UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
For the fiscal year ended June 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Transition Period from
______________ to ______________
Commission file number 0-19352
AGRIBIOTECH, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 85-0325742
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
120 Corporate Park Drive, Henderson, NV 89014
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 566-2440
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Securities registered pursuant to Section 12(b) of the Exchange Act: None.
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
stock, par value $.001 per share.
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X
No__
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained herein, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant, as of October 12, 1999, was $209,831,038
(assuming solely for purposes of this calculation that all directors and
executive officers, of the Registrant are "affiliates"), based on a closing sale
price of $4.34375 per share.
The number of shares outstanding of the Registrant's Common Stock, par
value $.001 per share, as of October 12, 1999, was 49,678,281.
Documents Incorporated by Reference: Not applicable.
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TABLE OF CONTENTS
PART 1
PAGE
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ITEM 1. BUSINESS.......................................................... 2
General......................................................... 2
Forward Looking Statements...................................... 3
Products........................................................ 8
Cool-Season Turfgrass........................................... 8
Forages......................................................... 8
Proprietary vs. Non-Proprietary................................. 8
Intellectual Property........................................... 9
Research and Development........................................ 9
Biotechnology................................................... 9
Seed Production and Packaging................................... 9
Production...................................................... 9
Packaging....................................................... 10
Distribution.................................................... 10
Domestic........................................................ 10
Foreign......................................................... 10
Competition..................................................... 11
Seasonality..................................................... 11
Environmental Regulation........................................ 11
Employees....................................................... 11
ITEM 2. DESCRIPTION OF PROPERTIES......................................... 11
ITEM 3. LEGAL PROCEEDINGS................................................. 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............... 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................... 12
ITEM 6. SELECTED FINANCIAL DATA........................................... 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................... 14
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........ 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................... 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.............................................. 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................ 25
ITEM 11. EXECUTIVE COMPENSATION............................................ 27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.... 32
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 34
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.. 35
List of Exhibits................................................ 35
SIGNATURES................................................................. 39
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PART I
ITEM 1. BUSINESS
GENERAL
AgriBioTech, Inc. ("ABT") is a Nevada corporation formed in 1987. ABT's
principal executive offices are located at 120 Corporate Park Dr., Henderson,
Nevada 89014.
ABT is a vertically integrated developer, producer, marketer, and
distributor of forage and cool-season turfgrass seed, whose operations include a
research and development program to develop improved varieties through
traditional breeding programs, seed processing plants to clean, condition and
package seed grown under contract for ABT, and national and international sales
and distribution networks. In order to offer its customers a broad array of
products, ABT also distributes seeds for warm-season turfgrasses, wildflowers,
and native grasses, and seeds for other crops such as corn, soybeans, sorghum,
wheat, and vegetables. ABT's Specialty Distribution operations, which operate in
certain geographical areas, also sell pesticides, wetting agents, water and soil
conditioning products, and lawn, garden and golf course supplies.
The forage and cool-season turfgrass seed business has historically been a
low margin, cyclical business due to its fragmented nature, lack of vertical
integration, potential for over capacity and resulting over production of
non-proprietary, freely available public varieties, and price-based competition.
To address this, ABT has implemented a three stage business strategy. The
first stage is the acquisition of leading North American companies active in
each step (research, production, distribution and sales) of the forage and
cool-season turfgrass seed industry. The second stage is the combination of
these acquisitions into a single customer-focused vertically integrated, more
efficient, higher margin, operating entity. The third stage is the development
of higher value proprietary varieties and the shifting of sales to them and away
from public, non-proprietary seed varieties. ABT also has the long-term
objective of using biotechnology to make new traits available to customers.
ABT has completed the first stage of its strategy by making 34
acquisitions, including nine in the fiscal year ended June 30 ("Fiscal), 1999,
and thereby growing from net sales of approximately $29,000 in calendar 1994 to
net sales of $370 million for Fiscal 1999. During Fiscal 1999, ABT initiated the
second stage by restructuring and combining the personnel and operations of the
acquired companies into a single operating entity and implementing a
company-wide accounting and management information system. This restructuring
and combining included a significant reduction in headcount, consolidation and
closing of 33 facilities, reduction of brand names and other efficiencies. The
third stage has begun and will be a continuing process.
Prior to the June 1999 restructuring, ABT assessed performance of its
operations and made decisions about allocation of resources as one combined
business, consisting of all the acquired entities and, therefore, operated as a
single segment. After restructuring, ABT will operate and manage its business by
business units focused on the nature of the customers served by each business
unit. ABT has segregated its customers into three basic categories: (1) those
that are primarily retail focused or are end-use consumers; (2) those that are
primarily wholesale focused; and (3) those characterized by ABT as Specialty
Distribution. The retail operations serve customers throughout North America
using four geographical areas. These customers include mass merchandisers,
independent lawn and garden or agricultural retailers, golf courses, sports
fields, sod farms, landscapers, dairies, cattle ranchers, commercial hay
growers, farmers, land reclamation projects, hydroseeders, highway departments,
and airports. The wholesale operations serve domestic customers that generally
are larger entities with their own sales forces and distribution channels that
re-sell ABT's products to others and international users of forage and
cool-season turfgrass seed. Wholesale operations also includes seeds sold
through private labels of others. Specialty Distribution serves customers
formerly served by three acquired businesses that provide a full range of seed,
chemicals, fertilizers, lawn and garden supplies, and ancillary products to a
wide range of customers, including golf course, landscapers and hardware-type
retail stores in certain markets in the United States. On a prospective basis,
ABT will report operating segments based on the customer segregation described
above. Due to the number of acquisitions completed by ABT and the different
methods and systems of accumulating data in the acquired businesses, it is
impossible to provide operations data for the periods prior to July 1, 1999
based on the segments to be used prospectively.
2
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Forward Looking Statements
In this report and elsewhere (Annual Report, other SEC filings, press
releases, investor and analyst conference calls), ABT has made and will make
forward-looking statements relating to matters such as anticipated financial and
operational performance; management plans; revenue, cost and profit projections;
research and development of new products; acquisition and integration of
companies; performance of the seed industry and ABT's competitors, and
management's underlying assumptions about the above.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements in order to encourage companies to make
such statements in order to provide additional information to investors. ABT
wishes to make such statements and to avail itself of the "safe-harbor". In
order to do so ABT states that, as to any forward-looking statement, it involves
risks and uncertainties is not a guarantee of future performance, and the actual
financial and economic performance and condition of ABT may differ materially
from that expressed in the forward-looking statement, due to a variety of
factors, including:
Ability to Effectively and Profitably Integrate Our 34 Acquisitions: Our
future success depends upon our ability to combine or integrate the operations
of the businesses we have acquired into a vertically integrated operation,
combining research, production, distribution, marketing and sales. We must also
realize efficiencies and cost savings without losing sales and margins. These
will consist mainly of headcount reductions, the closing of certain facilities
and reduction in brands and seed inventory. If we cannot successfully and
efficiently integrate all of the businesses we have acquired, our business,
financial condition and/or operating results may be materially adversely
affected and we would not expect to operate profitably.
Lack of Historical Profitability: Accumulated Deficit of Approximately $62
Million as of June 30, 1999: Over the life of ABT, we have not shown consistent
profitability. We have reported only four profitable quarters since becoming a
publicly owned company in September 1993 and Fiscal 1998 was our first
profitable year. We had an accumulated deficit of $61,798,147 through June 30,
1999 which includes a net loss of $49,760,307 for Fiscal 1999. This affects and
lead to the financial factors discussed below.
Possible Inability to Obtain Additional Capital or Short and Long Term
Financing: Our capital requirements have been and are expected to remain
significant. We will need additional capital and/or financing to fund operations
until we achieve and sustain profitability. Our capital requirements depend on
many factors. These factors include the timing and cost of future acquisitions,
if any, the time and cost involved in integrating our acquired companies, recent
weaknesses in the agricultural economy and our success at expanding existing
operations. We may need to seek additional capital and/or an increase in or an
alternative to the revolving credit facility and/or other financings to finance
increased operating or integration needs, or a cutback in operations resulting
from, among other things, unexpected changes in seasonality or weather patterns,
or if our integration plans are more costly than anticipated.
We are currently exploring financing alternatives, including leveraging
real estate assets that are not now encumbered, to supplement, our current
revolving credit facilities. It is also possible we may issue additional equity.
There is no assurance that such financing will be finalized.
Possible Inability to Fund Debt Service Costs of Approximately $12 Million
Per Year on Substantial Indebtedness: Effects of Financial Leverage: We have
indebtedness that is substantial in relation to our stockholders' equity, and
interest and debt service requirements that are significant compared to our cash
flow from operations. Our cash flow from operations, to date, has not been
sufficient to meet our debt service obligations without additional equity and
debt financings. We have a revolving credit facility with financial institutions
under which we may incur up to $90 million of indebtedness subject to a
borrowing base computation and compliance with financial covenants. Through June
30, 1999, ABT has not been in compliance with the debt service covenant.
Subsequent to June 30, 1999, this covenant has been amended to reflect ABT's
current operational structure and forecasted results of operation. As of October
8, 1999, we had borrowed approximately $62.1 million under the revolving credit
facility and approximately $26.5 million was available on that date to be
borrowed. In addition, we have approximately $18 million of other long-term
obligations.
3
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The annual debt service requirements, including scheduled debt repayments
and interest, on this debt total approximately $12 million, reflecting
anticipated average borrowings under our revolving credit facility. Weaknesses
in the agricultural economy and the bankruptcy of a major customer (Hechinger
Co.) have negatively impacted availability under our revolving credit facility.
It is possible we may not have sufficient funds in the future to meet our
obligations under the revolving credit facility and other indebtedness.
The extent of our debt could have important consequences. For example:
- Our level of indebtedness could make it more difficult to satisfy our
debt repayment obligations;
- Our level of indebtedness could increase our vulnerability to general
adverse economic and industry conditions;
- A substantial portion of our cash flow from operations must be dedicated
to debt service and is, therefore, not available for operations and other
purposes;
- Our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, research and development, or
general corporate purposes may be impaired;
- Covenants in the revolving credit facility could limit our ability to
expand, compete and make capital improvements; and
- Our borrowings under the revolving credit facility are and will continue
to be at variable rates of interest, which exposes us to the risk of
increased interest rates.
Our ability to pay interest on debt and to satisfy our other obligations
depends upon our future financial and operating performance. If we are unable to
service our indebtedness, we will be forced to adopt an alternative strategy
that may include reducing or delaying capital expenditures, scaling back
expansion efforts, selling assets, restructuring or refinancing indebtedness or
seeking additional equity capital. We may not be able to implement any of these
strategies on terms acceptable to us.
Risk of Foreclosure Due to Possible Violations of Restrictions Imposed on
ABT by Terms of Lender Indebtedness: Our revolving credit facility or additional
lending agreements with our lenders contain or may contain restrictions that
limit us in many ways. A breach of any of these covenants could constitute an
event of default under such agreements. These restrictions may significantly
limit or prohibit us from incurring additional indebtedness, making prepayments
of indebtedness, paying dividends, making investments or acquisitions, engaging
in transactions with affiliates, creating liens, selling assets and/or engaging
in mergers and corporate consolidations. The revolving credit facility also
requires us to maintain specified financial ratios and to satisfy various
financial condition tests. If there were an event of default under this
agreement, the lenders could declare the total amount outstanding, together with
accrued interest, immediately due and payable. If we were unable to repay those
amounts, the lender could proceed to foreclose their security interest in the
collateral securing the indebtedness.
Operating Results May Fluctuate Due To Cyclical Nature of Agricultural
Products and Weather: Most agricultural products, including much forage and
turfgrass seed, are commodities, whose wholesale price and quantity are subject
to wide fluctuations based on supply and demand. This could result in large
fluctuations in our results of operations. In addition, weather (rain, drought,
wind, hail, frost) pests, disease and other natural forces can affect the
quantity, quality and timing of the production of seed, and the demand for seed,
and this affects availability and price of seed.
Demand is Subject to a Variety of Factors: Demand for turfgrass depends
upon the initial seeding and subsequent reseeding of lawns in a variety of user
markets such as home lawns, office landscaping, athletic fields, golf courses,
landscapers and sod growers, which demand depends upon general economic
conditions, population and income growth, housing starts, golf course and
recreational facilities development and office construction. Demand for forage
crops depend upon demand for beef, sheep and milk and other dairy products, as
well as the economic attraction of alternate crops such as corn and soybeans,
which, in turn, depends upon grain prices for such crops and the agricultural
economy in general.
4
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Fluctuations of Quarterly Results: Our sales are subject to wide seasonal
fluctuations that reflect the typical purchasing and growing patterns for forage
crops and turfgrass. Results of operations from quarter to quarter do not
necessarily reflect the results that may be expected for any other interim
period, or for the entire year. Also, because the purchasing and growing
patterns are different for forage and turfgrass seeds, our sales are affected by
the breakdown of our product mix.
Ability to Implement and Utilize Management Information Systems and the
Year 2000 Risks: As of August 1, 1999, ABT believes that all of its domestic
information systems were Year 2000 ready. Domestic operations constitute
approximately 96.4% of the Company's annual revenue. This was in large part
accomplished by migrating approximately 86.5% of domestic operations to an
Oracle based Enterprise Resource Planning ("ERP") information system and the
remaining 13.5% will continue on an existing system that is believed to be Year
2000 ready. ABT is in the process of integrating its Canadian operations into
its ERP information system and has contracted for software, hardware and
consulting services to complete this integration by the end of October 1999.
ABT's operations in Mexico will be converted to an independent Year 2000 ready
platform by November 1999. The conversion of these international operations will
complete our internal Year 2000-information systems readiness project. However,
there can be no assurance that this will be accomplished.
The ability of third parties with which ABT transacts business to
adequately address their Year 2000 issues is outside of ABT's control. ABT has
taken steps to confirm that the systems of its major suppliers and customers are
Year 2000 compliant and to determine whether the nature of any noncompliance
would have a material adverse effect on ABT's business, financial condition and
results of operations.
There can be no assurance that the failure of ABT or such third parties to
adequately address their respective Year 2000 issues will not have a material
adverse effect on ABT's business, financial condition, cash flows and results of
operations.
Additionally, the Oracle ERP system is important to ABT's ability to obtain
accurate and timely company wide data, which is needed for management decision
making and financial reporting. Migration to and full use of, the ERP system has
caused and will continue to cause changes in business processes and practices.
These changes will continue. Full utilization of the system requires continual
improvement in the system, changes to business practices and training of
employees. There is no assurance that this will be optimal.
Potential Material Adverse Effects If We Are Unable to Manage Recent Rapid
Growth from Net Sales of $26 Million in Fiscal 1996 to Net Sales of $370 Million
for Fiscal 1999: We have acquired all or part of 34 businesses in the forage and
turfgrass seed sector since January 1, 1995. As a result of these acquisitions,
we have experienced significant revenue growth and expanded the number of our
employees and the geographic scope of our operations. Additionally, this rapid
growth has placed and may continue to place significant demands on our
management, technical, financial and other resources. To manage growth
effectively, we will need to improve operational, financial and management
information systems, procedures and controls. Additionally, we recently
reorganized our senior management. The founders of ABT are no longer members of
senior management. We have a new Chief Executive Officer, a new President/Chief
Operating Officer, two Executive Vice-Presidents and a Senior Vice-President,
who have overall responsibility for managing ABT. These changes were put into
effect in February through June 1999. There can be no assurance that management
will be able to successfully manage our growth. We may not be able to manage
future growth effectively, and failure to do so could have a material adverse
effect on our business, financial condition and/or operating results.
No Assurance of ABT's Ability to Continue to Grow Since We Relied on
Acquisitions to Grow and Do Not Intend to Make Many Acquisitions in the Future:
We have experienced significant growth in net sales, from $26 million in Fiscal
1996 to $66 million in Fiscal 1997, $205 million in Fiscal 1998 and to $370
million in Fiscal 1999. Although we have achieved this growth through
acquisitions, we do not intend to make many acquisitions in the future and may
even sell individual or groups of assets as part of our integration plans. Our
future growth depends upon our ability to integrate our operations, and to
increase sales from existing operations. We may not be successful in expanding
existing operations because we operate in a highly competitive industry, which
is highly cyclical due to weather and consumer demand.
5
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Possible Inability of ABT to Develop New Genetically Superior Products: We
are attempting to develop new, genetically superior forage and turfgrass
varieties. If we are not able to develop and successfully market genetically
superior strains, either through our own efforts or with industry partners, our
business, financial condition and results of operations may be materially
adversely affected.
Possible Inability to Obtain Market Acceptance for Genetically Superior
Varieties May Adversely Affect Profitability: Even if we are successful in
developing genetically superior forage and turfgrass varieties, there can be no
assurance that there will be a market for these products, or our competitors
could develop and market better products or products with greater market
acceptance. Even if a market for these products develops, there can be no
assurance that we will recover the costs associated with developing and
marketing them. If we cannot effectively market new products we develop, at
prices sufficient to cover costs and generate adequate return on capital, our
business, financial condition and results of operations may be materially
adversely affected.
Dependence on Rights for Forage and Turfgrass Varieties: We own the rights
to a number of forage and turfgrass varieties that are protected under the U.S.
patent laws, and/or the Plant Variety Protection Act and are seeking to acquire
and/or develop other protected varieties. These rights may be challenged,
invalidated or circumvented. In addition, others could claim that products that
we developed violate their rights. We may incur substantial costs in asserting
our rights against others, and/or defending any infringement suits brought
against us by others.
Possible Inability to Obtain Third Parties' Biotechnology or Lack of Market
Acceptance May Adversely Affect Profit Margins: Biotechnology tools and assets
have led to the introduction of new, improved and specialized corn, soybeans and
cotton. We believe that biotechnology will also lead to the introduction of
improved seeds in the forage and turfgrass seed sector. If we cannot develop or
obtain a license to biotechnology tools and bioengineered genetic traits, or if
we cannot develop and market products with these traits at prices sufficient to
cover costs and generate adequate return on capital, our business, financial
condition and results of operations may be materially adversely affected.
Furthermore, there has been consumer resistance to genetically modified food
grains, which could affect market acceptance in the United States for all
genetically modified plants. ABT's focus is on forage and turfgrass seed, not on
seed for food crops. A significant lack of market acceptance for these seeds
could have a material negative impact on ABT's anticipated future profit
margins.
Possible Inability to be Competitive Against Large Agricultural Seed
Companies, Who May Decide to Compete Against ABT, as Well as Numerous Large
Regional Seed Companies and Numerous Small Family Seed Businesses: The seed
industry and the field of agricultural technology are both highly competitive.
Our largest United States competitors for alfalfa seed are Cenex/Land
O'Lakes/Research Seed, Helena/AgriPro, Pioneer and Cal/West Seeds, each of which
we estimate has annual alfalfa seed sales of between $20 and $60 million. Our
largest competitors for forages other than alfalfa are FFR Research and its farm
cooperative members. We also compete with small family owned businesses that are
strong competitors in small geographic areas. For cool- season turfgrass seed,
we compete with a number of companies that have annual sales of between $20 and
$80 million. Most of these companies are regional companies with only Pennington
Seed, which is owned by Central Garden and Pet Company, and O.M. Scott having
national brand name acceptance.
The major agricultural seed companies in the United States focus their
sales around corn, and soybean seed, including Dupont/Pioneer Hi-Bred
International, Monsanto/DEKALB/Holden/Asgrow, Novartis AG and Dow/Mycogen
Corporation, and cottonseed, including Delta and Pine Land Company. In the past,
these companies have treated forage and turfgrass seeds as secondary crops.
Although many of our competitors are small family owned businesses and
regional companies, many are not. Additionally, other forage and/or turfgrass
competitors might consolidate. Further the major agricultural seed companies may
decide to intensify their efforts in the forage and turfgrass seed sector and
compete against us. We may not be able to compete successfully against these
companies. These competitive factors could have a material adverse effect on
ABT's business, results of operation and/or financial condition.
6
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Dependence on Key Personnel: Our success depends in large part on the
efforts, abilities and expertise of our executive officers. The founders of ABT
are no longer members of senior management and the new management structure
consisting of a Chief Executive Officer, a President/Chief Operating Officer,
two Executive Vice-Presidents, and a Senior Vice-President is completely
responsible for implementing ABT's integration efforts and restructuring. The
loss of any of these key personnel could have a material adverse effect on our
business, financial condition and results of operations. Along with our
integration efforts, we are hiring qualified marketing, financial, management
information system, and other technical personnel, upon whom our prospects
depend. Competition for qualified personnel is intense and there can be no
assurance that we will be successful in attracting or retaining such personnel.
Potential Undiscovered Liabilities Associated with ABT's 34 Acquisitions:
The businesses that we have acquired may have existing, but currently unknown,
liabilities that we may have been unable to discover during our pre-acquisition
investigation. If such liabilities are discovered, our operations may be
materially adversely affected. These liabilities may arise from environmental
contamination or non-compliance by prior owners with environmental laws or
regulatory requirements. Any indemnities or warranties that we receive from
prior owners may not fully cover these liabilities due to their limited scope,
amount or duration, the limited finances of the sellers, or for other reasons.
Costs of Complying with Department of Agriculture, Food and Drug
Administration, Environmental Protection Agency and Various State Government
Regulations: Our operations are directly and indirectly subject to various
Federal and state environmental controls and regulations. If existing
environmental regulations are changed, or additional laws or regulations are
passed, the cost of complying with those laws may be substantial. We believe
that we are in substantial compliance with existing environmental regulations.
However, these regulations may be changed with retroactive effect and new laws
or regulations may be passed at any time.
The United States Department of Agriculture, the Food and Drug
Administration, the Environmental Protection Agency, and various state agencies
regulate the development of seed of bio-engineered plants. The regulatory
agencies that administer existing or future regulations or legislation may not
allow us to produce and market genetically engineered seed. Even if we are
legally permitted to produce and market genetically engineered seed, existing or
future regulations and legislation may prevent us from doing so in a timely
manner or under technically or commercially feasible conditions.
Adverse Effect of Potential Future Sales of Common Stock: As of October 8,
1999, we had 49,678,281 shares of common stock issued and outstanding. Of these
shares, approximately 6,640,000 shares are "restricted securities" as that term
is defined in Rule 144 under the Securities Act. It is possible that the sale of
these restricted shares, or even the potential for these sales, may have a
depressive effect on the price of our common stock in the public trading market.
Any depressive effect could impair our ability to raise additional equity
capital. All but approximately 1,000,000 of these restricted shares, which are
currently available for resale under Rule 144, have been registered for resale
under the Securities Act. At June 30, 1999 we also have approximately 8.9
million shares of common stock available for issuance without restriction upon
exercise of outstanding options and 3.2 million shares of common stock available
for issuance without restriction upon exercise of outstanding warrants. We
cannot predict what effect sales of these shares may have on the existing market
price of our common stock.
Holders of restricted securities must satisfy the prospectus delivery and
other requirements of the Securities Act prior to making any sales of the
shares, unless the sales are made in accordance with the provisions of Rule 144.
Under Rule 144, if we are in compliance with various public information
requirements, holders of restricted securities that have held those securities
for at least one year may sell limited amounts of those securities. Rule 144
also permits non-affiliates to sell restricted securities free of any volume
limitations if those securities have been held for at least two years.
Public Market Risks: Volatility of ABT Securities Prices: The market price
for our securities has been and may continue to be very volatile. Factors such
as our financial results, financing efforts, changes in earnings estimates by
analysts, litigation, conditions in our business and various factors affecting
the agriculture industry generally may have a significant impact on the market
price of our securities. If, in some future quarter, our operating results are
below the expectations of analysts, which has occurred in the past, the price of
our securities may be materially adversely affected. These factors and general
economic and market trends may adversely affect the price of our securities.
Additionally, in the last several years, the stock market has experienced a high
level of price and volume volatility. During this period the market prices for
many companies, particularly small and emerging growth companies like ours, have
experienced wide price fluctuations and volatility that have not necessarily
been related to the operating performance of those companies. Our operating
results are also tracked by professional analysts.
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PRODUCTS
Cool-Season Turfgrass
Approximately 48% of ABT's sales in Fiscal 1999 were turfgrass seeds.
Cool-season turfgrass (turf-type tall fescue, ryegrass, bluegrass, fine fescue
and bentgrass), is utilized to establish and reseed home lawns, golf courses,
parks, cemeteries, and roadway medians. They provide the permanent turf cover in
cooler climates of North America and similar climates found around the world. In
many situations, it is common for cool season turfgrasses to be re-seeded or
spot seeded every 2-8 years depending upon the degree of summer or winter
stresses or related damage to a turf caused by mechanical equipment wear, foot
traffic, divots, disease or insects. Another significant market for sales of
cool-season turfgrasses is for annual fall/winter overseedings over dormant
warm-season turfs in the sunbelt states to provide a green, attractive, and wear
tolerant turf during cooler winter months particularly on golf courses, sports
fields, and other recreational or aesthetic sites.
ABT believes that domestic demand for turfgrass reflects population and
income growth, housing starts and the increasing number of recreational
facilities, such as golf courses and parks. The annual wholesale domestic market
is estimated to be $800 million.
Forages
Approximately 30% of ABT's sales in Fiscal 1999 were forage seeds. A forage
crop (alfalfa, timothy, clovers, orchardgrass, forage-type tall fescue, forage
corn and forage sorghum) is one where the entire plant is consumed. Forages are
the primary feed components for animals used in milk and meat products - cattle,
dairy cows and sheep. They are generally fed to animals either through grazing
or by being harvested and baled, producing hay, or for silage.
Alfalfa is the best known of the forage crops. In the United States,
alfalfa comprises approximately 40% of planted forage acreage, and alfalfa hay
represents approximately $12 billion of the $20 billion forage crops grown. In
addition to alfalfa, clover is a common leguminous forage species. Grass forage
species, including tall fescue, orchardgrass and bromegrass, are seeded in
mixtures with non-grass forages, to decrease bloat (swelling in the stomach of
cattle caused by foaming, which can result in death), improve soil structure,
decrease weed competition, improve organic matter and spread out seasonal peaks
of forage production. Leguminous and grass forage crops are reseeded every 2-5
years on average, depending on species, where planted and condition of the
existing crop. Corn and sorghum, which are planted annually, are also used as
forage crops, and forage corn and sorghum are developed and distributed by ABT.
The annual domestic market for forage seed (legumes, grass, corn and
sorghum) is estimated to be $750 million and the worldwide market is estimated
to be $1.2 billion.
Demand for forage crops and, hence, forage seeds, is primarily determined
by the size of the consuming animal population which will be determined by the
demand for meat and milk products, which, in turn will be influenced by income
levels. Short term, demand is also influenced by the general farm economy and by
the effects of weather (drought, wind, hail, frost, temperature), disease, and
insects.
Proprietary vs. Non Proprietary
A proprietary variety is one which is owned and marketed exclusively by one
party. To maintain this exclusivity, it is protected under either the United
States Plant Variety Protection Act or patent laws, both of which limit the
ability of others to reproduce, sell and breed with the variety. A public
variety is one that has no such protection. They were usually developed with
government funds (state or federal) and provided for public use.
ABT owns 16 issued PVPA certificates for alfalfa varieties and has received
one patent, on a white fly resistant alfalfa variety. ABT owns 18 PVPA
certificates on turfgrass varieties and has 31 pending PVPA applications.
8
<PAGE>
Intellectual Property
Intellectual property (patents and PVPA certificates) relating to the
conventionally bred genetic material in turfgrass and forage seeds has
historically not been of significant importance. However, as the industry, in
general, and ABT, in particular, move to higher margin, proprietery products,
the value of such intellectual property will increase. Although the value of
such intellectual property in the aggregate is important, no one patent or PVPA
certificate is dominant. In other seed sectors (corn, cotton, soybeans) where
biotechnology has allowed genetically engineered products to be developed and
come to market, the existence, scope and ownership of patents on genes, traits
expressed by those genes and genetic transformation methods are considered to be
important and may lead to competitive advantage. The same trend is anticipated
in the forage and turfgrass seed sector, but no dominant patent has emerged.
RESEARCH AND DEVELOPMENT
ABT's research is aimed at developing (i) value-added forage seed products
with improved characteristics in yield, nutritional quality, persistence, and
disease and insect tolerance and (ii) improved cool season turfgrass seeds that
display improved dark green leaf color, ease of mowing, improved pest
resistance, finer leaf texture, and reduced growth that provides less clippings.
ABT has four alfalfa research locations and three turfgrass research
locations. ABT does not conduct breeding programs for forage grasses or clover.
However, it has an agreement with FFR Cooperative, the leading breeder of such
plants, whereby ABT is the exclusive licensee in certain markets of such
products from their program. ABT also licenses varieties of alfalfa, turfgrass,
corn and soybeans. ABT had expenses of approximately $3.4 million, $2.3 million,
and $1.2 million for the fiscal years ended June 30, 1999, 1998, and 1997 on
research and development programs.
Biotechnology
Biotechnology has brought significant advances in plant traits to other
crops such as corn, soybeans and cotton, and such genetically engineered crops
have been commercially introduced. ABT believes similar advances are available
for forage and turfgrass species, although commercialization may not occur for
some time. Additionally, as many forage and turfgrass species could transfer
newly introduced genes to naturally occurring plants of sexually compatible
species (a process known as "outcrossing"), it is likely that a genetically
engineered method of blocking this for certain traits may be required.
ABT has obtained licenses for specific genes which impart certain important
characteristics to its products, as well as a license to "Whiskers", which is a
genetic transformation process to insert genes into different germplasms. ABT
has established a biotechnology program consisting of four Ph.D. level
scientists and four support personnel, located at the University of Rhode
Island.
SEED PRODUCTION AND PACKAGING
Production
Forage and cool-season turfgrass seed varieties are grown for ABT under
contract by farmers specializing in seed production. These contracts are
generally three years in length and contain fixed contract prices for all or
part of their duration. ABT provides the farmer with proprietary seed stock and
takes the entire production from the farmer's field. Farmers generally assume
all of the risks associated with growing the seed. Raw materials for such
production (land, equipment, water) are generally available in the major growing
areas for such seeds.
9
<PAGE>
Packaging
Growers deliver forage seed to ABT, which cleans and packages the seed,
typically in 50 pound bags. The grower of turfgrass seed usually cleans and
stores the seed until needed by ABT, at which time it is delivered to ABT in 50
pound bags. ABT may blend and/or repackage the seed to meet customer needs.
Turfgrass seeds are packaged in 50-pound bags for larger customers such as golf
courses and homeowner/retail turfgrass seeds are generally packaged in one to
twenty-five pound bags or boxes.
ABT's seed conditioning and packaging facilities are primarily located in
Oregon, Idaho, Texas, Wyoming, Oklahoma and Nevada. Management believes ABT's
facilities have enough capacity to handle current forage seed volume and
accommodate its near term growth needs. In completing the integration of ABT's
acquired turfgrass operations, certain smaller facilities will be closed and
combined with other facilities. In that regard ABT, anticipates obtaining
additional warehouse facilities to improve both efficiency and capacity.
DISTRIBUTION
Domestic
Domestically, ABT distributes seeds in all 50 states. ABT sells most of its
forage seeds through its internal or "retail" sales organization to local
agricultural retailers, who, in turn, sell to the individual farmer. ABT also
sells direct to the larger farmers. Forage seeds are sold primarily under two
brand names, "ABT" forages and "W-L" alfalfa. ABT forages are sold through
agricultural retailers or direct to large growers. ABT alfalfa varieties are
primarily sold by ABT under the "W-L" trademark to regional franchisees or the
"ABT" trademark through its retail operations in the United States. ABT also
provides some alfalfa varieties to larger customers who utilize their own brands
and trademarks. ABT has also signed an agreement with DirectAg.com to sell
selected alfalfa varieties directly to farmers through DirectAg.com's Internet
site although sales have not yet begun. Row crops (corn, sorghum and soybeans)
are sold by ABT in certain areas of the country under the "Hytest" brand.
A substantial majority of ABT's current cool-season turfgrass sales are
made to national and international distributors. The remainder are divided
between direct sales to mass merchandisers (the biggest are The Home Depot and
Lowe's), golf courses, smaller independent lawn and garden retailers, government
entities, sod farms, landscapers, hydroseeders, highway departments and
airports. The regional distributors and national accounts then sell to the same
type of end users.
ABT's internal or "retail" sales organization is organized into four
regions and numerous districts that have responsibility for sales and
distribution.
ABT's Independent Seeds operation sells and licenses large quantities of
seed to domestic and international customers for their re-distribution.
ABT's Specialty Distribution operation provides a full range of turfgrass
seed, chemicals, fertilizers, lawn, garden, and golf course supplies and
ancillary products to a wide range of customers, including golf courses,
landscapers and hardware-type retail stores in certain markets in the United
States.
Foreign
Internationally, ABT distributes in Europe, Asia, South America, Africa and
Australia through its independent dealers and licensees. ABT has established an
international group to consolidate international sales.
Argentina is the most important forage market outside of the United States.
ABT markets alfalfa in Argentina under the W-L brand name through Cargill
S.A.C.I, a subsidiary of Monsanto. Foreign sales accounted for approximately 8%,
11% and 15% of ABT's total sales for the fiscal years ended June 30, 1999, 1998
and 1997.
Domestically and internationally, ABT also licenses alfalfa and turfgrass
varieties to others for their production.
10
<PAGE>
No one customer of ABT has accounted for 10% or more of ABT's net sales.
Sales to governmental entities are not material.
COMPETITION
ABT competes in both forage and cool-season turfgrass seeds on the basis of
price, product traits, product performance, product quality and service. ABT
believes it competes favorably in each of these factors.
In the alfalfa seed industry, the largest United States competitors with
research programs are Research Seed, a subsidiary of Cenex/Land O'Lakes,
Helena/ABI, Pioneer Hi-Bred International and Cal/West Seeds. Additionally, a
large number of national and regional seed companies distribute and sell alfalfa
developed by others. ABT's largest competitors for forage seeds other than
alfalfa are FFR Cooperative and its farm cooperative members.
ABT has a number of competitors for cool-season turfgrass seed that have
annual seed sales of between $20 and $80 million. Most of these companies are
regional companies, with only Pennington Seed and O.M. Scott having national
name brand acceptance, similar to Lofts Seed, Inc. (a subsidiary of ABT).
SEASONALITY
Production, sale and distribution of seed is seasonal. ABT grows its forage
and turfgrass seed in North America in the summer, harvests it in the fall and
conditions, bags it and ships it to customers throughout the year, for spring
planting or fall planting. Sales efforts take place primarily in July through
September and December through April. Sales revenue is recognized upon shipment
and passage of title. Thus, a significant amount of ABT's sales occur in its
first fiscal quarter (ending September 30) and in the third fiscal quarter
(ending March 31), although weather can affect the timing of the shipments and
sales recognition. Cash collections are also seasonal, as payment is generally
due 30-120 days after shipment.
ENVIRONMENTAL REGULATION
Expenses relating to environmental regulations are not material.
EMPLOYEES
As of September 15, 1999, ABT had 826 full-time employees including five
executive officers. ABT also had 140 part-time employees.
ITEM 2. DESCRIPTION OF PROPERTIES
ABT owns or leases warehouse facilities, which generally contain
administrative office space, in the following states: Arizona; California;
Georgia; Iowa; Idaho; Indiana; Kentucky; Massachusetts; Maryland; Michigan;
Minnesota; Missouri; Nebraska; New Jersey; Nevada; New York; North Carolina;
Ohio; Oklahoma; Oregon; Pennsylvania; South Dakota; Tennessee; Texas; Utah;
Virginia; Washington; Wisconsin and Wyoming as well as in Mexico and Canada. Of
these facilities 44 are owned and 44 are leased. Certain facilities in Idaho,
Oregon, Texas, Wyoming, Arizona, Canada and Oklahoma include significant amounts
of equipment for cleaning and treating seed. As a result of the restructuring
described in Note 12 of Notes to Consolidated Financial Statements, 33
facilities owned or leased by ABT were determined to be duplicative and/or
inconsistent with ABT's current business plan, and have been either closed or
are currently scheduled to be closed. Of these facilities, 31 are located in the
United States and 2 in Canada. After all currently planned closures, ABT will
have 30 owned facilities and 25 leased facilities. The leased facilities contain
various lease terms and periods that expire between 1999 and 2004. In general,
the leased facilities consist of typical warehouse space. In the event expiring
leases can not be renewed on terms acceptable to ABT, ABT does not foresee
difficulty in finding other suitable space. Some of the facilities in Arizona,
Canada, Indiana, Idaho, Kentucky, Nevada, Oregon, and Wyoming are pledged under
various financial arrangements aggregating approximately $11.1 million. The
debt, lease and rental commitments are more fully described in the Notes to
Consolidated Financial Statements.
11
<PAGE>
ABT believes that each facility is suitable for its current use, is in good
condition and is adequately insured. Management believes that the properties
remaining after the integration are generally adequate to meet ABT's foreseeable
needs. Nevertheless, ABT may further combine the operations of facilities into
new facilities, although it has no definitive plans or capital expenditure
commitments in this regard.
ITEM 3. LEGAL PROCEEDINGS
Between January 14, 1999 and March 19, 1999, a number of securities class
action complaints were filed against ABT and certain of its former directors and
current and former officers in federal courts in New Mexico, New York and
Nevada. All cases have been transferred to the United States District Court for
the District of Nevada and consolidated into one action, captioned In re:
AgriBioTech, Inc. Securities Litigation, Base File No. CV-S-99-144-PMP (LRL). On
July 6, 1999, a Consolidated Amended Complaint was filed by plaintiffs
purporting to represent a class of purchasers of ABT common stock from September
24, 1997 through February 16, 1999. The complaint alleges, among other things,
that ABT's financial statements, including the accounting treatment for
acquisitions completed in 1997 and 1998, and certain statements made by ABT
concerning its efforts to find a strategic equity investor in late 1998 and
early 1999 and other topics were false and misleading and caused an artificial
rise in ABT's common stock price in violation of Section 10(b) of the Securities
Exchange Act of 1934, as amended, Rule 10b-5 promulgated thereunder, and Section
20 of the Exchange Act. On August 18, 1999, ABT filed a motion to dismiss the
complaint. ABT believes it has meritorious defenses to this action and intends
to defend itself vigorously. However, due to the risks of litigation, a
prediction of the final outcome of these proceedings cannot be made with
certainty, and an unfavorable result in this action could have a material
adverse impact.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ABT's common stock trades on the Nasdaq National Market under the symbol
"ABTX."
The following table sets forth the high and low sales prices for ABT common
stock for each quarter in Fiscal 1998 and Fiscal 1999 on the Nasdaq National
Market.
<TABLE>
<CAPTION>
Fiscal 1998 High Low
- ----------- ---- ---
<S> <C> <C>
July 1, 1997 - September 30, 1997 $10 11/16 $5 3/4
October 1, 1997 - December 31, 1997 $17 3/8 $6 3/4
January 1, 1998 - March 31, 1998 $19 9/16 $12 5/8
April 1, 1998 - June 30, 1998 $29 1/2 $13 1/8
Fiscal 1999
- -----------
July 1, 1998 - September 30, 1998 $27 3/4 $7 5/8
October 1, 1998 - December 31, 1998 $17 7/8 $7 3/4
January 1, 1999 - March 31, 1999 $17 7/8 $3 11/16
April 1, 1999 - June 30, 1999 $8 1/4 $5
</TABLE>
As of October 12, 1999, the closing price per share of ABT common stock was
$4.34375.
As of September 30, 1999, ABT had 479 record holders of its common stock
and reasonably believes that, based on information from shareholder mailing
services, there are in excess of 20,000 beneficial holders of its common stock.
12
<PAGE>
DIVIDEND POLICY
ABT has never declared or paid any cash dividends on its common stock. ABT
currently intends to retain any earnings for use in the operation and expansion
of ABT's business and does not anticipate paying any dividends on its common
stock for the foreseeable future. ABT's credit facility with Bank of America
Business Credit prohibits the declaration or payment of cash dividends without
prior approval.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data in the following table should be read in
conjunction with ABT's financial statements and the notes thereto, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other financial information included herein. The historical selected financial
data presented below are derived from the consolidated financial statements of
ABT and subsidiaries, which have been audited by KPMG LLP, independent certified
public accountants. The consolidated financial statements as of June 30, 1999
and 1998 and for each of the years in the three-year period ended June 30, 1999,
and the report thereon, are included under Item 8. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Item 1, "Business" for information that affects a comparison of ABT's quarterly
results of operations.
Statement of Operations Data (in thousands, except per share data):
<TABLE>
<CAPTION>
Nine
months
Year ended June 30, ended June
--------------------------------------------------- 30,
1999 1998 1997 1996 1995 (1)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 370,453 $ 205,117 $ 65,904 $ 25,962 $ 4,754
Cost of sales 286,210 157,797 49,527 19,236 3,398
--------- --------- --------- --------- ---------
Gross profit 84,243 47,320 16,377 6,726 1,356
Operating expenses 109,881 47,579 17,972 9,637 2,779
Restructuring and special charges 9,752 -- -- -- --
--------- --------- --------- --------- ---------
Earnings (loss) from operations (35,390) (259) (1,595) (2,911) (1,423)
Total other income (expense) (9,440) (2,261) (1,119) (413) 16
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes and (44,830) (2,520) (2,714) (3,324) (1,407)
extraordinary item
Income tax expense (benefit) 1,011 (2,907) -- -- --
--------- --------- --------- --------- ---------
Earnings (loss) before extraordinary item (45,841) 387 (2,714) (3,324) (1,407)
Extraordinary loss from early extinguishment
of subordinated convertible debt 3,919 -- -- -- --
--------- --------- --------- --------- ---------
Net earnings (loss) (49,760) 387 (2,714) (3,324) (1,407)
Discount and imputed dividends on preferred stock -- 84 3,233 2,318 --
--------- --------- --------- --------- ---------
Earnings (loss) attributable to common stock $ (49,760) $ 303 $ (5,947) $ (5,642) $ (1,407)
========= ========= ========= ========= =========
Shares of common stock used in computing
earnings (loss) per common share:
Basic 40,826 30,078 15,549 7,459 5,485
Diluted 40,826 32,062 15,549 7,459 5,485
========= ========= ========= ========= =========
Net earnings (loss) per common share (basic and
diluted):
Earnings (loss) before extraordinary item $ (1.12) $ 0.01 $ (0.38) $ (0.76) $ (0.26)
Extraordinary item
(0.10) -- -- -- --
--------- --------- --------- --------- ---------
Net earnings (loss) attributable to
common stock $ (1.22) $ 0.01 $ (0.38) $ (0.76) $ (0.26)
========= ========= ========= ========= =========
</TABLE>
Balance Sheet Data (in thousands):
<TABLE>
<CAPTION>
June 30,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 4,605 $ 2,701 $ 2,554 $ 2,522 $ 1,423
Total assets 342,129 264,531 95,113 26,184 8,014
Long-term obligations, excluding current
installments 12,198 11,029 2,668 1,055 148
Total liabilities 133,047 89,960 50,125 12,161 1,681
Working capital 1,498 25,400 7,555 6,461 3,792
Stockholders' equity 209,082 174,571 44,988 14,022 6,333
</TABLE>
(1) ABT changed its fiscal year end to June 30th effective in 1995.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes thereto of ABT included elsewhere herein. ABT is the
largest developer, producer, marketer, and distributor of forage and cool-season
turfgrass seed in North America. Since early 1995, ABT has implemented a
business strategy designed to first, acquire leading North America companies
active in each step (research, production, distribution, and sales) in the
forage and cool-season turfgrass seed sector; second, combine the acquired
businesses into a single, customer-focused, vertically integrated entity; and
third, shift the focus of the acquired businesses from public, non-proprietary
seed varieties toward proprietary varieties with a long-term objective of
developing biotechnologically enhanced varieties. ABT has acquired a number of
seed businesses since January 1, 1995 (the "Acquisition Program") to accomplish
its business strategy. These acquisitions are summarized in Note 1 of Notes to
Consolidated Financial Statements. Historically, the results of operations of
the acquired companies have been included in ABT's consolidated results
beginning with the effective date of the acquisition in accordance with the
purchase method of accounting. As discussed in Note 1(b) of Notes to
Consolidated Financial Statements, ABT has taken effective control of acquired
businesses as of a mutually agreed upon effective date that precedes the closing
date when consideration is transferred to the sellers. ABT has reflected the
acquired businesses in its Consolidated Financial Statements as of the effective
date. Due to the size of ABT and the internal focus on integration of acquired
businesses, ABT has changed its acquisition practices, to operate and acquire
businesses at the closing date, instead of the effective date, for acquired
businesses not included in ABT's March 31, 1998 consolidated financial
statements.
