Asgrow Seed Company ("Asgrow") in December 1994.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its majority controlled and owned subsidiaries. Investments in
unconsolidated entities, representing ownership interests between 20% and 50%,
are accounted for using the equity method of accounting. All material
intercompany transactions and balances have been eliminated in consolidation.
Certain reclassifications have been made to prior years' financial statements to
conform to fiscal year 1998 presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the fiscal year, including estimates and assumptions related to
customer discounts and allowances. Actual results could differ from those
estimates.
INTERIM FINANCIAL INFORMATION
Seminis generally operates on a thirteen week calendar closing on the
Friday closest to the natural calendar quarter. For convenience, all quarters
are described by their natural calendar dates. The accompanying unaudited
financial statements have been prepared in accordance with generally accepted
accounting principles and, in the opinion of management, reflect all adjustments
(consisting only of normal recurring adjustments) considered necessary to fairly
present the Company's financial position, results of operations and cash flows
for the periods presented. Information as of and for the six months ended March
31, 1998 and 1999 included in the footnotes is unaudited. The results of
operations for the six months ended March 31, 1999 are not necessarily
indicative of the results to be expected for any subsequent quarter or for the
year ending September 30, 1999.
REVENUE RECOGNITION
Product sales are recognized upon shipment of goods and are reduced by
provisions for discounts and allowances based on the Company's historical
experience.
CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents all highly liquid investments
purchased with an original maturity of three months or less. The Company invests
its excess cash in deposits with major international banks, in government
securities and in money market accounts with financial institutions. Such
investments are considered cash equivalents for purposes of reporting cash flows
and bear minimal risk.
ACCOUNTS RECEIVABLE
Accounts receivable are valued net of reserves for bad debts, discounts
and allowances. Calculations of reserves are based on historical experience and
anticipated market conditions and are adjusted as management determines
necessary. The Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral. The Company's
diversified customer base limits the amount of credit exposure to any one
customer.
F-8
<PAGE> 74
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
No customer accounts for more than 10% of accounts receivable or sales.
INVENTORIES
Inventories are stated at the lower of cost or estimated net realizable
value. Costs for substantially all inventories are determined using the
first-in, first-out ("FIFO") method and include the cost of materials, direct
labor and the applicable share of overhead costs. Unharvested crop-growing costs
are included as part of inventory and represent costs incurred to plant and
maintain seed crops which will be harvested during the subsequent fiscal year.
Inventories are periodically reviewed and reserves established for deteriorated,
excess and obsolete items.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Provisions for
depreciation have been made using the straight-line and accelerated methods for
financial reporting purposes and accelerated methods for tax purposes. Estimated
useful lives generally range from 5 to 40 years for buildings and improvements
and from 3 to 20 years for machinery and equipment.
INTANGIBLE ASSETS
Intangible assets consist of the excess of purchase price over the fair
market value of net assets acquired in purchase acquisitions, and the costs of
acquired germplasm patents and trademarks. Goodwill is amortized over 15 years
on a straight-line basis. The costs of acquired germplasm, patents and
trademarks are being amortized over 10 to 20 years on an accelerated basis.
Software costs and other intangibles are amortized over 3 to 5 years and 10
years, respectively, on straight-line bases.
CAPITALIZED SOFTWARE COSTS
Costs of computer software developed and obtained for internal use are
capitalized and amortized over respective license periods or expected useful
lives, which range from three to five years. Capitalized computer software costs
include external direct costs for licenses and services, and payroll and
payroll-related costs for employees who are directly associated with developing
or installing such software.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company continually monitors its long-lived assets to determine
whether any impairment of these assets has occurred. In making such
determination, the Company evaluates the performance of the underlying
businesses, products and product lines. The Company recognizes impairment of
long-lived assets in the event the net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets. No material
impairments have been experienced.
SEEDMEN'S ERRORS AND OMISSIONS
The Company maintains third party seedmen's errors and omissions insurance
covering claims by growers for losses incurred as a result of seed quality or
errors arising in fulfilling customer orders. Such policies are subject to
annual renewal and revision and have coverage limits, deductibles and other
terms. Provisions are made for anticipated losses in excess of coverage amounts
provided by insurance based on historical experience and expected resolution.
The Company performs ongoing evaluations of such claims and adjusts reserves as
necessary to reflect expected settlements.
ACCRETION OF REDEMPTION OBLIGATION FOR REDEEMABLE COMMON STOCK
Redeemable common stock is recorded at redemption value; annual accretion
of the redemption obligation is based on the terms
F-9
<PAGE> 75
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
of the Shareholders' Agreement, dated as of October 1, 1995 by and among the
Company, Savia and certain of the Company's stockholders, and is charged
directly to accumulated deficit.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs are charged to operations as incurred.
Costs attributable to in-process research and development activities acquired in
a purchase transaction are written-off at the date of acquisition.
INCOME TAXES
Deferred income taxes are determined using the liability method. A
deferred tax asset or liability is determined based on the difference between
the financial statement and tax basis of assets and liabilities as measured by
the enacted tax rates which will be in effect when these differences reverse.
Deferred tax expense is the result of changes in the asset and liability for
deferred taxes.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The financial statements of the Company's foreign subsidiaries are
generally measured using the local currency as the functional currency. Assets
and liabilities of these subsidiaries are translated at the rates of exchange at
the balance sheet date. Income and expense items are translated at average
quarterly rates of exchange prevailing during the fiscal year. The resultant
translation adjustments are included in accumulated other comprehensive loss as
a separate component of stockholders' equity. Gains and losses from foreign
currency transactions are included in the statement of operations.
Subsidiaries operating in highly inflationary economies or primarily using
the United States dollar as their functional currency include gains and losses
from foreign currency transactions and balance sheet translation adjustments in
the statement of operations.
The fiscal year 1997 foreign currency loss of $8,656 included in the
statement of operations was primarily due to the effect of exchange rate
fluctuations on the relative values of certain intercompany loans among the
Company's various operating subsidiaries.
FINANCIAL INSTRUMENTS
The Company uses interest rate swap and collar agreements to manage
interest costs and risks associated with changing interest rates. Amounts
currently due to or from interest rate swap counterparties are recorded in
interest expense in the period in which they accrue. Counterparties to the
interest rate swap and collar agreements are major financial institutions.
Credit loss from counterparty non-performance is not anticipated.
The Company's other financial instruments consist primarily of cash,
accounts receivable, notes receivable, accounts payable, accrued liabilities,
debt and mandatorily redeemable securities. These balances are carried in the
financial statements at amounts that approximate fair market value unless
separately disclosed in the Notes to Consolidated Financial Statements.
COMPREHENSIVE INCOME
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For the Company, comprehensive income consists of its
reported net income or loss and the change in the foreign currency translation
adjustment during a period.
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
F-10
<PAGE> 76
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
accordance with the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25"), and complies with the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). Under APB No. 25, compensation cost is
recognized based on the difference, if any, on the date of grant between the
fair market value of the Company's stock and the amount an employee must pay to
acquire the stock.
STOCK SPLIT
In May 1998, the Company's board of directors approved a 500 for 1 stock
split for all common shares. All common share information set forth in the
consolidated financial statements and notes thereto has been restated to reflect
the stock split.
SUPPLEMENTARY CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
----------------------------- --------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash paid for interest................ $23,876 $15,175 $21,590 $5,049 $30,178
Cash paid (refunded) for income
taxes............................... 17,777 2,847 87 (8,110) 2,076
Supplemental non-cash transactions
Issuance of preferred stock in
payment of Class C Preferred Stock
dividends......................... -- -- -- -- 338
</TABLE>
INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share has been computed pursuant to the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings per
Share." Basic income (loss) per common share is computed by dividing income
(loss) available to common stockholders by the average number of common shares
outstanding during each period. Income (loss) available to common stockholders
represents reported net income less preferred dividend requirements, accretion
of redemption value for redeemable common stock, and the excess of the
repurchase price paid over the redemption value of mandatorily redeemable common
stock. Diluted income (loss) per common share reflects the potential dilution
that could occur if dilutive securities and other contracts were exercised or
converted into common stock or resulted in the issuance of common stock. The
following table provides a reconciliation of income (loss) from continuing
operations and sets forth the
F-11
<PAGE> 77
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
computation for basic and diluted earnings
per share (before discontinued operations):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
------------------------------- -------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
NUMERATOR FOR BASIC AND DILUTED:
Income (loss) from continuing
operations.............................. $(56,085) $ 11,325 $ 6,762 $ 17,312 $ 4,086
Preferred stock dividends................. (2,000) (2,000) (2,000) (1,000) (1,338)
Accretion of Old Class B Redeemable Common
Stock................................... (6,333) (7,236) (3,840) (1,708) (1,524)
Excess of repurchase price over redemption
value for repurchase of Old Class B
Redeemable Common Stock................. -- -- (134,289) (134,289) --
-------- -------- --------- --------- --------
Income (loss) from continuing
operations available to common
stockholders........................ $(64,418) $ 2,089 $(133,367) $(119,685) $ 1,224
======== ======== ========= ========= ========
DENOMINATOR--SHARES:
Weighted average common shares outstanding
(basic)................................. 30,000 30,000 31,536 30,000 38,025
Add potential common shares:
Old Class B Redeemable Common Stock..... 18,091 18,091 9,602 12,432 6,772
Less antidilutive effect of potential
common shares........................... (18,091) (18,091) (9,602) (12,432) (6,772)
-------- -------- --------- --------- --------
Weighted average common shares
outstanding (diluted)............... 30,000 30,000 31,536 30,000 38,025
======== ======== ========= ========= ========
INCOME (LOSS) PER COMMON SHARE FROM
CONTINUING OPERATIONS:
Basic and diluted....................... $ (2.15) $ 0.07 $ (4.23) $ (3.99) $ 0.03
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair market value. It also requires that gains or losses resulting from changes
in the values of those derivatives be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The Company is
required to adopt SFAS No. 133 for its fiscal year beginning October 1, 1999.
Management believes the adoption of SFAS No. 133 will not have a material impact
on the Company's consolidated financial position or results of operations.
NOTE 2--MERGERS AND ACQUISITIONS
PETOSEED CO, INC.
On October 1, 1995, the Company acquired Petoseed Co, Inc. ("Petoseed")
through a tax-free merger (the "Merger") with George J. Ball, Inc. ("Ball"). As
part of the transaction, Seminis exchanged redeemable common and redeemable
preferred shares of Seminis for Ball's interest in Petoseed as described in Note
9. Following the Merger and exchange of stock, Savia owned approximately 62% of
Seminis and the Ball stockholders owned approximately 38%.
F-12
<PAGE> 78
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The total purchase price ascribed to the transaction was approximately
$133,542 and was based on the fair market value of the securities exchanged
which consisted of the following:
<TABLE>
<S> <C>
Old Class B Redeemable Common Stock issued to Ball
Stockholders.............................................. $108,542
Class A Redeemable Preferred Stock issued to Ball
Stockholders.............................................. 25,000
--------
Total consideration............................... $133,542
========
</TABLE>
The Merger was accounted for using the purchase method of accounting.
Accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair market values. The fair market value of the assets
acquired and liabilities assumed was $370,678 and $237,136, respectively.
The results of operations of Petoseed have been combined with those of the
Company since the date of acquisition. Cost of sales for the year ended
September 30, 1996 includes costs in excess of historical value of $60,000
relating to the step-up of the Petoseed inventories. In addition, $36,700 of the
purchase price was allocated to in-process research and development projects
that had not reached technological feasibility and had no probable alternative
future uses; the Company expensed such amount at the date of the acquisition.
HUNGNONG SEED CO., LTD
In July 1998, the Company acquired newly and previously issued common
stock of Hungnong Seed Co., Ltd. ("Hungnong"), a South Korean vegetable seed
company, representing a 70% ownership interest, for $120,620. The acquisition
was funded by capital contributions by the Company's stockholders (Note 9) and
borrowings under the Company's long-term debt facility (Note 8). The results of
Hungnong's operations have been combined with those of the Company since the
date of acquisition. The gross acquisition cost of $120,620 includes $86,687 of
acquired cash.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, a portion of the purchase price was allocated to the net assets
acquired based on their estimated fair market values. The fair market value of
assets acquired and liabilities assumed was $196,176 and $144,513 respectively.
The balance of the purchase price, $68,957, was recorded as excess of cost over
net assets acquired (i.e. goodwill) and is being amortized over 15 years on a
straight-line basis.
In connection with the purchase of its 70% interest in Hungnong, Seminis
loaned $35,612 to Young Il Chemical Company which is owned by minority
stockholders of Hungnong. The U.S. dollar denominated note receivable bears
interest at 10% per year, payable quarterly, and is due in installments of
$7,000 in July 1999, $7,000 in July 2000 and $21,612 in July 2001. The note
receivable is secured by common stock owned by minority stockholders
representing ownership of a 25% interest of Hungnong and is held in trust by an
independent trustee (the "Collateral Shares"). Under terms of the note
agreement, in the event of payment default or the occurrence of certain other
events such as the bankruptcy or insolvency, among others, of Young Il Chemical
Company, maturity of the note receivable accelerates. Transfer of ownership of
the Collateral Shares satisfies payment of the note in accordance with formula
provisions of the note agreement. The note agreement provides that, in
determining the payment to
F-13
<PAGE> 79
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
be applied, each one percent of equity interest has a 2 billion South Korean won
value (based on the fair market value of Hungnong at acquisition) and is
applied, at the then-current exchange rate, to reduce the outstanding balance
due until paid in full. Any remaining unpaid amounts are due on demand.
Seminis has pledged the note receivable from Young Il Chemical Company as
security for the subordinated debt due Savia (see Note 15). In the event of
default and transfer of shares to Seminis in payment of the note receivable,
Seminis is obligated under the convertible subordinated debt agreement to
transfer such shares to Savia and apply such shares as payments on the
subordinated debt.
HUNGNONG PUT OPTION
The Hungnong minority shareholders have the option to put their 30%
interest in Hungnong to the Company at a price of 2 billion South Korean won for
each 1% of outstanding shares plus accrued interest which accrues at 10% per
annum from July 15, 1998. This option expires on July 15, 2001. On November 15,
1998, the Hungnong minority shareholders exercised their put option for 5% of
the outstanding shares of Hungnong. As a result, on December 15, 1998, the
Company paid $8,673 to increase its ownership in Hungnong from 70% to 75%. As of
March 31, 1999, the remaining potential obligation in U.S. dollars related to
the put option is approximately $40,883.
CHOONG ANG SEED COMPANY
In July 1998, the Company acquired all of the outstanding shares of Choong
Ang Seed Company ("Choong Ang"), a South Korean vegetable seed company, for
$20,500. The acquisition was funded by capital contributions by the Company's
stockholders (Note 9) and borrowings under long-term debt facilities (Note 8).
The results of Choong Ang's operations have been combined with those of the
Company since the date of acquisition. The gross acquisition cost of $20,500
excludes $1,112 of acquired cash.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, a portion of the purchase price was allocated to the net assets
acquired based on their estimated fair market values. The fair market value of
assets acquired and liabilities assumed was $35,272 and $21,589, respectively.
The balance of the purchase price, $6,817, was recorded as excess of cost over
net assets acquired (goodwill) and is being amortized over 15 years on a
straight-line basis.
Unaudited pro forma consolidated results of operations are presented in
the table below for each of the two years in the period ended September 30,
1998. The pro forma results reflect the Hungnong and Choong Ang acquisitions as
if they had
F-14
<PAGE> 80
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
occurred at the beginning of each respective
fiscal year:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Total revenues....................................... $462,911 $466,054
Income (loss) from continuing operations............. 2,407 (1,292)
Income (loss) from continuing operations available
for common stockholders............................ (6,829) (141,421)
Income (loss) from continuing operations available
for common stockholders per common share
Basic and diluted.................................. $ (0.20) $ (4.05)
Weighted average common shares outstanding
Basic and diluted.................................. 33,757 34,912
</TABLE>
In management's opinion, the unaudited pro forma combined results of
operations may not necessarily be indicative of the actual results that would
have occurred had the acquisition been consummated at the beginning of fiscal
year 1997 or 1998 or of future operations of the combined companies under the
ownership and management of the Company.
AGROCERES
On November 10, 1998 the Company purchased the assets, subject to certain
liabilities, of the vegetable division of Sementes Agroceres, S.A.
("Agroceres"), a Brazilian company, for $19,455. Agroceres produces and
distributes vegetable seeds throughout Brazil. The acquisition was financed
through borrowings on the Company's revolving line of credit.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, a portion of the purchase price was allocated to the net assets
acquired based on their estimated fair market values. The fair value of assets
acquired and liabilities assumed was $8,802 and $987, respectively. The balance
of the purchase price, $11,640, was recorded as excess of cost over net assets
acquired (goodwill) and is being amortized over 15 years on a straight-line
basis.
NOTE 3--INVENTORIES
Inventories consist of the following at September 30, 1997 and 1998:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF
-------------------- MARCH 31,
1997 1998 1999
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Seed................................ $138,293 $209,928 $231,481
Unharvested crop growing costs...... 15,424 20,405 23,608
Supplies............................ 8,428 14,986 14,680
-------- -------- --------
$162,145 $245,319 $269,769
======== ======== ========
</TABLE>
F-15
<PAGE> 81
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at September 30,
1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Land................................................. $ 26,695 $ 65,156
Buildings and improvements........................... 70,198 95,989
Machinery and equipment.............................. 49,273 60,637
-------- --------
146,166 221,782
Less: accumulated depreciation....................... (17,986) (32,527)
-------- --------
$128,180 $189,255
======== ========
</TABLE>
NOTE 5--INTANGIBLES
Intangible assets at September 30, 1997 and 1998 consist of the following
and are net of accumulated amortization for the respective fiscal years as
parenthetically noted:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Goodwill (net of $1,313 and $3,521)................... $12,208 $ 85,066
Software costs (net of $342 and $492)................. 2,212 12,681
Trademarks (net of $2,831 and $4,038)................. 12,069 10,862
Germplasm (net of $22,824 and $32,388)................ 40,576 59,999
Other intangible assets (net of $1,050 and $2,260).... 2,027 22,664
------- --------
$69,092 $191,272
======= ========
</TABLE>
NOTE 6--SHORT-TERM BORROWINGS
Short-term borrowings consist of the following at September 30, 1997 and
1998:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Italian bank borrowing.................................. $ 9,851 $ --
Other borrowings........................................ 2,780 6,819
------- ------
$12,631 $6,819
======= ======
</TABLE>
In March 1998, the Company repaid the Italian bank borrowing and canceled
a stand-by letter of credit which guaranteed this foreign borrowing. Other
borrowings relate primarily to non-U.S. borrowings and bear interest rates
ranging from approximately 4% to 12% at September 30, 1997 and 4% to 18% at
September 30, 1998.
F-16
<PAGE> 82
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7--ACCRUED LIABILITIES
Accrued liabilities consist of the following at September 30, 1997 and
1998:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Employee salaries and related benefits................. $20,173 $35,082
Seedmen's errors and omissions......................... 8,586 7,346
Interest............................................... 519 7,963
Other.................................................. 21,204 28,134
------- -------
$50,482 $78,525
======= =======
</TABLE>
NOTE 8--LONG-TERM DEBT
Long-term borrowings consist of the following at September 30, 1997 and
1998:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Credit agreement borrowings........................... $74,000 $384,525
South Korean bank borrowings due in annual
installments through 2007........................... -- 18,339
Other borrowings...................................... 7,342 11,407
------- --------
81,342 414,271
Less current portion.................................. (1,011) (19,825)
------- --------
$80,331 $394,446
======= ========
</TABLE>
Other borrowings consist of various domestic and foreign, government and
non-government loans of less than $2,000 each, bearing interest annually at
rates ranging from 0% to 13% through 2007.
At September 30, 1997, the Company's credit agreement consisted of a
$100,000 revolving line of credit. Concurrent with the repurchase of 11,319
shares of Old Class B Redeemable Common Stock from the former Ball stockholders
(Note 9) and the retirement of the previous credit agreement, the Company
entered into a $375,000 credit agreement consisting of a $75,000 revolving line
of credit and $300,000 in term loans (the "Credit Facility"). The revolving line
of credit expires on December 31, 2002 and the term loans have varying
maturities ranging from December 31, 2002 to December 31, 2004. The Credit
Facility was amended in July 1998 in conjunction with the Hungnong and Choong
Ang acquisitions (Note 2) to include an additional $75,000 term portion expiring
December 31, 2004.
The Company, at its option, may elect to pay interest on Credit Facility
borrowings based on either the prime rate or the London interbank offered rate
("LIBOR") plus defined margins ranging from 0.75% to 2.75%. The Company is
required to pay a commitment fee, up to a maximum of 0.5%, on the unused portion
of the revolving line of credit. Interest rate margins and commitment fee rates
are reset quarterly based upon a defined leverage ratio. For the fiscal year
ended September 30, 1998, the Company incurred interest at a weighted-average
rate of 8.6% per annum under the Credit Facility.
In fiscal year 1998, loan origination fees of $7,713 were capitalized and
are being amortized to interest expense using the
F-17
<PAGE> 83
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
straight-line method over the life of the agreement. Interest expense includes
loan origination fees of $208 in fiscal year 1996, $514 in fiscal year 1997 and
$891 in fiscal year 1998.
The Company uses interest rate hedge agreements to effectively convert
variable rate Credit Facility debt to a fixed basis. The fair values of the
hedge agreements are not recognized in the financial statements. At September
30, 1998, the Company had outstanding interest rate hedge agreements with
notional amounts of $226,000 and an unrecognized loss of approximately $5,950.
Under the Credit Facility, the Company is required to maintain certain
financial ratios and meet certain net worth and indebtedness tests. The Credit
Facility also places limits on dividends, foreign debt, leasing, capital
expenditures and acquisitions. The Company was in compliance with all covenants
associated with the Credit Facility at September 30, 1998. The indebtedness
under the Credit Facility is secured by the majority of the Company's domestic
assets and by the majority of the shares of certain foreign subsidiaries.
SUBSEQUENT EVENT (UNAUDITED)
In February 1999, Seminis and the lenders under the old credit agreement
entered into a waiver and amendment of the old credit agreement to waive
compliance with certain financial ratio covenants as of December 31, 1998 and
March 31, 1999 and to revise the March 31, 1999 covenants. The amendment of the
old credit agreement also required Seminis to issue and sell no later than May
31, 1999 subordinated debt securities, common equity securities or any
combination thereof for an aggregate sales price of not less than $150,000. See
Note 17.
As of September 30, 1998, long-term debt maturities are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30
- ------------
<S> <C>
1999.......................... $ 19,825
2000.......................... 22,824
2001.......................... 19,908
2002.......................... 21,880
2003.......................... 33,074
Thereafter...................... 296,760
--------
$414,271
========
</TABLE>
NOTE 9--CAPITAL STOCK AND MANDATORILY REDEEMABLE EQUITY SECURITIES
CLASS A REDEEMABLE PREFERRED STOCK
As part of the Ball Merger, the Company issued 25 shares of Class A
Redeemable Preferred Stock to the stockholders of Ball. Holders of the Class A
Redeemable Preferred Stock have the right to cause the Company to redeem the
shares at any time prior to October 1, 2000. The redemption price shall be
$1,000 per share.
Each share of Class A Redeemable Preferred Stock will be automatically
converted into one share of Class B Redeemable Preferred Stock upon the earlier
of the occurrence of an initial public offering, October 1, 2000 or the
occurrence of certain other events. In addition, each share of Class A
Redeemable Preferred Stock will be convertible at the option of the holder at
any time into one share of Class B Redeemable Preferred Stock.
The Class A Redeemable Preferred Stock has no voting rights. The Company
pays quarterly dividends on all issued shares of Class A Redeemable Preferred
Stock at a rate of 8% per year. Dividends are cumulative if unpaid and are added
to the redemption value of the shares. The liquidation value of the shares is
equal to the redemption value at any point in time.
F-18
<PAGE> 84
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CLASS B REDEEMABLE PREFERRED STOCK
The Company is authorized to issue up to 25 shares of its Class B
Redeemable Preferred Stock. No shares have been issued to date. Terms of Class B
Redeemable Preferred Stock are identical to the Class A Redeemable Preferred
Stock with respect to dividends and liquidation preferences, however, Class B
Redeemable Preferred Stock is not redeemable at the option of the holder. The
Company shall redeem all outstanding shares of the Class B Redeemable Preferred
Stock on October 1, 2005.
OLD CLASS B REDEEMABLE COMMON STOCK
The Company also issued 18,091 shares of Old Class B Redeemable Common
Stock to the Ball stockholders as part of the Ball Merger. Holders of Old Class
B Redeemable Common Stock have the right to cause the Company to redeem the
shares on October 1, 2000, or earlier if an early redemption event occurs. The
redemption price accretes at an annual rate of approximately 6% up to a maximum
of $8.05 per share at October 1, 2000. The redemption price was $6.35 per share
on October 1, 1996, $6.75 per share on October 1, 1997 and $7.15 per share on
October 1, 1998.
Each share of Old Class B Redeemable Common Stock is automatically
convertible into one share of Class B Common Stock upon the consummation of an
initial public offering, October 1, 2000 or the occurrence of certain other
events. In addition, each share of Old Class B Redeemable Common Stock will be
convertible at the option of the holder at any time into one share of Class B
Common Stock; however, upon such conversion, the Old Class B Redeemable Common
Stock will lose its redemption rights and dilute other protections.
If any of the classes of mandatorily redeemable stock are required to be
redeemed, Savia is obligated to make a capital contribution to the Company in an
amount equal to the redemption price the Company is required to pay. In the
event Savia fails to make this capital contribution or the Company fails to
complete any redemption, whether or not Savia makes the capital contribution,
the holders of Old Class B Redeemable Common Stock will be entitled to 100 votes
per share and to elect a majority of the board of directors.
In January 1998, the Company repurchased 11,319 shares of Old Class B
Redeemable Common Stock from the former Ball stockholders for $211,824. Such
shares were canceled upon repurchase. Prior to this transaction, Savia purchased
3,895 shares of Old Class B Redeemable Common Stock from the former Ball
stockholders at the same price of $18.71 per share. Such shares remain
outstanding.
CLASS A COMMON STOCK
The Company is authorized to issue up to 91,000 shares of Class A Common
Stock. No shares have been issued, however, 3,677 shares were reserved for
issuance for options granted to employees in fiscal year 1998. Class A Common
Stock is entitled to one vote per share.
CLASS B COMMON STOCK
Following the Ball Merger, Savia owned all 30,000 outstanding shares of
the Company's Class B Common Stock. Holders of the Class B Common Stock are
entitled to three votes per share.
During fiscal year 1998, the Company issued 7,386 shares of Class B Common
Stock to Savia or its affiliates for cash in the amount of $138,200. The share
price of $18.71 was based on the fair market value of the Company at the time of
the transaction.
CLASS C PREFERRED STOCK (UNAUDITED)
The Company is authorized to issue up to 6 shares of its Class C Preferred
Stock. In
F-19
<PAGE> 85
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
December 1998, Savia made an equity
investment in Seminis of $10,000 in exchange for 1 shares of Class C Preferred
Stock to finance the purchase of shares of Hungnong which Seminis was obligated
to purchase from the minority shareholders of Hungnong in connection with the
acquisition of Hungnong and to provide working capital. In March 1999, Savia
made an additional equity investment in Seminis of $20,000 in exchange for 2
shares of Class C Preferred Stock to finance working capital requirements.
Shares of Class C Preferred Stock have no voting rights and are redeemable
at the option of the Company. Dividends accrue cumulatively at the rate of 10%
per year and are payable quarterly. Dividends payable through January 2001 are
payable by issuing additional fully paid and non assessable shares of Class C
Preferred Stock.
NOTE 10--INCOME TAXES
Consolidated pre-tax income (loss) consists of the following:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
U.S. operations............................... $(82,596) $(18,455) $(28,771)
Foreign operations............................ (4,890) 33,619 38,969
-------- -------- --------
$(87,486) $ 15,164 $ 10,198
======== ======== ========
</TABLE>
The expense (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1997 1998
Current: ---- ---- ----
<S> <C> <C> <C>
Federal..................................... $ (1,479) $ (7,420) $ (7,049)
State....................................... 582 (833) (691)
Foreign..................................... 9,221 6,571 11,284
-------- -------- --------
8,324 (1,682) 3,544
-------- -------- --------
Deferred:
Federal..................................... (26,168) (306) (2,833)
State....................................... (2,457) 27 (264)
Foreign..................................... (11,100) 5,800 2,989
-------- -------- --------
(39,725) 5,521 (108)
-------- -------- --------
$(31,401) $ 3,839 $ 3,436
======== ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax
F-20
<PAGE> 86
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
assets and liabilities as of September 30, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Reserve for doubtful accounts............................. $ 1,573 $ 3,902
Inventories............................................... 5,149 7,492
Other accruals............................................ 6,977 6,698
Net operating loss carryforwards and other credits........ 11,040 8,154
-------- --------
Total deferred tax assets......................... 24,739 26,246
Valuation allowance....................................... (5,610) (7,246)
-------- --------
Net deferred tax assets........................... 19,129 19,000
-------- --------
Deferred tax liabilities:
Depreciation and amortization............................. (30,021) (42,212)
Accrued taxes on undistributed foreign earnings........... (9,693) (11,638)
-------- --------
Total deferred tax liabilities.................... (39,714) (53,850)
-------- --------
$(20,585) $(34,850)
======== ========
</TABLE>
The valuation adjustment for deferred tax assets as of September 30, 1998
and September 30, 1997 was $7,246 and $5,610, respectively. The net change in
the total valuation allowance for the years ended September 30, 1998 and
September 30, 1997 was an increase of $1,636 and a decrease of $2,154,
respectively.
The Company's net operating loss carryforwards balance primarily relates
to a Netherlands net operating loss carryforward that has an indefinite life.
Based on management's assessment, it is more likely than not that the net
deferred tax assets will be realized through future taxable earnings or
alternative tax strategies.
The Company provides for Federal income taxes on the undistributed
earnings of certain foreign subsidiaries. The earnings for all other foreign
subsidiaries will only be distributed to the United States to the extent any
Federal income tax can be fully offset by foreign tax credits.
The expense (benefit) for income taxes varies from income taxes based on
the federal statutory rate as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Income tax at statutory Federal rate............... $(30,400) $ 5,311 $ 3,569
State and local income tax benefit, net of Federal
income tax effect................................ (2,617) (334) (180)
Research and other tax credits..................... (1,003) (1,083) (977)
Foreign earnings taxed at different rates.......... 1,552 969 959
Net reduction in valuation allowances.............. -- (1,303) (1,009)
</TABLE>
F-21
<PAGE> 87
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Goodwill amortization.............................. 152 239 825
Other.............................................. 915 40 249
-------- ------- -------
$(31,401) $ 3,839 $ 3,436
======== ======= =======
</TABLE>
NOTE 11--EMPLOYEE BENEFITS
PENSION PLANS
U.S. PLANS. The Company maintains a Company-sponsored defined contribution
savings plan covering eligible employees. Company contributions are based on a
percentage of employee contributions and on employee salaries. Company
contributions totaled $665, $1,797 and $2,050 in fiscal years 1996, 1997 and
1998, respectively. The Company also maintains a qualified profit sharing plan.
Annual contributions are made at the discretion of the Company's board of
directors and totaled $899, $1,660 and $1,284, in fiscal years 1996, 1997 and
1998, respectively.
FOREIGN PLANS. In accordance with the local statutory requirements, the
Company sponsors retirement and severance plans at several of its foreign
locations. The Company has recorded an accrual of $3,405 at September 30, 1997
and $10,509 at September 30, 1998 for anticipated payments to be made to foreign
employees upon retirement or termination.
The Company provides defined-benefit pension plans in certain foreign
countries where required by statute. The Company's funding policy for foreign
defined-benefit plans is consistent with the local requirements in each country.
The funded status of these plans as of September 30, 1997 and 1998 was as
follows:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Vested benefit obligation................................... $24,455 $28,090
======= =======
Accumulated benefit obligation.............................. $24,455 $28,090
======= =======
Projected benefit obligation................................ $32,606 $39,356
Fair market value of plan assets............................ 31,323 36,712
------- -------
Projected benefit obligations in excess of plan assets...... (1,283) (2,644)
Unrecognized net loss....................................... 4,377 7,035
------- -------
Prepaid pension asset....................................... $ 3,094 $ 4,391
======= =======
</TABLE>
F-22
<PAGE> 88
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The components of net pension expense for the foreign plans, based on the
most recent valuation dates, were as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Service cost........................................ $ 1,764 $ 1,069 $ 1,096
Interest cost....................................... 1,817 1,908 1,956
Actual gain on plan assets.......................... (1,908) (2,291) (1,596)
Net amortization and deferral....................... 221 156 (593)
------- ------- -------
$1,894.. $ 842 $ 863
======= ======= =======
</TABLE>
Assumptions used in the above calculations were as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Weighted-average discount rate.............................. 6.0% 6.0% 6.0%
Rate of future compensation increases....................... 4.0 4.0 4.0
Long-term rate of return on plan assets..................... 7.5 7.5 7.5
</TABLE>
STOCK OPTION PLAN
In 1998, the Company adopted the Seminis 1998 Stock Option Plan (the
"Stock Option Plan") under which key employees and those who will become key
employees may be granted options to purchase shares of the Company's authorized
but unissued Class A Common Stock. The board of directors reserved 3,677 shares
for issuance under the plan and, in July 1998, awarded options to acquire 267
shares by plan participants at $18.71 per share (Note 9). Under the Stock Option
Plan, the option exercise price is equal to fair market value at the date of
grant, as determined by independent appraisal.
Options currently expire no later than ten years from the grant date and
generally vest over four years. Proceeds received by the Company from exercises
will be credited to common stock and additional paid-in capital.
Stock option plan activity during the fiscal year was as follows:
<TABLE>
<CAPTION>
OPTIONS GRANTED
SHARES ---------------------
AVAILABLE NUMBER EXERCISE
FOR OPTIONS OF SHARES PRICE
----------- --------- --------
<S> <C> <C> <C>
Reserved..................................... 3,677 -- $ --
Grants....................................... (267) 267 18.71
Exercises.................................... -- -- --
Cancellations................................ -- -- --
----- --- ------
September 30, 1998........................... 3,410 267 $18.71
===== === ======
</TABLE>
As of September 30, 1998, no options were exercisable. Options outstanding
at September 30, 1998 will expire if not exercised on or before June 30, 2008.
F-23
<PAGE> 89
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro forma information regarding net income is required by SFAS No. 123.
This information is required to be determined as if the Company had accounted
for its employee stock options granted under the fair market value method of
that statement. The fair market value of options granted in fiscal year 1998 was
$16.41 per share using a minimum value method assuming a risk-free interest rate
of 5.48%, an expected life of four years and no projected dividend yields.
Unlike other permitted option pricing models, the minimum value method excludes
stock price volatility, which cannot be reasonably estimated for the Company.
For purposes of pro forma disclosures, the estimated fair market value of
the options is amortized to expense over the options' vesting periods. There is
no difference in net loss per share in applying the pro forma provisions of SFAS
No. 123 for the year ended September 30, 1998.
NOTE 12--COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases land, buildings, machinery and equipment under
operating leases. Rental expenses aggregated approximately $8,080, $6,685 and
$9,788 in fiscal years 1996, 1997 and 1998, respectively.
Minimum annual lease commitments under non-cancelable operating leases at
September 30, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30
- ------------
<S> <C>
1999............................. $3,779
2000............................. 1,916
2001............................. 678
2002............................. 368
2003............................. 218
Thereafter........................ 643
------
$7,602
======
</TABLE>
CONTINGENCIES
The Company has been named as a defendant in various lawsuits arising out
of alleged seedmen's errors and omissions. The Company maintains third-party
seedsmen's errors and omissions insurance covering these types of claims, thus
policies are subject to annual renewal and revisions and house deductibles and
coverage limits. An accrual for management's estimate of exposure related to
such claims has been recorded in the financial statements and is disclosed in
Note 7. It is the opinion of management that the ultimate resolution of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
Historically, resolution of asserted claims has been in line with
management's expectations.
NOTE 13--DISCONTINUED OPERATIONS
At the time Asgrow was purchased from the Upjohn Company in 1995, the
Company operated in two distinct business segments, Vegetable Seeds and
Agronomics Seeds (the "Agronomics Segment"). On October 1, 1996, management
elected to dispose of its Agronomics Segment and on January 31, 1997, the
Agronomics Segment was sold to Monsanto for a gross sales price of $240,000. As
a result of this transaction, the Agronomics Segment has been accounted for as a
discontinued operation and, accordingly, its operations are segregated in the
accompanying statements of operations. Net revenues for the Agronomics Segment
were $194,074 and $77,637 in fiscal years 1996 and 1997, respectively.
F-24
<PAGE> 90
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 14--GEOGRAPHIC INFORMATION
The Company operates principally in one business segment consisting of the
development, production and marketing of vegetable and fruit seeds. Revenues
derived from sales to external customers attributed to the Company's country of
domicile, to individual countries representing more than 10% of the Company's
consolidated net sales and to all other foreign countries in total are
summarized as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net sales
United States................................. $113,164 $117,015 $132,274
Italy......................................... 48,779 47,411 47,376
Spain......................................... 24,433 22,891 24,749
Mexico........................................ 23,625 28,637 31,355
Other foreign................................. 171,397 163,590 192,669
-------- -------- --------
Consolidated net sales..................... $381,398 $379,544 $428,423
======== ======== ========
</TABLE>
Long-lived assets other than financial instruments and deferred tax assets
located in the Company's country of domicile, located in individual foreign
countries representing more than 10% of the Company's consolidated long-lived
assets and located in all other foreign countries in total in which the Company
holds assets are summarized as follows:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Long-lived assets
United States............................................. $116,704 $152,242
The Netherlands........................................... 44,006 43,032
South Korea............................................... -- 156,974
Other foreign............................................. 46,530 56,014
-------- --------
Consolidated long-lived assets......................... $207,240 $408,262
======== ========
</TABLE>
NOTE 15--RELATED PARTIES
Balances and transactions with related parties included in the
consolidated financial statements are as follows:
a) Research and development expenses include $2,500 in both fiscal years
1997 and 1998 in biotechnology research fees incurred pursuant to an
agreement between the Company and Bionova Holding Corporation, a
publicly traded company. Savia is the majority stockholder in Bionova.
b) Operating expenses for fiscal years 1997 and 1998 include $6,200 and
$8,465, respectively, in management fees paid to Savia.
c) Gain on disposal of the Agronomics Segment includes $8,000 in fees paid
in fiscal year 1997 to Savia for investment banking and other
professional fees and services provided in connection with the sale.
d) Convertible subordinated debt of $35,857 at September 30, 1998 is
payable to Savia, bears interest at 10% per year and was due in
installments of $7,000 in July 1999, $7,000 in July 2000 and $21,857 in
F-25
<PAGE> 91
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
July 2001. Advances to Young Il Chemical Company (Note 2) secured the
convertible subordinated debt. On February 1, 1999, the convertible
subordinated debt was converted into 1,916 shares of Class B Common
Stock at $18.71 per share.
e) Other accrued liabilities at September 30, 1998 include $2,286
representing accrued management fees and interest on the subordinated
debt.
f) Unaudited -- In December 1998, Savia made an equity investment in the
Company of $10,000 in exchange for 1 shares of Class C Preferred Stock
to finance the purchase of shares of Hungnong which the Company was
obligated to purchase from the minority shareholders of Hungnong in
connection with the acquisition of Hungnong and to provide working
capital. Through April 1999 an additional 0.0338 shares of Class C
Preferred Stock has been issued as dividends.
g) Unaudited -- In January 1999, Seminis borrowed $20,000 from Savia as an
intercompany advance to finance working capital requirements. This
intercompany advance bears interest at 10.0% per year.
h) Unaudited -- In March 1999, Savia made an additional equity investment
in the Company of $20,000 in exchange for 2 shares of Class C Preferred
Stock to finance working capital requirements.
NOTE 16--RECAPITALIZATION
Prior to the effective date of the registration statement, the board of
directors of Seminis, Inc., an Illinois corporation, authorized the
reincorporation of the Company in Delaware. In conjunction with the
reincorporation, the holders of certain securities agreed to a plan for the
recapitalization of the Company (the "Recapitalization") to occur concurrently.
The Recapitalization provides for the exchange of shares of the Illinois
corporation for shares of the Delaware corporation as follows: (i) all preferred
stock is to be exchanged for like preferred stock; (ii) all 6,772 shares of
Class B Redeemable Common Stock ("Old Class B Redeemable Common Stock") are to
be converted into one-half the number of such shares of Class B Common Stock;
(iii) all Class A Common Stock is to be exchanged for one-half the number of
such shares of Class B Common Stock; and (iv) all options to purchase Class C
Common Stock are to be exchanged for options to purchase Class A Common Stock.
Immediately following the Recapitalization, the Company shall pay a 1-for-1
stock dividend to all holders of Class B Common Stock. These consolidated
financial statements reflect the pending Recapitalization and stock dividend as
described above with the exception of the conversion of Old Class B Redeemable
Common Stock into Class B Common Stock.
The unaudited pro forma information presented in the consolidated balance
sheet at March 31, 1999 reflects the conversion of Old Class B Redeemable Common
Stock into Class B Common Stock as if the conversion had occurred on March 31,
1999.
NOTE 17--SUBSEQUENT EVENT--CURRENT CREDIT AGREEMENT (UNAUDITED)
On April 30, 1999 Seminis entered into a credit agreement (the "Current
Credit Agreement") with Bank of Montreal and Harris Trust and Savings Bank which
includes a $445,000 secured term loan and a $28,000 secured revolving credit
facility. The Company borrowed $473,000 under the Current Credit Agreement to
repay the $10,000 bank demand note and $439,225 outstanding under Seminis' old
credit agreement. The remaining $23,775 of borrowings were for payment of loan
origination fees of $5,250 and working
F-26
<PAGE> 92
SEMINIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
capital. The loan origination fees relating to the Current Credit Agreement were
capitalized and will be amortized as interest expense using the straight line
method over the term of the agreement. Unamortized loan fees of $6,408 relating
to the old Credit Facility were charged to operations as an extraordinary item
of $3,973, net of tax.
The Company, at its option, may elect to pay interest on the Current
Credit Agreement borrowings based on either LIBOR plus defined margins of 4%
through June 30, 1999, 5% from July 1, 1999 through August 30, 1999 and 6%
thereafter until maturity on June 30, 2000, or the prime rate plus defined
margins of 2.5% through June 30, 1999, 3.5% from July 1, 1999 through August 30,
1999 and 4.5% thereafter until maturity on June 30, 2000. The Company is
required to pay a commitment fee of 0.5% on the unused portion of the revolving
line of credit.
Under the Current Credit Agreement the Company is required to apply the
net proceeds of debt or equity offerings to repay borrowings outstanding. The
Company is required to meet a minimum interest coverage ratio and a minimum net
worth test. The Current Credit Agreement also places limits on dividends,
foreign debt, leasing, capital expenditures, transactions with affiliates and
acquisitions.
If the Current Credit Agreement is not repaid by July 31, 1999, Seminis is
required to pay a non-refundable fee of 3% of the used and unused portions, as
defined in the agreement, of the revolving credit and term loan portions of the
Current Credit Agreement and issue to the lenders warrants to purchase, at a
nominal price, shares of Seminis' common stock aggregating 3% of the outstanding
shares of common stock on July 31, 1999, determined on a fully diluted basis. As
part of the use of proceeds from the offering and funds available under the new
credit facility, the Company will repay all borrowings under the Current Credit
Agreement.
On May 6, 1999, Seminis entered into a commitment letter with Bank of
Montreal and Harris Trust and Savings Bank providing for an underwritten credit
facility. Seminis anticipates that the new credit facility will be an unsecured
credit facility for $350.0 million, consisting of a term loan in the amount of
$200.0 million and a revolving line of credit in the amount of $150.0 million.
The term loan will amortize semi-annually with the balance due on June 30, 2004
and the revolving line of credit will mature on June 30, 2004. Seminis
anticipates that the new credit facility will bear interest in accordance with a
grid pricing formula based on the achievement of a specific debt ratio, with
such interest ranging from the prime rate to the prime rate plus 0.5% or, at the
option of Seminis, ranging from LIBOR plus 1.25% to LIBOR plus 2.0%. Seminis
will also pay commitment fees quarterly on the unused amount of the revolver.