The seed business is subject to wide seasonal and annual fluctuations. The
significant number of acquisitions and the period for which each is included in
ABT's consolidated financial statements in relation to the seasonality of the
business cycle of each acquisition significantly affects the meaningfulness of
comparisons drawn between periods. See also "Quarterly Comparisons" below.
The above factors may have significant impact on the following discussion
and analysis and should be considered as part of it.
RESULTS OF OPERATIONS
Selected information concerning the results of operations for ABT's fiscal
years ("Fiscal") ended June 30 (dollars in thousands) is summarized as follows:
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
-------- -------- -------
<S> <C> <C> <C>
Net sales $370,453 $205,117 $65,904
Gross profit 84,243 47,320 16,377
Percentage of net sales 22.7% 23.1% 24.8%
Operating expenses 109,881 47,579 17,972
Percentage of net sales 29.7% 23.2% 27.3%
Restructuring and special charges 9,752 - -
Percentage of net sales 2.6% - -
</TABLE>
ABT has essentially completed the first phase and, in late Fiscal 1999,
initiated the second phase of its business strategy. The first phase is an
acquisition program that enabled ABT to accumulate the critical mass it believes
is necessary to lead the transformation of the forage and turfgrass sector of
the seed industry. The second phase is to integrate the acquired businesses,
which have generally been operating as they were prior to being acquired, into a
single, customer-driven business entity centered around the ABT name and logo
(the "Integration Process"). In the Integration Process, ABT's objectives
include raising margins through the introduction of proprietary products and
reducing expenses by gaining economies of scale. The integration process has
progressed to the point that ABT believes that operating expenses will be
reduced by at least $14 million, on an annualized basis, for the fiscal year
beginning July 1, 1999.
14
<PAGE>
Since ABT did not initiate the Integration Process until near the end of
Fiscal 1999, essentially none of the efficiencies and cost reductions associated
with the Integration Process occurred in Fiscal 1999. To the contrary, during
Fiscal 1999, ABT incurred duplicative operating costs as it was necessary to
continue costs attributable to the individual acquired businesses while also
absorbing the costs associated with building the infrastructure necessary to
operate after the Integration Process is complete. Accordingly, management does
not believe Fiscal 1999 is indicative of future operating results.
Management believes EBITDA (earnings before interest, income taxes,
depreciation and amortization) is an important indicator of ABT's operating
performance particularly during the first and second phases of its business
strategy. EBITDA is widely used as a measure of a company's operating
performance and its ability to service its indebtedness. EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be construed as a substitute for net earnings (loss)
as a measure of performance, or cash flow from operations as a measure of
liquidity. Adjusted EBITDA, defined by ABT as EBITDA before restructuring and
special charges and extraordinary item, was $(12.7) million in Fiscal 1999, $6.4
million in Fiscal 1998 and $0.1 million in Fiscal 1997.
The increases in the dollar amounts of the items in the above table are in
part due to ABT's Acquisition Program which results in certain operations not
being included for the entire periods listed above. An integral part of ABT's
business strategy is to become vertically integrated with production operations
producing seed varieties developed by ABT's research operations and then
providing those seeds to ABT's distribution operations. This results in sales
made by production operations that formerly were made to third parties prior to
being acquired by ABT being made as intercompany sales to ABT owned distribution
operations after acquisition. Such sales between ABT operations are eliminated
in the consolidated results of operations and amounted to $102.0 million (27.6%
of reported net sales) in Fiscal 1999, $26.6 million (13.0% of reported net
sales) in Fiscal 1998 and $7.0 million (10.6% of reported net sales) in Fiscal
1997.
Net Sales. During Fiscal 1999, ABT had net sales of $370.5 million as
compared to $205.1 million during Fiscal 1998, and $65.9 million during Fiscal
1997. Such amounts reflect the operations of 34, 25, and 14 acquisitions,
respectively, beginning with the date of acquisition, as well as certain
start-up operations.
Total sales have been negatively impacted by lower prices and less than
expected international seed sales due to weak demand from the "Pacific Rim"
countries and weak demand in Europe. The countries in the Pacific Rim were
affected by weak economies, the strong U.S. dollar and tightening credit. This
situation resulted in a significant reduction in sales to customers in these
countries. The demand and price in Europe was negatively impacted by higher than
normal fall moisture patterns, which resulted in higher than normal seed
production yields but less seed being planted by consumers due to wet
conditions. Because of this situation, European companies were net exporters of
turfgrass seed products instead of importers. They have shipped less expensive
seed into the U.S. market, which had a negative impact on prices. The excess
European inventories have reduced both the amount of product sold into the
European market and the price for which it was sold. Forage seed sales were
impacted by the continuing weakness in the agricultural markets. Prices received
by farmers for hogs and beef cattle have remained weak and prices received for
dairy products, which had been strong have fluctuated significantly throughout
the year. The major corn seed producers have been reducing prices in an effort
to increase their market share. These developments have exerted a downward
pressure on forage prices. These factors have resulted in reduced sales of
forage seeds. Overall forage seed inventories continue to be in excess of
demand, except for shortages of non-dormant alfalfa, bluegrass, fine fescues and
annual ryegrass.
An important reason ABT management believes it can successfully execute its
long-term business plan is demand for ABT's proprietary forage and turfgrass
seed products. There has been strong demand during the winter and spring for
many of ABT's leading proprietary varieties of tall fescue, perennial ryegrass,
annual ryegrass, alfalfa and forage sorgham, with many of ABT's important,
leading forage and turfgrass seed varieties being virtually sold out.
Cost of Sales and Gross Profit. Cost of sales, primarily seed costs, were
$286.2 million, or 77.3% of net sales, in Fiscal 1999 as compared to $157.8
million, or 76.9% of net sales, for Fiscal 1998, and $49.5 million, or 75.2% of
net sales, for Fiscal 1997. The increases were primarily due to the Acquisition
Program and the Integration Process. The Acquisition Program resulted in the
addition of nine businesses in Fiscal 1999, eleven in Fiscal 1998 and four in
Fiscal 1997. These businesses have been included in ABT's operations only since
the date of their acquisition and not for the entire periods. The Integration
15
<PAGE>
Process impacted cost of sales for Fiscal 1999 through costs related to the
elimination of certain brands and varieties. When these products were
eliminated, any items still remaining in inventories had to be discarded or
written down. The costs included items that were no longer saleable and were
discarded. In addition, certain proprietary value-added products of brands and
varieties that are not to be continued were written down to reflect those
products being sold as common varieties. Furthermore, a decline in general price
levels of seeds sold as commodities required a reduction in the carrying amount
of these items in ABT's inventory. These costs, which were recognized in the
fourth quarter of Fiscal 1999, aggregated approximately $10.3 million. If these
inventory reductions are excluded, Fiscal 1999 cost of sales would have been
approximately $275.9 million or 74.5% of net sales.
The increase in the amount of gross profit is due to the Acquisition
Program, as described above. The decrease in the gross profit percentage is due
to a combination of factors, including, an excess supply of non-proprietary
grasses which created downward pricing pressure, the continuing pressure on
farmers because of falling prices for their products which creates downward
pressure on the price of products they purchase, the higher production costs
associated with the shortage of non-dormant alfalfa and the impact of the
Integration Program, offset, in part, by a change in product mix toward higher
gross profit proprietary products which were sold out by the third quarter.
There is worldwide oversupply of turfgrass and forage seed, except for
non-dormant alfalfa, bluegrass, fine fescues, and annual ryegrass. This
oversupply situation was caused by the "El Nino" wet spring weather pattern
which allowed U.S., Canadian and European seed growers to experience unusually
large harvests during the last crop year. The industry is following a trend
towards consolidation in the U.S. and in Europe. Smaller independent companies
facing this trend have responded with aggressive pricing programs to move their
excess inventories and retain their market share. These conditions are expected
to continue to cause downward pressure on prices and margins through the current
and into the next crop year.
ABT's goal is to raise gross margins over the next several years as a
result of ABT's attempt to consolidate the forage and turfgrass sector of the
seed industry, vertically integrate its operations, and shift its product lines
from primarily public varieties (commodities or commons) to proprietary (value
added) products.
Operating Expenses. Operating expenses increased from $18.0 million in
Fiscal 1997 and $47.6 million in Fiscal 1998 to $109.9 million in Fiscal 1999.
The increase is due to the Acquisition Program, the Integration Process, the
bankruptcy of a major customer and a general downturn in the farm economy. Nine
additional companies, acquired as part of the Acquisition Program, are included
in the results of operations for Fiscal 1999. The Integration Process required
ABT to expend additional resources during Fiscal 1999 which are not considered
"restructuring" or "special" charges. Some examples of these expenses are:
advertising which focuses on the ABT name as opposed to the various subsidiary
names, duplication of operating expenses during the Integration Process, the
cost of relocating equipment and personnel from closed facilities to open
facilities, the training costs associated with the enterprise resource planning
("ERP") system, travel cost associated with planning and implementing the
program and data conversion costs.
To accomplish ABT's business strategy, it was necessary to build a
centralized, upgraded, operational infrastructure ahead of revenue growth and
restructuring driven cost savings. This necessitated that personnel and other
resources be added at the central location prior to the time corresponding
resources were eliminated at other locations, resulting in duplication of costs
during the time both existing systems were being operated and the new system was
being implemented. For example, prior to deciding to centralize the accounting
function, ABT had approximately 60 full-time equivalent employees in its various
operations performing accounting functions. During the centralization process,
ABT added 13 employees, but after centralization, the accounting function is
estimated to require only about 30 employees.
The major components of operating expenses are personnel costs, occupancy
expense, vehicle and shipping expenses, outside services, travel and
advertising, all of which increased substantially in the current year compared
to the prior year. These increases are primarily due to the Acquisition Program.
The major components of operating expenses (in thousands) were as follows:
16
<PAGE>
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
----------- ----------- -----------
<S> <C> <C> <C>
Personnel costs $45,163 $22,353 $9,415
Occupancy expenses 15,594 5,587 2,778
Vehicle and shipping 12,097 2,646 1,280
Outside services 7,401 1,831 615
Travel 3,423 1,867 810
Advertising and promotion 8,518 3,901 642
Depreciation and amortization 11,230 4,738 1,156
</TABLE>
Personnel costs increased in Fiscal 1999 due to an increase in total
employees to a peak of 1,136 in February 1999 prior to staff reductions
associated with restructuring. Total employees at June 30, 1999 were 831
compared to 864 at June 30, 1998 and 325 at June 30, 1997. Occupancy expenses
increased in Fiscal 1999 resulting from ABT utilizing up to 88
warehouse/operating locations during the year. At June 30, 1999, ABT had 74
warehouse/operating locations compared to 70 at June 30, 1998 and 27 at June 30,
1997. Upon completion of the Integration Process, ABT estimates it will have
about 55 operating locations. Vehicle and shipping, outside services, travel,
advertising expenses, and depreciation and amortization also increased as a
result of ABT's increased level of operations following ABT's completion of
acquisitions for each respective period. At June 30, 1999, ABT has unamortized
intangible assets, including goodwill, of $152.9 million. ABT's ability to
recover the carrying amount of goodwill through undiscounted cash flows assumes
that results of operations and cash flows in future periods will improve from
historical levels. If ABT is unable to achieve its business objectives, some
portion of goodwill could be impaired in subsequent periods.
Restructuring and Special Charges. As discussed in Note 12 of Notes to
Consolidated Financial Statements, ABT's Board of Directors approved the
restructuring plan for the implementation phase of the business strategy. The
plan includes the closure of 33 facilities, a reduction in the workforce of
approximately 300 employees, consolidation of brands and implementation of a
consistent company-wide information system. Accordingly, in the year ended June
30, 1999, ABT recorded $9.8 million of restructuring and other integration
related costs that are non-recurring or infrequent in occurrence. Included in
this total are anticipated losses on disposal of closed facilities of $3.4
million, severance and other employee related costs of $3.2 million, anticipated
losses on disposal of duplicate and less efficient machinery and equipment not
needed in the integrated operations of $0.9 million, and other costs associated
with the integration of $2.3 million. Other costs includes lease termination
costs, consulting and professional fees, travel expenses, and various other
costs related to the integration. ABT anticipates that substantially all of the
restructuring will be completed in the year ending June 30, 2000. The
restructuring charges are based on estimates and therefore, are subject to
change. ABT does not believe any revisions to these estimates will be material.
Certain costs, such as equipment relocation and personnel relocation, are not
accrued until they actually occur. These costs will be recorded in Fiscal 2000
and are not expected to exceed $1 million.
Research and Development. Research and development expense was $3.4 million
in Fiscal 1999 compared to $2.3 million in Fiscal 1998 and $1.2 million in
Fiscal 1997. At June 30, 1999, ABT has research agreements or relationships with
The Samuel Roberts Noble Foundation, Global Agro, Inc., FFR Cooperative, Garst
Seed Company, Kimeragen and Forage Genetics. ABT also purchased Hybrigene, LLC,
a biotechnology company with an extensive patent estate involving site specific
recombination technology and has opened a molecular biology transformation
laboratory at and in association with the University of Rhode Island. As ABT
attempts to transform its forage and turfgrass seed businesses to proprietary
products with higher gross margins, ABT expects that research and development
expenses as a percentage of net sales will continue to increase and eventually
be similar to public companies in the other proprietary seed sectors. Research
and development expenditures increased dramatically in Fiscal 1998 with the
acquisition of Lofts and in Fiscal 1997 due to ABT's acquisition of W-L Research
and Burlingham. W-L Research's operations contain a sizable genetic research
program in alfalfa and Burlingham's and Lofts' businesses include significant
research programs for turfgrasses.
17
<PAGE>
Interest Expense. ABT's interest expense increased to $11.2 million in
Fiscal 1999 compared to $4.2 million in Fiscal 1998 and $1.7 million in Fiscal
1997. This was primarily due to increased borrowings under ABT's revolving line
of credit, including a $15 million overadvance facility beginning in August
1998, and the $15 million bridge loan from Deutsche Bank AG beginning in July
1998. The overadvance facility and the bridge loan bore interest at rates that
were considerably higher than the revolving line of credit. Under these
arrangements, ABT incurred interest expense and fees during Fiscal 1999
aggregating $2.9 million. Interest expense in prior years also includes imputed
interest of $554,816 in Fiscal 1998 and $390,000 in Fiscal 1997 to account for
the period of time between the effective and closing dates of ABT's
acquisitions.
Income Taxes. SFAS No. 109 provides that deferred taxes should be
determined by first identifying types and amounts of existing temporary
differences, the nature and amount of each type of operating loss carryforward,
and the remaining length of the carryforward period. Total deferred tax
liabilities and deferred tax assets are then measured by applying the enacted
tax rate to the existing differences. In addition, deferred tax assets are
reduced by a valuation allowance if, based on the weight of available evidence,
it is more likely than not (a likelihood of more than 50 percent) that some
portion or all of the deferred tax assets will not be realized. Accordingly, the
valuation allowance should be sufficient to reduce the deferred tax asset to the
amount that is more likely than not to be realized. A change in judgment about
the realizability of the related deferred tax asset in future years ordinarily
shall be included in income from operations. Future realization of the tax
benefit of an existing deductible temporary difference or carryforward depends
on the existence of sufficient taxable income within the period of reversal or
the carryforward period available under the tax law and/or future reversals of
existing deferred tax liabilities.
At June 30, 1997, ABT had deferred tax assets of approximately $3.6
million, which amount was reduced by a valuation allowance of approximately $3.3
million as required by SFAS No. 109, because ABT was unable to conclude that it
is more likely than not it will realize the deferred tax assets. Through the
quarter ended March 31, 1998, ABT reported approximately $1.4 million of
year-to-date book income before taxes, and forecast increasing future profits
based on the assumptions of increased revenue growth, synergies to occur from
the integration of acquired companies, and reduced product costs to be obtained
through vertical integration. Based on this current performance and projections,
ABT concluded that it was more likely than not that the deferred tax assets
would be realized, and removed the valuation allowance, resulting in an income
tax benefit of approximately $2.9 million in the quarter ended March 31, 1998.
At June 30, 1999, ABT has established a valuation allowance of $16,183,582
(exclusive of the $2,682,187 valuation allowance related to the loss
carryforward from stock option deductions), which results in no net deferred tax
asset or liability as of this date. Accordingly, ABT recognized a deferred tax
expense of $836,362 for Fiscal 1999. At June 30, 1999, ABT had net operating
loss carryforwards for federal income tax purposes aggregating approximately $39
million that are available to offset future taxable income. Therefore, ABT does
not anticipate any significant cash payments for federal income taxes in the
near term.
A summary of the valuation allowance activity is provided below.
Year ended June 30,
----------------------------
1999 1998
------------ ------------
Balance at beginning of year $ 3,415,311 $ 3,290,824
Stock options 1,148,334 3,415,311
Current year activity 16,183,582 591,711
Recognition of future benefits -- (2,947,914)
Deferred tax calculation on acquisitions (1,881,458) (934,621)
------------ ------------
Balance at end of year $ 18,865,769 $ 3,415,311
============ ============
Extraordinary loss from early extinguishment of subordinated debt. In
December 1998 and January 1999, ABT sold $23.3 million of convertible debentures
and 1.7 million warrants to purchase ABT's common stock. This transaction is
described in Note 5 of Notes to Consolidated Financial Statements. ABT received
an aggregate of $25 million from this transaction. On May 28, 1999, ABT
completed an early redemption of the subordinated convertible debentures. The
warrants remain outstanding. ABT paid cash of $27.6 million, including accrued
interest to fully redeem the debt. The difference between the cost of redeeming
the debt and the amount reflected on ABT's books amounting to $3.9 million is
reflected as an extraordinary item in the statement of operations.
Net Earnings(Loss). ABT's net loss was $49,760,307 for Fiscal 1999,
compared to net earnings of $387,241 for Fiscal 1998 and a net loss of
$2,713,765 for Fiscal 1997, primarily as a result of the items discussed above.
18
<PAGE>
As discussed in Note 7 of Notes to Consolidated Financial Statements, the
Staff of the Securities and Exchange Commission has taken a position regarding
securities, such as ABT's convertible preferred stock, containing conversion
features allowing for conversion into common stock at a discount from future
quoted market prices. Application of this position required ABT to allocate an
amount to the conversion feature and to account for it as a return to the
holders of the securities, as well as to impute dividends on the convertible
preferred stock. This resulted in the net earnings (loss) attributable to common
stock (on which earnings (loss) per share is computed) being decreased by
$84,100 to $303,141 for Fiscal 1998, and $3,233,426 to $(5,947,191) in Fiscal
1997.
Average common shares outstanding used in computing earnings (loss) per
common share increased due to additional shares issued, primarily for cash,
acquisitions, options and warrants. For purposes of computing diluted earnings
per share for Fiscal 1998, average shares outstanding are increased by the
dilutive effects of options, warrants, and convertible preferred stock
outstanding during the year. Such items were anti-dilutive and, therefore,
excluded in Fiscal 1999 and 1997.
Quarterly Comparisons
See "Overview" above for a discussion of ABT's Acquisition Program. The
table below sets forth quarterly operating data of ABT for Fiscal 1998 and
Fiscal 1999. This quarterly information is unaudited, but in management's
opinion, reflects all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information for the period
presented.
The forage and turfgrass seed sector has a seasonal sales cycle, as do
other agribusinesses. Weather conditions and the economic outlook for
alternative crops affect seed production yields, insect population and farmers'
planting decisions, which may, in turn, cause fluctuations in seed prices and
annual sales. A significant portion of ABT's sales have historically been in the
third fiscal quarter (ending March 31) for planting in late March through May.
ABT's acquisitions of Burlingham, Olsen Fennell and Lofts added a significant
amount of turfgrass seed sales in the fall, primarily for overseeding golf
courses, southern forage grasses, landscapes, and retail.
<TABLE>
<CAPTION>
Quarters ended
----------------------------------------------------------------------------------------------------
June 30, March Dec 31, Sept. 30, June 30, March 31, Dec. 31, Sept.
1999 31, 1999 1998 1998 1998 1998 1997 30, 1997
(In thousands, except per share data)
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 98,476 $ 106,436 $ 75,939 $ 89,602 $ 65,422 $ 75,880 $ 23,357 $ 40,458
Cost of sales 83,893 78,076 58,411 65,830 48,588 57,623 18,662 32,924
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit 14,583 28,360 17,528 23,772 16,834 18,257 4,695 7,534
Operating expenses 36,507 27,071 25,078 21,225 20,137 14,763 6,208 6,471
Restructuring and
special charges 7,795 1,957 -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from
operations (29,719) (668) (7,550) 2,547 (3,303) 3,494 (1,513) 1,063
Other income (expense) (2,943) (1,583) (3,043) (1,871) (627) (1,475) 120 (279)
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before
income taxes and
extraordinary item (32,662) (2,251) (10,593) 676 (3,931) 2,019 (1,393) 785
Income tax expense
(benefit) 970 11 (312) 342 -- (2,907) -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before
extraordinary item (33,632) (2,262) (10,281) 334 (3,931) 4,926 (1,393) 785
Extraordinary item 3,919 -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) (37,551) (2,262) (10,281) 334 (3,931) 4,926 (1,393) 785
Discount and imputed
dividends on
preferred stock -- -- -- -- 3 27 27 27
--------- --------- --------- --------- --------- --------- --------- ---------
Net earnings (loss)
attributable to
common stock $ (37,551) $ (2,262) $ (10,281) $ 334 $ (3,934) $ 4,899 $ (1,420) $ 758
========= ========= ========= ========= ========= ========= ========= =========
Net earnings (loss) per
common share (diluted):
Earnings (loss) before
extraordinary item $ (0.82) $ (0.05) $ (0.26) $ 0.01 $ (0.11) $ 0.13 $ (0.05) $ 0.03
Extraordinary item (0.10) -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) $ (0.92) $ (0.05) $ (0.26) $ 0.01 $ (0.11) $ 0.13 $ (0.05) $ 0.03
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
19
<PAGE>
Earnings per share (basic) is the same as diluted for the periods presented
above except for the quarter ended March 31, 1998, which had basic earnings per
share of $0.15. See Note 12 of Notes to Consolidated Financial Statements for a
discussion of the restructuring and special charges and a related inventory
adjustment recognized in the fourth quarter of Fiscal 1999.
As discussed under "Overview" above, through March 31, 1998, ABT has
recognized acquired businesses in its Consolidated Financial Statements as of
the effective date agreed upon with their sellers. The following table shows the
net sales and net earnings (loss) as if the results of operation of the acquired
business from the effective date to the closing date were removed from the
reported consolidated operating results and reflecting acquisitions beginning
with the closing date. Since March 31, 1998, the closing dates and effective
dates for acquisitions have been the same.
Period ended Net sales Net earnings (loss)
------------ --------- ------------------
(In thousands)
-------- --------
Three months ended September 30, 1996 $ 4,938 $ (1,563)
Three months ended December 31, 1996 11,073 (1,264)
Three months ended March 31, 1997 20,223 1,285
Three months ended June 30, 1997 16,264 (2,120)
-------- --------
Year ended June 30, 1997 $ 52,498 $ (3,662)
======== ========
Three months ended September 30, 1997 $ 30,618 $ (166)
Three months ended December 31, 1997 22,905 (1,528)
Three months ended March 31, 1998 64,129 4,314
-------- --------
Nine months ended March 31, 1998 $117,652 $ 2,620
======== ========
The following charts show the net sales and net earnings (loss) shown in
ABT's Consolidated Financial Statements compared to those items as shown in the
above table, as well as similar comparisons of total assets and total
stockholders' equity.
20
<PAGE>
[Omitted line graphs for 1) net sales, 2) net earnings (loss), 3) total assets,
and 4) total stockholders' equity showing by quarter from September 30, 1996
through March 31, 1998 amounts in thousands a) as reported, using effective
dates, and b) using closing dates.]
LIQUIDITY AND CAPITAL RESOURCES
The following summarizes certain information concerning ABT's financial
condition:
<TABLE>
<CAPTION>
June 30,
------------------------------
1999 1997 1998
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Working capital $ 1,498 $ 25,400 $ 7,555
Property, plant, and equipment, net 62,212 47,965 17,864
Short-term debt 71,909 50,330 24,203
Long-term debt, including amounts
due within one year 18,176 14,281 3,724
Total stockholders' equity 209,082 174,571 44,988
</TABLE>
Changes in the above items are primarily due to the acquisitions completed
by ABT, including changes in these items following the dates of acquisition due
to growth and seasonality of the seed business and related financings. ABT
primarily obtains working capital internally from collections on accounts
receivable and externally from borrowings under its revolving line of credit and
proceeds from the issuance of common stock. Information concerning increases
(decreases) in certain operational assets and liabilities acquired in
acquisitions and other changes is as follows:
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 Fiscal 1997
------------------- ------------------- -------------------
Acquis- Other Acquis- Other Acquis- Other
itions changes itions changes itions changes
-------- -------- -------- -------- -------- --------
( In thousands)
<S> <C> <C> <C> <C> <C> <C>
Accounts receivable $ 12,674 $ (6,493) $ 19,768 $ 2,260 $ 11,796 $ (1,823)
Inventories 16,340 (8,032) 34,574 706 18,172 (1,898)
Property, plant and equipment 11,794 10,535 25,214 6,930 9,822 1,073
Accounts payable and accrued
expenses 14,952 1,467 20,294 (10,365) 12,210 (4,948)
</TABLE>
21
<PAGE>
Net earnings (loss), adjusted for non-cash impacts of depreciation,
amortization, equity in earnings of associated entity, deferred income taxes,
common stock and options for services, and restructuring and special charges
amounted to $(33,440,557), $1,766,201, and $(1,718,454) for Fiscal 1999, Fiscal
1998, and Fiscal 1997. Such amounts reflect the growth of ABT due to the
Acquisition Program and the items discussed under Results of Operation above.
These amounts and the changes in the levels of operational assets and
liabilities, primarily receivables, inventories, and payables, resulted in total
net cash used in operating activities being $16,918,902, $11,289,913 and
$2,526,926 for the years ended June 30, 1999, 1998 and 1997. The changes in
operational assets and liabilities reflect changes in the levels of such items
at fiscal year end from such levels at the beginning of the year or the
acquisition date, if acquired during the year. The impact of acquisitions is
dependent upon the timing of the date of acquisition in relation to the highs
and lows of such items caused by the seasonality of each acquired business.
ABT used cash in investing activities, primarily related to acquisitions
and additions to property, plant and equipment, amounting to $48,678,385 in
Fiscal 1999, $73,301,112 in Fiscal 1998, and $26,534,673 in Fiscal 1997. Since
ABT has essentially completed the acquisition phase of its development, cash
used in investing activities is anticipated to be at significantly reduced
levels in the future.
ABT had working capital of $1,498,277 at June 30, 1999, as compared to
$25,399,772 at June 30, 1998. The change in working capital is due to changes in
ABT's current assets and current liabilities, which are primarily attributable
to decreases due to acquisitions, additions to property, plant, and equipment,
and the operating loss for Fiscal 1999, offset, in part, by increases from
issuances of common stock. To finance acquisitions and ongoing operations, ABT
has raised significant amounts of equity capital. During Fiscal 1999, ABT
received cash proceeds of $54,290,829 from the sale of 6,879,670 shares of its
common stock, $4,075,820 from the issuance of warrants to purchase common stock,
and $8,847,148 from the exercise of options and warrants to acquire ABT's common
stock. During Fiscal 1998, ABT received cash proceeds of $67,663,505 from the
sale of 5,075,182 shares of its common stock and 586,500 warrants and
$19,103,300 from the exercise of options and warrants to acquire ABT's common
stock. ABT also received $9,990,000 in payments on notes receivable at June 30,
1997 from the exercise of options and warrants prior to June 30, 1997.
During Fiscal 1997, ABT received cash proceeds of $9,443,827 from the
exercise of existing options and warrants, including payments on notes
receivable for warrants and options exercised. In addition, ABT received gross
proceeds of $10 million from the private placement of its Series C Preferred
Stock during Fiscal 1997. ABT paid commissions equal to 13% of the gross
proceeds.
ABT entered into a Revolving Credit Facility (the "Revolving Credit
Facility") on June 23, 1998, with BankAmerica Business Credit, Inc. ("BABC"),
and certain other financial institutions. Under the Revolving Credit Facility,
ABT has a maximum borrowing availability of up to $100 million (subject to a
borrowing base computation and compliance with certain financial covenants), and
may borrow, repay and reborrow revolving loans. The Revolving Credit Facility
expires on June 23, 2001. As of June 30, 1999, ABT had borrowed approximately
$71.9 million, including items in process of collection. At October 8, 1999,
approximately $62.1 million was outstanding and $26.5 million was available to
be borrowed under the Revolving Credit Facility based on the borrowing base
computation at that date.
ABT may elect to borrow amounts under the Revolving Credit Facility that
bear interest at a variable rate equal to the "reference rate" of Bank of
America plus 1.125% or at a variable rate of interest equal to the applicable
"London Interbank Offered Rate" of the Bank plus 3.00%. The average interest
rate on amounts outstanding under the Revolving Credit Facility at June 30, 1999
was 8.06%. The Revolving Credit Facility is secured by collateral consisting of
substantially all the assets (excluding real property) of ABT and its
subsidiaries. The terms of the Revolving Credit Facility contain operating and
financial covenants, including requirements to maintain minimum ratios of cash
flow to debt service and a maximum ratio of total debt to equity.
22
<PAGE>
On August 14, 1998, ABT and BABC amended the Revolving Credit Facility to
provide for borrowings of $15 million in excess of amounts allowed under the
borrowing base computation (the "BABC Bridge") through December 31, 1998. This
additional borrowing carried a fixed interest rate of 18%.
ABT entered into a bridge loan facility (the "Deutsche Bridge") on July 3,
1998 with Deutsche Bank AG, which provided ABT with $15 million of unsecured
bridge financing. The loan was repaid upon maturity on January 4, 1999. Interest
on the Deutsche Bridge averaged the LIBOR rate plus 4.8%.
In December 1998 and January 1999, ABT sold $23.3 million of convertible
debentures and 1.7 million warrants to purchase ABT's common stock. ABT received
an aggregate of $25 million from this transaction, which was used to repay the
BABC Bridge and the Deutsche Bridge. The debt was due on December 30, 2001 and
provided for interest at 5% per annum, which ABT had the option of paying in
cash or its common stock. The debt was subordinated to ABT's Revolving Credit
Facility. On May 28, 1999, ABT completed an early redemption of the subordinated
convertible debentures. ABT paid cash of $27.6 million, including accrued
interest, to fully redeem the debt. In connection with the early redemption of
its subordinated convertible debt, ABT borrowed $10 million from Richard Budd, a
director of ABT and its Chief Executive Officer since February 26, 1999, and his
family, including Kenneth Budd, ABT's President and Chief Operating Officer. The
debt was repaid on June 8, 1999, including interest at 8.25% per annum. See Note
5 of Notes to Consolidated Financial Statements.
ABT had long-term obligations (including current installments) of
approximately $18.2 million at June 30, 1999 and $14.3 million at June 30, 1998.
The long-term obligations consisted primarily of mortgages, covenants not to
compete and deferred compensation. In addition, as described in Note 7 of Notes
to Consolidated Financial Statements, ABT has guaranteed the proceeds from the
sale of common stock by certain former owners of certain acquired companies.
During Fiscal 1999, ABT made payments aggregating $3.9 million under these
agreements and $1.5 million was accrued at June 30, 1999 that was paid
subsequently. If the shares remaining to be sold are sold at an average price of
$4.00 per share, ABT would make an additional payment of $1.6 million in July
2000.
Subsequent to June 30, 1999, ABT sold 700,000 shares of common stock for
cash of $3.5 million. In addition, ABT borrowed approximately $3 million from a
special purpose entity controlled by officers of ABT the proceeds of which were
used for working capital. This debt is secured by certain real estate and
provides for interest at 10% per annum. The debt is due on demand or, if no
demand is made, ninety days from the borrowing, and is repayable upon any
refinancing by ABT.
When ABT entered into the Revolving Credit Facility, the debt service
covenant was reflective of ABT's forecasted operations, including businesses
acquired at that time. Subsequent acquisitions and other changes in ABT's
operations have caused the covenant to not be appropriate for ABT's current
business structure. The loss incurred during the fourth quarter of the year
ended June 30, 1999 resulted in ABT not being in compliance with the debt
service covenant at June 30, 1999 and would have prevented ABT from being able
to comply with the covenant through June 30, 2000. Subsequent to June 30, 1999,
the lenders agreed to waive compliance with the covenant at June 30, 1999 and
the covenant has been amended to reflect ABT's current operational structure and
forecasted results of operation. ABT believes it will be able to comply with the
covenant as restructured. At the time the covenant was amended, the revolving
line of credit was also amended to reduce the maximum borrowings under the line
to $90 million and to increase the interest rate charged on borrowings by 1%. In
addition, at ABT's discretion, the advance rate on eligible inventory may be
reduced to 55% effective January 15, 2000, or the interest rate on borrowings
will be increased by an additional 1% and additional fees will be due the
lenders.
ABT has received a commitment from a major financial institution that, if
consummated, would provide ABT with additional financing capacity and replace
ABT's existing Revolving Credit Facility. The proposed financing arrangement
would provide ABT with a revolving line of credit of up to $115 million and
five-year term financing of up to $20 million. ABT would be required to obtain
an additional $5 million of equity capital or unsecured debt. The revolving debt
would be subject to a borrowing base computation based on levels of eligible
accounts receivable and inventory. The term debt would be based on the appraised
values of certain items of ABT's property, plant and equipment. The new debt
would be secured by substantially all of ABT's assets. ABT is currently
evaluating the terms of the commitment but has not yet accepted it. It is
anticipated that this financing will be completed by the end of November 1999,
although there can be no assurance this financing will be completed. In the
event this financing is not completed, ABT will continue to explore other
alternatives to supplement or replace its existing Revolving Credit Facility,
including obtaining long-term debt secured by ABT's property, plant and
equipment. In addition, it is possible ABT may seek to raise additional equity
capital.
ABT believes, based on its current operational structure and forecasted
results of operations for Fiscal 2000 that borrowings under the revolving Credit
Facility will be sufficient to fund ABT's operations through June 30, 2000.
However, the seed business is subject to wide seasonal fluctuations, which
result in a significant increase in the level of inventory prior to and during
the heavier selling season in the spring and related higher levels of accounts
receivable following such sales through the early summer. This also reflects
industry practice that dictates a significant amount of sales of certain
products are made with extended terms through mid summer. In addition, the seed
business can be significantly impacted by the weather, which can alter the
timing and nature of crops planted by farmers which, in turn, affects the timing
and nature of seed sales. For these reasons, or if ABT were to make additional
acquisitions, ABT may need to seek additional financial resources to finance
ongoing operations.
23
<PAGE>
YEAR 2000 READINESS STATEMENT
As of August 1, 1999, ABT believes all of its domestic information systems
were Year 2000 ready. Domestic operations constitute approximately 96.4% of
ABT's annual net sales. This was in large part accomplished by migrating
approximately 86.5% of domestic operations to an enterprise resource planning
("ERP") information system and the remaining 13.5% will continue on an existing
system that ABT believes is Year 2000 ready. ABT is in the process of
integrating its Canadian operations into its ERP information system and has
contracted for software, hardware and consulting services to implement this
integration by the end of October 1999. ABT's operations in Mexico will be
converted to an independent Year 2000 platform by November 1999. The conversion
of these international operations will complete the internal Year 2000
information systems readiness project. The cost of this implementation is not
expected to exceed $8.5 million, which amount includes internal costs for
personnel, training, supplies, travel and equipment. At June 30, 1999, ABT had
incurred approximately $8.2 million of these costs. The implementation costs are
funded through operations, the credit facilities described above, and
approximately $954,000 of financing provided by one of the vendors.
The ERP and related network and hardware systems are designed to be Year
2000 compliant. Local area networks, desktop hardware, and desktop operating
systems for domestic operations are believed to be Year 2000 ready.
International operations are planned to be Year 2000 ready by November 1999 as a
result of the system integration and migration.
ABT believes that it has allocated adequate resources to mitigate the most
significant risks related to the Year 2000 issue. ABT expects its Year 2000
program to be successfully completed on a timely basis prior to January 1, 2000.
However, there can be no assurance that this will be accomplished. In the event
any operating units remain Year 2000 non-compliant in late 1999, ABT's
contingency plan is twofold. First, ABT has identified reparation for existing
software that is available as an upgrade, patch, or software replacement (data
field masks, editing date related computations, or as a temporary workaround).
Secondly, ABT has identified the potential to encapsulate data information as a
temporary measure until the software or systems can be replaced. In the worst
case scenario, ABT can resort at the operating unit level to simple desktop
accounting packages that are Year 2000 compliant. ABT estimates that the overall
risk to its operations as a result of non-compliance with Year 2000 for its
existing systems in a worst case scenario to be less than $100,000. However,
there can be no assurance that this estimate is the absolute maximum.
The ability of third parties with which ABT transacts business to
adequately address their Year 2000 issues is outside of ABT's control. ABT has
taken steps to confirm that the systems of its suppliers and customers are
expected to be Year 2000 compliant and to determine whether the nature of any
noncompliance would have a material adverse effect on ABT's business, financial
condition and results of operations. ABT has identified what it considers major
customers and vendors. Each identified company was sent a survey concerning Year
2000 compliance. Non respondents were sent a second survey and/or were contacted
directly. Responses from all critical vendors have been received but 28
customers and 66 other vendors have not responded to our inquiries. ABT believes
that these vendor and customers will not have a material adverse impact on ABT's
operations if they are not Year 2000 compliant. Year 2000 Readiness Statements
are on file for all survey respondents. ABT anticipates the process for
obtaining readiness statements for the remainder of its major customers and
suppliers will be complete no later than November 1999. The responses received
have not indicated any instances of noncompliance with Year 2000 that would
cause significant problems to ABT.
There can be no assurance that the failure of ABT or such third parties to
adequately address their respective Year 2000 issues will not have a material
adverse effect on ABT's business, financial condition, cash flows and results of
operations.
INFLATION
Management does not believe that inflation has had a significant effect on
ABT's operations to date. The cost of seed products is largely affected by seed
yields and alternative crop prices, which have not generally been greatly
impacted by inflation. The costs which are normally impacted by inflation, such
as wages, transportation and energy, are a relatively small part of ABT's total
operations. However, ABT remains subject to possible significant inflation in
Mexico, Argentina and other foreign countries.
24
<PAGE>
IMPACT OF ACCOUNTING STANDARDS NOT YET ADOPTED
The impact of new accounting standards not yet adopted by ABT is discussed
in Note 2 of Notes to Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the normal course of business, ABT is subject to a variety of market
risks, including, but not limited to, interest rate movements. ABT routinely
monitors these risks and takes actions to protect against the adverse effects of
these and other potential exposures. Although ABT does not anticipate any
material losses in these areas, no assurance can be made that material losses
will not be incurred in these areas in the future. ABT has no derivative
financial instruments or derivative commodity instruments, nor does ABT have any
financial instruments entered into for trading purposes. ABT's financial
instruments are not subject to significant foreign currency exchange risk,
commodity price risk, or equity price risk. Other financial instruments are
discussed in Note 11 of Notes to Consolidated Financial Statements. Long-term
obligations and short-term debt are discussed in Notes 5 and 6 of Notes to
Consolidated Financial Statements, including the extent of such items that bear
interest at variable rates. An increase or decrease in the interest rate of 100
basis points on ABT's variable rate short-term debt would decrease or increase
ABT's pre-tax earnings by one percent of the average amount outstanding under
the line of credit. The level of short term debt is significantly impacted by
the level and timing of acquisitions, the results of operations, and the timing
and amount of permanent capital raised. The average variable rate short-term
debt was approximately $82.5 million for Fiscal 1999 and $32.5 million for
Fiscal 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules required by Item 8 begin on page
F-1. The supplementary financial information requirements of Item 8 are not
applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and executive officers of ABT at June 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Richard P. Budd 57 Director, Chairman of the Board and Chief Executive Officer
James W. Hopkins 64 Director (l)
Randy Ingram 39 Director, Executive Vice President, Chief Financial Officer, and Director of
Business Development
James W. Johnston 53 Director (l)
L. Glenn Orr, Jr. 59 Director
Thomas B. Rice 53 Director, Executive Vice President, and Director of Research
Kenneth R. Budd 38 President and Chief Operating Officer
Douglas A. Fisher 50 Senior Vice President, General Counsel, Director of Business
Services and Secretary
</TABLE>
(1) Member of the Audit, Compensation and Stock Option Committees.