Seminis expects the new credit facility to contain a number of financial
covenants, including net worth and indebtedness tests, and limitations on its
ability to make acquisitions, transfer or sell assets, create liens, pay
dividends, enter into transactions with its affiliates or enter into a merger,
consolidation or sale of substantially all of its assets, among other actions.
The new credit facility may be secured, depending upon the amount of net
proceeds of the offering and Seminis' debt ratio after the offering. Seminis
also expects that its new credit facility will provide for events of default
typical of facilities of its type, as well as an event of default if Pulsar
Internacional, S.A. de C.V., together with its affiliates, which includes Savia,
fails to hold a majority of the board of directors or direct the management of
Seminis or control at least 51% of the voting rights of Seminis.
F-27
<PAGE> 93
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Hungnong Seed Co., Ltd
We have audited the accompanying consolidated balance sheet of Hungnong
Seed Co., Ltd and its subsidiaries (collectively referred to as the "Company")
as of December 31, 1997 and the related consolidated statements of operations,
of stockholders' equity and of cash flows for the year then ended (all expressed
in South Korean Won). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1997, and the results of its operations and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
As described in Note 1, the Company's functional currency is the South
Korean Won, however, solely for the convenience of readers outside of South
Korea, the consolidated financial statements have been translated into U.S.
dollars. Our audits examined the translation of the South Korean Won amounts
into U.S. dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 1.
As described in Note 1, in July 1998, Seminis, Inc. acquired a controlling
interest in the Company.
As described in Note 1, the consolidated statements of operations and of
cash flows for the six month period ended June 30, 1998 are unaudited and are
presented solely for comparative purposes.
SEONJIN ACCOUNTING CORPORATION
Seoul, South Korea
October 28, 1998
F-28
<PAGE> 94
HUNGNONG SEED CO., LTD
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
(in thousands of U.S.
dollars, except per
share data)
<S> <C>
ASSETS:
Current assets
Cash and cash equivalents................................. $ 2,144
Marketable securities..................................... 422
Accounts receivable, less allowance for doubtful accounts
of $2,250.............................................. 10,023
Inventories............................................... 22,272
Prepaid expenses and other current assets................. 1,951
--------
Total current assets.............................. 36,812
Property, plant and equipment, net.......................... 19,488
Deferred income taxes....................................... 3,175
Other assets................................................ 7,001
--------
Total assets...................................... $ 66,476
========
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities
Short-term borrowings (includes $6,700 due to related
party)................................................. $ 37,277
Current maturities of long-term debt...................... 11,839
Accounts payable.......................................... 3,833
Accrued liabilities....................................... 22,486
--------
Total current liabilities......................... 75,435
Long-term debt, net of current maturities................... 18,167
Minority interest in subsidiaries........................... 453
Net obligations of discontinued operations.................. 5,395
--------
Total liabilities................................. 99,450
--------
Commitments and contingencies (Note 8)
Stockholders' deficit
Common stock, $6.34 par value; 2,000 shares authorized;
1,000 shares issued and outstanding.................... 6,340
Accumulated deficit....................................... (59,363)
Unrealized loss on marketable securities.................. (1,294)
Foreign currency translation.............................. 21,343
--------
Total stockholders' deficit....................... (32,974)
--------
Total liabilities and stockholders' deficit....... $ 66,476
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-29
<PAGE> 95
HUNGNONG SEED CO., LTD
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
(unaudited)
(in thousands of U.S. dollars)
<S> <C> <C>
Net sales......................................... $ 58,126 $17,317
Cost of goods sold................................ 26,531 8,258
-------- -------
Gross profit............................ 31,595 9,059
-------- -------
Operating expenses
Research and development expenses............... 4,514 1,326
Selling, general and administrative expenses.... 23,406 5,771
-------- -------
Total operating expenses................ 27,920 7,097
-------- -------
Income from continuing operations................. 3,675 1,962
Other income (expense)
Interest income................................. 1,436 341
Interest expense................................ (13,749) (6,540)
Foreign currency gain (loss).................... 1,340 (433)
Minority interest............................... (428) (116)
Other, net...................................... (257) (519)
-------- -------
(11,658) (7,267)
-------- -------
Loss from continuing operations before income
taxes........................................... (7,983) (5,305)
Income tax benefit................................ 282 1,060
-------- -------
Loss from continuing operations................... (7,701) (4,245)
-------- -------
Discontinued operations (Note 9):
Loss from operations before income taxes........ (10,698) (2,016)
Income tax benefit.............................. -- --
-------- -------
Loss from discontinued operations............ (10,698) (2,016)
-------- -------
Net loss.......................................... $(18,399) $(6,261)
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE> 96
HUNGNONG SEED CO., LTD
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK LOSS ON FOREIGN TOTAL
--------------- ACCUMULATED MARKETABLE CURRENCY STOCKHOLDERS'
NUMBER AMOUNT DEFICIT SECURITIES TRANSLATION DEFICIT
------ ------ ----------- ---------- ----------- -------------
(in thousands of U.S. dollars, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996...... 1,000 $6,340 $(40,964) $ (857) $ (129) $(35,610)
Net loss........................ (18,399) (18,399)
Unrealized loss on marketable
securities.................... (783) (783)
Foreign currency translation.... 346 21,472 21,818
----- ------ -------- ------- ------- --------
Balance, December 31, 1997...... 1,000 $6,340 $(59,363) $(1,294) $21,343 $(32,974)
===== ====== ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE> 97
HUNGNONG SEED CO., LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1997 JUNE 30, 1998
------------ -------------
(unaudited)
(in thousands of U.S.
dollars)
<S> <C> <C>
Cash flows from operating activities Net loss.............. $(18,399) $ (6,261)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 1,450 419
Deferred income tax benefit........................... (2,164) (1,165)
Net loss from discontinued operations................. 10,698 2,016
Minority interest..................................... 428 116
Other................................................. 701 333
Changes in assets and liabilities
Accounts receivable................................. (3,773) 3,240
Inventories......................................... (5,295) (454)
Prepaid expenses and other assets................... 1,307 1,013
Accounts payable.................................... (1,672) (1,793)
Accrued liabilities................................. 7,332 (9,320)
-------- --------
Net cash used in operating activities............ (9,387) (11,856)
-------- --------
Cash flows from investing activities
Purchases of fixed assets................................ (2,199) (633)
Proceeds from disposition of assets...................... 1,727 165
Other assets............................................. (216) 2,078
Discontinued operations advances account................. (3,217) (4,429)
-------- --------
Net cash used in investing activities............ (3,905) (2,819)
-------- --------
Cash flows from financing activities
Proceeds from long-term debt............................. 18,280 8,797
Repayments of long-term debt............................. (8,655) (212)
Net short-term borrowings................................ 224 6,141
-------- --------
Net cash provided by financing activities........ 9,849 14,726
-------- --------
Effect of exchange rate changes on cash.................... (1,879) 49
-------- --------
(Decrease) increase in cash and cash equivalents........... (5,322) 100
Cash and cash equivalents, beginning of period............. 7,466 2,144
-------- --------
Cash and cash equivalents, end of period................... $ 2,144 $ 2,244
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE> 98
HUNGNONG SEED CO., LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS)
NOTE 1-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND CHANGE IN OWNERSHIP
Hungnong Seed Co., Ltd ("Hungnong") is a South Korean-based vegetable seed
company. As of December 31, 1997, the shares of Hungnong were primarily held by
certain members of a Korean family (the "Korean Family"). In July 1998, Seminis,
Inc., an Illinois Corporation hereinafter referred to as Seminis, purchased 70%
of the outstanding shares of Hungnong from the Korean Family (the "Seminis
Acquisition"). See Note 10 for further discussion of the Seminis Acquisition.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The Company's consolidated financial statements included herein have been
prepared in accordance with accounting principles generally accepted in the
United States of America and include the accounts of Hungnong Seed Co., Ltd and
its majority controlled and owned subsidiaries ("the Company"). All material
intercompany transactions and balances have been eliminated in consolidation.
See Note 9 for discussion of the Company's discontinued operations.
The Company's functional currency is the South Korean Won and the
Company's monetary accounts are predominately denominated in South Korean Won.
The consolidated financial statements have been translated into U.S. dollar
amounts in accordance with the provisions of Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation."
To enhance the comparability of the financial information, consolidated
statements of operations and of cash flows for the six months ended June 30,
1998, which are unaudited, are presented with those for the year ended December
31, 1997.
The preparation of financial statements in conformity with generally
accepted accounting principles in the U.S. requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the fiscal year, including customer returns and allowances.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Product sales are recognized upon shipment of goods and are reduced by
management's estimates for the effect of discounts and allowances. Customer
payments received in advance of shipment are recorded as advances from
customers.
CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents all highly liquid investments
purchased with an original maturity of three months or less. The Company invests
its excess cash in deposits with financial institutions. Such investments are
considered cash equivalents for purposes of reporting cash flows and bear
minimal risk.
MARKETABLE SECURITIES
The Company considers its investment portfolio available-for-sale as
defined in Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" and accordingly, these
investments are recorded at fair value. Adjustments for changes in unrealized
appreciation or depreciation are recorded as Unrealized Loss on Marketable
Securities in the Statement of Stockholders' Deficit.
ACCOUNTS RECEIVABLE
Accounts receivable are recorded net of reserves for bad debts, discounts
and
F-33
<PAGE> 99
HUNGNONG SEED CO., LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
allowances. Determination of reserves are based on historical experience and
anticipated market conditions and are adjusted by management as deemed
necessary. The Company performs ongoing credit evaluations of its customers'
financial condition and does not require collateral. The Company's diversified
customer base limits the amount of credit exposure to any one customer.
INVENTORIES
Inventories are stated at the lower of cost or estimated realizable value.
Costs for inventories are determined using the average cost method and include
the costs of materials, direct labor and the applicable share of overhead costs.
Unharvested crop-growing costs are included as part of inventory cost and
represent costs incurred to plan and maintain seed crops that will be harvested
during the subsequent fiscal year. Inventories are periodically reviewed and
reserves established for deteriorated, excess and obsolete items.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Provisions for
depreciation of plant and equipment have been made using the straight-line and
accelerated method for financial reporting and tax purposes. Estimated useful
lives generally range from 8 to 40 years for buildings and improvements, from 5
to 18 years for machinery and equipment and from 3 to 20 years for office
furniture and equipment.
SEVERANCE AND RETIREMENT BENEFITS
In accordance with South Korean law, employees who have been with the
Company for more than one year are entitled to lump-sum payments based on
current rates of pay and length of service when they leave the Company. The
Company's liability as of December 31, 1997 for these benefits is included in
accrued liabilities.
RESEARCH AND DEVELOPMENT AND OTHER COSTS
Research and development costs are charged to operations as incurred.
SUPPLEMENTARY CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1997
-------
<S> <C>
Cash paid for interest............ $13,947
Cash paid for income taxes........ $ 1,852
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, inventories and debt. These balances are carried in the financial
statements at amounts that approximate fair value unless separately disclosed in
the Notes to Consolidated Financial Statements.
RELATED PARTIES
Balances and transactions with related parties that are included in the
consolidated financial statements are not material except for short-term
borrowings from shareholders of $6,700 which accrues interest at 15% and was
repaid in July 1998.
NOTE 2--INVENTORIES
Inventories as of December 31, 1997 are comprised of the following:
<TABLE>
<S> <C>
Seed........................................................ $19,033
Unharvested crop-growing costs.............................. 1,714
Supplies.................................................... 1,525
-------
Total inventories................................. $22,272
=======
</TABLE>
F-34
<PAGE> 100
HUNGNONG SEED CO., LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
NOTE 3--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1997 includes the following:
<TABLE>
<S> <C>
Land and improvements....................................... $ 5,839
Building and improvements................................... 18,413
Machinery and equipment..................................... 3,693
-------
Total cost........................................ 27,945
Accumulated depreciation.......................... (8,457)
-------
Net property, plant and equipment............ $19,488
=======
</TABLE>
NOTE 4--OTHER ASSETS
Other assets as of December 31, 1997 consist of the following:
<TABLE>
<S> <C>
Restricted cash and deposits................................ $2,371
Restricted deposit for payments of retirement benefits...... 2,860
Long-term bank deposits..................................... 1,483
Other....................................................... 287
------
$7,001
======
</TABLE>
Restricted cash and deposits consist primarily of cash advanced to
financial institutions as per certain borrowing agreements. Restricted deposits
for payment of retirement benefits consist primarily of advances to financial
institutions to be used to settle Company severance obligations.
NOTE 5--ACCRUED LIABILITIES
Accrued liabilities as of December 31, 1997 consist of the following:
<TABLE>
<S> <C>
Accrued severance and other................................. $ 6,667
Advances from customers..................................... 7,296
Seedmen's errors and omissions liability.................... 3,230
Other....................................................... 5,293
-------
$22,486
=======
</TABLE>
NOTE 6--DEBT
Short-term borrowings as of December 31, 1997 consist primarily of
borrowings from various South Korean financial institutions. Interest accrues at
fixed interest rates ranging from 10% to 42%.
Except for the non-South Korean Won borrowings of $1,798 below, long-term
debt consist of South Korean Won borrowings which were translated to U.S.
dollars using an exchange rate of 1,415 South Korean Won to 1 U.S. Dollar.
Substantially all loans are secured by the Company's assets. Long-term
F-35
<PAGE> 101
HUNGNONG SEED CO., LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
debt as of December 31, 1997 consist of the
following:
<TABLE>
<S> <C>
9.0%-13.25% bank borrowings due 1998 through 2000........... $ 7,809
11.5% bank loan due in 1998................................. 5,654
5.0% South Korean government research loans due 1998 through
2007...................................................... 1,553
8.0%-8.8% non-South Korean Won borrowings due 2001 through
2005...................................................... 1,798
10.0%-13.0% subordinated debentures due 1998 through 2000... 13,192
--------
30,006
Less current portion................................... (11,839)
--------
$ 18,167
========
</TABLE>
For the year ended December 31, 1997 the Company incurred interest at a
weighted-average rate of 14% per annum on its outstanding borrowings.
As of December 31, 1997, long-term debt matures as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31:
- ------------
<S> <C>
1998............................ $11,839
1999............................ 8,995
2000............................ 6,271
2001............................ 596
2002............................ 591
Thereafter........................ 1,714
-------
$30,006
=======
</TABLE>
In July 1998, the Company significantly reduced its short-term borrowings
and long-term debt through the issuance of common stock and borrowings from
Seminis, Inc. in conjunction with the Seminis Acquisition. See Note 10 for
further discussion on the Seminis Acquisition.
NOTE 7--INCOME TAXES
The benefit for income taxes consists of the following:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Current expense................... $(1,840)
Deferred benefit.................. 2,122
-------
Income tax benefit................ $ 282
=======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant
F-36
<PAGE> 102
HUNGNONG SEED CO., LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
components of the Company's deferred tax
accounts are as follows:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Deferred tax assets:
Accounts receivable....................................... $ 1,981
Accrued liabilities....................................... 1,758
Research and development costs............................ 580
Fixed assets.............................................. 1,246
Other, net................................................ 4
-------
Deferred tax assets............................... 5,569
Deferred tax asset valuation allowance...................... (2,394)
-------
Net deferred tax asset............................ $ 3,175
=======
</TABLE>
Management believes net deferred tax assets will be realized through
future taxable earnings or alternative tax strategies.
As of December 31, 1997, the Company's Chinese subsidiary had unremitted
earnings of $1,253. The Company has not made a South Korean tax provision on
these unremitted earnings as such undistributed earnings are expected to be
reinvested indefinitely in China.
A reconciliation of the income tax benefit at the statutory income tax
rate and the recorded income tax benefit for the year ended December 31, 1997 is
as follows:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Income tax benefit at South Korean statutory rate........... $2,327
Unrealizable deferred tax assets............................ (1,824)
Foreign tax rate differential............................... (199)
Other, net.................................................. (22)
------
$ 282
======
</TABLE>
NOTE 8--COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
The Company leases land, buildings, machinery and equipment under
operating leases. Rental expenses aggregated approximately $633 for the year
ended December 31, 1997.
Minimum annual lease commitments under existing non-cancelable operating
leases as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31:
- ------------
<S> <C>
1998............................... $375
1999............................... 309
2000............................... 156
2001............................... 6
----
$846
====
</TABLE>
F-37
<PAGE> 103
HUNGNONG SEED CO., LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
CONTINGENCIES
The Company has been named as a defendant in various lawsuits arising out
of alleged seedmen's errors and omissions. An accrual related to such claims has
been recorded in the financial statements based on management's estimate of the
ultimate resolution of these matters.
NOTE 9--DISCONTINUED OPERATIONS
As part of its strategy and plan of acquisition of the Company, in July
1998, Seminis discontinued the Company's non-vegetable seed operations. The
non-seed operations primarily include Handock Electronics, a South Korean based
automotive parts supplier and Hungnong Industrial, a South Korean based
agricultural equipment manufacturer. The non-vegetable seed operations are
accounted for as discontinued operations, and accordingly, their operations are
segregated in the accompanying Consolidated Statement of Operations. The
accompanying Consolidated Balance Sheet has also been restated to separately
reflect the net obligations of discontinued operations.
Net sales of discontinued operations were approximately $19,742 and $5,145
for the year ended December 31, 1997 and six months ended June 30, 1998
(unaudited), respectively. Seminis plans to wind down operations by June 1999.
NOTE 10--SUBSEQUENT EVENT
SEMINIS ACQUISITION
In July 1998, Seminis acquired 70% of the shares of the Company through
the purchase of 1,428,000 newly issued shares of the Company (for cash in the
amount of $82,537) and 271,585 previously issued shares from the South Korean
Family. Below is the Hungnong share ownership prior to and after the Seminis
Acquisition.
<TABLE>
<CAPTION>
SHARES HELD BY
-----------------------------------
KOREAN
FAMILY SEMINIS TOTAL
------ ------- -----
<S> <C> <C> <C>
As of June 30, 1998......................................... 1,000,000 -- 1,000,000
Company issued shares in July 1998.......................... -- 1,428,000 1,428,000
Seminis July 1998 purchase shares from South Korean
Family.................................................... (271,585) 271,585 --
--------- --------- ---------
As of July 31, 1998......................................... 728,415 1,699,585 2,428,000
========= ========= =========
</TABLE>
F-38
<PAGE> 104
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
Effective July 1, 1998, Seminis acquired for cash certain assets and
assumed certain liabilities of Hungnong Seed Co. in a transaction accounted for
under the purchase method of accounting. The total purchase price paid was
$120,620. A portion of the purchase price was allocated to the net assets
acquired based on their estimated fair market values. The fair market value of
assets acquired and liabilities assumed were $196,176 and $144,513,
respectively. The balance of the purchase price, $68,957, was recorded as excess
of cost over net assets acquired (i.e., goodwill) and is being amortized over 15
years on a straight-line basis. A summary of the purchase price allocation is as
follows:
<TABLE>
<CAPTION>
BOOK FAIR
VALUE ADJUSTMENT VALUE
----- ---------- -----
(in thousands of U.S. dollars)
<S> <C> <C> <C>
Cash and cash equivalents......................... $ 86,687 $ -- $ 86,687
Accounts receivable............................... 12,508 -- 12,508
Inventories....................................... 19,293 -- 19,293
Property, plant and equipment, net................ 21,089 23,148 44,237
Germplasm......................................... -- 27,000 27,000
Goodwill.......................................... -- 68,957 68,957
Other............................................. 6,451 -- 6,451
-------- -------- --------
Total assets............................ 146,028 119,105 265,133
Current liabilities............................... (93,391) -- (93,391)
Non-current liabilities........................... (15,213) (18,555) (33,768)
Minority interest................................. -- (17,354) (17,354)
-------- -------- --------
Net assets acquired..................... $ 37,424 $ 83,196 $120,620
======== ======== ========
</TABLE>
The following unaudited pro forma consolidated results of operations
assume the acquisition was effective October 1, 1997. Seminis' historical
results of operations include the results of operations of Hungnong from the
date of acquisition (July 1, 1998) to September 30, 1998, including the effects
of purchase accounting. Hungnong's historical results of operations represents
its results of operations for the period prior to acquisition (October 1, 1997
through June 30, 1998). Pro forma adjustments are made to reflect those expenses
for the period October 1, 1997 through June 30, 1998 which are recurring in
nature and are not otherwise reflected in the historical results of operations
of either Seminis or Hungnong. As more fully described below and in the Notes to
Seminis' Consolidated Financial Statements, the pro forma adjustments include
the assumed amortization of the effects of purchase accounting adjustments,
assumed interest income from the note receivable from Young II Chemical Company,
the net elimination of interest expense based on Seminis' assumed capitalization
of Hungnong at October 1, 1997, the assumed reduction in interest expense
related to the subordinated debt held by Savia due to conversion to common
shares effective October 1, 1997, assumed minority interest benefit and the
assumed income tax effects of pro forma adjustments.
F-39
<PAGE> 105
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
------------------------ FOR THE FOR THE
SEMINIS(1) HUNGNONG(2) ACQUISITION ACQUISITIONS
---------- ----------- ----------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales................................... $ 428,423 $27,564 $ -- $ 455,987
Cost of goods sold.......................... 162,806 15,028 -- 177,834
--------- ------- ------- ---------
Gross profit....................... 265,617 12,536 -- 278,153
--------- ------- ------- ---------
Operating expenses
Research and development expenses......... 49,416 2,284 -- 51,700
Selling, general and administrative
expenses................................ 158,588 10,740 -- 169,328
Management fees paid to Savia............. 8,465 -- -- 8,465
Amortization of intangible assets......... 14,457 -- 7,528(3) 21,985
--------- ------- ------- ---------
Total operating expenses........... 230,926 13,024 7,528 251,478
--------- ------- ------- ---------
Income (loss) from operations............... 34,691 (488) (7,528) 26,675
Other income (expense)
Interest income........................... 1,952 646 2,689(4) 5,287
Interest expense.......................... (29,034) (9,459) 3,871(5) (34,622)
Foreign currency gain (loss).............. 3,205 (148) -- 3,057
Minority interest......................... (219) (207) 2,942(6) 2,516
Other, net................................ (397) (574) -- (971)
--------- ------- ------- ---------
(24,493) (9,742) 9,502 (24,733)
--------- ------- ------- ---------
Income (loss) from continuing operations
before income taxes....................... 10,198 (10,230) 1,974 1,942
Income tax benefit (expense)................ (3,436) 1,120 (918)(7) (3,234)
--------- ------- ------- ---------
Income (loss) from continuing operations.... $ 6,762 $(9,110) $ 1,056 $ (1,292)
========= ======= ======= =========
Income (loss) from continuing operations
available for common stockholders......... $(133,367) $(9,110) $ 1,056 $(141,421)
========= ======= ======= =========
Loss from continuing operations available
for common stockholders per common
share..................................... $(4.23) $ -- $ -- $ (4.05)
========= ======= ======= =========
Weighted average common shares
outstanding............................... 31,536 -- -- 34,912
========= ======= ======= =========
</TABLE>
- ---------------
(1) Includes results of operations of Hungnong from July 1, 1998.
(2) Reflects operations of Hungnong for the period from October 1, 1997 through
June 30, 1998.
(3) To reflect nine months of amortization of Hungnong purchase accounting
adjustments which include fair value step-ups for intangible assets,
goodwill, and buildings. The intangible assets step-up is being amortized
over approximately a 10 year period on an accelerated basis. The goodwill
and building step-ups are being amortized over approximately 15 and 20 year
periods, respectively, on a straight-line basis.
(4) To reflect assumed interest income from the note receivable from Young II
Chemical Company for the period October 1, 1997 through June 30, 1998. See
Note 2 -- Hungnong Seed Co. Ltd. of Seminis' Notes to Consolidated Financial
Statements for discussion of the note receivable.
F-40
<PAGE> 106
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998 -- (CONTINUED)
(5) To reflect assumed elimination of interest expense of $2,975 due to assumed
capitalization of Hungnong by Seminis effective October 1, 1997 and assumed
reduction of interest expense of $896 related to subordinated debt due to
Savia due to assumed conversion of debt to Class B common shares effective
October 1, 1997. See Note 2 -- Hungnong Seed Co. Ltd. and Note 15 -- Related
Parties of Seminis' Notes to Consolidated Financial Statements for
discussion of the subordinated debt due to Savia.
(6) To reflect assumed allocation of net loss to minority interest based on 30%
minority interest in Hungnong for the nine months ended June 30, 1998,
including applicable pro forma adjustments.
(7) To reflect assumed income tax expense at a 37% effective tax rate applied to
taxable pro forma adjustments.
F-41
<PAGE> 107
GLOSSARY OF TERMS
AGRONOMIC--(1) a description of crop characteristics related to yield,
disease, insect resistance, virus resistance and tolerance to adverse
environmental conditions or (2) related to cereal or oilseed crops.
ARABLE--well-suited for the growing of crops.
GENES--a part of DNA or RNA that contains information needed to make a
particular protein (e.g. an enzyme) or control or influence an inherited
physical trait or activity (e.g. eye color).
GENOMICS--an understanding of the structure and function of the genetic
make-up of plants.
GERMPLASM--the genetic resources used for crop improvements (e.g. plants,
seeds, pollen, DNA).
HYBRID--seeds produced using genetically different parents.
INPUT COSTS--grower costs of production (e.g. fertilizer, crop protection
chemicals).
INPUT TRAITS--genetic traits or characteristics that reduce or eliminate
certain input costs or make crop plants resistant to pests or disease.
OPEN-POLLINATED--seeds produced using a single parent.
OUTPUT TRAITS--genetic traits or characteristics that enhance crop yield,
color, texture, flavor and ready-to-eat convenience.
PHENOTYPICALLY--a visible or detectable characteristic of a plant.
PHYTOSANITARY--plant material that is free of disease.
PLANT BREEDING--the cross-fertilization of two like plants and selection
of desired offspring.
PLANT PATHOLOGY--the study of plant diseases.
TRANSWITCH TECHNOLOGY--complementary, recombinant DNA that prevents gene
function.
G-1
<PAGE> 108
UNDERWRITING
Seminis, Savia and the underwriters for the U.S. offering named below have
entered into an underwriting agreement with respect to the shares being offered
in the United States. Subject to certain conditions, each U.S. underwriter has
severally agreed to purchase the number of shares indicated in the following
table. Goldman, Sachs & Co., J.P. Morgan Securities Inc., ING Baring Furman Selz
LLC, Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc. and VECTORMEX
Incorporated are the representatives of the U.S. underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
J.P. Morgan Securities Inc. ................................
ING Baring Furman Selz LLC..................................
Morgan Stanley & Co. Incorporated...........................
Salomon Smith Barney Inc. ..................................
VECTORMEX Incorporated......................................
-----------
Total..................................................... 11,000,000
===========
</TABLE>
----------------------
If the U.S. underwriters sell more shares than the total number set forth
in the table above, the U.S. underwriters have an option to buy up to an
additional 1,650,000 shares from Seminis to cover such sales. They may exercise
that option for 30 days. If any shares are purchased pursuant to this option,
the U.S. underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the U.S. underwriters by Seminis. Such amounts are
shown assuming both no exercise and full exercise of the U.S. underwriters'
option to purchase additional shares.
<TABLE>
<CAPTION>
Paid by Seminis
---------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Share............ $ $
Total................ $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
Seminis and Savia have entered into underwriting agreements with the
underwriters for the sale of 2,750,000 shares outside of the United States. The
terms and conditions of both offerings are the same and the sale of shares in
both offerings are conditioned on each other. Goldman Sachs International, J.P.
Morgan Securities Ltd., ING Barings Limited as agent for ING Bank N.V., London
Branch, Morgan Stanley & Co. International Limited and Salomon Brothers
International Limited are representatives of the underwriters for the
international offering outside the United States. Seminis has granted the
international underwriters a
U-1
<PAGE> 109
similar option to purchase up to an aggregate of an additional 412,500 shares.
The underwriters for both of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a part of the distribution of the
shares. The underwriters also have agreed that they may sell shares among each
of the underwriting groups.
Seminis and its directors and executive officers, Savia and other
stockholders of Seminis have agreed with the underwriters not to dispose of or
hedge any of their common stock or securities convertible into or exchangeable
for shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, except
with the prior written consent of Goldman, Sachs & Co. This agreement does not
apply to options or shares issued pursuant to Seminis' existing employee benefit
plans. In addition, Seminis may issue shares of common stock to fund future
acquisitions provided that the recipient enters into a similar lock-up
arrangement and Savia may pledge additional shares of common stock to the extent
necessary to comply with its recent borrowings. See "Shares Available for Future
Sale" for a discussion of certain transfer restrictions.
Prior to the offerings, there has been no public market for the shares.
The initial public offering price has been negotiated among Seminis and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be Seminis' historical performance, estimates of the business
potential and earnings prospects of Seminis, an assessment of Seminis'
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
The shares of Class A common stock have been approved for listing, subject
to official notice of issuance, on the Nasdaq National Market under the trading
symbol "SMNS".
In connection with the offerings, the underwriters may purchase and sell
shares of Class A common stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the Class A
common stock while the offerings are in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the Class A common stock. As a result, the price of
the Class A common stock may be higher than the price that otherwise might exist
in the open market. If these activities are commenced, they may be discontinued
by the underwriters at any time. These transactions may be effected on the
Nasdaq National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
Seminis estimates that its share of the total expenses of the offerings,
excluding underwriting discounts and commissions, will be approximately $2.7
million.
Seminis and Savia have agreed to indemnify the several underwriters
against certain liabilities, including liabilities under the Securities Act of
1933. However, Savia's indemnity obligations will not exceed $40.0 million.
At Seminis' request, the underwriters have reserved shares of Class A
common stock for sale to directors, officers, employees and retirees of Seminis
who have
U-2
<PAGE> 110
expressed an interest in participating in the offering. Seminis expects these
persons to purchase no more than 5% of the Class A common stock offered in the
offering. The number of shares available for sale to the general public will be
reduced to the extent such persons purchase such reserved shares.
Alfonso Romo Garza, chairman of the board and director of Seminis and
beneficial owner of approximately 92.9% of the outstanding common stock, is one
of the principal shareholders of VECTORMEX Incorporated. Eugenio Najera
Solorzano, a director of Seminis, is also a director of Vector Casa de Bolsa,
S.A. de C.V., the indirect parent of VECTORMEX Incorporated.
In view of the fact that VECTORMEX Incorporated is an affiliate of
Seminis, the offerings are being conducted in accordance with Conduct Rule 2720
of the National Association of Securities Dealers, Inc., which provides that the
offering price to the public may not be higher than that recommended by a
"qualified independent underwriter" who has participated in the preparation of
the registration statement and prospectus and has exercised the usual standards
of "due diligence" with respect thereto. Goldman, Sachs & Co. has agreed to
serve as "qualified independent underwriter" and the offering price to the
public will not be higher than the price recommended by Goldman, Sachs & Co.
From time to time in the ordinary course of their respective businesses,
certain of the underwriters and their affiliates have engaged in and may in the
future engage in commercial banking and/or investment banking transactions with
Seminis and its affiliates.
This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside of the
United States, to persons located in the United States.
Greenhill & Co., LLC, a National Association of Securities Dealers, Inc.
member, has agreed with Seminis to act as its financial advisor in connection
with the offerings. For these services, Seminis has agreed to pay Greenhill &
Co., LLC an advisory fee of $500,000, a portion of which will be paid to
Greenhill & Co., LLC by the underwriters out of the gross underwriting
discounts. Timothy M. George, a director of Seminis, is also a member and a
Managing Director of Greenhill & Co., LLC.
U-3
<PAGE> 111
[Inside Back Cover]
[Logo of Seminis]
[Logo of Asgrow]
[Logo of Petoseed]
[Logo of Royal Sluis]
[Logo of Bruinsma]
[Logo of California]
[Logo of Choong Ang]
[Logo of Genecorp]
[Logo of Horticeres]
[Logo of Hungnong]
[Logo of LSL PlantScience]
[Logo of Seneca]
<PAGE> 112
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 8
Use of Proceeds........................ 12
Dividend Policy........................ 12
Capitalization......................... 13
Dilution............................... 15
Selected Consolidated Financial Data... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 19
Business............................... 28
Management............................. 48
Principal Stockholders................. 55
Certain Relationships and Related
Transactions......................... 56
Shares Eligible for Future Sale........ 56
Description of Capital Stock........... 57
Legal Matters.......................... 63
Experts................................ 63
Available Information.................. 63
Index to Consolidated Financial
Statements........................... F-1
Glossary of Terms...................... G-1
Underwriting........................... U-1
</TABLE>
----------------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to an unsold allotment or subscription.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
13,750,000 Shares
SEMINIS, INC.
Class A Common Stock
----------------------
[SEMINIS LOGO]
----------------------
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
ING BARING FURMAN SELZ LLC
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
VECTORMEX INCORPORATED
Representatives of the Underwriters
---------------------------------------------------------
---------------------------------------------------------
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- ----------
<S> <C>
SEC Registration Fee $ 94,520
----------
NASD Filing Fee 30,500
----------
Nasdaq National Market Listing Fee 84,875
Blue Sky Fees and Expenses 10,000
Printing Costs 650,000
Transfer Agent Fees 3,500
Legal Fees and Expenses 1,200,000
Accounting Fees and Expenses 450,000
Miscellaneous Costs 184,605
----------
Total $2,708,000
==========
</TABLE>
All amounts are estimated except for the SEC Registration Fee and the NASD fee.
- ---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Seminis is incorporated under the laws of the State of Delaware. Section
145 ("Section 145") of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who is, or
is threatened to be made, a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that such
person's conduct was illegal. A Delaware corporation may indemnify any person
who was, is, or is threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the corporation's best
interests except that no indemnification is permitted without judicial approval
if the officer or director is adjudged to be liable to the corporation. Where an
officer or director is successful on the merits or otherwise in the defense of
any action referred to above, the corporation must indemnify the person against
the expenses which such officer or director has actually and reasonably
incurred.
Seminis' Certificate of Incorporation limits the personal liability of
directors and officers of Seminis for breaches of fiduciary duty to Seminis or
its stockholder, except in certain circumstances including (1) breach of the
duty of loyalty to Seminis or its stockholders, (2) acts or omissions not in
good faith or involving intentional misconduct or a knowing violation of law,
(3) any transaction from which the director derived an improper personal benefit
or (4) under
II-1
<PAGE> 114
Section 174 of the DGCL, which relates to
unlawful payments of dividends or unlawful stock or redemptions.
The By-Laws of Seminis provide that Seminis shall indemnify each person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director or officer of
Seminis or is or was serving, at the request of Seminis, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise to the fullest extent allowed by the DGCL. This right shall
include the right to be paid by Seminis the expenses (including attorney's
fees), in defending any such proceeding in advance of its final disposition.
However, if the DGCL so requires, the advancement of such expenses will only be
made upon the delivery to Seminis of an undertaking by or on behalf of such
person to repay all amounts so advanced if it shall ultimately be determined by
final judicial decision from which there is no further right to appeal that such
person is not entitled to be indemnified for such expenses by Seminis.
In addition, the By-Laws provide that Seminis may maintain insurance to
protect itself and any director, officer, employee or agent of Seminis against
any expense, liability or loss, whether or not Seminis would have the power to
indemnify a person against any expense, liability or loss under the DGCL. The
By-Laws further provide that Seminis may, to the extent permitted by the board
of directors, grant rights to indemnification, and rights to advancement to
expenses, to any employee or agent of Seminis.
Seminis has obtained insurance through Savia for the benefit of Seminis'
officers and directors insuring such persons against certain liabilities,
including liabilities under the securities laws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following provides information as to securities of the Registrant sold
by the Registrant with in the past 36 months which were not registered under the
Securities Act.
Between June 1, 1998 and December 31, 1998, Seminis Illinois granted
267,181 options to purchase shares of Old Class C common stock at an exercise
price of $18.71 per share to certain officers and employees pursuant to the
Seminis, Inc. 1998 Stock Option Plan. As of the date of this prospectus none of
the granted options have been exercised. The issuance of such shares was
effected in reliance on the exemption from registration under Section 4(2) of
the Securities Act.
On July 14, 1998, Seminis sold 7,386,424 shares of Old Class A common
stock to Savia and Asesorias Administrativas Moderna, S.A. de C.V., an affiliate
of Savia, for an aggregate purchase price of $138,200,000. These shares were
issued for investment purposes. The shares in such transaction were sold in
reliance on the exemptions from registration provided by Section 4(2) of the
Securities Act of 1933.
On July 14, 1998, Savia loaned $35,857,000 to Seminis in exchange for a
subordinated convertible note. The principal amount of this note, plus accrued
and unpaid interest, was convertible into shares of Class B common stock at the
option of Savia. Savia converted the note into 1,916,462 shares of Class B
common stock on February 1, 1999. The issuance of such shares was effected in
reliance on the exemption from registration under Section 3(a)(9).
On December 1, 1998, Seminis issued and sold 1,000 shares of Old Class C
preferred stock to Savia for an aggregate purchase price of $10.0 million. These
shares were issued for investment purposes. The shares in such transaction were
sold in reliance on exemptions from registration provided by Section 4(2) of the
Securities Act of 1933. Through April 1, 1999 an additional 33.8 shares of Class
C Preferred Stock has been issued as dividends.
In February 1999, Seminis issued and sold 100 shares of common stock to
Seminis Illinois for an aggregate purchase price of $1 in connection with
Seminis Illinois' formation
II-2
<PAGE> 115
of Seminis for purposes of the reincorporation in Delaware. The shares were
issued for investment purposes. The issuance of such shares was effected in
reliance on the exemption from registration under Section 4(2) of the Securities
Act.
In March 1999, Savia made an additional equity investment in Seminis of
$20.0 million in exchange for 2,000 shares of Class C preferred stock. The
shares were issued for investment purposes. The issuance of such shares was
effected in reliance on the exemption from registration under Section 4(2) of
the Securities Act.
On June 21, 1999, Seminis Illinois was reincorporated as a Delaware
corporation through the merger of Seminis Illinois with and into Seminis.
Pursuant to the terms of the merger, each share of Old Class A common stock of
Seminis Illinois was automatically converted into one-half share of Class B
common stock of Seminis and each share of Old Class B mandatorily redeemable
common stock of Seminis Illinois was automatically converted into one-half share
of Class B common stock of Seminis. Each share of Old Class A mandatorily
redeemable preferred stock of Seminis Illinois was automatically converted into
one share of Seminis' Class A mandatorily redeemable preferred stock. Upon
consummation of the offering, each share of Seminis' issued and outstanding
Class A mandatorily redeemable preferred stock will automatically convert into
one share of Seminis' Class B mandatorily redeemable preferred stock. Also
pursuant to the reincorporation merger, each option to purchase one share of Old
Class C common stock of Seminis Illinois was automatically converted and changed
into an option to purchase one share of Class A common stock of Seminis. The
issuance of such shares was effected in reliance on the exemption from
registration under Section 3(a)(9).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
*1 Form of Underwriting Agreement
2 Merger Agreement by and between Seminis, Inc., an Illinois
corporation and Seminis, Inc., a Delaware corporation
3.1 Certificate of Incorporation
3.2 Certificate of Designations of Class A Mandatorily
Redeemable Preferred Stock and Class B Mandatorily
Redeemable Preferred Stock of Seminis, Inc.
3.3 Certificate of Designations of Class C Redeemable Preferred
Stock of Seminis, Inc.
3.4 By-Laws
4.1 Form of Class A Common Stock Certificate
*4.2 Registration Rights Agreement by and among Seminis, Inc. and
certain shareholders of Seminis, dated October 1, 1995
5 Opinion of Milbank, Tweed, Hadley & McCloy LLP
*10.1 Seminis, Inc. 1998 Stock Option Plan
*10.2 Form of Amended and Restated Seminis, Inc. 1998 Stock Option
Plan
*10.3 Share Subscription Agreement by and between Seminis, Inc.
and Hungnong Seed Co., Ltd., dated June 12, 1998
10.4 Form of New Credit Facility among Seminis, Inc., Seminis
Vegetable Seeds, Inc., SVS Holland B.V., as borrowers,
Harris Trust and Savings Bank, individually and as
Administrative Agent, Bank of Montreal, Chicago Branch,
individually and as Syndication Agent, and the Lenders from
time to time parties thereto, as lenders, dated as of June
, 1999
</TABLE>
II-3
<PAGE> 116
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
10.5 Form of Letter Agreement between Savia, S.A. de C.V. and
Seminis, dated as of June 21, 1999
*21 Subsidiaries of Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in
its opinion filed as Exhibit 5 hereto)
23.3 Consent of Seonjin Accounting Corporation
*24 Power of Attorney (included on signature pages hereto)
</TABLE>
- ---------------
* Previously filed.
(b) Financial Statement Schedules.
None.
All other schedules have been omitted as they are inapplicable, or the
other information is included in the financial statements.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide the
underwriters at the Closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each
purchaser.
(b) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission,
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel that matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall
be deemed to be part of this Registration Statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York on June 21, 1999.
SEMINIS, INC.
By:/s/ ALEJANDRO RODRIGUEZ GRAUE
------------------------------------
Name: Alejandro Rodriguez Graue
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board June 21, 1999
- ---------------------------------------------------
Alfonso Romo Garza
* Director June 21, 1999
- ---------------------------------------------------
Francisco Gonzalez Sebastia
/s/ ALEJANDRO RODRIGUEZ GRAUE Director and President June 21, 1999
- --------------------------------------------------- (Principal Executive Officer)
Alejandro Rodriguez Graue
* Director June 21, 1999
- ---------------------------------------------------
Bernardo Jimenez Barrera
* Director June 21, 1999
- ---------------------------------------------------
G. Carl Ball
* Director June 21, 1999
- ---------------------------------------------------
George Carl Ball, Jr.
* Director June 21, 1999
- ---------------------------------------------------
Peter Davis
* Director June 21, 1999
- ---------------------------------------------------
Frank J. Pipp
* Director June 21, 1999
- ---------------------------------------------------
Dr. Eli Shlifer
</TABLE>
II-5
<PAGE> 118
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director June 21, 1999
- ---------------------------------------------------
Eugenio Najera Solorzano
* Director June 21, 1999
- ---------------------------------------------------
Christopher J. Steffen
* Chief Financial Officer June 21, 1999
- --------------------------------------------------- (Principal Financial Officer)
Octavio Hernandez
* Controller June 21, 1999
- --------------------------------------------------- (Principal Accounting Officer)
Michael Pigott
*By: /s/ ALEJANDRO RODRIGUEZ GRAUE
---------------------------------------------
Alejandro Rodriguez Graue
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 119
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
*1 Form of Underwriting Agreement
2 Merger Agreement by and between Seminis, Inc., an Illinois
corporation and Seminis, Inc., a Delaware corporation
3.1 Certificate of Incorporation
3.2 Certificate of Designations of Class A Mandatorily
Redeemable Preferred Stock and Class B Mandatorily
Redeemable Preferred Stock of Seminis, Inc.
3.3 Certificate of Designations of Class C Redeemable Preferred
Stock of Seminis, Inc.
3.4 By-Laws
4.1 Form of Class A Common Stock Certificate
*4.2 Registration Rights Agreement by and among Seminis, Inc. and
certain shareholders of Seminis, dated October 1, 1995
5 Opinion of Milbank, Tweed, Hadley & McCloy LLP
*10.1 Seminis, Inc. 1998 Stock Option Plan
*10.2 Amended and Restated Seminis, Inc. 1998 Stock Option Plan
*10.3 Share Subscription Agreement by and between Seminis, Inc.
and Hungnong Seed Co., Ltd., dated June 12, 1998
10.4 Form of New Credit Facility among Seminis, Inc, Seminis
Vegetable Seeds, Inc., SVS Holland B.V., as borrowers,
Harris Trust and Savings Bank, individually and as
Administrative Agent, Bank of Montreal, individually and as
Syndication Agent, and the Lenders from time to time parties
thereto, as lenders, dated as of June , 1999
10.5 Form of Letter Agreement between Savia, S.A. de C.V. and
Seminis, dated as of June 21, 1999
*21 Subsidiaries of Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Milbank, Tweed, Hadley & McCloy LLP (included in
its opinion filed as Exhibit 5 hereto)
23.3 Consent of Seonjin Accounting Corporation
*24 Power of Attorney (included on signature pages hereto)
</TABLE>
- ---------------
* Previously filed.
II-7
<PAGE> 1
Exhibit 2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of June 14,
1999 (this "Agreement") by and among Seminis, Inc., an Illinois corporation
("Seminis Illinois"), and Seminis, Inc., a Delaware corporation and a
wholly-owned subsidiary of Seminis Illinois ("Seminis Delaware" and together
with Seminis Illinois, the "Constituent Corporations").
WHEREAS, the Boards of Directors of Seminis Illinois and Seminis
Delaware desire that Seminis Illinois merge with and into Seminis Delaware
pursuant to the terms and conditions of this Agreement and in accordance with
(i) Section 11.35 of the Illinois Business Corporation Act (the "IBCA"), and
have adopted and approved this Agreement in accordance with Section 11.35 of the
IBCA and (ii) Section 252 of the Delaware General Corporation Law (the "DGCL"),
and have adopted and approved this Agreement in accordance with Section 252 of
the DGCL.
WHEREAS, as of the date of this Agreement, (a) 39,302,886 shares of
Class A Common Stock, par value $.01 per share, of Seminis Illinois ("Seminis
Illinois Class A Common Stock"), (b) 6,771,500 shares of Class B Common Stock,
par value $.01 per share, of Seminis Illinois ("Seminis Illinois Class B Common
Stock"), (c) no shares of Class C Common Stock, par value $.01 per share, of
Seminis Illinois ("Seminis Illinois Class C Common Stock" and together with
Seminis Illinois Class A Common Stock and Seminis Illinois Class B Common Stock,
the "Seminis Illinois Common Stock "), (d) 25,000 shares of Class A Preferred
Stock, par value $.01 per share, of Seminis Illinois ("Seminis Illinois Class A
Preferred Stock"), (e) no shares of Class B Preferred Stock, par value $.01 per
share, of Seminis Illinois ("Seminis Illinois Class B Preferred Stock") and (f)
1,033.80 shares of Class C Preferred Stock, par value $.01 per share, of Seminis
Illinois ("Seminis Illinois Class C Preferred Stock" and together with the
Seminis Illinois Class A Preferred Stock and Seminis Illinois Class B Preferred
Stock, the "Seminis Illinois Preferred Stock") were issued and outstanding;
WHEREAS, as of the date hereof, 100 shares of Class A Common Stock, par
value $.01 per share, of Seminis Delaware (the "Seminis Delaware Class A Common
Stock") were issued and outstanding;
WHEREAS, Seminis Illinois, as the sole stockholder of Seminis Delaware,
has adopted and approved this Agreement in accordance with Section 228 of the
DGCL;
WHEREAS, Seminis Illinois intends to solicit, at its annual meeting of
shareholders (the "Annual Meeting"), the approval of this Agreement by the
holders of Seminis Illinois Common Stock entitled to vote thereon in accordance
with Section 11.20 of the IBCA;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Seminis Illinois shall merge with and into
Seminis Delaware (the "Merger"). Seminis Delaware shall be the surviving
corporation in the Merger (the "Surviving Corporation"), and at the Effective
Time (as defined below), the separate existence of Seminis Illinois shall cease.
The corporate existence of Seminis Delaware, with its purposes, powers and
objects, shall continue unaffected and unimpaired by the Merger, and as the
Surviving Corporation it shall succeed to all rights, assets, liabilities and
obligations of Seminis Illinois as and to the extent provided in Section 259 of
the DGCL and Section 11.50 of the IBCA.
Section 1.2. The Effective Time. The Merger shall become effective on
[May 21, 1999] (the "Effective Time").
Section 1.3. Certificate of Incorporation. The Certificate of
Incorporation of Seminis Delaware as in effect immediately prior to the
Effective Time shall become the Certificate of Incorporation of the Surviving
Corporation and shall be the Certificate of Incorporation of Seminis Delaware
until duly amended.
Section 1.4. By-Laws. The By-Laws of the Surviving Corporation shall be
the By-Laws as set forth in Annex A, and shall be the By-Laws of Seminis
Delaware until duly amended.
Section 1.5. Officers and Directors. At the Effective Time, the
directors and officers of Seminis Illinois immediately prior to the Effective
Time shall be and constitute the directors and officers of the Surviving
Corporation until their successors shall have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
Section 1.6. Required Approvals. This Agreement is subject to the
adoption and approval of the holders of a majority of all of the outstanding
shares of Seminis Illinois Class A Common Stock entitled to vote thereon at the
Annual Meeting and all of the outstanding shares of Seminis Illinois Class B
Common Stock entitled to vote thereon at the Annual Meeting, each voting as a
separate class ("Seminis Illinois Shareholder Approval").
-2-
<PAGE> 3
ARTICLE II
CONVERSION OF SHARES
Section 2.1. Effect of the Merger on Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of the
Constituent Corporations or the holders of any capital stock thereof:
(a) Cancellation of Certain Capital Stock of Seminis Illinois. Each
share of the (i) Seminis Illinois Common Stock and (ii) Seminis Illinois
Preferred Stock that is owned by Seminis Illinois as treasury stock or by any of
its subsidiaries shall be canceled and cease to exist.
(b) Conversion of Seminis Illinois Common Stock. Excluding shares of
Seminis Illinois Common Stock and Seminis Illinois Preferred Stock canceled
under Section 2.1(a) and Dissenting Shares (as defined below), (i) every share
of Seminis Illinois Class A Common Stock, if any, and Seminis Illinois Class B
Common Stock, if any, shall be converted into the right to receive one-half
share of Class B Common Stock, par value $.01 per share, of the Surviving
Corporation ("Surviving Corporation Class B Common Stock") and (ii) every share
of Seminis Illinois Class C Common Stock, if any, shall be converted into the
right to receive one-half share of Class A Common Stock, par value $.01 per
share, of the Surviving Corporation ("Surviving Corporation Class A Common
Stock").
(c) Conversion of Seminis Illinois Preferred Stock. Excluding shares of
Seminis Illinois Preferred Stock canceled under Section 2.1(a), (i) every share
of Seminis Illinois Class A Preferred Stock, if any, shall be converted into the
right to receive one share of Class A Preferred Stock, par value $.01 per share,
of the Surviving Corporation, (ii) every share of Seminis Illinois Class B
Preferred Stock, if any, shall be converted into the right to receive one share
of Class B Preferred Stock, par value $.01 per share, of the Surviving
Corporation and (iii) every share of Seminis Illinois Class C Preferred Stock,
if any, shall be converted into the right to receive one share of Class C
Preferred Stock, par value $.01 per share, of the Surviving Corporation.
(d) Cancellation of Shares Upon Conversion. Upon the conversion of
Seminis Illinois Common Stock and Seminis Illinois Preferred Stock pursuant to
paragraphs (b) and (c) of this Section 2.1, excluding Dissenting Shares, such
shares shall be canceled and cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, other than the right to receive shares of capital stock of the
Surviving Corporation as provided in paragraphs (b) and (c) above.
(e) Cancellation of Certain Capital Stock of Seminis Delaware. Each
share of Seminis Delaware Class A Common Stock that is issued and outstanding
immediately prior to the Effective Time shall be canceled and cease to exist.
(f) Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary, each outstanding share of Seminis Illinois Common Stock, the
holder of which has not voted in favor of the Merger, has perfected such
holder's right to an appraisal of such holder's shares in accordance with the
applicable provisions of the IBCA and has not effectively
-3-
<PAGE> 4
withdrawn or lost such right to appraisal (a "Dissenting Share"), shall not be
converted into or represent a right to receive shares of the capital stock of
the Surviving Corporation pursuant to Section 2.1(b), but the holder thereof
shall be entitled only to such rights as are granted by the applicable
provisions of the IBCA; provided, however, that any Dissenting Share held by a
person at the Effective Time who shall, after the Effective Time, withdraw the
demand for appraisal or lose the right of appraisal, in either case pursuant to
the IBCA, shall be deemed to be converted into, as of the Effective Time, the
right to receive shares of capital stock of the Surviving Corporation pursuant
to Section 2.1(b).
(g) Stock Option Plan. Subject to the terms and conditions of the
Seminis, Inc. 1998 Stock Option Plan, or any successor plan thereto (the "Stock
Option Plan"), and the stock option agreements executed pursuant thereto (the
"Stock Options"), the Stock Option Plan and each option to purchase Seminis
Illinois Class C Common Stock granted thereunder that is outstanding at the
Effective Time shall be assumed by Seminis Delaware and continued in accordance
with their respective terms and each such option shall become a right to
purchase the number of shares of Surviving Corporation Class A Common Stock as
the holder of such Stock Option would have been entitled to receive pursuant to
the Merger had such holder exercised such option in full immediately prior to
the Effective Time, at a price per share equal to (x) the aggregate exercise
price for the shares of Seminis Illinois Class C Common Stock subject to such
Stock Option divided by (y) the number of full shares of Surviving Corporation
Class A Common Stock deemed purchasable as a result of this provision pursuant
to such Stock Option; provided, however, that, in the case of any Stock Option
to which Section 421 of the Code applies by reason of its qualification under
any of Sections 422-424 of the Code, the option exercise price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
425(a) of the Code. As soon as practicable after the Effective Time, the
Surviving Corporation shall deliver to the participants in the Stock Option Plan
appropriate notices setting forth such participants' rights pursuant thereto and
take all corporate action necessary to reserve for issuance a sufficient number
of shares of Surviving Corporation Class A Common Stock for delivery under the
Stock Option Plan as adjusted in accordance with this Section.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. (a) Representations and Warranties. Each party hereby
represents and warrants to the other that such party: (i) is a corporation duly
organized and in good standing in its jurisdiction of incorporation; (ii) has
obtained the approval of its board of directors to execute and deliver this
Agreement and effect the Merger; and (iii) has full power and authority to
execute, deliver and perform this Agreement.
(b) Seminis Illinois, as sole stockholder of Seminis Delaware, hereby
represents and warrants that it has adopted and approved this Agreement in
accordance with the DGCL.
-4-
<PAGE> 5
ARTICLE IV
COVENANTS
Section 4.1. Delaware Certificate of Incorporation. Seminis Delaware
covenants and agrees that prior to the Effective Time, it and its officers and
directors will take all necessary actions to file with the Secretary of State of
the State of Delaware the Amended and Restated Certificate of Incorporation
substantially in the form as set forth in Annex B.
Section 4.2 Certificates of Designations. Seminis Delaware covenants
and agrees that prior to the Effective Time, it and its officers and directors
will take all necessary actions to file with the Secretary of State of the State
of Delaware the Certificates of Designations as set forth in Annex C.
Section 4.3 Illinois Articles of Merger. Each of the parties hereto
covenant and agree that prior to the Effective Time, each shall execute and
cause to be filed Articles of Merger (the "Articles of Merger") with the
Secretary of State of the State of Illinois pursuant to Section 11.25 of the
IBCA.
ARTICLE V
CLOSING CONDITIONS
Section 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The consummation of the Merger and the other transactions provided
herein is subject to the fulfillment, prior to the Effective Time, of the
following conditions:
(a) Shareholder Approval. Seminis Illinois Shareholder Approval shall
have been obtained.
(b) Illinois Certificate of Merger. The Secretary of State of the State
of Illinois shall have issued a Certificate of Merger pursuant to Section 11.40
of the IBCA.
(c) Bank Consents. Seminis Illinois shall have obtained all required
consents under any loan or financing agreement among Seminis Illinois and its
commercial bank lenders.
ARTICLE VI
TERMINATION; AMENDMENTS
Section 6.1. Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the filing of the Articles of Merger by
mutual consent of the Board of Directors of the parties hereto.
Section 6.2. Amendments. At any time prior to the filing of the
Articles of Merger , the parties hereto may, by written agreement, amend, modify
or supplement any provision of this Agreement.
-5-
<PAGE> 6
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Further Assurances. The parties hereto each agree to
execute such documents and instruments and to take whatever action may be
necessary or desirable to consummate the Merger.
Section 7.2. Governing Law. Except to the extent that the IBCA or the
DGCL is mandatorily applicable to the Merger and the rights of the stockholders
of the Constituent Corporations, this Agreement shall be construed under and in
accordance with the laws of the State of New York applicable to contracts to be
fully performed in such State, without giving effect to choice of law principles
except Section 5-1401 of the New York General Obligations Law.
Section 7.3. Binding Effect; Successors and Assigns. This Agreement may
not be assigned by any party without the written consent of all other parties;
this Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto.
Section 7.4. Counterparts. This Agreement may be executed in separate
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts when taken together shall constitute but one and
the same instrument.
Section 7.5. Merger Agreement. A copy of this Agreement is on file at
the principal place of business of Seminis Delaware, c/o Seminis, Inc., 2901
North Ventura Road, Suite 250, Oxnard, California 93030 and will be furnished by
Seminis Delaware, on request and without cost, to any shareholder of any
Constituent Corporation.
-6-
<PAGE> 7
IN WITNESS WHEREOF, Seminis Illinois and Seminis Delaware have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the day first above written.
SEMINIS, INC.
(Seminis Illinois)
By:___________________________________________
Name:
Title:
SEMINIS, INC.
(Seminis Delaware)
By:___________________________________________
Name:
Title:
-7-
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
-OF-
SEMINIS, INC.
Seminis, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Seminis, Inc. (the "Corporation").
The original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on February 18, 1999.
2. This Amended and Restated Certificate of Incorporation has been duly
proposed by resolutions adopted and declared advisable by the Board of Directors
of the Corporation, duly adopted by the stockholders of the Corporation at a
stockholder meeting on March 16, 1999 and duly acknowledged and executed by the
officers of the Corporation in accordance with the provisions of Sections 103,
242 and 245 of the General Corporation Law of the State of Delaware ("GCL") and,
upon filing with the Secretary of State in accordance with Section 103, shall
thenceforth supersede the original Certificate of Incorporation, and shall, as
it may thereafter be amended in accordance with its terms and the law, be the
Amended and Restated Certificate of Incorporation of the Corporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended hereby to read as herein set forth in
full:
FIRST: The name of the Corporation is Seminis, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is The Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the GCL.
FOURTH: The total number of shares of stock which the Corporation has
authority to issue is 810,000,000 shares, consisting of (a) 10,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock") and (b)
800,000,000 shares of Common Stock, par value $.01 per share (the "Authorized
Common Stock"), to be divided into two classes, consisting of (i) 500,000,000
shares of Class A Common Stock, par value $.01 per share (the "Class A Common
Stock") and (ii) 300,000,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common Stock").
<PAGE> 2
(A) PREFERRED STOCK.
The Board of Directors is hereby expressly authorized at any time, and
from time to time, to create and provide for the issuance of shares of Preferred
Stock in one or more series and, by filing a certificate pursuant to the GCL
(hereinafter referred to as a "Preferred Stock Designation"), to establish the
number of shares to be included in each such class or series, and to fix the
designations, preferences and relative, participating, optional or other special
rights of the shares of each such class or series and the qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue thereof adopted by the Board
of Directors, including, but not limited to, the following:
(1) the designation of and the number of shares constituting
such class or series, which number the Board of Directors may
thereafter (except as otherwise provided in the Preferred Stock
Designation) increase or decrease (but not below the number of shares
of such class or series then outstanding);
(2) the dividend rate for the payment of dividends on such
class or series, if any, the conditions and dates upon which such
dividends shall be payable, the preference or relation which such
dividends, if any, shall bear to the dividends payable on any other
class or classes of or any other series of capital stock, the
conditions and dates upon which such dividends, if any, shall be
payable, and whether such dividends, if any, shall be cumulative or
non-cumulative;
(3) whether the shares of such class or series shall be
subject to redemption by the Corporation, and, if made subject to such
redemption, the times, prices and other terms and conditions of such
redemption;
(4) the terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such class or series;
(5) whether or not the shares of such class or series shall be
convertible into or exchangeable for shares of any other class or
classes of, any other series of any class or classes of capital stock
of, or any other security of, the Corporation or any other corporation,
and, if provision be made for any such conversion or exchange, the
times, prices, rates, adjustments and any other terms and conditions of
such conversion or exchange;
(6) the extent, if any, to which the holders of the shares of
such class or series shall be entitled to vote as a class or otherwise
with respect to the election of directors or otherwise;
(7) the restrictions, if any, on the issue or reissue of
shares of the same class or series or of any other class or series;
(8) the amounts payable on and the preferences, if any, of the
shares of such class or series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
and
2
<PAGE> 3
(9) any other relative rights, preferences and limitations of
that class or series.
(B) COMMON STOCK
(1) General. The Common Stock shall be subject to the express
terms of any series of Preferred Stock set forth in the Preferred Stock
Designation relating thereto. Except as provided for in paragraph 2 of
this Section B of this Article FOURTH holder of Common Stock shall have
one vote in respect of each share of Common Stock held by such holder
of record on the books of the Corporation for the election of directors
and on all other matters on which stockholders of the Corporation are
entitled to vote. The holders of shares of Common Stock shall be
entitled to receive, when and if declared by the Board of Directors,
out of the assets of the Corporation which are by law available
therefor, dividends payable either in cash, in stock or otherwise;
provided, however, that if any dividend is declared payable to the
holders of shares of Class A Common Stock, an equal and simultaneous
dividend will be paid to the holders of shares of Class B Common Stock,
and if any dividend is declared payable to the holders of shares of
Class B Common Stock, an equal and simultaneous dividend will be paid
to the holders of shares of Class A Common Stock.
(2) Voting Rights. Except as otherwise provided herein or as
specifically required under the GCL, the holders of Class A Common
Stock shall be entitled to one (1) vote per share and the holders of
Class B Common Stock shall be entitled to three (3) votes per share.
Class A Common Stock and Class B Common Stock shall vote as a single
class on all matters to be voted on by the Corporation's stockholders,
including, without limitation, any consolidation or merger of the
Corporation into or with any other corporation or the sale or transfer
by the Corporation of all or substantially all of its assets. With the
approval of a majority of the shares of the Class A Common Stock and
the Class B Common Stock, each voting separately as a class, the
Company may change the number of votes per share each share of the
Class B Common Stock shall be entitled to vote.
(3) Conversion.
(a) Mandatory Conversion. Each share of Class B
Common Stock shall automatically be converted into one share
of Class A Common Stock, without any action by the Corporation
or further action by the holder thereof, upon the Transfer (as
defined below) of such share of Class B Common Stock other
than pursuant to an Exempt Transfer (as defined below).
(b) Optional Conversion. Each share of Class B Common
Stock shall, at the option of the holder thereof, be
convertible into one share of Class A Common Stock at any
time.
3
<PAGE> 4
(c) Surrender of Certificates. With respect to any
conversion of shares of Class B Common Stock into shares of
Class A Common Stock, the holder thereof shall surrender the
certificate or certificates therefor, duly endorsed, at the
office of the Corporation during normal business hours
together with, in the case of a conversion pursuant to Subpart
(b) above, a written notice by such holder stating that such
holder desires to convert the shares, or a stated number of
the shares, of Class B Common Stock represented by such
certificate or certificates into shares of Class A Common
Stock. The Corporation will, as soon as practicable thereafter
issue and deliver to such holder of shares of Class B Common
Stock, or to the nominee or nominees of such holder,
certificates for the number of shares of Class A Common Stock
into which such shares have been converted. If surrendered
certificates for shares of Class B Common Stock are converted
only in part, the Corporation will issue and deliver to the
holder, or to the nominee or nominees of such holder, a new
certificate or certificates representing the aggregate of the
unconverted shares of Class B Common Stock. Shares of Class B
Common Stock shall be deemed to have been converted into
shares of Class A Common Stock in the case of a conversion
pursuant to Subpart (a) above, as of the date of the Transfer
of shares of Class B Common Stock (other than pursuant to an
Exempt Transfer) and, in the case of a conversion pursuant to
Subpart (b) above, as of the date of the surrender of such
shares for conversion and delivery of the accompanying notice
as provided above, and the person or persons entitled to
receive the shares of Class A Common Stock issuable upon such
conversion shall be treated for all purposes as the record
holder or holders of such shares of Class A Common Stock on
such date.
(d) Reservation of Shares. The Corporation will
reserve and at all times keep available out of its authorized
but unissued shares of Class A Common Stock or its shares of
treasury stock of such class, a sufficient number of shares of
Class A Common Stock to satisfy the conversion requirements of
all outstanding shares of Class B Common Stock. The
Corporation will take all such action as may be necessary to
ensure that all shares of Class A Common Stock issued upon
conversion of shares of Class B Common Stock will be duly and
validly authorized and issued and fully paid and
nonassessable.
(e) Transfer Taxes. The issuance of certificates for
shares of Class A Common Stock upon the conversion of shares
of Class B Common Stock shall be made without charge to the
holders converting such shares of Class B Common Stock for any
issue or stamp tax in respect of the issuance of such
certificates, and such certificates shall be issued in the
respective names of, or in such names as may be direct by, the
holders of shares of Class B Common Stock converted; provided,
however, that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate in a name
other than that of the holder of
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shares of Class B Common Stock converted, and the Corporation
shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance
thereof shall have paid to the Corporation the amount of such
tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
(f) Definitions. For purposes of this Article Fourth,
the following terms shall have the following meanings:
"Affiliate" means, with respect to any Business
Organization, any natural person or Business
Organization that, directly or indirectly through one
or more intermediaries, controls, or is controlled
by, or is under common control with, such Business
Organization.
"Business Organization" means a corporation,
partnership, association, joint-stock company or
trust where the interests of the beneficiaries are
evidenced by a security, unincorporated organization,
estate, governmental or political subdivision thereof
or governmental agency.
"Exempt Transfer" means a Transfer of Class B Common
Stock (i) to any other holder of Class B Common Stock
or an Affiliate of a holder of Class B Common Stock
which holder is a Business Organization, (ii) to a
trust for the sole benefit of a holder of Class B
Common Stock who is a natural person, (iii) to a
spouse, sibling, parent, grandparent or descendant,
whether natural or adopted, of a holder of Class B
Common Stock who is a natural person, or (iv) to a
trust for the sole benefit of a spouse, sibling,
parent, grandparent or descendant, whether natural or
adopted, of a holder of Class B Common Stock who is a
natural person, (v) by will to a spouse, sibling,
parent, grandparent or descendant, whether natural or
adopted, of a holder of Class B Common Stock who is a
natural person, (vi) pursuant to the laws of descent
and distribution to a spouse, sibling, parent,
grandparent or descendant, whether natural or
adopted, of a holder of Class B Common Stock who is a
natural person, (vii) to any charitable foundation or
other organization qualified under Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended, or
(viii) to the Company.
"Transfer" means a sale, assignment, transfer, gift,
encumbrance or other disposition; provided, however,
that a bona fide pledge for collateral security
purposes shall not be deemed a Transfer.
FIFTH: The Board of Directors is hereby authorized to create and issue,
whether or not in connection with the issuance and sale of any of its stock or
other securities or property, rights entitling the holders thereof to purchase
from the Corporation shares of stock or other securities of the Corporation or
any other corporation, recognizing that, under certain
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circumstances, the creation and issuance of such rights could have the effect of
discouraging third parties from seeking, or impairing their ability to seek, to
acquire a significant portion of the outstanding securities of the Corporation,
to engage in any transaction which might result in a change of control of the
Corporation or to enter into any agreement, arrangement or understanding with
another party to accomplish the foregoing or for the purpose of acquiring,
holding, voting or disposing of any securities of the Corporation. The times at
which and the terms upon which such rights are to be issued will be determined
by the Board of Directors and set forth in the contracts or instruments that
evidence such rights. The authority of the Board of Directors with respect to
such rights shall include, but not be limited to, determination of the
following:
(A) the initial purchase price per share or other unit of the
stock or other securities or property to be purchased upon exercise of
such rights;
(B) provisions relating to the times at which and the
circumstances under which such rights may be exercised or sold or
otherwise transferred, either together with or separately from, any
other stock or other securities of the Corporation;
(C) provisions which adjust the number or exercise price of
such rights or amount or nature of the stock or other securities or
property receivable upon exercise of such rights in the event of a
combination, split or recapitalization of any stock of the Corporation,
a change in ownership of the Corporation's stock or other securities or
a reorganization, merger, consolidation, sale of assets or other
occurrence relating to the Corporation or any stock of the Corporation,
and provisions restricting the ability of the Corporation to enter into
any such transaction absent an assumption by the other party or parties
thereto of the obligations of the Corporation under such rights;
(D) provisions which deny the holder of a specified percentage
of the outstanding stock or other securities of the Corporation the
right to exercise such rights and/or cause the rights held by such
holder to become void;
(E) provisions which permit the Corporation to redeem or
exchange such rights, which redemption or exchange may be within the
sole discretion of the Board of Directors, if the Board of Directors
reserves such right to itself; and
(F) the appointment of a rights agent with respect to such
rights.
Notwithstanding anything contained in this Amended and Restated Certificate of
Incorporation to the contrary, the affirmative vote of at least a majority of
the voting power of the then outstanding Voting Stock (as defined below), voting
together as a single class, shall be required to amend, repeal or adopt any
provision inconsistent with this Article FIFTH. For the purposes of this Amended
and Restated Certificate of Incorporation, "Voting Stock" shall mean the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors.
SIXTH: (A) In furtherance, and not in limitation, of the powers
conferred by law, the Board of Directors is expressly authorized and empowered:
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(i) to adopt, amend or repeal the Bylaws of the
Corporation, in each case without the requirement of any vote
of stockholders, provided, however, that any Bylaws adopted by
the Board of Directors under the powers hereby conferred may
be amended or repealed by the Board of Directors or by the
stockholders having voting power with respect thereto; and
(ii) from time to time to determine whether and to
what extent, and at what times and places, and under what
conditions and regulations, the accounts and books of the
Corporation, or any of them, shall be open to inspection of
stockholders; and, except as so determined, or as expressly
provided in this Amended and Restated Certificate of
Incorporation or in any Preferred Stock Designation, no
stockholder shall have any right to inspect any account, book
or document of the Corporation other than such rights as may
be conferred by law.
(B) The Corporation may in its Bylaws confer powers upon the
Board of Directors in addition to the foregoing and in addition to the
powers and authorities expressly conferred upon the Board of Directors
by law.
(C) Notwithstanding anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least a majority of the voting power of the
then outstanding Voting Stock, voting together as a single class, shall
be required to amend, repeal or adopt any provision inconsistent with
(i) this Article SIXTH or (ii), subject to Subclause (A)(i) above,
Section 2.2, 2.4, 2.5, 2.7 or 2.10 of Article II, Section 3.2, 3.3 or
3.5 of Article III or Article X of the Bylaws of the Corporation.
SEVENTH: (A) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in this
Amended and Restated Certificate of Incorporation to elect additional directors
under specified circumstances or to consent to specific actions taken by the
Corporation, any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing in lieu of a meeting of such stockholders.
(B) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in
this Amended and Restated Certificate of Incorporation to elect
additional directors under specified circumstances, a special meeting
of the holders of stock of the Corporation entitled to vote on any
business to be considered at any such meeting may be called only by the
Chairman of the Board of the Corporation, and shall be called by the
Secretary of the Corporation at the request of the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
directors which the Corporation would at the time have if there were no
vacancies (the "Whole Board").
(C) Notwithstanding anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, the affirmative
vote of at least a majority of the voting power of the then outstanding
Voting Stock, voting together as a single class,
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<PAGE> 8
shall be required to amend, repeal or adopt any provision inconsistent
with this Article SEVENTH.
EIGHTH: (A) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in this
Amended and Restated Certificate of Incorporation to elect additional directors
under specified circumstances, the number of directors of the Corporation shall
be fixed, and may be increased or decreased from time to time, in such a manner
as may be prescribed by the Bylaws of the Corporation.
(B) Unless and except to the extent that the Bylaws of the
Corporation shall so require, the election of directors of the
Corporation need not be by written ballot.
(C) The directors, other than those who may be elected by the
holders of any series of Preferred Stock or any other series or class
of stock as set forth in this Amended and Restated Certificate of
Incorporation, shall be divided into three classes, each consisting of,
as near as possible, an equal number of directors, and designated as
Class I, Class II and Class III. Class I directors shall be initially
elected for a term expiring at the 2000 annual meeting of stockholders,
Class II directors shall be initially elected for a term expiring at
the 2001 annual meeting of stockholders, and Class III directors shall
be initially elected for a term expiring at the 2002 annual meeting of
stockholders. Members of each class shall hold office until their
successors are elected and qualified. At each succeeding annual meeting
of the stockholders of the Corporation, the successors of the class of
directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held
in the third year following the year of their election, and until their
successors are elected and qualified.
(D) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in
this Amended and Restated Certificate of Incorporation to elect
additional directors under specified circumstances, any director may be
removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least a majority of the voting
power of the then outstanding Voting Stock, voting together as a single
class.
(E) Advance notice of stockholder nominations for the election
of directors shall be given in the manner provided in the Bylaws of the
Corporation.
(F) Subject to the rights of the holders of any series of
Preferred Stock or any other series or class of stock as set forth in
this Amended and Restated Certificate of Incorporation to elect
additional directors under specified circumstances, vacancies resulting
from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from
any increase in the authorized number of directors, may be filled only
by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors, and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they
have been elected expires and until such director's successor shall
have been duly elected and qualified. No decrease in the
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number of authorized directors constituting the Whole Board shall
shorten the term of any incumbent director.
(G) Notwithstanding anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least a majority of the voting power of the
then outstanding Voting Stock, voting together as a single class, shall
be required to amend, repeal or adopt any provisions inconsistent with
this Article EIGHTH.
NINTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the GCL or (iv) for any transaction
from which the director derived an improper personal benefit. No amendment or
repeal of this Article NINTH shall adversely affect any right or protection of a
director of the Corporation existing hereunder in respect of any act or omission
occurring prior to such amendment or repeal.
TENTH: Except as may be expressly provided in this Amended and Restated
Certificate of Incorporation, the Corporation reserves the right at any time and
from time to time to amend, alter, change or repeal any provision contained in
this Amended and Restated Certificate of Incorporation or a Preferred Stock
Designation, and any other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed herein or by law, and all powers, preferences and rights of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Amended and Restated Certificate of
Incorporation in its present form or as hereafter amended are granted subject to
the right reserved in this Article TENTH, provided, however, that no Preferred
Stock Designation shall be amended after the issuance of any shares of the
series of Preferred Stock created thereby, except in accordance with the terms
of such Preferred Stock Designation and the requirements of law.
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IN WITNESS WHEREOF, Seminis, Inc. has caused this Certificate to be
signed by ___________, its ____________, this ___ day of __________, 1999.
__________________________________
Name:
Title:
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<PAGE> 1
Exhibit 3.2
CERTIFICATE OF DESIGNATIONS
OF
CLASS A REDEEMABLE PREFERRED STOCK
AND
CLASS B REDEEMABLE PREFERRED STOCK
OF
SEMINIS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
----------------------------------------
Seminis, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law (the "GCL") by unanimous written consent on February 24,
1999:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation of the Corporation, the Board of Directors hereby creates a
Class A Redeemable Preferred Stock, par value $.01 per share (the "Class A
Preferred Stock"), of the Corporation and a Class B Redeemable Preferred Stock,
par value $.01 per share (the "Class B Preferred Stock" and together with the
Class A Preferred Stock, the "Preferred Stock"), of the Corporation and hereby
states the designation and number of shares of each such Class, and fixes the
relative rights, preferences, and limitations thereof as follows:
Part 1. Designation.
1A. Designation and Amount Class A Preferred Stock. The shares
of Class A Preferred Stock shall be designated as "Class A Redeemable
Preferred Stock" and the
<PAGE> 2
number of shares constituting the Class A Preferred Stock shall be
Twenty Five Thousand (25,000). Such number of shares may be increased
or decreased by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Class A Preferred Stock
to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding
securities issued by the Corporation convertible into Class A Preferred
Stock.
1B. Designation and Amount Class B Preferred Stock. The shares
of Class B Preferred Stock shall be designated as "Class B Redeemable
Preferred Stock" and the number of shares constituting the Class B
Preferred Stock shall be Twenty Five Thousand (25,000). Such number of
shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares
of Class B Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon the
conversion of any outstanding securities issued by the Corporation
convertible into Class B Preferred Stock.
Part 2. Dividends.
2A. Payment of Dividends. The dividends on each share of the
Preferred Stock shall accrue cumulatively at the rate of 8% per annum
of the Liquidation Value thereof from and including the date of
issuance thereof to and including the date on which the Preferred
Redemption Price of such share of Preferred Stock is paid. The
dividends on each share of Preferred Stock shall be payable, to the
extent permitted under the GCL and not prohibited by the Loan
Agreement, to the registered holder thereof quarterly on the first day
of January, April, July and October of each year, or if such day is not
a Business Day, on the immediately preceding Business Day. Such
dividends shall accrue whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of
dividends. To the fullest extent permitted under the GCL and not
prohibited by the Loan Agreement, the Board of Directors of the
Corporation shall declare and the Corporation shall pay all dividends
accrued on the Preferred Stock on the dates set forth above. Any
dividends which are not declared and paid on the dates set forth above
shall be declared and paid as soon as permitted under the GCL and not
prohibited by the Loan Agreement. The Corporation shall not, and shall
not permit any Subsidiary to, enter into any Loan Agreement which
expressly prohibits (i) the payment by the Corporation of dividends on
the Preferred Stock in the amounts and at the times specified herein or
(ii) the payment by such Subsidiary of dividends to the Corporation for
the purpose of paying dividends on the Preferred Stock; provided,
however, that the foregoing shall not be deemed to restrict the ability
of the Corporation or any Subsidiary to enter into any Loan Agreement
which prohibits or restricts the payment by the Corporation of
dividends on the Preferred Stock or the payment by any Subsidiary of
dividends to the Corporation upon (i) the existence of an event of
default, or any event which after notice or the passage of time or
both, would constitute an event of default, under the Loan Agreement,
which gives rise to a right by the lender to accelerate amounts
outstanding under, or terminate, such Loan Agreement or (ii) the
occurrence of certain events or the failure of the Corporation or such
Subsidiary to satisfy certain conditions, where such events had not
occurred and such conditions were satisfied at the time the Loan
Agreement was entered into.
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2B. Distribution of Partial Dividend Payments. If at any time
the Corporation distributes less than the total amount of dividends
then accrued with respect to Preferred Stock, such payment will be
distributed among the holders of Preferred Stock so that an equal
amount will be paid (as nearly as possible) with respect to each
outstanding share of Preferred Stock.
Part 3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, the holders of Preferred Stock shall be entitled to be
paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the aggregate Preferred
Redemption Price of all shares of Preferred Stock then outstanding, and
the holders of Preferred Stock shall not be entitled to any further
payment. If upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets to be distributed among the
holders of the Preferred Stock are insufficient to permit payment to
such holders of the aggregate amount which they are entitled to be
paid, then the entire assets to be distributed shall be distributed
equally and ratably among such holders based upon the aggregate
Preferred Redemption Price of the Preferred Stock held by each such
holder. The Corporation shall mail written notice of such liquidation,
dissolution or winding up, not less than 60 days prior to the payment
date stated therein, to each record holder of Preferred Stock. Neither
the consolidation or merger of the Corporation into or with any other
corporation or corporations, nor the sale or transfer by the
Corporation of all or any part of its assets, nor the reduction of the
capital stock of the Corporation, will be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this
Part 3 unless such consolidation, merger, sale or transfer shall be in
connection with a plan of liquidation, dissolution or winding up of the
business of the Corporation.
Part 4. Redemption.
4A. Mandatory Redemption. Subject to the terms and conditions
provided in Part 5 hereof, the Corporation shall redeem all of the
shares of Preferred Stock then outstanding on the earlier of the tenth
anniversary of the Closing Date or the date of the consummation of a
Company Sale (the "Preferred Mandatory Redemption Date"), at a price
per share equal to the Preferred Redemption Price.
4B. Optional Redemption. (i) Shareholder's Option. Subject to
the terms and conditions provided in Part 5 hereof, the Corporation
shall, at the option of each holder of Class A Preferred Stock
exercised during the period from and after the Closing Date until the
earlier of the fifth anniversary of the Closing Date or the date of the
consummation of an Initial Public Offering, redeem any or all of the
shares of Class A Preferred Stock then held by such holder at a price
per share equal to the Preferred Redemption Price.
(ii) Corporation's Option. Subject to the terms and
conditions provided in Part 5 hereof, the Corporation may, at
the option of the Corporation exercised at any time on or
after the earlier of the fifth anniversary of the Closing Date
or the date of the consummation of an Initial Public Offering,
redeem any or all of the shares of Preferred Stock then
outstanding at a price per share equal to the Preferred
Redemption Price. If the Corporation shall at any time elect
to
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<PAGE> 4
redeem less than all of the shares of Preferred Stock then
outstanding, it shall make such redemption on a pro rata basis
among the holders of the Preferred Stock then outstanding.
4C. Dividends After Redemption Date. No share of Preferred
Stock shall be entitled to any dividends accruing after the date on
which the Preferred Redemption Price of such share of Preferred Stock
is paid. On such date all rights of the holder of such share of
Preferred Stock shall cease, and such share of Preferred Stock will not
be deemed to be outstanding.
4D. Redeemed or Otherwise Acquired Shares. All shares of
Preferred Stock which are redeemed or otherwise acquired by the
Corporation prior to the Preferred Mandatory Redemption Date shall be
available for reissuance by the Corporation at any time prior to the
Preferred Mandatory Redemption Date. All shares of Preferred Stock
which are redeemed by the Corporation on the Preferred Mandatory
Redemption Date (or thereafter in accordance with Part 5 hereof) shall
be canceled and shall not be reissued, sold or transferred.
Part 5. Redemption Procedures.
5A. Notice of Redemption. (i) In the event that a holder of
Class A Preferred Stock elects to cause the Corporation to redeem such
holder's shares of Class A Preferred Stock pursuant to Subpart 4B(i),
such holder shall deliver to the Corporation, at the time or times
specified in the applicable Subpart, a written notice of such election
(which notice and election shall, without the written consent of the
Corporation, be irrevocable) and the shares of Class A Preferred Stock
to be redeemed (the "Shareholder Redemption Notice"). Notwithstanding
the foregoing, the holders of Class A Preferred Stock may only deliver
to the Corporation Shareholder Redemption Notices during the first ten
Business Days of each of January, April, July and October of each year.
Upon receipt of a valid Shareholder Redemption Notice, the Corporation
shall notify the holder of Class A Preferred Stock in writing, within
60 days of receipt of the Shareholder Redemption Notice, of the
redemption date for the shares to be redeemed (the "Shareholder
Redemption Date"), which Shareholder Redemption Date shall be a date
not more than 90 days from the date of receipt of the Shareholder
Redemption Notice; provided, however, that with respect to any
Shareholder Redemption Date upon which the Total Redemption Price the
Corporation shall pay is less than $50,000,000, the Corporation shall
notify the holder of Class A Preferred Stock of the Shareholder
Redemption Date within 30 days of receipt of the Shareholder Redemption
Notice, which Shareholder Redemption Date shall be a date not more than
45 days from the date of receipt of the Shareholder Redemption Notice.
(ii) In the event that the Corporation shall be
required to redeem shares of Preferred Stock pursuant to
Subpart 4A, or the Corporation elects to redeem shares of
Preferred Stock pursuant to Subpart 4B(ii), as the case may
be, the Corporation shall deliver to the holders of the shares
of Preferred Stock to be redeemed written notice of such
redemption (the "Corporate Redemption Notice"). The
Corporation Redemption Notice shall specify the shares of
Preferred Stock to be redeemed and the redemption date for the
shares to be redeemed (the "Corporation Redemption Date"),
which Corporation Redemption
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Date shall be a date not less than 30 days and not more than
60 days from the date of the Corporation Redemption Notice.
5B. Limitation on Redemptions. (i) With respect to any
Redemption Date, the Corporation shall be obligated to redeem only that
number of shares of Preferred Stock which are legally permitted under
the GCL and which will not cause the Corporation to be in violation of
any term in the Loan Agreement. Any shares of Preferred Stock not
redeemed on any Redemption Date shall be redeemed at such later time as
such redemption is legally permitted and will not cause such a
violation.
(ii) Except with respect to any Corporation
Redemption Date, the Corporation shall not be obligated to
redeem any shares of Class A Preferred Stock if at the time of
such proposed redemption an Initial Public Offering has been
consummated.
5C. Payment of Redemption Price. On the Redemption Date
specified in the Redemption Notice (or such later date provided in
paragraph (i) of Part 5B hereof), the holder of Class A Preferred Stock
being redeemed shall deliver to the Corporation the certificate or
certificates representing such shares of Class A Preferred Stock, as
the case may be, duly endorsed or accompanied by a duly executed stock
power, against payment therefor by the Corporation, and the Corporation
shall redeem, and acquire good and valid title to, such shares, free
and clear of any liens, charges, encumbrances or restrictions of any
nature whatsoever.
5D. Notices. Except as otherwise expressly provided, all
notices referred to herein shall be in writing and shall be delivered
personally, by courier, by registered or certified mail, return receipt
requested, postage prepaid or by telecopy with a copy sent by one of
the foregoing methods, and shall be deemed to have been given when
received (i) by the Corporation, at its principal executive officers,
and (ii) by any holder of Preferred Stock, at such holder's address as
it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder).
Part 6. Conversion.
6A. Mandatory Conversion. Each share of Class A Preferred
Stock shall automatically be converted into one share of Class B
Preferred Stock, without any action by the Corporation or further
action by the holder thereof, upon the earlier of (i) the Transfer of
such share of Class A Preferred Stock other than pursuant to an Exempt
Transfer, (ii) the date of the consummation of an Initial Public
Offering or (iii) the fifth anniversary of the Closing Date, unless on
or prior to such fifth anniversary a valid Redemption Notice has been
given, but the Redemption Date has not occurred, with respect to such
share of Class A Preferred Stock.
6B. Optional Conversion. Each share of Class A Preferred Stock
shall, at the option of the holder thereof, be convertible into one
share of Class B Preferred Stock at any time prior to the Redemption
Date for such share of Class A Preferred Stock.
6C. Surrender of Certificates. With respect to any conversion
of shares of Class A Preferred Stock into shares of Class B Preferred
Stock, the holder thereof shall
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<PAGE> 6
surrender the certificate or certificates therefor, duly endorsed, at
the office of the corporation during normal business hours together
with, in the case of a conversion pursuant to Subpart 6B, a written
notice by such holder stating that such holder desires to convert the
shares, or a stated number of the shares, of Class A Preferred Stock
represented by such certificate or certificates into shares of Class B
Preferred Stock. The Corporation will, as soon as practicable
thereafter, issue and deliver to such holder of shares of Class A
Preferred Stock, or to the nominee or nominees of such holder,
certificates for the number of shares of Class B Preferred Stock into
which such shares have been converted. If surrendered certificates for
shares of Class A Preferred Stock are converted only in part, the
Corporation will issue and deliver to the holder, or to the nominee or
nominees of such holder, a new certificate or certificates representing
the aggregate of the unconverted shares of Class A Preferred Stock.
Shares of Class A Preferred Stock shall be deemed to have been
converted into shares of Class B Preferred Stock, in the case of a
conversion pursuant to Subpart 6A, as of the date of the Transfer of
such shares of Class A Preferred Stock (other than pursuant to an
Exempt Transfer) or other event provided in Subpart 6A which causes
such conversion, and in the case of a conversion pursuant to Subpart
6B, as of the date of the surrender of such shares for conversion and
delivery of the accompanying notice as provided above, and the person
or persons entitled to receive the shares of Class B Preferred Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Class B Preferred Stock on
such date.
6D. Reservation of Shares. The Corporation will reserve and at
all times keep available out of its authorized but unissued shares of
Class B Preferred Stock or its shares of treasury stock of such class,
a sufficient number of shares of Class B Preferred Stock to satisfy the
conversion requirements of all outstanding shares of Class A Preferred
Stock. The Corporation will take all such action as may be necessary to
ensure that all shares of Class B Preferred Stock issued upon
conversion of shares of Class A Preferred Stock will be duly and
validly authorized and issued and fully paid and nonassessable.
6E. Transfer Taxes. The issuance of certificates for shares of
Class B Preferred Stock upon the conversion of shares of Class A
Preferred Stock shall be made without charge to the holders converting
such shares of Class A Preferred Stock for any issue or stamp tax in
respect of the issuance of such certificates, and such certificates
shall be issued in the respective names of, or in such names as may be
directed by, the holders of shares of Class A Preferred Stock
converted; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate in a name
other than that of the holder of shares of Class A Preferred Stock
converted, and the Corporation shall not be required to issue or
deliver such certificate sunless or until the person or persons
requesting the issuance thereof shall have paid to the Corporation the
amount of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
Part 7. Voting Rights. Except as provided by law or in Part 9 hereof,
the Preferred Stock shall have no voting rights.