25
<PAGE>
Richard P. Budd has been Chairman of the Board and Chief Executive Officer
("CEO") of ABT since February 26, 1999. He was elected a director of ABT on
January 6, 1998, upon ABT's acquisition of Lofts Seed, Inc. He served as the CEO
of Budd Seed, Inc., an affiliate of Lofts, from 1985 and of Lofts Seed, Inc.
from June 1996 until both companies were acquired by ABT in January 1998. Mr.
Budd has also been the CEO of The Budd Group since 1964. The Budd Group is a
service company engaged in primarily janitorial, landscape, security guard and
administrative support services, and provided management services to ABT from
January 1998 through December 1998. Mr. Budd is President of Sylco Aviation,
Inc. and the Vice Chairman of High Point University. Richard Budd is the uncle
of Kenneth R. Budd.
James W. Hopkins has served as a director of ABT since January 1997 and
also as a consultant to ABT since June 1997. Since July 1996, he has served as
President of Agriworld Technologies, an agricultural consulting firm. Prior
thereto, from December 1993, he served as Vice President of Mycogen Corporation
and General Manager of Mycogen Seeds. For Mycogen Corporation, Mr. Hopkins
worked on strategic alliances, joint ventures, acquisitions and mergers and was
responsible for all global seed activities. For Mycogen Seeds he was responsible
for the consolidation of four autonomous operating companies. Between 1963 and
1992, Mr. Hopkins had a variety of responsibilities with four different seed
companies. He has extensive experience in the summer annual forage crops.
Randy Ingram has served as Executive Vice President of ABT since June 9,
1999. From February 23, 1999 to June 8, 1999, Mr. Ingram served as Co-President.
He has been the Chief Financial Officer ("CFO") and Director of Business
Development since November 3, 1998. He was elected to ABT's Board of Directors
in February 1999. Prior to joining ABT in September 1998, Mr. Ingram was Head,
Business Planning and Development at Novartis Seeds AG (Basel, Switzerland), the
world's second largest seed company. At Novartis, Mr. Ingram coordinated global
strategic and annual business planning processes and served as leader of
technology licensing and acquisitions efforts. Prior to his Basel position, he
was Vice President and CFO of Northrup King Co. (then part of Sandoz and now
part of Novartis Seeds). He began his career in the seed industry in finance at
Pioneer Hi-Bred International, Inc.
James W. Johnston has served as a director of ABT since March 16, 1999. Mr.
Johnston is President and Chief Executive Officer of Stonemarker Enterprises,
Inc., a consulting and investment company. During his career, he served as Vice
Chairman of RJR Nabisco, Inc., a holding company, from 1995 to 1996. From 1989
to 1996, he also served as Chairman of R.J. Reynolds Tobacco Co., and was CEO of
that company until 1995. Mr. Johnston was named a Director of RJR Nabisco
Holdings Corp. in 1992 and Chairman of R.J. Reynolds Tobacco International, Inc.
in 1993. He retired from R.J. Reynolds in July 1996. Mr. Johnston began his
business career with Ford Motor Co. and has held senior management positions at
various subsidiaries of Northwest Industries, Inc. and Citibank N.A.
L. Glenn Orr, Jr. has served as a director of ABT since June 16, 1999. He
is currently Chairman, CEO and President of Orr Management Company, an
investment-banking firm in Winston-Salem, NC. He is Chairman Emeritus, and
former Chairman, CEO and President of Southern National Corporation, a southeast
U.S. banking firm. He helped to successfully merge Southern National Corporation
with Branch Bank & Trust Co., creating one of the leading banks in the southeast
U.S. Mr. Orr serves on the Board of Directors of eight companies, including
three other publicly traded companies (Polymer Group, Highwoods Properties, and
Ladd Furniture Co.) and one registered investment company (BMC Fund, Inc.), and
also serves on the Boards of various non-profit organizations including as
Trustee of Wake Forest University and a former member of the North Carolina
Economic Development Commission.
Thomas B. Rice, Ph.D. has served as Executive Vice President of ABT since
June 9, 1999. From February 23, 1999 to June 8, 1999, Dr. Rice served as
Co-President. He has been Director of Research since January 1, 1998. On
February 1, 1999, he was elected a director of ABT. Dr. Rice has a Ph.D. in
genetics from Yale University. Dr. Rice has over 20 years of experience in the
seed industry in both research and management. From 1976 to 1985, Dr. Rice
worked for Pfizer, Inc. where he served as senior research scientist, project
leader and manager. From 1985 to 1990, he served as Vice President, Director of
Research and Executive Vice President of DEKALB-Pfizer Genetics. From March 1990
to July 1993, Dr. Rice was the President and Chief Operating Officer of DEKALB
Plant Genetics. From July 1993 until April 1995 he served as the Senior Vice
President, Director of Research of DEKALB Genetics Corp. From May 1995 until
joining ABT, Dr. Rice was a self-employed consultant.
26
<PAGE>
Kenneth R. Budd became an executive officer of ABT on June 9, 1999 serving
as President and Chief Operating Officer ("COO"). Mr. Budd is responsible for
retail operations and retail marketing, including the mass merchant business and
Specialty Distribution. He joined ABT in January 1998 as a result of the Lofts
acquisition. Prior to his current position, he served ABT as Eastern Operations
Director and President of Lofts Seed, Inc. Budd has over 15 years' operational
management experience in the seed business, beginning as General Manager of the
Budd family's first seed company acquisition. He successfully directed and led
the consolidation of the various Budd seed holdings into Lofts Seed, Inc. Budd
has been actively involved in seed industry trade associations during his career
and is a former President of the North Carolina Seedsman Association and past
member of the Board of Directors of the North Carolina Crop Improvement
Association. Kenneth Budd is the nephew of Richard Budd.
Douglas A. Fisher became an executive officer of ABT on June 9, 1999 when
he became a Senior Vice President. From February 1, 1998 to June 8, 1999, he
served as Vice President. He has also been General Counsel and Director of
Business Services since February 1, 1998 and Secretary since February 1, 1999.
Prior to joining ABT, he served as General Counsel at Seminis, Inc., a world
leader in vegetable seed products. From 1982 to 1995, he was Deputy General
Counsel of DEKALB Genetics Corporation. Prior to that he was in private law
practice. Mr. Fisher's legal experience has been in the areas of intellectual
property, licensing, biotechnology, litigation and dispute resolution,
anti-trust, international, distribution, and securities.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board of
Directors.
The Board of Directors has established Audit, Stock Option and Compensation
Committees, each of which consists of Mr. Hopkins and Mr. Johnston. Mr. Hopkins
was a member of these committees for all of Fiscal 1999 and Mr. Johnston has
been on these committees since becoming a director on March 16, 1999. Mr.
Richard P. Budd was a member of these committees from July 1, 1998, the
beginning of ABT's fiscal year, until he became the CEO on February 26, 1999.
See Item 11 for a description of consulting arrangements with certain directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Pursuant to Section 16 of the Exchange Act, ABT's Directors and executive
officers and beneficial owners of more than 10% of ABT's common stock, par value
$.001, are required to file certain reports, within specified time periods,
indicating their holdings of and transactions in the common stock and derivative
securities of ABT. Based solely on a review of such reports provided to ABT and
written representations from such persons regarding the necessity to file such
reports, ABT is not aware of any failures to file reports or report transactions
in a timely manner during ABT's fiscal year ended June 30, 1999, except that
Messrs. Hopkins and Ingram each filed one late report on Form 4 concerning one
transaction each, and Messrs. Richard Budd and Kent Schulze filed one late
report on Form 5 concerning one transaction each.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by, or
paid for all services rendered to ABT during the fiscal year ended June 30, 1999
("Fiscal 1999"), the fiscal year ended June 30, 1998 ("Fiscal 1998") and the
fiscal year ended June 30, 1997 ("Fiscal 1997") by those persons who, during
Fiscal 1999, served as CEO, the four highest compensated executive officers who
received compensation in excess of $100,000 during Fiscal 1999, and two
additional individuals who would have been included in the previous category,
except for the fact that they were not executive officers at the end of Fiscal
1999 (collectively, the "Named Executive Officers").
27
<PAGE>
<TABLE>
<CAPTION>
Long-term
Other annual
Annual compensation compensation
---------------------------------------------- --------
Securities
Other annual underlying
Name and principal position Year Salary($) Bonus($) compensation($)(1) options(#)
--------------------------- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Richard P. Budd (2) 1999 $-- $ -- $ -- --
CEO
Kenneth R. Budd (3) 1999 $125,000 $ 50,000 $ -- 25,000
President and COO
Douglas A. Fisher(3) 1999 $150,000 $ -- $ -- --
Senior Vice-President,
General Counsel, Secretary
and Director Of
Business Services
Randy Ingram (3) 1999 $120,000 $ 40,000 $ -- 300,000
Executive Vice-President, CFO
and Treasurer
Thomas B. Rice (4) 1999 $128,000 $ -- $ -- --
Executive Vice-President, 1998 $ 60,000 $ -- $ -- 500,000
Director of Research
Johnny R. Thomas (5) 1999 $ 44,000 $ -- $ -- 50,000
1998 $ 60,000 $ -- $ -- --
1997 $ 84,000 $ -- $131,906(6) --
Kent Schulze (7) 1999 $139,183 $ -- $399,999 --
1998 $ 87,500 $ -- $ -- 400,000
Henry A. Ingalls (8) 1999 $150,000 $ 30,000 $ 20,000 --
Vice President 1998 $150,000 $ 30,000 $ 20,000 --
1997 $150,000 $ 30,000 $ 26,250(6) --
</TABLE>
(1) The above compensation figures do not include the cost to ABT of benefits,
including premiums for life and health insurance and any other personal
benefits provided by ABT to such persons in connection with ABT's business,
which were in any event below reportable thresholds.
(2) Richard P. Budd became CEO on February 26, 1999, but did not become an
employee of ABT until July 1, 1999. From February 26, 1999 through June 30,
1999, he was paid $68,250, as a consultant. Effective July 1, 1999, he will
be compensated at an annual rate of $ 150,000 and he was granted options to
purchase 500,000 shares of ABT's common stock at a price of $6.125, which
was the closing price of ABT's common stock on the date of grant.
(3) Mr. Ingram became an executive officer on November 2, 1998. Mr. Kenneth R.
Budd and Mr. Fisher became executive officers on June 9, 1999. Each had
been employed in non-executive officer positions prior to such date. The
compensation amounts reflect all amounts paid for Fiscal 1999 in all
capacities of service to ABT.
(4) Dr. Rice joined ABT and became an executive officer on January 1, 1998.
(5) Dr. Thomas was the CEO until February 26, 1999, at which time he ceased to
be an executive officer. His compensation as CEO was at an annual rate of
$60,000. Dr. Thomas remains a part-time employee of ABT receiving
compensation of $1,000 per month and he was granted options to purchase
50,000 shares of ABT's common stock at $5.81 per share, which was the
closing price of ABT's common stock on the date of grant.
(6) Includes the difference between the exercise price and the fair market
value of options (the "spread") on the date of exercise of in-the-money
options, but excludes the spread for options not in-the-money when
exercised.
(7) Mr. Schulze was President and COO from January 1, 1998 to March 24, 1999,
when he resigned. The amount of other annual compensation for Fiscal 1999
includes $374,999, which Mr. Schulze was entitled to under the terms of his
employment contract, and $25,000 representing the difference between the
exercise price and the fair market value of options (the "spread") on the
date of exercise of in-the-money options.
(8) Mr. Ingalls was Vice President, Chief Financial Officer, and Treasurer of
ABT from April 3, 1996 through November 1, 1998, at which time he ceased to
be an executive officer.
28
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The table below includes information regarding Named Executive Officers to
whom options were granted during Fiscal 1999.
<TABLE>
<CAPTION>
Potential realizable value
Percent of total value at assumed
Number of securities options granted annual rates of stock price
underlying options to employees in Exercise price Expiration appreciation for option term
Name granted (#) fiscal year(%) ($/share) date 5% 10%
---- ----------- -------------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Kenneth R. Budd 25,000(1) 1.0 12.75 9/22/03 88,065 194,600
Randy Ingram 250,000(2) 10.0 15.5625 8/4/03 1,074,908 2,375,265
Randy Ingram 50,000(3) 2.0 13.00 12/8/03 179,583 396,832
Johnny R. Thomas 50,000(4) 2.0 5.81 2/23/04 80,260 177,353
</TABLE>
(1) Became exercisable on January 6, 1999.
(2) Become exercisable 50,000 upon grant and 50,000 on each September 14
beginning in 1999.
(3) Became exercisable 42,500 on December 8, 1998 and 7,500 on January 8, 1999.
(4) Become exercisable 25,000 on February 23, 2000 and 25,000 on February 23,
2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The table below includes information regarding the value realized on option
exercises and the market value of unexercised options held by the Named
Executive Officers in the Summary Compensation Table during Fiscal 1999.
<TABLE>
<CAPTION>
Number of securities
underlying unexercised Value of unexercised
Shares options at FY-end (#) in-the-money options at
acquired on Value realized exercisable/ FY-end ($) exercisable/
Name exercise ($) unexercisable unexercisable(1)
---- -------- --- ------------- ----------------
<S> <C> <C> <C> <C>
Richard P. Budd -0- -0- 20,000/0 0/0
Kenneth R. Budd -0- -0- 75,000/100,000 0/0
Douglas A. Fisher -0- -0- 60,000/90,000 0/0
Randy Ingram -0- -0- 100,000/200,000 0/0
Thomas B. Rice -0- -0- 200,000/300,000 0/0
Johnny R. Thomas -0- -0- 0/50,000 0/12,650
Kent Schulze 5,000 25,000 20,000/0 40,060/0
Henry A. Ingalls -0- -0- 1,225,000/0 4,830,175/0
</TABLE>
(1) Based on the closing price of ABT's common stock on June 30, 1999 of
$6.063.
COMPENSATION OF DIRECTORS
Officer-directors currently receive no compensation for serving on the
Board of Directors other than reimbursement of reasonable expenses incurred in
attending meetings. Outside directors receive $9,000 per year for attending
meetings on up to six different days, $1,500 for additional days and
reimbursement of expenses. Each outside director also received options to
purchase, at the closing price on the date of grant, 20,000 shares of common
stock upon joining the Board, 10,000 of which vested immediately, and 10,000 of
which vest after a year of service. See "Consulting Agreements" for a
description of consulting arrangements with certain directors.
EMPLOYMENT AGREEMENTS
On March 10, 1994, ABT entered into an employment agreement with Dr. Johnny
R. Thomas, commencing on April 11, 1994. During the term of his agreement, and
for a period of two years following termination of employment, Dr. Thomas will
be prohibited from engaging in activities which are competitive with those of
ABT and its affiliated corporations within the United States and from disclosing
proprietary information of ABT. On July 1, 1997, Dr. Thomas agreed to reduce his
salary to $60,000 per year. In connection with his resignation as CEO on
February 26, 1999, Dr. Thomas' compensation was reduced to $1,000 per month and
he was granted options to purchase 50,000 shares of ABT's common stock at $5.81
per share that vest over a two year period.
29
<PAGE>
On February 13, 1996, ABT entered into an employment agreement with Henry
A. Ingalls. The agreement's term runs from April 3, 1996 for four years. Mr.
Ingalls' aggregate compensation begins at $170,000 per annum plus a minimum
bonus of $30,000 per year. The compensation is subject to annual escalations at
the greater of 5% or the general inflation rate. The agreement contains a
covenant by Mr. Ingalls not to compete against ABT during the term and for a
two-year period thereafter. Mr. Ingalls also received options to purchase up to
1,250,000 shares of common stock, exercisable at $2.12 per share vesting over
five years, but immediately exercisable for cash. Upon termination without
cause, Mr. Ingalls would be entitled to two years' compensation. In the event
there is a material change in the ownership or management of ABT and at any time
thereafter Mr. Ingalls is either terminated or, in his sole determination, there
is a significant change in his duties, responsibilities, principal location of
employment or compensation, Mr. Ingalls shall be vested in full in all stock
options granted pursuant to his employment agreement and shall be entitled to
receive his full compensation and other employee benefits for three years.
On November 18, 1997, ABT entered into an employment agreement with Thomas
B. Rice. The agreement's term runs from January 1, 1998 for four years. Dr.
Rice's salary begins at $120,000 and is subject to annual increases as
determined by the Compensation Committee. Dr. Rice also received options to
purchase up to 500,000 shares of common stock at prices ranging from $8.50 to
$10.00 per share vesting over four years. The agreement contains a covenant by
Dr. Rice not to compete against ABT during the term and for a two to five-year
period thereafter. Upon termination without cause, or if Dr. Rice voluntarily
terminates the agreement upon at least nine months' notice (and assists in the
transition process), Dr. Rice would be entitled to one year's compensation and
become vested in his stock options which would otherwise become vested within 12
months from such date. In the event there is a change in the CEO of ABT and at
any time thereafter Dr. Rice is either terminated or, in his sole determination,
there is a significant change in his duties, responsibilities, or compensation,
Dr. Rice shall be vested in full in all stock options granted pursuant to his
employment agreement and shall be entitled to receive his full compensation and
other employee benefits for two years. In addition, for a one-year period
following the change of CEO, Dr. Rice has the option to terminate the agreement
without justification and be vested in his stock options, which would otherwise
become vested on the next anniversary date of employment and receive his full
compensation for one year.
On November 19, 1997, ABT entered into an employment agreement with Kent
Schulze. Mr. Schulze's salary began at $187,500. Mr. Schulze also received
options to purchase up to 400,000 shares of common stock at prices ranging from
$9.25 to $13.25 per share vesting over four years. The agreement contains a
covenant by Mr. Schulze not to compete against ABT during the term and for a two
year period thereafter. Mr. Schulze resigned from ABT on March 24, 1999. Under
the terms of his employment agreement, Mr. Schulze was paid $374,999 upon
termination.
On December 5, 1997, ABT entered into an employment agreement with Douglas
A. Fisher. The agreement's term runs from February 1, 1998 for four years. Mr.
Fisher's salary begins at $150,000 and is subject to annual increases as
determined by the Compensation Committee. Mr. Fisher also received options to
purchase up to 150,000 shares of common stock at $11.50 per share vesting over
four years. The agreement contains a covenant by Mr. Fisher not to compete
against ABT during the term and for five years thereafter. The agreement
contains termination and change of control provisions substantially similar to
those contained in Dr. Rice's agreement, described above.
On January 6, 1998, ABT entered into an employment agreement with Kenneth
R. Budd, which was amended in September 1998. The term of the agreement is five
years and can be terminated by either party with twelve months notice. Mr.
Budd's salary is $150,000 plus a bonus of up to $50,000 per year. Mr. Budd has
been granted options to purchase 150,000 shares of common stock at $8.50 per
share, vesting over five years, and 25,000 shares at $12.75 that vested on
January 6, 1999. The agreement contains a covenant by Mr. Budd not to compete
against ABT during the term and for three years thereafter for which he will be
paid $50,000 per year during that period.
30
<PAGE>
On August 5, 1999, ABT entered into an employment agreement with Randy
Ingram. Mr. Ingram's salary begins at $150,000 and is subject to annual
increases at ABT's discretion. Mr. Ingram has been granted options to purchase
250,000 shares of common stock at $15.5625 per share, vesting over four years,
and 50,000 shares at $13.00 per share that have fully vested. The agreement
contains a covenant by Mr. Ingram not to compete against ABT during the term and
for one year thereafter. ABT may terminate the agreement without cause by giving
ten days notice, in which case Mr. Ingram would become vested in options that
would otherwise become vested on the next anniversary of employment and be
entitled to receive his full salary for one year. In the event there is a change
in the CEO of ABT and at any time thereafter Mr. Ingram is either terminated or,
in his sole determination, there is a significant change in his duties,
responsibilities, or compensation, Mr. Ingram shall be vested in full in all
stock options granted pursuant to his employment agreement and shall be entitled
to receive his full compensation and other employee benefits for two years. In
addition, for a one-year period following the change of CEO, Mr. Ingram has the
option to terminate the agreement without justification and be vested in his
stock options, which would otherwise become vested on the next anniversary date
of employment, and receive his full compensation for one year.
Effective July 1, 1999, ABT entered into an employment agreement with
Richard P. Budd. Mr. Budd's salary begins at $150,000 and is subject to annual
increases at ABT's discretion. As an inducement to enter into the employment
agreement, ABT granted Mr. Budd options to purchase 500,000 shares of common
stock at $6.125 that vest over a four year period. The agreement contains a
covenant by Mr. Budd not to compete against ABT during the term and for two
years after ceasing to be an employee or director. Mr. Budd may terminate the
agreement by giving ninety working days notice. ABT can terminate the agreement
without cause by giving ten days notice, in which case Mr. Budd would become
vested in options that otherwise would become vested on the next anniversary of
employment and be entitled to receive his full salary for one year. If within
two years following a change of control, either Mr. Budd is terminated or, in
his sole discretion, his position or duties are adversely affected or changed
and he terminates employment within sixty days of the change or effect, Mr. Budd
will be entitled to a severance payment equal to three years salary.
CONSULTING AGREEMENTS
On June 17, 1997, ABT retained James W. Hopkins, a director of ABT,
pursuant to a consulting agreement commencing July 1, 1997. ABT entered into the
agreement to capitalize on Mr. Hopkins' knowledge and expertise in the seed
business and to ensure that he will not compete with ABT. The agreement provides
that Mr. Hopkins shall provide annually up to 25 days of consulting services on
specific projects, as requested by ABT's CEO, provided that the projects do not
conflict with other seed business obligations of Mr. Hopkins. Mr. Hopkins may
also propose ideas or concepts to ABT. ABT shall have exclusive control over
deciding whether to proceed with any proposal. In compensation for his services,
Mr. Hopkins received options to purchase 5,000 shares of common stock at $5.50
per share exercisable through June 30, 1999 and $750 per day of actual
consulting services, plus pre-approved expenses. Mr. Hopkins was paid $4,500 for
consulting services provided during Fiscal 1999 and $18,375 during Fiscal 1998.
On February 26, 1999, Richard P. Budd became Chairman of the Board and CEO
of ABT, but he did not become an employee of ABT until July 1, 1999. During the
period prior to becoming an employee, Mr. Budd was compensated as a consultant
on a per diem basis and received an aggregate of $68,250.
STOCK BONUS PLAN
ABT adopted an Employee Stock Bonus Plan (the "Bonus Plan") effective May
24, 1994 providing for the issuance of up to 40,000 shares of common stock per
year to any employee, consultant, officer or director, up to an aggregate of
400,000 shares for the entire Bonus Plan. Pursuant to the Bonus Plan, employees
of ABT are eligible to receive a stock bonus at the discretion of ABT based on
length of service and contribution or potential value to ABT. As of the date
hereof, no bonus shares have been issued.
STOCK OPTIONS
ABT has established the AgriBioTech, Inc. 1994 Employee Stock Option Plan,
as amended (the "Plan"). The Plan is intended to provide the employees,
directors, independent contractors and consultants of ABT with an added
incentive to continue their services to ABT, and to induce them to exert their
maximum efforts toward ABT's success. The Plan provides for the grant of options
to qualified directors, employees (including officers), independent contractors
and consultants of ABT to purchase an aggregate of 3,600,000 shares of common
stock, but no more than 300,000 options may be granted to any one person in any
two-year period. The Plan is currently administered by the Stock Option
Committee of the Board of Directors. The Committee determines, among other
things, the persons to be granted options under the Plan, the number of shares
subject to each option and the option price.
31
<PAGE>
The Plan allows ABT to grant incentive stock options ("ISOs"), as defined
in Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
Non-Qualified Stock Options ("NQSOs") not intended to qualify under Section
422(b) of the Code and Stock Appreciation Rights ("SARs"; collectively,
"Options") at any time within 10 years from the date the Plan was adopted. The
exercise price of ISOs may not be less than the fair market value of the common
stock on the date of grant, provided that the exercise price of ISOs granted to
an optionee owning more than 10% of the outstanding common stock may not be less
than 110% of the fair market value of the common stock on the date of grant. In
addition, the aggregate fair market value of stock with respect to which ISO's
were exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000. Options shall have a term of no more than ten years,
except that ISOs granted to an optionee owning more than 10% of the outstanding
common stock shall have a term of no more than five years and must be granted to
and exercised by employees of ABT (including officers). Options are not
transferable, except upon the death of the optionee.
At June 30,1999, an aggregate of 2.1 million options were outstanding under
the Plan, at prices ranging from $2.00 to $27.688, including 20,000 options to
each to Messrs. Richard Budd, Johnston, Orr and Schulze, 50,000 to Mr. Thomas,
25,000 to Mr. Kenneth Budd, and 15,000 to Mr. Ingram. Options to purchase an
aggregate of 1.1 million shares of common stock were available for future grants
under the Plan as of June 30, 1999.
In addition, as of June 30, 1999, officers, key employees and consultants
of ABT held options to purchase an aggregate of 6.8 million shares of common
stock outside of the Plan, exercisable for up to ten years ending in 2006, at
prices ranging from $2.00 to $25.63 per share. Of these, Mr. Ingalls held
ten-year options to purchase up to 1,225,000 shares of common stock at $2.12 per
share, Dr. Rice held five-year options to purchase up to an aggregate of 500,000
shares of common stock at prices ranging from $8.50 to $10.00 per share, Mr.
Fisher held five-year options to purchase 150,000 shares of common stock at
$11.50 per share, Mr. Kenneth Budd held six-year options to purchase 150,000
shares of common stock at $8.50 per share, and Mr. Ingram held options to
purchase 250,000 shares of common stock at $15.5625 per share and 35,000 shares
of common stock at $13.00 per share. On July 1, 1999, Mr. Richard Budd was
granted options to purchase 500,000 shares of common stock at $6.125 per share.
The above options vest over three to six-year periods.
RETIREMENT PLAN
ABT has a defined contribution plan (the "401(k) Plan") which covers all
employees. Eligible employees may contribute up to 20 percent of their annual
compensation, not to exceed the statutory maximum. ABT may make discretionary
contributions. Participants are immediately vested in their contribution and
vest 20 percent per year in ABT's contributions for each year of service after
the first year. ABT made no contributions to the 401(k) Plan in Fiscal 1997.
Beginning in January 1998, ABT began matching employee contributions to the
401(k) Plan up to 50% of the first 4% of the employees' compensation for
employees whose base compensation is $60,000 or less. For other employees, ABT's
matching is limited to 50% of the first 2% of amounts contributed by the
employees. No matching contributions are made for officers of ABT.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
ABT has a Compensation Committee consisting of James W. Hopkins and James
W. Johnston, which has the responsibility of setting executive compensation.
There are no compensation committee (or Board of Directors) interlock
relationships with respect to ABT. See "Consulting Agreements" for a description
of consulting arrangements with certain directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 8, 1999 based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of common stock by (i) each person known by ABT
to be the beneficial owner of more than 5% of the outstanding shares of common
stock, (ii) each Director, (iii) each person named in the Summary Compensation
Table and (iv) all executive officers and Directors individually and as a group.
32
<PAGE>
<TABLE>
<CAPTION>
Amount and nature of beneficial Percentage of common stock
Beneficial owner ownership (1) owned(2)
- ---------------- ------------- --------
<S> <C> <C>
Richard P. Budd 964,352(3) 1.9%
Kenneth R. Budd 248,653(4) *
Douglas A. Fisher 82,150(5) *
James W. Hopkins 30,000 *
Randy Ingram 160,000(6) *
James W. Johnston 44,700(7) *
L. Glenn Orr, Jr. 12,000(7) *
Thomas B. Rice 455,000(8) *
Johnny R. Thomas 835,000(9) 1.7%
Kent Schulze 25,000(10) *
Henry A. Ingalls 1,302,378(11) 2.6%
The State of Wisconsin Investment Board
121 E. Wilson Street, 2nd Floor
Madison, Wisconsin 53707 9,402,517 18.9%
All executive officers and directors as a
group (8 persons) 1,996,855(14) 4.0%
</TABLE>
- ---------------
*Less than 1%.
(1) Unless otherwise noted, ABT believes that each person has sole voting and
investment power with respect to all shares of common stock beneficially
owned, subject to community property laws, where applicable. Each person is
deemed to be the beneficial owner of securities that can be acquired by
such person within 60 days from the date of determination upon the exercise
of warrants or options. The percentage ownership of each person is
determined by assuming that options or warrants that are held by such
person (but not those held by any other person) and which are exercisable
within 60 days from the date of determination have been exercised.
(2) Based on 49,678,281 shares outstanding as of October 12, 1999.
(3) Includes 701,368 shares issued on January 6, 1998, in connection with ABT's
acquisition of Lofts Seed, Inc. and related entities. Mr. Budd disclaims
beneficial ownership of 1,298,632 shares owned by other former shareholders
of the acquired entities, including the Richard P. Budd Irrevocable Living
Trust. Also includes 20,000 shares issuable upon exercise of options
granted January 6, 1998 when Mr. Budd became a Director of ABT and 100,000
shares issuable upon exercise of options granted under his employment
agreement, but excludes 400,000 shares issuable upon exercise of options
not currently exercisable.
(4) Includes 75,000 shares issuable upon exercise of currently exercisable
options, but excludes 100,000 shares issuable upon exercise of options not
currently exercisable.
(5) Includes 60,000 shares issuable upon exercise of currently exercisable
options, but excludes 90,000 shares underlying options not currently
exercisable.
(6) Includes 150,000 shares issuable upon exercise of currently exercisable
options, but excludes 150,000 shares underlying options not currently
exercisable.
(7) Includes 10,000 shares issuable upon exercise of currently exercisable
options, but excludes 10,000 shares underlying options not currently
exercisable.
33
<PAGE>
(8) Includes 200,000 shares issuable upon exercise of currently exercisable
options, but excludes 300,000 shares underlying options not currently
exercisable.
(9) Based on reported ownership information as of February 26, 1999 when Mr.
Thomas ceased to be an executive officer of ABT. Excludes 50,000 shares
underlying options that are not currently exercisable.
(10) Based on reported ownership information as of March 25, 1999 when Mr.
Schulze ceased to be an executive officer of ABT. Includes 20,000 shares
issuable upon exercise of currently exercisable options.
(11) As of November 1, 1998, Mr. Ingalls ceased to be an executive officer of
ABT. Includes 1,225,000 shares issuable upon exercise of currently
exercisable options and 13,000 shares held by Mr. Ingalls' minor child for
which Mr. Ingalls disclaims beneficial ownership.
(14) Includes 625,000 shares underlying options included for Messrs. Richard P.
Budd, Kenneth R. Budd, Rice, Fisher, Ingram, Johnston, and Orr in notes
(3)-(8) above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the acquisition of Lofts Seed, Inc. in January 1998, ABT
entered into a five-year agreement with The Budd Group to provide ABT with
certain accounting and human resources services. During Fiscal 1999, ABT paid
$778,263 to The Budd Group for these services. Richard Budd is the CEO of The
Budd Group. He also is a stockholder but does not control The Budd Group. In
September 1998, ABT and The Budd Group agreed to an early termination of the
services arrangement effective December 31, 1998. As part of the termination
arrangement, ABT agreed to pay $500,000 to The Budd Group, which amount was
satisfied through the issuance of 37,913 shares of ABT's common stock in January
1999.
As part of the agreements entered into at the time of the acquisition of
Lofts Seed, Inc., ABT agreed to lease certain operating facilities, which were
owned by Richard Budd and being leased to Lofts. During Fiscal 1999, lease
payments and reimbursement of repair and maintenance costs under these
agreements amounted to $227,830. ABT also reimbursed The Budd Group and Sylco
Aviation, Inc., a company owned by Richard Budd's wife, a total of $68,426 for
expense incurred by those entities on behalf of ABT.
On May 28, 1999 in connection with ABT's early redemption of its
subordinated convertible debt, ABT borrowed $10 million from Richard Budd and
his family, including Kenneth Budd. The debt was repaid on June 8, 1999,
including interest at 8.25% per annum.
Subsequent to June 30, 1999, ABT borrowed approximately $3 million from a
special purpose entity controlled by Richard Budd and Kenneth Budd. This debt is
secured by certain real estate of ABT and provides for interest at 10% per
annum. The debt is due on demand or, if no demand is made, ninety days from the
borrowing, and is repayable upon any refinancing by ABT.
See Item 11 for a description of consulting arrangements with certain
directors and employment agreements with certain officers.
34
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements-See Index on page F-1
(a)(2) Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts appears on page S-1.
(a)(3) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Articles of Incorporation of the Registrant, as amended. (1)
*3.2 Amended and Restated By-Laws of the Registrant.
3.3 Articles of Merger of the Registrant. (1)
3.4 Agreement and Plan of Merger. (1)
3.5 Certificate of Amendment of Articles of Incorporation. (8)
4.1 Form of Common Stock Purchase Warrant dated May 1998. (6)
4.2 Form of Common Stock Purchase Warrant dated August 1998.(11)
*4.3 Form of Common Stock Purchase Warrant dated December 1998.
4.4 Form of Common Stock Purchase Warrant dated December 1998. (5)
4.5 Form of Securities Purchase Agreement dated December 1998. (5)
4.6 Form of Registration Rights Agreement dated December 1998. (5)
4.7 Form of 5% Subordinated Debentures dated December 1998. (5)
*10.1 Employment Agreement between the Registrant and Richard P. Budd
dated July 1, 1999.
10.2 Employment Agreement between the Registrant and Johnny R. Thomas
dated March 10, 1994. (1)
10.3 Employment Agreement between the Registrant and John C. Francis
dated March 24, 1994. (1)
10.4 1994 Stock Option Plan, as amended. (1)
10.5 Employee Stock Bonus Plan. (1)
*10.6 Employment Agreement dated January 6, 1998 between Kenneth R.
Budd and the Registrant.
*10.7 Employment Agreement dated August 6, 1998 between the Registrant
and Randy Ingram.
*10.8 Employment Agreement dated December 5, 1997 between the
Registrant and Douglas A. Fisher.
35
<PAGE>
*10.9 Price Guaranty Agreement dated September 18, 1998 by and
between the former owners of Garden West Distributors, Inc.
and the Registrant.
10.10 Employment Agreement dated February 13, 1996 between Henry A.
Ingalls and the Registrant. (3)
10.11 Stock Option Agreement dated as of February 13, 1996 between the
Registrant and Henry A. Ingalls. (4)
*10.12 Proceeds Guarantee Agreement dated December 20, 1998 by and
between Kimeragen, Inc. and the Registrant.
*10.13 Guaranty Agreement dated August 31, 1999 by and between Michael
J. McCarthy and the Registrant.
10.14 Stock Purchase Agreement dated August 22, 1997 by and among the
Registrant, Olsen Fennell Seeds, Inc., Greg S. Fennell and
James E. Olsen. (7)
10.15 Consulting Agreement dated June 17, 1997, between Kent Schulze
and the Registrant. (8)
10.16 Consulting Agreement dated June 17, 1997, between James W.
Hopkins and the Registrant. (9)
10.17 Form of Stock Purchase Agreement between AgribioTech, Inc.
and each of Quantum Partners LDC, Ardsley Partners I, L.P.,
Ardsley Partners II, L.P., Ardsley Offshore Fund, Ltd., Brown
Simpson Strategic Growth Fund, Ltd. and Southbrook
International Investments, Ltd. (10)
10.18 Loan and Security Agreement dated as of June 23, 1998 with Bank
America Business Credit, Inc., as agent, and Deutsche
Financial Services Corporation, as Administrative Agent. (12)
10.19 Over advance facility-amendment dated August 14, 1998 to the
Loan and Security Agreement referred to in Exhibit 10.18. (13)
10.20 Agreement and Plan of Reorganization dated December 1, 1997, by
and among the Registrant, Lofts Seed, Inc., Budd Seed Inc.,
Lofts Mergerco, Inc. and the shareholders of Lofts Seed Inc. and
Budd Seed, Inc. (14)
10.21 Stock Purchase Agreement dated January 9, 1998, by and among the
Registrant, Alan Rosoff, Seed Corporation of America, Green
SCA Corp. and Green Seed Company Limited Partnership. (15)
10.22 Stock Purchase Agreement dated August 21, 1998, by and
among the Registrant and its subsidiary E.F.Burlingham &
Sons, Willard W. Mclagan, Robert R. Lowery, Thomas G. Burns,
Hiram G. Olsen, The H.G. Olsen & Ann Olsen Charitable Trust,
Terry L. Shumaker, Evelyn J. Lacey, William W. Spurlin,
Phillip J. Hawkins and Willamette Seed Co. (16)
10.23 Asset Purchase Agreement dated August 28, 1998 by and among the
Registrant, a subsidiary of the Registrant and Agway, Inc. (2)
10.24 Stock Purchase Agreement dated September 1, 1998 by and
among the Registrant, a subsidiary of the Registrant,
1304516 Ontario, Inc., Gabriel A. Eros and Mary E. Eros. (2)
36
<PAGE>
*10.25 Price Guaranty Agreement dated September 1, 1998 between
1304516 Ontario Inc., an Ontario Corporation and the
Registrant.
*10.26 Securities Purchase Agreement dated June 4, 1999 by and between
The State of Wisconsin Investment Board and the Registrant.
*10.27 Repurchase Agreement dated May 28, 1998, by and among the
Registrant and the former holders of the subordinated debt.
*10.28 Price Guaranty Agreement dated June 25, 1998 by and between the
former owners of W-D Seed Growers, Inc.
*10.29 Guaranty Agreement dated January 22, 1999 by and between Bill
L. Rose, L.L.C., an Oregon limited liability company and the
Registrant.
*10.30 Guaranty Agreement dated January 22, 1999 by and between
Thomas K. Hodges and Halina K. Hodges and the Registrant.
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of KPMG LLP.
*27.1 Financial Data Schedule.
*99.1 Pro Forma Financial Information.
- ------------
* Filed with this Report.
(1) Incorporated by reference from the Registrant's Registration Statement on
Form SB-2 for April 29, 1994, as amended (No. 33-78470-NY).
(2) Incorporated by reference from the Registrant's Current Report on Form 8-K
for August 28, 1998.
(3) Incorporated by reference from the Registrant's Quarterly Report on Form
10-QSB for the fiscal quarter ended March 31, 1996.
(4) Incorporated by reference from the Registrant's Registration Statement on
Form S-8 filed June 28, 1996 (No. 333-07123).
(5) Incorporated by reference from the Registrant's Current Report on Form 8-K
for December 30, 1998.
(6) Incorporated by reference from the Registrant's Form 10-K for the year
ended June 30, 1998.
(7) Incorporated by reference from the Registrant's Current Report on Form 8-K
for August 22, 1997.
(8) Incorporated by reference from the Registrant's Annual Report on Form
10-KSB, as amended, for the fiscal year ended June 30, 1997.
(9) Identical to the Consulting Agreement between Kent Schulze and the
Registrant.
(10) Incorporated by reference from the Registrant's Current Report on Form 8-K
for March 31, 1998.
37
<PAGE>
(11) Incorporated by reference from the Registrant's Current Report on Form 8-K
for August 28, 1998.
(12) Incorporated by reference from the Registrant's Current Report on Form 8-K
for June 23, 1998.
(13) Incorporated by reference from Amendment No. 1 to the Registrant's Current
Report on Form 8-K for June 23, 1998.
(14) Incorporated by reference from the Registrant's Current Report on Form 8-K
for December 1, 1997.
(15) Incorporated by reference from the Registrant's Current Report on Form 8-K
for January 9, 1998.
(16) Incorporated by reference from the Registrant's Current Report on Form 8-K
for January 26, 1998.
(b) Reports on Form 8-K:
(i) A Current Report on Form 8-K dated May 28, 1999 was filed on May
29, 1999 with respect to an event on Item 5, the early redemption of
ABT's convertible subordinated debt.
(ii) A Current Report on Form 8-K dated June 6, 1999 was filed on June
9, 1999 with respect to Item 5, the sale of 4,276,850 shares of AB's
common stock to The State of Wisconsin Investment Board.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: October 13, 1999
AGRIBIOTECH, INC.
By: /s/Randy Ingram
--------------------
Randy Ingram,
Executive Vice President,
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/Richard P. Budd Chairman of the Board, Chief Executive Officer
- ----------------------- and Director (Principal Executive Officer) October 13, 1999
Richard P. Budd
/s/Randy Ingram Executive Vice President, Chief Financial Officer
- ----------------------- and Director (Principal and Accounting Officer) October 13, 1999
Randy Ingram
/s/Thomas B. Rice Executive Vice President, Director of Research
- ----------------------- and Director October 13, 1999
Thomas B. Rice
/s/James W. Hopkins Director October 13, 1999
- -----------------------
James W. Hopkins
/s/James W. Johnston Director October 13, 1999
- -----------------------
James W. Johnston
/s/L. Glenn Orr, Jr. Director October 13, 1999
- -----------------------
L. Glenn Orr, Jr.
</TABLE>
39
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES OF AGRIBIOTECH, INC.
Independent Auditors' Report................................................F-2
Consolidated Balance Sheets
as of June 30, 1999 and 1998..............................................F-3
Consolidated Statements of Operations
for the years ended June 30, 1999, 1998, and 1997 ........................F-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended June 30, 1999, 1998, and 1997.........................F-6
Consolidated Statements of Cash Flows
for the years ended June 30, 1999, 1998, and 1997.........................F-7
Notes to Consolidated Financial Statements
- June 30, 1999, 1998, and 1997 ..........................................F-9
Schedule II - Valuation and Qualifying Accounts
for the years ended June 30, 1999, 1998, and 1997.........................S-1
Schedules other than that listed above are omitted since they are not required
or are not applicable, or the required information is shown in the Consolidated
Financial Statements or Notes thereto.