Part 8. Priority. So long as any Preferred Stock remains outstanding,
the Corporation shall not redeem, purchase or otherwise acquire any
Junior Securities, nor shall the
6
<PAGE> 7
Corporation declare or pay any dividend or make any distribution upon
Junior Securities, if immediately after such redemption, purchase,
acquisition, dividend or distribution any Preferred Event of
Noncompliance would exist.
Part 9. Amendment and Waiver; Merger or Consolidation. No amendment,
modification or waiver shall be binding or effective with respect to
any provision of this Certificate of Designation which would:
(a) increase or decrease the aggregate number of
authorized shares of such class;
(b) effect an exchange, reclassification, or cancellation
of all or part of the shares of such class;
(c) change the designations, preferences, qualifications,
limitations, restrictions, or special or relative
rights of the shares of such class;
(d) in the case of a preferred or special class of
shares, divide the shares of such class into series
and fix or authorize the board of directors to fix
the variations in the relative rights and preferences
between the shares of such series;
(e) change the shares of such class into the same or a
different number of shares of the same class or
another class or classes;
(f) create a right of exchange, of all or any part of the
shares of another class into the shares of such
class;
(g) create a new class of shares having rights and
preferences prior, superior or substantially equal to
those of the shares of such class, or increase the
rights and preferences of any class having rights and
preferences prior, superior or substantially equal to
those of the shares of such class, or increase the
rights and preferences of any class having rights and
preferences subordinate to those of such class if
such increase would then make the rights and
preferences substantially equal to or superior to
those of such class;
(h) limit or deny the existing preemptive rights of the
shares of such class;
(i) cancel or otherwise affect dividends on the shares of
such class which had accumulated but had not been
declared;
(j) limit or deny the voting rights of the shares of such
class,
Nor shall the Corporation merge or consolidate with any entity in a
transaction that would result in any such change, without the prior
written consent of the holders of at least a majority of the Preferred
Stock outstanding at the time such action is taken.
Part 10. Definitions. For purposes of this Certificate of Designation,
the following capitalized terms shall have the following meanings:
"Business Day" means a day of the year on which commercial
banks are not required or authorized to close in New York, New York.
"Closing Date" has the meaning ascribed thereto in the Merger
Agreement.
7
<PAGE> 8
"Company Sale" means, after the occurrence of a Majority
Shareholder Default and during the continuation thereof, the sale of
the Corporation (whether by merger, consolidation or sale of all or
substantially all of the outstanding capital stock of the Corporation)
or the sale of all or substantially all of the assets of the
Corporation, in a single transaction or a Class of related
transactions.
"Exempt Transfer" has the meaning ascribed thereto in the
Shareholders Agreement.
"Initial Public Offering" has the meaning ascribed thereto in
the Shareholders Agreement.
"Junior Securities" means any of the Corporation's equity
securities other than the Preferred Stock.
"Liquidation Value" of any share of Preferred Stock shall be
$1,000 (as adjusted for stock splits, stock dividends, combinations and
similar changes in the Corporation's capital stock occurring after the
Closing Date).
"Loan Agreement" has the meaning ascribed thereto in the
Shareholders Agreement.
"Majority Shareholder Default" has the meaning ascribed
thereto in the Shareholders Agreement.
"Merger Agreement" means the Agreement and Plan of Merger
dated as of August 31, 1995 by and among the Corporation, Geo. J. Ball,
Inc., Empresas La Moderna, S.A. de C.V. and the persons named as Ball
Shareholders on Annex A thereto.
"Preferred Event of Noncompliance" means (i) the Corporation
fails to pay on any dividend payment date the full amount of dividends
then accrued, or (ii) the Corporation fails to make any redemption
payment with respect to the Preferred Stock which it is obligated to
make.
"Preferred Redemption Price" means, with respect to any share
of Preferred Stock, an amount equal to the Liquidation Value thereof
plus cumulated and unpaid dividends thereon.
"Redemption Date" means, as to any share of Preferred Stock,
the Corporation Redemption Date or the Shareholder Redemption Date, as
the case may be; provided that no such date will be a Redemption Date
unless the applicable Preferred Redemption Price or Common Redemption
Price is actually paid in full on such date, and if not so paid in
full, the Redemption Date will be the date on which such Preferred
Redemption Price or Common Redemption Price is fully paid.
8
<PAGE> 9
"Redemption Notice" means, as to the redemption of any share
of Preferred Stock, the Corporation Redemption Notice or the
Shareholder Redemption Notice, as the case may be.
"Shareholders Agreement" means the Shareholders Agreement
dated as of the Closing Date among the Corporation and its
shareholders, as in effect from time to time.
"Subsidiary" has the meaning ascribed thereto in the
Shareholders Agreement.
"Total Redemption Price" means, with respect to any Redemption
Date, the Preferred Redemption Price multiplied by the number of shares
of Preferred Stock to be redeemed upon such Redemption Date.
"Transfer" has the meaning ascribed thereto in the
Shareholders Agreement.
IN WITNESS WHEREOF, Seminis, Inc. has caused this Certificate
of Designations to be duly executed by ___________________, its ______________
this __ day of _______, 1999.
Seminis, Inc.
____________________________
9
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF DESIGNATIONS
OF
CLASS C REDEEMABLE PIK PREFERRED STOCK
OF
SEMINIS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
----------------------------------------
Seminis, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law (the "GCL") by unanimous written consent on February 24,
1999:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Articles of
Incorporation of the Corporation, as amended, the Board of Directors hereby
creates a Class C Redeemable PIK Preferred Stock, par value $.01 per share (the
"Class C Preferred Stock"), of the Corporation and hereby states the designation
and number of shares of such Class, and fixes the relative rights, preferences,
and limitations thereof as follows:
Part 1. Designation and Amount Class C Preferred Stock. The shares of
Class C Preferred Stock shall be designated as "Class C Redeemable PIK
Preferred Stock" and the number of shares constituting the Class C
Preferred Stock shall be two thousand (2,000). Such number of shares
may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Class C
Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance of
additional shares of Class C Preferred Stock pursuant to the terms
hereof and the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the
Corporation convertible into Class C Preferred Stock.
<PAGE> 2
Part 2. Dividends.
2A. Payment of Dividends. The dividends on each share of the
Preferred Stock shall accrue cumulatively at the rate of 10% per annum
of the Stated Value thereof from and including December 1, 1998 to and
including the date on which the Class C Preferred Stock is redeemed.
The dividends on each share of Class C Preferred Stock shall be
payable, to the extent permitted under the GCL and not prohibited by
the Credit Agreement, to the registered holder thereof quarterly on the
first day of January, April, July and October of each year, or if such
day is not a Business Day, on the immediately preceding Business Day;
provided that for each quarterly payment until and including the
quarterly payment due January 2001, dividends shall be payable by
issuing a number of additional fully paid and non-assessable shares
(including fractional shares, if any) of Class C Preferred Stock
determined by dividing the amount of the dividend by the Stated Value
(each a "PIK Dividend Payment"). Such dividends shall accrue whether or
not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends. To the fullest extent
permitted under the GCL and not prohibited by the Credit Agreement, the
Board of Directors of the Corporation shall declare and the Corporation
shall pay all dividends accrued on the Class C Preferred Stock on the
dates set forth above. Any dividends which are not declared and paid on
the dates set forth above shall be declared and paid as soon as
permitted under the GCL. The Corporation shall not, and shall not
permit any Subsidiary to, enter into any credit or loan agreement which
expressly prohibits (i) the payment by the Corporation of dividends on
the Class C Preferred Stock in the amounts and at the times specified
herein or (ii) the payment by such Subsidiary of dividends to the
Corporation for the purpose of paying dividends on the Class C
Preferred Stock; provided, however, that the foregoing shall not be
deemed to restrict the ability of the Corporation or any Subsidiary to
enter into any credit or loan agreement which prohibits or restricts
the payment by the Corporation of dividends on the Class C Preferred
Stock or the payment by any Subsidiary of dividends to the Corporation
upon (i) the existence of an event of default, or any event which after
notice or the passage of time or both, would constitute an event of
default, under such credit or loan agreement, which gives rise to a
right by the lender to accelerate amounts outstanding under, or
terminate, such credit or loan agreement or (ii) the occurrence of
certain events or the failure of the Corporation or such Subsidiary to
satisfy certain conditions, where such events had not occurred and such
conditions were satisfied at the time such credit or loan agreement was
entered into.
2B. Distribution of Partial Dividend Payments. If at any time
the Corporation distributes less than the total amount of cash
dividends then accrued with respect to Class C Preferred Stock, such
payment will be distributed among the holders of Class C Preferred
Stock so that an equal amount will be paid (as nearly as possible) with
respect to each outstanding share of Class C Preferred Stock.
Part 3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, each holder of Class C Preferred Stock shall be
entitled to be paid, before any distribution or payment is made upon
any Junior Security, an amount in cash equal to the aggregate of the
Liquidation Value multiplied by the number of shares of Class C
Preferred Stock then held by such holder and each such holder of Class
C Preferred Stock shall not be entitled to any further payment. If upon
any such liquidation, dissolution or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of the
2
<PAGE> 3
Class C Preferred Stock are insufficient to permit payment to such
holders of the aggregate amount which they are entitled to be paid,
then the entire assets to be distributed shall be distributed equally
and ratably among such holders based upon the number of shares of the
Class C Preferred Stock held by each such holder. The Corporation shall
mail written notice of such liquidation, dissolution or winding up, not
less than 60 days prior to the payment date stated therein, to each
record holder of Class C Preferred Stock. Neither the consolidation or
merger of the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all or any
part of its assets, nor the reduction of the capital stock of the
Corporation, will be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of this Part 3 unless such
consolidation, merger, sale or transfer shall be in connection with a
plan of liquidation, dissolution or winding up of the business of the
Corporation.
Part 4. Redemption.
4A. Optional Redemption. Subject to the terms and conditions
provided in Part 5 hereof, the Corporation may, at the option of the
Corporation exercised at any time, redeem any or all of the shares of
Class C Preferred Stock then outstanding at a price per share equal to
the Liquidation Value. If the Corporation shall at any time elect to
redeem less than all of the shares of Class C Preferred Stock then
outstanding, it shall make such redemption on a pro rata basis among
the holders of the Class C Preferred Stock then outstanding.
4B. Dividends After Redemption Date. No share of Class C
Preferred Stock shall be entitled to any dividends accruing after the
date on which the Class C Preferred Stock is redeemed and an amount
equal to the Liquidation Value is paid for each share redeemed. On such
date all rights of the holder of such share of Class C Preferred Stock
shall cease, and such share of Class C Preferred Stock will not be
deemed to be outstanding.
4C. Redeemed or Otherwise Acquired Shares. All shares of Class
C Preferred Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled and shall not be reissued, sold or
transferred.
Part 5. Redemption Procedures.
5A. Notice of Redemption. In the event that the Corporation
elects to redeem shares of Class C Preferred Stock pursuant to Subpart
4A, the Corporation shall deliver to the holders of the shares of Class
C Preferred Stock to be redeemed written notice of such redemption (the
"Redemption Notice"). The Redemption Notice shall specify the shares of
Preferred Stock to be redeemed and the redemption date for the shares
to be redeemed (the "Redemption Date"), which Redemption Date shall be
a date not less than 30 days and not more than 60 days from the date of
the Redemption Notice.
5B. Limitation on Redemptions. (i) With respect to any
Redemption Date, the Corporation shall be obligated to redeem only that
number of shares of Class C Preferred Stock which are legally permitted
under the GCL and which will not cause the Corporation to be in
violation of any term in the Credit Agreement. Any shares of
3
<PAGE> 4
Class C Preferred Stock not redeemed on any Redemption Date shall be
redeemed at such later time as such redemption is legally permitted and
will not cause such a violation.
5C. Payment of Redemption Price. On the Redemption Date
specified in the Redemption Notice (or such later date provided in
paragraph (i) of Part 5B hereof), the holder of Class C Preferred Stock
being redeemed shall deliver to the Corporation the certificate or
certificates representing such shares of Class C Preferred Stock, as
the case may be, duly endorsed or accompanied by a duly executed stock
power, against payment therefor by the Corporation, and the Corporation
shall redeem, and acquire good and valid title to, such shares, free
and clear of any liens, charges, encumbrances or restrictions of any
nature whatsoever.
5D. Notices. Except as otherwise expressly provided, all
notices referred to herein shall be in writing and shall be delivered
personally, by courier, by registered or certified mail, return receipt
requested, postage prepaid or by telecopy with a copy sent by one of
the foregoing methods, and shall be deemed to have been given when
received (i) by the Corporation, at its principal executive officers,
and (ii) by any holder of Class C Preferred Stock, at such holder's
address as it appears in the stock records of the Corporation (unless
otherwise indicated by any such holder).
Part 6. Voting Rights. Except as provided by law or in Part 9 hereof,
the Class C Preferred Stock shall have no voting rights.
Part 7. Rank. Shares of Class C Preferred Stock shall rank (i) junior
to the Class A Preferred Stock and the Class B Preferred Stock with
respect to the payment of dividends, redemptions and upon liquidation
and (ii) senior and prior to Junior Securities and, except as approved
by a majority of the holders of Class C Preferred Stock, to all other
classes or series of the capital stock of the Corporation (now or
hereafter authorized or issued), with respect to the payment of
dividends, redemptions and upon liquidation.
Part 8. Priority. So long as any Class C Preferred Stock remains
outstanding, the Corporation shall not redeem, purchase or otherwise
acquire any Junior Securities, nor shall the Corporation declare or pay
any dividend or make any distribution upon Junior Securities, unless
the Corporation shall not be in default under Part 2A hereof.
Part 9. Amendment and Waiver; Merger or Consolidation. No amendment,
modification or waiver shall be binding or effective with respect to
any provision of this Certificate of Designations which would:
(a) increase or decrease the aggregate number of
authorized shares of such class;
(b) effect an exchange, reclassification, or cancellation
of all or part of the shares of such class;
(c) change the designations, preferences, qualifications,
limitations, restrictions, or special or relative
rights of the shares of such class;
(d) in the case of a preferred or special class of
shares, divide the shares of such class into series
and fix or authorize the board of directors to fix
the variations in the relative rights and preferences
between the shares of such series;
4
<PAGE> 5
(e) change the shares of such class into the same or a
different number of shares of the same class or
another class or classes;
(f) create a right of exchange, of all or any part of the
shares of another class into the shares of such
class;
(g) create a new class of shares having rights and
preferences prior, superior or substantially equal to
those of the shares of such class, or increase the
rights and preferences of any class having rights and
preferences prior, superior or substantially equal to
those of the shares of such class, or increase the
rights and preferences of any class having rights and
preferences subordinate to those of such class if
such increase would then make the rights and
preferences substantially equal to or superior to
those of such class;
(h) limit or deny the existing preemptive rights of the
shares of such class;
(i) cancel or otherwise affect dividends on the shares of
such class which had accumulated but had not been
declared;
(j) limit or deny the voting rights of the shares of such
class,
nor shall the Corporation merge or consolidate with any entity in a
transaction that would result in any such change, without the prior
written consent of the holders of at least a majority of the Class C
Preferred Stock outstanding at the time such action is taken.
Part 10. Fractional Shares. Each fractional share of Class C Preferred
Stock outstanding shall be entitled to a ratably proportionate amount
of all dividends and distributions payable with respect to each
outstanding share of Class C Preferred Stock in accordance with the
terms hereof, whether as a dividend or upon a liquidation, dissolution
or winding-up of the affairs of the Corporation, and all such dividends
and distributions shall be payable in the same manner and at the same
time as provided herein for each outstanding share of Class C Preferred
Stock. Each fractional share of Class C Preferred Stock outstanding
shall entitle the holder thereof to a ratably proportionate amount of
the votes to which each outstanding share of Class C Preferred Stock is
entitled, and shall be voted in the same manner as each outstanding
share of Class C Preferred Stock.
Part 11. Definitions. For purposes of this Certificate of Designations,
the following capitalized terms shall have the following meanings:
"Business Day" means a day of the year on which commercial
banks are not required or authorized to close in New York, New York.
"Class A Preferred Stock" means the Class A Redeemable
Preferred Stock, par value $.01 per share, of the Corporation.
"Class B Preferred Stock" means the Class B Redeemable
Preferred Stock, par value $.01 per share, of the Corporation.
"Credit Agreement" shall mean any loan agreement or credit
agreement by and between the Corporation and any commercial bank as may
exist at the time the Class C Preferred Stock is first issued.
5
<PAGE> 6
"Junior Securities" means any of the Corporation's equity
securities other than the Class A Preferred Stock, Class B Preferred
Stock or Class C Preferred Stock.
"Liquidation Value" of any share of Class C Preferred Stock
shall be the Stated Value plus an amount equal to the accrued and
unpaid dividends and distributions thereon.
"Stated Value" means $10,000.00.
"Subsidiary" means any corporation or other entity of which a
majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by the Corporation.
IN WITNESS WHEREOF, Seminis, Inc. has caused this Certificate
of Designations to be duly executed by __________________, its ______________
this ____ day of __________, 1999.
Seminis, Inc.
____________________________
6
<PAGE> 1
Exhibit 3.4
BYLAWS
OF
SEMINIS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I Office and Records................................................................................. 1
Section 1.1 Delaware Office........................................................................... 1
Section 1.2 Other Offices............................................................................. 1
Section 1.3 Books and Records......................................................................... 1
ARTICLE II Stockholders...................................................................................... 1
Section 2.1 Annual Meeting............................................................................ 1
Section 2.2 Special Meetings.......................................................................... 1
Section 2.3 Notice of Meetings........................................................................ 2
Section 2.4 Quorum.................................................................................... 2
Section 2.5 Voting.................................................................................... 3
Section 2.6 Proxies................................................................................... 3
Section 2.7 Notice of Stockholder Business and Nominations............................................ 3
Section 2.8 Inspectors of Elections; Opening and Closing the Polls.................................... 5
Section 2.9 List of Stockholders...................................................................... 6
Section 2.10 No Stockholder Action by Written Consent.................................................. 6
ARTICLE III Directors........................................................................................ 6
Section 3.1 General Powers............................................................................ 6
Section 3.2 Number, Tenure and Qualifications......................................................... 7
Section 3.3 Vacancies and Newly Created Directorships................................................. 7
Section 3.4 Resignation............................................................................... 7
Section 3.5 Removal................................................................................... 8
Section 3.6 Chairman of the Board..................................................................... 8
Section 3.7 Meetings.................................................................................. 8
Section 3.8 Quorum and Voting......................................................................... 8
Section 3.9 Written Consent of Directors in Lieu of a Meeting......................................... 9
Section 3.10 Compensation.............................................................................. 9
Section 3.11 Committees of the Board of Directors...................................................... 9
ARTICLE IV Officers.......................................................................................... 10
Section 4.1 Elected Officers.......................................................................... 10
Section 4.2 Election and Term of Office............................................................... 10
Section 4.3 Resignation and Removal................................................................... 10
Section 4.4 Compensation and Bond..................................................................... 10
Section 4.6 President................................................................................. 11
Section 4.7 Vice Presidents........................................................................... 11
Section 4.8 Treasurer................................................................................. 11
</TABLE>
<PAGE> 3
2
<TABLE>
<S> <C>
Section 4.9 Secretary................................................................................. 11
Section 4.10 Assistant Treasurers...................................................................... 11
Section 4.11 Assistant Secretaries..................................................................... 12
Section 4.12 Delegation of Duties...................................................................... 12
ARTICLE V Indemnification and Insurance...................................................................... 12
Section 5.1 Right to Indemnification.................................................................. 12
Section 5.2 Right to Advancement of Expenses.......................................................... 12
Section 5.3 Right of Indemnitee to Bring Suit......................................................... 13
Section 5.4 Non-Exclusivity of Rights................................................................. 13
Section 5.5 Insurance................................................................................. 14
Section 5.6 Indemnification of Employees and Agents of the Corporation................................ 14
Section 5.7 Contract Rights........................................................................... 14
ARTICLE VI Capital Stock..................................................................................... 14
Section 6.1 Certificates.............................................................................. 14
Section 6.2 Transfers of Stock........................................................................ 14
Section 6.3 Lost, Stolen or Destroyed Certificates.................................................... 15
Section 6.4 Stockholder Record Date................................................................... 15
ARTICLE VII Seal............................................................................................. 16
Section 7.1 Seal...................................................................................... 16
ARTICLE VIII Waiver of Notice................................................................................ 16
Section 8.1 Waiver of Notice.......................................................................... 16
ARTICLE IX Checks, Notes, Drafts, Etc........................................................................ 16
Section 9.1 Checks, Notes, Drafts, Etc................................................................ 16
ARTICLE X Amendments......................................................................................... 16
Section 10.1 Amendments................................................................................ 17
</TABLE>
<PAGE> 4
BYLAWS
OF
SEMINIS, INC.
ARTICLE I
Office and Records
Section 1.1 Delaware Office. The principal office of the
Corporation in the State of Delaware shall be located in the City of Wilmington,
County of New Castle, and the name and address of its registered agent is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware.
Section 1.2 Other Offices. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time to
time require.
Section 1.3 Books and Records. The books and records of the
Corporation may be kept at the Corporation's principal executive offices in
Oxnard, California or at such other locations outside the State of Delaware as
may from time to time be designated by the Board of Directors.
ARTICLE II
Stockholders
Section 2.1 Annual Meeting. The annual meeting of stockholders
of the Corporation shall be held on such date, at such time and at such place as
may be fixed by the Board of Directors.
Section 2.2 Special Meetings. Subject to the rights of the
holders of any series of preferred stock, par value $.01 per share, of the
Corporation (the "Preferred Stock"), or any other series or class of stock as
set forth in the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation") to elect additional directors under specified
circumstances, a special meeting of the holders of stock of the Corporation
entitled to vote on any business to be considered at any such meeting may be
called only by the Chairman of the Board of the Corporation, and shall be called
by the Secretary of the Corporation at the request of the Board
<PAGE> 5
2
of Directors pursuant to a resolution adopted by a majority of the total number
of directors which the Corporation would at the time have if there were no
vacancies (the "Whole Board"). The Board of Directors may designate the place of
meeting for any special meeting of the stockholders, and if no such designation
is made, the place of meeting shall be the principal executive offices of the
Corporation.
Section 2.3 Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, unless notice is waived
as provided in Section 8.1 of these Bylaws, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called.
Unless otherwise provided by law, and except as to any
stockholder duly waiving notice, the written notice of any meeting shall be
given personally or by mail, not less than ten (10) nor more than sixty (60)
days before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, notice shall be deemed given when deposited in the mail,
postage prepaid, directed to the stockholder at his or her address as it appears
on the records of the Corporation. Any previously scheduled meeting of the
stockholders may be postponed by resolution of the Board of Directors upon
public notice given prior to the time previously scheduled for such meeting of
stockholders.
When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If, however, the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.4 Quorum. Except as otherwise provided by law or by
the Certificate of Incorporation or by these Bylaws, at any meeting of
stockholders the holders of a majority of the voting power of the outstanding
shares of the Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), either present or represented by proxy, shall
constitute a quorum for the transaction of any business at such meeting, except
that when specified business is to be voted on by a class or series voting as a
class, the holders of a majority of the shares of such class or series shall
constitute a quorum for the transaction of such business. The chairman of the
meeting or a majority of the voting power of the shares of Voting Stock so
represented may adjourn the meeting from time to time, whether or not there is
such a quorum (or in the case of specified business to be voted on as a class or
series, the chairman or a majority of the shares of such class or series so
represented may adjourn the meeting with respect to such specified business). No
notice of the time and place of adjourned meetings need be given except as
provided in the last paragraph of Section 2.3 of these Bylaws. The stockholders
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
<PAGE> 6
3
Section 2.5 Voting. Except as otherwise set forth in the
Certificate of Incorporation with respect to the right of any holder of any
series of Preferred Stock or any other series or class of stock to elect
additional directors under specified circumstances, whenever directors are to be
elected at a meeting, they shall be elected by a plurality of the votes cast at
the meeting by the holders of stock entitled to vote. Whenever any corporate
action, other than the election of directors, is to be taken by vote of
stockholders at a meeting, such corporate action shall, except as otherwise
required by law or by the Certificate of Incorporation or by these Bylaws, be
authorized by the affirmative vote of the holders of a majority of the voting
power of the then outstanding Voting Stock present or represented by proxy and
entitled to vote with respect to such corporate action.
Except as otherwise provided by law, or by the Certificate of
Incorporation, each holder of record of stock of the Corporation entitled to
vote on any matter at any meeting of stockholders shall be entitled to one vote
for each share of such stock standing in the name of such holder on the stock
ledger of the Corporation on the record date for the determination of the
stockholders entitled to vote at the meeting.
Upon the demand of any stockholder entitled to vote, the vote
for directors or the vote on any other matter at a meeting shall be by written
ballot, but otherwise the method of voting and the manner in which votes are
counted shall be discretionary with the presiding officer at the meeting.
Section 2.6 Proxies. Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for him
or her by proxy, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. Every proxy
shall be signed by the stockholder or by his duly authorized attorney. Such
proxy must be filed with the Secretary of the Corporation or his or her
representative at or before the time of the meeting.
Section 2.7 Notice of Stockholder Business and Nominations.
(A) Annual Meeting of Stockholders.
(1) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a) by or at
the direction of the Chairman of the Board or the Board of Directors pursuant to
a resolution adopted by a majority of the Whole Board or (b) by any stockholder
of the Corporation who is entitled to vote at the meeting with respect to the
election of directors or the business to be proposed by such stockholder, as the
case may be, who complies with the notice procedures set forth in clauses (2)
and (3) of paragraph (A) of this Section 2.7 and who is a stockholder of record
at the time such notice is delivered to the Secretary of the Corporation as
provided below.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (b) of
paragraph (A)(1) of this Section 2.7, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation
<PAGE> 7
4
and such business must be a proper subject for stockholder action under the
Delaware General Corporation Law (the "GCL"). To be timely, a stockholder's
notice shall be delivered to the Secretary of the Corporation at the principal
executive offices of the Corporation not less than sixty (60) days nor more than
ninety (90) days prior to the first anniversary of the date of the notice of
meeting for preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is advanced by more than thirty (30)
days, or delayed by more than sixty (60) days, from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
ninetieth (90th) day prior to such annual meeting and not later than the close
of business on the later of the sixtieth (60th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. Such stockholder's notice shall set forth
(a) as to each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 2.7 to the contrary, in the event that the
number of directors to be elected to the Board of Directors is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the Corporation
at least eighty (80) days prior to the first anniversary of the notice of
meeting for the preceding year's annual meeting, a stockholder's notice required
by paragraph (A)(2) of this Section 2.7 shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary of the Corporation at the principal
executive offices of the Corporation not later than the close of business on the
tenth (10th) day following the day on which such public announcement is first
made by the Corporation.
(B) Special Meeting of Stockholders. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) by or at the direction
of the Chairman of the Board or the Board of Directors pursuant to a resolution
adopted by a majority of the Whole Board or (ii) by any stockholder of the
Corporation who is entitled to vote at the meeting with respect to the election
of directors, who complies with the notice procedures set forth in this
paragraph (B) and who is a stockholder of record at the time such notice is
delivered to the Secretary of the Corporation as provided below. Nominations by
stockholders of persons for election to the Board of Directors may be made at
such a special meeting of stockholders if the stockholder's notice as required
by paragraph (A)(2) of this Section 2.7 shall be delivered to the Secretary of
the Corporation at the principal executive offices of the Corporation not
earlier than the ninetieth (90th) day prior to
<PAGE> 8
5
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(C) General. (1) Only persons who are nominated in
accordance with the procedures set forth in this Section 2.7 shall be eligible
to serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 2.7.
(2) Except as otherwise provided by law, the Certificate
of Incorporation or this Section 2.7, the chairman of the meeting shall have the
power and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Section 2.7 and, if any proposed nomination or business is not in
compliance with this Section 2.7, to declare that such defective nomination or
proposal shall be disregarded.
(3) For purposes of this Section 2.7, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(4) Notwithstanding the foregoing provisions of this
Section 2.7, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 2.7. Nothing in this Section 2.7 shall be
deemed to affect any rights (i) of stockholders to request inclusion of
proposals in the Corporation's proxy materials with respect to a meeting of
stockholders pursuant to Rule 14a-8 under Exchange Act or (ii) of the holders of
any series of Preferred Stock or any other series or class of stock as set forth
in the Certificate of Incorporation to elect directors under specified
circumstances or to consent to specific actions taken by the Corporation.
Section 2.8 Inspectors of Elections; Opening and Closing the
Polls. (A) The Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath to execute faithfully the duties of his or her ability. The
inspectors shall have the duties prescribed by the GCL.
(B) The chairman of the meeting shall fix and announce at
the meeting the time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting.
<PAGE> 9
6
Section 2.9 List of Stockholders. The officer who has charge
of the stock ledger of the Corporation shall prepare and make, at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
Section 2.10 No Stockholder Action by Written Consent. Subject
to the rights of the holders of any series of Preferred Stock or any other
series or class of stock as set forth in the Certificate of Incorporation to
elect additional directors under specified circumstances or to consent to
specific actions taken by the Corporation, any action required or permitted to
be taken by the stockholders of the Corporation must be taken at an annual or
special meeting of the stockholders and may not be taken by any consent in
writing by such stockholders.
ARTICLE III
Directors
Section 3.1 General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these Bylaws expressly
conferred upon it, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Certificate of Incorporation or by these Bylaws required to be exercised or done
by the stockholders.
Section 3.2 Number, Tenure and Qualifications. Subject to the
rights of the holders of any series of Preferred Stock or any other series or
class of stock as set forth in the Certificate of Incorporation to elect
directors under specified circumstances, the number of directors shall be fixed
from time to time exclusively pursuant to a resolution adopted by a majority of
the Whole Board. The directors, other than those who may be elected by the
holders of any series of Preferred Stock or any other series or class of stock
as set forth in the Certificate of Incorporation, shall be divided into three
classes, each consisting of, as near as possible, an equal number of directors,
and designated as Class I, Class II and Class III. Class I directors shall be
initially elected for a term expiring at the 2000 annual meeting of
stockholders, Class II directors shall be initially elected for a term expiring
at the 2001 annual meeting of stockholders and Class III directors shall be
initially elected for a term expiring at the 2002 annual meeting of
<PAGE> 10
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stockholders. Members of each class shall hold office until their successors
shall have been duly elected and qualified. At each succeeding annual meeting of
stockholders of the Corporation, the successors of the class of directors whose
term expires at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders held in the third year following the year
of their election, and until their successors are elected and qualified.
Section 3.3 Vacancies and Newly Created Directorships. Subject
to the rights of the holders of any series of Preferred Stock or any other
series or class of stock as set forth in the Certificate of Incorporation to
elect additional directors under specified circumstances, vacancies resulting
from death, resignation, retirement, disqualification, removal from office or
other cause, and newly created directorships resulting from any increase in the
authorized number of directors, may be filled only by the affirmative vote of a
majority of the remaining directors, though less than a quorum of the Board of
Directors, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
directors constituting the Whole Board shall shorten the term of any incumbent
director.
Section 3.4 Resignation. Any director may resign at any time
upon written notice to the Corporation. Any such resignation shall take effect
at the time specified therein or, if the time be not specified, upon receipt
thereof, and the acceptance of such resignation, unless required by the terms
thereof, shall not be necessary to make such resignation effective.
Section 3.5 Removal. Subject to the rights of the holders of
any series of Preferred Stock or any other series or class of stock as set forth
in the Certificate of Incorporation to elect additional directors under
specified circumstances, any director may be removed from office at any time,
but only for cause and only by the affirmative vote of the holders of a majority
of the voting power of the then outstanding Voting Stock, voting together as a
single class.
Section 3.6 Chairman of the Board. The Chairman of the Board
shall be chosen by, and from among, the Board of Directors. The Chairman of the
Board shall not be an officer of the Corporation. The Chairman of the Board
shall preside at all meetings of stockholders and of the Board of Directors. The
Chairman of the Board shall make reports to the Board of Directors and the
stockholders and shall perform all duties incidental to such office which may be
required by law and all such other duties as are properly required by the Board
of Directors. The Chairman of the Board shall see that all orders and
resolutions of the Board of Directors and of any committee thereof are carried
into effect.
Section 3.7 Meetings. Meetings of the Board of Directors,
regular or special, may be held at any place within or without the State of
Delaware. Members of the Board of Directors, or of any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors
or such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting by such means shall constitute
presence in person at such meeting. An annual meeting of the Board of Directors
shall be held at the same
<PAGE> 11
8
place and immediately following each annual meeting of stockholders, and no
further notice thereof need be given other than this Bylaw. The Board of
Directors may fix times and places for additional regular meetings of the Board
of Directors and no further notice of such meetings need be given. A special
meeting of the Board of Directors shall be held whenever called by the Chairman
of the Board or by a majority of the Whole Board, at such time and place as
shall be specified in the notice or waiver thereof. The person or persons
authorized to call special meeting of the Board of Directors may fix the place
and time of the meetings. Notice of any special meeting shall be given to each
director at his or her business or residence in writing or by telegram or by
telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with postage
thereon prepaid, at least five (5) days before such meeting. If by telegram,
such notice shall be deemed adequately delivered when the telegram is delivered
to the telegraph company at least twenty-four hours before such meeting. If by
facsimile transmission, such notice shall be transmitted at least twenty-four
hours before such meeting. If by telephone, the notice shall be given at least
twelve hours prior to the time set for the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice of such meeting, except for
amendments to these Bylaws as provided under Section 10.1 of these Bylaws.
Section 3.8 Quorum and Voting. A whole number of directors
equal to at least a majority of the Whole Board shall constitute a quorum for
the transaction of business at any meeting of the Board of Directors, but if
there be less than a quorum, a majority of the directors present may adjourn the
meeting from time to time, and no further notice thereof need be given other
than announcement at the meeting which shall be so adjourned. Except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws, the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 3.9 Written Consent of Directors in Lieu of a Meeting.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board of Directors or of such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or of such committee.
Section 3.10 Compensation. Directors may receive compensation
for services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the Board
of Directors.
Section 3.11 Committees of the Board of Directors. The Board
of Directors may from time to time, by resolution passed by majority of the
Whole Board, designate one or more committees, each committee to consist of one
or more directors of the Corporation. The Board of Directors may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. The resolution of
the Board of Directors may, in addition or alternatively, provide that in the
absence or disqualification of a member of a committee, the member or members
thereof present at any
<PAGE> 12
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meeting and not disqualified from voting, whether or not he, she or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it, except as otherwise provided by law. Unless the
resolution of the Board of Directors expressly so provides, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock. Any such committee may adopt rules governing the method of
calling and time and place of holding its meetings. Unless otherwise provided by
the Board of Directors, a majority of any such committee (or the member thereof,
if only one) shall constitute a quorum for the transaction of business, and the
vote of a majority of the members of such committee present at a meeting at
which a quorum is present shall be the act of such committee. Each such
committee shall keep a record of its acts and proceedings and shall report
thereon to the Board of Directors whenever requested so to do. Any or all
members of any such committee may be removed, with or without cause, by
resolution of the Board of Directors, passed by a majority of the Whole Board.
ARTICLE IV
Officers
Section 4.1 Elected Officers. The elected officers of the
Corporation shall be a President, a Secretary and a Treasurer, and may also
include one or more Vice Presidents, one or more Assistant Secretaries and one
or more Assistant Treasurers. All officers chosen by the Board of Directors
shall each have such powers and duties as generally pertain to their respective
offices, subject to the specific provisions of this Article IV, together with
such other powers and duties as from time to time may be conferred by the Board
of Directors or any committee thereof. Any number of such offices may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity. The Board of Directors may appoint, and
may delegate power to appoint, such other officers, agents and employees as it
may deem necessary or proper, who shall hold their offices or positions for such
terms, have such authority and perform such duties as may from time to time be
determined by or pursuant to authorization of the Board of Directors.
Section 4.2 Election and Term of Office. The elected officers
of the Corporation shall be elected annually by the Board of Directors at the
regular meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Subject to Section
4.3 of these Bylaws, each officer shall hold office until his or her successor
shall have been duly elected and shall have qualified or until his or her death
or until such officer shall resign.
Section 4.3 Resignation and Removal. Any officer may resign at
any time upon written notice to the Corporation. Any elected officer may be
removed by a majority of the
<PAGE> 13
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members of the Whole Board, with or without cause, at any time. The Board of
Directors may delegate such power of removal as to officers, agents and
employees not elected by the Board of Directors. Such removal shall be without
prejudice to a person's contract rights, if any, but the appointment of any
person as an officer, agent or employee of the Corporation shall not of itself
create contract rights.
Section 4.4 Compensation and Bond. The compensation of the
officers of the Corporation shall be fixed by the Board of Directors, but this
power may be delegated to any officer in respect of other officers under his or
her control. The Corporation may secure the fidelity of any or all of its
officers, agents or employees by bond or otherwise.
Section 4.6 President. The President shall act in a general
executive capacity and shall be responsible for the general management of the
affairs of the Corporation's business and general supervision of its policies
and affairs. The President shall report to the Board of Directors. The President
shall, in the absence of or because of the inability to act of the Chairman of
the Board, preside at all meetings of stockholders and of the Board of
Directors. The President may sign, alone or with the Secretary or any other
proper officer of the Corporation authorized by the Board of Directors,
certificates, contracts and other instruments of the Corporation as authorized
by the Board of Directors.
Section 4.7 Vice Presidents. Each Vice President shall have
such powers and perform such duties as the Board of Directors or the President
may from time to time prescribe. In the absence or inability to act of the
President, unless the Board of Directors shall otherwise provide, the Vice
President who has served in that capacity for the longest time and who shall be
present and able to act, shall perform all the duties and may exercise any of
the powers of the President.
Section 4.8 Treasurer. The Treasurer shall have charge of all
funds and securities of the Corporation, shall endorse the same for deposit or
collection when necessary and deposit the same to the credit of the Corporation
in such banks or depositaries as the Board of Directors may authorize. He or she
may endorse all commercial documents requiring endorsements for or on behalf of
the Corporation and may sign all receipts and vouchers for payments made to the
Corporation. He or she shall have all such further powers and duties as
generally are incident to the position of Treasurer or as may be assigned to him
or her by the President or the Board of Directors.
Section 4.9 Secretary. The Secretary shall record all the
proceedings of the meetings of the stockholders and directors in a book to be
kept for that purpose and shall also record therein all action taken by written
consent of directors in lieu of a meeting. He or she shall attend to the giving
and serving of all notices of the Corporation. He or she shall have custody of
the seal of the Corporation and shall attest the same by his or her signature
whenever required. He or she shall have charge of the stock ledger and such
other books and papers as the Board of Directors may direct, but he or she may
delegate responsibility for maintaining the stock ledger to any transfer agent
appointed by the Board of Directors. He or she shall have all
<PAGE> 14
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such further powers and duties as generally are incident to the position of
Secretary or as may be assigned to him or her by the President or the Board of
Directors.
Section 4.10 Assistant Treasurers. In the absence or inability
to act of the Treasurer, any Assistant Treasurer may perform all the duties and
exercise all the powers of the Treasurer. An Assistant Treasurer shall also
perform such other duties as the Treasurer or the Board of Directors may assign
to him or her.
Section 4.11 Assistant Secretaries. In the absence or
inability to act of the Secretary, any Assistant Secretary may perform all the
duties and exercise all the powers of the Secretary. An Assistant Secretary
shall also perform such other duties as the Secretary or the Board of Directors
may assign to him or her.
Section 4.12 Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may confer for the time
being the powers or duties, or any of them, of such officer upon any other
officer or upon any director.
ARTICLE V
Indemnification and Insurance
Section 5.1 Right to Indemnification. Each person who was or
is made a party or is threatened to be made a party to or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director
or an officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of any other corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to any employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the GCL, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, excise taxes or penalties under
the Employee Retirement Income Security Act of 1974, as amended, and amounts
paid or to be paid in settlement) reasonably incurred by such indemnitee in
connection therewith; provided, however, that except as provided in Section 5.3
with respect to proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee seeking indemnification in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors.
<PAGE> 15
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Section 5.2 Right to Advancement of Expenses. The right to
indemnification conferred in Section 5.1 shall include the right to be paid by
the Corporation the expenses (including attorneys' fees) incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the GCL requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Section 5.2 or otherwise.
Section 5.3 Right of Indemnitee to Bring Suit. If a claim
under Section 5.1 or Section 5.2 is not paid in full by the Corporation within
thirty (30) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right of an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the GCL. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the GCL, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel
or stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article V or otherwise shall be on the Corporation.
Section 5.4 Non-Exclusivity of Rights. The right to
indemnification and the advancement of expenses conferred in this Article V
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Certificate of Incorporation,
provision of these Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
<PAGE> 16
13
Section 5.5 Insurance. The Corporation may maintain insurance,
at its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the GCL.
Section 5.6 Indemnification of Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to the
advancement of expenses, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article V with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
Section 5.7 Contract Rights. The rights to indemnification and
to the advancement of expenses conferred in Section 5.1 and Section 5.2 shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
ARTICLE VI
Capital Stock
Section 6.1 Certificates. Certificates for stock of the
Corporation shall be in such form as shall be approved by the Board of Directors
and shall be signed in the name of the Corporation by the Chairman of the Board,
the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary. Such certificates may be
sealed with the seal of the Corporation or a facsimile thereof. Any of or all
the signatures on a certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
Section 6.2 Transfers of Stock. Transfers of stock shall be
made only upon the books of the Corporation by the holder, in person or by duly
authorized attorney, and on the surrender of the certificate or certificates for
the same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, with such proof of the authenticity
of the signature as the Corporation or its agents may reasonably require. The
Board of Directors shall have the power to make all such rules and regulations,
not inconsistent with the Certificate of Incorporation and these Bylaws and the
GCL, as the Board of Directors may deem appropriate concerning the issue,
transfer and registration of certificates for stock of the Corporation. The
Board of Directors may appoint one or more transfer agents or registrars of
transfers, or both, and may require all stock certificates to bear the signature
of either or both.
<PAGE> 17
14
Section 6.3 Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new stock certificate in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or destroyed
certificate or his or her legal representative to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate. The Board of Directors may require such
owner to satisfy other reasonable requirements as it deems appropriate under the
circumstances.
Section 6.4 Stockholder Record Date. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purpose of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which shall not be more than sixty nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action.
If no record date is fixed by the Board of Directors, (l) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the date on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held, and (2) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to notice of, and to vote at, such meeting
and any adjournment thereof, or to receive payment of such dividend or other
distribution, or to exercise such rights in respect of any such change,
conversion or exchange of stock, or to participate in such action, as the case
may be, notwithstanding any transfer of any stock on the books of the
Corporation after any record date so fixed.
<PAGE> 18
15
ARTICLE VII
Seal
Section 7.1 Seal. The seal of the Corporation shall be
circular in form and shall bear, in addition to any other emblem or device
approved by the Board of Directors, the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
ARTICLE VIII
Waiver of Notice
Section 8.1 Waiver of Notice. Whenever notice is required to
be given to any stockholder or director of the Corporation under any provision
of the GCL or the Certificate of Incorporation or these Bylaws, a written waiver
thereof, signed by the person or persons entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of such
notice. In the case of a stockholder, such waiver of notice may be signed by
such stockholder's attorney or proxy duly appointed in writing. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice.
ARTICLE IX
Checks, Notes, Drafts, Etc.
Section 9.1 Checks, Notes, Drafts, Etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors or a duly authorized committee thereof may from time to time
designate.
ARTICLE X
Amendments
Section 10.1 Amendments. These Bylaws may be amended, added
to, rescinded or repealed at any meeting of the Board of Directors or of the
stockholders, provided that notice of the proposed change was given in the
notice of the meeting and, in the case of the Board of
<PAGE> 19
16
Directors, in a notice given no less than twenty-four hours prior to the
meeting; provided, however, that, in the case of amendments by stockholders,
notwithstanding any other provisions of these Bylaws or any provision of law
which might otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of stock
required by law, the Certificate of Incorporation or these Bylaws, the
affirmative vote of the holders of a majority of the voting power of the then
outstanding shares of Voting Stock, either present or represented by proxy,
voting together as a single class, shall be required to alter, amend or repeal
any provision of these Bylaws.
<PAGE> 1
Exhibit 4.1
CLASS A COMMON STOCK
CLASS A COMMON STOCK
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 816658 10 8
SEMINIS, INC.
This is to certify that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK, PAR VALUE $.01 PER
SHARE, OF SEMINIS, INC. transferable on the books of the Corporation in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
Witness the facsimile signatures of the duly authorized officers of the
Corporation.
Dated:
SECRETARY
CHAIRMAN OF THE BOARD
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
SEMINIS, INC.
THE CORPORATION WILL FURNISH, WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, A FULL STATEMENT OF THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF EACH CLASS AUTHORIZED TO BE ISSUED, AND A FULL STATEMENT OF THE
DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF EACH SERIES OF ANY
CLASS OF PREFERRED STOCK AUTHORIZED TO BE ISSUED SO FAR AS THE SAME MAY HAVE
BEEN FIXED AND THE AUTHORITY OF THE BOARD TO DESIGNATE AND FIX THE RELATIVE
RIGHTS, PREFERENCES AND LIMITATIONS OF OTHER SERIES. ANY SUCH REQUEST SHOULD BE
ADDRESSED TO THE SECRETARY OF THE COMPANY, OR TO THE TRANSFER AGENT AND
REGISTRAR NAMED ON THE FACE OF THIS CERTIFICATE.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-D
TEN ENT-D
JT TEN-D
as tenants in common
as tenants by the entireties
as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT-D Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE
Shares
of the stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
<PAGE> 3
ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
Exhibit 5
June __, 1999
Seminis, Inc.
1905 Lirio Avenue
Saticoy, CA 93004
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed
by you with the Securities and Exchange Commission on February 11, 1999
(Registration No. 333-72141), Amendment No. 1 thereto filed on April 28, 1999,
Amendment No. 2 thereto filed on May 27, 1999 and Amendment No. 3 thereto filed
on June [ ], 1999 (as so amended, the "Registration Statement"), in connection
with the public offering of __________ shares (including the Underwriters'
over-allotment option) (the "Shares") of the Class A Common Stock, $0.01 par
value per share, of Seminis, Inc. (the "Company"). The Shares are to be sold to
the Underwriters for resale to the public as described in the Registration
Statement and pursuant to the Underwriting Agreement in the form filed as
Exhibit 1 thereto. As your counsel in connection with this transaction, we have
examined the proceedings proposed to be taken in connection with said sale and
issuance of Shares.
Based on these examinations, it is our opinion that upon
completion of the proceedings being taken or which we, as your counsel,
contemplate will be taken prior to the issuance of the Shares, the Shares, when
issued and sold in the manner referred to in the Registration Statement, will be
legally and validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name, whenever
appearing in the Registration Statement, including any Prospectus constituting a
part thereof, and any amendments thereto. This opinion is furnished to you in
connection with the registration of the Shares.
Very truly yours,
MILBANK, TWEED, HADLEY & MCCLOY LLP
<PAGE> 1
Exhibit 10.4
CREDIT AGREEMENT
AMONG
SEMINIS, INC.
SEMINIS VEGETABLE SEEDS, INC.
SVS HOLLAND B.V.
as Borrowers
AND
HARRIS TRUST AND SAVINGS BANK
Individually and as Administrative Agent
AND
BANK OF MONTREAL, CHICAGO BRANCH
Individually and as Syndication Agent
AND
THE LENDERS FROM TIME TO TIME PARTIES HERETO
as Lenders
Dated as of __________, 1999
<PAGE> 2
TABLE OF CONTENTS
SEMINIS, INC.
SEMINIS VEGETABLE SEEDS, INC.
SVS HOLLAND B.V.
CREDIT AGREEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. THE CREDITS
Section 1.1. The Revolving Credit
Section 1.2. The Term Credit
Section 1.3. Manner of Borrowing
Section 1.4. Letters of Credit
Section 1.5. Reimbursement Obligation
Section 1.6. Participation in L/C's
Section 1.7. Absolute Obligations
Section 1.8. The Collateral and the Guarantees
Section 1.9. Several Liability of SVS Holland
SECTION 2. INTEREST
Section 2.1. Options
Section 2.2. Base Rate Portion
Section 2.3. LIBOR Portions
Section 2.4. Computation
Section 2.5. Minimum Amounts
Section 2.6. Manner of Rate Selection
SECTION 3. THE NOTES, FEES, PREPAYMENTS, TERMINATIONS AND APPLICATION OF PAYMENTS
Section 3.1. Commitment Fee
Section 3.2. Agents' Fee
Section 3.3. Prepayments
(a) Optional Prepayments of Base Rate Portions
(b) Optional Prepayments of LIBOR Portions
(c) Mandatory Prepayments of Excess Borrowings
Section 3.4. Revolving Credit Termination
Section 3.5. Place and Application of Payments
Section 3.6. Capital Adequacy
Section 3.7. The Register
SECTION 4. DEFINITIONS
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 4.1. Certain Definitions
Section 4.2. Accounting Terms
SECTION 5. REPRESENTATIONS AND WARRANTIES
Section 5.1. Organization and Qualification
Section 5.2. Financial Reports
Section 5.3. Litigation; Tax Returns; Approvals
Section 5.4. Regulation U
Section 5.5. No Default
Section 5.6. ERISA
Section 5.7. Subsidiaries and Affiliates
Section 5.8. Accurate Information
Section 5.9. Enforceability
Section 5.10. Restrictive Agreements
Section 5.11. No Violation of Law
Section 5.12. No Default Under Other Agreements
Section 5.13. Status Under Certain Laws
Section 5.14. Year 2000 Compliance
Section 5.15. Indebtedness to Savia
SECTION 6. CONDITIONS PRECEDENT
Section 6.1. Initial Extension of Credit
Section 6.2. Each Extension of Credit
SECTION 7. COVENANTS
Section 7.1. Maintenance of Property
Section 7.2. Taxes
Section 7.3. Maintenance of Insurance
Section 7.4. Financial Reports
Section 7.5. Inspection
Section 7.6. Consolidation and Merger
Section 7.7. Transactions with Affiliates
Section 7.8. Borrowings and Guaranties
Section 7.9. Liens
Section 7.10. Investments, Loans, Advances and Acquisitions
Section 7.11. Sale of Property
Section 7.12. Notice of Suit or Adverse Change in Business or Default
Section 7.13. ERISA
Section 7.14. Use of Proceeds
Section 7.15. Compliance with Laws, etc
Section 7.16. Maintenance of Existence
Section 7.17. Leases
Section 7.18. Capital Expenditures
Section 7.19. Year 2000 Assessment
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Section 7.20. Minimum Interest Coverage Ratio
Section 7.21. Minimum Net Worth
Section 7.22. Maximum Debt Ratio
Section 7.23. Interest Rate Protection
Section 7.24. No Restrictions on Subsidiaries
Section 7.25. Post-Closing Items
SECTION 8. EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Definitions
Section 8.2. Remedies for Non-Bankruptcy Defaults
Section 8.3. Remedies for Bankruptcy Defaults
Section 8.4. L/Cs
SECTION 9. CHANGE IN CIRCUMSTANCES REGARDING LIBOR PORTIONS
Section 9.1. Change of Law
Section 9.2. Unavailability of Deposits or Inability to Ascertain the Adjusted
LIBOR Rate
Section 9.3. Taxes and Increased Costs
Section 9.4. Funding Indemnity
Section 9.5. Lending Branch
Section 9.6. Discretion of Bank as to Manner of Funding
SECTION 10. THE AGENT
Section 10.1. Appointment and Powers
Section 10.2. Powers
Section 10.3. General Immunity
Section 10.4. No Responsibility for Loans, Recitals, etc
Section 10.5. Right to Indemnity
Section 10.6. Action upon Instructions of Banks
Section 10.7. Employment of Agents and Counsel
Section 10.8. Reliance on Documents; Counsel
Section 10.9. May Treat Payee as Owner
Section 10.10. Agent's Reimbursement
Section 10.11. Rights as a Bank
Section 10.12. Bank Credit Decision
Section 10.13. Resignation of Agent
Section 10.14. Duration of Agency
Section 10.15. Syndication Agent
SECTION 11. THE GUARANTEES
Section 11.1. The Guarantees
Section 11.2. Guarantee Unconditional
Section 11.3. Discharge Only upon Payment in Full; Reinstatement in Certain
Circumstances
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
Section 11.4. Subrogation
Section 11.5. Waivers
Section 11.6. Stay of Acceleration
SECTION 12. MISCELLANEOUS
Section 12.1. Amendments and Waivers
Section 12.2. Waiver of Rights
Section 12.3. Several Obligations
Section 12.4. Non-Business Day
Section 12.5. Documentary Taxes
Section 12.6. Representations
Section 12.7. Notices
Section 12.8. Costs and Expenses; Indemnity; Environmental Indemnity
Section 12.9. Counterparts
Section 12.10. Successors and Assigns; Governing Law; Entire Agreement
Section 12.11. No Joint Venture
Section 12.12. Severability
Section 12.13. Table of Contents and Headings
Section 12.14. Sharing of Payments
Section 12.15. Jurisdiction; Venue; Waiver of Jury Trial
Section 12.16. Participants
Section 12.17. Assignment Agreements
Section 12.18. Withholding Taxes
Section 12.19. Judgment Currency
Section 12.20. Service of Process
Section 12.21. Netherlands Taxes
Section 12.22. Confidentiality
Signature Page
</TABLE>
Exhibit A The Loan Documents
Exhibit A-1 Secured Revolving Credit Note of the Domestic Borrowers
Exhibit A-2 Secured Revolving Credit Note of SVS Holland
Exhibit B-1 Secured Term Credit Note of the Domestic Borrowers
Exhibit B-2 Secured Term Credit Note of SVS Holland
Exhibit C Letter of Credit Agreement
Exhibit D Compliance Certificate
Exhibit E Form of Legal Opinion of the Domestic Borrowers' Counsel
Exhibit F Form of Legal Opinion of SVS Holland Counsel
Exhibit G Form of Legal Opinion of Administrative Agent's U.S. Counsel
Exhibit H The Existing Letters of Credit
Exhibit I Post-Closing Items
Exhibit J Security Agreement Re: Stock
Exhibit K Security Agreement Re: Intellectual Property
Exhibit L SVS Notarial Deed of Pledge
<PAGE> 6
Exhibit M Peto Notarial Deed of Pledge
Exhibit N Form of Legal Opinion of the Domestic Borrower's counsel
Exhibit O Form of Legal Opinion of counsel to SVS Europe
Exhibit P Form of Legal Opinion of counsel to Peto International
Schedule 5.7 Existing Subsidiaries
Schedule 7.8 Existing Indebtedness
Schedule 7.9 Existing Liens
Schedule 7.10 Existing Investments in Subsidiaries
<PAGE> 7
SEMINIS, INC.
SEMINIS VEGETABLE SEEDS, INC.
SVS HOLLAND B.V.
CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
The lenders from time to time parties hereto
Ladies and Gentlemen:
The undersigned SEMINIS, INC., a Delaware corporation and successor by
merger to Seminis, Inc., an Illinois corporation ("Seminis"), and SEMINIS
VEGETABLE SEEDS, INC., a California corporation ("SVS"), and SVS HOLLAND B.V., a
private company with limited liability incorporated under the laws of The
Netherlands ("SVS Holland" and, together with Seminis and SVS, individually a
"Borrower" and collectively the "Borrowers"), apply to you for your several
commitments, subject to all the terms and conditions hereof and on the basis of
the representations and warranties hereinafter set forth, to make a revolving
credit (the "Revolving Credit") available to the Borrowers and to make a term
credit (the "Term Credit") available to Seminis and SVS (individually a
"Domestic Borrower" and collectively the "Domestic Borrowers") and SVS Holland,
and to make a swingline (the "Swingline") available to the Domestic Borrowers,
all as more fully hereinafter set forth. Each of you is hereinafter referred to
individually as "Bank" and collectively as "Banks." Harris Trust and Savings
Bank in its individual capacity is sometimes referred to herein as "Harris," and
in its capacity as Administrative Agent for the Banks is hereinafter sometimes
referred to as the "Administrative Agent." Bank of Montreal in its capacity as
Syndication Agent for the Banks is hereinafter sometimes referred to as the
"Syndication Agent." All capitalized terms not defined in the text of this
Agreement are defined in Section 4 hereof.
SECTION 1. THE CREDITS.
Section 1.1. The Revolving Credit. (a) Subject to all of the terms and
conditions hereof, the Revolving Credit Lenders agree to extend a Revolving
Credit to the Borrowers which may be availed of by the Borrowers in their
discretion from time to time, be repaid and used again, during the period from
the date hereof to and including June 30, 2004 (the "Termination Date"). The
Revolving Credit may be utilized by the Borrowers in the form of loans
(individually a "Revolving Credit Loan" and collectively the "Revolving Credit
Loans") and letters of credit (individually a "L/C" and collectively the
"L/Cs"), provided that the aggregate amount of the principal amount of the
outstanding Revolving Credit Loans, the principal amount of the outstanding
Swingline Loans, the aggregate amount available to be drawn under all
outstanding L/Cs and, without duplication, the aggregate amount of unpaid
Reimbursement Obligations with respect to L/Cs (collectively, the "Revolving
Credit Obligations") at any one time shall not
<PAGE> 8
exceed the Revolving Credit Commitments, provided further, that in no event may
SVS Holland obtain the issuance of L/Cs under the Revolving Credit and in no
event may the aggregate outstanding principal amount of Revolving Credit Loans
borrowed by SVS Holland hereunder ever exceed $10,000,000 at any time.
The respective initial maximum aggregate principal amounts of the
Revolving Credit at any one time outstanding and the percentage of the Revolving
Credit available at any time which each Revolving Credit Lender agrees to make
available to the Borrowers (its "Commitment Percentage") are as follows
(collectively, the "Revolving Credit Commitments" and individually, a "Revolving
Credit Commitment"):
<TABLE>
<CAPTION>
<S> <C> <C>
Harris Trust and Savings Bank $ 12,857,142.86 8.57142857%
Bank of Montreal $137,142,857.14 91.42857143%
TOTAL $150,000,000 100%
</TABLE>
The obligations of the Revolving Credit Lenders hereunder are several and not
joint and no Revolving Credit Lender shall under any circumstances be obligated
to extend credit under the Revolving Credit in excess of its Revolving Credit
Commitment or its Commitment Percentage of the credit outstanding hereunder.
All Revolving Credit Loans made by the Revolving Credit Lenders on the
same date are hereinafter referred to as a "Borrowing." Each Borrowing, other
than a Borrowing pursuant to Section 1.5, shall be in a minimum amount not less
than the lesser of $5,000,000 and the maximum amount that can then be borrowed
under the Revolving Credit Commitments and shall be made pro rata from the
Revolving Credit Lenders in accordance with their respective Commitment
Percentages.
All Revolving Credit Loans and Swingline Loans made by each Revolving
Credit Lender to any Domestic Borrower shall be evidenced by a Revolving Credit
Note in the form (with appropriate insertions) attached hereto as Exhibit A-1 of
the Domestic Borrowers payable to the order of such Revolving Credit Lender, and
all Revolving Credit Loans made by each Revolving Credit Lender to SVS Holland
shall be evidenced by a Revolving Credit Note in the form (with appropriate
insertions) attached hereto as Exhibit A-2 of SVS Holland payable to the order
of such Revolving Credit Lender (such Revolving Credit Notes are hereinafter
referred to individually as a "Revolving Credit Note" and collectively as the
"Revolving Credit Notes"). Without regard to the face principal amount of each
Revolving Credit Note, the actual principal amount at any time outstanding and
owing by the Borrowers on account thereof during the period ending on the
Termination Date shall be the sum of all advances then or theretofore made
thereon less all principal payments actually received thereon during such
period.
(b) Swingline Loans under the Revolving Credit.
(i) Swingline Commitment. Subject to the terms and conditions
hereof and in reliance on the obligations of the Revolving Credit
Lenders to the Administrative Agent under this Section 1.1(b), the
Administrative Agent agrees to advance one or more swingline loans
(each a "Swingline Loan") to the Domestic Borrowers from time to time
before the Termination Date on a revolving basis up to $15,000,000 in
aggregate
<PAGE> 9
principal amount at any time outstanding; provided that the
Administrative Agent shall have no obligation to advance any Swingline
Loan if the outstanding Revolving Credit Obligations after giving
effect to such Swingline Loan would thereby exceed the Revolving Credit
Commitments then in effect. All Swingline Loans shall bear interest as
provided in Section 1.1(b)(v) hereof and will be in an amount not less
than $250,000 or an integral multiple of $100,000 in excess thereof.
Swingline Loans may be repaid and their principal amount reborrowed
before the Termination Date, subject to the terms and conditions
hereof. Each Swingline Loan shall mature on the last day of the
Interest Period applicable thereto.
(ii) Refunding Loans. In its sole and absolute discretion, the
Administrative Agent may at any time, on behalf of the Domestic
Borrowers (each of which hereby irrevocably authorizes the
Administrative Agent to act on its behalf for such purpose), request
each Revolving Credit Lender to make a Revolving Credit Loan in an
amount equal to such Revolving Credit Lender's Commitment Percentage of
the amount of the Swingline Loans outstanding on the date such notice
is given. Unless any of the conditions of Section 6.2 are not fulfilled
on such date, each Revolving Credit Lender shall make the proceeds of
its requested Revolving Credit Loan available to the Administrative
Agent, in immediately available funds, at the principal office of the
Administrative Agent in Chicago, Illinois, before 12:00 Noon (Chicago
time) on the Business Day following the day such notice is given. The
proceeds of such Revolving Credit Loans shall be immediately applied to
repay the outstanding Swingline Loans. The Domestic Borrowers authorize
the Administrative Agent to charge their accounts with the
Administrative Agent (up to the amount available in such accounts) to
pay the amount of any such outstanding Swingline Loans to the extent
amounts received from the Revolving Credit Lender are not sufficient to
repay in full such Swingline Loans.
(iii) Participations. If any Revolving Credit Lender refuses or
otherwise fails to make a Revolving Credit Loan when requested by the
Administrative Agent pursuant to Section 1.1(b)(ii) above (because the
conditions in Section 6.2 are not satisfied or otherwise), such
Revolving Credit Lender will, by the time and in the manner such
Revolving Credit Loan was to have been funded to the Administrative
Agent, purchase from the Administrative Agent an undivided
participating interest in the outstanding Swingline Loans in an amount
equal to its Commitment Percentage of the aggregate principal amount of
Swingline Loans that were to have been repaid with such Revolving
Credit Loans. Each Revolving Credit Lender that so purchases a
participation in a Swingline Loan shall thereafter be entitled to
receive its Commitment Percentage of each payment of principal received
on the Swingline Loan and of interest received thereon accruing from
the date such Revolving Credit Lender funded to the Administrative
Agent its participation in such Loan. The obligation of the Revolving
Credit Lenders to the Administrative Agent shall be absolute and
unconditional and shall not be affected or impaired by any Event of
Default or Potential Default which may then be continuing hereunder.
(iv) Manner of Borrowing. The relevant Domestic Borrower shall
give telephonic, telex or telecopy notice to the Administrative Agent
(which notice, if
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<PAGE> 10
telephonic, shall be promptly confirmed in writing) no later than 12:00
Noon (Chicago time) on the date it requests the Administrative Agent to
make a Swingline Loan to it hereunder. Each such notice shall be
irrevocable and shall specify the date of the Swingline Loan requested
(which shall be a Business Day), the principal amount of such Swingline
Loan, the interest rate option applicable thereto and the Interest
Period applicable thereto; provided, that in no event shall the
principal amount of any requested Swingline Loan plus the aggregate
Revolving Credit Obligations outstanding hereunder exceed the Revolving
Credit Commitments as such amounts may be reduced pursuant to Section
3.4 of this Agreement. The Domestic Borrowers agree that the
Administrative Agent may rely on any such telephonic, telex or telecopy
notice given by any person who the Administrative Agent reasonably
believes is authorized to give such notice without the necessity of
independent investigation and in the event any notice by such means
conflicts with the written confirmation, such notice shall govern if
the Administrative Agent or any Bank has acted in reliance thereon.
(v) Interest. Each Swingline Loan shall bear interest
(computed on the basis of a year of 365/366 days and actual days
elapsed) on the unpaid principal amount thereof from the date such
Swingline Loan is made until the last day of the Interest Period
applicable thereto at either the rate of interest applicable to Base
Rate Portions of the Revolving Credit Loans or the rate per annum
quoted to the relevant Domestic Borrower by the Administrative Agent
for the Interest Period applicable thereto (each such rate is referred
to as an "Offered Rate"), as the relevant Domestic Borrower may elect;
provided, however, that the Domestic Borrowers understands and agrees
that the Administrative Agent has no obligation to quote rates and may
refuse to quote such rates after receiving a request therefor from any
Domestic Borrower. Each Domestic Borrower acknowledges and agrees that
the interest rate quote by the Administrative Agent for any Swingline
Loan may not be the best or lowest rate offered to other customers of
the Administrative Agent and may not be the same rate offered to other
customers of the Administrative Agent for loans of similar amounts and
maturities, but is the rate at which the Administrative Agent in its
sole and exclusive discretion is willing to offer to the relevant
Domestic Borrower for the specified amount and maturity.
Section 1.2. The Term Credit. (a) Subject to all of the terms and
conditions hereof, each Term Credit Lender agrees to make a loan to the
Borrowers under Term Credit in the amount of its Term Credit Commitment;
provided that the aggregate principal amount of all Term Loans made to SVS
Holland hereunder shall not exceed $50,000,000. The respective maximum aggregate
principal amounts of the Term Credit at any one time outstanding and the
percentage of the Term Credit available at any time which each Term Credit
Lender by its acceptance hereof severally agrees to make available to the
Borrowers are as follows (collectively, the "Term Credit Commitments" and
individually, a "Term Credit Commitment"):
<TABLE>
<CAPTION>
<S> <C> <C>
Harris Trust and Savings Bank $ 17,142,857.14 8.57142857%
Bank of Montreal $182,857,142.86 91.42857143%
TOTAL $200,000,000 100%
</TABLE>
The loans from all Term Credit Lenders under Term Credit (the "Term Loans")
shall be made concurrently and such loans shall be made, if at all, on or before
June 30, 1999, at which time the
<PAGE> 11
Term Credit Commitments shall expire.
The Term Loan made by each Term Credit Lender to the Domestic Borrowers
shall be evidenced by a Term Credit Note of the Domestic Borrowers in the form
(with appropriate insertions) attached hereto as Exhibit B-1 payable to the
order of such Term Credit Lender in the amount of its Term Loan to the Domestic
Borrowers, and each Term Loan made by each Term Credit Lender to SVS Holland
shall be evidenced by a Term Credit Note of SVS Holland in the form (with
appropriate insertions) attached hereto as Exhibit B-2 payable to the order of
such Term Credit Lender in the amount of its Term Loan to SVS Holland (such Term
Credit Notes are hereinafter referred to individually as a "Term Credit Note"
and collectively as the "Term Credit Notes"). Each Term Credit Note shall be
expressed to mature in ten (10) consecutive semi-annual installments of
principal, commencing December 31, 1999 and continuing on the last day of each
June and December thereafter to and including June 30, 2004, with the aggregate
principal amount of each such installment on all Term Credit Notes to be as
follows: $5,000,000 on December 31, 1999 and June 30, 2000; $12,500,000 on
December 31, 2000 and June 30, 2001; $17,500,000 on December 31, 2001 and June
30, 2002; $20,000,000 on December 31, 2002 and June 30, 2003; $25,000,000 on
December 31, 2003; and with the final installment due June 30, 2004 to be in the
amount equal to the then outstanding principal balance of the Term Loans, and
with the amount of each installment due on the Term Credit Note held by each
Term Credit Lender to be a pro rata part (based on the percentage of the
aggregate principal amount of all Term Loans then outstanding which is evidenced
by each Term Credit Note) of each such aggregate amount.
Section 1.3. Manner of Borrowing. Seminis shall notify the
Administrative Agent (which may be written or oral, but which must be given
prior to 11:00 a.m. Chicago time) of the date (which may, subject to the
immediately preceding parenthetical, be the date on which such notice is given)
upon which it requests that any advance be made under the Revolving Credit
Commitments, except for Swingline Loans made pursuant to Section 1.1(b) hereof
and Revolving Credit Loans made pursuant to Section 1.5 hereof, or that any Term
Loan be made, specifying the amount of each such loan, and the Administrative
Agent shall promptly notify the relevant Banks of its receipt of each such
notice. Subject to all of the terms and conditions hereof, the proceeds of each
advance, to the extent received by the Administrative Agent from the relevant
Banks, shall be made available to the Borrowers at the office of the
Administrative Agent in Chicago and in funds there current. Each loan from each
Bank shall initially constitute part of a Base Rate Portion except to the extent
Seminis has otherwise timely elected, all as provided in Section 2 hereof.
Unless the Administrative Agent shall have been notified by a Bank that has a
Commitment to make a requested loan hereunder prior to the date such loan is to
be made hereunder that such Bank does not intend to make its pro rata share of
such loan available to the Administrative Agent (which notice a Bank shall not
be entitled to give unless a condition precedent to lending has not been
satisfied or waived), the Administrative Agent may assume that such Bank has
made such share available to the Administrative Agent on such date and the
Administrative Agent may in reliance upon such assumption make available to the
Borrowers a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Bank and the Administrative
Agent has made such amount available to the Borrowers, the Administrative Agent
shall be entitled to receive such amount from such Bank forthwith upon its
demand, together with interest thereon in respect of each day
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<PAGE> 12
during the period commencing on the date such amount was made available to the
Borrowers and ending on but excluding the date the Administrative Agent recovers
such amount at a rate (the "Fed Funds Rate") per annum equal to the effective
rate charged to the Administrative Agent for overnight federal funds
transactions with member banks of the federal reserve system for each day as
determined by the Administrative Agent (or in the case of a day which is not a
Business Day, then for the preceding day).
Section 1.4. Letters of Credit. (a) Subject to all the terms and
conditions hereof, Harris shall issue L/Cs for the account of the Domestic
Borrowers subject to availability under the Revolving Credit, and the Revolving
Credit Lenders hereby agree to participate therein as more fully described in
Section 1.6 hereof. Each L/C shall be issued pursuant to an application for
letter of credit (an "L/C Agreement") in the form attached hereto as Exhibit C.
The L/C's shall consist of stand-by letters of credit in an aggregate undrawn
amount not to exceed $15,000,000. Each L/C shall conform to the general
requirements of Harris for letters of credit as to form and substance, shall be
in U.S. Dollars, shall be a letter of credit which Harris may lawfully issue and
shall have an expiry date not more than one year from the date of issuance
thereof (but in no event later than the Termination Date). The amount available
under each L/C issued pursuant hereto shall be deducted from the credit
otherwise available under the Revolving Credit. In consideration of the issuance
of L/Cs each Domestic Borrower jointly and severally agrees to pay Harris a fee
(the "L/C Participation Fee") in the amount per annum equal to the Applicable
Margin for LIBOR Portions of the Revolving Credit Loans (computed on the basis
of a 360-day year and actual days elapsed) of the undrawn amount for each L/C
issued for the account of the Domestic Borrowers hereunder. In addition, the
Domestic Borrowers shall pay Harris a fee (the "L/C Issuance Fee") in the amount
equal to one-eighth of one percent (0.125%) of the stated amount of each L/C
issued hereunder and such drawing, negotiation, amendment and other
administrative fees in connection with each L/C as may be generally established
by Harris from time to time for letters of credit issued by it of that type for
each L/C (the "L/C Administrative Fee"). All L/C Participation Fees shall be
payable quarterly in arrears on the last day of each March, June, September and
December commencing June 30, 1999 and on the Termination Date, and all L/C
Administrative Fees and L/C Issuance Fees shall be payable on the date of
issuance of each L/C hereunder and on the date required by Harris.
(b) Notwithstanding anything contained in any L/C Agreement to the
contrary: (i) the Domestic Borrowers shall pay fees in connection with each L/C
as set forth in Section 1.4(a) hereof, and (ii) before the occurrence of an
Event of Default, Harris will not call for the funding by any Domestic Borrower
of any amount under an L/C issued for the Domestic Borrowers' account, or for
any other form of collateral security for the Domestic Borrowers' obligations in
connection with such L/C, before being presented with a drawing thereunder. If
Harris issues any L/C with an expiration date that is automatically extended
unless Harris gives notice that the expiration date will not so extend beyond
its then scheduled expiration date, Harris will give such notice of non-renewal
before the time necessary to prevent such automatic extension if before such
required notice date (i) the expiration date of such L/C if so extended would be
after the Termination Date, (ii) the Revolving Credit Commitments have been
terminated, or (iii) an Event of Default exists and the Required Revolving
Credit Lenders have given Harris instructions not to so permit the extension of
the expiration date of such L/C. Whenever any provision of this Agreement
conflicts with any provision of an L/C Agreement, or whenever any
<PAGE> 13
provision of this Agreement and a provision of an L/C Agreement have a common
subject matter, the provision of this Agreement shall control and the provision
of the L/C Agreement shall be of no force or effect. Without limiting the
generality of the foregoing, the following provisions of Exhibit C (and the
equivalent provisions of any L/C Agreement) shall be of no force or effect:
paragraph 3; paragraph 4; paragraph 6; paragraph 7; paragraph 10 and paragraph
11.
Upon satisfaction of all conditions precedent to the initial Loan
hereunder, without any further action on the part of any Domestic Borrower,
Harris, the Administrative Agent or any Revolving Credit Lender, (i) each of the
letters of credit listed on Exhibit H hereto (the "Existing L/Cs") previously
issued for the account of any Domestic Borrower shall be deemed for all purposes
of this Agreement to be an L/C issued hereunder, (ii) each application and
agreement for letter of credit pursuant to which each Existing L/C was issued
shall be deemed for all purposes of this Agreement to be an L/C Agreement, and
(iii) all of the Domestic Borrowers' indebtedness and liabilities to Harris with
respect to the Existing Letters of Credit shall be deemed to be Reimbursement
Obligations of such Domestic Borrower for all purposes of this Agreement.
(c) The Administrative Agent shall give prompt telephone, telex, or
telecopy notice to each Revolving Credit Lender of each issuance of, or
amendment to, an L/C specifying the effective date of the L/C or amendment, the
amount, the beneficiary, and the expiration date of the L/C, in each case as
established originally or through the relevant amendment, as applicable, the
account party or parties for the L/C, each Revolving Credit Lender's pro rata
participation in such L/C and whether the Administrative Agent has classified
the L/C as a commercial, performance, or financial letter of credit for
regulatory reporting purposes.
Section 1.5. Reimbursement Obligation. The Domestic Borrowers are
obligated, and hereby unconditionally agree, jointly and severally, to pay in
immediately available funds to the Administrative Agent for the account of
Harris the face amount of each draft drawn and presented under an L/C issued by
Harris hereunder (the obligation of the Domestic Borrowers under this Section
1.5 with respect to any L/C is a "Reimbursement Obligation"). At the time each
payment is made under an L/C, the Domestic Borrowers shall be deemed to have
automatically requested a Revolving Credit Loan from the Revolving Credit
Lenders hereunder, as of the maturity date of such Reimbursement Obligation, the
proceeds of which shall be used to repay such Reimbursement Obligation. Such
Loan shall only be made if no Event of Default shall exist under Sections 8.1(h)
or (i) of this Agreement, and shall be subject to availability under the
Revolving Credit. If such Loan is not made by the Revolving Credit Lenders for
any reason, the unpaid amount of such Reimbursement Obligation shall be due and
payable to Harris upon demand and, after demand, shall bear interest at the
default rate of interest specified in Section 2.2 hereof.
Section 1.6. (a) Participation in L/C's. Each of the Revolving Credit
Lenders will acquire a risk participation in each L/C upon the issuance thereof.
In the event any Reimbursement Obligation is not immediately paid by the
Domestic Borrowers pursuant to Section 1.5 hereof and the Loan described in
Section 1.5 hereof is not made for any reason, each Revolving Credit Lender will
pay to Harris funds in an amount equal to such Revolving Credit
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<PAGE> 14
Lender's Commitment Percentage of the unpaid amount of such Reimbursement
Obligation. The obligation of the Revolving Credit Lenders to Harris under this
Section 1.6 shall be absolute and unconditional and shall not be affected or
impaired by any Event of Default or Potential Default which may then be
continuing hereunder. Harris shall notify each Revolving Credit Lender by
telephone of its Commitment Percentage of such unpaid Reimbursement Obligation.
If such notice has been given to each Revolving Credit Lender by 12:00 Noon,
Chicago time, each Revolving Credit Lender agrees to put Harris in immediately
available and freely transferable funds on the same Business Day. Funds shall be
so made available at the account designated by Harris in such notice to the
Revolving Credit Lenders. Harris shall share with each Revolving Credit Lender
on a pro rata basis relative to its Commitment Percentage a portion of any L/C
Participation Fee payable by the Domestic Borrowers, and any such fee shall be
promptly remitted to the Revolving Credit Lenders when and as received by Harris
from the Domestic Borrowers. The L/C Issuance Fees and L/C Administration Fee
shall be for Harris' sole account and shall not be shared by the Revolving
Credit Lenders.
(b) The Revolving Credit Lenders shall, in accordance with their
respective Commitment Percentages, indemnify Harris (to the extent not
reimbursed by the Borrowers) against any cost, expense (including reasonable
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from Harris' gross negligence or willful misconduct) that
Harris may suffer or incur in connection with any L/C. If after any payment is
made by the Revolving Credit Lenders to Harris pursuant to this Section, Harris
receives from or on behalf of the Borrowers any amount in respect of such costs,
expenses, claims, demands, actions, losses or liabilities, Harris shall promptly
remit to each Revolving Credit Lender its shares in accordance with its
Commitment Percentage. The obligations of the Revolving Credit Lenders under
this Section 1.6(b) and all other parts of this Section 1.6 shall survive
termination of this Agreement and of all L/C Agreements, and all drafts or other
documents presented in connection with drawings thereunder.
Section 1.7. Absolute Obligations. Each Domestic Borrower acknowledges
and agrees that its joint and several liability on the Notes, Reimbursement
Obligations and on all obligations owed by any Borrower or Borrowers under this
Agreement is absolute and unconditional and shall not in any manner be affected
or impaired by any of acts or omissions whatsoever by the Banks, and without
limiting the generality of the foregoing, each Domestic Borrower's joint and
several liability on the Notes, Reimbursement Obligations and under this
Agreement shall not be impaired by any acceptance by the Banks of any other
security for or guarantors upon the Notes, Reimbursement Obligations or any
obligations under this Agreement or by any failure, neglect or omission on the
Banks' part to resort to any one or all of the Borrowers for payment of the
Notes, Reimbursement Obligations or the obligations under this Agreement or to
realize upon or protect any collateral security therefor. Each Domestic
Borrower's joint and several liability on the Notes, Reimbursement Obligations
and under this Agreement shall not in any manner be impaired or affected by who
receives or uses the proceeds of the loans evidenced by the Notes, Reimbursement
Obligations or for what purposes such proceeds are used, and each Domestic
Borrower waives notice of borrowing requests issued by, and loans made to, other
Borrowers. Such joint and several liability of each Domestic Borrower shall also
not be impaired or affected by any sale, pledge, surrender, compromise,
settlement, release, renewal, extension, indulgence, alteration, substitution,
exchange, change in, modification or disposition of any collateral
<PAGE> 15
security for the Notes, Reimbursement Obligations or the obligations under this
Agreement or of any guaranty thereof. In order to enforce payment of the Notes,
Reimbursement Obligations and the Borrowers' obligations under this Agreement,
foreclose or otherwise realize on any collateral security therefor, and to
exercise the rights granted to the Administrative Agent hereunder and thereunder
and under applicable law, the Administrative Agent shall be under no obligation
at any time to first resort to any collateral security, property, liens or any
other rights or remedies whatsoever, and the Banks shall have the right to
enforce the Notes, Reimbursement Obligations and the Borrowers' obligations
under this Agreement irrespective of whether or not other proceedings or steps
are pending seeking resort to or realization upon or from any of the foregoing.
By its acceptance below, each Domestic Borrower hereby expressly waives and
surrenders any defense to its joint and several liability on the Notes,
Reimbursement Obligations or under this Agreement based upon any of the
foregoing. In furtherance thereof, each Domestic Borrower agrees that wherever
in this Agreement it is provided that a Borrower is liable for a payment such
obligation is the joint and several obligation of each Domestic Borrower.
Section 1.8. The Collateral and the Guarantees. (a) Payment of all of
SVS Holland's indebtedness obligations and liabilities to the Agents and the
Banks under this Agreement and the other Loan Documents is guaranteed by the
Domestic Borrowers pursuant to Section 11 of this Agreement. If the Company's
Initial Debt Ratio on the Transaction Date is equal to or greater than 3.5 to 1
the payment of SVS Holland's indebtedness, obligations and liabilities to the
Agents and the Banks under this Agreement and the other Loan Documents shall be
secured by a pledge of 66% of the capital stock of SVS Holland and certain
related rights and Properties and payment of all of the Borrowers' indebtedness
obligations and liabilities to the Agents and the Banks under this Agreement and
the other Loan Documents shall be secured by all of the Domestic Borrowers'
intellectual property and related rights and Properties and a pledge of all of
the capital stock of SVS and 66% of the capital stock of SVS Europe and certain
related rights and Properties pursuant to the Security Documents.
(b) The Administrative Agent and the Banks agree that all liens and
security interests they may have on the Collateral shall terminate, and the
Administrative Agent shall release all such liens and security interests, if at
any time (A) Seminis maintains a Debt Ratio of less than 3.5 to 1 with respect
to each of the two immediately preceding fiscal quarters of Seminis and (B) no
Potential Default or Event of Default shall have occurred and be continuing at
such time. Notwithstanding such termination, the Domestic Borrowers' joint and
several liability hereunder, including without limitation under Section 11 of
this Agreement shall remain unaffected by such release.
Section 1.9. Several Liability of SVS Holland. Notwithstanding any
provision of this Agreement or the other Loan Documents to the contrary
(including without limitation Sections 2, 3.1, 3.6, 9, 12.8, 12.18 and 12.21
hereof), the liability of SVS Holland under this Agreement shall be several and
not joint or joint and several. In no event shall SVS Holland be liable for the
payment of any principal of or interest on any Loans other than Loans borrowed
by it hereunder, any Reimbursement Obligations, any commitment fees other than
such fees payable with respect to the maximum amount of the Revolving Credit
Commitments which it may borrow, or any costs and expenses under Section 12.8
hereof other than any such costs and expenses relating to its indebtedness
hereunder or the enforcement of its obligations under this Agreement and the
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<PAGE> 16
other Loan Documents.
SECTION 2. INTEREST.
Section 2.1. Options. Subject to all of the terms and conditions of
this Section 2, portions of the principal indebtedness, other than the Swingline
Loans, evidenced by each Class of Notes (all of the indebtedness evidenced by a
particular Class of Notes bearing interest at the same rate for the same period
of time being hereinafter referred to as a "Portion") may, at the option of
Seminis, bear interest with reference to the Base Rate (the "Base Rate
Portions") or with reference to the Adjusted LIBOR Rate ("LIBOR Portions"), and
Portions may be converted from time to time from one basis to the other. All of
the indebtedness, other than the Swingline Loans, evidenced by each Class of
Notes which is not part of an LIBOR Portion shall constitute a single Base Rate
Portion. All of the indebtedness, other than the Swingline Loans, evidenced by
each Class of Notes which bears interest with reference to a particular Adjusted
LIBOR Rate for a particular Interest Period shall constitute a single LIBOR
Portion. Anything contained herein to the contrary notwithstanding, there shall
not be more than eight LIBOR Portions applicable to the Revolving Credit Notes
nor more than two LIBOR Portions applicable to the Term Credit Notes at any one
time and each Bank shall have a ratable interest in each Portion. The Borrowers
promise to pay interest on each Portion at the rates and times specified in this
Section 2.
Section 2.2. Base Rate Portion. Each Base Rate Portion shall bear
interest (which the Borrowers jointly and severally promise to pay at the times
herein provided), at the rate per annum determined by adding the Applicable
Margin to the Base Rate as in effect from time to time. Interest on the Base
Rate Portions shall be payable on the last day of each month in each year and at
maturity of the applicable Notes and interest after maturity shall be due and
payable upon demand.
Section 2.3. LIBOR Portions. Each LIBOR Portion shall bear interest
(which the Borrowers promise to pay at the times herein provided) for each
Interest Period selected therefor at a rate per annum equal to the Adjusted
LIBOR Rate for such Interest Period plus the Applicable Margin, provided that if
any Event of Default has occurred and is continuing, and effective at the end of
the Interest Period applicable to each LIBOR Portion, each LIBOR Portion shall
automatically be converted into and added to the applicable Base Rate Portion
and shall thereafter bear interest at the interest rate applicable to the
applicable Base Rate Portion after default. Interest on each LIBOR Portion shall
be due and payable on the last day of each Interest Period applicable thereto
and, if an Interest Period is longer than three months, then at the end of each
three month period and at the end of such Interest Period, and interest after
maturity shall be due and payable upon demand. Seminis shall notify the
Administrative Agent on or before 11:00 a.m. (Chicago time) on the third
Business Day preceding the end of an Interest Period applicable to a LIBOR
Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in which
event Seminis shall notify the Administrative Agent of the new Interest Period
selected therefor, and in the event Seminis shall fail to so notify the
Administrative Agent, such LIBOR Portion shall automatically be converted into
and added to the Base Rate Portion as of and on the last day of such Interest
Period. The Administrative Agent shall promptly notify each Bank of each notice
received from Seminis pursuant to the foregoing provisions. Anything contained
<PAGE> 17
herein to the contrary notwithstanding, the obligation of the Banks to create,
continue or effect by conversion any LIBOR Portion shall be conditioned upon the
fact that at the time no Potential Default or Event of Default shall have
occurred and be continuing.
Section 2.4. Computation. Interest on the LIBOR Portions shall be
computed on the basis of a year of 360 days for the actual number of days
elapsed. All other interest on the Notes and all fees, charges and commissions
due hereunder shall be computed on the basis of a year of 365/366 days for the
actual number of days elapsed unless otherwise specifically provided in this
Agreement.
Section 2.5. Minimum Amounts. Each LIBOR Portion shall be in a minimum
amount of $10,000,000.00 or any greater amount that is a whole multiple of
$1,000,000 and each Base Rate Portion shall be in a minimum amount of
$5,000,000.00 or any greater amount that is a whole multiple of $1,000,000.
Section 2.6. Manner of Rate Selection. Seminis shall notify the
Administrative Agent by 11:00 a.m. (Chicago time) at least three (3) Business
Days prior to the date upon which it requests that any LIBOR Portion be created
or that any part of a Base Rate Portion be converted into a LIBOR Portion (such
notice to specify in each instance the amount thereof and the Interest Period
selected therefor) and the Administrative Agent shall promptly advise each Bank
of each such notice. All requests for the creation, continuance or conversion of
Portions under this Agreement shall be irrevocable. If any request is made to
convert a LIBOR Portion in to the applicable Base Rate Portion, such conversion
shall only be made so as to become effective on the last day of the Interest
Period applicable thereto. Such requests may be written or oral and the
Administrative Agent is hereby authorized to honor telephonic requests for
creations, continuances and conversions received by it from any person
purporting to be a person authorized to act on behalf of Seminis hereunder, the
Borrowers hereby jointly and severally indemnifying the Administrative Agent and
the Banks from any liability or loss ensuing from so acting.
SECTION 3. THE NOTES, FEES, PREPAYMENTS, TERMINATIONS AND APPLICATION
OF PAYMENTS.
Section 3.1. Commitment Fee. For the period from the date hereof to and
including the Termination Date, or such earlier date on which the Revolving
Credit is terminated in whole pursuant to Section 3.4 hereof, the Borrowers,
jointly and severally, shall pay to the Administrative Agent for the account of
the Banks a commitment fee with respect to the Revolving Credit at the rate per
annum equal to the Applicable Margin on the average daily unused amount of the
Revolving Credit Commitments (determined in each case after giving effect to any
reductions thereof as specified in Section 3.4 hereof and without regard to
whether any Swingline Loans are outstanding). Such fee shall be payable
quarterly in arrears on the last day of each March, June, September and December
commencing on June 30, 1999, and on the Termination Date, unless the Revolving
Credit is terminated in whole on an earlier date, in which event the fees for
the period from the date of the last payment made pursuant to this Section 3.1
through the effective date of such termination in whole shall be paid on the
date of such earlier termination in whole.
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<PAGE> 18
Section 3.2. Agents' Fee. The Borrowers shall pay to and for the sole
account of each Agent such fees as the Borrowers and such Agent may agree upon
in writing from time to time. Such fees shall be in addition to any fees and
charges the Agents may be entitled to receive under the other Loan Documents.
Section 3.3. Prepayments.