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
AgriBioTech, Inc.:
We have audited the accompanying consolidated balance sheets of AgriBioTech,
Inc. and subsidiaries as of June 30, 1999 and 1998, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1999. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule as listed at Item 14(a)(2). These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AgriBioTech, Inc.
and subsidiaries as of June 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1999 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Las Vegas, Nevada
October 13, 1999
F-2
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,604,739 $ 2,700,846
Accounts receivable, less allowance for doubtful accounts
of $6,489,753 at June 30, 1999 and $2,177,442 at June 30, 1998 45,684,024 39,503,262
Inventories 66,917,763 58,609,554
Deferred income taxes 1,696,161 1,339,709
Other 1,748,157 1,673,903
------------ ------------
Total current assets 120,650,844 103,827,274
Property, plant and equipment, net 62,212,326 47,964,522
Intangible assets, net of accumulated amortization 152,949,334 109,882,815
Investment in associated entity 936,901 818,182
Other assets 5,379,306 2,038,115
------------ ------------
Total assets $342,128,711 $264,530,908
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Current liabilities:
Short-term debt $ 71,909,061 $ 50,329,614
Current installments of long-term obligations 5,977,852 3,251,846
Accounts payable 20,124,901 13,594,285
Accrued liabilities 21,140,753 11,251,757
------------- -------------
Total current liabilities 119,152,567 78,427,502
Long-term obligations, excluding current installments 12,198,297 11,029,022
Deferred income taxes 1,696,161 503,348
------------- -------------
Total liabilities 133,047,025 89,959,872
------------- -------------
Stockholders' equity:
Preferred stock, $.001 par value; authorized 10,000,000
shares; none issued and outstanding -- --
Common stock , $.001 par value; authorized 100,000,000
shares; issued and outstanding 47,498,061 shares at
June 30, 1999 and 37,203,013 shares at June 30, 1998 47,498 37,203
Capital in excess of par value 270,832,335 186,571,673
Accumulated (deficit) (61,798,147) (12,037,840)
------------- -------------
Total stockholders' equity 209,081,686 174,571,036
------------- -------------
Commitments, contingencies and subsequent events (notes 6, 7 and 8)
Total liabilities and stockholders' equity $ 342,128,711 $ 264,530,908
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended June 30,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 370,453,411 $ 205,117,007 $ 65,904,058
Cost of sales 286,210,082 157,796,888 49,527,150
------------- ------------- -------------
Gross profit 84,243,329 47,320,119 16,376,908
Operating expenses 109,881,470 47,579,105 17,971,813
Restructuring and special charges 9,751,631 -- --
------------- ------------- -------------
Earnings (loss) from operations (35,389,772) (258,986) (1,594,905)
------------- ------------- -------------
Other income (expense):
Interest expense (11,175,488) (4,223,483) (1,691,084)
Interest income 543,712 520,256 344,417
Earnings of associated entity 726,436 808,447 233,690
Other 465,472 633,507 (5,883)
------------- ------------- -------------
Total other income (expense) (9,439,868) (2,261,273) (1,118,860)
------------- ------------- -------------
Earnings (loss) before income taxes and extraordinary item (44,829,640) (2,520,259) (2,713,765)
Income tax expense (benefit) 1,011,362 (2,907,500) --
------------- ------------- -------------
Earnings (loss) before extraordinary item (45,841,002) 387,241 (2,713,765)
Extraordinary loss from early extinguishment of subordinated
convertible debt 3,919,305 -- --
------------- ------------- -------------
Net earnings (loss) (49,760,307) 387,241 (2,713,765)
Discount and imputed dividends on preferred stock -- 84,100 3,233,426
------------- ------------- -------------
Net earnings (loss) attributable to common stock $ (49,760,307) $ 303,141 $ (5,947,191)
============= ============= =============
Shares of common stock used in computing earnings (loss)
per common share:
Basic 40,825,827 30,077,693 15,549,184
Diluted 40,825,827 32,061,546 15,549,184
============= ============= =============
Net earnings (loss) per common share (basic and diluted):
Earnings (loss) before extraordinary item $ (1.12) $ 0.01 $ (0.38)
Extraordinary item (0.10) -- --
------------- ------------- -------------
Net earnings (loss) $ (1.22) $ 0.01 $ (0.38)
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Preferred stock Common stock
------------------------------ ----------------------------- Capital in
excess of
Shares Amount Shares Amount par value
------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996 6,530 $ 7 8,543,757 $ 8,544 $ 23,752,051
Issuance of preferred stock for cash 10,000 10 -- -- 9,999,990
Common stock issued for:
Services -- -- 15,000 15 45,885
Exercise of options -- -- 5,076,000 5,076 12,753,791
Exercise of warrants -- -- 2,116,000 2,116 6,672,844
Preferred stock converted and redeemed (15,430) (16) 7,094,226 7,094 (2,714,349)
Cancellation of options -- -- 750,000 750 (750)
Retirement of debt -- -- 148,402 148 319,852
Reduction of notes for:
Cash -- -- -- -- --
Notes receivable paid subsequent to year end -- -- -- -- --
Common stock to be issued in acquisition -- -- -- -- --
Expenses of stock issuances -- -- -- -- (1,389,995)
Reduction in deferred compensation -- -- -- -- --
Net (loss) -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1997 1,100 1 23,743,385 23,743 49,439,319
Common stock issued for:
Cash -- -- 5,075,182 5,075 67,658,430
Exercise of options -- -- 993,005 993 3,545,432
Exercise of warrants -- -- 2,185,625 2,186 15,554,689
Acquisitions -- -- 4,867,030 4,867 51,347,362
Conversion of preferred stock (1,100) (1) 308,677 309 (308)
Reduction of indebtedness -- -- 30,109 30 447,841
Options issued for services -- -- -- -- 396,965
Amounts received pursuant to proceed sharing
under stock price guarantees -- -- -- -- 94,609
Expenses of stock issuances -- -- -- -- (1,912,666)
Net earnings -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1998 -- -- 37,203,013 37,203 186,571,673
Common stock issued for:
Cash -- -- 6,879,670 6,880 54,283,949
Exercise of options -- -- 542,363 542 2,169,686
Exercise of warrants -- -- 556,410 556 6,676,364
Acquisitions -- -- 961,692 962 17,318,957
Costs related to intellectual property -- -- 225,000 225 3,999,772
Reduction of indebtedness -- -- 59,913 60 826,040
Allocation to warrants of proceeds from
issuance of unts including common stock
and convertible debt -- -- -- -- 4,075,820
Options issued for services -- -- -- -- 814,134
Adjustment to prior issuances of common stock
due to stock price guarantees -- -- 1,070,000 1,070 (5,433,188)
Amounts received pursuant to proceed sharing
under stock price guarantees -- -- -- -- 574,190
Expenses of stock issuances -- -- -- -- (1,045,062)
Net (loss) -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1999 -- $ -- 47,498,061 $ 47,498 $ 270,832,335
============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Common stock Notes
to be issued Accumulated Deferred receivable from
in acquisition (deficit) compensation sale of stock Total
------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996 $ -- $ (9,711,316) $ (26,790) $ -- $ 14,022,496
Issuance of preferred stock for cash -- -- -- -- 10,000,000
Common stock issued for:
Services -- -- -- -- 45,900
Exercise of options -- -- -- (8,040,000) 4,718,867
Exercise of warrants -- -- -- (3,750,000) 2,924,960
Preferred stock converted and redeemed -- -- -- -- (2,707,271)
Cancellation of options -- -- -- -- --
Retirement of debt -- -- -- -- 320,000
Reduction of notes for:
Cash -- -- -- 1,800,000 1,800,000
Notes receivable paid subsequent to year end -- -- -- 9,990,000 9,990,000
Common stock to be issued in acquisition 7,950,000 -- -- -- 7,950,000
Expenses of stock issuances -- -- -- -- (1,389,995)
Reduction in deferred compensation -- -- 26,790 -- 26,790
Net (loss) -- (2,713,765) -- -- (2,713,765)
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1997 7,950,000 (12,425,081) -- -- 44,987,982
Common stock issued for:
Cash -- -- -- -- 67,663,505
Exercise of options -- -- -- -- 3,546,425
Exercise of warrants -- -- -- -- 15,556,875
Acquisitions (7,950,000) -- -- -- 43,402,229
Conversion of preferred stock -- -- -- -- --
Reduction of indebtedness -- -- -- -- 447,871
Options issued for services -- -- -- -- 396,965
Amounts received pursuant to proceed sharing
under stock price guarantees -- -- -- -- 94,609
Expenses of stock issuances -- -- -- -- (1,912,666)
Net earnings -- 387,241 -- -- 387,241
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1998 -- (12,037,840) -- -- 174,571,036
Common stock issued for:
Cash -- -- -- -- 54,290,829
Exercise of options -- -- -- -- 2,170,228
Exercise of warrants -- -- -- -- 6,676,920
Acquisitions -- -- -- -- 17,319,919
Costs related to intellectual property -- -- -- -- 3,999,997
Reduction of indebtedness -- -- -- -- 826,100
Allocation to warrants of proceeds from
issuance of unts including common stock
and convertible debt -- -- -- -- 4,075,820
Options issued for services -- -- -- -- 814,134
Adjustment to prior issuances of common stock
due to stock price guarantees -- -- -- -- (5,432,118)
Amounts received pursuant to proceed sharing
under stock price guarantees -- -- -- -- 574,190
Expenses of stock issuances -- -- -- -- (1,045,062)
Net (loss) -- (49,760,307) -- -- (49,760,307)
------------- ------------- ------------- ------------- -------------
Balance at June 30, 1999 $ -- $ (61,798,147) $ -- $ -- $ 209,081,686
============= ============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
AGRIBIOTECH, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the year ended June 30,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(49,760,307) $ 387,241 $ (2,713,765)
Adjustments to reconcile net earnings (loss) to net cash
flows from operating activities:
Amortization 7,314,729 2,694,936 253,985
Depreciation 3,915,500 2,043,420 902,326
Equity in earnings of associated entity (726,436) (808,447) (233,690)
Deferred income taxes 836,362 (2,947,914) --
Options issued for services 814,134 396,965 72,690
Restructuring and special charges 4,165,461 -- --
Changes in assets and liabilities excluding
effects of acquisitions:
Accounts receivable 6,492,978 (2,260,461) 1,822,905
Inventories 8,031,857 (706,340) 1,898,354
Other assets 1,235,558 275,784 418,751
Accounts payable (5,787,037) (13,302,854) (4,596,592)
Accrued liabilities 6,548,299 2,937,757 (351,890)
------------ ------------ ------------
Net cash flows from operating activities (16,918,902) (11,289,913) (2,526,926)
------------ ------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (10,535,009) (6,930,355) (1,073,239)
Additions to intangible assets (320,058) (24,620) (19,228)
Distributions from associated entity 607,717 557,500 348,095
Acquisitions (44,450,318) (66,903,637) (25,790,301)
Disposition of acquired assets held for sale 9,345,034 -- --
Amounts received (paid) pursuant to stock price
guarantees and proceed sharing (3,325,751) -- --
------------ ------------ ------------
Net cash flows from investing activities (48,678,385) (73,301,112) (26,534,673)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds of short-term debt 5,781,892 3,238,582 13,986,911
Additions to long-term debt 23,464,831 7,559,848 1,037,717
Reductions of long-term debt (27,914,278) (12,854,332) (1,278,265)
Payments on amount due in connection with acquisitions -- (7,300,000) --
Sale of common stock 54,290,829 67,663,505 --
Exercise of options 2,170,228 3,546,425 4,718,867
Exercise of warrants 6,676,920 15,556,875 2,924,960
Allocation to warrants of proceeds from issuance of
units including common stock and convertible debt 4,075,820 -- --
Sale of preferred stock -- -- 10,000,000
Redemption of preferred stock -- -- (2,707,271)
Expenses of stock issuances (1,045,062) (1,912,666) (1,389,995)
Expenses of debt issuance -- (750,000) --
Payments received on notes receivable from sale of stock -- 9,990,000 1,800,000
------------ ------------ ------------
Net cash flows from financing activities 67,501,180 84,738,237 29,092,924
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 1,903,893 147,212 31,325
Cash and cash equivalents at beginning of period 2,700,846 2,553,634 2,522,309
------------ ------------ ------------
Cash and cash equivalents at end of period $ 4,604,739 $ 2,700,846 $ 2,553,634
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the year ended June 30,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Supplemental Cash Flow Information:
Interest paid $ 11,089,850 $ 4,361,808 $ 1,536,469
============= ============= =============
Non cash investing and financing activities:
Accrued costs of acquisitions $ 595,325 $ 1,038,000 $ 1,167,322
Common stock issued to reduce indebtedness 826,100 447,871 320,000
Common stock issued in acquisitions 17,319,919 43,496,838 --
Common stock to be issued in acquisition -- -- 7,950,000
Common stock issued for costs related to intellectual property 3,999,997 -- --
Receivable from exercise of options and warrants -- -- 11,790,000
Notes receivable paid subsequent to year end -- -- 9,990,000
Debt incurred in connection with acquisitions 4,890,000 4,457,000 --
Adjustment to prior issuances of common stock
due to stock price guarantees 5,432,118 -- --
============= ============= =============
Summary of assets and liabilities acquired through acquisitions:
Cash $ 1,126,805 $ 1,367,211 $ 567,566
Accounts receivable 12,673,740 19,767,914 11,796,067
Inventories 16,340,066 34,574,253 18,171,587
Net assets held for sale 9,345,034 -- --
Property, plant and equipment 11,793,755 25,213,535 9,821,994
Intangible assets 50,061,190 88,970,592 22,094,688
Other assets 651,007 2,448,085 1,341,835
Accounts payable and accrued expenses (14,952,271) (20,294,275) (12,209,690)
Long-term and short-term debt (19,252,283) (34,729,445) (7,790,489)
Deferred income taxes -- (1,093,184) (1,018,369)
------------- ------------- -------------
Net assets acquired $ 67,787,043 $ 116,224,686 $ 42,775,189
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999, 1998, and 1997
1) Corporate Organization and Acquisitions
---------------------------------------
a) Business
--------
AgriBioTech, Inc. ("ABT") is a vertically integrated developer,
producer, marketer, and distributor of forage and cool-season
turfgrass seed. Since early 1995, ABT has implemented a business
strategy designed to first, acquire leading North American companies
active in each step (research, production, distribution, and sales) in
the forage and cool-season turfgrass seed sector; second, combine the
acquired businesses into a single, customer-focused, vertically
integrated entity; and third, shift the focus of the acquired
businesses from public, non-proprietary seed varieties toward
proprietary varieties with a long-term objective of developing
biotechnologically enhanced varieties. ABT's vertically integrated
forage and cool-season turfgrass seed operations include
traditional-genetic-breeding research and development programs, seed
conditioning plants that clean, condition and package seed grown under
contract for ABT, and national and international sales and
distribution networks.
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 and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
b) Acquisitions
------------
ABT has acquired a number of seed businesses since January 1, 1995 to
accomplish its business strategy while transforming its business from
being composed of primarily commodity type products to proprietary
value-added products. Historically, the agreements for the
acquisitions involved ABT taking effective control of the acquired
businesses as of a mutually agreed upon date that preceded the closing
date when consideration was transferred to the sellers. Subsequent to
the effective date, the businesses were operated by the sellers on
behalf of and for the benefit or liability of ABT under the direct
supervision and control of ABT. This enabled ABT to begin the process
of integrating the acquired operations into those of ABT as of the
designated effective date. For accounting purposes, ABT has included
the acquired businesses in its consolidated financial statements as of
such effective dates. ABT has not recognized the effects of the
acquisition of a business prior to the date that the seller conveys in
a written agreement effective control of the business to ABT without
restrictions other than those required to protect the owners of the
acquired business. At such effective date, there have been no
substantive conditions or material terms of the acquisition agreement
remaining to be resolved and all risks and rewards of ownership of the
business pass to ABT. Due to the size of ABT and the internal focus on
integration of acquired businesses, ABT changed its acquisition
practices, to operate and acquire businesses at the closing date,
instead of the effective date, for acquired businesses not included in
ABT's March 31, 1998 consolidated financial statements.
Through June 30, 1999, ABT has completed the following acquisitions:
<TABLE>
<CAPTION>
Purchase price
Company Acquisition date (In millions)
------- ---------------- -------------
<S> <C> <C>
Seed Resource, Inc. January 1, 1995 $ 1.1
Scott Seed Co. March 1, 1995 2.0
Hobart Seed Company April 1, 1995 1.7
Sphar Seed July 1, 1995 0.3
F-9
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Halsey Seed Company July 1, 1995 1.1
Arnold-Thomas Seed Service, Inc. October 1, 1995 0.9
Clark Seeds, Inc. October 1, 1995 2.2
Doug Conlee Seed Company January 1, 1996 0.6
Michigan Hybrid Seed June 30, 1996 Nil
Beachley-Hardy Seed February 1, 1996 4.1
W-L Research, Inc. and Germain's, Inc. September 1, 1996 16.2
E. F. Burlingham & Sons April 1, 1997 9.6
The Sexauer Company April 1, 1997 3.2
Olsen Fennell Seeds, Inc. June 1, 1997 15.2
Lacrosse Seed Corporation July 1, 1997 7.0
Lofts Seed, Inc. and affiliates January 1, 1998 33.1
Seed Corporation of America and affiliates January 1, 1998 9.2
Zajac Performance Seeds, Inc. January 1, 1998 6.6
Van Dyke Seed Co., Inc. January 1, 1998 8.2
Las Vegas Fertilizer Co., Inc. January 1, 1998 12.4
Discount Farm Center, Inc. January 24, 1998 3.1
Kinder Seed, Inc. February 1, 1998 3.5
Ohio Seed Company March 1, 1998 3.8
Peterson Seed Co., Inc. May 22, 1998 6.3
W-D Seed Growers, Inc. June 25, 1998 12.1
Geo. W. Hill & Co. (KY) July 8, 1998 6.3
Fine Lawn Research, Inc. July 8, 1998 2.7
Geo. W. Hill of Indiana, Inc. July 10, 1998 1.5
J & M Seed Company July 21, 1998 3.4
Willamette Seed Company August 21, 1998 10.8
Allied Seed Company August 28, 1998 14.0
Oseco, Inc. September 1, 1998 4.3
Garden West Distributors September 18, 1998 6.5
HybriGene, LLC January 22, 1999 11.5
</TABLE>
The net purchase price of these acquisitions was paid through
approximately 7.0 million shares of ABT common stock valued at
approximately $70.2 million, based on the market price of ABT's common
stock when the terms of the agreements were reached or a guaranteed
value designated in the agreements, with the remainder paid in cash or
seller provided financing. Each acquisition was recorded using the
purchase method of accounting.
The business of Willamette Seed Company consisted of a seed division
and a division that manufactures fertilizer and distributes
fertilizers and other chemicals. Willamette's fertilizer division was
outside the primary strategic focus of ABT's business and,
accordingly, when ABT purchased Willamette in August 1998, it intended
to dispose of the fertilizer division. On December 22, 1998, ABT sold
the assets of the fertilizer division for $10.5 million with
approximately $7.5 million paid in cash and the balance paid through
the assumption of trade payables and other selected debt. Under Issue
No. 87-11 of the Emerging Issues Task Force, the operating income of
the fertilizer division aggregating approximately $277,000, including
interest charges of approximately $336,000, during the period owned by
ABT has been excluded from ABT's consolidated results of operations.
The sales price for the fertilizer division approximated the estimated
net realizable value at the date of acquisition and no gain or loss
was recognized.
Pro forma results of operations (unaudited) assuming the above
acquisitions had occurred at the beginning of the periods presented
are as follows. These pro forma results of operations include the
effect of refinancing certain indebtedness incurred in acquisitions
with subsequent issuances of equity securities.
F-10
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 377,584,398 $ 409,500,435
Earnings (loss) before extraordinary item (46,175,892) (2,003,781)
Net earnings (loss) (50,095,197) (2,003,781)
Net earnings (loss) attributable to common stock (50,095,197) (2,087,881)
Net earnings (loss) per share-basic and diluted:
Earnings (loss) before extraordinary item (1.03) (0.05)
Extraordinary item
(.09) --
------------- -------------
Net earnings (loss) $ (1.12) $ (0.05)
============= =============
</TABLE>
In certain acquisitions, ABT has guaranteed the sellers will receive
an amount equal to the value assigned to the common stock in the
acquisition if the stock is sold pursuant to a schedule provided in a
lock-up agreement. The status of these guarantees is discussed in Note
7. In addition, ABT will receive a portion of proceeds from the sale
of ABT's common stock by the former owners of certain of such acquired
businesses at prices in excess of certain amounts stated in the
agreements.
2) Significant Accounting Policies
-------------------------------
a) Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of ABT and its wholly owned subsidiaries. All significant
intercompany accounts have been eliminated.
b) Cash and Cash Equivalents
-------------------------
Cash equivalents consist of financial instruments with original
maturities of no more than ninety days.
c) Inventories
-----------
Inventories, consisting primarily of seed and related products, are
stated at the lower of cost (first-in, first-out) or market.
d) Property, Plant, and Equipment
------------------------------
Property, plant, and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful
lives of the assets. Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets is
determined by a comparison of the carrying amount of an asset to
undiscounted future net cash flows expected to be generated by the
asset. If an asset is considered to be impaired, the impairment is
measured by the excess of its carrying amount over its fair value.
e) Intangible Assets
-----------------
Intangible assets are stated at cost and primarily consist of
goodwill, patents and intellectual property, and covenants not to
compete related to ABT's seed business. Goodwill is amortized using
the straight-line method over the expected benefit period of up to 40
years with a weighted average of 29.5 years at June 30, 1999 and 30.5
years at June 30, 1998. Patents and intellectual property are
amortized over the shorter of legal or economic lives, averaging 10
years at June 30, 1999. Covenants not to compete are amortized using
the straight-line method over the lives of agreements, ranging from 3
F-11
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
to 8 years. The recoverability of intangible assets is evaluated
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. ABT assesses the
recoverability of goodwill and measures any impairment by determining
whether the amortization of goodwill over its remaining life can be
recovered through undiscounted future cash flows from the acquired
business.
f) Investment in Associated Entity
-------------------------------
ABT records its 50% investment in SeedBiotics, L.L.C., acquired
effective September 1, 1996, using the equity method of accounting and
records its share of the associated entity's income or loss as other
income or expense. A summary of financial information for SeedBiotics,
LLC is as follows:
<TABLE>
<CAPTION>
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
Assets
Current assets $ 789,500 $ 705,080
Fixed assets 1,333,815 1,350,677
Other assets 10,631 2,288
---------- ----------
Total assets $2,133,946 $2,058,045
========== ==========
Liabilities and Members' Equity
Current liabilities $ 248,387 $ 425,825
Equity 1,885,559 1,632,220
Total liabilities ---------- ----------
and equity $2,133,946 $2,058,045
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $ 4,574,250 $ 4,236,467 $ 1,970,316
Cost of sales 1,816,457 1,778,634 1,017,216
----------- ----------- -----------
Gross profit 2,757,793 2,457,833 953,100
Operating expenses 1,274,364 842,281 484,634
Other income (expense) (30,556) 1,344 (1,086)
----------- ----------- -----------
Net earnings $ 1,452,873 $ 1,616,896 $ 467,380
=========== =========== ===========
</TABLE>
g) Income Taxes
------------
Income taxes are provided under Statement of Financial Accounting
Standards ("SFAS") No. 109, Accounting for Income Taxes. SFAS No. 109
requires that deferred income taxes be provided on temporary
differences between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes using the asset and
liability method. Under this method, deferred income taxes are
computed based on the enacted tax rates scheduled to be in effect when
such differences reverse.
h) Revenue Recognition
-------------------
ABT recognizes revenue when product is shipped to customers and title
passes. Revenue is reduced by a reserve for estimated returns.
i) Research and Development Costs
------------------------------
Research and development costs are expensed as incurred and aggregated
$3,405,304, $2,271,466, and $1,170,703 in the years ended June 30,
1999, 1998, and 1997, respectively.
F-12
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
j) Employee Stock Options
----------------------
Under Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, ABT does not record compensation for stock
options granted to employees unless the exercise price is less than
the quoted market price of ABT's common stock at the measurement date.
The Financial Accounting Standards Board ("FASB") has issued SFAS No.
123, Accounting for Stock-Based Compensation, which allows ABT to
continue its present policy or, alternatively, to record a
compensation element for stock options granted to employees on the
"fair value based method" which generally uses a modeling technique to
calculate the fair value of options issued. ABT has elected to
continue its present method of accounting for employee stock options.
Had ABT adopted the alternative method provided by SFAS No. 123, the
earnings (loss) before extraordinary item, net earnings (loss), net
earnings (loss) attributable to common stock, earnings (loss) before
extraordinary item per share - basic and diluted, and net earnings
(loss) per share - basic and diluted would have been $(50,337,585),
$(54,256,890), $(54,256,890), $(1.23) and $(1.33) for the year ended
June 30, 1999, $(392,213), $(392,213), $(476,313), $(0.02), and
$(0.02) for the year ended June 30, 1998, and $(3,603,236),
$(3,603,236), $(6,836,662), ($0.44) and ($0.44) for the year ended
June 30, 1997. The weighted-average grant-date fair value of options
granted was $9,625,238 in the year ended June 30, 1999, $15,280,646 in
the year ended June 30, 1998, and $644,035 in the year ended June 30,
1997. These computations were made using the Black-Scholes modeling
technique. The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options that have no
vesting requirements and are fully transferable. ABT's employee stock
options typically vest over a number of years and are not
transferable. The option valuation model also requires estimates of
highly subjective assumptions, including the expected stock price
volatility and expected term of options. Changes in the subjective
input assumptions can materially affect the estimate of fair value of
employee stock options. Therefore, the option valuation model does not
necessarily provide a reliable single measure of the fair value of
employee stock options. The weighted-average of assumptions used in
making these computations for the years ended June 30, 1999, 1998, and
1997 were 5.4%, 5.9%, and 5.8% for risk-free interest rate; 2.7 years,
2.9 years, and 2.2 years, for expected life; 55%, 54%, and 37%, for
expected volatility; and 0%, 0%, and 0% for expected dividends.
k) Earnings/ (Loss) Per Common Share
---------------------------------
The components of shares of common stock used in computing earnings
(loss) per common share are as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Basic (weighted average
shares outstanding) 40,825,827 30,077,693 15,549,184
Options and warrants -- 1,737,394 --
Convertible preferred stock -- 246,459 --
---------- ---------- ----------
Diluted 40,825,827 32,061,546 15,549,184
========== ========== ==========
</TABLE>
The above table does not reflect contingently issuable securities that
are anti-dilutive due to losses or where underlying prices exceeded
the average market price of ABT common stock, which at the end of the
periods presented consisted of:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Options 8,923,182 1,575,449 3,948,600
Warrants 3,219,500 586,500 2,185,625
Convertible preferred stock -- -- 288,936
</TABLE>
F-13
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
See Note 7 for potential contingently issuable shares under guarantee
agreements entered into in connection with acquisitions.
For the year ended June 30, 1998, net earnings attributable to common
stock was used to compute basic earnings per share and discount and
imputed dividends on preferred stock were added back to such number to
compute diluted earnings per share.
l) Advertising and Promotion
-------------------------
ABT advertises its products through national and regional media and
cooperative advertising programs with retailers. ABT also utilizes
promotional allowances and rebate programs. ABT expenses advertising
and promotion costs as incurred, although in interim periods costs are
generally expensed ratably in relation to sales. Advertising and
promotion expenses amounted to $8.5 million, $3.9 million, and $0.6
million for the years ended June 30, 1999, 1998 and 1997.
m) New Accounting Standards Not Yet Adopted
----------------------------------------
In March 1998, Statement of Position ("SOP") 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use, was
issued. The SOP requires that certain costs related to the development
or purchase of internal-use software be capitalized and amortized over
the estimated useful life of the software. The SOP also requires that
costs related to the preliminary project stage and the
post-implementation/operations stage of an internal-use computer
software development project to be expensed as incurred. The SOP is
effective for fiscal years beginning after December 15, 1998 and is to
be applied on a prospective basis. ABT's current practice is
materially consistent with the SOP.
SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued in June 1998. This statement establishes
accounting and reporting standards for derivative instruments and
hedging activities. The statement is effective for financial
statements for fiscal years beginning after June 15, 2000, although
early adoption is permitted. ABT has not determined the impact, if
any, of adopting SFAS No. 133.
n) Reclassifications
-----------------
Certain amounts in the prior year financial statements have been
reclassified to be comparable to the current year presentation.
3) Property, Plant, and Equipment
------------------------------
A summary of property, plant, and equipment is as follows:
<TABLE>
<CAPTION>
Useful Lives June 30,
------------ --------
1999 1998
---- ----
<S> <C> <C> <C>
Land - $ 8,316,133 $ 7,968,555
Buildings 12 to 40 years 31,105,243 24,511,420
Equipment 1 to 25 years 29,538,748 18,740,672
----------- -----------
Total property, plant, and
equipment 68,960,124 51,220,647
Less accumulated depreciation 6,747,798 3,256,125
----------- -----------
Property, plant, and equipment, net $62,212,326 $47,964,522
=========== ===========
</TABLE>
F-14
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The June 30, 1999 amounts include non-cash write-downs of approximately
$4.2 million recorded in connection with the 1999 restructuring plan. See
Note 12.
4) Intangible Assets
-----------------
Intangible assets consist of:
<TABLE>
<CAPTION>
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
Goodwill $141,630,861 $106,589,177
Covenants not to compete 9,795,963 6,121,594
Patents and intellectual property 11,667,558 189,511
------------ ------------
Total intangible assets 163,094,382 112,900,282
Less accumulated amortization 10,145,048 3,017,467
------------ ------------
Intangible assets, net $152,949,334 $109,882,815
============ ============
</TABLE>
ABT's ability to fully recover the carrying amount of goodwill through
undiscounted cash flows assumes that results of operations and cash flows
in future periods will improve from historical levels. If ABT is unable to
achieve its business objectives, some portion of goodwill could be impaired
in subsequent periods.
5) Long-Term Obligations
---------------------
A summary of long-term obligations is as follows:
<TABLE>
<CAPTION>
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
Notes and mortgages payable; repayable in principal payments
of $1,829,259 annually plus interest at 7.9% to 10%;
secured by property, plant and equipment $ 10,531,824 $ 9,495,300
Notes payable 3,023,334 1,120,449
Covenants not to compete 3,894,374 3,041,250
Deferred compensation 397,471 283,333
Other 329,146 340,536
------------ ------------
Total long-term obligations 18,176,149 14,280,868
Less current installments 5,977,852 3,251,846
------------ ------------
Long-term obligations, excluding current
installments $ 12,198,297 $ 11,029,022
============ ============
</TABLE>
Required principal payments are as follows:
<TABLE>
<CAPTION>
Year ending June 30, Amount
-------------------- ------
<S> <C> <C>
2000 $5,977,852
2001 3,779,707
2002 1,886,039
2003 2,050,167
2004 1,146,395
</TABLE>
In December 1998 and January 1999, ABT sold $23.3 million of convertible
debentures and 1.7 million warrants to purchase ABT's common stock. ABT
received an aggregate of $25 million from this transaction, which was used
to repay short-term credit facilities described in Note 6. The debt was due
on December 30, 2001 and provided for interest at 5% per annum, which ABT
had the option of paying in cash or its common stock. The debt was
subordinated to ABT's revolving line of credit. The debt was convertible
F-15
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
into ABT's common stock at $13.68 per share, a 10% premium above the $12.44
price of the common stock on December 29, 1998, when the transaction was
priced. ABT had the option to redeem the debt every six months beginning
June 30, 1999, at redemption prices beginning at 120% of the outstanding
amounts and escalating thereafter. On each redemption date that ABT did not
redeem the debt, the conversion price would have been adjusted to the
market price at that time if such price was lower than the conversion
price.
On May 28, 1999, ABT completed an early redemption of the subordinated
convertible debentures. ABT paid cash of $27.6 million, including accrued
interest, to fully redeem the debt. The redemption prevented a resetting of
the amount of shares into which the debt could be converted. The warrants
remain outstanding. The difference between the cost of redeeming the debt
and the amount reflected on ABT's books amounting to $3.9 million is
reflected as an extraordinary item in the statement of operations.
In connection with ABT's early redemption of its subordinated convertible
debt, ABT borrowed $10 million from Richard Budd, a director of ABT and its
Chief Executive Officer since February 26, 1999, and his family, including
Kenneth Budd, ABT's President and Chief Operating Officer. The debt was
repaid on June 8, 1999, including interest at 8.25% per annum.
6) Short-Term Debt
---------------
ABT has a credit facility with BankAmerica Business Credit, Inc. and
certain other financial institutions that includes a $100 million revolving
line of credit, of which approximately $71.9 million was outstanding at
June 30, 1999, including items in process of collection. The amount
available under the revolving line of credit is limited to the sum of 85%
of ABT's eligible receivables less than 60 days past due and 65% of
eligible inventory and is secured by substantially all of ABT's assets,
except real estate. ABT can borrow up to the maximum amount under the line
of credit, subject to the limitations of the borrowing base and compliance
with certain covenants. All proceeds realized from inventory and
receivables are used to repay amounts outstanding under the revolving line
of credit. Accordingly, the revolving line of credit is classified as a
current liability although it matures in June 2001. Interest on the
revolving line of credit is at the Bank of America's reference rate plus
1.125% (8.875% at June 30, 1999) or the LIBOR rate plus 3.00% (8.0% at June
30, 1999), at ABT's option. The average interest rate on short-term debt
outstanding at June 30, 1999 and 1998 was 8.06% and 8.05%. In addition, ABT
pays a commitment fee of 0.25% per annum of the unused line of credit. On
August 14, 1998, the revolving line of credit was amended to provide for
borrowings of $15 million in excess of amounts allowed under the borrowing
base computation through December 31, 1998. The additional borrowing
carried a fixed interest rate of 18%. At October 8, 1999, approximately
$62.1 million was outstanding and $26.5 million was available to be
borrowed under the revolving line of credit based on the borrowing base
computation at that date.
On July 3, 1998, ABT entered into a bridge loan agreement in the amount of
$15 million with Deutsche Bank, AG. The loan was unsecured and was repaid
upon maturity on January 4, 1999. Interest on the loan averaged the LIBOR
rate plus 4.8%.
When ABT entered into the revolving line of credit, the debt service
covenant was reflective of ABT's forecasted operations, including
businesses acquired at that time. Subsequent acquisitions and other changes
in ABT's operations have caused the covenant to not be appropriate for
ABT's current business structure. The loss incurred during the fourth
quarter of the year ended June 30, 1999 resulted in ABT not being in
compliance with the debt service covenant at June 30, 1999 and would have
prevented ABT from being able to comply with the covenant through June 30,
2000. Subsequent to June 30, 1999, the lenders agreed to waive compliance
with the covenant at June 30, 1999 and the covenant has been amended to
reflect ABT's current operational structure and forecasted results of
operation. ABT believes it will be able to comply with the covenant as
restructured. At the time the covenant was amended, the revolving line of
credit was also amended to reduce the maximum borrowings under the line to
$90 million and to increase the interest rate charged on borrowings by 1%.
In addition, at ABT's discretion, the advance rate on eligible inventory
may be reduced to 55% effective January 15, 2000, or the interest rate on
borrowings will be increased by an additional 1% and additional fees will
be due the lenders. ABT believes, based on its current operational
structure and forecasted results of operations for Fiscal 2000, that
borrowings under the revolving credit facility will be sufficient to fund
ABT's operations through June 30, 2000.
ABT has received a commitment from a major financial institution that, if
consummated, would provide ABT with additional financing capacity and
replace ABT's existing revolving line of credit. The proposed financing
arrangement would provide ABT with a revolving line of credit of up to $115
million and five-year term financing of up to $20 million. ABT would be
required to obtain an additional $5 million of equity capital or unsecured
debt. The revolving debt would be subject to a borrowing base computation
based on levels of eligible accounts receivable and inventory. The term
debt would be based on the appraised values of certain items of ABT's
property, plant and equipment. The new debt would be secured by
substantially all of ABT's assets. ABT is currently evaluating the terms of
the commitment but has not yet accepted it. It is anticipated that this
financing will be completed by the end of November 1999, although there can
be no assurance this financing will be completed. In the event this
financing is not completed, ABT will continue to explore other alternatives
to supplement or replace its existing credit facility, including obtaining
long-term debt secured by ABT's property, plant and equipment. In addition,
it is possible ABT may seek to raise additional equity capital.
Subsequent to June 30, 1999, ABT borrowed approximately $3 million from a
special purpose entity controlled by officers of ABT. This debt is secured
by certain real estate of ABT and provides for interest at 10% per annum.
The debt is due on demand or, if no demand is made, ninety days from the
borrowing, and is repayable upon any refinancing by ABT.
F-16
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
7) Capital Stock
-------------
To fund the acquisitions described above and to finance operations to date,
ABT has entered into numerous arrangements to raise equity capital. Prior
to July 1, 1995, ABT issued warrants to purchase ABT's common stock as part
of a private placement of ABT's common stock for cash. The "Class A
Warrant" entitled the holder to obtain one share of ABT's common stock and
a warrant (the "Class B Warrant") upon payment of the exercise price of
$3.50 through January-17, 1996. The Class B Warrant entitled the holder to
obtain one share of ABT's common stock and a warrant (the "Class C
Warrant") upon the payment of the exercise price of $5.00 through January
17, 1997. The Class C Warrant entitled the holder to obtain one share of
ABT's common stock upon payment of the exercise price of $7.50 through
January 17, 1998. ABT also issued Class A Warrants to a consultant for
assistance with investor relations, strategic planning, funding plans, and
other corporate activities. The terms of the warrants gave ABT the
discretion to lower the exercise price, extend the expiration date, call
the warrants even when the exercise price was below the current market
price, and to arrange for stand-by purchasers in the event holders did not
exercise the warrants. To accelerate the raising of capital, ABT reduced
the exercise price of certain of its warrants at various times. In
addition, ABT allowed certain warrants to be exercised through promissory
notes that were transferable and non-interest bearing. The common stock
underlying the exercise of these warrants was held in escrow by ABT until
the promissory notes were paid. All of the Class A, Class B, and Class C
Warrants were exercised prior to their expiration.
ABT issued other warrants to the placement agent in connection with the
issuance of convertible preferred stock and has also entered into financing
arrangements in which common stock and warrants were sold in units and
where warrants were sold in connection with debt (Note 5). A summary of
activity in ABT's warrants is as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning of year 586,500 2,185,625 2,685,625
Issued 3,189,410 586,500 1,616,000
Exercised 556,410 2,185,625 2,116,000
--------- --------- ---------
Outstanding at end of year 3,219,500 586,500 2,185,625
========= ========= =========
</TABLE>
All of the warrants outstanding at June 30, 1999 and 1998 contain
provisions under which ABT can force the warrants to be converted into
common stock (or redeem the warrants) if the closing sale price of ABT's
common stock exceeds a specified price for a period of time. A summary of
warrants outstanding is as follows:
<TABLE>
<CAPTION>
Outstanding
June 30,
--------
Stock price for forced
Exercise price Expiration conversion 1999 1998
-------------- ---------- ---------- ---- ----
<S> <C> <C> <C> <C>
$17.50 May 2001 $25.00 586,500 586,500
$12.00 August 2001 $19.50 330,000 --
$15.00 December 2001 $15.00 600,000 --
$15.00 January 2002 $15.00 1,703,000 --
--------- -------
3,219,500 586,500
========= =======
</TABLE>
In April 1996, ABT completed a private placement of convertible preferred
stock and issued 7,425 shares of Series B Convertible Preferred Stock. ABT
received cash proceeds, after commissions, of $6,608,250 from the issuance
of the Series B Convertible Preferred Stock. In September 1996, ABT
completed a private placement of 10,000 shares of Series C Convertible
Preferred Stock at $1,000 per share, receiving gross proceeds of
$10,000,000. ABT paid commissions and selling expenses of 13% of the gross
proceeds. These series of preferred stock (collectively, the "Preferred
Stock") were not entitled to dividends and were not mandatorily redeemable
by ABT. The Preferred Stock was convertible into shares of common stock
equal to the original amount of issuance plus a premium, divided by a
conversion price that was the lesser of 80 percent of the average closing
bid price for ABT's common stock for the five days prior to conversion or a
F-17
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
set amount. In the event of a conversion when the average closing bid price
of ABT's common stock was lower than a stated amount, ABT had the option of
redeeming for cash, at the average closing bid price, the shares of common
stock issuable upon such conversion. All of the Preferred Stock had been
converted into common stock or redeemed prior to June 30, 1998.
When ABT issued the Preferred Stock, ABT determined the economic substance
of the Preferred Stock was equivalent to common stock. This conclusion was
reached because the documents authorizing the Preferred Stock provide that
the holders of the Preferred Stock are not entitled to receive dividends,
ABT has no requirements to make any cash payments with respect to the
Preferred Stock, and the ultimate satisfaction of the Preferred Stock would
be through conversion into common stock, either by the election of the
holders or automatically at the future date provided by the underlying
documents. Accordingly, ABT did not reflect any accounting consequences of
the conversion features of the Preferred Stock or account for dividends on
the Preferred Stock. In March 1997, an announcement was made at a meeting
of the FASB's Emerging Issues Task Force (Topic No. D-60) setting forth the
position of the staff of the Securities and Exchange Commission (the
"Staff") regarding securities containing conversion features allowing for
conversion into common stock at a discount from future quoted market
prices. The Staff stated that an allocation of the proceeds from the
issuance of the securities should be made to the conversion feature and the
resulting discount is analogous to a dividend that should be recognized as
a return to the holders of the securities over the period between issuance
and when the securities first become convertible. The Staff's position is
reflected in the accompanying financial statements. The discounts and
imputed dividends were attributed to capital in excess of par value and,
therefore, resulted in no change in stockholders' equity.
On January 5, 1996, ABT entered into an eighteen-month consulting agreement
to assist ABT with investor communications and relations. In consideration
of the agreement, ABT granted the consultant a five-year option to purchase
2,000,000 shares of ABT's common stock exercisable at $1.81 per share,
which equaled the market price at the grant date. ABT determined that the
value of the investor communications and relations services to be received
under this agreement was $108,000, which was amortized over the term of the
agreement. In August 1996, ABT entered into another agreement with the
consultant under which the consultant surrendered rights to 1,550,000 of
the options. In exchange, ABT issued 750,000 shares of its restricted
common stock to the consultant. The options surrendered by the consultant
were transferable by their original terms and were assigned to persons,
primarily stockholders of ABT, whom ABT believed would exercise them and
provide capital to ABT. At the time of this arrangement, the market price
of ABT's common stock exceeded the exercise price of the options. The
difference between the market price and the exercise price, deemed to be a
preferential dividend to these stockholders for accounting purposes,
aggregated approximately $1.8 million. However, since ABT had no retained
earnings, such amount would be charged to capital in excess of par value
and would be offset by a deemed contribution to capital in excess of par
value resulting in no change in stockholders' equity. All of these options
have been exercised.
ABT has (1) an Employee Stock Option Plan (the "ESOP") under which options
for the purchase of up to 3,600,000 shares of common stock may be granted
to qualified employees, officers and directors, employees of subsidiaries,
independent contractors, consultants, and other individuals and (2) an
Employee Stock Bonus Plan under which up to 400,000 shares of common stock
may be issued to qualified full-time employees. The ESOP is administered by
a committee of non-employee members of ABT's Board of Directors, who have
complete discretion to select the optionee and the terms and conditions of
each option. The exercise price of the options cannot be less than the fair
market value of ABT's common stock on the date of grant and options may not
be exercised more than ten years from the date of grant. At June 30, 1999,
ABT had outstanding options under the ESOP for the purchase of 2.1 million
shares of common stock at prices ranging from $2.00 to $27.688 per share,
of which 1.3 million were exercisable. No shares have been issued under the
Employee Stock Bonus Plan.
F-18
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
ABT has also granted options outside of the ESOP for the purchase of ABT's
common stock to officers and key employees of ABT, including those of
acquired businesses. These options are exercisable at prices ranging from
$2.00 to $25.625 per share and expire five to ten years from the date of
grant. The options become exercisable over periods of three to five years.
Options for 6.8 million shares were outstanding at June 30, 1999 of which
3.7 million were exercisable.
Following is a summary of activity in ABT's options for employees and
directors:
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
------------------- ---------------------- --------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
price Number price Number price Number
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year $ 7.85 7,675,695 $ 2.70 3,948,600 $ 2.63 5,751,500
Issued 12.53 2,507,300 11.41 4,774,113 3.54 1,467,400
Exercised 3.97 (542,363) 3.85 (843,005) 2.93 (3,226,000)
Forfeited 13.78 (717,450) 6.57 (204,013) 3.75 (44,300)
------ --------- ------ --------- ------ ---------
Outstanding at
end of year $ 8.93 8,923,182 $ 7.85 7,675,695 $ 2.70 3,948,600
====== ========= ====== ========= ====== =========
Exercisable at end
of year $ 6.96 4,982,637 $ 4.73 3,488,037 $ 2.28 2,810,200
====== ========= ====== ========= ====== =========
</TABLE>
The following summarizes certain information regarding stock options
outstanding at June 30, 1999:
<TABLE>
<CAPTION>
Total Exercisable
------------------------------------- -----------------------
Weighted-
Weighted- average Weighted-
average remaining average
Exercise exercise contractual exercise
Price Number price life (years) Number price
----- ------ ----- ------------ ------ -----
<S> <C> <C> <C> <C> <C>
$2.00 to $2.12 2,075,000 $ 2.07 6.6 2,075,000 $ 2.07
$2.13 to $5.00 951,891 3.98 4.3 739,226 4.13
$5.01 to $8.00 1,408,183 6.14 4.2 399,319 5.83
$8.01 to $11.00 1,019,400 8.94 3.7 356,450 8.61
$11.01 to $14.00 1,235,400 12.29 4.2 548,366 12.55
$14.01 to $17.00 1,411,215 15.30 3.8 527,615 15.15
$17.01 to $27.688 822,093 20.72 3.8 336,660 20.95
--------- ------ --- --------- ------
Total 8,923,182 $ 8.93 4.6 4,982,637 $ 6.96
========= ====== === ========= ======
</TABLE>
In connection with acquisitions of businesses and intellectual property
rights where the owners received ABT common stock as part of the purchase
price, "lock-up agreements" were executed that limit the amount of ABT
common stock that the recipients can sell within specified time periods. In
addition, ABT guaranteed the proceeds to be received by certain of the
recipients from the sale of the common stock if sold in accordance with the
lock-up agreements. Through December 31, 1998, ABT was not required to
provide additional consideration under the guarantee agreements.
However, due to declines in the price of ABT's common stock from December
31, 1998 through June 30, 1999, there were five such arrangements where
F-19
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
common stock was sold for less than the guaranteed price. These five
arrangements, which were entered into from June 1998 through January 1999,
guaranteed that $21.9 million would be received from the 1.2 million shares
of ABT common stock issued in these transactions when sold pursuant to the
related lock-up agreements. The common stock issued in these transactions
was recorded at values equal to the guaranteed prices. Through June 30,
1999, approximately 705,000 shares have been sold by the recipients who
received proceeds of approximately $5.0 million, which is approximately
$7.9 million less than the amounts guaranteed to be received from the
shares sold. Two of these arrangements were modified whereby the recipients
agreed to suspend sales of ABT's common stock until after June 30, 1999 and
ABT agreed to make cash payments aggregating $2.8 million that were
credited against the guaranteed amounts to be received by the recipients.
Otherwise, the terms of the original agreements were not changed. In
addition, certain recipients were granted options to purchase an aggregate
of 95,000 shares of ABT's common stock at $5.00 per share, which equaled
the market price at the time of grant. On June 29, 1999, ABT issued
1,070,000 additional shares of common stock to the recipients under two of
the guarantee agreements. If these additional shares and the shares
remaining unsold on that date were sold at an average price of $6.50, which
approximated the price of ABT's common stock at that time, the proceeds
would have been sufficient to satisfy these guarantee agreements.
Generally accepted accounting principles provide that additional
obligations under stock issued with a guaranteed price be recorded with a
simultaneous reduction in the amount previously recorded for the stock
issued. Accordingly, in the year ended June 30, 1999, ABT recorded the
additional shares issued and established a current liability for the $5.4
million paid or to be paid in cash, related to the price guarantees for
shares sold through June 30, 1999, with a corresponding reduction in
stockholders' equity. Of this amount, $3.9 million was paid in cash prior
to June 30, 1999, and $1.5 million will be paid in cash prior to October
15, 1999.
If the shares remaining to be sold pursuant to these agreements at June 30,
1999 are sold at an average of $4.00 per share, the proceeds received would
be approximately $5.2 million less than the amounts guaranteed to be
received for such shares. Of this amount, approximately $1.6 million would
be paid in cash with the remaining $3.6 million to be satisfied through the
issuance of additional shares of ABT's common stock or the payment of cash,
at ABT's option. Subsequent to June 30, 1999, ABT issued an additional
532,820 shares under these agreements.
The closing price for ABT's common stock on October 12, 1999 was $4.34375
per share and the range of sales prices has been as follows:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
July 1, 1996 - June 30, 1997 $ 7.00 $ 1.969
July 1, 1997 - June 30, 1998 29.50 5.75
July 1, 1998 - June 30, 1999 27.75 3.688
July 1, 1999 - October 12, 1999 6.531 3.563
</TABLE>
In July 1999, ABT sold 700,000 shares of common stock for cash of $3.5
million. In September 1999, ABT issued 500,000 shares of common stock to
extinguish an obligation of $1.9 million under an agreement that cancelled
a long-term obligation to an individual related to certain intellectual
property rights. These shares can be sold pursuant to a lock-up agreement
and if the proceeds from such sale do not equal the amount of the
obligation being extinguished, ABT will make up the shortfall in cash. If
the proceeds exceed the obligation prior to all shares being sold, the
remaining shares, or excess net proceeds, will be returned to ABT.
F-20
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
8) Commitments and Contingencies
-----------------------------
ABT contracts with growers to produce a substantial portion of its
proprietary seed requirements, which ABT would be obligated to purchase
upon delivery by the growers. These contracts are typically for one to four
growing seasons and are generally renewed or replaced with other growers.
ABT rents office space, land, warehouse space, vehicles, and equipment
under agreements expiring through the year 2005. Total rent expense was
approximately $3.4 million, $1.3 million, and $0.3 million for the years
ended June 30, 1999, 1998, and 1997. Rent commitments under agreements
longer than one year as of June 30, 1999 are as follows.
<TABLE>
<CAPTION>
Year ending June 30, Amount
-------------------- ------
<S> <C>
2000 $2,117,060
2001 1,763,214
2002 1,502,301
2003 1,019,595
2004 594,442
</TABLE>
Between January 14, 1999 and March 19, 1999, a number of securities class
action complaints were filed against ABT and certain of its former
directors and current and former officers in federal courts in New Mexico,
New York and Nevada. All cases have been transferred to the United States
District Court for the District of Nevada and consolidated into one action.
On July 6, 1999, a consolidated amended complaint was filed by plaintiffs
purporting to represent a class of purchasers of ABT common stock from
September 24, 1997 through February 16, 1999. The complaint alleges, among
other things, that ABT's financial statements, including the accounting
treatment for acquisitions completed in 1997 and 1998, and certain
statements made by ABT concerning its efforts to find a strategic equity
investor in late 1998 and early 1999 and other topics were false and
misleading and caused an artificial rise in ABT's common stock price in
violation of federal securities law. On August 18, 1999, ABT filed a motion
to dismiss the complaint. ABT believes it has meritorious defenses to this
action and intends to defend itself vigorously. However, due to the risks
of litigation, a prediction of the final outcome of these proceedings
cannot be made with certainty, and an unfavorable result in this action
could have a material adverse impact.
In the ordinary course of business, ABT is also a party to certain other
claims, actions and proceedings incidental to its business, none of which
is expected to have a material adverse effect on the business, financial
position or results of operations of ABT.
9) Income Taxes
------------
ABT reported no income tax expense or benefit for the year ended June 30,
1997 due to operating losses in that period and, as required by SFAS No.
109, the deferred tax assets generated by those operating losses being
fully offset by a valuation allowance since, at that time, ABT was unable
to conclude it was more likely than not that the deferred tax assets will
be realized. The provision for income tax attributable to operations for
the years ended June 30, 1999 and 1998 consists of the following:
F-21
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
Current tax expense:
Federal $ -- $ --
Foreign 175,000 --
State -- 40,414
----------- -----------
Total current tax expense 175,000 40,414
Deferred tax expense (benefit):
Federal 768,548 (2,708,891)
State 67,814 (239,023)
----------- -----------
Total deferred tax expense (benefit) 836,362 (2,947,914)
----------- -----------
Total income tax expense (benefit) $ 1,011,362 $(2,907,500)
=========== ===========
</TABLE>
The principal elements causing ABT's income tax provision to differ from
the expected federal statutory rate of 34% were as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Expected income tax on earnings (loss)
before extraordinary item, based
on statutory rate $(15,242,077) $ (856,888) $ (922,680)
Effect of valuation allowance 15,091,066 (2,356,203) 949,241
Amortization of goodwill 886,998 256,900 --
State income taxes, net of federal benefit -- (4,991) (53,733)
Other 275,375 53,682 27,172
------------ ------------ ------------
Total income tax expense (benefit) $ 1,011,362 $ (2,907,500) $ --
============ ============ ============
</TABLE>
Deferred tax liabilities and assets relate to the following:
<TABLE>
<CAPTION>
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $ (5,743,858) $ (4,508,960)
Intangible assets (904,462) --
Other (145,600) (478,453)
------------ ------------
Total deferred tax liabilities (6,793,920) (4,987,413)
------------ ------------
Deferred tax assets:
Net operating loss carryforwards from operations 9,949,113 3,415,910
Net operating loss carryforwards from stock options 4,563,645 3,415,311
Inventory capitalization 839,909 718,283
Allowance for doubtful accounts 2,814,391 566,746
Restructuring costs 2,351,944 --
Inventory obsolescence 2,868,241 408,782
Other 2,272,446 714,054
------------ ------------
Total gross deferred tax assets 25,659,689 9,239,086
Less valuation allowance 18,865,769 3,415,311
------------ ------------
Net deferred tax assets 6,793,920 5,823,775
------------ ------------
Net deferred tax assets $ -- $ 836,362
============ ============
</TABLE>
SFAS No. 109 provides that deferred taxes should be determined by first
identifying types and amounts of existing temporary differences, the nature
and amount of each type of operating loss carryforward, and the remaining
length of the carryforward period. Total deferred tax liabilities and
deferred tax assets are then measured by applying the enacted tax rate to
the existing differences. In addition, deferred tax assets are reduced by a
valuation allowance if, based on the weight of available evidence, it is
more likely than not (a likelihood of more than 50 percent) that some
portion or all of the deferred tax assets will not be realized.
Accordingly, the valuation allowance should be sufficient to reduce the
deferred tax asset to the amount that is more likely than not to be
realized. A change in judgment about the realizability of the related
deferred tax asset in future years ordinarily shall be included in income
from operations. Future realization of the tax benefit of an existing
F-22
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
deductible temporary difference or carryforward depends on the existence of
sufficient taxable income within the period of reversal or the carryforward
period available under the tax law and/or future reversals of existing
deferred tax liabilities.
Through the year ended June 30, 1997, ABT could not conclude that it was
more likely than not it would realize the deferred tax assets and had
established a valuation allowance for its deferred tax assets. Through the
quarter ended March 31, 1998, ABT reported approximately $1.4 million of
year-to-date book income before taxes, and forecast increasing future
profits based on the assumptions of increased revenue growth, synergies to
occur from the integration of acquired companies, and reduced product costs
to be obtained through vertical integration. Based on this current
performance and projections, ABT concluded it was more likely than not that
the deferred tax assets would be realized, and removed the valuation
allowance, resulting in an income tax benefit of approximately $2.9 million
in the quarter ended March 31, 1998. At June 30, 1999, ABT has established
a valuation allowance of $16,183,582 (exclusive of the $2,682,187 valuation
allowance described below), which results in no net deferred tax asset or
liability as of such date.
For income tax purposes, ABT receives a deduction for the difference
between the exercise price of certain stock options and the market price of
ABT's common stock at the date of exercise, even though there is no
compensation recorded for financial reporting purposes. During the years
ended June 30, 1999 and 1998, ABT received approximately $3.1 and $9.2
million of such tax deductions. The deferred tax asset arising in the years
ended June 30, 1999 and 1998, attributable to the tax deductions from stock
option exercises was $1,148,334 and $3,415,311, respectively. The tax
benefits from the realization of the loss carryforwards related to the
stock options will be the last benefits of the carryforwards recognized for
financial reporting purposes. ABT was not able to conclude that it is more
likely than not it will realize the deferred tax asset pertaining to this
loss carryforward, resulting in ABT establishing a valuation allowance for
the deferred tax asset from this loss carryforward as of June 30, 1999 and
1998. When the deferred tax asset relating to the loss carryforward from
stock option deductions is realized, those benefits will be credited
directly to equity, and will not be reflected in ABT's statement of
operations. Of the valuation allowance at June 30, 1999, $2,682,187 will be
credited to equity upon realization of the deferred tax asset relating to
the loss carryforward from the stock option deductions.
Further, in accordance with SFAS No. 109, the valuation allowance was
adjusted pursuant to the interrelationship of deferred tax calculations and
applying the purchase method of accounting for acquired businesses. Under
SFAS No. 109, the deferred tax consequence of an acquisition is measured as
the difference between the acquiror's net deferred tax asset or liability
just prior to the acquisition and the combined entity's net deferred tax
asset or liability just after the acquisition. During the years ended June
30, 1999 and 1998, ABT reduced the valuation allowance by $1,881,458 and
$934,621, respectively as a result of deferred tax calculations pursuant to
acquisitions. The offset of this entry was a reduction in goodwill of the
respective acquired companies.
A summary of the valuation allowance activity is provided below.
<TABLE>
<CAPTION>
Year ended June 30,
--------------------
1999 1998
---- ----
<S> <C> <C>
Balance at beginning of year $ 3,415,311 $ 3,290,824
Stock options 1,148,334 3,415,311
Current year activity 16,183,582 591,711
Recognition of future benefits -- (2,947,914)
Deferred tax calculation on acquisitions (1,881,458) (934,621)
------------ ------------
Balance at end of year $ 18,865,769 $ 3,415,311
============ ============
</TABLE>
F-23
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The utilization of operating losses for income tax purposes that originated
prior to June 30, 1992 are limited in each year to an amount equal to the
federal long-term tax exempt interest rate times the entity's market value
at the time of change in ownership. ABT believes that the effect of these
limitations will be to limit the utilization of pre-1993 net operating loss
carryforwards to approximately $25,000 annually through the year 2007. The
net operating losses for income-tax purposes expire, if unused, as follows:
<TABLE>
<CAPTION>
Loss from Loss from Total
Year ending June 30, operations stock options carryforward
-------------------- ---------- ------------- ------------
<S> <C> <C> <C>
2001 - 2006 $ 350,000 $ -- $ 350,000
2007 514,888 -- 514,888
2008 443,691 -- 443,691
2009 932,712 -- 932,712
2010 1,354,706 -- 1,354,706
2011 2,678,019 -- 2,678,019
2012 1,834,113 -- 1,834,113
2013 (1,587,301) 9,230,571 7,643,270
2019 20,368,667 3,103,606 23,472,273
------------ ------------ ------------
Total $ 26,889,495 $ 12,334,177 $ 39,223,672
</TABLE>
10) Retirement Plan
---------------
ABT has a defined contribution plan which covers all employees. Eligible
employees may contribute up to 20 percent of their annual compensation, not
to exceed the statutory maximum. ABT may make discretionary contributions.
Participants are immediately vested in their contribution and vest 20
percent per year in ABT's contributions for each year of service after the
first year. ABT made contributions of $366,656, $98,864, and none for the
years ended June 30, 1999, 1998, and 1997.
11) Fair Value of Financial Instruments
-----------------------------------
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and short-term debt approximate fair value due to the
short maturity periods of these instruments. The fair value of ABT's
long-term obligations based on the present value of the cash flows from
those obligations was approximately $17.1 million at June 30, 1999 using an
assumed interest rate of 9.0%, and $13.2 million at June 30, 1998 using an
assumed interest rate of 8.5%.
12) Restructuring and Special Charges
---------------------------------
In June 1999, ABT's Board of Directors approved the restructuring plan to
integrate the acquired businesses. The plan includes the closure of 33
facilities that were determined to be either redundant or inconsistent with
ABT's overall strategic plan and an associated reduction in workforce of
approximately 300 full-time employees related to facility closures,
elimination of duplicate positions, and streamlining ABT operations related
to cost reduction initiatives. Accordingly, in the year ended June 30,
1999, ABT recorded $9.8 million of restructuring and other integration
related costs that are non-recurring or infrequent in occurrence. Included
in this total are anticipated losses on disposal of closed facilities of
$3.4 million, severance and other employee related costs of $3.2 million,
anticipated losses on disposal of duplicate and less efficient machinery
and equipment not needed in the integrated operations of $0.9 million, and
other costs associated with the integration of $2.3 million. Other costs
include lease termination costs, consulting and professional fees, travel
expenses, and various other costs related to the integration. As of June
30, 1999, cash payments of approximately $3.3 million have been made. ABT
anticipates that substantially all of the restructuring will be completed
in the year ending June 30, 2000. Certain costs, such as equipment
relocation and personnel relocation, can not be accrued as restructuring
until they actually occur. These costs will be recorded in fiscal 2000 and
are not expected to exceed $1 million.
F-24
<PAGE>
AGRIBIOTECH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The restructuring and special charges are summarized as follows:
<TABLE>
<CAPTION>
Non-cash Cash
----------------------- -----------------------
Realized To be Paid
Through realized Through To be paid
Total June 30, after June June 30, after June
charges 1999 30, 1999 1999 30, 1999
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Facility closure $3,361,596 $ 11,473 $3,350,123 $ -- $ --
Employee termination 3,181,960 -- -- 1,310,268 1,871,692
Disposal of equipment 897,660 82,322 815,338 -- --
Other 2,310,415 -- -- 2,002,665 307,750
---------- ---------- ---------- ---------- ----------
Total $9,751,631 $ 94,795 $4,165,461 $3,312,933 $2,179,442
========== ========== ========== ========== ==========
</TABLE>
As part of the restructuring, ABT has also consolidated and discontinued
brands under which its products are sold. Inventory associated with many of
the discontinued brands was only saleable at reduced prices, if at all. The
carrying amount of this inventory was reduced to net realizable value. This
reduction is not includable in restructuring and special charges under
generally accepted accounting principles. In the fourth quarter of the year
ended June 30, 1999, ABT increased cost of sales for reductions in
inventory values, primarily related to the integration, aggregating $10.3
million.
The restructuring charges are based on estimates and, therefore, are
subject to change. ABT does not believe any revisions to these estimates
will be material.
13) Segment Information
-------------------
Effective June 30, 1999, ABT adopted SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information. Prior to the June 1999
restructuring (Note 12), ABT assessed performance of its operations and
made decisions about allocation of resources as one combined business,
consisting of all the acquired entities and, therefore, under SFAS No. 131,
operated as a single segment. ABT's major product groups and the percentage
of total net sales for the year ended June 30, 1999 include turf seeds
(48%), forage seeds (30%), other seeds (6%), and non-seed (16%). Due to the
number of acquisitions completed by ABT and the different methods and
systems of accumulating data in the acquired businesses, similar
information is not available for prior years. After restructuring, ABT will
operate and manage its business by business units focused on the nature of
the customers served by each business unit. ABT has segregated its
customers into three basic categories: (1) those that are primarily retail
focused or are end-use consumers; (2) those that are primarily wholesale
focused; and (3) those characterized by ABT as Specialty Distribution. The
retail operations serve customers throughout North America using four
geographical areas. These customers include mass merchandisers, independent
lawn and garden or agricultural retailers, golf courses, sports fields, sod
farms, landscapers, dairies, cattle ranchers, commercial hay growers,
farmers, land reclamation projects, hydroseeders, highway departments, and
airports. The wholesale operations serve domestic customers that generally
are larger entities with their own sales forces and distribution channels
that re-sell ABT's products to others and international users of forage and
cool-season turfgrass seed. Wholesale operations also includes seeds sold
through private labels of others. Specialty Distribution serves customers
formerly served by three acquired businesses that provide a full range of
seed, chemicals, fertilizers, lawn and garden supplies, and ancillary
products to a wide range of customers, including golf course, landscapers
and hardware-type retail stores in certain markets in the United States. On
a prospective basis, ABT will report operating segments based on the
customer segregation described above. Due to the number of acquisitions
completed by ABT and the different methods and systems of accumulating data
in the acquired businesses, it is impossible to provide operations data for
the periods prior to July 1, 1999 based on the segments to be used
prospectively.
Approximately 8%, 11%, and 15% of ABT's net sales for the years ended June
30, 1999, 1998, and 1997 were to customers in foreign countries, determined
based on destination of the products. ABT's long-lived assets located
outside of the United States are immaterial.
F-25
<PAGE>
Schedule II
AGRIBIOTECH, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Beginning Acquired in Bad debt Ending
Description balance acquisition expense Write-offs balance
- ------------------------------- ---------- ---------- ---------- ---------- ----------
Allowance for doubtful accounts
for the year ended:
<S> <C> <C> <C> <C> <C>
June 30, 1999 $2,177,442 $ 730,242 $4,370,540 $ 788,471 $6,489,753
June 30, 1998 729,352 1,522,827 298,394 373,131 2,177,442
June 30, 1997 104,773 548,160 208,196 131,777 729,352
</TABLE>
Cumulative as of May 27, 1999
AMENDED BY-LAWS
OF
AGRIBIOTECH, INC.
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the Corporation
within the State of Nevada shall be in the City of Las Vegas.
SECTION 2. Other Offices. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Nevada, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or without the State of Nevada, as shall be designated from time
to time by the Board of Directors and stated in the notice of meeting or in a
duly executed waiver thereof.
SECTION 2. Annual Meeting. The annual meeting of the stockholders,
commencing with the year 1990, shall be held at 10:00 a.m. on the fifteenth of
March if not a legal holiday, and if a legal holiday, then on the next
succeeding day not a legal holiday, at 10:00 a.m., or at such other date and
time as shall be designated from time to time by the Board of Directors and
stated in the notice of meeting or in a duly executed waiver thereof. At such
annual meeting, the stockholders shall elect, by a plurality vote, a Board of
Directors and transact such other business as may properly be brought before the
meeting.
SECTION 3. Special Meetings. Special meetings of the stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board of
Directors or the Chairman of the Board, if one shall have been elected, or the
President.
<PAGE>
SECTION 4. Notice of Meetings. Except as otherwise expressly required by
statute, written notice of each annual and special meeting of the stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote thereat not less than ten (10) or
more than sixty (60) days before the date of the meeting. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice. Notice shall be given personally or by mail and, if by mail, shall
be sent in a postage prepaid envelope, addressed to the stockholder at his
address as it appears on the records of the Corporation. Notice by mail shall be
deemed given at the time when the same shall be deposited in the United States
mail, postage prepaid. Notice of any meeting shall not be required to be given
to any person who attends such meeting, except when such person attends the
meeting in person or by proxy 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, or who, either before or after the meeting,
shall submit a signed written waiver of notice, in person or by proxy. Neither
the business to be transacted at, nor the purpose of, an annual or special
meeting of stockholders need be specified in any written waiver of notice.
SECTION 5. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before each
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, showing the address of 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, town or village where
the meeting is to be held, which place shall be specified in the notice of
meeting, or, if not specified, at the place where the meeting is to be held. The
list shall 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.
SECTION 6. Quorum. Adjournments. The holders of a majority of the voting
power of the issued and outstanding stock of the Corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of stockholders, except as
otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any meeting
of stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented by proxy. At such adjourned meeting at which a
quorum shall be present or represented by proxy, any business may be transacted
which might have been transacted at the meeting as originally called. If the
adjournment is for more than thirty days, or, if after adjournment a new record
date is set, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
<PAGE>
SECTION 7. Organization. At each meeting of the stockholders, the Chairman
of the Board, if one shall have been elected, or in his absence or if one shall
not have been elected, the President shall act as chairman of the meeting. The
Secretary, or in his absence or inability to act, the person whom the chairman
of the meeting shall appoint secretary of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
SECTION 8. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of the stockholders to one vote for each of capital
stock of the Corporation standing in his name on the record of stockholders of
the Corporation:
(a) on the date fixed pursuant to the provisions of Section 6 of Article V of
these By-Laws as the record date for the determination of the stockholders
who shall be entitled to notice of and to vote at such meeting; or
(b) if no such record date shall have been so fixed, then at the close of
business on the date next preceding the day on which notice thereof shall
be given, or, if notice is waived, at the close of business on the date
next preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of the stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in fact but no proxy shall be voted after three
years from its date, unless the proxy provides for a longer period. Any such
proxy shall be delivered to the secretary of the meeting at or prior to the time
designated in the order of business for so delivering such proxies. When a
quorum is present at any meeting, the vote of the holders of a majority of the
voting power of the issued and outstanding stock of the Corporation entitled to
vote thereon, present in person or represented by proxy, shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of statute or of the Certificate of Incorporation or of these
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question. Unless required by
statute, or determined by the chairman of the meeting to be advisable, the vote
on any question need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
3
<PAGE>
SECTION 10. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares of capital stock of the Corporation
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as an inspector of an election of directors. Inspectors
need not be stockholders.
SECTION 11. Action by Consent. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of statute or of the Certificate of
Incorporation or of these By-Laws, the meeting and vote of stockholders may be
dispensed with, and the action taken without such meeting and vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares of
stock of the Corporation entitled to vote thereon were present and voted.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
SECTION 2. Each director must be at least 18 years of age. A director need
not be a stockholder or a resident of the State of Nevada. The initial Board of
Directors shall consist of three persons. Thereafter, the number of directors
constituting the whole board shall be at least one. Subject to the foregoing
limitation and except for the first Board of Directors, such number may be fixed
from time to time by action of the stockholders or of the directors, or, if the
number is not fixed, the number shall be three. The number of directors may be
increased or decreased by action of the stockholders or the directors. The whole
board of Directors shall consist of not less than three members.
4
<PAGE>
SECTION 3. Place of Meetings. Meetings of the Board of Directors shall be
held at such place or places, within or without the State of Nevada, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting.
SECTION 4. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of the stockholders,
on the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Nevada) as shall be
specified in a notice thereof given as hereinafter provided in Section 7 of this
Article III.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
SECTION 6. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board, if one shall have been elected, or by
two or more directors of the Corporation or by the President.
SECTION 7. Notice of Meetings. Notice of each special meeting of the Board
of Directors (and of each regular meeting for which notice shall be required)
shall be given by the Secretary as hereinafter provided in this Section 7, in
which notice shall be stated the time and place of the meeting. Except as
otherwise required by these By-Laws, such notice need not state the purpose of
such meeting. Notice of each such meeting shall be mailed, postage prepaid, to
each director, addressed to him at his residence or usual place of business, by
first-class mail, at least two days before the day on which such meeting is to
be held, or shall be sent addressed to him at such place by telegraph, cable,
telex, telecopier or other similar means, or be delivered to him personally or
be given to him by telephone, or other similar means, at least twenty-four hours
before the time at which such meeting is to be held. Notice of any such meeting
need not be given to any director who shall, either before or after the meeting,
submit a signed waiver of notice or who shall attend such meeting, except when
he shall attend 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.
5
<PAGE>
SECTION 8. Quorum and Manner of Acting. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to the directors unless such time
and place were announced at the meeting at which the adjournment was taken, in
which case such notice shall only be given to the directors who were not present
thereat. At any adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as originally
called. The directors shall act only as a Board and the individual directors
shall have no power as such.
SECTION 9. Organization. At each meeting of the Board of Directors, the
Chairman of the Board, if one shall have been elected, or, in the absence of the
Chairman of the Board or if one shall not have been elected, the President (or,
in his absence, another director chosen by a majority of the directors present)
shall act as chairman of the meeting and preside thereat. The Secretary, or, in
his absence, any person appointed by the chairman shall act as secretary of the
meeting and keep the minutes thereof.
SECTION 10. Resignations. Any director of the Corporation may resign at any
time by giving written notice of his resignation to the Corporation. Any such
resignation shall take effect at the time specified or, if the time when it
shall become effective shall not be specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 11. Vacancies. Any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), an increase in
the number of directors or any other cause, may be filled by the vote of a
majority of the directors then in office, though less than a quorum, or the sole
remaining director or by the stockholders at the next annual meeting thereof or
at a special meeting thereof. Each director so elected shall hold office until
his successor shall have been elected and qualified.
SECTION 12. Removal of Directors. Except as otherwise provided by statute,
any director may be removed, with cause, at any time by the stockholders at a
special meeting thereof. Except as otherwise provided by statute, any director
may be removed for cause by the Board of Directors at a special meeting thereof.
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SECTION 13. Compensation. The Board of Directors shall serve without
compensation, unless otherwise determined by the Board of Directors. Said
Directors will be reimbursed for expenses incurred for services rendered to the
Corporation.
SECTION 14. Committees. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
including any executive committee, each committee to consist of two or more of
the directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee to replace any absent
member at any meeting of the committee, except to the extent that such
committee, by its charter, consists solely of independent directors, in which
case, any absence on any such committee shall only be filled by an alternate
independent director. Except to the extent restricted by statute or the
Certificate of Incorporation, each such committee, to the extent provided in the
resolution creating it, shall have and may exercise all the authority of the
Board of Directors. Each such committee shall serve at the pleasure of the Board
of Directors and have such name as may be determined from time to time to be
affixed to all papers which require it. Each such committee shall serve at the
pleasure of the Board of Directors and have such name as may be determined from
time to time by resolution adopted by the Board of Directors. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors.
SECTION 15. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee consent in writing to the adoption
of a resolution authorizing the action. The resolution and the written consents
thereto by the members of the Board of Directors or such committee shall be
filed with the minutes of the proceedings of the Board of Directors or such
committee.
SECTION 16. Telephonic Meeting. Unless restricted by the Certificate of
Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at a
meeting.
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Article IV, Section I of the By Laws of the Company are hereby amended to read
as follows:
ARTICLE IV
Officers
SECTION 1. Number and Qualifications. The officers of the Corporation shall
be elected by the Board of Directors and shall include one or more Presidents
(who may also be called a "Co-President"), one or more Vice-Presidents, the
Secretary, the Treasurer, a Resident Agent and any such other officers,
(including a Chief Executive Officer and a Chief Operating Officer, one or more
Assistant Treasurers and one or more Assistant Secretaries), as may be necessary
or desirable for the business of the Corporation. Any two or more offices may be
held by the same person. Each officer shall hold office until the first meeting
of the Board of Directors following the next annual meeting of the stockholders,
and until his successors shall have been elected and shall have qualified, or
until his death, or until he shall have resigned or have been removed, as
hereinafter provided in these By-Laws.
SECTION 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the President or the Secretary. Any such resignation shall take effect at the
time specified therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt. Unless otherwise specified
therein, the acceptance of any such resignation shall not be necessary to make
it effective.
SECTION 3. Removal. Any officer of the Corporation may be removed, either
with or without cause, at any time, by the Board of Directors at any meeting
thereof.
SECTION 4A. Chief Executive Officer. The Chief Executive Officer shall
function as the Chief Executive Officer of the Corporation, and shall, unless
the Board of Directors by motion establishes otherwise, be the senior officer of
the Corporation. He shall, in the absence of the Chairman of the Board, or if a
Chairman of the Board shall not have been elected, preside at each meeting of
the Board of Directors and at the stockholders' meeting.
SECTION 4B. Chief Operating Officer. The Chief Operating Officer shall
function as the Chief Operating Officer of the Corporation. The Board may, by
motion, add or remove duties. He shall, in the absence of the Chairman of the
Board and the Chief Executive Officer, or if both have not been elected, preside
at each meeting of the Board of Directors and the stockholders' meeting.
SECTION 4C. The President. A President shall have the authority under these
by-laws to perform all duties incident to the office of President and such other
duties as may from time to time be assigned to him by the Board of Directors or
by the Chief Executive Officer. If there is more than one President, they may be
called a Co-President.
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SECTION 5. Vice-Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board of Directors or
the President. At the request of the President or in his absence or in the event
of his inability or refusal to act, the Vice-President, or if there shall be
more than one, the Vice-Presidents in the order determined by the Board of
Directors (or if there be no such determination, then the Vice-Presidents in the
order of their election), shall perform the duties of the President, and, when
so acting, shall have the powers of and be subject to the restrictions placed
upon the President in respect of the performance of such duties.
SECTION 6. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the Corporation in
such depositaries as may be designated by the Board of Directors or
pursuant to its direction:
(d) receive, and give receipts for, moneys due and payable to the Corporation
from any source whatsoever:
(e) disburse the funds of the Corporation and supervise the investments of its
funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of Directors may
require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Board of
Directors.
SECTION 7. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the purpose, the
minutes of all meetings of the Board of Directors, the committees of the
Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the provisions of
these By-Laws and as required by law;
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(c) be custodian of the records and the seal of the Corporation and affix and
attest the seal to all certificates for shares of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents
to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other documents
and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all duties incident to the office of Secretary and such
other duties as from time to time may be assigned to him by the Board of
Directors.
SECTION 8. The Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 9. The Assistant Secretary. The Assistant Secretary, or if there
shall be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 10. Officers' Bonds or Other Security. If required by the Board of
Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of his duties, in such amount and with such surety
or sureties as the Board of Directors may require.
SECTION 11. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation.
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ARTICLE V
Shares etc.
SECTION 1. Share Certificates. Each owner of shares of the Corporation
shall be entitled to have a certificate, in such form as shall be approved by
the Board of Directors, certifying the number of shares of the Corporation owned
by him. The certificates representing shares shall be signed in the name of the
Corporation by the President or a Vice-President and by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer and sealed with the
seal of the Corporation (which seal may be a facsimile, engraved or printed);
provided, however, that where any such certificate is countersigned by a
transfer agent, or is registered by a registrar (other than the Corporation or
one of its employees), the signatures of the President, Vice President,
Secretary, Assistant Secretary, Treasurer or Assistant Treasurer upon such
certificates may be facsimiles, engraved or printed. In case any officer who
shall have signed any such certificate shall have ceased to be such officer
before such certificate shall be issued, it may nevertheless be issued by the
Corporation with the same effect as if such officer were still in office at the
date of their issue. When the Corporation is authorized to issue shares of more
than one class there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the Corporation will
furnish to any shareholder upon request and without charge, a full statement of
the designation, relative rights, preferences, and limitations of the shares of
each class authorized to be issued and, if the Corporation is authorized to
issue any class of preferred shares in series, the designation, relative rights,
preferences and limitations of each such series so far as the same have been
fixed and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series.
SECTION 2. Books of Account and Record of Stockholders. There shall be kept
correct and complete books and records of account of all the business and
transactions of the Corporation. There shall also be kept, at the office of the
Corporation, in the State of Nevada, or such other State as determined by the
Corporation, or at the office of its transfer agent in said State, a record
containing the names and addresses of all stockholders of the Corporation, the
number of shares held by each, and the dates when they became the holders of
record thereof.
SECTION 3. Transfer of Shares. Transfer of shares of the Corporation shall
be made on the records of the Corporation only upon authorization by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent,
and on surrender of the certificate or certificates for such shares properly
endorsed or accompanied by a duly executed stock transfer power and the payment
of all taxes thereon. The person in whose names shares shall stand on the record
of stockholders of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security and not absolutely and written notice thereof shall
be given to the Secretary or to a transfer agent, such fact shall be noted on
the records of the Corporation.
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SECTION 4. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars and may require all certificates for shares of
stock to bear the signature of any of them.
SECTION 5. Regulations. The Board of Directors may make such additional
rules and regulations, not SECTION 5. Regulations. The Board of Directors may
make such additional rules and regulations, not inconsistent with these By-Laws,
as it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the Corporation.
SECTION 6. Fixing of Record Date. The Board of Directors may fix, in
advance, a date not more than sixty (60) nor less than ten (10) days before the
date then fixed for the holding of any meeting of the stockholders or before the
last day on which the consent or dissent of the stockholders may be effectively
expressed for any purpose without a meeting, as the time as of which the
stockholders entitled to notice of and to vote at such meeting or whose consent
or dissent is required or may be expressed for any purpose, as the case may be,
shall be determined, and all persons who were stockholders of record of voting
shares at such time, and no others, shall be entitled to notice of and to vote
at such meeting or to express their consent or dissent, as the case may be. The
Board of Directors may fix, in advance, a date not more than sixty (60) nor less
than ten (10) days preceding the date fixed for the payment of any dividend or
the making of any distribution or the allotment of rights to subscribe for
securities of the Corporation, or for the delivery of evidence of rights or
evidences of interests arising out of any change, conversion or exchange of
shares or other securities, as the record date for the determination of the
stockholders entitled to receive any such dividend, distribution, allotment,
rights or interests, and in such case only the stockholders of record at the
time so fixed shall be entitled to receive such dividend, distribution,
allotment, rights or interests.
SECTION 7. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of such certificate, and the
Corporation may issue a new certificate in the place of any certificate
theretofore issued by it which the owner thereof shall allege to have been lost
or destroyed or which shall have been mutilated. The Board of Directors may, in
its discretion, require such owner or his legal representatives to give to the
Corporation a bond in such sum, limited or unlimited, and in such form and with
such surety or sureties as the Board of Directors in its absolute discretion
shall determine, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss of destruction of any such
certificate, or the issuance of such new certificate.
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ARTICLE VI
Indemnification
On the terms, to the extent, and subject to the condition prescribed by
statute and by such rules and regulations, not inconsistent with statute, as the
Board of Directors may in its discretion impose in general or particular cases
or classes of cases, (a) the Corporation shall indemnify any person made, or
threatened to be made, a party to an action or proceeding, civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise which any director or officer of the
Corporation served in any capacity at the request of the Corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees, actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, and (b) the Corporation may pay, in advance
of final disposition of any such action or proceeding, expenses incurred by such
person in defending such action or proceeding.
On the terms, to the extent, and subject to the conditions prescribed by
statute and by such rules and regulations, not inconsistent with statute, as the
Board of Directors may in its discretion impose in general or particular cases
or classes of cases, (a) the Corporation shall indemnify any person made a party
to an action by or in the right of the Corporation to procure a judgment in its
favor, by reason of the fact that he, his testator or intestate, is or was a
director or officer of the Corporation, against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred by him in
connection with the defense of such action, or in connection with an appeal
therein, and (b) the Corporation may pay, in advance of final disposition of any
such action, expenses incurred by such person in defending such action or
proceeding.
ARTICLE VII
General Provisions
SECTION 1. Dividends. Subject to statute and the Certificate of
Incorporation, dividends upon the shares of the Corporation may be declared by
the Board of Directors at any regular or special meeting. Dividends may be paid
in cash, in property or in shares of the Corporation, unless otherwise provided
by statute or the Certificate of Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors may, from time to time, in its absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors may think conducive to the
interests of the Corporation. The Board of Directors may modify or abolish any
such reserves in the manner in which it was created.
13
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SECTION 3. Seal. The seal of the Corporation shall be in such form as shall
be approved by the Board of Directors.
SECTION 4. Fiscal Year. The first fiscal year of the Corporation shall be
June but may be changed by resolution of the Board of Directors.
SECTION 5. Checks, Notes Drafts. Etc.. All checks, notes, drafts or other
orders for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.
SECTION 6. Execution of Contracts Deeds. Etc.. The Board of Directors may
authorize any officer or officers, agent or agents, in the name and on behalf of
the Corporation to enter into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and such authority
may be general or confined to specific instances.
SECTION 7. Voting of Stocks in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, or the President, from time to
time, may (or may appoint one or more attorneys or agents to) cast the votes
which the Board of Directors may be entitled to cast as a stockholder or
otherwise in any other corporation, any of whose shares or securities may be
held by the Corporation, at meetings of the holders of the shares or other
securities of such other corporation, or to consent in writing to any action by
any such other corporation. In the event one or more attorneys or agents are
appointed, the President may instruct the person or persons so appointed as to
the manner of casting such votes or giving such consent. The President may, or
may instruct the attorneys or agents appointed to, execute or cause to be
executed in the name and on behalf of the Corporation and under its seal or
otherwise, such written proxies, consents, waivers or other instruments as may
be necessary or proper in the premises.
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ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new By-Laws may be adopted at
any annual or special meeting of stockholders at which time a quorum is present
or represented, by the vote of the holders of shares entitled to vote in the
election of directors provided that notice of the proposed amendment or repeal
or adoption of new By-Laws is contained in the notice of such meeting. These
By-Laws may also be amended or repealed or new By-Laws may be adopted by the
Board at any regular or special meeting of the Board of Directors. If any By-Law
regulating an impending election of directors is adopted, amended or repealed by
the Board of Directors, there shall be set forth in the notice of the next
meeting of the stockholders for the election of directors the By-Law so adopted,
amended or repealed, together with a concise statement of the changes made.
By-Laws adopted by the Board of Directors may be amended or repealed by the
stockholders.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS AND
THE SECURITIES MAY NOT BE OFFERED OR SOLD, UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT OR ANY APPLICABLE STATES SECURITIES LAWS IS
AVAILABLE.
Warrant to Purchase ________ Shares of Common Stock
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
AGRIBIOTECH, INC.