(a) Optional Prepayments of Base Rate Portions. The Borrowers shall
have the privilege of prepaying without premium or penalty and in whole or in
part (but if in part, then in a minimum principal amount of $500,000 or such
greater amount which is an integral multiple of $500,000) the Base Rate Portion
of any Loan at any time upon prior telecopy or telephonic notice from Seminis to
the Administrative Agent on or before 11:00 a.m. (Chicago time) on the Business
Day of such prepayment. Any amount prepaid under the Revolving Credit may,
subject to the terms and conditions of this Agreement, be borrowed, repaid and
borrowed again.
(b) Optional Prepayments of LIBOR Portions. The Borrowers may prepay
any LIBOR Portion, upon telephonic notice (which shall be promptly confirmed in
writing by facsimile communication, telex or telegraph) by no later than 11:00
a.m. (Chicago time) on the date of such prepayment from Seminis to the
Administrative Agent, such prepayment to be made by the payment of the principal
amount to be prepaid and accrued interest thereon and any compensation required
by Section 9.4 hereof, if applicable; provided, however, that any such
prepayment shall be in a principal amount of no less than $1,000,000 or such
greater amount which is an integral multiple of $1,000,000 and after giving
effect to any such prepayment the outstanding principal amount of any such LIBOR
Portion prepaid in part shall not be less than $1,000,000 or such greater amount
which is an integral multiple of $1,000,000.
(c) Mandatory Prepayments of Excess Borrowings. If the aggregate
outstanding principal amount of all Revolving Credit Obligations shall ever
exceed the Revolving Credit Commitments in effect from time to time, the
Borrowers shall immediately prepay Revolving Credit Loans, Swingline Loans and
Reimbursement Obligations in such amount as shall be necessary to eliminate such
excess.
Section 3.4. Revolving Credit Termination. The Borrowers shall have the
right at any time upon written notice to the Administrative Agent to terminate
the Revolving Credit Commitments in whole or in part (but if in part in a
minimum principal amount of $10,000,000 or such greater amount which is an
integral multiple of $5,000,000); provided, however, that no such reduction or
termination shall be permitted to the extent that after giving effect to such
reduction or termination and to any prepayments made on the effective date
thereof, the aggregate principal amount of all outstanding Revolving Credit
Loans, the aggregate principal amount of all outstanding Swingline Loans, the
aggregate amount available to be drawn under all outstanding L/Cs and, without
duplication, the aggregate amount of unpaid Reimbursement Obligations with
respect to L/Cs would exceed the Revolving Credit Commitments then in effect.
Section 3.5. Place and Application of Payments. All payments by the
Borrowers hereunder shall be made in Dollars to the Administrative Agent at its
office at 111 West Monroe
<PAGE> 19
Street, Chicago, Illinois 60690 and in immediately available funds, prior to
12:00 noon (Chicago time) on the date of such payment. Subject to Section 12.18
of this Agreement, all such payments shall be made without setoff or
counterclaim and without reduction for, and free from, any and all present and
future levies, imposts, duties, fees, charges, deductions withholdings,
restrictions or conditions of any nature imposed by any government or any
political subdivision or taxing authority thereof. Any payments received after
12:00 noon (Chicago time) (or after any later time the Banks may otherwise
direct) shall be deemed received upon the following Business Day. All
prepayments of the Term Loans shall be applied to the several principal
installments thereof in the inverse order of their respective maturities, unless
otherwise required by this Agreement. The Administrative Agent shall remit to
each Bank its proportionate share of each payment of principal, interest and
fees received by the Administrative Agent by 12:00 noon (Chicago time) on the
same day of its receipt and its proportionate share of each such payment
received by the Administrative Agent after 12:00 noon (Chicago time) on the
Business Day following its receipt by the Administrative Agent. In the event the
Administrative Agent does not remit any amount to any Bank when required by the
preceding sentence, the Administrative Agent shall pay to such Bank interest on
such amount until paid at a rate per annum equal to the Fed Funds Rate. Each
Borrower hereby authorizes the Administrative Agent, at any time that an Event
of Default has occurred and is continuing hereunder, to automatically debit any
of its accounts with Harris for any principal, interest and fees when due under
the Notes, the L/C Agreement or this Agreement and to transfer the amount so
debited from such account to the Administrative Agent for application as herein
provided. Harris shall notify the Borrowers of each such debit promptly after it
is made, but its failure to do so will not impair the validity of such debit or
result in any liability of Harris to the Borrowers.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of Reimbursement Obligations and the
indebtedness evidenced by the Notes and all proceeds of the Collateral received,
in each instance, by the Administrative Agent or any of the Banks after the
occurrence and during the continuation of an Event of Default shall be remitted
to the Administrative Agent and distributed as follows:
(a) first to the payment of any outstanding costs and
expenses incurred by the Administrative Agent in monitoring, verifying,
protecting, preserving or enforcing the liens on the Collateral or in
protecting, preserving or enforcing rights under this Agreement, the
Security Documents or the Notes and in any event including all costs
and expenses of a character which the Borrowers have agreed to pay
under Section 12.8 hereof (such funds to be retained by the
Administrative Agent or Agent for its own account unless it has
previously been reimbursed for such costs and expenses by the Banks, in
which event such amounts shall be remitted to the Banks to reimburse
them for payments theretofore made to the Administrative Agent);
(b) second to the payment of any outstanding interest or
other fees or amounts then due and payable under the L/C Agreements,
the Notes, the Security Documents or this Agreement other than for
principal, ratably as among the Banks in accord with the amount of such
interest and other fees or amounts owing each;
(c) third, to the payment of the principal of the
Reimbursement Obligations
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<PAGE> 20
and the Notes then due and payable, ratably as among the Reimbursement
Obligations and the Notes;
(d) fourth, to be held as collateral security for outstanding
L/Cs pursuant to Section 8.4 hereof;
(e) fifth, to the payment of the Borrowers' indebtedness,
obligations and liabilities to the Banks under Interest Rate Protection
Agreements then due and payable, ratably as among such indebtedness,
obligations and liabilities;
(f) sixth, to the Banks ratably in accord with the amounts of
any other indebtedness, obligations or liabilities of the Borrowers
then due and payable to each of them and secured by the Security
Documents unless and until all such indebtedness, obligations and
liabilities have been fully paid and satisfied; and
(g) seventh, to the Borrowers.
Section 3.6. Capital Adequacy. If, after the date hereof, any Bank or
the Administrative Agent shall have determined in good faith that the adoption
after such date of any applicable law, rule or regulation regarding capital
adequacy, or any change therein (including, without limitation, any revision in
the Final Risk-Based Capital Guidelines of the Board of Governors of the Federal
Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225, Appendix A) or of
the Office of the Comptroller of the Currency (12 CFR Part 3, Appendix A), or in
any other applicable capital rules heretofore adopted and issued by any
governmental authority), or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Lending Office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital, or on the capital of any corporation controlling such
Bank, in each case as a consequence of its obligations hereunder, to a level
below that which such Bank would have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within thirty (30) days after demand by such Bank (with a copy to
the Administrative Agent), the Borrowers shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such reduction.
Section 3.7. The Register. The Administrative Agent, on behalf of the
Borrowers, shall maintain at its address referred to in Section 12.7 a copy of
each assignment and acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Banks and each Commitment
of, and principal amount of the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrowers, the Agents and the Banks may
treat each Person whose name is recorded in the Register as a Bank hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by any Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice. Upon its receipt of an
<PAGE> 21
assignment and acceptance executed by an assigning Bank and an assignee, the
Administrative Agent shall, if such assignment and acceptance has been completed
and is acceptable to the Administrative Agent in form and substance, (a) accept
such assignment and acceptance, (b) record the information contained therein in
the Register and (c) give prompt notice thereof to Seminis.
SECTION 4. DEFINITIONS.
Section 4.1. Certain Definitions. The terms hereinafter set forth when
used herein shall have the following meanings:
"Adjusted LIBOR Rate" means a rate per annum determined pursuant to
the following formula:
<TABLE>
<CAPTION>
<S> <C> <C>
Adjusted LIBOR Rate = LIBOR Rate
100% - Reserve Percentage
</TABLE>
"Administrative Agent" shall have the meaning specified in the first
paragraph of this Agreement.
"Affiliate" shall mean, for any Person, any other Person (including all
directors and officers of such Person) that directly or indirectly controls, or
is under common control with, or is controlled by, such Person. As used in this
definition, "control" means the power, directly or indirectly, to direct or
cause the direction of management or policies of a Person (through ownership of
voting securities, by contract or otherwise), provided that, in any event for
purposes of the definition any Person that owns directly or indirectly 20% or
more of the securities having ordinary voting power for the election of
directors of a corporation or 20% or more of the partnership or other ownership
interests of any other Person will be deemed to control such corporation or
other Person.
"Agent" shall mean the Administrative Agent or the Syndication Agent.
"Agreement" shall mean this Credit Agreement as supplemented and
amended from time to time.
"Applicable Margin" shall mean with respect to the commitment fee and
each type of Portion of the Revolving Credit Loans and the Term Loans described
below, the rate of interest per annum shown below for the range of Debt Ratio
specified below:
<TABLE>
<CAPTION>
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
<S> <C> <C> <C> <C> <C>
greater than or greater than or greater than or
Debt Ratio < 2.5 to 1 equal to 2.5 to 1 >3.0 to 1 equal to 3.5 to 1 equal to 3.75 to 1
< 2.99 to 1 < 3.49 to 1 < 3.74 to 1
Base Rate Portion 0% 0% 0% 0.25% 0.5%
LIBOR Portion 1.25% 1.375% 1.50% 1.75% 2.00%
Commitment Fee 0.25% 0.30% 0.35% 0.40% 0.50%
</TABLE>
-21-
<PAGE> 22
provided, however, that the Applicable Margins shall be adjusted on the
Transaction Date on the basis of the Initial Debt Ratio rather than the Debt
Ratio, and provided further, however, that if and so long as any Event of
Default has occurred and is continuing, the Applicable Margins other than the
Applicable Margin for the commitment fee as otherwise computed hereunder shall
be increased by adding 2% per annum thereto.
The Applicable Margins will be adjusted upon receipt of Seminis'
quarterly financial statements for each fiscal quarter of Seminis and the
related Compliance Certificate, commencing with the quarter ended June 30, 1999.
Not later than 5 Business Days after receipt by the Administrative Agent of the
financial statements called for by Section 7.4 hereof for each fiscal quarter of
Seminis, the Administrative Agent shall determine the Debt Ratio for the
applicable period and shall promptly notify the Borrowers and the Banks of such
determination and of any change in the Applicable Margins resulting therefrom.
Any such change in the Applicable Margins shall be effective as of the date the
Administrative Agent so notifies the Borrowers and the Banks with respect to all
Loans outstanding on such date, and such new Applicable Margins shall continue
in effect until the effective date of the next redetermination in accordance
with this Section. Each determination of the Debt Ratio and Applicable Margins
by the Administrative Agent in accordance with this Section shall be conclusive
and binding on the Borrowers and the Banks absent manifest error. From the date
hereof until the Applicable Margins are first adjusted pursuant hereto, the
Applicable Margins shall be those set forth in Level V.
"Bank" and "Banks" shall have the meanings specified in the first
paragraph of this Agreement.
"Base Rate" means for any day the rate of interest announced by Harris
from time to time as its prime commercial rate in effect on such day, with any
change in the Base Rate resulting from a change in said prime commercial rate to
be effective as of the date of the relevant change in said prime commercial rate
(the "Harris Prime Rate"), provided that if the rate per annum determined by
adding 1/2 of 1% to the rate at which Harris would offer to sell federal funds
in the interbank market on or about 10:00 a.m. (Chicago time) on any day (the
"Adjusted Fed Funds Rate") shall be higher than the Harris Prime Rate on such
day, then the Base Rate for such day and for the succeeding day which is not a
Business Day shall be such Adjusted Fed Funds Rate. The determination of the
Adjusted Fed Funds Rate by the Administrative Agent shall be final and
conclusive provided it has acted in good faith in connection therewith.
"Base Rate Portion" shall have the meaning specified in Section 2.1
hereof.
"Borrower" and "Borrowers" shall have the meaning specified in the
first paragraph of this Agreement.
"Borrowing" shall have the meaning specified in Section 1.1 hereof.
"Business Day" shall mean any day except Saturday or Sunday on which
banks are open for business in Chicago, Illinois and Los Angeles, California,
and, with respect to LIBOR
<PAGE> 23
Portions, dealing in United States dollar deposits in London, England and
Nassau, Bahamas.
"Capital Expenditures" shall mean, for any period, capital expenditures
of the Company and its Subsidiaries during such period as defined and classified
in accordance with generally accepted accounting principles, consistently
applied.
"Capitalized Lease" shall mean any lease or obligation for rentals
which is required to be capitalized on a consolidated balance sheet of a
Borrower and its Subsidiaries in accordance with generally accepted accounting
principles, consistently applied.
"Capitalized Lease Obligation" shall mean the present discounted value
of the rental obligations under any Capitalized Lease determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied.
"Choong Ang" shall mean Choong Ang Seed Co., Ltd, a corporation
organized under the laws of Korea.
"Class of Notes" shall mean the Revolving Credit Notes as a group and
the Term Credit Notes as a group.
"Collateral" shall mean the collateral security provided to the Agent
for the benefit of the Banks pursuant to this Agreement and the Security
Documents.
"Commitment" shall mean a Revolving Credit Commitment and a Term Credit
Commitment of any Bank, and "Commitments" shall mean the Revolving Credit
Commitment and Term Credit Commitment of a Bank or Banks.
"Commitment Percentage" shall have the meaning set forth in Section 1.1
hereof.
"Debt" of any Person shall mean as of any time the same is to be
determined, the aggregate of:
(a) all indebtedness with respect to borrowed money;
(b) all reimbursement and other obligations with respect to
letters of credit, banker's acceptances, customer advances and other
extensions of credit whether or not representing obligations for
borrowed money;
(c) the aggregate amount of Capitalized Lease Obligations;
(d) all indebtedness of the type described in subsections
(a), (b), (c), (e) and (f) of this definition secured by any lien or
any security interest on any Property or assets of such person, whether
or not the same would be classified as a liability on a balance sheet;
(e) all indebtedness representing the deferred purchase price
of Property, but
-23-
<PAGE> 24
excluding all trade payables incurred in the ordinary course of
business; and
(f) all guaranties, endorsements (other than any liability
arising out of the endorsement of items for deposit or collection in
the ordinary course of business) and other contingent obligations in
respect of, or any obligations to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, or to assure
an obligee against failure to make payment in respect of, any of the
foregoing.
Debt of a Borrower shall be computed and determined, without duplication, on a
consolidated basis for such Borrower and its Subsidiaries after the elimination
of intercompany items in accordance with generally accepted accounting
principles consistent with those used in the preparation of the audit report
referred to in Section 5.2 hereof.
"Debt Ratio" shall mean, as of any date of determination, the ratio of
the aggregate outstanding principal amount of all Debt of Seminis and its
Subsidiaries (determined on a consolidated basis) as of such date to EBITDA of
Seminis and its Subsidiaries (determined on a consolidated basis) for the twelve
consecutive months ending on such date.
"Dollar" or "$" or "U.S. Dollar" shall mean lawful money of the United
States of America.
"Domestic Borrower" shall have the meaning specified in the first
paragraph hereof. hereof.
"Domestic Subsidiary" shall mean a Subsidiary organized under the laws
of any state of the United States or the District of Columbia.
"EBITDA" shall mean, with reference to any period, Net Income for such
period plus all amounts deducted in arriving at such Net Income amount in
respect of (i) Interest Expense for such period, plus (ii) federal, state and
local income taxes for such period, plus (iii) all amounts properly charged for
depreciation of fixed assets and amortization of intangible assets during such
period on the books of Seminis and its Subsidiaries, plus (iv) management fees
paid by Seminis to Savia before September 30, 1998, minus (in the case of gains)
or plus (in the case of losses) (v) non-cash charges relating to foreign
currency gains or losses attributable to intercompany loans from Seminis and its
Domestic Subsidiaries to Seminis' Foreign Subsidiaries, plus (vi) the write-off
of unamortized loan origination fees associated with credit facilities entered
into prior to the date of this Agreement, plus (vii) non-cash charges with
respect to purchase accounting adjustments associated with acquisitions
permitted by this Agreement; provided that for purposes of determining EBITDA
for any period prior to any acquisition permitted hereunder the acquired entity
shall be treated as though it had been a Subsidiary of Seminis at all times
during the relevant period, and provided further that for purposes of
determining EBITDA for any period prior to a disposition of any Subsidiary
permitted by this Agreement such entity shall be treated as though it had not
been a Subsidiary of Seminis during the relevant period.
"Environmental Laws" shall mean all federal, state and local
environmental, health and
<PAGE> 25
safety statutes and regulations, including without limitation all statutes and
regulations establishing quality criteria and standards for air, water, land and
toxic or hazardous wastes and substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Event of Default" shall mean any event or condition identified as
such in Section 8.1 hereof.
"Existing Agreement" shall mean the Credit Agreement dated as of April
30, 1999, among the Borrowers, Harris Trust and Savings Bank, individually and
as administrative agent thereunder, and the lenders from time to time parties
thereto, as amended.
"Existing Banks" shall mean the lenders under the Existing Agreement.
"Exposure" shall mean, as to any Bank, the sum (without duplication) of
such Bank's (a) unused Revolving Credit Commitment, if any, (b) outstanding
Revolving Credit Loans, if any, (c) interest in outstanding Reimbursement
Obligations, if any, (d) participation in outstanding L/Cs, if any, (e)
outstanding Swingline Loans, if any, (f) participation in outstanding Swingline
Loans, if any, and (g) outstanding principal amount, if any, of its Term Loan.
"Fed Funds Rate" shall have the meaning specified in Section 1.3(a)
hereof.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"Harris" shall have the meaning specified in the first paragraph of
this Agreement.
"Hungnong" shall mean Hungnong Seed Co., Ltd., a corporation organized
under the laws of Korea.
"Initial Debt Ratio" shall mean the ratio, calculated after giving
effect to the completion of the Transaction and the making of the initial Loans
hereunder, of the aggregate outstanding principal amount of all Debt of Seminis
and its Subsidiaries (determined on a consolidated basis) as of such date to
EBITDA of Seminis and its Subsidiaries (determined on a consolidated basis) for
the twelve consecutive months ended on March 31, 1999.
"Intellectual Property Security Agreement" shall mean the Security
Agreement Re: Intellectual Property substantially in the form of Exhibit K among
the Domestic Borrowers and the Administrative Agent, as the same may be
supplemented and amended from time to time.
"Interest Coverage Ratio" shall mean, as of any date, the ratio of (a)
EBITDA of Seminis and its Subsidiaries for the twelve consecutive months ended
on such date, to (b) the Interest Expense of Seminis and its Subsidiaries for
the same period.
"Interest Expense" shall mean, with reference to any period, the sum of
all interest
-25-
<PAGE> 26
charges (including imputed interest charges with respect to Capitalized Lease
Obligations, and all amortization of debt discount and expense) of Seminis and
its Subsidiaries for such period determined on a consolidated basis in
accordance with generally accepted accounting principles, consistently applied;
provided, that solely for purposes of determining compliance with the Interest
Coverage Ratio requirement contained in Section 7.23 hereof as of any date of
determination occurring during the period from the Transaction Date through the
date one year thereafter, Interest Expense shall mean an amount equal to (a) the
sum of all interest charges (including imputed interest charges with respect to
Capitalized Lease Obligations, all amortization of debt discount and expense) of
Seminis and its Subsidiaries for such period determined on a consolidated basis
in accordance with generally accepted accounting principles, consistently
applied, for the period from the Transaction Date through such date of
determination multiplied by (b) a fraction, the numerator of which is 365 and
the denominator of which is the number of days in such period.
"Interest Period" shall mean (a) with respect to any LIBOR Portion, the
period used for the computation of interest commencing on the date the relevant
LIBOR Portion is made, continued or effected by conversion and concluding on the
date one, two, three or six months thereafter as selected by Seminis in its
notice as provided herein, and (b) with respect to any Swingline Loan, the
period used for the computation of interest commencing on the date the relevant
Swingline Loan is made and concluding 1 to 7 days thereafter as selected by
Seminis in its notice as provided herein; provided that all of the foregoing
provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless in the case of an Interest Period
for a LIBOR Portion the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period applicable to any Revolving Credit
Loan or Swingline Loan may extend beyond the Termination Date and no
Interest period applicable to any Term Loan may extend beyond the final
maturity date thereof; and
(iii) the interest rate to be applicable to each LIBOR Portion
for each Interest Period shall apply from and including the first day
of such Interest Period to but excluding the last day thereof.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.
"Interest Rate Protection Agreement" shall mean any interest rate swap,
interest rate cap, interest rate collar, or other interest rate hedging
agreement or arrangement entered into pursuant to Section 7.23 of this
Agreement.
<PAGE> 27
"Inventory" shall mean all raw materials, work in process, finished
goods, and goods held for sale or lease or furnished or to be furnished under
contracts of service in which any Borrower now has or hereafter acquires any
right.
"IPO" shall mean the initial public offering of Seminis' common stock
pursuant to the Registration Statement.
"Lending Office" shall mean the branch, office or affiliate specified
on the appropriate signature page hereof for each type of Loan.
"L/C" shall have the meaning set forth in Section 1.1(a) hereof.
"L/C Agreement" shall have the meaning set forth in Section 1.4(a)
hereof.
"L/C Administrative Fee" shall have the meaning specified in Section
1.4(a) hereof.
"L/C Issuance Fee" shall have the meaning specified in Section 1.4(a)
hereof.
"L/C Participation Fee" shall have the meaning specified in Section
1.4(a) hereof.
"LIBOR Index Rate" shall mean, for any Interest Period applicable to a
LIBOR Portion, the rate per annum (rounded upwards, if necessary, to the next
higher one hundred-thousandth of a percentage point) for deposits in U.S.
Dollars for a period equal to such Interest Period, which appears on the
Telerate Page 3750 as of 11:00 a.m. (London, England time) on the day two
Business Days before the commencement of such Interest Period.
"LIBOR Rate" shall mean for each Interest Period applicable to a LIBOR
Portion, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
nearest 1/100 of 1%) at which deposits in U.S. Dollars in immediately available
funds are offered to the Administrative Agent at 11:00 a.m. (London, England
time) two (2) Business Days before the beginning of such Interest Period by
three (3) or more major banks in the interbank eurodollar market selected by the
Administrative Agent for a period equal to such Interest Period and in an amount
equal or comparable to the principal amount of the LIBOR Portion scheduled to be
made by the Administrative Agent during such Interest Period.
"Loan" shall mean a Revolving Credit Loan, a Swingline Loan or a Term
Loan, and "Loans" shall mean any two or more of the foregoing.
"Loan Documents" shall mean this Agreement and any and all exhibits
hereto, the L/C Agreements, the Notes and, if applicable, the Security
Documents.
"Material Subsidiary" shall mean any Subsidiary that accounts for more
than 2.5% of Seminis' annual revenues for the most recently completed calendar
year or 2.5% of Seminis' Total Assets as shown on Seminis' most recent audited
financial statement at the time of determination; provided that for purposes
only of Sections 8.1(h) and (i) hereof the term
-27-
<PAGE> 28
"Material Subsidiary" shall mean any one or more Subsidiaries that individually
or in the aggregate account for more than $5,000,000 of annual revenues or whose
total assets are greater than $5,000,000.
"Net Income" means, with reference to any period, the net income (or
net loss) of Seminis and its Subsidiaries for such period as computed on a
consolidated basis in accordance with generally accepted accounting principles,
consistently applied, and, without limiting the foregoing, after deduction from
gross income of all expenses and reserves, including reserves for all taxes on
or measured by income.
"Net Worth" means, at any time the same is to be determined, the total
shareholders' equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock, but excluding minority
interests in Subsidiaries) which would appear on the balance sheet of Seminis
and its Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles, consistently applied.
"Non-Borrowing Subsidiary" shall mean any Subsidiary except SVS and SVS
Holland.
"Note" shall mean a Revolving Credit Note or a Term Credit Note, and
"Notes" shall mean any two or more of the foregoing.
"Offered Rate" shall have the meaning specified in Section 1.1(b)(v)
hereof.
"Oxnard Facilities" shall mean corporate and operating facilities of
Seminis in Oxnard, California.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean and include any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether national,
federal, state, county, city, municipal, or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
"Peto International" shall mean Petoseed International, Inc., a
California corporation.
"Peto Notarial Deed of Pledge" shall mean the Notarial Deed of Pledge
substantially in the form of Exhibit M from SVS Europe to the Administrative
Agent.
"Plan" shall mean any employee benefit plan covering any officers or
employees of any Borrower or any Subsidiary, any benefits of which are, or are
required to be, guaranteed by the PBGC.
"Pledgor" shall mean Peto International and SVS Europe.
"Potential Default" shall mean any event or condition which, with the
lapse of time, or giving of notice, or both, would constitute an Event of
Default.
<PAGE> 29
"Property" shall mean all assets and properties of any nature
whatsoever, whether real or personal, tangible or intangible, including without
limitation intellectual property.
"Registration Statement" shall mean the Amended Form S-1 Registration
Statement dated _________, 1999, filed by Seminis with the Securities and
Exchange Commission on April 28, 1999.
"Reimbursement Obligations" has the meaning specified in Section 1.5
hereof.
"Rentals" shall mean and include all fixed rents (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender of the property) payable by a Borrower or a Subsidiary,
as lessee or sublessee under a lease of real or personal property, but shall be
exclusive of any amounts required to be paid by such Borrower or a Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called "percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of sales
volume or gross revenues. Capitalized Rentals shall be excluded from the
definition of Rentals for all purposes hereunder other than the use of the term
"rentals" in the definitions of Capitalized Lease and Capitalized Lease
Obligations.
"Required Banks" shall mean any Bank or Banks which in the aggregate
hold at least 66 2/3% of the Total Exposure.
"Required Revolving Credit Lenders" shall mean Revolving Credit Lenders
with Commitment Percentages aggregating at least 66-2/3%.
"Reserve Percentage" means the daily arithmetic average maximum rate at
which reserves (including, without limitation, any supplemental, marginal and
emergency reserves) are imposed on member banks of the Federal Reserve System
during the applicable Interest Period by the Board of Governors of the Federal
Reserve System (or any successor) under Regulation D on "eurocurrency
liabilities" (as such term is defined in Regulation D), subject to any
amendments of such reserve requirement by such Board or its successor, taking
into account any transitional adjustments thereto. For purposes of this
definition, the LIBOR Portions shall be deemed to be eurocurrency liabilities as
defined in Regulation D without benefit or credit for any prorations, exemptions
or offsets under Regulation D.
"Restricted Group" shall mean (a) the Borrowers, (b) all Subsidiaries
of SVS and SVS Holland, and (c) all Subsidiaries of Seminis, other than SVS, SVS
Holland and their respective Subsidiaries, so long as, if the Security Documents
are in effect, such Subsidiary's stock or other equity interests (i) have been
pledged to the Administrative Agent for the benefit of the Banks pursuant to
security documents containing substantially the same terms and conditions as the
Security Agreement and otherwise satisfactory in form and substance to the
Administrative Agent and (ii) are not subject to any other security interest,
lien or encumbrances of any nature whatsoever.
"Revolving Credit" shall have the meaning specified in the first
paragraph of this
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<PAGE> 30
Agreement.
"Revolving Credit Commitment" and "Revolving Credit Commitments" shall
have the meanings specified in Section 1.1(a) hereof.
"Revolving Credit Lenders" shall mean, as of any time, those Banks
which then have a Revolving Credit Commitment or, if the Revolving Credit
Commitments have been terminated or expired, those Banks holding outstanding
Revolving Credit Loans, outstanding Reimbursement Obligations, and
participations in outstanding L/Cs.
"Revolving Credit Loan" and "Revolving Credit Loans" shall have the
meanings specified in Section 1.1(a) hereof.
"Revolving Credit Note" or "Revolving Credit Notes" shall have the
meanings specified in Section 1.1(a) hereof.
"Savia" shall mean Savia, S.A. de C.V., a corporation organized under
the laws of the United Mexican States.
"Savia Advances" shall mean an unsecured loan made by Savia to the
Borrowers or either of them in the principal amount of $20,000,000.
"Security Agreement" shall mean the Security Agreement Re: Stock
substantially in the form of Exhibit J among the Domestic Borrowers and the
Administrative Agent, as the same may be supplemented and amended from time to
time.
"Security Documents" shall mean the Security Agreement, the
Intellectual Property Security Agreement, the Peto Notarial Deed of Pledge, the
SVS Notarial Deed of Pledge, all stock powers delivered in connection therewith,
all acknowledgements and other instruments and documents received pursuant to
any of the foregoing and all financing statements filed in connection therewith.
"Subsidiary" shall mean, for any Borrower, any corporation or other
entity of which more than fifty percent (50%) of the outstanding stock or
comparable equity interests having ordinary voting power for the election of the
Board of Directors of such corporation or similar governing body in the case of
a non-corporation (irrespective of whether or not, at the time, stock or other
equity interests of any other class or classes of such corporation or other
entity shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by such Borrower or by
one or more of its Subsidiaries.
"SVS Europe" shall mean SVS Europe B.V., a private company with limited
liability organized under the laws of The Netherlands formerly known as Peto
Europe B.V.
"SVS Notarial Deed of Pledge" shall mean a Notarial Deed of Pledge
substantially in the form of Exhibit L from SVS and Peto International to the
Administrative Agent.
<PAGE> 31
"Syndication Agent" shall have the meaning specified in the first
paragraph of this Agreement.
"Swingline" shall have the meaning specified in the first paragraph
hereof.
"Swingline Loan" shall have the meaning specified in Section 1.1(b)(i)
hereof.
"Telerate Page 3750" shall mean the display page designated as "Page
3750" on the Telerate Service (or such other page as may replace Page 3750 on
that service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar deposits).
"Term Credit" shall have the meaning specified in the first paragraph
hereof.
"Term Credit Commitment" and "Term Credit Commitments" shall have the
meanings specified in Section 1.2(a) hereof.
"Term Credit Lenders" shall mean the holders of the Term Credit Notes.
"Term Credit Note" and "Term Credit Notes" shall have the meanings
specified in Section 1.2(a) hereof.
"Term Loan" shall have the meaning specified in section 1.2(a) hereof.
"Termination Date" shall have the meaning set forth in Section 1.1
hereof.
"Total Assets" shall mean the total assets of Seminis and its
Subsidiaries, determined in accordance with general accepted accounting
principles, consistently applied.
"Total Exposure" shall mean the aggregate Exposure for all Banks.
"Transaction" shall mean, collectively, (a) the payment in full of the
Borrowers' indebtedness, obligations and liabilities under the Existing
Agreement and (b)the repayment in full of the Savia Advances and accrued
interest thereon and the redemption or other retirement of Seminis' preferred
stock for an aggregate cash consideration of not less than $40,000,000 or not
more than $42,000,000.
"Transaction Date" shall mean the date on which the Transaction is
completed.
"Year 2000 Problem" shall mean any significant risk that computer
hardware, software, or equipment containing embedded microchips essential to the
business or operations of Seminis or any of its Subsidiaries will not, in the
case of dates or time periods occurring after December 31, 1999, function at
least as efficiently and reliably as in the case of times or time periods
occurring before January 1, 2000, including the making of accurate leap year
calculations.
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<PAGE> 32
"Young IL" shall mean Young IL Chemical Co., Ltd., a corporation
organized under the laws of the Republic of Korea.
Section 4.2. Accounting Terms. Any accounting term not otherwise
specifically defined in this Agreement shall have the meaning customarily given
to such terms in accordance with generally accepted accounting principles in
effect on the date of this Agreement, consistently applied, consistent with
those used in the preparation of the audit report of Seminis referred to in
Section 5.2 hereof. Where the character or amount of any asset or liability or
item of income or expense is required to be determined or any consolidation or
other accounting computation is required to be made for the purpose of this
Agreement, it shall be done in accordance with such generally accepted
accounting principles, to the extent applicable, except where such principles
are inconsistent with the requirements of this Agreement, provided, that the
financial statements required to be delivered pursuant to Section 7.4 hereof
shall be prepared in accordance with generally accepted accounting principles as
in effect from time to time.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants to the Banks as follows:
Section 5.1. Organization and Qualification. Each Borrower is duly
organized and validly existing under the laws of its respective state of
incorporation, has full and adequate corporate power to carry on its business as
now conducted, is duly licensed or qualified in all jurisdictions wherein the
nature of its activities requires such licensing or qualifying and in which the
failure to be so licensed or qualified would have a material adverse effect on
the financial condition or results of operations of Seminis and its Subsidiaries
taken as a whole, has full right, power and authority to enter into this
Agreement and the other Loan Documents to which it is a party, to make the
borrowings herein provided for, to execute and issue its Notes in evidence
thereof, to encumber its assets as collateral security for its indebtedness,
obligations and liabilities under the Loan Documents, and to perform each and
all of the matters and things herein and therein provided for. Each Domestic
Borrower is in good standing under the laws of its respective state of
incorporation.
Section 5.2. Financial Reports. The Borrowers have heretofore delivered
to each Bank a copy of the annual audit report as of September 30, 1998 and the
accompanying consolidated financial statements of Seminis and its consolidated
Subsidiaries, the unaudited financial statement as of and for the six-month
period ended March 31, 1999, of Seminis and its Subsidiaries and the
Registration Statement. Such financial statements have been prepared in
accordance with generally accepted accounting principles (except for the
omission of footnotes from such unaudited statements) and fairly reflect the
consolidated financial position of Seminis and its consolidated Subsidiaries as
of the dates thereof (subject to year-end adjustments in the case of the
unaudited statements), and the results of its operations for the periods covered
thereby. Seminis and its consolidated Subsidiaries have no known contingent
liabilities that are required to be disclosed on such financial statements other
than as indicated on said financial statements. Since the date of the
Registration Statement there has been no material adverse change in the
financial condition or results of operations, or with respects to the
Properties, of Seminis and its Subsidiaries taken as a whole, except those
disclosed in writing to the Banks
<PAGE> 33
prior to the date of this Agreement.
Section 5.3. Litigation; Tax Returns; Approvals. There is no
litigation, labor controversy or governmental proceeding pending, nor to the
knowledge of any Borrower threatened, against such Borrower or any Subsidiary
which could reasonably be expected to result in any material adverse change in
the financial condition or results of operations of Seminis and its Subsidiaries
taken as a whole. All United States federal and material state and local income
tax returns for each Borrower and its Subsidiaries required to be filed have
been filed on a timely basis (taking into account any extension of time within
which to file), and all amounts required to be paid as shown by said returns
have been paid, except for amounts that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established in
accordance with generally accepted accounting principles consistently applied.
There are no material claims for taxes being asserted against any Borrower and
its Subsidiaries for any fiscal year. No authorization, consent, license,
exemption or filing or registration with any court or governmental department,
agency or instrumentality, is or will be necessary to the valid execution,
delivery or performance by any Borrower of the Loan Documents to which it is a
party, other than the filling of financing statements to perfect the security
interests granted under the security Documents that may be perfected by the
filing of financing statements and the filings with the United States Patent and
Trademark Office required to perfect the security interests granted pursuant to
the Intellectual Property Security Agreement.
Section 5.4. Regulation U. Neither any Borrower nor any Subsidiary is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any Loan
or other extension of credit hereunder will be used to purchase or carry any
margin stock or to extend credit to others for such a purpose.
Section 5.5. No Default. No Potential Default or Event of Default is
existing under this Agreement.
Section 5.6. ERISA. The Borrowers and their Subsidiaries are in
compliance in all material respects with ERISA to the extent applicable to it
and neither any Borrower nor any Subsidiary has received any notice to the
contrary from the PBGC or any other governmental entity or agency. No steps have
been taken to terminate any Plan other than a "standard termination" meeting the
requirements of Section 4041(b) of ERISA, and no contribution failure has
occurred with respect to any Plan sufficient to give rise to a lien under
Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Plan which is reasonably likely to result in the
incurrence by any Borrower or any Subsidiary of any fine, penalty or liability
(other than the liability for making contributions when due to such Plan in
accordance with Section 302 of ERISA) which could reasonably be expected to have
a material adverse effect on the financial condition or results of operations of
Seminis and its Subsidiaries taken as a whole. Neither any Borrower nor any
Subsidiary has any contingent liability with respect to any post-retirement
benefit, other than liability for continuation coverage described in Part 6 of
Title I of ERISA that could reasonably be expected to have a material adverse
effect on the financial condition or results of operations of Seminis and its
Subsidiaries taken as a whole, except as disclosed in writing to the Banks prior
to the date hereof.
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<PAGE> 34
Section 5.7. Subsidiaries and Affiliates. Each Material Subsidiary is
duly organized and validly existing under the laws of the state or country of
its incorporation, has full and adequate corporate power to carry on its
business as now conducted, and is duly licensed or qualified to do business in
all jurisdictions wherein the nature of its activities requires such licensing
or qualification and in which the failure to be so qualified would have a
material adverse effect on the financial condition or results of operations of
such Subsidiary. All of Seminis' Subsidiaries on the date of this Agreement,
Seminis' percentage ownership therein and their respective jurisdiction of
organization are listed on Schedule 5.7.
Section 5.8. Accurate Information. No information, exhibit or report
furnished by any Borrower or any Subsidiary to the Banks in connection with the
negotiation or performance of the Loan Documents contains any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading in light of the
circumstances in which made. The financial projections furnished by the
Borrowers to the Banks are based on assumptions regarding the future results of
operations and financial position of the Borrowers and their Subsidiaries that
Seminis' management believe are reasonable as of the date of this Agreement.
Section 5.9. Enforceability. This Agreement is and the other Loan
Documents to which each Borrower is a party are the legal, valid and binding
agreement of such Borrower, enforceable against it in accordance with its terms,
except as may be limited by (a) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or other similar laws or judicial decisions for
the relief of debtors or the limitation of creditors' rights generally; and (b)
any equitable principles relating to or limiting the rights of creditors
generally or any equitable remedy which may be granted to cure any defaults.
Section 5.10. Restrictive Agreements. No Borrower is a party to any
contract or agreement, or subject to any charge or other corporate restriction,
which affects its ability to execute, deliver and perform the Loan Documents to
which it is a party and repay its indebtedness, obligations and liabilities
under the Loan Documents or which materially and adversely affects or, insofar
as any Borrower can reasonably foresee, could reasonably be expected to
materially and adversely affect the financial condition or results of operations
of Seminis and its Subsidiaries taken as a whole, or would in any respect
materially and adversely affect such Borrower's legal ability to repay the
indebtedness, obligations and liabilities under the Loan Documents, or any
Bank's or any Agent's rights under the Loan Documents to which any Borrower is a
party.
Section 5.11. No Violation of Law. Neither any Borrower nor any
Subsidiary is in violation of any law (including Environmental Laws), statute,
regulation, ordinance, judgment, order or decree applicable to it which
violation could reasonably be expected to materially and adversely affect any
Bank's or any Agent's rights under the Loan Documents or the financial condition
or results of operations of Seminis and its Subsidiaries taken as a whole.
Section 5.12. No Default Under Other Agreements. Neither any Borrower
nor any Subsidiary is in default with respect to any note, indenture, loan
agreement, mortgage, lease, deed, or other agreement to which it is a party or
by which it or its Property is bound, which
<PAGE> 35
default could reasonably be expected to materially and adversely affect any
Bank's or any Agent's rights under the Loan Documents or the financial condition
or results of operations of Seminis and its Subsidiaries taken as a whole.
Section 5.13. Status Under Certain Laws. Neither any Borrower nor any of
its Subsidiaries is an "investment company" or a person directly or indirectly
controlled by or acting on behalf of an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding Company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company," within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
Section 5.14. Year 2000 Compliance. Seminis has conducted a
comprehensive review and assessment of the computer applications of Seminis and
its Subsidiaries and has made inquiry of their material suppliers, vendors
(including data processors) and customers, with respect to any defect in
computer software, data bases, hardware, controls and peripherals related to the
occurrence of the year 2000 or the use at any time of any date which is before,
on and after December 31, 1999, in connection therewith. Based on the foregoing
review, assessment and inquiry, Seminis believes that no such defect could
reasonably be expected to have a material adverse effect on the business or
financial affairs of Seminis and its Subsidiaries taken on a consolidated basis.
Section 5.15. Indebtedness to Savia. The Savia Advances, together with
accrued interest thereon, are the only indebtedness, obligations and liabilities
owed by Seminis and its Subsidiaries to Savia.
SECTION 6. CONDITIONS PRECEDENT.
The obligation of the Banks to make any Loan or accept any L/C pursuant
hereto shall be subject to the following conditions precedent:
Section 6.1. Initial Extension of Credit. Prior to the initial Loan or
L/C hereunder:
(a) the Borrowers shall have delivered to the Administrative
Agent for the benefit of the Banks in sufficient counterparts for
distribution to the Banks:
(i) the Notes;
(ii) evidence of insurance required by Section 7.3
hereof;
(iii) copies of the Articles of Incorporation, and all
amendments thereto, of each Domestic Borrower, certified by
the Secretary of State of its state of incorporation not
earlier than June 10, 1999;
(iv) copies of the Articles of Association of SVS
Holland, certified as true, correct and complete on the date
hereof by a Managing Director of SVS
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<PAGE> 36
Holland;
(v) copies of the ByLaws, and all amendments
thereto, of each Domestic Borrower, certified as true, correct
and complete on the date hereof by the Secretary or Assistant
Secretary of each Domestic Borrower;
(vi) good standing certificates for each Domestic
Borrower issued by the Secretary of State of the state of its
incorporation and each state in which it is qualified to do
business as a foreign corporation, dated no earlier than June
10, 1999;
(vii) copies, certified as true, correct and complete
by the Secretary or Assistant Secretary of each Domestic
Borrower and a Managing Director of SVS Holland, of
resolutions regarding the transactions contemplated by this
Agreement, duly adopted by the Board of Directors of each
Domestic Borrower and the Managing Director of SVS Holland,
respectively, and satisfactory in form and substance to all of
the Banks;
(viii) a pay-off letter from the Existing Banks under
the Existing Agreement in form and substance satisfactory to
the Administrative Agent and such other evidence that all of
the Borrowers' indebtedness thereunder has been fully paid as
the Administrative Agent may require; and
(ix) an incumbency and signature certificate for each
Borrower satisfactory in form and substance to all of the
Banks;
(b) if Seminis' Initial Debt Ratio on the date the initial
Loan is requested hereunder is equal to or greater than 3.5 to 1, the
Borrowers shall have delivered to the Administrative Agent for the
benefit of the Banks in sufficient counterparts for distribution to the
Banks:
(i) the Security Agreement and Intellectual Property
Security Agreement in form and substance satisfactory to the
Banks, together with appropriate forms of financing statements
to perfect the security interests of the Administrative Agent
provided for by such Security Agreement and Intellectual
Property Security Agreement;
(ii) stock certificates representing 100% of the
issued and outstanding capital stock of SVS, together with
blank stock powers therefor;
(iii) an incumbency and signature certificate for each
Domestic Borrower satisfactory in form and substance to all of
the Banks;
(iv) All liens and security interests under the
Security Agreement and Intellectual Property Security
Agreement shall have been duly perfected in a manner
satisfactory to the Administrative Agent and its counsel;
<PAGE> 37
(v) The Administrative Agent shall have received
evidence satisfactory to it that its security interests in the
Collateral pursuant to the Security Agreement and the
Intellectual Property Security Agreement is prior to all
liens, security interests and encumbrances thereon, other than
liens permitted by Sections 7.9 (a), (e), (f) and (j) hereof;
and
(vi) legal matters incident to the execution and
delivery of the Security Agreement and Intellectual Property
Security Agreement shall be satisfactory to each of the Banks
and their legal counsel; and the Administrative Agent shall
have received the favorable written opinion of Milbank, Tweed,
Hadley & McCloy, L.L.P., counsel for the Domestic Borrowers,
substantially in the form of Exhibit N in substance
satisfactory to each of the Banks and their respective legal
counsel;
(c) Concurrently with the making of the initial Loans
hereunder Seminis shall (i) complete the Transaction and (ii) receive
net proceeds of its IPO in an amount not less than $232,000,000;
(d) The Banks shall have received copies of the Registration
Statement, the audited financial statements of Seminis and its
Subsidiaries for the fiscal year ended September 30, 1998, the
unaudited financial statements of Seminis and its Subsidiaries for the
three-month period ended December 31, 1998 and the six-month period
ended March 31, 1999, a pro forma balance sheet of Seminis and its
Subsidiaries as of the Transaction Date after giving effect to the
Transaction and projections of Seminis' financial performance for each
of the five fiscal years commencing with the fiscal year ending
September 30, 1999;
(e) legal matters incident to the execution and delivery of
this Agreement and the other Loan Documents contemplated hereby shall
be satisfactory to each of the Banks and their legal counsel; and the
Administrative Agent shall have received the favorable written opinion
of Milbank, Tweed, Hadley & McCloy, L.L.P., counsel for Peto
International and the Domestic Borrowers, substantially in the form of
Exhibit E, and the favorable written opinion of Stibbe Simont Monahan
Duhot, counsel to SVS Holland and SVS Europe, substantially in the form
of Exhibit F, and the favorable written opinion of Chapman and Cutler,
special counsel to the Administrative Agent, substantially in the form
of Exhibit G, each in substance satisfactory to each of the Banks and
their respective legal counsel;
(f) The Administrative Agent shall have received copies
(executed or certified, as may be appropriate) of all documents or
proceedings taken in connection with the execution and delivery of the
Loan Documents to the extent any Bank or its respective legal counsel
requests; and
(g) the Agents shall have received all fees payable to them
in connection with the execution and delivery of this Agreement and the
transactions contemplated hereby.