This is to certify that, FOR VALUE RECEIVED, _________ ("Holder"), a
____________ corporation with an address at ___________________________________,
is entitled to purchase, subject to the provisions of this Warrant, from
AgriBioTech, Inc., a Nevada corporation (the "Company"), ______________________
fully paid, validly issued and non-assessable shares of Common Stock (the
"Common Stock"), par value $.001 per share, of the Company at any time or from
time to time for three years from the date hereof until 5:00 PM. Pacific Time,
on December __, 2001, at a price of $15.00 per share. This Warrant was issued at
a cost of $____ per share as part of the Units sold on this date by the Company
to the Holder, each Unit consisting of one Warrant for each share of Common
Stock purchased.
The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as
<PAGE>
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price."
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part
(but no partial exercise shall be for less than ten thousand (10,000) Warrant
Shares) at any time or from time to time on or after the date hereof and until
December 4, 2001; provided, however, that if such day is a day on which banking
institutions in the State of Nevada are authorized by law to close, then this
Warrant may be exercised on the next succeeding day which shall not be such a
day. This Warrant may be exercised by presentation and surrender hereof to the
Company at its principal office or to the Company's warrant agent, if any has
been so appointed, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price, in cash or by certified or bank
cashier's check, for the number of Warrant Shares specified in such form. As
soon as practicable after each such exercise of the Warrants, the Company shall
issue or cause to be issued and delivered to the Holder a certificate or
certificates for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. The Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of any such exercise,
provided such exercise is in accordance with the provisions set forth herein. If
this Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant for cancellation, execute and deliver a new Warrant evidencing
the rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder in such denominations requested by the Holder, but not to
purchase less than 10,000 Warrant Shares. Upon receipt by the Company of this
Warrant at its office in proper form for exercise, the Holder shall be deemed
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to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
Notwithstanding the foregoing, commencing ninety (90) days from the date
hereof, if, and only if, at the time of exercise of this Warrant, the Warrant
Shares are not saleable pursuant to an effective registration statement, then in
addition to the exercise of all or a part of this Warrant by payment of the
Exercise Price in cash as provided above, and in lieu of such payment, the
Holder shall have the right at any time and from time to time as provided above
to exercise this Warrant in whole or in part by surrendering this Warrant in
exchange for the number of shares of Common Stock equal to the product of (x)
the number of shares as to which this Warrant is being exercised multiplied by
(y) a fraction the numerator of which is the current market value of the Common
Stock less the Exercise Price then in effect and the denominator of which is the
current market value (in each case adjusted for fractional shares as herein
provided).
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. No
adjustment shall be made in respect of cash dividends on Warrant Shares
delivered upon exercise of any Warrant. With respect to any fraction of a share
called for upon exercise hereof, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the average closing bid and asked
prices of
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<PAGE>
the Common Stock on the last available date for which quotations are available
immediately preceding the date of exercise of this Warrant, or if the bid and
asked prices are not so reported, then the current market value shall be an
amount, not less than the book value thereof as at the end of the most recent
fiscal year of the Company ending prior to the date of the exercise of the
Warrant, determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
(d) EXCHANGE OR LOSS OF WARRANT. This Warrant is exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof to
the Company for other Warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation hereof at the principal
office of the Company with a written notice specifying the denominations in
which new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company or its warrant agent, if any,
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein
and in any warrant agreement entered into by and
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<PAGE>
between the Company and a warrant agent with respect to the Warrants. In the
event the Company enters into a warrant agreement with a warrant agent, the
terms of the Warrant shall be embodied in the warrant agreement; and the
acceptance of this Warrant by the Holder shall be deemed consent by the Holder
for the Company to enter into any such warrant agreement, upon such terms and
conditions mutually agreeable between the Company and any such warrant agent,
provided such warrant agreement does not adversely affect any of the rights of
the Holder, as set forth in this Warrant.
(f) ANTI-DILUTION PROVISIONS. After each adjustment of the Exercise Price
pursuant to this Section (f), the number of shares of Common Stock purchasable
upon the exercise of the Warrant shall be the number of Warrant Shares
receivable upon exercise thereof prior to such adjustment multiplied by a
fraction the numerator of which shall be the original Exercise Price as defined
above and the denominator of which shall be such adjusted Exercise Price. The
Exercise Price shall be subject to adjustment as set forth below:
(i) In the event that the Company shall hereafter (A) pay a
dividend or make a distribution on its Common Stock in shares of its
capital stock (whether shares of Common Stock or of capital stock of
any other class), (B) subdivide its outstanding shares of Common
Stock, (C) combine its outstanding shares of Common Stock into a
smaller number of shares, or (D) issue by reclassification of its
shares of Common Stock any shares of capital stock of the Company, the
Exercise Price in effect immediately prior to such action shall be
adjusted so that the Holder of any Warrant thereafter exercised shall
be entitled to receive the number of shares of capital stock of the
Company which the Holder would have owned immediately following such
action had such Warrant been exercised immediately prior thereto. An
adjustment made
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<PAGE>
pursuant to this subsection shall become effective immediately after
the record date in the case of a dividend and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification.
(ii) No adjustment in the Exercise Price shall be required to be
made unless such adjustment would require an increase or decrease of
at least $.10; provided, however, that any adjustments which by reason
of this subsection are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section (f) shall be made to the nearest cent
or to the nearest one-one hundredth of a share, as the case may be,
but in no event shall the Company be obligated to issue fractional
shares upon the exercise of any Warrant.
(iii) No adjustment of the Exercise Price shall be made except on
the conditions set forth in this Section (f). Without limitation to
the foregoing, there shall be no adjustment pursuant to this Section
(f) should the Company issue any capital stock for cash or other
consideration on terms approved by the Board of Directors.
(iv) In the event of any change of outstanding shares of Common
Stock issuable upon exercise of the Warrants (other than a change in
par value or from par value to no par value or from no par value to
par value or as a result of a subdivision or combination), or in case
of any consolidation or merger of the Company with or into another
corporation (other than a merger with a Subsidiary in which merger the
Company is the continuing corporation and which does not result in any
reclassification or change of the then outstanding shares of Common
Stock or other capital stock issuable upon exercise of the Warrants
other than a change in par value or from par value to no par value or
from no par value to par value) or in the case of any
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<PAGE>
sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, then, as a
condition of such change, consolidation, merger, sale or conveyance,
the Company, or such successor or purchasing corporation, as the case
may be, shall make lawful and adequate provision whereby the Holder of
the Warrants shall have the right thereafter to receive on exercise of
such Warrant the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock issuable upon exercise of such Warrant
immediately prior to such change, consolidation, merger, sale or
conveyance. Such provisions shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided elsewhere in this Section (f). The above
provisions of this Section (f) shall similarly apply to successive
consolidations, mergers, sales or conveyances.
(v) Before taking any action which would cause an adjustment
reducing the Exercise Price below the then par value of the shares of
Common Stock issuable upon exercise of the Warrants, the Company will
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue
fully paid and non-assessable shares of the Company at such adjusted
Exercise Price.
(g) REGISTRATION RIGHTS. Section 3, with the heading "Registration," of the
Securities Purchase Agreement executed on the date hereof pursuant to which this
Warrant was issued is incorporated here in by reference and shall govern the
registration of the Warrant Shares.
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(h) TRANSFERABILITY; INVESTMENT REPRESENTATION. This Warrant shall be fully
transferrable, except as provided herein. No transfer may take place in
violation of any securities laws or regulations. By accepting this Warrant, the
Holder acknowledges that it is being taken for his own account as principal, for
investment purposes only, and not with a view to, or for, resale (except to or
with the Company's consent), distribution or fractionalization thereof, in whole
or in part, and no other person has a direct or indirect beneficial interest in
such Warrant and such Warrant may only be transferred, subject to compliance
with the legend set forth on the first page. Unless the shares issuable upon the
exercise of this Warrant are registered under the Securities Act of 1933, as
amended (the "Act"), or the shares have been received as a result of a cashless
exercise the Holder, upon exercise of this Warrant will be required to provide
the Company with an investment letter and the certificates representing such
shares will contain a legend to the effect that the Holder may not transfer,
sell, pledge or hypothecate such shares unless the registration provisions of
the Act have been complied with and unless the Company has received an opinion
of counsel that such registration is not required.
(i) MANDATORY CONVERSION. This Warrant shall be automatically converted by
the Company into Common Stock, if it has not previously been exercised, upon
five (5) business days prior written notice (the sixth business day being the
"Conversion Date") to the Holder of the Company's intent to exercise the right
of mandatory conversion, provided that the Closing sale price of the Company's
Common Stock has closed at or above $25.00 per share for twenty (20) trading
days out of any thirty (30) consecutive trading day period, ending within
fifteen (15) calender days of the Company's mailing of the notice of conversion.
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<PAGE>
The Warrant Shares shall be delivered to the Holder of converted Warrants
within five (5) business days after the Conversion The Warrant Shares shall be
delivered to the Holder of converted Warrants within five (5) business days
after the Conversion Date specified in the notice of such conversion to such
Holder; provided, however, that the Company shall not be obligated to deliver
any Warrant Shares unless either the Warrants are delivered to the Company or
its Warrant agent as provided in Section (a), or the Holder notifies the Company
or the Warrant Agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Company to indemnify the Company
from any loss incurred by it in connection with such certificates.
In the event that neither the Warrants are delivered to the Company or its
Warrant Agent or a satisfactory indemnity is not delivered to the Company as set
forth in the preceding sentence prior to the Conversion Date, the Holder's right
to convert this Warrant shall terminate and be null and void and the Company
shall have the right to have this Warrant transferred on its transfer books to a
standby purchaser who shall be entitled to exercise same. The transfer shall be
deemed to have occurred simultaneous with the Conversion Date.
(j) NOTICES. All notices and other communications which are required or may
be given under this Warrant shall be in writing and shall be deemed to have been
duly given when delivered in person or transmitted by facsimile, one (1) day
after being sent by overnight courier service or three (3) days after being
mailed, postage prepaid, in the case of the Company to 120 Corporate Park Drive,
Henderson, Nevada 89014, and in the case of the Holder to the address set forth
herein, or to such other address as such party shall have specified by notice to
the other party hereto. If notice is given by registered or certified first
class mail, postage prepaid, return receipt requested, the return receipt shall
be conclusive evidence of the notice having been mailed on the date set forth.
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<PAGE>
(k) MISCELLANEOUS. This Agreement contains the entire Agreement and
supersedes all prior agreements and understandings, (k) MISCELLANEOUS. This
Agreement contains the entire Agreement and supersedes all prior agreements and
understandings, oral or written, between the parties hereto with respect to the
subject matter hereof. This Warrant may not be changed orally, but only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought, provided, however, that this
Warrant may be amended or modified without the consent of the Holder if such
amendment or modification does not adversely affect the rights of the Holder
hereunder. This Agreement will not be assigned by either party hereto and shall
be interpreted under the laws of the State of Nevada without application to the
principles of conflicts of laws.
[Remainder of this page intentionally left blank.]
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AGRIBIOTECH, INC.
By: _______________________
Johnny R. Thomas
Chief Executive Officer
ATTEST:
__________________________
Elliot H. Lutzker
Dated: December __, 1998
<PAGE>
PURCHASE FORM PURCHASE FORM
Dated ___________________, 19
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _________ shares of Common Stock and hereby makes
payment of ________ in payment of the actual exercise price thereof.
____________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
(Please typewrite or print in block letters)
Address_________________________________________________________________________
Social Security No. TIN number__________________________________________________
Signature_______________________________________________________________________
EMPLOYMENT AGREEMENT
Richard Budd - AgriBioTech, Inc.
THIS EMPLOYMENT AGREEMENT (the "Agreement") sets forth the agreement
effective July 1, 1999 by and between RICHARD BUDD (hereinafter referred to as
"Budd") and AgriBioTech, Inc., a Nevada corporation, 120 Corporate Park Drive,
Henderson Nevada 89014 (hereinafter referred to as "ABT").
WITNESSETH
WHEREAS, Budd has experience, talents and training of use to ABT, and ABT
desires to employ Budd; and
WHEREAS, Budd desires to accept such employment with ABT; and
WHEREAS, Budd and ABT desire to set forth their employment relationship in
a written agreement.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1.00 - EMPLOYMENT
1.01 EMPLOYMENT. ABT hereby offers to employ Budd upon the terms and
conditions hereinafter set forth, and Budd accepts such offer.
1.02 TITLE AND DUTIES. Budd's initial title shall be Chief Executive
Officer, and Budd shall report to the Board of Directors. Budd's primary duties
shall be the senior officer and chief executive officer of ABT. Budd
acknowledges that ABT may change his duties, reporting relationship and/or title
from time to time.
ARTICLE 2.00 - TERM AND TERMINATION
2.01 TERM. ABT agrees to employ Budd in the above position commencing on
July 1, 1999 and continuing until terminated, as provided herein.
2.02 TERMINATION. This Agreement may be terminated as follows:
A. Termination by Budd. This Agreement may be terminated upon no less than
ninety working days notice to ABT by Budd. However, upon receipt of such
notice, ABT may elect to shorten this period to no less than two weeks
and/or may also elect to pay Budd two weeks of pay and immediately
terminate this Agreement. In the event Budd elects to terminate this
Agreement, ABT has no obligation to make any separation or severance
payments to Budd, and Budd has no rights to exercise any stock options
after the termination of this Agreement.
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B. Budd Death. This Agreement shall terminate immediately upon the death of
Budd, in which event, Budd's heirs may exercise options which become vested
within one year of the termination as specified in the Option Agreement.
C. Budd Disability. This Agreement shall terminate upon ten (10) working days
notice by ABT if, in the opinion of ABT, Budd becomes substantially unable
to perform services required pursuant to this Agreement because of mental,
emotional or physical illness or injury, provided, however, that ABT acts,
in accordance with the provisions of the Americas with Disabilities Act,
the Family and Medical Leave Act, and any other relevant state or federal
law.
D. ABT Termination Without Cause. ABT may terminate this Agreement (and the
employment relationship between ABT and Budd) without cause and for any
reason or for no reason upon at least ten (10) working days notice. In this
event, Budd:
1. Will immediately be vested in those stock options referenced in
Section 3.02 which would otherwise become vested on the next
anniversary of employment following such termination;
2. Will receive his full salary as set forth in Section 3.01 (payable on
ABT's regular paydays) for a period of one year ; and
3. Will be entitled to receive applicable bonus and accrued vacation,
prorated for the actual period worked, if any is due;
4. Will not be entitled to receive any benefits, except that medical
insurance will be available through COBRA, upon Budd payment of COBRA
premiums.
F. Termination with Cause. ABT may terminate this Agreement immediately with
Cause. "Cause" means:
1) Budd's failure or refusal to adequately perform the employment duties
hereunder or assigned to Budd by Budd's supervisors;
2) the commission by Budd of any willful or intentional act which
reasonably could be expected to injure the reputation, business or
business relationships of ABT and/or Budd, and/or create a legal
exposure for ABT as a result of Budd' wrongdoing;
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3) Budd's violation of ABT's Codes of Conduct or other policies, as set
forth by ABT in its Employee Manual or other company policies as
issued from time to time;
4) Budd's conviction of a felony or of any crime involving
misrepresentation, moral turpitude or fraud; or
5) Budd's breach of or non-adherence to Budd' other covenants hereunder
or other agreements with ABT, and the failure to cure said breach or
non-adherence within thirty (30) days of written notice thereof from
ABT
F. Termination After Change of Control. In the event that within two years
after a Change of Control, either Budd's employment is terminated without
cause, or Budd's position or employment duties are adversely affected or
changed (which shall be determined by Budd in his sole discretion and Budd
shall terminate his employment within sixty days of such affect or change),
then ABT upon Budd's request, shall pay Budd a severance payment equal to
three years of Budd's then annual salary minus $1.
A "Change of Control" shall mean either:
(i) Approval by ABT's shareholders of (x) a merger or consolidation in
which ABT is not the surviving corporation and/or which results in any
reclassification or reorganization of the then outstanding Common Stock,
(y) a sale of all or substantially all of ABT's assets or (z) a plan of
liquidation or dissolution of ABT; or
(ii) the acquisition of at least 50% of the issued and outstanding shares
of the Common Stock by a sinlge person or affiliated group of persons.
G. Termination of this Agreement shall not relieve the parties hereto of any
rights or obligations which specifically survive the termination of this
Agreement.
2.03 BUDD'S OBLIGATIONS AT TERMINATION. At termination of this Agreement
Budd shall:
A. Return all ABT equipment, documents, computerized data or programs,
and any other ABT property or material in the possession or control of
Budd;
B. Abide by the provisions of this Agreement which survive termination of
this Agreement, including but not limited to, paragraph 4.02(E),
Articles 5.00 and 6.00; and
C. Abide by any other ABT policies governing terminated employees, as set
forth from time to time in ABT's employee manual or other ABT
policies.
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ARTICLE 3.00 - COMPENSATION
3.01 SALARY. ABT shall pay Budd, as consideration for his services, an
initial salary equal to an annual rate of $150,000 Budd shall be eligible for an
increase in salary after annual review according to ABT policies and procedures.
Such increase, if any, will be determined by ABT, in its sole discretion and
there is no assurance that the salary will increase. The salary will be payable
in equal bi-weekly installments, less deductions for income tax and FICA
withholding and any other deductions as authorized by Budd or required by law.
3.02 STOCK OPTIONS. The parties understand and agree that ABT has induced
Budd to accept this employment due, in part to, the providing by ABT to Budd of
Non-Qualified Stock Options to purchase 500,000 shares of ABT's common stock at
a price of $ 6.125 per share, the closing price of ABT common stock on July 1,
1999. Ownership in said NQS Options shall vest on the following schedule,
subject to Budd continuing employment and/or continuing as a Director of ABT on
the vesting date (unless otherwise set forth in Article 2.02 (B) and (E):
A) 100,000 vest at the signing of this Agreement;
B) 100,000 vest on the first anniversary of this Agreement;
C) 100,000 vest on the second anniversary of this Agreement;
D) 100,000 vest on the third anniversary of this Agreement; and
E) 100,000 vest on the fourth anniversary of this Agreement.
3.03 VACATION. During the term of this Agreement, Budd shall be eligible
for four weeks per year of vacation, during which time Budd's compensation shall
be paid in full, provided, however, that Budd will be granted an accrual for two
(2) weeks of vacation upon commencement of employment and will be eligible to
take any accrued vacation upon commencement of employment.
3.04 BENEFITS. During the term of this Agreement, Budd shall be eligible to
receive insurance and other employee benefits generally available to employees
of ABT pursuant to the terms of the various employee benefit plans.
3.05 BONUS In order to reflect any outstanding contribution to ABT by Budd,
ABT may pay Budd, in addition to the compensation for services described in
Section 3.01 above, a bonus in an amount determined by the Compensation
Committee of ABT in its sole discretion.
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ARTICLE 4.00 - SPECIFIC OBLIGATIONS OF THE PARTIES
4.01 ABT'S OBLIGATIONS. ABT shall provide Budd with and pay Budd's expenses
for the following:
A. Such equipment, materials and supplies as Budd reasonably requires for
the performance of his services;
B. Costs, including meals, lodging, and transportation (including
reimbursement for private aircraft hired by Budd pursuant to the Board
Resolution of May 11,1999) reasonably incurred by Budd to fulfill his
duties and responsibilities to ABT; and
C. Expenses for professional dues, tuition, publications, and continuing
professional education, pursuant to ABT's policies for such expenses.
4.02 BUDD'S OBLIGATIONS. Budd agrees that during the term of this
Agreement, he shall:
A. Faithfully and to the best of his ability and skill serve ABT and
perform his duties pursuant to this Agreement;
B. Maintain records in the manner established by ABT;
C. Keep current all records, reports, insurance records and clerical work
required by ABT; and
D. Abide by the practices, policies and codes of conduct set forth in
ABT's policies and practices, as disseminated from time to time,
except as expressly modified in this Agreement.
ARTICLE 5.00 - COVENANTS
5.01 COVENANT NOT TO COMPETE. ABT and Budd acknowledge and confirm that
Budd shall not compete with ABT while employed by ABT or for a period of two
years after employment or service as a Director ceases (the "Non-Compete
Period"). "Compete" shall mean having any relationship with any entity whose
primary business(es) includes turf grass, forage grass or alfalfa seed products
in any geographic area serviced by ABT or into which ABT has plans to expand
during Budd's employment. This covenant in this Agreement does not supercede or
change any agreements not to compete contained in any other agreements Budd may
have with ABT, in particular, agreements entered into in connection with the
purchase of Lofts by ABT.
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5.02 COVENANT FOR PROTECTION OF CONFIDENTIAL AND/OR PROPRIETARY
INFORMATION. ABT and Budd recognize that during the course of Budd's employment,
Budd will have access to information and biomaterials which ABT and its
affiliated companies deem proprietary and/or confidential (hereinafter referred
to as "Information").
In order to protect the Information, during the period of Budd's employment
with ABT and thereafter, for an unlimited period, Budd shall not disclose
Information he/she receives or has received from ABT or its affiliated companies
that is proprietary and/or confidential in nature, including, but not by way of
limitation, Information marked PROPRIETARY or CONFIDENTIAL or STRICTLY PRIVATE
or INTERNAL DATA, to any other person, firm or company, or use it for his own
benefit except as provided herein, and shall use such care to safeguard the
information as is set forth in ABT's Employee Manual or other policies, and, in
any event, shall use no less stringent degree of care to avoid disclosure or use
of such Information than Budd employs with respect to his own proprietary and/or
confidential information which he does not wish to be disseminated, published or
disclosed.
The parties hereto agree that Information shall not be deemed proprietary
and/or confidential and Budd shall have no obligation with respect to any such
Information which:
A. Is or becomes publicly known through no wrongful act of Budd;
B. Is furnished to a third party by ABT and its affiliated companies
without a similar restriction on the third party's rights; or
C. Is approved for release by written authorization of ABT or its
affiliated companies.
In the event Information in Budd' possession should be lost, stolen or
otherwise compromised, Budd shall promptly notify ABT by phone, and follow up
with a detailed report in writing within ten (10) days. Budd shall then follow
ABT's reasonable requests to recover such information.
Budd shall return at any time upon ABT's request, and/or upon termination
of this Agreement, all tangible forms of Information including biomaterials,
documents, drawings, computerized data or programs, specifications, devices,
models or any other material.
6
<PAGE>
As used in this Agreement, the term "biomaterials" includes, but is not
limited to, plants, plant parts, microorganisms, cell cultures, organelles or
other subcellular components, viruses, DNA or DNA-containing material, RNA or
RNA-containing material, oligonucleotides, proteins, peptides, subparts of any
of the foregoing, and products made from any of the foregoing.
5.03 ENFORCEMENT OF COVENANTS; NOTIFICATION TO NEW EMPLOYER. Budd and ABT
agree that the periods set forth in this Article 5.0 are reasonable and further
that the periods set forth in this Article 5.00 do not terminate at the
termination of this Agreement, but shall continue throughout any period of
affiliation with ABT, and for any stated period thereafter. Budd understands and
agrees that ABT may inform any new employer of Budd of the existence and terms
of the covenants set forth in this Agreement.
5.04 DEFINITION OF AFFILIATION. Affiliation, as used in this Article, shall
mean any proprietary, employment or fiduciary relationship of Budd with ABT and
its affiliated companies, including, but not limited to, the position of Budd as
director, officer or consultant of ABT or its affiliated companies.
5.05 SURVIVAL. This Article 5.00, and its obligations shall survive any
termination of this Agreement.
ARTICLE 6.00 - ASSIGNMENT OF INTELLECTUAL PROPERTY.
6.01 DISCLOSURE. Budd will disclose promptly to ABT all ideas, inventions,
discoveries and improvements which are conceived or made by Budd, either alone
or with others, during the period of employment by ABT.
6.02 ASSIGNMENT. Budd will assign to ABT, royalty-free, all ideas,
inventions, discoveries, improvements, and research results or products
(including biomaterials), whether patentable or not and whether maintained as
trade secrets or not, which are conceived or made by Budd, either alone or with
others, during Budd's employment by ABT, to the extent such assignment is
permitted under the applicable law.
6.03 ASSISTANCE IN OBTAINING PROTECTION. Budd will assist ABT (at ABT's
expense) in obtaining patent, PVP or other intellectual property protection,
including assistance in the form of execution of documents as requested by ABT,
with respect to all ideas, inventions, discoveries, improvements and research
results or products which Budd has a duty to assign under this Agreement-
6.04 OBLIGATIONS AFTER TERMINATION CONTINUE. Budd agrees that upon any
termination of Budd's employment, Budd's obligation and duties incurred during
the time of employment under this Article shall continue and be binding upon
Budd's assigns, heirs, executors, administrators or other legal representatives.
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6.05 THIRD PARTY INFORMATION. Budd is aware that Budd should not disclose
to ABT information if any, which Budd is bound by prior agreement with any
former employer or other third party not to so disclose. Budd hereby states that
Budd has not made any such disclosure to ABT and agrees not to make any such
disclosure to ABT in the future.
ARTICLE 7.00 - ADDITIONAL OBLIGATIONS OF BUDD.
7.01 UNFAVORABLE STATEMENTS. During and after termination of this
Agreement, Budd agrees not to directly or indirectly defame, disparage, libel or
otherwise convey an unjust or unfavorable impression of ABT or the business or
businesses operated by ABT and its subsidiaries.
7.02 COOPERATION IN CLAIMS. During and after termination of this Agreement,
Budd agrees to assist ABT in representing ABT's interests with respect to claims
and litigation brought by or against ABT arising during or relating to Budd's
employment with ABT.
7.03 NONSOLICITATION. Budd agrees that during the term of his employment
with ABT and for a period of 2 years after termination of this Agreement, Budd
shall not interfere with ABT's employment and business relationships with ABT
employees, customers, vendors or other such affiliated entities, and that Budd
will not solicit any current employees of ABT to leave the employ of ABT.
7.04 SURVIVAL. This article 7.00 and its obligations shall survive any
termination of this Agreement.
ARTICLE 8.00 - INDEMNIFICATION.
A. Subject to 8B, and to the maximum extent allowed by Nevada law, ABT
shall indemnify, defend, and hold Budd harmless from and against any
and all costs, expenses, losses, claims, debts, demands, interest,
penalties, assessments, and/or deficiencies, including, without
limitation, attorney's fees, damages and/or judgments, with respect to
any and all civil and/or criminal claims, or threatened claims
asserted against Budd by any party in any country in connection with
or arising from Budd's employment by ABT.
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B. The parties agree that:
1. ABT shall have no obligation to indemnify Budd for any acts committed
in bad faith, or which were the result of active and deliberate
dishonesty, or from which Budd gained a financial profit or other
advantage to which it is not legally entitled, it being further
understood by the parties that the mere allegations or charges of such
behavior shall not release ABT from its obligations to defend Budd;
2. Budd shall provide ABT with immediate notice upon learning of any
claim for which it is entitled to indemnification;
3. ABT shall have the right to select counsel to represent Budd;
4. Budd shall cooperate fully in the defense of such claims; and
ABT shall have the sole authority to settle or defend such claims.
ARTICLE 9.00 - DISPUTE RESOLUTION
9.01 NOTICE OF DISPUTE. Budd and ABT agree to make good faith efforts to
resolve any disputes under this Agreement (except as set forth in Article 8.02)
by giving the other party 30 days prior notice before commencing any legal
action regarding the Agreement. In the event such dispute is not resolved after
good faith efforts, ABT may, but is not required to, submit the dispute to
arbitration in Las Vegas in accordance with the rules of the American
Arbitration Association then in effect, and, if ABT does so, Budd agrees to such
arbitration as the exclusive remedy for the dispute. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
9.02. ENFORCEMENT OF COVENANTS. The parties agree that breach of Employee's
covenants in Articles 5.00, 6.00 and 7.00 will bring irreparable harm to ABT and
that monetary damages will not be sufficient to remedy any such harm. The breach
of these Articles may be enforced by specific performance or any available legal
or equitable remedy, including, but not by way of limitation, temporary
restraining orders or preliminary and permanent injunctions, and ABT and its
affiliated companies shall be entitled to recover from Budd all court costs and
reasonable attorney's fees incurred in enforcing these covenants. The remedies
hereunder shall not be exclusive of each other, but shall be cumulative
ABT may seek specific enforcement of these covenants without resort to the
informal dispute resolution provision of Article 8.01
9.03. ATTORNEY'S FEES. In the event of a dispute under this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees and costs
expended in such action, including but not limited to, attorney's fees arising
from any arbitration proceeding.
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ARTICLE 10.00 - GENERAL MATTERS.
10.01 NEVADA LAW. This Agreement shall be governed by the laws of the State
of Nevada and shall be construed in accordance therewith.
10.02 NO WAIVER. No provision of this Agreement may be waived except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as waiver of any other term or provision.
10.03 BINDING EFFECT. This Agreement shall be binding upon the parties,
their heirs, executors, administrators, successors or assignees. The parties
agree to do any and all things necessary to effectuate the purpose of this
Agreement.
10.04 CONSTRUCTION. Throughout this Agreement, the singular shall include
the plural; the plural shall include the singular; and the masculine and neuter
shall include the feminine, wherever the context so requires.
10.05 TEXT TO CONTROL. The headings of articles and sections are included
solely for convenience of reference. If any conflict between any heading and the
text of this Agreement exists, the text shall control.
10.06 SEVERABILITY. If any provision of this Agreement is declared by a
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions. On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions never had been inserted in this
Agreement.
10.07 COMPLETE AGREEMENT; AMENDMENT. This Agreement and the Non-Qualified
Stock Option Agreement of July 1, 1999 comprise the complete agreement between
the parties relating to the employment by ABT of Budd as Chief Executive Officer
and no prior agreements or representations survive this Agreement. This
Agreement may be amended, altered or revoked at any time, in whole or in part,
only by a written instrument setting forth such changes, signed by ABT and Budd.
10.08 NOTICES. All notices required to be given by this Agreement shall be
made in writing either by:
A. Personal delivery to the party requiring notice with written
confirmation of receipt; or
B. Mailing notice in the U.S. mails to the last known address of the
party requiring notice, which shall be the address shown on the
records of ABT for Budd, and the corporate headquarters of ABT for
ABT, attention Director of Human Resources, by certified mail, return
receipt requested.
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The effective date of the notice shall be the date of the written receipt
received upon delivery in Paragraph A above or four (4) days after the date the
notice was delivered to the U.S. mail as posted on the receipt in Paragraph B
above.
The parties hereby execute this Employment Agreement on the day and year
first written above.
Richard Budd AGRIBIOTECH, INC.
/S/ Richard Budd By: /s/ Douglas A. Fisher
- ---------------- -----------------
Title: Senior VP
-----------------
11
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 6th day of January, 1998, is by
and between KENNETH R. BUDD (hereinafter referred to as "Employee") and
AgriBioTech, Inc., a Nevada Corporation and Lofts Seeds, Inc. (hereinafter
collectively referred to as "Corporation").
WITNESSETH
WHEREAS, the Corporation desires to initially employ the Employee as
Director of Operations for facilities east of the Mississippi River, and for the
similar duties as Employee performed for Lofts Seeds, Inc. and affiliated
companies prior to the Agreement and Plan of reorganization (the "Reorganization
Agreement") agreement dated this 1st day of December, 1997 by and between
AgriBioTech, Inc., Lofts Seed, Inc. (including Great Western), Sunbelt Seed, and
Budd Seed (collectively "Lofts") and Lofts Mergerco and each shareholder of
Lofts Seeds, Inc. and Budd Seed, Inc., et. al., (the "Purchase Agreement"); and
WHEREAS, the Employee desires to accept such employment with the
Corporation; and
WHEREAS, the Employee and the Corporation desire to set forth their
employment relationship in a written agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants herein
set forth, and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follow:
ARTICLE 1.00 - EMPLOYMENT
1.01 EMPLOYMENT. The Corporation hereby offers to employ the Employee as
Director of Operations, East Coast and as manager of Lofts upon the terms and
conditions hereinafter set forth and the Employee accepts such offer and agrees
to abide by the terms and conditions hereof, and the terms and conditions of the
Corporation's and its affiliated corporations Articles of Incorporation, its
Bylaws and Employment Procedures Manual.
1.02 DUTIES. Employee shall perform duties for Corporation equivalent to
duties prior to closing of the Purchase Agreement and such additional duties as
may be required to manage Corporation operations and facilities east of the
Mississippi River. Employee shall perform all services reasonably required by
the Corporation in furtherance of the Corporation's business purposes as
determined, from time to time, by the Board of Directors of the Corporation. In
addition and as part of his duties hereunder, the Employee shall, if elected to
such position, serve as an officer and/or director of the Corporation provided
that the Employee is indemnified by Corporation to the fullest extent permitted
by Nevada law. Nothing contained in this Agreement shall require the
Corporation, its shareholders or directors, to cause the election of the
Employee as an officer and/or director or the Corporation.
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ARTICLE 2.00 - TERM AND TERMINATION
2.01 TERM. Employment, under this Agreement, shall commence upon closing of
the Purchase Agreement. Such employment shall continue for five years or until
terminated per this Agreement. Employment terms after this five-year period
shall be mutually negotiated.
2.02 TERMINATION. The Corporation may, by giving zero (0) days notice to
the Employee, terminate this Agreement with cause. Cause shall be defined as the
performance of illegal acts, excluding minor traffic violations, or repeated
failure to perform the duties of employment after written documentation of
failure to perform and written notice and a reasonable opportunity to cure.
Notwithstanding the above, this Agreement shall terminate immediately upon the
death of the Employee, and shall terminate upon ten (10) working days notice by
the Corporation if, in the opinion of the Corporation, Employee becomes unable
to perform services required pursuant to this Agreement because of illness or
injury. In order to be grounds for termination, the injury or illness should be
serious enough to prevent performance for 120 consecutive days or more. Any
decision to terminate this Agreement by the Corporation shall not be voted upon
by the Employee in any capacity whatsoever. In no event shall termination of
this Agreement relieve the parties hereto of any rights or obligations which
survive the termination of this Agreement as set forth herein. The Corporation
or Employee may after the second anniversary date, by giving twelve months
notice to the other party, terminate this agreement without cause anytime after
the 36th month of employment. If Employee terminates, employee forfeits all
further option vesting and is entitled to no ongoing salary/benefits except as
permitted by law (Cobra for example).
ARTICLE 3.00 - COMPENSATION
3.01 SALARY. The Corporation covenants and agrees to pay Employee, as
consideration for his services, a salary of ONE HUNDRED TWENTY-FIVE THOUSAND
DOLLARS ($125,000.00) per year payable in equal biweekly installments, less
payroll deductions for income tax, FICA, withholding and any other deductions as
authorized by the Employee.
3.02 STOCK OPTIONS. For the purpose of causing the Employee's compensation
to equal the reasonable value of his services to the Corporation and to reflect
any outstanding contribution to the Corporation's revenue by Employee, the
Corporation will issue Employee, in addition to the salary for services
described in Section 3.01 above, stock options as follows:
Employee shall be granted options to purchase 150,000 shares of
AgriBioTech, Inc. common stock upon closing of the Purchase Agreement and
signing of this Employment Agreement. Said options shall vest and be exercisable
on the following schedule.
The 150,000 options shall vest as follows:
i) 25,000 options shall vest at closing and shall be exercisable through
the 6th anniversary of closing at a purchase price of $8.50 per share.
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ii) 25,000 options shall vest on the first anniversary of closing of the
Purchase Agreement provided Employee continues his employment with
Corporation and shall be exercisable through the 6th anniversary of
closing at a purchase price of $8.50 per share.
iii) 25,000 options shall vest on the second anniversary of closing of the
Purchase Agreement provided Employee continues his employment with
Corporation and shall be exercisable through the 6th anniversary of
closing at a purchase price of $8.50 per share.
iv) 25,000 options shall vest on the third anniversary of closing of the
Purchase Agreement provided Employee continues his employment with
Corporation and shall be exercisable through the 6th anniversary of
closing at a purchase price of $8.50 per share.
v) 25,000 options shall vest on the fourth anniversary of closing of the
Purchase Agreement provided Employee continues his employment with
Corporation and shall be exercisable through the 6th anniversary of
closing at a purchase price of $8.50 per share.
vi) 25,000 options shall vest on the fifth anniversary of closing of the
Purchase Agreement provided Employee continues his employment with
Corporation and shall be exercisable through the 6th anniversary of
closing at a purchase price of $8.50 per share.
All options shall vest in accordance with the Stock Option Agreement as
attached to Purchase Agreement Exhibit 3D if Corporation breaches this
Agreement.
3.03 BONUS. Employee and Corporation shall mutually develop a "Performance
Goal" for 1998 and 1999. For this purpose, the "Performance Goal" for each of
1998 and 1999 shall be the Net Income budget for the year for operations for
which Employee is directly responsible, as reasonably agreed by Corporation and
Employee. The determination of Net Income for each such year shall be made by
Corporation within 60 days following the close of the year in good faith in a
manner consistent with the methods used to prepare the budget for such year.
Employee shall receive a cash bonus based on the schedule in the table
below for achieving the stated level of achievement.
Percentage of Performance Goal Cash Bonus ($)
------------------------------ --------------
85% $0
------------------------------ --------------
100% $200,000
------------------------------ --------------
115% $230,000
------------------------------ --------------
In addition Employee will receive 20% of the total net savings of expenses
achieved through the consolidation of any and all ABT facilities and branches
east of the Mississippi.
3.04 NON-COMPETE COMPENSATION. In addition to Employee's pro-rata portion
of the $717,000 non-compete allocated to Employee relative to the purchase,
Employee shall be paid $50,000 per year, for 3 years, specifically for
non-compete compensation after employee ceases employment with Corporation. Such
compensation shall be paid quarterly in arrears and payment is subject to
Employee being in compliance with the non-compete terms of this agreement.
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3.05 VACATION. During the term of this Agreement, the Employee shall be
entitled to a vacation of reasonable length (by the current Corporation policy)
during which time Employee's salary shall be paid in full.
ARTICLE 4.00 - SPECIFIC OBLIGATIONS OF THE PARTIES
4.01 CORPORATION'S OBLIGATIONS. The Corporation shall provide the employee
with and pay Employee's expenses for the following:
A. Such equipment, materials, and supplies as the Employee requires for
the performance of his services.
B. Costs, including tuition, meals, lodging, and transportation incurred
by the Employee to attend meetings agreed upon by the Corporation and
Employee; and
C. Corporation shall continue the pre-closing Lofts' car policy for
Employee's use through the "useful life of the existing car",
thereafter, consistent with general policy of ABT. ABT will assign to
Employee the rights to purchase the current car once Corporation no
longer desires to lease said car for Employee's use.
D. Corporation shall provide Employee other benefits, such as insurance
and 401(K), consistent with the Corporation's policies.
4.02 EMPLOYEE'S OBLIGATIONS. The Employee agrees that during the term of
this Agreement, he shall:
A. Faithfully and to the best of his ability and skill serve the
Corporation and perform his duties pursuant to this Agreement;
B. Maintain records in the manner established by the Corporation; and
C. Keep current all records, reports, insurance records and clerical work
required by Corporation.
ARTICLE 5.00 - COVENANTS ON NON-COMPETE/PROTECTION OF PROPRIETARY PROPERTY.
In the course of its business, Corporation, including its subsidiaries and
affiliates, develops and possesses valuable proprietary material and information
which may be created by or made available to its employees, and company and its
employees have a common interest in protecting.
Therefore, in consideration of Employee's employment with Corporation and
for such additional compensation as may be specified herein, Employee hereby
agrees as follows:
5.01 COVENANT NOT TO COMPETE RELATIVE TO CORPORATION'S PURCHASE OF Lofts
Seeds, Inc. Pursuant to the Purchase Agreement, Employee agrees not to compete
with the Corporation from the date hereof through March 31, 2002 or for a period
of three (3) years following the date Employee ceases to be an employee of the
Corporation and/or Lofts, whichever is longer. During this non-compete period,
Employee shall not sell or solicit any products or services which comprise 5% or
more of Corporation sales to any current customers of the Corporation.
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Employee acknowledges that breach or threatened violation of any of the
restrictive covenants contained in this Section 5.01 may cause irreparable
damage to Corporation for which remedies at law would be inadequate. Employee
further acknowledges that the restrictive covenants set forth herein are
essential terms and conditions of the Purchase Agreement and this Agreement.
Corporation shall be entitled to a decree or order by any court of competent
jurisdiction enjoining such threatened or actual violation of any of such
covenants. Such decree or order, to the extent appropriate, shall specifically
enforce the full performance of any such covenant by Employee, and Employee and
Corporation hereby consent to the jurisdiction of any such court of competent
jurisdiction. This remedy shall be in addition to all other remedies available
to Corporation at law or equity. If any portion of this Section 5.01 is
adjudicated to be invalid or unenforceable, this Section 5.01 shall be deemed
amended to delete therefrom the portion so adjudicated, such deletion to apply
only with respect to the operation of this Section 5.01 in the jurisdiction in
which such adjudication is made.
The Corporation agrees to pay Employee cash for specific non-compete
compensation, as consideration for the non-compete provision of Section 5.01 of
this Employment Agreement. Said cash compensation is defined in section 3.04.
5.02 TRADE SECRETS. Except as explicitly required in the performance of
Employee's duties for the Company, Employee will not use voluntarily (subpoenaed
by Court) or disclose in any manner, during or at any time after his employment
with the Corporation, any Trade Secrets of the Corporation. "Trade Secrets"
shall mean any secret, confidential or proprietary information, knowledge or
data, including Inventions, germplasm, and know how of the Corporation or of
third parties obtained or created by or made available to Employee during his
employment, which is:
a) of a technical nature, including methods, formulas, compositions,
processes, products, germplasm, computer software, apparatus, and
similar items; or
b) of a business nature, including costs, purchasing, profits, markets,
sales, customer lists, and similar items; or
c) related to research and development, including marketing,
manufacturing, procedures, planning, engineering, breeding techniques
and similar matters.
Upon termination of Employee's employment with Corporation, or at any other
time at the Corporation's request, Employee will deliver promptly, and will not
retain without Corporation's prior written consent, all writings, drawings,
software or owner records in any form, and all copies thereof, relating to any
of the Trade Secrets as defined herein.
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5.03 INVENTIONS.
a) Disclosure. Employee will promptly disclose to Corporation in writing,
except as excluded in Section 503 (c) of this Agreement, all inventions,
discoveries, and improvements in the scope of Employee's employment
("Inventions"), whether involving processes, products, germplasm, services or
any aspect of Corporation's business and whether patentable or not, which are
made, conceived, or otherwise originated by Employee, either jointly singly on
his own or on Corporation time, during the period of his employment with
Corporation and one year thereafter.
b) Assignment. All such Inventions shall belong solely and exclusive to
Corporation. To evidence and implement Employee's assignment to Corporation of
Employee's entire right, title and interest in such Inventions, Employee will,
at Corporation's reasonable request and expense, execute all instruments of
Assignment and other documents, and do all other acts and things necessary to
assist the Company in lawfully obtaining patents, copyrights or other ownership
interests and in the enforcement and protection thereof.
c) Exception. This Agreement does not apply to an Invention for which no
equipment, supplies, facility or trade secret information of Corporation was
used and which was developed entirely on Employee's own time, and:
1) does not relate: (a) directly or indirectly to the business of
Corporation; or (b) to Corporation's actual or demonstrably
anticipated research or development; or
2) does not result from any work performed by Employee for Corporation.