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<PAGE> 38
Section 6.2. Each Extension of Credit. As of the time of the making of
each Loan and the acceptance of each L/C hereunder (including the initial Loan
and L/C):
(a) each of the representations and warranties set forth in
Section 5 hereof shall be and remain true and correct as of said time,
except that the representations and warranties made under Section 5.2
(except the last sentence thereof) shall be deemed to refer to the most
recent financial statements furnished to the Banks pursuant to Section
7.4 hereof; and
(b) no Potential Default or Event of Default shall have
occurred and be continuing;
and the request by any Borrower for any Loan or L/C pursuant hereto shall be and
constitute a warranty to the foregoing effects.
SECTION 7. COVENANTS.
It is understood and agreed that so long as credit is in use or
available under this Agreement or any amount remains unpaid on any Note,
Reimbursement Obligation or L/C except to the extent compliance in any case or
cases is waived in writing by the Required Banks:
Section 7.1. Maintenance of Property. Each Borrower will, and will
cause each Subsidiary to, keep and maintain all of its Properties necessary or
useful in its business in good condition, and make all necessary renewals,
replacements, additions, betterments and improvements thereto, except where the
failure to do so would not have a material adverse effect on the financial
condition or results of operations of Seminis and its Subsidiaries taken as a
whole; provided, however, that nothing in this Section shall prevent the
Borrowers or any Subsidiary from discontinuing the operating and maintenance of
any of its Properties if such discontinuance is, in the judgment of such
Borrower, desirable in the conduct of its business and not disadvantageous in
any material respect to the Banks as holders of the Notes.
Section 7.2. Taxes. Each Borrower will, and will cause each Subsidiary
to, duly pay and discharge all material taxes, rates, assessments, fees and
governmental charges upon or against such Borrower or any Subsidiary or against
its Properties in each case before the same becomes delinquent and before
penalties accrue thereon unless and to the extent that the same is being
contested in good faith and by appropriate proceedings.
Section 7.3. Maintenance of Insurance. Each Borrower will, and will
cause each Material Subsidiary to, maintain insurance with insurers recognized
as financially sound and reputable by prudent business persons in such forms and
amounts and against such risks as is usually carried by companies engaged in
similar business and owning similar Properties in the same general areas in
which such Borrower or such Material Subsidiary operates. Each Borrower shall
provide the Administrative Agent with copies of all insurance policies
maintained by it upon the Administrative Agent's request.
Section 7.4. Financial Reports. Each Borrower will, and will cause each
Material
<PAGE> 39
Subsidiary to, maintain a system of accounting in accordance with sound
accounting practice and will furnish promptly to each of the Banks and their
duly authorized representatives such information respecting the business and
financial condition of such Borrower and its Material Subsidiaries as may be
reasonably requested and, without any request, Seminis will furnish each Bank:
(a) as soon as available, and in any event within 45 days
after the close of each quarterly fiscal period of Seminis a copy of
consolidated balance sheets, income statements and cash flow statements
for Seminis and its consolidated Subsidiaries for such quarterly period
and the year to date and for the corresponding periods of the preceding
fiscal year, all in reasonable detail, prepared by Seminis and
certified by the chief financial officer of Seminis;
(b) as soon as available, and in any event within 90 days
after the close of each fiscal year of Seminis, a copy of the audit
report for such year and accompanying financial statements, including
consolidated balance sheets, change in stockholder equity, statements
of income and statements of cash flow for Seminis and its consolidated
Subsidiaries showing in comparative form the figures for the previous
fiscal year of Seminis and its consolidated Subsidiaries, all in
reasonable detail, prepared and certified by Price Waterhouse LLP or
any of the other independent public accountants of nationally
recognized standing commonly known as the "Big Five" accounting firms
selected by Seminis;
(c) no later than 45 days after the last day of each fiscal
quarter of Seminis, a Compliance Certificate in the form of Exhibit D
attached hereto, prepared and signed by the chief financial officer of
Seminis;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which
Seminis shall have filed with the Securities and Exchange Commission or
any governmental agency substituted therefor, or any national
securities exchange, including copies of Seminis' form 10K annual
report, its form 10Q quarterly report to the Securities and Exchange
Commission and any Form 8K filed by Seminis with the Securities and
Exchange Commission; and
(e) promptly upon the mailing thereof to the shareholders of
Seminis generally, copies of all financial statements, reports and
proxy statements so mailed.
Section 7.5. Inspection. Each Borrower shall, and shall cause each
Subsidiary to, permit each of the Banks, by their representatives and agents, to
inspect any of the Properties, corporate books and financial records of such
Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of each Borrower and their Subsidiaries and
to discuss the affairs, finances and accounts of each Borrower and their
Subsidiaries with, and to be advised as to the same by, its officers at such
reasonable times and reasonable intervals as the Required Banks may request. The
Borrowers shall pay the reasonable costs and expenses of the Administrative
Agent in connection with any audit or inspection of the Borrowers' and their
Subsidiaries' books and records.
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<PAGE> 40
Section 7.6. Consolidation and Merger. Each Borrower will not, and will
not permit any Subsidiary to, consolidate with or merge into any Person, or
permit any other Person to merge into it, or acquire (in a transaction analogous
in purpose or effect to a consolidation or merger) all or substantially all of
the Property of any other Person (for purposes of this Section 7.6, each of such
transactions, a "merger"; and the verb "to merge" shall have meanings
correlative thereto), except that
(a)(i) any Subsidiary may merge with and into any Borrower or
any other Subsidiary, and (ii) any Borrower may merger with and into
any other Borrower or any Subsidiary; and;
(b) any other Person (except Seminis) may merge with and into
any Borrower or any Subsidiary so long as:
(i) the surviving entity shall be either a Borrower
or a Subsidiary, provided that if the Security Documents are
in effect and the surviving entity is a Subsidiary of Seminis
but not of SVS or SVS Holland, Seminis shall pledge the
Administrative Agent to the benefit of the Banks all (or 65%,
if such Subsidiary is a Foreign Subsidiary) of the capital
stock or other equity interest of such Subsidiary owned by
Seminis pursuant to security documents containing
substantially the same terms and conditions as the Security
Agreement and otherwise satisfactory in form and substance to
the Administrative Agent and subject to no other security
interest, liens or encumbrances of any nature whatsoever;
(ii) the Person merging with or into a Borrower or a
Subsidiary shall be substantially in the same or a related
line of business as the Borrowers and their Subsidiaries or
businesses reasonably related thereto;
(iii) no Potential Default or Event of Default shall
exist before or after giving effect to such merger and Seminis
shall deliver to the Banks pro forma calculations, certified
by the chief financial officer of Seminis, showing that after
giving effect to such merger Seminis would have been in
compliance with the covenants contained in Sections 7.20, 7.21
and 7.22 hereof during the four consecutive fiscal quarters
preceding such merger and that Seminis will be in compliance
with such covenants during the four consecutive fiscal
quarters following such merger; and
(iv) the aggregate consideration (including the
aggregate principal amount of any Debt assumed or incurred in
connection therewith but excluding the fair market value or
the net cash proceeds from the sale of any capital stock of
any Borrower or any Subsidiary issued or sold in connection
therewith) paid in connection with all such mergers and all
investments and acquisitions permitted by Section 7.10(c)
hereof in any fiscal year shall not exceed an amount equal to
30% of Seminis' Net Worth as shown on Seminis' audited
financial statements for the immediately preceding fiscal
year.
<PAGE> 41
Section 7.7. Transactions with Affiliates. Except as expressly
permitted by this Agreement, each Borrower will not, and will not permit any
Subsidiary to, enter into any transaction, including without limitation, the
purchase, sale, lease or exchange of any Property, or the rendering of any
service, with any Affiliate of such Borrower except (a) upon fair and reasonable
terms no less favorable to such Borrower or such Subsidiary than would be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of such Borrower; provided however that the foregoing shall not prevent (a) any
transactions between any member of the Restricted Group and any other member of
the Restricted Group, in each case on any terms mutually acceptable to them, and
(b) the Transaction.
Section 7.8. Borrowings and Guaranties. Each Borrower will not, and
will not permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Debt, nor be or remain liable, whether as endorser, surety,
guarantor or otherwise, for or in respect of any Debt of any other Person, other
than:
(a) indebtedness of the Borrowers arising under or pursuant
to this Agreement or the other Loan Documents;
(b) the liability of the Borrowers and their Subsidiaries
arising out of the endorsement for deposit or collection of commercial
paper received in the ordinary course of business;
(c) indebtedness of the Borrowers and their Subsidiaries
existing on the date hereof and disclosed on Schedule 7.8 hereof and
any refinancings thereof which do not increase the principal amount
thereof;
(d) indebtedness of any member of the Restricted Group to
any other member of the Restricted Group;
(e) Debt arising out of any currency or commodity hedging
transactions entered into in the ordinary course of business;
(f) Debt of any entity acquired by the Borrowers or their
Subsidiaries that was outstanding at the time of such acquisition,
provided such Debt was not incurred in connection with or in
contemplation of such acquisition;
(g) any other Debt of Seminis' Subsidiaries so long as the
aggregate principal amount of all such Debt together with the aggregate
amount of all principal components of all Capitalized Lease Obligations
of Seminis and its Subsidiaries, shall not exceed an amount equal to
10% of the Total Assets of Seminis and its Subsidiaries as shown on
Seminis' most recent audited financial statements at the time of the
incurrence of such Debt or Capitalized Lease Obligation; and
(h) additional Debt of Seminis so long as both before and
after the incurrence thereof Seminis shall be in compliance with
Section 7.20, 7.21 and 7.22 of this Agreement.
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<PAGE> 42
Section 7.9. Liens. Each Borrower will not, and will not permit any
Subsidiary to, pledge, mortgage or otherwise encumber or subject to or permit to
exist upon or be subjected to any lien, charge or security interest of any kind
(including any conditional sale or other title retention agreement and any lease
in the nature thereof), on any of its Properties of any kind or character at any
time owned by such Borrower or any Subsidiary, other than:
(a) liens, pledges or deposits for worker's compensation,
unemployment insurance, old age benefits or social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith deposits made in connection with tenders, contracts
or leases to which a Borrower or a Subsidiary is a party or other
deposits required to be made in the ordinary course of business,
provided in each case the obligation secured is not overdue or, if
overdue, is being contested in good faith by appropriate proceedings
and adequate reserves have been provided therefor in accordance with
generally accepted accounting principles and that the obligation is not
for borrowed money, customer advances, trade payables, or obligations
to agricultural producers;
(b) the pledge of assets for the purpose of securing an
appeal or stay or discharge in the course of any legal proceedings,
provided that the aggregate amount of liabilities of any Borrower or a
Subsidiary so secured by a pledge of property permitted under this
subsection (b) including interest and penalties thereon, if any, shall
not be in excess of $10,000,000 at any one time outstanding;
(c) liens, pledges, mortgages, security interests or other
charges existing on the date hereof and disclosed on Schedule 7.9
hereto;
(d) liens, pledges, mortgages, security interests and other
encumbrances on Property which secure only indebtedness incurred to
finance the acquisition of such Property (but only to the extent of the
fair market value of such Property);
(e) liens for property taxes and assessments or governmental
charges or levies which are not yet due and payable or which are being
contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with generally
accepted accounting principles consistently applied;
(f) liens incidental to the conduct of business or the
ownership of properties and assets (including warehousemen's, grower's
lien and attorneys' liens and statutory landlords' liens) or other
liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money, provided in
each case, the obligation secured is not overdue or, if overdue, is
being contested in good faith by appropriate actions or proceedings;
(g) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Borrowers and their Subsidiaries or which customarily
exist on properties of corporations engaged in similar activities and
similarly situated and
<PAGE> 43
which do not in any event materially impair their use in the operation
of the business of the Borrowers and their Subsidiaries;
(h) liens on Property existing at the time of its acquisition
by a Borrower or a Subsidiary, provided that any such liens shall not
encumber any other Property of any Borrower or Subsidiary;
(i) liens on Property of a corporation existing at the time
such corporation is purchased by, merged into or consolidated with any
Borrower or Subsidiary or at the time of a sale, lease or other
disposition of such Property of a corporation or firm as an entirety or
substantially as an entirety to any Borrower or Subsidiary, provided
that any such liens shall not encumber any other Property of any
Borrower or any Subsidiary;
(j) liens and security interests in favor of the
Administrative Agent;
(k) liens and security interests in favor of the holders of
liens otherwise permitted hereby in all supporting evidence and
documents relating to any of the above-described property, including,
without limitation, computer programs, disks, tapes and related
electronic data processing media, and all rights of such Borrower or
Subsidiary to retrieve the same from third parties, written
applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice copies,
delivery receipts, notes and other evidences of indebtedness, insurance
certificates and the like, together with all books of account, ledgers
and cabinets in which the same are reflected or maintained, all whether
now existing or hereafter arising;
(l) liens and security interests not otherwise permitted
hereby, provided that such liens and security interests do not attach
the Collateral, any stock (or other equity interests) of any Subsidiary
of any of the Borrowers or any of the Domestic Borrowers' current
assets and that the aggregate amount of all liabilities secured thereby
shall not exceed an amount equal to 10% of the Total Assets of Seminis
and its Subsidiaries as shown on Seminis' most recent audited financial
statements at the time of the granting of such lien or security
interest; and
(m) any lien and security interests replacing any of the
foregoing.
Section 7.10. Investments, Loans, Advances and Acquisitions. Each
Borrower will not, and will not permit any Subsidiary to, make or retain any
investment (whether through the purchase of stock, obligations or otherwise) in
or make any loan or advance to, any other Person, or acquire substantially as an
entirety the Property or business of any other Person, other than:
(a) investments shown on the financial statements referred to
in Section 5.2 in existing Subsidiaries listed on Schedule 5.7 and
Affiliates;
(b) loans and advances from any member of the Restricted
Group to any other member of the Restricted Group;
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<PAGE> 44
(c) investments in and acquisitions (other than by merger or
consolidation) of the Property or business or stock or other equity
interests of any Person, provided that the aggregate consideration
(including the aggregate principal amount of any Debt assumed or
incurred in connection therewith but excluding the fair market value or
the net cash proceeds from the sale of any capital stock of any
Borrower or any Subsidiary issued or sold in connection therewith) paid
in connection with all such investments and acquisitions and all
mergers permitted by Section 7.6(b) hereof shall not exceed in any
fiscal year an amount equal to 30% of Seminis' Net Worth as shown on
Seminis' audited financial statements for the immediately preceding
fiscal year, and provided further, that in the case of an acquisition
of all or substantially all of the Property or business of any Person
or a controlling portion of the stock or other equity interests of any
other Person:
(i) such Person shall be substantially in the same
or a related line of business as the Borrowers and their
Subsidiaries or businesses reasonably related thereto;
(ii) no Potential Default or Event of Default shall
exist before or after giving effect to such acquisition and
Seminis shall deliver to the Banks pro forma calculations,
certified by the chief financial officer of Seminis, showing
that after giving effect to such acquisition Seminis would
have been in compliance with the covenants contained in
Sections 7.20, 7.21 and 7.22 hereof during the four
consecutive fiscal quarters preceding such acquisition and
that Seminis will be in compliance with such covenants during
the four consecutive fiscal quarters following such
acquisition; and
(iii) if such entity is a Subsidiary of Seminis but
not of SVS or SVS Holland and the Security Documents are in
effect, Seminis shall pledge the Administrative Agent to the
benefit of the Banks all (or 65%, if such Subsidiary is a
Foreign Subsidiary) of the capital stock or other equity
interest of such Subsidiary owned by Seminis pursuant to
security documents containing substantially the same terms and
conditions as the Security Agreement and otherwise
satisfactory in form and substance to the Administrative Agent
and subject to no other security interest, liens or
encumbrances of any nature whatsoever;
(d) investments in currency and commodity hedging
transactions made in the ordinary course of business;
(e) investments in certificates of deposit having a maturity
of one year or less issued by any Bank or any United States commercial
bank having capital and surplus of not less than $500,000,000, and
investments in Eurodollar deposits with branches or offices located
outside of the United States of any of the Banks;
(f) investments in commercial paper rated P1, or the
equivalent thereof, by Moody's Investors Service, Inc. or A1, or the
equivalent thereof, by Standard & Poor's maturing within 270 days of
the date of issuance thereof;
<PAGE> 45
(g) marketable obligations for which the full faith and
credit of the United States is pledged for the repayment of principal
and interest thereof; provided that such obligations have a final
maturity of no more than one year from the date acquired;
(h) repurchase, reverse repurchase agreements and security
lending agreements collateralized by securities of the type described
in subsection (g), provided that the Borrower or Subsidiary, as the
case may be, which is a party to such arrangement shall hold
(individually or through an agent) all securities relating thereto
during the entire term of each such arrangement; and
(i) investments in guaranties permitted by this Agreement.
Section 7.11. Sale of Property. The Borrowers will not and will not
permit any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of
all or a material part of their Property to any other Person during any fiscal
year; provided, however, that each Borrower and their Subsidiaries may make:
(a) sales and other dispositions of Inventory in the ordinary
course of business;
(b) sales or leases of machinery and equipment that is
obsolete, unusable or not needed for such Borrower's or Subsidiary's
operations in the ordinary course of its business;
(c) dispositions permitted by Sections 4 and 6(b) of the
Intellectual Property Security Agreement;
(d) notwithstanding any provision of this Agreement to the
contrary, Hungnong and Choong Ang may sell [CERTAIN NON-OPERATING
ASSETS];
(e) transfers from any member of the Restricted Group to any
other member of the Restricted Group; and
(f) any other sales and dispositions of Property other than
the Collateral, provided that, (i) the consideration received by a
Borrower or a Subsidiary for such sale or disposition shall not be less
than the fair market value of such Property as determined in good faith
by the Board of Directors of such Person, and (ii) the net proceeds of
such sales and dispositions are invested in the businesses of the
Borrowers and their Subsidiaries or businesses reasonably related
thereto, including the repayment or retirement of Debt of any Borrower
or any of its Subsidiaries, within 180 days of their receipt by a
Borrower or any Subsidiary.
For purposes of this Section, "material part" shall mean Property
having an aggregate fair market value (as determined in good faith by such
Borrower's or Subsidiary's board of directors) in excess of an amount equal to
5% of the Total Assets of Seminis and its Subsidiaries as shown on Seminis' most
recent audited financial statements.
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<PAGE> 46
Section 7.12. Notice of Suit or Adverse Change in Business or Default.
Each Borrower shall, as soon as possible, and in any event within five (5) days
after such Borrower learns of the following, give written notice to the Banks of
(a) any proceeding(s) being instituted or threatened to be instituted by or
against any Borrower or any Subsidiary in any federal, state, local or foreign
court or before any commission or other regulatory body (federal, state, local
or foreign) which could reasonably be expected to have a material adverse effect
on the financial condition or results of operations of Seminis and its
Subsidiaries taken as a whole, (b) any material adverse change in the financial
condition or results of operations of Seminis and its Subsidiaries taken as a
whole, and (c) the occurrence of any Potential Default or Event of Default.
Section 7.13. ERISA. Each Borrower will, and will cause each Subsidiary
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed is likely to result in the
imposition of a lien against any of its Property which together with all such
other liens existing at the time on its Property and that of the other Borrowers
and Subsidiaries secure such obligations and liabilities in an aggregate amount
in excess of $5,000,000, and will promptly notify the Administrative Agent of
(a) the occurrence of any reportable event (as defined in ERISA) for which the
notice requirement has not been waived by the PBGC and which is reasonably
likely to result in the termination by the PBGC of any Plan, (b) receipt of any
notice from PBGC of its intention to seek termination of any such Plan or
appointment of a trustee therefor, and (c) its intention to terminate or
withdraw from any Plan, other than a "standard termination" meeting the
requirements of Section 4041(b) of ERISA. Each Borrower will not, and will not
permit any Subsidiary to, terminate any such Plan or withdraw therefrom unless
it shall be in compliance with all of the terms and conditions of this Agreement
after giving effect to any liability to PBGC resulting from such termination or
withdrawal.
Section 7.14. Use of Proceeds. The Borrowers shall use the proceeds of
the Loans and the IPO solely to finance in part the Transaction and for general
corporate purposes.
Section 7.15. Compliance with Laws, etc. Each Borrower will, and will
cause each of its Subsidiaries to, comply in all material respects with all
applicable laws, rules, regulations and orders, including Environmental Laws,
except where the failure to do so could not reasonably be expected to have a
material adverse effect on the financial condition or the results of operations
of Seminis and its Subsidiaries taken as a whole.
Section 7.16. Maintenance of Existence. Each Borrower shall, and shall
cause each Material Subsidiary to, maintain its corporate existence except for
(a) mergers permitted by Section 7.6 hereof, and (b) the dissolution of any
Non-Borrowing Subsidiary.
Section 7.17. Leases. Each Borrower will not, and will not permit any
Subsidiary to, enter into any rental agreement or lease as lessee of real or
personal property, which is not a Capitalized Lease, if the aggregate of Rentals
payable under all such rental agreements or leases would exceed $20,000,000 in
any fiscal year of Seminis.
Section 7.18. Capital Expenditures. Each Borrower will not, and will not
permit any Subsidiary to, expend for Capital Expenditures, net of (x) the amount
of proceeds of the sale of
<PAGE> 47
capital assets of such Borrower and its Subsidiaries and (y) Capital
Expenditures incurred in such fiscal year in connection with the acquisition and
construction of the Oxnard Facilities in an aggregate of up to $30,000,000
during the term of this Agreement, in any fiscal year in an amount in excess of
$40,000,000 in any fiscal year of Seminis, provided, that any portion of any
such amount which is not expended in the fiscal year for which it is permitted
above, but not to exceed $10,000,000 for any fiscal year, may be carried over
and added to the amount which is to be available for expenditure by Seminis and
its Subsidiaries in the next following year.
Section 7.19. Year 2000 Assessment. Seminis shall take all actions
necessary and commit adequate resources to assure that its computerbased and
other systems (and those of all Subsidiaries) are able to effectively process
dates, including dates before, on and after January 1, 2000, without
experiencing any Year 2000 Problem that could cause a material adverse effect on
the business or financial affairs of Seminis and its Subsidiaries taken on a
consolidated basis. At the request of the Administrative Agent, Seminis will
provide the Administrative Agent with written assurances and substantiations
(including, but not limited to, the results of internal or external audit
reports prepared in the ordinary course of business) reasonably acceptable to
the Administrative Agent as to the capability of Seminis and its Subsidiaries to
conduct its and their businesses and operations before, on and after January 1,
2000, without experiencing a Year 2000 Problem causing a material adverse effect
on the business or financial affairs of Seminis and its Subsidiaries taken on a
consolidated basis.
Section 7.20. Minimum Interest Coverage Ratio. Seminis shall maintain an
Interest Coverage Ratio as of the last day of each fiscal quarter of Seminis of
not less than the ratio specified for such date below:
<TABLE>
<CAPTION>
INTEREST COVERAGE RATIO SHALL NOT BE LESS
FISCAL QUARTER ENDING THAN
<S> <C>
June 30, 1999 3.00 to 1
September 30, 1999 3.00 to 1
December 31, 1999 3.00 to 1
March 31, 2000 3.00 to 1
June 30, 2000 3.50 to 1
September 30, 2000 3.50 to 1
December 31, 2000 3.50 to 1
March 31, 2001 3.50 to 1
June 30, 2001 and thereafter 4.00 to 1
</TABLE>
Section 7.21. Minimum Net Worth. Seminis shall maintain at all times Net
Worth in an amount not less than:
(a) from the date of this Agreement through September 30,
1999, an amount equal to the sum of $250,000,000 plus 80% of the net
proceeds of the issuance and sale of equity securities of Seminis or
any of its Subsidiaries after March 31, 1999 and on or before September
30, 1999; and
(b) at all times during the fiscal year of Seminis ending
September 30, 2000
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<PAGE> 48
an amount equal to the sum of the minimum amount required by subsection
(a) above plus 50% of the Net Income of Seminis for its fiscal year
ended September 30, 1999 and 50% of the net proceeds of the issuance and
sale of equity securities of Seminis or any of its Subsidiaries after
September 30, 1999; and
(c) at all times during each fiscal year of Seminis thereafter
and amount equal to the sum of the minimum amount required during the
immediately preceding fiscal year plus an amount equal to 50% of the
Net Income of Seminis for its immediately preceding fiscal year and 50%
of the net proceeds of the issuance and sale of equity securities of
Seminis or any of its Subsidiaries during such fiscal year.
Section 7.22. Maximum Debt Ratio. Seminis shall not permit, as of the
last day of any fiscal quarter, its Debt Ratio to be greater than the ratio
specified for such date below:
<TABLE>
<CAPTION>
DEBT RATIO SHALL NOT BE GREATER
FISCAL QUARTER ENDING THAN
<S> <C>
June 30, 1999 4.25 to 1
September 30, 1999 4.00 to 1
December 31, 1999 4.00 to 1
March 31, 2000 4.00 to 1
June 30, 2000 3.50 to 1
September 30, 2000 3.50 to 1
December 31, 2000 3.50 to 1
March 31, 2001 3.50 to 1
June 30, 2001 and thereafter 3.25 to 1
</TABLE>
Section 7.23. Interest Rate Protection. The Domestic Borrowers will
maintain in effect at all times during the term of this Agreement one or more
Interest Rate Protection Agreements with a counterparty or counterparties
reasonably satisfactory to the Administrative Agent providing the Domestic
Borrowers compensation against increases in interest rates on at least 50% of
the aggregate Term Loans from time to time outstanding from all the Banks above
a rate reasonably acceptable to the Administrative Agent.
Section 7.24. No Restrictions on Subsidiaries. Seminis shall not and
shall not permit any of its Subsidiaries directly or indirectly to create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on (a) the ability of Seminis or any of
its Subsidiaries to grant a perfected first priority security interest in the
Collateral, the stock (or other equity interests) of any Subsidiary of any of
the Borrowers or the Domestic Borrowers' current assets (i) to the
Administrative Agent for the benefit of the Banks to secure the Borrowers'
indebtedness, obligations and liabilities to the Agents and the Banks under the
Loan Documents, and (ii) to any lender or lenders (or a security trustee on
their behalf) who provide indebtedness used to refinance the Borrowers'
indebtedness, obligations and liabilities to the Agents and the Banks under the
Loan Documents, or (b) the ability of any Subsidiary of Seminis to declare and
pay dividends or other distributions on its capital stock or other equity
interests.
<PAGE> 49
Section 7.25. Post-Closing Items. Each Borrower agrees to do each of the
things listed on Exhibit I hereto at the times specified therein.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Definitions. Any one or more of the following shall
constitute an Event of Default:
(a) (i) Default in the payment when due of any principal of
any Note or any Reimbursement Obligation, whether at the stated
maturity thereof or at any other time provided in this Agreement, (ii)
default in the payment when due of any interest on any Note or
Reimbursement Obligation, whether at the stated due date thereof or at
any other time provided in this Agreement, and the continuation thereof
for two (2) Business Days, or (iii) default in the payment when due of
any other fee or other amount payable by any Borrower pursuant to this
Agreement and the continuation thereof for five (5) Business Days after
written notice of such default to the Borrowers by any Bank;
(b) Default in the observance or performance of any covenant
set forth in Sections 7.4, 7.6, 7.8, 7.9(l), 7.10, 7.11, 7.16, 7.17,
7.18, 7.20, 7.21, 7.22, 7.23 or 7.24, hereof or of any provision of any
of the Security Documents requiring the maintenance of insurance on the
Collateral subject thereto or dealing with the use or remittance of
proceeds of such Collateral;
(c) Default in the observance or performance of any other
covenant, condition, agreement or provision hereof or any of the other
Loan Documents and such default shall continue for 30 days after
written notice thereof to the Borrowers by any Bank;
(d) Default shall occur under any evidence of Debt in a
principal amount exceeding $10,000,000 issued or assumed or guaranteed
by any Borrower or any Subsidiary, or under any mortgage, agreement or
other similar instrument under which the same may be issued or secured
and such default shall continue for a period of time sufficient to
permit the acceleration of maturity of any indebtedness evidenced
thereby or outstanding or secured thereunder;
(e) Any representation or warranty made by any Borrower
herein or in any Loan Document or in any statement or certificate
furnished by it pursuant hereto or thereto, proves untrue in any
material respect as of the date made or deemed made pursuant to the
terms hereof;
(f) Any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $10,000,000 shall be entered or filed
against any Borrower or any Subsidiary or against any of their
respective Property or assets and remain unstayed and undischarged for
a period of 30 days from the date of its entry;
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<PAGE> 50
(g) Any reportable event (as defined in ERISA) which
constitutes grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a
trustee to administer or liquidate any such Plan, shall have occurred
and be continuing thirty (30) days after written notice to such effect
shall have been given to any Borrower by any Bank; or any such Plan
shall be terminated other than a "standard termination" meeting the
requirements of Section 4041(b) of ERISA; or a trustee shall be
appointed by the appropriate United States District Court to administer
any such Plan; or the Pension Benefit Guaranty Corporation shall
institute proceedings to administer or terminate any such Plan;
provided, however, that no event or condition described in this Section
8.1(g) shall constitute an Event of Default if it, together with all
other such events and conditions at the time existing, has not
subjected and is not reasonably likely to subject any Borrower or any
Subsidiary to any liability that exceeds $10,000,000 in the aggregate;
(h) Any Borrower or any Material Subsidiary shall (i) have
entered involuntarily against it an order for relief under the
Bankruptcy Code of 1978, as amended, (ii) admit in writing its
inability to pay, or not pay, its debts generally as they become due or
suspend payment of its obligations, (iii) make an assignment for the
benefit of creditors, (iv) apply for, seek, consent to, or acquiesce
in, the appointment of a receiver, custodian, trustee, conservator,
liquidator or similar official for it or any substantial part of its
Property, (v) file a petition seeking relief or institute any
proceeding seeking to have entered against it an order for relief under
the Bankruptcy Code of 1978, as amended, to adjudicate it insolvent, or
seeking dissolution, winding up, liquidation, reorganization,
arrangement, marshalling of assets, adjustment or composition of it or
its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, or (vi) fail to contest in good faith any appointment or
proceeding described in Section 8.1(i) hereof;
(i) A custodian, receiver, trustee, conservator, liquidator
or similar official shall be appointed for any Borrower, any Material
Subsidiary or any substantial part of its respective Property, or a
proceeding described in Section 8.1(h)(v) shall be instituted against
any Borrower or any Material Subsidiary and such appointment continues
undischarged or any such proceeding continues undismissed or unstayed
for a period of 45 days;
(j) Pulsar Internacional, S.A. de C.V., together with its
Affiliates, shall at any time and for any reason cease, directly or
indirectly, to (i) have and exercise, or to have the unrestricted right
to exercise, voting power for the election of at least a majority of
the board of directors of Seminis or to direct the management of the
business and operations of Seminis or (ii) control sufficient shares of
the capital stock of Seminis entitled to vote for the election of
directors of Seminis to elect at least a majority of Seminis' board of
directors;
(k) Any Domestic Borrower or Pledgor repudiates, disavows or
purports to terminate its obligations under any of the Security
Documents, or any of the Security
<PAGE> 51
Documents shall not be, or shall cease to be, for any reason, other
than the application of Section 1.8(b) hereof, valid and binding upon
the Domestic Borrower or Pledgor that is a party thereto, or any
security interest granted pursuant to any of the Security Documents
shall not be, or shall cease to be, perfected and prior to all other
security interests in the Collateral subject thereto or any part
thereof except liens and security interests permitted by Sections 7.9
(a), (e), (f) and (j) hereof; or
(l) Savia shall directly or indirectly create or otherwise
cause or suffer to exist or become effective any consensual encumbrance
or restriction of any kind on the ability of (i) Seminis or any of its
Subsidiaries to grant a perfected first priority security interest in
the Collateral, the stock (or other equity interests) of any Subsidiary
of any of the Borrowers or the Domestic Borrowers' current assets (A)
to the Administrative Agent for the benefit of the Banks to secure the
Borrowers' indebtedness, obligations and liabilities to the Agents and
the Banks under the Loan Documents, and (B) to any lender or lenders
(or a security trustee on their behalf) who provide indebtedness used
to refinance the Borrowers' indebtedness, obligations and liabilities
to the Agents and the Banks under the Loan Documents, or (ii) the
ability of any Subsidiary of Seminis to declare and pay dividends or
other distributions on its capital stock or other equity interests.
Section 8.2. Remedies for Non-Bankruptcy Defaults. When any Event of
Default, other than an Event of Default described in subsections (h) and (i) of
Section 8.1 hereof, has occurred and is continuing, the Administrative Agent, if
directed by the Required Banks, shall give notice to the Borrowers and take any
or all of the following actions: (a) terminate the remaining Commitments
hereunder on the date (which may be the date thereof) stated in such notice, (b)
declare the principal of and the accrued interest on the Notes and Reimbursement
Obligations to be forthwith due and payable and thereupon the Notes and
Reimbursement Obligations including both principal and interest, shall be and
become immediately due and payable without further demand, presentment, protest
or notice of any kind, and (c) take any action or exercise any remedy under any
of the Loan Documents or exercise any other action, right, power or remedy
permitted by law. Any Bank may exercise the right of set off with regard to any
deposit accounts or other accounts or investments maintained by any Borrower
with any of the Banks.
Section 8.3. Remedies for Bankruptcy Defaults. When any Event of
Default described in subsections (h) or (i) of Section 8.1 hereof has occurred
and is continuing, then the Notes and Reimbursement Obligations shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, and the obligation of the Banks to extend further credit
pursuant to any of the terms hereof shall immediately terminate.
Section 8.4. L/Cs. Promptly following the acceleration of the maturity
of the Notes pursuant to Section 8.2 or 8.3 hereof, the Borrowers shall
immediately pay to the Administrative Agent for the benefit of the Banks the
full aggregate undrawn amount of all outstanding L/Cs outstanding hereunder. The
Administrative Agent shall hold all such funds and proceeds thereof as
collateral security for the obligations of the Borrowers to the Banks under the
Loan Documents. All such funds shall be held in an interest bearing deposit
account established by the Administrative Agent. Any such funds remaining in
such account after all of the Borrowers' indebtedness, obligations and
liabilities to the Administrative Agent and the Banks have been
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paid in full, all Commitments have terminated and all L/Cs have terminated or
expired without any further liability of Harris relating thereto shall be
returned to the Borrowers or whoever may be legally entitled thereto.
SECTION 9. CHANGE IN CIRCUMSTANCES REGARDING LIBOR PORTIONS.
Section 9.1. Change of Law. Notwithstanding any other provisions of
this Agreement or any Note to the contrary, if at any time after the date hereof
with respect to LIBOR Portions, any Bank shall determine in good faith that any
change in applicable law or regulation or in the interpretation thereof makes it
unlawful for such Bank to create or continue to maintain any LIBOR Portion or to
give effect to its obligations as contemplated hereby, such Bank shall promptly
give notice thereof to the Borrowers and to the Administrative Agent to such
effect, and such Bank's obligation to create, continue or convert any such
affected LIBOR Portions under this Agreement shall terminate until it is no
longer unlawful for such Bank to create or maintain such affected Portion. The
Borrowers shall prepay the outstanding principal amount of any such affected
LIBOR Portion made to them, together with all interest accrued thereon and all
other amounts due and payable to the Banks under Section 9.4 of this Agreement,
on the earlier of the last day of the Interest Period applicable thereto and the
first day on which it is illegal for such Bank to have such LIBOR Portion
outstanding; provided, however, the Borrowers may convert the LIBOR Portions
into a Base Rate Portion, subject to all of the terms and conditions of this
Agreement.
Section 9.2. Unavailability of Deposits or Inability to Ascertain the
Adjusted LIBOR Rate. Notwithstanding any other provision of this Agreement or
any Note to the contrary, if prior to the commencement of any Interest Period
any Banks having 25% or more of the aggregate Commitments shall determine (i)
that deposits in the amount of any LIBOR Portion scheduled to be outstanding are
not available to it in the relevant market or (ii) by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Adjusted LIBOR Rate, then such Banks shall promptly give
telephonic or telex notice thereof to the Borrowers, the Administrative Agent
and the other Banks (such notice to be confirmed in writing), and the obligation
of the Banks to create, continue or convert any such LIBOR Portion in such
amount and for such Interest Period shall terminate until deposits in such
amount and for the Interest Period selected by Seminis shall again be readily
available in the relevant market and adequate and reasonable means exist for
ascertaining the Adjusted LIBOR Rate. Upon the giving of such notice, the
affected Borrower may elect to either (i) pay or prepay, as the case may be,
such affected Portion or (ii) convert the LIBOR Portions into a Base Rate
Portion, subject to all terms and conditions of this Agreement.
Section 9.3. Taxes and Increased Costs. (a) With respect to the LIBOR
Portions, if any Bank shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority having
jurisdiction over such Bank or its lending branch or the LIBOR Portions
contemplated by this Agreement (whether or not having the force of law) ("Change
in Law") shall:
<PAGE> 53
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirements against assets held by, or deposits in
or for the account of, or loans by, or any other acquisition of funds
or disbursements by, such Bank (other than reserves included in the
determination of the Adjusted LIBOR Rate);
(ii) subject such Bank, any LIBOR Portion or any Note to any
tax (including, without limitation, any United States interest
equalization tax or similar tax however named applicable to the
acquisition or holding of debt obligations and any interest or
penalties with respect thereto), duty, charge, stamp tax, fee,
deduction or withholding in respect of this Agreement, any LIBOR
Portion or any Note except such taxes (x) as may be measured by the
overall net income of such Bank or its lending branch and imposed by
the jurisdiction, or any political subdivision or taxing authority
thereof, in which such Bank's principal executive office or its lending
branch is located, and (y) any U.S. Taxes (as defined in Section
12.18(c) hereof) or Netherlands Taxes (as defined in Section 12.21(c)
hereof) that are deductible or otherwise directly payable by a
Borrower, which shall be governed exclusively by Section 12.18 or
Section 12.21 hereof, as the case may be;
(iii) change the basis of taxation of payments of principal and
interest due from any Borrower to such Bank hereunder or under any Note
(other than by a change in taxation of the overall net income of such
Bank); or
(iv) impose on such Bank any penalty with respect to the
foregoing or any other condition regarding this Agreement, any LIBOR
Portion or any Note;
and such Bank shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to such Bank
of making or maintaining any LIBOR Portion hereunder or to reduce the amount of
principal or interest received by such Bank, then the Borrowers shall pay to
such Bank from time to time as specified by such Bank such additional amounts as
such Bank shall reasonably determine are sufficient to compensate and indemnify
it for such increased cost or reduced amount. If any Bank makes such a claim for
compensation, it shall provide to the Borrowers a certificate setting forth such
increased cost or reduced amount as a result of any event mentioned herein
specifying such Change in Law, and such certificate shall be conclusive and
binding on the Borrowers as to the amount thereof except in the case of manifest
error. Upon the imposition of any such cost, the Borrowers may prepay any
affected Loan or convert it to another type of Loan available hereunder, subject
to the provisions of Sections 3.3 and 9.4 hereof.
(b) Each Bank shall notify the Borrowers of any event occurring after
the date of this Agreement entitling such Bank to compensation under Section 3.6
or Section 9.3(a) as promptly as practicable, but in any event within 90 days,
after such Bank obtains actual knowledge thereof; provided that (i) if any Bank
fails to give such notice within 90 days after it obtains actual knowledge of
such an event, such Bank shall, with respect to compensation payable pursuant to
Section 3.6 or Section 9.3(a) in respect of any costs resulting from such event,
only be entitled to payment under Section 3.6 or Section 9.3(a) for costs
incurred from and after the
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date 90 days prior to the date that such Bank does give such notice and (ii)
each Bank will designate a different Lending Office for the Loans,
participations in L/Cs and Reimbursement Obligations of such Bank if such
designation will avoid the need for, or reduce the amount of, compensation to
which such Bank is entitled under Section 3.6 or Section 9.3(a) and will not, in
the sole judgment of such Bank, be disadvantageous to such Bank.
(c) In the event any Bank requires payment under Section 3.6 or 12.18
hereof, delivers a certificate pursuant to subsection (a) above or gives notice
under Section 9.1 that it will not fund or maintain LIBOR Portions, the
Borrowers may require, at their expense, such Bank to assign (in accordance with
Section 12.17 hereof) all its interests, rights and obligations hereunder
(including all of its Commitment, the Loans and Reimbursement Obligations at the
time owing to it, and the Notes and participations in L/Cs held by it), to one
or more financial institutions specified by the Borrowers (each a "Substitute
Bank"), provided that (i) such assignment shall not conflict with or violate any
law, rule or regulation or order of any court or other governmental agency or
instrumentality, (ii) each Substitute Bank shall be reasonably acceptable to the
Administrative Agent and (iii) the Borrowers shall have paid to the assigning
Bank all monies then due to it under the Loan Documents (including pursuant to
this Section 9.3 and Sections 3.6 and 12.18) with the Substitute Bank purchasing
all accrued but not yet due indebtedness, obligations and liabilities of the
Borrowers owed such assigning Bank.
Section 9.4. Funding Indemnity. (a) In the event any Bank shall incur
any loss, cost, expense or premium (including, without limitation, any loss,
cost, expense or premium incurred by reason of the liquidation or re-employment
of deposits or other funds acquired by such Bank to fund or maintain any LIBOR
Portion or the relending or reinvesting of such deposits or amounts paid or
prepaid to such Bank but excluding loss of profit and, without duplication, the
Applicable Margin) as a result of:
(i) any conversion, payment or prepayment of a LIBOR Portion
on a date other than the last day of the then applicable Interest
Period; or
(ii) any failure by any Borrower to borrow, continue or
convert any LIBOR Portion on the date specified in the notice given
pursuant to Sections 1.3 or 2.6 hereof;
then, upon the demand of such Bank, the Borrowers shall pay to such Bank such
amount as will reimburse such Bank for such loss, cost or expense.
(b) If any Bank makes a claim for compensation under this Section 9.4,
it shall provide to the Borrowers a certificate setting forth the amount of such
loss, cost or expense in reasonable detail and such certificate shall be
conclusive and binding on the Borrowers as to the amount thereof except in the
case of manifest error.
Section 9.5. Lending Branch. Each Bank may, at its option, elect to
make, fund or maintain its LIBOR Portions hereunder at the branch or office
specified opposite its signature on the signature page hereof or such other of
its branches or offices as such Bank may from time to time elect, subject to the
provisions of Section 1.3 hereof.
<PAGE> 55
Section 9.6. Discretion of Bank as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Bank shall
be entitled to fund and maintain its funding of all or any part of its Loans in
any manner it sees fit, it being understood however, that for the purposes of
this Agreement all determinations hereunder shall be made as if the Banks had
actually funded and maintained each LIBOR Portion during each Interest Period
for such LIBOR Portion through the purchase of deposits in the relevant
interbank market having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the Adjusted LIBOR Rate, for such Interest
Period.
SECTION 10. THE AGENT.
Section 10.1. Appointment and Powers. (a) Harris is hereby appointed by
the Banks as Agent under the Loan Documents, and each of the Banks irrevocably
authorizes the Agent to act as the Agent of such Bank. The Agent agrees to act
as such upon the express conditions contained in this Agreement.
(b) Bank of Montreal is hereby appointed by the Administrative Agent as
Syndication Agent under the Loan Documents, and the Administrative Agent
irrevocably authorizes the Syndication Agent to act as the Syndication Agent of
such Bank. The Syndication Agent agrees to act as such upon the express
conditions contained in this Agreement.
Section 10.2. Powers. Each Agent shall have and may exercise such powers
hereunder as are specifically delegated to such Agent by the terms of the Loan
Documents, together with such powers as are incidental thereto. No Agent shall
have any implied duties to the Banks or any other Agent nor any obligation to
the Banks or any other Agent to take any action under the Loan Documents except
any action specifically provided by the Loan Documents to be taken by such
Agent.
Section 10.3. General Immunity. Neither any Agent nor any of its
directors, officers, agents or employees shall be liable to the Banks, any Bank
or any other Agent for any action taken or omitted to be taken by it or them
under the Loan Documents or in connection therewith except for its or their own
gross negligence or willful misconduct.
Section 10.4. No Responsibility for Loans, Recitals, etc. No Agent shall
(a) be responsible to the Banks or any other Agent for any recitals, reports,
statements, warranties or representations contained in the Loan Documents or
furnished pursuant thereto, (b) be responsible for any Loans hereunder, (c) be
bound to ascertain or inquire as to the performance or observance of any of the
terms of the Loan Documents, or (d) determine or verify the existence,
eligibility or value of any Collateral, or the correctness of any Compliance
Certificate. In addition, neither any Agent nor its counsel shall be responsible
to the Banks or any other Agent for the enforceability or validity of any of the
Loan Documents.
Section 10.5. Right to Indemnity. The Banks hereby indemnify each Agent
for any actions taken in accordance with this Section 10, and each Agent shall
be fully justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks pro rata in
accordance with their respective Exposures against any and all liability and
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expense which may be incurred by it by reason of taking or continuing to take
any such action, other than any liability which may arise out of such Agent's
gross negligence or willful misconduct.
Section 10.6. Action upon Instructions of Banks. Each Agent agrees, upon
the written request of the Required Banks, to take any action of the type
specified in the Loan Documents as being within such Agent's rights, duties,
powers or discretion. Each Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with written
instructions signed by the Required Banks, and such instructions and any action
taken or failure to act pursuant thereto shall be binding on all of the Banks
and on all holders of the Notes. In the absence of a request by the Required
Banks, each Agent shall have authority, in its sole discretion, to take or not
to take any action, unless the Loan Documents specifically require the consent
of the Required Banks or all of the Banks.
Section 10.7. Employment of Agents and Counsel. Each Agent may execute
any of its duties as such Agent hereunder by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Banks, except as to money
or securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it in good faith
and with reasonable care. Each Agent shall be entitled to advice and opinion of
legal counsel concerning all matters pertaining to the duties of the agencies
hereby created.
Section 10.8. Reliance on Documents; Counsel. Each Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in respect
to legal matters, upon the opinion of legal counsel selected by the Agent.
Section 10.9. May Treat Payee as Owner. Each Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Administrative Agent. Any request, authority or consent of any
person, firm or corporation who at the time of making such request or giving
such authority or consent is the holder of any such Note shall be conclusive and
binding on any subsequent holder, transferee or assignee of such Note or of any
Note issued in exchange therefor.
Section 10.10. Agent's Reimbursement. Each Bank agrees to reimburse each
Agent pro rata in accordance with its Exposure for any reasonable out-of-pocket
expenses (including fees and charges for field audits) not reimbursed by the
Borrowers (a) for which such Agent is entitled to reimbursement by the Borrowers
under the Loan Documents and (b) for any other reasonable expenses incurred by
such Agent on behalf of the Banks, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents.
Section 10.11. Rights as a Bank. With respect to its commitment, Loans
made by it, L/Cs accepted and discounted by it, and the Notes issued to it, each
Agent shall have the same rights and powers hereunder as any Bank and may
exercise the same as though it were not an Agent, and the term "Bank" or "Banks"
shall, unless the context otherwise indicates, include each Agent in its
individual capacity. Each Agent may accept deposits from, lend money to, and
generally
<PAGE> 57
engage in any kind of banking or trust business with the Borrowers as if it were
not an Agent.
Section 10.12. Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank and based on
the financial statements referred to in Section 5.2 and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into the Loan Documents. Each Bank also acknowledges that it
will, independently and without reliance upon any Agent or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents.
Section 10.13. Resignation of Agent. Subject to the appointment of a
successor Agent, each Agent may resign as such Agent for the Banks under this
Agreement and the other Loan Documents at any time by thirty days' notice in
writing to the Banks and the Borrowers. Such resignation shall take effect upon
appointment of such successor. The Required Banks, with the consent of the
Borrowers (unless an Event of Default shall have occurred and be continuing, in
which event the Borrowers' consent shall not be required) shall have the right
to appoint a successor Agent who shall be entitled to all of the rights of, and
vested with the same powers as, the original Agent under the Loan Documents. In
the event a successor Agent shall not have been appointed within the sixty day
period following the giving of notice by an Agent, such Agent may appoint its
own successor. Resignation by an Agent shall not affect or impair the rights of
such Agent under Sections 10.5 and 10.10 hereof with respect to all matters
preceding such resignation. Any successor Agent must be a national banking
association or a bank chartered in any State of the United States or a branch of
a foreign bank licensed to do business in any State of the United States, in
each case having capital and surplus of not less than $500,000,000, or one of
the Banks.
Section 10.14. Duration of Agency. Each agency established by Section
10.1 hereof shall continue, and Sections 10.1 through and including this Section
10.14 shall remain in full force and effect, until the Notes and all other
amounts due hereunder and thereunder shall have been paid in full and the Banks'
commitments to extend credit to or for the benefit of the Borrowers shall have
terminated or expired.
Section 10.15. Syndication Agent. Nothing in this Agreement or the other
Loan Documents shall impose any obligation on Bank of Montreal in its capacity
as Syndication Agent.
SECTION 11. THE GUARANTEES.
Section 11.1. The Guarantees. To induce the Banks to provide the credits
described herein and in consideration of benefits expected to accrue to each
Domestic Borrower by reason of the Commitments and for other good and valuable
consideration, receipt of which is hereby acknowledged, each Domestic Borrower
hereby unconditionally and irrevocably guarantees jointly and severally to the
Agent, the Banks and each other holder of any of SVS Holland's obligations under
the Loan Documents, the due and punctual payment of all present and future
indebtedness, obligations and liabilities of SVS Holland evidenced by or arising
out of the Loan
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Documents, including, but not limited to, the due and punctual payment of
principal of and interest on the Notes and the due and punctual payment of all
other obligations now or hereafter owed by SVS Holland under the Loan Documents
as and when the same shall become due and payable, whether at stated maturity,
by acceleration or otherwise, according to the terms hereof and thereof. In case
of failure by SVS Holland punctually to pay any indebtedness guaranteed hereby,
each Domestic Borrower hereby unconditionally agrees jointly and severally to
make such payment or to cause such payment to be made punctually as and when the
same shall become due and payable, whether at stated maturity, by acceleration
or otherwise, and as if such payment were made by SVS Holland.
Section 11.2. Guarantee Unconditional. The obligations of each Domestic
Borrower as a guarantor under this Section 11 shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of SVS Holland or of any other
Domestic Borrower under this Agreement or any other Loan Document or by
operation of law or otherwise;
(b) any modification or amendment of or supplement to this
Agreement or any other Loan Document;
(c) any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting, SVS Holland, any other Domestic Borrower,
or any of their respective assets, or any resulting release or
discharge of any obligation of SVS Holland or of any other Domestic
Borrower contained in any Loan Document;
(d) the existence of any claim, set-off or other rights which
the Domestic Borrower may have at any time against the Agent, any Bank
or any other Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or
demand or any exercise of, or failure to exercise, any rights or
remedies against SVS Holland, any other Domestic Borrower or any
Collateral;
(f) any application of any sums by whomsoever paid or
howsoever realized to any obligation of SVS Holland, regardless of what
obligations of SVS Holland remain unpaid,
(g) any invalidity or unenforceability relating to or against
SVS Holland or any other Domestic Borrower for any reason of this
Agreement or of any other Loan Document or any provision of applicable
law or regulation purporting to prohibit the payment by SVS Holland of
the principal of or interest on any Note, any Reimbursement Obligations
or any other amount payable by it under the Loan Documents; or
(h) any other act or omission to act or delay of any kind by
the Agent, any
<PAGE> 59
Bank or any other Person or any other circumstance whatsoever that
might, but for the provisions of this paragraph, constitute a legal or
equitable discharge of the obligations of the Domestic Borrower under
this Section 11.
Section 11.3. Discharge Only upon Payment in Full; Reinstatement in
Certain Circumstances. Each Domestic Borrower's obligations under this Section
11 shall remain in full force and effect until the Commitments are terminated
and the principal of and interest on the Notes and all other amounts then due
and payable by SVS Holland under this Agreement and all other Loan Documents
shall have been paid in full. If at any time any payment of the principal of or
interest on any Note or any other amount payable by SVS Holland under the Loan
Documents is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of SVS Holland or of a Domestic
Borrower, or otherwise, each Domestic Borrower's obligations under this Section
11 with respect to such payment shall be reinstated at such time as though such
payment had become due but had not been made at such time.
Section 11.4. Subrogation. No Domestic Borrower will exercise any rights
which it may acquire by way of subrogation by any payment made hereunder, or
otherwise, until the Notes and all other amounts payable by SVS Holland under
the Loan Documents shall have been paid in full and after the termination of the
Commitments. If any amount shall be paid to a Domestic Borrower on account of
such subrogation rights at any time prior to the later of (a) the payment in
full of the Notes and all other amounts payable by such Domestic Borrower
hereunder and (y) the termination of all the Commitments, such amount shall be
held in trust for the benefit of the Agent and the Banks and shall forthwith be
paid to the Agent and the Banks or be credited and applied upon SVS Holland's
obligations under the Loan Documents, whether matured or unmatured, in
accordance with the terms of this Agreement. Notwithstanding any other provision
hereof, the right to recovery against each Domestic Borrower under this Section
11 shall not exceed $1.00 less than the amount which would render such Domestic
Borrower's obligations under this Section 11 void or voidable under applicable
law, including without limitation fraudulent conveyance law.
Section 11.5. Waivers. Each Domestic Borrower irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by the
Agent, any Bank or any other Person against SVS Holland, another Domestic
Borrower or any other Person.
Section 11.6. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by SVS Holland under this Agreement or any other
Loan Document is stayed upon the insolvency, bankruptcy or reorganization of SVS
Holland, all such amounts otherwise subject to acceleration under the terms of
this Agreement or the other Loan Documents shall nonetheless be payable jointly
and severally by the Domestic Borrowers hereunder forthwith on demand by the
Administrative Agent.
SECTION 12. MISCELLANEOUS.
Section 12.1. Amendments and Waivers. Any term, covenant, agreement or
condition of
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this Agreement may be amended only by a written amendment executed by the
Borrowers, the Required Banks and, if the rights or duties of an Agent are
affected thereby, such Agent, or compliance therewith only may be waived (either
generally or in a particular instance and either retroactively or
prospectively), if the Borrowers shall have obtained the consent in writing of
the Required Banks and, if the rights or duties of an Agent are affected
thereby, such Agent, provided, however, that:
(a) without the consent in writing of the holders of all
outstanding Notes and unpaid Reimbursement Obligations, or all Banks if
no Notes or Reimbursement Obligations are outstanding, no such
amendment or waiver shall (i) change the amount or postpone the date of
payment of any scheduled payment or required prepayment of principal of
the Notes or Reimbursement Obligations or extend the term of any L/C at
a time that the Borrowers would not be able to obtain a Loan or L/C
hereunder or reduce the rate or extend the time of payment of interest
on the Notes or Reimbursement Obligations, or reduce the amount of
principal thereof, or modify any of the provisions of the Notes with
respect to the payment or prepayment thereof, (ii) give to any Note or
Reimbursement Obligations any preference over any other Notes or
Reimbursement Obligations, (iii) amend the definition of Required
Banks, (iv) alter, modify or amend the provisions of this Section 12.1,
(v) change the amount or term of any of the Banks' Revolving Credit
Commitments, (vi) alter, modify or amend the provisions of Section 6.1
of this Agreement, (vii) alter, modify or amend any Bank's right
hereunder to consent to any action, make any request or give any
notice, (viii) release any Borrower from its obligations hereunder, or
(ix) except as permitted by the Loan Documents, release any of the
Collateral;
(b) without the consent of all of the Term Credit Lenders no
such amendment or waiver shall alter, modify, waive or amend the
provisions of Section 6.2 with respect to any requested Term Loan; and
(c) without the consent of all of the Revolving Credit
Lenders no such amendment or waiver shall (i) reduce any fee payable
pursuant to Section 1.4 or Section 3.1 or extend the time for payment
thereof or (ii) alter, modify, waive or amend the provisions of Section
6.2 of this Agreement with respect to any Revolving Credit Loan or L/C.
Any such amendment or waiver shall apply equally to all Banks and the holders of
the Notes and Reimbursement Obligations and shall be binding upon them, upon
each future holder of any Note and Reimbursement Obligation and upon each
Borrower, whether or not such Note shall have been marked to indicate such
amendment or waiver. No such amendment or waiver shall extend to or affect any
obligation not expressly amended or waived.
Section 12.2. Waiver of Rights. No delay or failure on the part of any
Agent or any Bank or on the part of the holder or holders of any Note or
Reimbursement Obligation in the exercise of any power or right shall operate as
a waiver thereof, nor as an acquiescence in any Potential
<PAGE> 61
Default or Event of Default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right, and the rights and remedies hereunder of the
Agents, the Banks and of the holder or holders of any Notes are cumulative to,
and not exclusive of, any rights or remedies which any of them would otherwise
have.
Section 12.3. Several Obligations. The commitments of each of the Banks
hereunder shall be the several obligations of each Bank and the failure on the
part of any one or more of the Banks to perform hereunder shall not affect the
obligation of the other Banks hereunder, provided that nothing herein contained
shall relieve any Bank from any liability for its failure to so perform. In the
event that any one or more of the Banks shall fail to perform its commitment
hereunder, all payments thereafter received by the Administrative Agent on the
principal of Loans and Reimbursement Obligations hereunder, shall be distributed
by the Administrative Agent to the Banks making such additional Loans ratably as
among them in accordance with the principal amount of additional Loans made by
them until such additional Loans shall have been fully paid and satisfied. All
payments on account of interest shall be applied as among all the Banks ratably
in accordance with the amount of interest owing to each of the Banks as of the
date of the receipt of such interest payment.
Section 12.4. Non-Business Day. If any payment of principal or interest
on any Loan shall fall due on a day which is not a Business Day, interest at the
rate such Loan bears for the period prior to maturity shall continue to accrue
on such principal from the stated due date thereof to and including the next
succeeding Business Day on which the same is payable.
Section 12.5. Documentary Taxes. The Borrowers agree to pay any
documentary or similar taxes with respect to the Loan Documents, including
interest and penalties, in the event any such taxes are assessed irrespective of
when such assessment is made and whether or not any credit is then in use or
available hereunder.
Section 12.6. Representations. All representations and warranties made
herein or in certificates given pursuant hereto shall survive the execution and
delivery of this Agreement and of the Notes, and shall continue in full force
and effect with respect to the date as of which they were made and as reaffirmed
on the date of each borrowing and each request for a L/C and as long as any
credit is in use or available hereunder.
Section 12.7. Notices. Unless otherwise expressly provided herein, all
communications provided for herein shall be in writing or by telecopy and shall
be deemed to have been given or made when served personally, when an answer back
is received in the case of notice by telecopy, when actually delivered by a
reputable courier service or five (5) Business Days after the date when
deposited in the United States mail (registered, if to the Borrowers) addressed
if to any Borrower to c/o Seminis, Inc., 2901 North Ventura Road, Suite 250,
Oxnard, California 93030, Attention: Chief Financial Officer, with a copy to
Milbank, Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New York
100051413, Attention: Howard Kelberg, Esquire; if to the Administrative Agent or
Harris at 111 West Monroe Street, Chicago, Illinois
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60690, Attention: Agribusiness Group; and if to any of the Banks, at the address
for each Bank set forth under its signature hereon; or at such other address as
shall be designated by any party hereto in a written notice to each other party
pursuant to this Section 12.7.
Section 12.8. Costs and Expenses; Indemnity; Environmental Indemnity.
(a) Each Borrower jointly and severally agrees to pay on demand and upon receipt
of supporting statements, all reasonable out-of-pocket costs and expenses of the
Agent, in connection with the negotiation, preparation, execution and delivery
of this Agreement, the Notes and the other instruments and documents to be
delivered hereunder or in connection with the transactions contemplated hereby,
including the reasonable fees and expenses of Messrs. Chapman and Cutler,
special counsel to the Agents; all reasonable out-of-pocket costs and expenses
of the Agent (including attorneys' fees) incurred while any Potential Default or
Event of Default shall have occurred and be continuing, all reasonable
out-of-pocket costs and expenses incurred by the Agents, the Banks and any other
holder of any Note or any Reimbursement Obligation in connection with any
consents or waivers hereunder or amendments hereto, and all reasonable
out-of-pocket costs and expenses (including attorneys' fees and allocable costs
of in-house counsel), if any, incurred by the Agents, the Banks or any other
holders of a Note or any Reimbursement Obligation in connection with the
enforcement of this Agreement, the Notes, the Security Documents and the other
instruments and documents to be delivered hereunder or in liquidating the
Collateral, including any of the foregoing arising in, under or related to
proceeding under the United States Bankruptcy Code, provided that such joint and
several liability shall not include any obligation of the other Borrower to
repay Loans and Reimbursement Obligations owed by such other Borrower. Each
Borrower jointly and severally agrees to indemnify and save harmless the Banks
and the Agents from any and all liabilities, losses, costs and expenses incurred
by the Banks or the Agents in connection with any action, suit or proceeding
brought against any Agent or any Bank by any Person which arises out of the
transactions contemplated or financed hereby or by the Notes, or out of any
action or inaction by any Agent or any Bank hereunder or thereunder, except for
(i) such thereof as is caused by the gross negligence or willful misconduct of
the party indemnified and (ii) any of the foregoing incurred in connection with
or resulting or arising from (A) legal proceedings brought by any Borrower
against Harris, as issuer of L/Cs hereunder, in which such Borrower ultimately
prevails, (B) legal proceedings between two or more indemnified parties, and (C)
legal proceedings by any indemnified party or indemnified parties against any
Agent in which such Agent does not ultimately prevail. Notwithstanding anything
to the contrary herein, (a) the Borrowers shall be obligated to pay only the
reasonable fees and expenses of a single special counsel and any necessary
single local counsel (in each case chosen by the Administrative Agent) for each
jurisdiction acting on behalf of the Banks and the Agents and (b) the Borrowers
shall not be liable for any waiver, release or settlement of any action, suit or
proceeding entered into by any indemnified party without the Borrowers' prior
written consent.
(b) Without limiting the generality of the foregoing, the Borrowers
jointly and severally unconditionally agree to forever indemnify, defend and
hold harmless, each Agent and each Bank, and covenant not to sue for any claim
for contribution against, the Agent or any Bank for
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any damages, costs, loss or expense, including without limitation, response,
remedial or removal costs, arising out of any of the following: (i) any
presence, release, threatened release or disposal of any hazardous or toxic
substance or petroleum by any Borrower or otherwise occurring on or with respect
to its Property, (ii) the operation or violation of any Environmental Law,
whether federal, state, or local, and any regulations promulgated thereunder, by
any Borrower or otherwise occurring on or with respect to its Property, (iii)
any claim for personal injury or property damage in connection with any Borrower
or otherwise occurring on or with respect to its Property, and (iv) the
inaccuracy or breach of any environmental representation, warranty or covenant
by any Borrower made herein or in any loan agreement, promissory note, mortgage,
deed of trust, security agreement or any other instrument or document evidencing
or securing any indebtedness, obligations or liabilities of any Borrower owing
to any Agent or any Bank or setting forth terms and conditions applicable
thereto or otherwise relating thereto, except for (A) such thereof as is caused
by the gross negligence or willful misconduct of the party indemnified and (B)
any of the foregoing incurred in connection with or resulting or arising from
(I) legal proceedings brought by any Borrower against Harris, as issuer of L/Cs
hereunder, in which such Borrower ultimately prevails, (II) legal proceedings
between two or more indemnified parties, and (III) legal proceedings by any
indemnified party or indemnified parties against any Agent in which such Agent
does not ultimately prevail. Notwithstanding anything to the contrary herein,
(a) the Borrowers shall be obligated to pay only the reasonable fees and
expenses of a single special counsel and any necessary single local counsel (in
each case chosen by the Administrative Agent) for each jurisdiction acting on
behalf of the indemnified parties and (b) the Borrowers shall not be liable for
any waiver, release or settlement of any action, suit or proceeding entered into
by any indemnified party without the Borrowers' prior written consent. This
indemnification shall survive the payment and satisfaction of all indebtedness,
obligations and liabilities of the Borrowers owing to the Agents and the Banks
and the termination of this Agreement, and shall remain in force beyond the
expiration of any applicable statute of limitations and payment or satisfaction
in full of any single claim under this indemnification.
(c) This indemnification shall be binding upon the successors and
assigns of each Borrower and shall inure to the benefit of Agents and the Banks
and their respective directors, officers, employees, agents, and collateral
trustees, and their successors and permitted assigns. The provisions of this
Section 12.8 and the protective provisions of Section 9.4 hereof shall survive
payment of the Notes and Reimbursement Obligations and the termination of the
Banks' Commitments hereunder.
Section 12.9. Counterparts. This Agreement may be executed in any number
of counterparts and all such counterparts taken together shall be deemed to
constitute one and the same instrument. One or more of the Banks may execute a
separate counterpart of this Agreement which has also been executed by the
Borrowers, and this Agreement shall become effective as and when all of the
Banks have executed this Agreement or a counterpart thereof and lodged the same
with the Agent.
Section 12.10. Successors and Assigns; Governing Law; Entire Agreement.
This Agreement shall be binding upon each of the Borrowers, the Agents and the
Banks and their
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respective successors and assigns, and shall inure to the benefit of the
Borrowers, the Agents and each of the Banks and the benefit of their respective
successors and assigns, including any subsequent holder of any Note or
Reimbursement Obligation. This Agreement and the rights and duties of the
parties hereto shall be construed and determined in accordance with the laws of
the State of Illinois, except conflict of laws principles. This Agreement
constitutes the entire understanding of the parties with respect to the subject
matter hereof and any prior agreements, whether written or oral, with respect
thereto are superseded hereby. The Borrowers may not assign any of their
respective rights or obligations hereunder without the written consent of the
Banks.
Section 12.11. No Joint Venture. Nothing contained in this Agreement
shall be deemed to create a partnership or joint venture among the parties
hereto.
Section 12.12. Severability. In the event that any term or provision
hereof is determined to be unenforceable or illegal, it shall be deemed severed
herefrom to the extent of the illegality and/or unenforceability and all other
provisions hereof shall remain in full force and effect.
Section 12.13. Table of Contents and Headings. The table of contents and
section headings in this Agreement are for reference only and shall not affect
the construction of any provision hereof.
Section 12.14. Sharing of Payments. Each Bank agrees with each other Bank
that if such Bank shall receive and retain any payment, whether by set-off or
application of deposit balances or otherwise ("Set-Off"), on any Loan,
Reimbursement Obligation or other amount outstanding under this Agreement or the
other Loan Documents in excess of its ratable share of payments on all Loans,
Reimbursement Obligations and other amounts then outstanding to the Banks, then
such Bank shall purchase for cash at face value, but without recourse (except
for defects in title), ratably from each of the other Banks such amount of the
Loans held by each such other Bank (or interest therein) as shall be necessary
to cause such Bank to share such excess payment ratably with all the other
Banks; provided, however, that if any such purchase is made by any Bank, and if
such excess payment or part thereof is thereafter recovered from such purchasing
Bank, the related purchases from the other Banks shall be rescinded ratably and
the purchase price restored as to the portion of such excess payment so
recovered, but without interest. Each Bank's ratable share of any such Set-Off
shall be determined by the proportion that the aggregate principal amount of
Loans and Reimbursement Obligations and other amounts then due and payable to
such Bank bears to the total aggregate principal amount of Loans and
Reimbursement Obligations and other amounts then due and payable to all the
Banks.
Section 12.15. Jurisdiction; Venue; Waiver of Jury Trial. Each borrower
hereby submits to the nonexclusive jurisdiction of the united states district
court for the northern district of illinois and of any illinois court sitting in
chicago for purposes of all legal proceedings arising out of or relating to this
agreement or the transactions contemplated hereby. Each borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any
<PAGE> 65
claim that any such proceeding brought in such a court has been brought in an
inconvenient forum. Each borrower, each agent and each bank hereby irrevocably
waives any and all right to trial by jury in any legal proceeding arising out of
or relating to any loan document or the transactions contemplated thereby.
Section 12.16. Participants. Each Bank shall have the right at its own
cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made and/or Reimbursement
Obligations, participations in L/Cs and Commitments held by such Bank at any
time and from time to time to one or more other Persons; provided that (i) no
such participation shall relieve any Bank of any of its obligations under this
Agreement, (ii) no such participant shall have any direct rights under this
Agreement except as provided in this Section 12.16, and no Agent shall have any
obligation or responsibility to such participant. Any agreement pursuant to
which such participation is granted shall provide that the granting Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrowers under this Agreement and the other Loan Documents including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of the Loan Documents, except that such agreement may provide that
such Bank will not agree to any modification, amendment or waiver of the Loan
Documents that would reduce the amount of or postpone any fixed date for payment
of any Obligation in which such participant has an interest. Any party to which
such a participation has been granted shall have the benefits of Section 3.6,
Section 9.3 and Section 9.4 hereof, up to an amount not exceeding the amount
that would otherwise have been payable to the Bank who sold the participation
interest to such party. The Borrowers authorize each Bank to disclose to any
participant or prospective participant under this Section 12.16 any financial or
other information pertaining to the Borrowers, provided, that such participant
or prospective participant, as the case may be, agrees to be bound by the same
standard of confidentiality as is required of such Bank hereunder and under the
other Loan Documents .
Section 12.17. Assignment Agreements. (a) Each Bank may, at its own
expense, from time to time, assign to one or more Persons part of its rights and
obligations under this Agreement (including without limitation the indebtedness
evidenced by the Notes then owned by such assigning Bank, together with an
equivalent proportion of its obligation to make loans and advances and
participate in L/Cs) pursuant to written agreements executed by such assigning
Bank, such assignee or assignees, the Borrowers and the Administrative Agent,
which agreements shall specify in each instance the portion of the indebtedness
evidenced by the Notes, the Reimbursement Obligations and the participations in
L/Cs which are to be assigned to each such assignee and the portion of the
Commitments of the assigning Bank to be assumed by it (the "Assignment
Agreements"); provided, however, that unless, in the case of clauses (i) and
(iii) the Administrative Agent, the Borrowers, the assignor Bank and the
assignee, in writing, agree to the contrary, (i) the aggregate amount of the
Exposure of the assigning Bank being assigned to such assignee pursuant to each
such assignment (determined as of the effective date of the relevant Assignment
Agreement) shall in no event be less than $10,000,000 and shall be an integral
multiple of $1,000,000 (other than (x) assignments from Bank of Montreal as
assigning Bank
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which may be in any amount and (y) assignments between existing Banks or between
an existing Bank and its Affiliates, which may be in the amount of $5,000,000 or
in such greater amount which is an integral multiple of $1,000,000); (ii) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register pursuant to Section 3.7 hereof, an
Assignment Agreement, together with any Notes subject to such assignment, (iii)
each Bank (other than Bank of Montreal) shall maintain for its own account at
least $10,000,000 of its Exposure or assign all of its Exposure; (iv) the
Administrative Agent and (except for an assignment made during the continuance
of any Event of Default) the Borrowers must each consent, which consents shall
not be unreasonably withheld, to each such assignment to (provided no such
consent is required for any assignment to any affiliate of the assigning Bank),
(v) each such assignment shall be a constant, and not a varying, percentage of
all such rights and obligations relating to the indebtedness evidenced by Notes
of each Class and each Commitment, if any, subject to such assignment, and (vi)
the assignee must pay to the Administrative Agent a processing and recordation
fee of $3,500 and any out-of-pocket attorney's fees incurred by the
Administrative Agent in connection with such Assignment Agreement. Upon the
execution of each Assignment Agreement by the assigning Bank thereunder, the
assignee thereunder, the Borrowers and the Administrative Agent, satisfaction of
all of the conditions set forth above and payment to such assigning Bank by such
assignee of the purchase price for the portion of the Exposure being acquired by
it, (i) such assignee shall thereupon become a "Bank" for all purposes of this
Agreement with an Exposure in the amounts set forth in such Assignment Agreement
and with all the rights, powers and obligations afforded a Bank hereunder, (ii)
such assigning Bank shall have no further liability for funding the portion of
any of its Commitments assumed by such other Bank, (iii) the address for notices
to such assignee Bank shall be as specified in the Assignment Agreement executed
by it, and (iv) the Administrative Agent shall comply with Section 3.7 hereof.
Concurrently with the execution and delivery of such Assignment Agreement, the
Borrowers shall execute and deliver new Notes to the assignee Bank in the amount
of its applicable Commitment or Loans and new Notes to the assigning Bank in the
amounts of its applicable Commitment or Loans after giving effect to the
reduction occasioned by such assignment, such new Notes to constitute "Notes"
for all purposes of this Agreement.
(b) Any Bank may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Bank, including any such pledge or grant to a Federal Reserve Bank, and this
Section shall not apply to any such pledge or grant of a security interest;
provided that no such pledge or grant of a security interest shall release a
Bank from any of its obligations hereunder or substitute any such pledgee or
secured party for such Bank as a party hereto; provided further, however, the
right of any such pledgee or grantee (other than any Federal Reserve Bank) to
further transfer all or any portion of the rights pledged or granted to it,
whether by means of foreclosure or otherwise, shall be at all times subject to
the terms of this Agreement.
Section 12.18. Withholding Taxes.
(a) U.S. Withholding Tax Exemptions. Each Bank that is not a United
States person (as
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such term is defined in Section 7701(a)(30) of the Code) shall submit to the
Borrowers and the Administrative Agent on or before the date the initial
Borrowing is made hereunder or, if later, the date such Bank becomes a Bank
hereunder, two duly completed and signed copies of (i) either Form 1001
(relating to such Bank and entitling it to a complete exemption from withholding
on all amounts to be received by such Bank, including fees, pursuant to this
Agreement and the Loans) or Form 4224 (relating to all amounts to be received by
such Bank, including fees, pursuant to this Agreement and the Loans and
Reimbursement Obligations) of the United States Internal Revenue Service, or
(ii) solely if such Bank is claiming exemption from United States withholding
tax under Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest", a Form W8, or any successor form prescribed by the
Internal Revenue Service, and a certificate representing that such Bank is not a
bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of the Company and is
not a controlled foreign corporation related to the Company (within the meaning
of Section 864(d)(4) of the Code). Thereafter and from time to time, each such
Bank shall submit to the Borrowers and the Administrative Agent such additional
duly completed and signed copies of one or the other of such Forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may be (i) notified by the Borrowers or
Administrative Agent to such Bank and (ii) required under then-current United
States law or regulations to avoid or reduce United States withholding taxes on
payments in respect of all amounts to be received by such Bank, including fees,
pursuant to this Agreement or the Loans and Reimbursement Obligations. Upon the
request of the Borrowers or Administrative Agent, each Bank that is a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrowers a certificate to the effect that it is such a United
States person.
(b) Inability of Bank to Submit Forms. If any Bank determines, as a
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Borrowers any form or certificate that such Bank is obligated to submit pursuant
to subsection (a) of this Section 12.18, or that such Bank is required to
withdraw or cancel any such form or certificate previously submitted or any such
form or certificate otherwise become ineffective or inaccurate, such Bank shall
promptly notify the Borrowers and Administrative Agent of such fact and the Bank
shall to that extent not be obligated to provide any such form or certificate
and will be entitled to withdraw or cancel any affected form or certificate, as
applicable.
(c) Payment of Additional Amounts. If, as a result of any change in
applicable law, regulation or treaty, or in any official application or
interpretation thereof after the date of this Agreement or, if later, the date a
Bank becomes a Bank hereunder, any Borrower is required by law or regulation to
make any deduction, withholding or backup withholding of any taxes, levies,
imposts, duties, fees, liabilities or similar charges of the United States of
America, any possession or territory of the United States of America (including
the Commonwealth of Puerto Rico) or any area subject to the jurisdiction of the
United States of America ("U.S. Taxes") from any payments to a Bank in respect
of Loans or Reimbursement Obligations then or thereafter
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outstanding, or other amounts owing hereunder, the amount payable by such
Borrower will be increased to the amount which, after deduction from such
increased amount of all U.S. Taxes required to be withheld or deducted
therefrom, will yield the amount required under this Agreement to be payable
with respect thereto; provided that such Borrower shall not be required to pay
any additional amount pursuant to this subsection (c) to any Bank that (i) is
not, on the date this Agreement is executed by such Bank or, if later, the date
such Bank became a Bank hereunder, either (x) entitled to submit Form 1001
relating to such Bank and entitling it to a complete exemption from withholding
on all amounts to be received by such Bank, including fees, pursuant to this
Agreement and the Loans and Reimbursement Obligations or Form 4224 relating to
all amounts to be received by such Bank, including fees, pursuant to this
Agreement and the Loans and Reimbursement Obligations or (y) a U.S. person (as
such term is defined in Section 7701(a)(30) of the Code), or (ii) has failed to
submit any form or certificate that it was required to file pursuant to
subsection (a) of this Section 12.18 and entitled to file under applicable law,
or (iii) is no longer entitled to submit Form 1001 or Form 4224 or Form W8 as a
result of any change in circumstances other than a change in applicable law,
regulation or treaty or in any official application or interpretation thereof.
Within 30 days after any Borrower's payment of any such U.S. Taxes, such
Borrower shall deliver to the Administrative Agent, for the account of the
relevant Bank(s), originals or certified copies of official tax receipts
evidencing such payment. The obligations of the Borrowers under this subsection
(c) shall survive the payment in full of the Loans and Reimbursement Obligations
and the termination of the Commitments. If any Bank or the Administrative Agent
determines it has received or been granted a credit against or relief or
remission for, or repayment of, any taxes paid or payable by it because of any
U.S. Taxes paid by a Borrower and evidenced by such a tax receipt, such Bank or
Administrative Agent shall, to the extent it can do so without prejudice to the
retention of the amount of such credit, relief, remission or repayment, pay to
such Borrower such amount as such Bank or Administrative Agent determines is
attributable to such deduction or withholding and which will leave such Bank or
Agent (after such payment) in no better or worse position than it would have
been in if such Borrower had not been required to make such deduction or
withholding. Nothing in this Agreement shall interfere with the right of each
Bank and the Agent to arrange its tax affairs in whatever manner it thinks fit
nor oblige any Bank or the Agent to disclose any information relating to its tax
affairs or any computations in connection with such taxes. Notwithstanding the
foregoing, if the Borrowers are required to pay additional amounts to or for the
account of any Bank pursuant to this Section 12.18, then such Bank will
designate a different Lending Office for the Loans, participations in L/Cs and
Reimbursement Obligations of such Bank if such designation would eliminate or
reduce any such excess additional amounts and would not, in the sole judgment of
such Bank, be disadvantageous to such Bank.
Section 12.19. Judgment Currency. Each reference in this Agreement to
U.S. Dollars (the "relevant currency") is of the essence. If in connection with
determining the amount of a judgment to be rendered in a currency other than
Dollars, it is necessary to convert a sum payable by a Borrower to any Person
entitled to receive such payment under this Agreement in Dollars into such other
currency, then, unless another rate of exchange is required under applicable
laws, the rate of exchange used shall be the Administrative Agent's spot rate of
exchange in Chicago,
<PAGE> 69
Illinois on the Business Day preceding the day on which final judgment is to be
rendered. Notwithstanding the foregoing, to the fullest extent permitted by law,
the obligation of each Borrower in respect of any amount due in the relevant
currency under this Agreement shall, notwithstanding any payment in any other
currency (whether pursuant to a judgment or otherwise), be discharged only to
the extent of the amount in the relevant currency that the Person entitled to
receive such payment may, in accordance with normal banking procedures, purchase
with the sum paid in such other currency (after any premium and costs of
exchange) on the Business Day immediately following the day on which such Person
receives such payment. If the amount of the relevant currency so purchased on
such Business Day in accordance with such procedures for any reason is less than
the sum originally due to such Person in the relevant currency, such Borrower
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify such Person against such loss, and if the amount of the specified
currency so purchased exceeds the sum of (a) the amount originally due to the
relevant Person in the specified currency plus (b) any amounts shared with other
Banks as a result of allocations of such excess as a disproportionate payment to
such Person under Section 12.14 such Person agrees to remit such excess to the
relevant Borrower.
Section 12.20. Service of Process. SVS Holland hereby irrevocably
consents to the service of process by registered or certified mail out of any
such court or by service of process on CT Corporation System (now at 208 South
LaSalle Street, Chicago, Illinois 60604) which SVS Holland hereby irrevocably
appoints as its agent to receive, for it and on its behalf, service of process
in any action or proceeding in Illinois. Such service shall be deemed completed
on delivery of such process to such process agent (whether or not it is
forwarded to and received by SVS Holland) provided that notice of such service
of process is given by any Bank to SVS Holland. If, for any reason, such process
agent ceases to be able to act as such or no longer has an address in Illinois,
SVS Holland irrevocably agrees to appoint a substitute process agent acceptable
to the Administrative Agent and to deliver to the Administrative Agent a copy of
the new agent's acceptance of that appointment within 30 days after such agent
ceases to act as such or to have an address in Illinois. Nothing contained
herein shall affect the right of the Banks to serve legal process in any other
manner or to bring any proceeding hereunder in any jurisdiction where SVS
Holland may be amenable to suit. SVS Holland hereby waives any objection to any
action or proceeding in any Illinois court or federal court located in Chicago,
Illinois on the grounds of venue or any claim that any State of Illinois court
or federal court located in Chicago, Illinois is an inconvenient forum.
Section 12.21. Netherlands Taxes. (a) All payments by SVS Holland to or
for the account of any Bank or any Agent hereunder or under any Note shall be
made free and clear of and without deduction for any and all Netherlands Taxes
(as hereinafter defined). If SVS Holland shall be required by law to deduct any
Netherlands Taxes from or in respect of any sum payable hereunder to any Bank or
the Administrative Agent, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section) such Bank or the Administrative
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions
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been made, (ii) SVS Holland shall make such deductions, (iii) SVS Holland shall
pay the full amount deducted to the relevant authority in accordance with
applicable law and (iv) SVS Holland shall furnish to the Administrative Agent
the original or a certified copy of a receipt evidencing payment thereof.
(b) The Borrowers hereby jointly and severally agrees to indemnify each
Agent and each Bank for the full amount of Netherlands Taxes (including, without
limitation, any Netherlands Taxes imposed on amounts payable under this Section)
paid by such Agent or such Bank in respect of payments by SVS Holland to or for
the account of any Bank or any Agent hereunder or under any Revolving Credit
Note and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. Payments due under this indemnification shall
be made within 30 days of the date such Agent or such Bank makes demand
therefor.
(c) For purposes of this Section 12.21, the term "Netherlands Taxes"
means any and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and any and all liabilities with respect to the
foregoing imposed by The Netherlands or any authority thereof or therein, but
excluding Excluded Taxes, and the term "Excluded Taxes" means, in the case of
each Bank or applicable lending installation and each Agent, taxes imposed on
its overall net income, franchise, and doing business taxes imposed on it, (i)
by the jurisdiction under the laws of which such Bank or such Agent is
incorporated or organized, (ii) by the jurisdiction in which such Agent's or
such Bank's principal executive office or such Bank's applicable lending
installation is located, or (iii) as a result of any connection between such
Bank or Agent, as applicable, and The Netherlands.
(d) If any Bank or any Agent determines it has received or been granted
a credit against or relief or remission for, or repayment of, any taxes paid or
payable by it because of any Netherlands Taxes paid by SVS Holland and evidenced
by a tax receipt, such Bank or Agent shall, to the extent it can do so without
prejudice to the retention of the amount of such credit, relief, remission or
repayment, pay to SVS Holland such amount as such Bank or Agent determines is
attributable to such deduction or withholding and which will leave such Bank or
Agent (after such payment) in no better or worse position than it would have
been in if SVS Holland had not been required to make such deduction or
withholding. Nothing in this Agreement shall interfere with the right of each
Bank and each Agent to arrange its tax affairs in whatever manner it thinks fit
nor oblige any Bank or any Agent to disclose any information relating to its tax
affairs or any computations in connection with such taxes. Notwithstanding the
foregoing, if SVS Holland is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 12.21, then such Bank will
designate a different Lending Office for the Loans, participations in L/Cs and
Reimbursement Obligations of such Bank if such designation would eliminate or
reduce any such excess additional amounts and would not, in the sole judgment of
such Bank, be disadvantageous to such Bank.
Section 12.22. Confidentiality. Each of the Agents and each Bank agrees
to keep confidential all non-public information provided to it by any Borrower
pursuant to this Agreement that is designated by such Borrower as confidential
and all copies thereof and extracts
<PAGE> 71
therefrom; provided that nothing herein shall prevent any Agent or any Bank from
disclosing any such information (a) to any Agent or any other Bank, (b) to any
participant or assignee or prospective participant or assignee which agrees to
comply with the provisions of this Section 12.22, (c) on a need-to-know basis,
to the employees, directors, agents, attorneys, accountants and other
professional advisors of such Bank, (d) upon the request or demand of any
governmental authority having jurisdiction over such Agent or such Bank, (e) in
response to any order of any court or other governmental authority or as may
otherwise be required pursuant to any applicable law, (f) if requested or
required to do so in connection with any litigation or similar proceeding, (g)
which has been publicly disclosed other than in breach of this Section 12.22, or
(h) in connection with the exercise of any remedy hereunder or under any other
Loan Document.
-71-
<PAGE> 72
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall be a contract between us for the purposes hereinabove set forth.
Dated as of __________, 1999.
SEMINIS, INC.
By
Its__________________________________
SEMINIS VEGETABLE SEEDS, INC.
By
Its__________________________________
SVS HOLLAND B.V.
By
Its__________________________________
<PAGE> 73
Accepted and Agreed to as of the day and year last above written.
HARRIS TRUST AND SAVINGS BANK individually and as
Administrative Agent
By
Its Vice President
Address: 111 West Monroe Street
Chicago, Illinois 60690
Attention: Agribusiness Division
Eurodollar Lending Office:
Nassau Branch
111 West Monroe Street
Chicago, Illinois 60603
BANK OF MONTREAL
By
Its Director
Address: 115 South LaSalle Street
Chicago, Illinois 60603
Attention: Global Distribution
Eurodollar Lending Office:
-73-
<PAGE> 1
Exhibit 10.5
[SAVIA, S.A. DE C.V. LETTERHEAD]
June 21, 1999
Mr. Alejandro Rodriguez Graue
Seminis, Inc.
1905 Lirio Avenue
Saticoy, California 93004
Dear Mr. Rodriguez:
Savia, S.A. de C.V. ("Savia") has entered into agreements with
third parties (the "Third Party Agreements") whereby Savia under specified terms
is granted the use to certain technology, intellectual property and know-how
relating to the agrobiotechnology business (the "Third Party Technology").
In signing these agreements it had and it is always been the
intention of Savia to provide to its direct and indirect subsidiaries operating
in that business, access to the Third Party Technology to the extent permitted
under such Third Party Agreements.
Very truly yours,
SAVIA, S.A. de C.V.
By: ____________________
Name:
Title:
ACKNOWLEDGED AND AGREED
SEMINIS, INC.
By: ____________________
Name:
Title:
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated December 18, 1998, except
as to Notes 16 and 17 which are as of June 18, 1999, relating to the financial
statements of Seminis, Inc., which appears in such Prospectus. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
June 21, 1999
- -----------
<PAGE> 1
Exhibit 23.3
[SEONJIN ACCOUNTING CORPORATION LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTS
To the Board of Directors and
Stockholders of Hungnong Seeds Co.
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated October 28, 1998,
relating to the financial statements of Hungnong Seeds Co., Ltd, which appears
in such Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Seonjin Accounting Corporation
SEONJIN ACCOUNTING CORPORATION
Seoul, Korea
June 21, 1999