5.04 NOTICE OF AGREEMENT. Corporation may give notice of the existence and
terms of this Agreement to anyone else employing Employee or evidencing an
intent to employ Employee provided that Corporation uses its best efforts to
provide Employee with prior notice of its intent to contact such third party.
ARTICLE 6.00 - GENERAL MATTER.
6.01 NEVADA LAW. This Agreement shall be governed by the laws of the State
of Nevada and shall be construed in accordance therewith.
6.02 NO WAIVER. No provision of this Agreement may be waived except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as waiver of any other term or provision.
6.03 BINDING EFFECT. This Agreement shall be binding upon the parties,
their heirs, executors, administrators, successors or assignees. The parties
agree to do any and all things necessary to effectuate the purpose of this
Agreement.
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6.04 CONSTRUCTION. Throughout this Agreement, the singular shall include
the plural; the plural shall include the singular; and the masculine and neuter
shall include the feminine, wherever the context so requires.
6.05 TEXT TO CONTROL. The headings of articles and sections are included
solely for convenience of reference. If any conflict between any heading and the
text of this agreement exists, the text shall control.
6.06 SEVERABILITY. If any provision of this agreement is declared by an
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions. On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions never had been inserted in this
Agreement.
6.07 AMENDMENT. This Agreement may be amended, altered or revoked at any
time, in whole or in part, by filing with this Agreement a written instrument
setting forth such charges, signed by the Corporation and the Employee.
6.08 ARBITRATION. If the parties are unable to resolve a controversy within
thirty (30) days after commencement of meditation thereof, the dispute shall be
settled by binding arbitration or by either party initiating an action in a
court of competent jurisdiction. Arbitration of any dispute may be initiated by
one party by sending a written demand for arbitration to the other party. This
demand will specify the matter in dispute and request the appointment of an
arbitration panel. The arbitration panel will consist of one arbitrator named by
ABT, one arbitrator named by the Employee and a third arbitrator named by the
arbitrators so chosen. The arbitration hearing will be conducted by the American
Arbitration Association or Center for Public Resources, in accordance with the
rules and procedures of the American Arbitration Association. The situs of the
arbitration will be Chicago, IL. The arbitrators shall not be empowered to award
punitive or exemplary damages to either party.
6.09 NOTICES. All notices required to be given by this Agreement shall be
made in writing either by:
A. Personal delivery to the party requiring notice and securing a written
receipt, or
B. Mailing notice in the U.S. mails to the last known address of the
party requiring notice, which shall be the address shown on the
records of the Corporation for the Employee, by certified mail, return
receipt requested.
The effective date of the notice shall be the date of the written receipt
received upon delivery in Paragraph A above or four (4) days after the date the
notice was delivered to the U.S. mail as posted on the receipt in Paragraph B
above.
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The parties hereby execute this Employment Agreement on the day and year
first written above.
AGRIBIOTECH, INC.
/s/ Kathleen L. Gillespie
-----------------------------------------
Kathleen L. Gillespie, Vice President
EMPLOYEE:
/s/ Kenneth R. Budd
- -------------------
Kenneth R. Budd
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EMPLOYMENT AGREEMENT
Ingram - AgriBioTech, Inc.
THIS EMPLOYMENT AGREEMENT sets forth the agreement reached August 5, 1998
(at which point the stock options were priced) by and between RANDY INGRAM
(hereinafter referred to as "Ingram") and AgriBioTech, Inc., a Nevada
corporation (hereinafter referred to as "ABT").
WITNESSETH
WHEREAS, ABT desires to employ Ingram; and
WHEREAS, Ingram desires to accept such employment with ABT; and
WHEREAS, Ingram and ABT desire to set forth their employment relationship
in a written agreement.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1.00 - EMPLOYMENT
1.01 EMPLOYMENT. ABT hereby offers to employ Ingram upon the terms and
conditions hereinafter set forth, and Ingram accepts such offer.
1.02 DUTIES. Ingram's initial title shall be Vice President, Assistant CFO,
Director Business Development. Ingram shall report directly to the President,
COO of ABT. Primary duties of Ingram shall include investment analysis,
development of strategic fit for newly acquired companies, participation in
strategic business planning efforts and to develop and supervise a capital
investment review process. Ingram shall also perform all services reasonably
required by ABT in furtherance of ABT's business purposes as determined, from
time to time, by ABT. Ingram acknowledges that ABT may change his/her duties
and/or title from time to time. Ingram shall diligently utilize his/her talents,
experience and expertise to carry out Ingram's duties and achieve ABT's mission
statement and goals. Ingram will work only for AgriBioTech, Inc. and its
subsidiaries, as may be needed except as may be mutually agreed by Ingram and
ABT.
ARTICLE 2.00 - TERM AND TERMINATION
2.01 TERM. ABT agrees to employ Ingram in the above position commencing on
or about September 15, 1998 (exact date subject to timing of Ingram leaving
current position) and continuing until terminated pursuant to 2.02 below.
2.02 TERMINATION. This Agreement may be terminated as follows:
A. ABT may terminate this Agreement immediately with Cause. "Cause" means:
1) Ingram's failure or refusal to adequately perform the employment
duties hereunder or assigned to Ingram by ABT's Board of Directors;
2) the commission by Ingram of any willful or intentional act which
reasonably could be expected to injure the reputation, business or
business relationships of ABT and/or Ingram, and/or create a legal
exposure for ABT as a result of Ingram's wrongdoing.
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3) Ingram's violation of ABT's Codes of Conduct or other significant
policies, as set forth by ABT in its Employee Manual or other company
policies as issued from time to time;
4) Ingram's conviction of a felony or of any crime involving
misrepresentation, moral turpitude or fraud; or
5) Ingram's breach of or nonadherence to Ingram's other covenants
hereunder or other agreements with ABT, and the failure to cure said
breach or nonadherence within thirty (30) days of written notice
thereof from ABT.
B. Termination as a result of management change: It is understood and agreed
that the current Chief Executive Officer, Johnny R. Thomas, desires Ingram
to become an integral part of the core management team. It is understood
that both the Corporation and Ingram hope for a long term relationship. In
the event there is a change in the Chief Executive Officer of the
Corporation and at any time thereafter (i) the Employee is terminated or
(ii) in the sole determination of the Employee, there is a significant
adverse change in the duties, responsibilities, or compensation of the
Employee, then employee shall immediately be vested in full on all stock
options referenced in Section 3.02 and shall be entitled to receive a
payment equal to (a) his full Compensation as set forth in section 3.01 for
two (2) years from the date of such termination or determination, less $1,
and (b) other employee benefits (excluding long term disability and life
insurance) for two (2) years from the date of such termination or
determination. In Addition to the foregoing, for a period of one (1) year
following any such change of the Chief Executive Officer, Employee shall
have the option of termination of this Agreement without justification and,
in such event, will be entitled to (i) immediately be vested in the stock
options referenced in Section 3.02 which would otherwise become vested on
the next anniversary of employment following such termination and (ii)
receive his full Compensation as set forth in Section 3.01 and other
employee benefits for one (1) year following such termination.
C. This Agreement shall terminate immediately upon the death of Ingram, in
which event, Ingram's heirs may exercise options which become vested within
one year of the termination as specified in the option agreement.
D. This Agreement shall terminate upon ten (10) working days notice by the
Corporation if, in the opinion of ABT, Ingram becomes substantially unable
to perform services required pursuant to this Agreement because of mental,
emotional or physical illness or injury, provided that ABT act, in
accordance with the provisions of the Americas with Disabilities Act, the
Family and Medical Leave Act, and any other relevant state or federal law.
E. ABT may terminate this Agreement (and the employment relationship between
ABT and Ingram) without cause and for any reason or for no reason upon ten
(10) working days notice.
F. In the event ABT terminates this Agreement without cause pursuant to
2.02(E), Ingram:
1. Will be immediately vested in the stock options referenced in Section
3.02 which would otherwise become vested on the next anniversary of
employment following such termination;
2. Will receive his/her full salary as set forth in Section 3.01 (payable
on ABT's regular paydays) for a period of twelve months; and
3. Any bonus or any benefits, except that medical insurance will be
available through COBRA, upon Ingram payment of COBRA premiums.
G. This Agreement shall terminate upon ten (10) working days notice to ABT by
Ingram, provided that upon receipt of such notice, ABT may elect to pay
Ingram two weeks pay in lieu of notice and the Agreement shall terminate
effective immediately. In the event Ingram so elects to terminate this
Agreement, ABT has no obligation to make any separation or severance
payments to Ingram, and Ingram has no rights to exercise any stock options
exercisable on dates after the termination of this Agreement.
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H. Termination of this Agreement shall not relieve the parties hereto of any
rights or obligations which specifically survive the termination of this
Agreement.
2.03 INGRAM'S OBLIGATIONS AT TERMINATION. At termination of this Agreement
Ingram shall:
A. Return all ABT equipment, documents, computerized data or programs,
and any other ABT property or material in the possession or control of
Ingram;
B. Abide by the provisions of this Agreement which survive termination of
this Agreement, including but not limited to, paragraph 4.02(E),
Articles 5.00 and 6.00; and
C. Abide by any other ABT policies governing the obligations of
terminated employees, as set forth from time to time in ABT's employee
manual or other ABT policies.
ARTICLE 3.00 - COMPENSATION
3.01 SALARY. ABT shall pay Ingram, as consideration for his/her services, a
salary equal to an annual rate of $150,000. Ingram shall be eligible for an
increase in salary annually beginning July 22. Such increase, if any, will be
determined by ABT, in its sole discretion, after annual review. The salary will
be payable in equal bi-weekly installments, less deductions for income tax and
FICA withholding and any other deductions as authorized by Ingram or required by
law.
3.02 STOCK OPTIONS. Ingram shall be granted 250,000 options to purchase
ABT's common stock. Ownership in said options shall vest on the following
schedule, subject to Ingram continuing employment with ABT on the vesting date
(unless otherwise set forth in Article 2.02 (B) and (D)):
A) 50,000 vest at the signing of this Agreement, exercisable at $15.5625
per share;
B) 50,000 vest on the first anniversary of employment, exercisable at
$15.5625 per share;
C) 50,000 vest on the second anniversary of employment, exercisable at
$15.5625 per share;
D) 50,000 vest on the third anniversary of employment, exercisable at
$15.5625 per share; and
E) 50,000 vest on the fourth anniversary of employment, exercisable at
$15.5625 per share.
3.03 BONUS. In order to reflect any outstanding contribution to ABT by
Ingram, ABT may pay Ingram, in addition to the compensation for services
described in Section 3.01 above, a bonus in an amount determined by ABT in its
sole discretion
3.04 VACATION. During the term of this Agreement, Ingram shall be eligible
for vacation pursuant to the terms of the ABT Employee Manual, during which time
Ingram's compensation shall be paid in full, provided, however, that Ingram will
be granted an accrual for two (2) weeks of vacation upon commencement of
employment and will be eligible to take any accrued vacation upon commencement
of employment.
3.05 BENEFITS. During the term of this Agreement, Ingram shall be eligible
to receive insurance and other Employee benefits generally available to
Employees of ABT pursuant to the terms of the various employee benefit plans.
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ARTICLE 4.00 - SPECIFIC OBLIGATIONS OF THE PARTIES
4.01 ABT'S OBLIGATIONS. ABT shall provide Ingram with and pay Ingram's
expenses for the following:
A. Such equipment, materials and supplies as Ingram reasonably requires
for the performance of his services;
B. Costs, including meals, lodging, and transportation reasonably
incurred by Ingram to fulfill his duties and responsibilities to ABT;
and
C. Pre approved expenses for professional dues, tuition, publications,
and continuing professional education, pursuant to ABT's policies for
such expenses.
4.02 INGRAM'S OBLIGATIONS. Ingram agrees that during the term of this
Agreement, he/she shall:
A. Faithfully and to the best of his/her ability and skill serve ABT and
perform his/her duties pursuant to this Agreement;
B. Maintain records in the manner established by ABT;
C. Keep current all records, reports, insurance records and clerical work
required by ABT;
D. Abide by the practices, policies and codes of conduct set forth in
ABT's policies and practices, as disseminated from time to time,
except as expressly modified in this Agreement; and
E. Disclose and assign to ABT Ingram's entire rights in all inventions,
ideas, intellectual property, designs, trademarks, copyrights,
discoveries, formulae, processes, manufacturing techniques, trade
secrets, inventions, improvements, ideas or copyrightable works
relating to Ingram's work at ABT or that which is aided by the use of
ABT's equipment, supplies, facilities or trade secret information.
Ingram agrees to execute whatever documents are necessary to effect
such assignment as requested from time to time by ABT.
ARTICLE 5.00 - COVENANTS
5.01 COVENANT NOT TO COMPETE. ABT and Ingram acknowledge and confirm that
Ingram shall not compete with ABT while employed by ABT or for a one-year period
after employment ceases (the "Non-Compete Period"). "Compete" shall mean any
relationship with any entity whose primary business is based on turf grass,
forage grass or alfalfa seed products in any geographic area serviced by ABT.
5.02 COVENANT FOR PROTECTION OF CONFIDENTIAL AND/OR PROPRIETARY
INFORMATION. ABT and Ingram recognize that during the course of Ingram's
employment, Ingram will have access to information which ABT and its affiliated
companies deem proprietary and/or confidential (hereinafter referred to as
"Information").
In order to protect the Information, during the period of Ingram's
employment with ABT and thereafter, for an unlimited period, Ingram shall not
disclose Information he/she receives or has received from ABT or its affiliated
companies that is proprietary and/or confidential in nature, including, but not
by way of limitation, Information marked PROPRIETARY or CONFIDENTIAL or STRICTLY
PRIVATE or INTERNAL DATA, to any other person, firm or company, or use it for
his own benefit except as provided herein, and shall use such care to safeguard
the information as is set forth in ABT's Employee Manual or other policies, and,
in any event, shall use no less stringent degree of care to avoid disclosure or
use of such Information than Ingram employs with respect to his/her own
proprietary and/or confidential information which he/she does not wish to be
disseminated, published or disclosed.
The parties hereto agree that Information shall not be deemed proprietary
and/or confidential and Ingram shall have no obligation with respect to any such
Information which:
A. Is or becomes publicly known through no wrongful act of Ingram;
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B. Is furnished to a third party by ABT and its affiliated companies
without a similar restriction on the third party's rights; or
C. Is approved for release by written authorization of ABT or its
affiliated companies.
In the event Information in Ingram's possession should be lost, stolen or
otherwise compromised, Ingram shall promptly notify ABT by phone, and follow up
with a detailed report in writing within ten (10) days. Ingram shall then follow
ABT's requests to recover such information.
Ingram shall return at any time upon ABT's request, and/or upon termination
of this Agreement, all tangible forms of Information including documents,
drawings, computerized data or programs, specifications, devices, models or any
other material.
5.03 ENFORCEMENT OF COVENANTS. Ingram and ABT agree that the periods set
forth in this Article 5.0 are reasonable and further that the periods set forth
in this Article 5.00 do not terminate at the termination of this Agreement, but
shall continue throughout any period of affiliation with ABT, and for any stated
period thereafter.
5.04 DEFINITION OF AFFILIATION. Affiliation, as used in this Article, shall
mean any proprietary, employment or fiduciary relationship of Ingram with ABT
and its affiliated companies, including, but not limited to, the position of
Ingram as director, officer, Ingram or consultant of ABT or its affiliated
ABT's.
5.05 SURVIVAL. This Article 5.00, and its obligations shall survive any
termination of this Agreement.
ARTICLE 6.00 - MISCELLANEOUS
6.01 UNFAVORABLE STATEMENTS. Ingram agrees not to directly or indirectly
defame, disparage, libel or otherwise convey an unjust unfavorable impression of
ABT or the business or businesses operated by ABT and its subsidiaries. Ingram
further agrees that he will not make public comments on the reason for his
termination of employment with ABT.
6.02 COOPERATION IN CLAIMS. Ingram agrees to assist ABT in representing
ABT's interests with respect to claims and litigation brought by or against ABT
arising during or relating to Ingram's employment with ABT.
6.03 NONSOLICITATION. Ingram agrees that during the term of his employment
with ABT and for a period of 2 years after termination of this Agreement, Ingram
shall not interfere with ABT's employment and business relationships with ABT
employees, customers, vendors or other such affiliated entities, and that Ingram
will not solicit any current employees of ABT to leave the employ of ABT.
6.04 SURVIVAL. This article 6.00 and its obligations shall survive any
termination of this Agreement.
ARTICLE 7.00 - DISPUTE RESOLUTION
7.01 NOTICE OF DISPUTE. Ingram and ABT agree to make good faith efforts to
resolve any disputes under this Agreement (except as set forth in Article 7.02)
by giving the other party 30 days prior notice before commencing any legal
action regarding the Agreement. In the event such dispute is not resolved after
good faith efforts, ABT may, but is not required to, submit the dispute to
arbitration in Las Vegas in accordance with the rules of the American
Arbitration Association then in effect, and, if ABT does so, Ingram agrees to
such arbitration as the exclusive remedy for the dispute. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
5
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7.02. ENFORCEMENT OF COVENANTS. The covenants in Articles 5.00 and 6.00 may
be enforced by specific performance or any available legal or equitable remedy,
including, but not by way of limitation, temporary restraining orders or
preliminary and permanent injunctions, and ABT and its affiliated companies
shall be entitled to recover from Ingram all court costs and reasonable
attorney's fees incurred in enforcing these covenants. The remedies hereunder
shall not be exclusive of each other, but shall be cumulative
ABT may seek specific enforcement of these covenants without resort to the
informal dispute resolution provision of Article 7.01
7.03. ATTORNEY'S FEES. In the event of a dispute under this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees and costs
expended in such action, including but not limited to, attorney's fees arising
from any arbitration proceeding.
ARTICLE 8.00 - GENERAL MATTERS.
8.01 NEVADA LAW. This Agreement shall be governed by the laws of the State
of Nevada and shall be construed in accordance therewith.
8.02 NO WAIVER. No provision of this Agreement may be waived except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as waiver of any other term or provision.
8.03 BINDING EFFECT. This Agreement shall be binding upon the parties,
their heirs, executors, administrators, successors or assignees. The parties
agree to do any and all things necessary to effectuate the purpose of this
Agreement.
8.04 CONSTRUCTION. Throughout this Agreement, the singular shall include
the plural; the plural shall include the singular; and the masculine and neuter
shall include the feminine, wherever the context so requires.
8.05 TEXT TO CONTROL. The headings of articles and sections are included
solely for convenience of reference. If any conflict between any heading and the
text of this Agreement exists, the text shall control.
8.06 SEVERABILITY. If any provision of this Agreement is declared by a
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions. On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions never had been inserted in this
Agreement.
8.07 AMENDMENT. This Agreement may be amended, altered or revoked at any
time, in whole or in part, by filing with this Agreement a written instrument
setting forth such changes, signed by ABT and Ingram.
8.08 NOTICES. All notices required to be given by this Agreement shall be
made in writing either by:
A. Personal delivery to the party requiring notice with written
confirmation of receipt; or
B. Mailing notice in the U.S. mails to the last known address of the
party requiring notice, which shall be the address shown on the
records of ABT for Ingram, and the corporate headquarters of ABT for
ABT, attention CEO, by certified mail, return receipt requested.
The effective date of the notice shall be the date of the written receipt
received upon delivery in Paragraph A above or four (4) days after the date the
notice was delivered to the U.S. mail as posted on the receipt in Paragraph B
above.
6
<PAGE>
The parties hereby execute this Employment Agreement on the day and year
first written above.
AGRIBIOTECH, INC.
/s/ Kent Schulze
-------------------------------
Kent Schulze
EMPLOYEE:
/s/ Randy Ingram
- ----------------
Randy Ingram
7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT sets forth the agreement reached the 5th day of
December, 1997, by and between DOUGLAS A. FISHER (hereinafter referred to as
"Employee") and AgriBioTech, Inc., a Nevada Corporation (hereinafter referred to
as "Corporation").
WITNESSETH
WHEREAS, the Corporation desires to employ the Employee; and
WHEREAS, the Employee desires to accept such employment with the
Corporation; and
WHEREAS, the Employee and the Corporation desire to set forth their
employment relationship in a written agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants herein
set forth, and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follow:
ARTICLE 1.00 - EMPLOYMENT
1.01 EMPLOYMENT. The Corporation hereby offers to employ the Employee upon
the terms and conditions hereinafter set forth and the Employee accepts such
offer and agrees to abide by the terms and conditions hereof, and the terms and
conditions of the Corporation's and its affiliated corporations' Articles of
Incorporation, Bylaws and Employee Manual except as otherwise set forth herein.
The Employee shall be considered a Regular Employee from the effective date of
employment, i.e., not a Probationary Employee.
1.02 DUTIES. Employee's title shall be Vice President, General Counsel,
Director of Business Services. Employee shall report directly to the President
of the Corporation. Employee shall perform all services reasonably required by
the Corporation in furtherance of the Corporation's business purposes as
determined, from time to time, by the Board of Directors of the Corporation. The
Employee will work only for AgriBioTech, Inc. and its subsidiaries, as may be
needed, except as may be mutually agreed by Employee and Corporation. In
addition and as part of his duties hereunder, the Employee shall, if elected to
such position, serve as a director of the Corporation.
1
<PAGE>
ARTICLE 2.00 - TERM AND TERMINATION
2.01 TERM. The Corporation agrees to employ the Employee commencing on
February 1, 1998 and continuing for at least four years from the date of
employment unless terminated pursuant to 2.02 below. Duties of Employee shall
include direct responsibility for operational business services of the Company
including but not limited to; contract and policy development, management legal
counseling and other legal services, risk management, regulatory compliance,
government relations, benefit administration, and other personnel services.
2.02 TERMINATION. The Corporation may, by giving zero (0) days notice to
the Employee, terminate this Agreement with cause. Notwithstanding the above,
this Agreement shall terminate immediately upon the death of the Employee, and
shall terminate upon ten (10) working days notice by the Corporation if, in the
opinion of the Corporation, Employee becomes unable for a period of three (3)
months to perform services required pursuant to this Agreement because of
illness or injury. Any decision to terminate this Agreement by the Corporation
shall not be voted upon by the Employee in any capacity whatsoever. In no event
shall termination of this Agreement relieve the parties hereto of any rights or
obligations which survive the termination of this Agreement as set forth herein.
In the event of Employee's death, Employee's heirs may exercise vested options
within one year as specified in the option agreement.
Termination as a result of management change: It is understood and agreed
that current Chief Executive Officer, other senior management and founding
owners, i.e., Johnny R. Thomas, John C. Francis and Scott J. Loomis desire
Employee to become an integral part of the core management team. As such,
Employee is to diligently utilize his talents, experience and expertise to
achieve Corporation's mission statement and objectives. It is understood that
both the Corporation and Employee are making at least a four year commitment. In
the event there is a change in Chief Executive Officer of the Corporation and at
any time thereafter (i) the Employee is terminated or (ii) in the sole
determination of the Employee, there is a significant change in the duties,
responsibilities, or compensation of the Employee, then Employee shall
immediately be vested in full on all stock options referenced in Section 3.02
and shall be entitled to receive a payment equal to (a) his full Compensation as
set forth in Section 3.01 for two (2) years from the date of such termination or
determination, less $1, and (b) other employee benefits (excluding long term
disability and life insurance for two (2) years from the date of such
termination or determination. In addition to the foregoing, for a period of one
(1) year following any such change of the Chief Executive Officer, Employee
shall have the option of terminating this Agreement without justification and,
in such event, will be entitled to (i) immediately be vested in the stock
options referenced in Section 3.02 which would otherwise become vested on the
next anniversary of employment following such termination and (ii) receive his
full Compensation as set forth in Section 3.01 and other employee benefits for
one (1) year following such termination.
2
<PAGE>
In the event Corporation desires to terminate this Agreement without cause,
Employee will be entitled to (i) immediately be vested in the stock options
referenced in Section 3.02 which would otherwise become vested on the next
anniversary of employment following such termination and (ii) receive his full
Compensation as set forth in Section 3.01 and other employee benefits (excluding
long term disability and life insurance) for one (1) year following such
termination.
In the event Employee desires to terminate this agreement for any reason or
in the event Employee, Chief Operating Officer and/or Corporation's Board of
Directors determine that the duties of Vice President, General Counsel, Director
of Business Services, cannot be performed satisfactorily from two geographic
offices (Palatine, IL and Las Vegas, NV), Employee shall agree to locate at the
location deemed "most effective" by the Senior Management Team, or cooperate in
selecting a successor and developing an effective transition. Employee shall
agree to give Corporation a minimum of nine (9) months notice and to assist
Corporation in all reasonable respects in finding a successor to the Employee's
duties and responsibilities and in the transition process. In the event Employee
gives notice of intent to terminate this Agreement, then Employee will be
entitled to (I) receive his full Compensation as set forth in Section 3.01 and
other employee benefits for one (1) year and (ii) to become vested in the stock
options referenced in section 3.02, which would otherwise become vested during
the 12 months following such notice. In the event Employee decides not to move
to one location, then Employee will be entitled to (I) receive his full
Compensation as set forth in Section 3.01 and other benefits for one (1) year
from the date Employee was given "relocation notice" and (ii) to become vested
in the stock options, referenced in Section 3.02, which would otherwise become
vested on the next anniversary of employment following the end of the nine (9)
month transition process. Specifically, in either of the preceding cases the
"one (1) year of Compensation" includes the nine (9) month transition period.
ARTICLE 3.00 - COMPENSATION
3.01 SALARY. The Corporation covenants and agrees to pay Employee, as
consideration for his services, Compensation as set forth in this Article 3.00
Compensation shall include an annualized salary of ONE HUNDRED FIFTY THOUSAND
DOLLARS ($150,000.00) ("Salary"). Employee shall be entitled to an annual
increase in the above described Salary beginning July 1, 1998. Such increase
will be determined by the Compensation committee. The salary will be payable in
equal bi-weekly installments, less payroll deductions for income tax, FICA,
withholding and any other deductions as authorized by the Employee.
3.02 STOCK OPTIONS. Employee shall be granted options to purchase the
150,000 shares of Corporation's common stock. Ownership in said options shall
vest on the following schedule; subject to Employee continuing employment with
Corporation on the vesting date:
3
<PAGE>
A) 30,000 vest at signing of Agreement, exercisable for five years from
vesting date at a purchase price of $11.50/share,
B) 30,000 vest on the first anniversary of employment, exercisable for
five years from vesting at $11.50 per share,
C) 30,000 vest on the second anniversary of employment, exercisable at
$11.50 per share through June 30, 2004,
D) 30,000 vest on the third anniversary of employment, exercisable at
$11.50 per share through June 30, 2004,
E) 30,000 vest on the fourth anniversary of employment, exercisable at
$11.50 per share through June 30, 2004.
3.03 BONUS. For the purpose of causing Employee's compensation to equal the
reasonable value of his services to the Corporation and to reflect any
outstanding contribution to Corporation by Employee, the Corporation may pay
Employee, in addition to the Salary described in Section 3.01 above, a bonus in
any amount determined by the Corporation in its sole discretion. The bonus, if
any, less payroll deductions for income taxes, FICA, withholding and any other
deductions authorized by the Employee, shall be paid by the Corporation to the
Employee at such time or times as the Corporation in its sole discretion
determines. All bonuses included in compensation, if applicable, will be paid
less applicable payroll deductions in July of each year.
3.04 VACATION. During the term of this Agreement, the Employee shall be
entitled to a vacation pursuant to the Employee Manual, but not less than four
weeks per year during which time Employee's Salary shall be paid in full.
Employee will be granted an accrual for three (3) weeks of vacation upon
commencement of employment and will be eligible to take any accrued vacation
upon commencement of employment.
3.05 BENEFITS. During the term of this Agreement, the Employee shall be
entitled to receive insurance and other benefits generally available to all
employees of the Corporation.
3.06 RELOCATION. The Corporation and Employee agree that for the Employee
to perform the services required by the Corporation, Employee shall initially
have two offices (Palatine, IL and Las Vegas, NV). Corporation shall pay $1,500
per month expense allowance for the Illinois office, including equipment and
support expenses which Employee shall provide (amount to be reviewed
periodically). In the event, the Board of Directors subsequently determine that
a relocation to Las Vegas is needed to perform the duties, Employee shall elect
to relocate or implement an efficient, timely transition. The Corporation will
reimburse the Employee for the reasonable and necessary expenses of such
relocation. Such expenses will include moving of the Employee's household goods,
brokers and other fees for the sale of the Employee's current residence, and
expenses for travel, lodging, meals, etc. for up to two house hunting trips to
Las Vegas and the actual relocation.
4
<PAGE>
During the dual office time period of employment, Corporation shall provide
an apartment or other accommodations in Las Vegas, to be mutually determined by
Employee and Corporation.
3.07 INDEMNIFICATION. The Corporation agrees to indemnify the Employee to
the full extent allowed by the Corporation's Articles of Incorporation and
Nevada law with respect to any claim, investigation, proceeding, or action
against or involving the Employee relating to this employment by the
Corporation. Such indemnification shall include advancement of attorney fees
during any such event and shall cover any adverse economic consequences to
Employee including judgments, settlements, and attorney fees. This Section 3.07
will survive termination of this Agreement irrespective of the reason for
termination.
ARTICLE 4.00 - SPECIFIC OBLIGATIONS OF THE PARTIES
4.01 CORPORATION'S OBLIGATIONS. The Corporation shall provide the employee
with and pay Employee's expenses for the following:
A) Such equipment, materials and supplies as the Employee requires for
the performance of his services.
B) Costs, including tuition, meals, lodging, and transportation incurred
by the Employee to fulfill his duties and responsibilities to the
Corporation, including professional dues, publications, and continuing
professional education.
4.02 EMPLOYEE'S OBLIGATIONS. The Employee agrees that during the term of
this Agreement, he shall:
A) Faithfully and to the best of his ability and skill serve the
Corporation and perform his duties pursuant to this Agreement;
B) Maintain records in the manner established by the Corporation; and
C) Keep current all records, reports, insurance records and clerical work
required by Corporation.
ARTICLE 5.00 - COVENANTS
5.01 COVENANT NOT TO COMPETE. The Corporation and Employee acknowledge and
confirm that Employee shall not compete with the Corporation while employed or
for a five year period after employment ceases.
5
<PAGE>
5.02 COVENANT FOR PROTECTION OF PROPRIETARY INFORMATION. The parties hereto
recognize that the Corporation and its affiliated corporations and Employee are
desirous of exchanging information during the term of this Agreement and during
the period of the time Employee is affiliated with the Corporation and its
affiliated corporations relating to the research, development, and marketing of
seed, seed products, seed related products and technology for application in the
general field of farming and ranching and that during the above periods of time,
the Corporation and its affiliated corporations may disclose to the Employee
certain information pursuant to this Agreement which the Corporation and its
affiliated corporations deems proprietary (hereinafter referred to as
"Information").
In order to protect the Information, the parties hereto agree that during
the period of Employee's affiliation with the Corporation and its affiliated
corporations, and for as long a period as the information does not fall within
A-F below, Employee shall not (i) disclose Information it receives or has
received from Corporation or its affiliated corporations that is proprietary in
nature, including, but not by way of limitation, Information marked PROPRIETARY
or CONFIDENTIAL or STRICTLY PRIVATE or INTERNAL DATA, to any other person, firm
or corporation, or (ii) use it for any purposes except as provided herein, and
(iii) shall use no less stringent degree of care to avoid disclosure or use of
such Information than Employee employs with respect to his own proprietary
information which it does not wish to be disseminated, published or disclosed.
The parties hereto agree that Information shall not be deemed proprietary
and Employee shall have no obligation with respect to any such Information
which:
A) Is already known to Employee through lawful channels of communication;
B) Is or becomes publicly known through no wrongful act of Employee;
C) Is rightfully received from a third party without similar restriction
and without breach of this Agreement;
D) Is independently developed by Employee without breach of this
Agreement;
E) Is furnished to a third party by Corporation and its affiliated
corporations without a similar restriction on the third party's
rights; or
F) Is approved for release by written authorization of Corporation or its
affiliated corporations. Either party may, without breach of this
Agreement, disclose Information to the government by reason of a
governmental requirement or to a court by reason of operation of law.
Employee shall not be liable for (1) inadvertent disclosure or use of
Information provided that (a) it used not less than the same degree of care in
safeguarding such Information as it used for its own Information of like
importance, and (b) upon discovery of such inadvertent disclosure or use of such
Information, it shall endeavor to prevent any further inadvertent disclosure or
use, or (2) unauthorized disclosure or use of Information by persons who are or
who have been in its employ, unless it fails to safeguard such Information with
not less than the same degree of care as it uses for its own proprietary
Information of like importance.
6
<PAGE>
In the event Information should be lost, stolen or otherwise compromised,
the party formerly in possession of that Information shall promptly notify the
Corporation by phone, and follow up with a detailed report in writing within ten
(10) days. A coordinated effort shall then be made to recover such Information.
All copies of written data delivered by one party hereto to the other party
pursuant to this Section shall be and remain the property of such one party, and
all such written data, and any copies thereof, shall be promptly returned to
such one party upon written request, or destroyed at such one party's option.
Employee and Corporation agree that the period set forth herein is
reasonable and further that the period set forth herein does not terminate at
the termination of this Agreement, but shall continue throughout any period of
affiliation, and for a two (2) year period thereafter. This covenant may be
enforced by specific performance or any available legal or equitable remedy,
including, but not by way of limitation, temporary restraining orders or
preliminary and permanent injunctions, and the Corporation and its affiliated
corporations shall be entitled to recover from Employee all court costs and
reasonable attorney's fees incurred in enforcing this covenant. The remedies
hereunder shall not be exclusive of each other, but shall be cumulative.
5.04 DEFINITION OF AFFILIATION. Affiliation, as used in this Article, shall
mean any proprietary, employment or fiduciary relationship of the Employee with
the Corporation and its affiliated corporations, including, but not limited to,
the position of Employee as director, officer, employee or consultant of the
Corporation or its affiliated corporations.
5.05 ASSIGNMENT. Employee will promptly notify and discuss and hereby
assigns to ABT the entire rights in all designs, trademarks, copyrights,
discoveries, formulae, processes, manufacturing techniques, trade secrets,
inventions, improvements, ideas or copyrightable works relating to his
employment at ABT (whether or not made during normal working hours) or that
which is aided by the use of ABT equipment, supplies, facilities or trade secret
information. Employee is not required to assign any invention where no ABT
equipment, supplies, facilities, or trade secret information was used and which
was developed entirely on his own time and (a) which does not relate (1) to
ABT's business or (2) to ABT's actual or demonstrably anticipated research or
development, or (b) which does not result from his ABT work.
7
<PAGE>
Nothing contained in this Section shall be construed as granting or
conferring any rights by license or otherwise, expressly, implied, or otherwise
for any invention, discovery or improvement made, conceived, or acquired prior
to or after the term of this Agreement.
ARTICLE 6.00 - GENERAL MATTER.
6.01 NEVADA LAW. This Agreement shall be governed by the laws of the State
of Nevada and shall be construed in accordance therewith.
6.02 NO WAIVER. No provision of this Agreement may be waived except by an
agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as waiver of any other term or provision.
6.03 BINDING EFFECT. This Agreement shall be binding upon the parties,
their heirs, executors, administrators, successors or assignees. The parties
agree to do any and all things necessary to effectuate the purpose of this
Agreement.
6.04 CONSTRUCTION. Throughout this Agreement, the singular shall include
the plural; the plural shall include the singular; and the masculine and neuter
shall include the feminine, wherever the context so requires.
6.05 TEXT TO CONTROL. The headings of articles and sections are included
solely for convenience of reference. If any conflict between any heading and the
text of this Agreement exists, the text shall control.
6.06 SEVERABILITY. If any provision of this Agreement is declared by an
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions. On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions never had been inserted in this
Agreement.
6.07 AMENDMENT. This Agreement may be amended, altered or revoked at any
time, in whole or in part, by filing with this Agreement a written instrument
setting forth such charges, signed by the Corporation and the Employee.
6.08 NOTICES. All notices required to be given by this Agreement shall be
made in writing either by:
A) Personal delivery to the party requiring notice and securing a written
receipt,
or
B) Mailing notice in the U.S. mails to the last known address of the
party requiring notice, which shall be the address shown on the
records of the Corporation for the Employee, by certified mail, return
receipt requested.
8
<PAGE>
The effective date of the notice shall be the date of the written receipt
received upon delivery in Paragraph A above or four (4) days after the date the
notice was delivered to the U.S. mail as posted on the receipt in Paragraph B
above.
The parties hereby execute this Employment Agreement on the day and year
first written above.
AGRIBIOTECH, INC.
/s/ Johnny R. Thomas
-------------------------------
Johnny R. Thomas, President/CEO
EMPLOYEE:
/s/ Douglas A. Fisher
- ---------------------
Douglas A. Fisher
9
PRICE GUARANTY AGREEMENT
PRICE GUARANTY AGREEMENT dated September 18, 1998 (the "Closing Date"), by
and between Lafayette Franklin III, Kenneth J. Fox, Philip E. Hemminghaus,
William M. Kunnari, Bradley D. Geisler and William A. Petersen ("Sellers"), and
AgriBioTech, Inc., a Nevada corporation ("ABT").
R E C I T A L S:
A. Las Vegas Fertilizer Co., Inc. ("Buyer") has agreed to purchase from the
Sellers an aggregate of 901,032 shares of the Common Stock of Garden West
Distributors, Inc., an Arizona Corporation (the "Company"), pursuant to a Stock
Purchase Agreement dated September 18, 1998 (the "Stock Purchase Agreement")
among the Sellers, the Company, the Buyer and ABT.
B. Pursuant to Section 3(a) of the Stock Purchase Agreement, ABT will
transfer to the Sellers 122,150 shares of the common stock of ABT (the "ABT
Shares").
C. Pursuant to Section 3(c) of the Stock Purchase Agreement, Sellers and
the Shareholder have entered into a Lock-Up Agreement (the "Lock-Up Agreement")
pursuant to which they have agreed that Sellers will shall not sell, transfer or
otherwise dispose of the ABT Shares except as specified in the Lock-Up Agreement
and, pursuant to Section 3(c) of the Stock Purchase Agreement, ABT has agreed to
enter into this Price Guaranty Agreement with Sellers.
Accordingly, in consideration of the foregoing recitals and the mutual
covenants contained in this Agreement, the parties hereto hereby agree as
follows:
(1) ABT agrees to pay to Sellers any deficiency realized in the Net
Proceeds from sales by Sellers of the ABT Shares in accordance with the terms of
the Lock-Up Agreement provided all of the ABT Shares are sold by June 30, 2000
and copies of sale confirmations and other documentation has been provided to
ABT by Sellers as required by the Lockup Agreement. As used herein, "Net
Proceeds" means the remainder of subtracting customary sales commission and
applicable stock transfer and sales taxes from the gross sales price of the ABT
Shares sold pursuant to the Lockup Agreement.
(2) (a) The Net Proceeds shall be determined within 15 days following June
30, 2000:
(b) Subject to the provisions of the Stock Purchase Agreement and the
Lock-Up Agreement, to the extent that the Net Proceeds of sales
of ABT Shares pursuant to the Lock-Up Agreement are less then
$2,137,625, ABT will pay to the Sellers cash in an amount equal
to any such deficiencies within 15 business days after June 30,
2000.
2
<PAGE>
(c) To the extent that the Net Proceeds of sales of ABT Shares
pursuant to the Lock-Up Agreement exceed $2,137,625, Sellers will
pay to ABT within 15 business days following June 30, 2000 an
amount equal to such surplus of Net Proceeds.
(d) Sellers shall prepare and deliver to ABT within 15 days after
June 30, 2000 a cumulative statement, supported by documentation
reflecting all sales of ABT Shares by Sellers pursuant to the
Lock-Up Agreement.
(e) In the event that the Sellers offer, sell, transfer or otherwise
dispose of the ABT Shares in violation of the Lock-Up Agreement,
without the prior written consent of ABT, (i) ABT's obligations
hereunder will immediately terminate, and (ii) all proceeds in
excess of $12.50 per share from the sale of all ABT Shares,
whether such proceeds derive from sales made prior to, concurrent
with or subsequent to such event of default, shall be paid to
ABT.
(3) Subject to Section 6, this Agreement shall inure to the benefit of and
be binding upon ABT, its successors and assigns, and Sellers.
(4) Should any provision of this Agreement, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of the remaining provisions, which
will remain in full force and effect as if this Agreement had been executed with
the invalid portion thereof deleted.
(5) This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Nevada without giving to the choice of
law rates thereof.
(6) This Agreement and all rights hereunder are personal to the parties and
shall not be assignable, and any purported assignment in violation thereof shall
be null and void.
(7) (a) All notices, requests, consents, and demands by the parties
hereunder shall be delivered by hand, sent by facsimile transmission confirmed
by a "hardcopy" sent by mail or overnight courier, recognized national overnight
courier or by deposit in the United States Mail, postage prepaid, by registered
or certified mail, return receipt requested, addressed to the party to be
notified at the address set forth below:
(i) if to the Sellers to:
with a copy to:
Johns & Flaherty S.C.
Suite 600 Exchange Building
205 Fifth Avenue, South
LaCrosse, WI 54632-1626
Attention: Terry A. Davis, Esq.
Telecopier No.: (608) 784-0557
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<PAGE>
(ii) if to the Buyer or ABT to:
AgriBioTech, Inc.
120 Corporate Park Drive
Henderson, Nevada 89014
Attention: Johnny R. Thomas, CEO
Telecopier No.: (888) 800-4841
with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Elliot H. Lutzker, Esq.
Telecopier No.: (212) 949-7052
(b) Notices given by mail shall be deemed effective on the earlier of
the date shown on the proof of receipt of such mail or, unless
the recipient proves that the notice was received later or not
received, three (3) days after the date of mailing thereof. Other
notices shall be deemed given on the date of receipt. Any party
hereto may change the address specified herein by written notice
to the other parties hereto.
(8) In the event that ABT fails to make a payment to Sellers required to be
made by it hereunder within 30 days after receipt of written notice from Sellers
demanding such payment and Sellers have fully complied with its obligations
hereunder and under the Stock Purchase Agreement and the Lock-Up Agreement, ABT
shall be in default under this Agreement with respect to such payment. Upon such
default by ABT, Sellers may pursue all remedies to which they are entitled.
(9) The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and such
provisions, terms and conditions shall remain in full force and effect. No
waiver of any term or any condition of this Agreement on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
/s/ Lafayette Franklin III /s/ Kenneth J. Fox
- -------------------------- --------------------------
Lafayette Franklin III Kenneth J. Fox
/s/ Philip E. Hemminghaus /s/ William M. Kunnari
- -------------------------- --------------------------
Philip E. Hemminghaus William M. Kunnari
/s/ Bradley D. Geisler /s/ William A. Petersen
- -------------------------- --------------------------
Bradley D. Geisler William A. Petersen
AGRIBIOTECH, INC.
By: /s/ Kathleen L. Gillespie
-------------------------
Kathleen L. Gillespie
Vice President
PROCEEDS GUARANTEE AGREEMENT
PROCEEDS GUARANTEE AGREEMENT (the "Guarantee") dated December 20, 1998 by
and between Kimeragen, Inc., a Delaware corporation ("Seller"), and AgriBioTech,
Inc., a Nevada corporation ("ABT" or the "Buyer").
W I T N E S S E T H:
WHEREAS, Buyer has agreed to license from Seller certain intellectual
property rights (the "Assets") pursuant to a License Agreement dated December
20, 1998 (the "License Agreement") by and between Seller and Buyer and purchase
shares of Seller's Common Stock pursuant to a Stock Purchase Agreement (the
"Stock Purchase Agreement") dated December 20, 1998 (the "Signing Date") by and
between Seller and ABT;
WHEREAS, pursuant to Section 1B of the Stock Purchase Agreement and
Sections 3.1.1 and 3.1.4 of the License Agreement, ABT will transfer to the
Seller (or Seller's broker-dealer) in the aggregate, Two Hundred Twenty Five
Thousand (225,000) shares of ABT Common Stock, par value $0.01 per share ("ABT
Common Stock"), at the Closing (as defined in the Stock Purchase Agreement), and
subject to adjustments as provided herein, and may transfer additional shares of
ABT Common Stock (collectively, the "ABT Shares") as set forth herein;
WHEREAS, pursuant to Sections 2F and 3E of the Stock Purchase Agreement,
Seller and Buyer have entered into a Lock-Up Agreement (the "Lock-Up") pursuant
to which Seller has agreed that it shall not sell, transfer or otherwise dispose
of the ABT Shares except as specified in the Lock-Up; and
WHEREAS, pursuant to Section 2D of the Stock Purchase Agreement, ABT has
guaranteed Seller $4,000,000 in cash by guaranteeing the Guaranteed Net Proceeds
(as defined below) from the sale of the ABT Shares when sold pursuant to the
Lock-Up.
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions
and mutual covenants appearing in this Guarantee, the parties hereto hereby
agree as follows:
Section 1. The ABT Shares, if sold in accordance with the terms of the Lock-Up,
shall have Guaranteed Net Proceeds (defined as gross sales price less customary
sales commissions using a resale prospectus and any applicable stock transfer
and sales taxes) in order that Seller shall have received no less than
$3,000,000 in cash proceeds from the sale of ABT Shares as of the date 90 days
after the Signing and no less than $4,000,000 as of the date 120 days after the
Signing.
Section 2. (a) Interim determinations of the Guaranteed Net Proceeds shall be
made on each of February 26,1999, March 8, 1999, 90 days and 120 days after the
Signing Date. The final determination of the Guaranteed Net Proceeds shall be
made at date no later than 127 days after the Closing Date or within 7 days of
when all of the ABT Shares have been sold pursuant to the Lock-Up.
<PAGE>
(b) On or about February 26, 1999, ABT and Seller will review Seller's
schedule of all sales of ABT Shares prior to that date. To the extent
that the aggregate value (determined by multiplying the last sale
price of ABT Common Stock as quoted on the Nasdaq National Market, the
"Fair Market Value Per Share," times the number of remaining ABT
shares) of the remaining ABT Shares held by Seller combined with net
cash proceeds received from sales prior to that date by Seller are
less than $4,000,000, ABT shall, at its sole option, issue additional
ABT Shares (valued at the Fair Market Value) and/or deposit cash into
an escrow account in an amount equal to such difference, sufficient to
ensure that Seller shall have received no less than $3,000,000 in cash
proceeds from sales of ABT Shares as of the date 90 days after the
Signing Date and no less than $4,000,000 as of the date 120 days after
the Signing Date.
(c) On March 8, 1999, ABT shall provide Seller in writing with its
determination made in accordance with subsection (b) above, however,
brought current through March 5, 1999 (ABT and Seller will review an
updated schedule of all sales of ABT shares), and on such date ABT
shall deposit the cash into an escrow account and/or deliver
additional ABT Shares to Seller's broker-dealer to ensure that Seller
shall receive $3,000,000 in cash proceeds from sales of ABT Shares as
of the date 90 days after the Signing Date and no less than $4,000,000
as of the date 120 days after the Signing Date. To the extent that
Seller has received net cash proceeds of less than $4,000,000 by 120
days after the Signing Date, ABT shall pay to Seller cash for any such
deficit and Seller shall deliver any remaining ABT Shares to ABT, if
any, at a date no later than one week after such 120 day period.
(d) To the extent that Seller Seller retains any ABT Shares after
receiving $4,000,000 in cash proceeds from sales of ABT Shares, the
Seller shall deliver such shares back to ABT and such excess cash over
$4,000,000, if any, at a date no later than one week after receiving
ne cash proceeds of $4,000,000.
(e) In the event that Seller offers, sells, transfers or otherwise
disposes of the ABT Shares in violation of the Lock-Up, without the
prior written consent of ABT, (i) the Guarantee shall not apply to the
Guaranteed Net Proceeds received from such sales and the Guarantee
shall from that time be null and void, and (ii) all proceeds in excess
of $17.78 per share from the sale of all ABT Shares, regardless of
whether such proceeds derive from sales made prior to, concurrent with
or subsequent to such event of default, shall be paid to ABT as
liquidated damages.
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<PAGE>
(f) In the event ABT delivers to Seller the certificate set forth in
Section 4.5(iii)(c) of the Stock Purchase Agreement, ABT shall pay to
Seller within 2 business days of such delivery the amount equal to the
difference of $4,000,000 and the net cash proceeds received by Seller
as of that date. Seller shall assign to ABT, within 2 business days of
such delivery, the remaining unsold ABT Shares or, at ABT's option,
shall sell the remaining ABT shares at the rates specified in the
Lock-Up and deliver to ABT the net proceeds in excess of the
$4,000,000 due to Seller.
(g) In the event that by January 8, 1999, Buyer does not have an effective
Registration Statement (as such term is defined in Section 36 of the
Stock Purchase Agreement) allowing public resale of the ABT Shares,
Buyer shall pay to Seller by January 12, 1999, $500,000 in cash which
shall be deemed to be an advance of $500,000 of the Guaranteed Net
Proceeds.
Section 3. Subject to Section 6 hereunder, this Agreement shall inure to the
benefit of and be binding upon ABT and its successors and assigns, and upon the
Seller and its successors and assigns.
Section 4. Should any part of this Guarantee, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Guarantee had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Guarantee without including therein any portion which
may for any reason be declared invalid.
Section 5. This Guarantee shall be construed and enforced in accordance with the
laws of the State of Nevada applicable to agreements made and to be performed in
such State without application of the principles of conflicts of laws of such
State.
Section 6. This Guarantee and all rights hereunder are personal to the parties
and shall not be assignable, and any purported assignment in violation thereof
shall be null and void.
Section 7. (a) All notices, requests, consents, and demands by the parties
hereunder shall be delivered by hand, recognized national overnight courier or
by deposit in the United States Mail, postage prepaid, by registered or
certified mail, return receipt requested, addressed to the party to be notified
at the address set forth below:
(i) if to the Seller to:
Kimeragen, Inc.
300 Pheasant Run
Newtown, PA 18940
Attention: President
Telecopier No.: (215) 504-4545
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<PAGE>
with a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Attention: Ellen B. Corenswet
Telecopier No.: (212) 586-7878
(ii) if to ABT to:
AgriBioTech, Inc.
120 Corporate Park Drive
Henderson, Nevada 89014
Attention: Johnny R. Thomas, CEO
Telecopier No.: (888) 800-4841
with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Elliot H. Lutzker, Esq.
Telecopier No.: (212) 949-7052
(b) Notices given by mail shall be deemed effective on the earlier of the
date shown on the proof of receipt of such mail or, unless the
recipient proves that the notice was received later or not received,
three (3) days after the date of mailing thereof. Other notices shall
be deemed given on the date of receipt. Any party hereto may change
the address specified herein by written notice to the other parties
hereto.
Section 8. The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Guarantee shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Guarantee on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Guarantee as of
the day and year first written above.
KIMERAGEN, INC.
By: /s/ Gerald Messerschmidt, M.D.
-----------------------------------
Name: Gerald Messerschmidt, M.D.
Title: President
AGRIBIOTECH, INC.
By: /s/ Thomas B. Rice
-----------------------------------
Name: Thomas B. Rice
Title: Vice President
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT (the "Guarantee") dated as of August 31, 1999 (the
"Closing Date"), by and between Michael J. McCarthy ("McCarthy"), 4147 N.W.
Martin Road, Forest Grove, OR 97116, and AgriBioTech, Inc., a Nevada corporation
("ABT").
W I T N E S S E T H:
WHEREAS, pursuant to a Cancellation of Obligations Agreement made effective
July 1, 1998 (the "Agreement"), ABT has agreed to pay McCarthy $2,000,000 plus
accrued interest of 6% on the unpaid balance ($106,735.89 through August 27,
1999) (the "Obligation") by October 1, 1999, in termination of all obligations
of E.F. Burlingham & Sons Inc. ("Burlingham") to McCarthy for use by Burlingham
or others of turfgrass developed by McCarthy and/or all claims which McCarthy
may have in such turfgrass and/or the intellectual property associated with such
turfgrass;
WHEREAS, pursuant to the Agreement ABT has made payments totaling $230,000
to McCarthy as partial payment of the Obligation;
WHEREAS, the parties have agreed that ABT will issue to McCarthy five
hundred thousand (500,000) registered shares of ABT's Common Stock (the "ABT
Shares") in order to complete payment to McCarthy of the Obligation. The ABT
Shares will be issued without restriction pursuant to ABT's shelf registration
statement;
WHEREAS, McCarthy has entered into a Lock-Up Agreement (the "Lock-Up")
pursuant to which he has agreed that he shall not sell, transfer or otherwise
dispose of the ABT Shares except as specified in the Lock-Up;
WHEREAS, ABT has agreed to guarantee the Net Proceeds (as defined below)
from the sale of the ABT Shares when sold pursuant to the Lock-Up.
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions
and mutual covenants appearing in this Guarantee, the parties hereto hereby
agree as follows:
Section 1. (a) The ABT Shares, if sold pursuant to the Lock-Up, shall have Net
Proceeds (defined as the aggregate gross sales proceeds from the sale of all of
the ABT Shares less customary sales commissions and any applicable stock
transfer and sales taxes) to fully satisfy the Obligation.
(b) In consideration of the guarantee granted hereby, McCarthy hereby
agrees that Net Proceeds from the sales of all of the ABT Shares in
excess of the amount necessary to fully satisfy the Obligation shall
be paid to ABT.
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<PAGE>
(c) In the event the proceeds from the sale of the ABT shares exceed the
amount of the Obligation prior to all (c) In the event the proceeds
from the sale of the ABT shares exceed the amount of the Obligation
prior to all ABT shares being sold, ABT may, in its sole discretion,
instruct McCarthy to not sell the remaining ABT Shares and have them
returned to ABT.
(d) ABT represents and warrants to McCarthy as follows:
(i) Validity of Shares. The ABT Shares, when delivered pursuant to
the terms of this Agreement, will be validly issued, fully paid
and non-assessable and will not have been issued in violation of
or subject to any preemptive or similar right.
(ii) Securities Registration. The ABT Shares have been registered
under the Securities Act of 1933, as amended. The issuance of the
ABT Shares to McCarthy shall comply with the Securities Act of
1933, as amended, and all rules and regulations promulgated
thereunder and any applicable state securities laws and rules and
regulations promulgated thereunder. The re-sale of the ABT Shares
by McCarthy pursuant to the terms of this Agreement and the
Lock-Up will comply with the Securities Act of 1933, as amended,
and all rules and regulations promulgated thereunder and any
applicable state securities laws and rules and regulations
promulgated thereunder.
(iii)Since July 1, 1997, ABT has made all filings required to be made
by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and any rules and regulations promulgated
thereunder (the "SEC Reports"). The SEC Reports, when filed,
complied in all material respects with all applicable
requirements of the Exchange Act or other requirements of law.
None of the SEC Reports at the time of filing, contained or today
contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein not misleading in light of the
circumstances in which they were made.
Section 2. (a) The Net Proceeds shall be determined as of November 3, 1999. The
final amount of the Obligation shall also be determined as of November 3, 1999,
reflecting actual proceeds received from sales of the ABT Shares and calculating
interest through the trade date. To compensate for the time between trade date
and settlement date, ABT will pay McCarthy additional interest in the amount of
$1000.00. Net proceeds shall be applied first against outstanding principal and
then against accrued interest through November 3, 1999.
(b) To the extent that the Net Proceeds are less than the final amount of
the Obligation, ABT shall pay to McCarthy cash for any shortfall,
including interest at 6% from November 3, 1999, no later than November
10, 1999. Cash payouts shall be applied first against accrued interest
and then against outstanding principal.
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<PAGE>
(c) To the extent that the Net Proceeds are greater than the final amount
of the Obligation, McCarthy shall pay to ABT cash for any surplus,
including interest at 6% on the daily average amount of such surplus,
no later than November 10, 1999.
(d) McCarthy shall prepare and deliver to ABT by November 5, 1999 a
cumulative statement, supported by documentation reflecting all sales
of ABT Shares, and stating the amount to be paid by ABT to McCarthy
pursuant to the terms of this Guarantee or the amount to be paid by
McCarthy to ABT pursuant to the terms of this Guarantee.
(e) In the event that McCarthy sells, transfers or otherwise disposes of
the ABT Shares in violation of the Lock-Up, without the prior written
consent of ABT, (i) the Guarantee shall be null and void, (ii) any
amounts previously paid by ABT to McCarthy pursuant to Section 2(b) of
this Guarantee shall be refunded to ABT by McCarthy, and (iii) all
proceeds in excess of the Obligation from the sale of all ABT Shares,
regardless of whether such proceeds derive from sales made prior to,
concurrent with or subsequent to such event of default, shall be paid
to ABT. Notwithstanding the forgoing, any violation of the Lock-Up
which is cured by McCarthy within three (3) business days of its
occurrence shall not trigger the above-described provisions in this
paragraph.
Section 3. Subject to Section 6 hereunder, this Agreement shall inure to the
benefit of and be binding upon ABT, its successors and assigns, and upon
McCarthy, his heirs, executors, administrators, legatees and legal
representatives.
Section 4. Should any part of this Guarantee, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Guarantee had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Guarantee without including therein any portion which
may for any reason be declared invalid.
Section 5. This Guarantee shall be construed and enforced in accordance with the
laws of the State of Nevada applicable to agreements made and to be performed in
such State without application of the principles of conflicts of laws of such
State.
Section 6. This Guarantee and all rights hereunder are personal to the parties
and shall not be assignable, and any purported assignment in violation thereof
shall be null and void.
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<PAGE>
Section 7. (a) All notices, requests, consents, and demands by the parties
hereunder shall be delivered by hand, recognized national overnight courier or
by deposit in the United States Mail, postage prepaid, by registered or
certified mail, return receipt requested, addressed to the party to be notified
at the address set forth below:
(i) if to McCarthy to:
4147 N.W. Martin Road
Forest Grove, OR 97116
with a copy to:
Schwabe, Williamson & Wyatt
1800 Pacwest Center
1211 S.W. 5th Avenue
Portland, OR 97204
Attention: Roy Lambert, Esq.
Telecopier No.: (503) 796-2900
(ii) if to ABT to:
AgriBioTech, Inc.
120 Corporate Park Drive
Henderson, Nevada 89014
Attention: Thomas B. Rice,
Executive Vice President
Telecopier No.: (702) 566-2461
with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Elliot H. Lutzker, Esq.
Telecopier No.: (212) 949-7052
(b) Notices given by mail shall be deemed effective on the earlier of the
date shown on the proof of receipt of such mail or, unless the
recipient proves that the notice was received later or not received,
three (3) days after the date of mailing thereof. Other notices shall
be deemed given on the date of receipt. Any party hereto may change
the address specified herein by written notice to the other parties
hereto.
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<PAGE>
Section 8. ABT hereby agrees to defend, indemnify and hold McCarthy harmless
against any claim, loss, damage, cost, and expense (including reasonable
attorney's fees) resulting or arising from any claim made by any person that the
ABT Shares are not duly registered and free from restriction on resale or that
McCarthy is an underwriter of ABT Shares for purposes of the Securities Act of
1933 or any state securities law due to his receipt of ABT stock in accordance
with this Guarantee, his sale in accordance with the terms of the Lock-Up, and
his disposition of sale proceeds in accordance with the terms of this Guarantee.
Section 9. Each party will pay their own expenses incurred in connection with
this Agreement, except ABT will reimburse McCarthy for reasonable legal expenses
in connection with this Guarantee and the Lock-Up upon presentation of an
invoice.
Section 10. The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Guarantee shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Guarantee on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
Section 11. Attorney Fees. If any claim, suit or action is filed by any party to
enforce this Guarantee or otherwise with respect to the subject matter of this
Guarantee, including any claim filed in a bankruptcy proceeding, the prevailing
party shall be entitled to recover reasonable attorney fees incurred in
preparation or in prosecution or defense of such claim, suit or action as fixed
by the trial court, and if any appeal is taken from the decision of the trial
court, reasonable attorney fees as fixed by the appellate court.
IN WITNESS WHEREOF, the parties hereto have executed this Guarantee as of
the day and year first written above.
/s/ Michael J. McCarthy
-----------------------
Michael J. McCarthy
AGRIBIOTECH, INC.
By: /s/Thomas B. Rice
------------------------
Thomas B. Rice
Executive Vice President
PRICE GUARANTY AGREEMENT
PRICE GUARANTY AGREEMENT dated August __, 1998 (the "Closing Date") 1304516
Ontario Inc., an Ontario corporation ("Seller"), and AgriBioTech, Inc., a Nevada
corporation ("ABT").
R E C I T A L S:
A. Rothwell Seeds International Company ("Buyer") has agreed to purchase
from the Seller an aggregate of ________ Class A Shares100 and voting the common
shares of Oseco Inc., an Ontario corporation (the "Company"), pursuant to a
Stock Purchase Agreement dated August __, 1998 (the "Stock Purchase Agreement")
among the Seller, Gabriel A. Eros and Mary E. Eros (the "Shareholders"), the
Buyer and ABT.
B. Pursuant to Section 3(a) of the Stock Purchase Agreement, ABT will
transfer to the Seller 100,000 shares of the common stock par value $.__ of ABT
(the "ABT Shares").
C. Pursuant to Section 3(c) of the Stock Purchase Agreement, Seller and the
Shareholder have entered into a Lock-Up Agreement (the "Lock-Up Agreement")
pursuant to which they have agreed that Seller will shall not sell, transfer or
otherwise dispose of the ABT Shares except as specified in the Lock-Up Agreement
and, pursuant to Section 3(c) of the Stock Purchase Agreement, ABT has agreed to
enter into this Price Guaranty Agreement with Seller.
Accordingly, in consideration of the foregoing recitals and the mutual
covenants contained in this Agreement, the parties hereto hereby agree as
follows:
(1) ABT agrees to pay to Seller any deficiency realized in the Net Proceeds
from sales by Seller of the ABT Share in accordance with the terms of the Lockup
Agreement provided all of the ABT Shares are sold by June 1, 1999 and copies of
sale confirmations and other documentation has been provided to ABT by Seller as
required by the Lockup Agreement. As used herein, "Net Proceeds" means the
remainder of subtracting customary sales commission and applicable stock
transfer and sales taxes from the gross sales price of the ABT Shares sold
pursuant to the Lockup Agreement. They shall be secured by a first priority
security interest, whenever reasonably possible, on the fixed assets and
equipment of the Company pursuant to the terms of a security agreement between
ABT and Seller.
(2) (a) The Net Proceeds shall be determined within 15 days following June
1, 1999:
(b) Subject to the provisions of the Stock purchase Agreement and the
Lock-Up Agreement, to the extent that the Net Proceeds of sales
of ABT Shares pursuant to the Lock-Up Agreement are less then
$2.06 million, ABT will pay to the Seller cash in an amount equal
to any such deficiencies within 15 business days after June 1,
1999.
<PAGE>
(c) To the extent that the Net Proceeds of Sales of ABT Shares
pursuant to the Lock-Up Agreement exceed $2.6 million, Seller
will pay to ABT within 15 business days following June 1, 1999 an
amount equal to such surplus of Net Proceeds.
(d) Sellers shall prepare and deliver to ABT within 15 days after
June 1, 1999 a cumulative statement, supported by documentation
reflecting all sales of ABT Shares by Seller pursuant to the
Lock-Up Agreement.
(e) In the event that the Seller or the Shareholders offer, sell,
transfer or otherwise dispose of the ABT Shares in violation of
the Lock-Up Agreement, without the prior written consent of ABT,
(i) ABT's obligations hereunder will immediately terminate, and
(ii) all proceeds from the sale of all ABT Shares, whether such
proceeds derive from sales made prior to, concurrent with or
subsequent to such event of default, shall be paid to ABT.
(3) Subject to Section 6, this Agreement shall inure to the benefit of and
be binding upon ABT, its successors and assigns, and Seller.
(4) Should any provision of this Agreement, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or
in part, such decision shall not affect the validity of the remaining
provisions, which will remain in full force and effect as if this
Agreement had been executed with the invalid portion thereof deleted.
(5) This Agreement shall be governed by, construed and enforced in
accordance with the __________ _________ laws of the State of Nevada
without giving to the choice of law rates thereof.
(6) This Agreement and all rights hereunder are personal to the parties
and shall not be assignable, and any purported assignment in violation
thereof shall be null and void.
(7) (a) All notices, requests, consents, and demands by the parties
hereunder shall be delivered by hand, sent by facsimile transmission
confirmed by a "hardcopy" sent by mail or overnight courier,
recognized national overnight courier or by deposit in the United
States Mail, postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to be notified at the
address set forth below:
(i) if to the Seller to:
R.R. 1
Norrik, Ontario L0P IK0
Attention: Gabriel A. Eros
Telecopier: (905)877-3312
2
<PAGE>
with a copy to:
Holmested & Sutton
Suite 1201
4 King Street West
Toronto, Ontario
Telecopier No.: (416)364-9918
(ii) if to the Buyer or ABT to:
AgriBioTech, Inc.
120 Corporate Park Drive
Henderson, Nevada 89014
Attention: Johnny R. Thomas, President
Telecopier No.: (888) 800-4841
with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Elliot H. Lutzker, Esq.
Telecopier No.: (212) 949-7052
(b) Notices given by mail shall be deemed effective on the earlier of
the date shown on the proof of receipt of such mail or, unless
the recipient proves that the notice was received later or not
received, three (3) days after the date of mailing thereof. Other
notices shall be deemed given on the date of receipt. Any party
hereto may change the address specified herein by written notice
to the other parties hereto.
(8) In the event that ABT fails to make a payment to Seller required to be
made by it hereunder within 30 days after receipt of written notice
from Seller demanding such payment and Seller has fully complied with
its obligations hereunder and under the Stock Purchase Agreement and
the Lock-Up Agreement, ABT shall be in default under this Agreement
with respect to such payment. Upon such default by ABT, Seller may
declare a default under the Security Agreement and pursue all remedies
to which it is entitled.
(9) The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall
not be construed as a waiver or relinquishment of future compliance
therewith, and such provisions, terms and conditions shall remain in
full force and effect. No waiver of any term or any condition of this
Agreement on the part of either party shall be effective for any
purpose whatsoever unless such waiver is in writing and signed by such
party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Guarantee as of
the day and year first written above.
1304516 Ontario Inc.
By:/s/ Gabriel A. Eros
-------------------
Gabriel A. Eros
President
AGRIBIOTECH, INC.
By:/s/ Kathleen L. Gillespie
-------------------------
Kathleen L. Gillespie
Vice President
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement"), dated as of June 4,
1999 is entered into by and between The State of Wisconsin Investment Board, an
independent state agency organized under the laws of Wisconsin, with an address
at 121 E. Wilson Street, 2nd Floor, Madison, Wisconsin 53707-7842, Attn:
Investment Director for Small Cap Stocks (the "Purchaser"), and AgriBioTech,
Inc., a Nevada corporation with an address at 120 Corporate Park Drive,
Henderson, Nevada 89014 (the "Company").
The Company has offered for sale, and the Purchaser has agreed to purchase
four million, two hundred seventy six thousand, eight hundred and fifty
(4,276,850) shares (the "Shares") of fully registered common stock, par value of
$.001 per share, of the Company ("Common Stock") on the terms and conditions
herein provided. In connection herewith, the Company and the Purchaser hereby
agree as follows:
1. Purchase and Sale of Shares. Upon the basis of the representations and
warranties and subject to the terms and conditions set forth herein, the Company
agrees to issue and sell the Shares to the Purchaser on the Closing Date (as
herein defined) at $6.546875 per Share, or an aggregate purchase price of
$28,000,000 (the "Purchase Price") and, upon the basis of the representations
and warranties and subject to the terms and conditions set forth herein, the
Purchaser agrees to purchase the Shares from the Company on the Closing Date at
the Purchase Price.
Notwithstanding the foregoing, in the event that the Company sells any
shares (or securities that may be converted into or exchanged for shares) of
Common Stock in an original issuance (not shares traded on Nasdaq in the
aftermarket) for less than $6.546875 per share at any time during the forty-five
(45) day period commencing on the date hereof (except for shares issued pursuant
to (a) stock options, (b) purchases by the Company of outstanding existing stock
options (c) warrants outstanding as of the date hereof, and (d) agreements
existing as of the date hereof that guarantee the price of common stock issued
in transactions with HybriGene, LLC and Kimeragen, Inc.), the Company shall have
the obligation to promptly notify and pay the Purchaser (x) the aggregate
difference between (i) the per share price of the Shares and (ii) the per share
price of such additional shares of the Company's Common Stock (or securities
that may be converted into or exchanged for shares of Common Stock) so sold, (y)
multiplied by the number of Shares purchased hereunder, at the Company's option,
in either cash or additional shares of the Company's Common Stock. If the
Company elects to pay in Common Stock, the Common Stock shall be valued at the
price at which the Company sells any such shares (or securities that may
converted into or exchanged for shares) of Common Stock and will be payable
within five (5) days of such other sale.
2. Closing. The closing of the purchase and sale of the Shares (the
"Offering") shall take place on June 7, 1999 as coordinated by the parties, or
on such other date or at such other time and place as the Company and the
Purchaser may agree upon (such time and date of the closing being referred to
herein as the "Closing Date"). Upon payment of the Purchase Price in full in
immediately available funds by or on behalf of the Purchaser to the Company by
wire transfer to an account specified by the Company to the Purchaser prior to
the Closing Date, the Company will promptly cause its transfer agent to deliver
to the Purchaser on the Closing Date certificates representing the shares of
Common Stock in such denominations and registered in such names as the Purchaser
shall request.
<PAGE>
3. Registration.
(a) On August 14, 1998, the Company's Registration Statement on Form S-3,
No. 333-61127, was declared effective by the Securities and Exchange
Commission ("Commission") and on May 13, 1999 Post-Effective Amendment
No. 1 was declared effective (including all exhibits thereto and all
information and documents incorporated by reference therein, the
"Registration Statement") and includes the registration of the
original issuance of the Shares of Common Stock purchased by the
Purchaser pursuant to this Agreement.
(b) Promptly after the Closing Date, the Company shall take all requisite
action to list the Shares for trading on The Nasdaq National Market.
4. Representations and Warranties of the Company. The Company represents and
warrants, as of the date hereof and as of the Closing Date, as follows:
(a) no consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the
Company or any of the Company's affiliates is required for the
execution of this Agreement or the sale of the Shares to the
Purchaser;
(b) neither the sale of the Shares nor the performance of the Company's
other obligations pursuant to this Agreement will violate, conflict
with, result in a breach of, or constitute a default (or an event
that, with the giving of notice or the lapse of time or both, would
constitute a default or trigger any right of a third party to acquire
equity interests in the Company or cause mandatory adjustment of the
price at which an outstanding security of the Company is convertible
into Common Stock) under (i) the Certificates of Incorporation or
bylaws of the Company; (ii) any decree, judgment, order or
determination of any court, governmental agency or body, or arbitrator
having jurisdiction over the Company or any of the Company's
properties or assets; (iii) any law, treaty, rule or regulation
applicable to the Company (other than the federal securities laws,
representations and warranties with respect to which are made by the
Company, or the requirements of the Nasdaq Stock Market); or (iv) the
terms of any bond, debenture, note or other evidence of indebtedness,
or any agreement, stock option or similar plan by which the Company is
bound or to which any property of the Company is subject, in any event
above, which violation, conflict or breach would have a material
adverse effect on the Company;
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(c) the Company has taken all corporate action required to authorize the
execution and delivery of this Agreement and the performance of its
obligations hereunder and will use the proceeds of sale for working
capital and to fully repay any balance remaining on the bridge loans
listed in paragraph (g) of this Section 4;
(d) the Company has duly authorized the issuance of the Shares and, when
issued and delivered to and paid for by the Purchaser in accordance
with the terms hereof, the Common Stock will be duly and validly
issued, fully paid and non-assessable and will not constitute
"restricted securities" within the meaning of Rule 144(a)(3)
promulgated under the Securities Act of 1933, as amended (the "Act");
(e) the Company's Prospectus dated May 13, 1999 included in the Company's
Post-Effective Amendment to its Registration Statement on Form S-3
(Registration No. 333-61127 attached hereto as Exhibit A) with a draft
supplement for this Offering, which includes the risk factor
disclosure (Exhibit B); the Company's Annual Report on Form 10-K for
its Fiscal Year Ended June 30, 1998, amended on January 29, 1999 and
March 31, 1999; the Company's proxy statement dated January 11, 1999,
as amended on February 8, 1999, for its Annual Meeting held on
February 22, 1999; the description of the Company's common stock,
$.001 par value, included in registration statement on Form 8-A (File
No. 0-19352), filed July 11, 1995, including any amendment or report
filed for the purpose of updating such information; the Company's
Quarterly Reports on Form 10-Q and 10-QSB for the fiscal quarters
ended March 31, 1996 (as amended on July 12, 1996), September 30,
1998, December 31, 1998, and March 31, 1999; the following Current
Reports on Form 8-K (collectively, Forms "8-K") filed by the Company
since July 1, 1998: Dated October 30, 1996 and filed on November 12,
1996, and amended on January 13, 1997, February 17, 1998 and August
11, 1998; Dated June 23, 1998 and filed on July 8, 1998 and amended on
August 28, 1998; Dated August 28, 1998 and filed September 11, 1998
and amended November 12, 1998 and January 29, 1999; Dated January 6,
1998 and filed on January 16, 1998, and amended on March 10, 1998,
March 30, 1998, August 11, 1998 and March 23, 1999; Dated January 9,
1998 and filed on January 20, 1998, and amended on March 10, 1998,
March 30, 1998 and August 11, 1998; Dated January 26, 1998 and filed
on March 10, 1998, and amended on March 30, 1998, August 11, 1998 and
September 4, 1998; Amendment filed on August 28, 1998 to report dated
October 22, 1997 and filed on November 6, 1997; Dated June 30, 1998
and filed October 26, 1998; Dated December 30, 1998 and filed on
January 11, 1999; Dated January 22, 1999 and filed on January 27,
1999; and Dated January 22, 1999 and filed on February 5, 1999
(collectively, the "Disclosure Documents") have been delivered to
Purchaser and, as of the date of each such respective document
included therein and when considered as of today together and with
this Agreement, such Disclosure Documents do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made with
respect to the Company;
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(f) the Company's Financial Statements for the year ended June 30, 1998,
as amended, included in the Disclosure Documents comply in all
material respects with the applicable requirements of the Securities
Exchange Act of 1934, as amended, and have been prepared, and fairly
present in all material respects the consolidated financial condition,
results of operations and cash flows of the Company and its
subsidiaries at the respective dates and for the respective periods
indicated, in accordance with generally accepted accounting principles
consistently applied throughout such periods (except as noted
therein);
(g) except as set forth in the Disclosure Documents or pursuant to this
Agreement, since June 30, 1998 (i) the Company has not incurred any
material liabilities, direct or contingent, except (A) in the ordinary
course of business, (B) additional borrowings under a revolving credit
facility (the Loan and Security Agreement dated June 23, 1998, as
amended) with Bank of America National Trust and Savings Association,
as successor to BankAmerica Business Credit Inc., as agent, and
Deutsche Financial Services Corporation as administrative agent under
which the Company had borrowed approximately $ 99 million as of June
2, 1999 and had $4 million available to be borrowed, (C) a $15 million
bridge loan from Deutsche Bank AG, (D) approximately $23.3 million of
subordinated convertible debentures, (E) indebtedness and liabilities
assumed in connection with acquisitions, and (F) bridge loans the
proceeds of which were used to redeem or repurchase the Company's
outstanding 5% Convertible Debentures due 2001 and (ii) there has been
no material adverse change in the properties, business, results of
operations or financial condition of the Company; and
(h) as of June 2, 1999 (and without giving effect to the sale of Shares of
Common Stock hereunder), the Company had a total of 42,117,711 shares
of Common Stock issued and outstanding; approximately 9.1 million
shares of Common Stock were reserved for issuance pursuant to existing
stock options under the Company's current stock option plans or
outside of the plans and an additional approximately 1.1 million
shares were issuable upon exercise of options available for future
grant; 400,000 shares of Common Stock were reserved for issuance upon
grant of Shares under the Bonus Plan, and 3,219,500 shares were
reserved for issuance pursuant to exercise of outstanding Warrants,
and there will be no changes in these numbers prior to the Closing
Date except as a result of (i) shares issued in connection with the
conversion or exchange of any securities of the Company or stock
options granted under or shares issued under any existing stock option
plan or other existing employee bonus or existing incentive plan of
the Company, (ii) shares issued pursuant to agreements existing as of
the date hereof that guarantee the price of common stock issued in
transactions with HybriGene, LLC and Kimeragen, Inc.), and (iii)
options to purchase up to 500,000 shares of Common Stock granted to
executive management.
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<PAGE>
5. Conditions of Closing. The obligations of each party hereunder shall be
subject to
(a) the accuracy in all material respects of the representations and
warranties of the other party hereto as of the date hereof and as of
the Closing Date, as if such representations and warranties had been
made again on and as of the Closing Date, (b) the performance in all
material respects by the other party of its obligations hereunder
which must be performed prior to the Closing Date, (c) issuance of
legal opinions to the Purchaser by counsels to the Company in the
forms set forth in Exhibit C hereto, with such changes thereto as may
be agreed upon by the Purchaser and the applicable counsel, and (d)
redemption or repurchase of all of the Company's outstanding 5%
Convertible Debentures due December 30, 2001 (or a combination
thereof) on or prior to the Closing Date.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchaser, each
person, if any, who controls the Purchaser within the meaning of
Section 15 of the Act and each officer, director, employee and agent
of the Purchaser and of any such controlling person against any and
all liabilities, claims, damages or expenses whatsoever, as incurred
arising out of or resulting from any breach or alleged breach or other
violation of any representation, warranty, covenant or undertaking by
the Company contained in this Agreement, and the Company will
reimburse the Purchaser for its reasonable legal and other expenses
(including the reasonable cost of any investigation and preparation,
and including the reasonable fees and expenses of counsel) incurred in
connection therewith.
(b) The Purchaser agrees to indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of Section
15 of the Act and each officer, director, employee and agent of the
Company and of any such controlling person against any and all losses,
liabilities, claims, damages or expenses whatsoever, as incurred
arising out of or resulting from any breach or alleged breach or other
violation or alleged violation of any representation, warranty,
covenant or undertaking by the Purchaser contained in this Agreement,
and the Purchaser will reimburse the Company for its reasonable legal
and other expenses (including the reasonable cost of any investigation
and preparation, and including the reasonable fees and expenses of
counsel) incurred in connection therewith.
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7. Agreements. The Company shall:
(a) (i) use its best efforts to reduce the percentage of all outstanding
stock options, including qualified and non-qualified stock options,
granted to directors and employees to 15% of the outstanding Common
Stock of the Company by the Company's 2001 annual stockholders meeting
(after giving effect to actions taken at such meeting), unless the
owners of a majority of the outstanding shares of Common Stock provide
their approval to a higher percentage; (ii) obtain additional
independent directors (as defined by the Council of Institutional
Investors in Exhibit D hereto) so that a majority of the Company's
Board of Directors shall consist of independent directors by the
Company's 2001 annual stockholders meeting (after giving effect to the
election of directors at such meeting); and (iii) by the Company's
2000 annual stockholders meeting (after giving effect to actions taken
at such meeting), have the Board of Directors establish a Nominating
Committee, consisting solely of independent directors, to select
future additional candidates for election to the Board;
(b) not adopt a shareholder rights plan in the form of a "poison pill"
unless the plan provides (i) for approval of continuation of the plan
or the use of the blank check preferred stock by the owners of a
majority of the Common Stock of the Company by a vote taken no later
than the third annual stockholders meeting after its adoption by the
Company, and subsequent such approvals of continuation of the plan are
obtained no further apart than every three annual stockholders'
meetings thereafter; and (ii) that a holding of up to 20 percent of
outstanding shares by Purchaser will not trigger the rights plan, any
dilution of Purchaser's ownership interests or any loss of rights by
Purchaser; and
(c) not issue blank check preferred stock with the primary effect of
preventing the hostile acquisition of securities of the Company unless
such issuance has been approved by the owners of a majority of the
Common Stock
(d) unless the owners of a majority of the Common Stock give their
approval, not grant any stock options at less than the closing market
price on the date of grant or reduce the price of any options which
either were granted as a non-qualified stock option grant to an
incoming employee or vendor or were granted under any of the Company's
existing or future stock option plans, provided, however, that the
forgoing shall not preclude the Company from (i) issuing new, lower
priced options issued from a stock option plan to persons holding
higher priced options from such plan, provided however, that if such
new lower priced options are granted in exchange for such higher
priced options, the shares covered by such higher priced options shall
be canceled or surrendered and not available for re-grant under such
stock option plan or (ii) reducing the higher price and number of a
non-qualified stock option grant in exchange for a lesser number of
lower priced options having a substantially equivalent value as vauled
by a recognized stock option valuation model (e.g., Black-Scholes);
provided that, such reduced non-qualified stock option grants are
subject to a revised vesting schedule acceptable to the Purchaser.
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<PAGE>
8. Survival of Representations and Warranties. The respective agreements,
representations, warranties, indemnities and other statements made by or on
behalf of each party hereto pursuant to this Agreement, as of the date they were
made, shall, unless otherwise specified, survive until the third anniversary of
the Closing Date, provided however, that the rights of Purchaser to enforce
Paragraphs 7 shall last for as long as Purchaser owns Common Stock of the
Company, and shall expire thereafter.
9. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts and such
counterparts shall constitute but one and the same agreement and
authorized signatures may be evidenced to the other party by facsimile
copies thereof; provided that the originally signed signature page of
any party is provided to the other party within two business days
after original execution.
(b) This Agreement shall inure to the benefit of and be binding upon the
parties hereto. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other party hereto and
no other person shall have any right or obligation hereunder. Without
limiting the foregoing, the rights of Purchaser set forth in
Paragraphs 3 and 7 shall not be transferable to subsequent purchasers
of the Shares. Any assignment contrary to the terms hereof shall be
null and void and of no force or effect.
(c) This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes any prior
agreements or understandings, whether written or oral, between the
parties respecting such subject matter. In particular, the agreements
set forth in the resolutions regarding repricing by the Company of
stock options, authorizations of further issuances of Preferred Stock
having an anti-takeover effect and adoption by the Company of
shareholders rights plans adopted by the Board of Directors of the
Company at their meeting held on December 17, 1997 (the
"Resolutions"), are hereby abrogated and superseded by this Agreement.
Purchaser will not object or take any action if the Board of Directors
of the Company rescinds the Resolutions or takes any actions
inconsistent with the Resolutions, so long as Company acts in
accordance with its obligations in this Agreement.
(d) If within 45 days of the date hereof the Company enters into or is a
party to any agreement to issue additional equity securities (or
securities convertible or exchangeable therefor), the Company shall
promptly provide notice of such agreement to the Purchaser, together
with a copy of such agreement.
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<PAGE>
10. Governing Law. This Agreement shall be governed by the internal laws of the
State of Nevada.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first set forth above.
AGRIBIOTECH, INC.
By: /s/ Randy Ingram
--------------------------
Randy Ingram,
Co-President and
Chief Financial Officer
THE STATE OF WISCONSIN INVESTMENT BOARD
By: /s/ John F. Nelson
---------------------------
John F. Nelson
Investment Director,
State of Wisconsin Investment
Board
REPURCHASE AGREEMENT
REPURCHASE AGREEMENT (the "Agreement"), dated as of May __, 1999, by and
among AgriBioTech, Inc., a Nevada corporation, with headquarters located at 120
Corporate Park Drive, Henderson, Nevada 89014 (the "Company"), and the investors
listed on the Schedule of Buyers attached hereto (individually, a "Buyer" and
collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers have entered into that certain Amended and
Restated Securities Purchase Agreement dated as of January 5, 1999 (the
"Purchase Agreement") pursuant to which the Buyers purchased from the Company
Convertible Debentures due 2001 in an aggregate principal amount of $23,297,000
(the "Debentures") and warrants (the "Warrants") to purchase the Company's
common stock, par value $.001 per share (the "Common Stock"). The Debentures are
convertible into shares of the Common Stock (as converted, the "Conversion
Shares") in accordance with the terms of the Debentures. Contemporaneously with
the execution and delivery of the Purchase Agreement, the Company and the Buyers
executed an Amended and Restated Registration Rights Agreement dated as of
January 5, 1999 (the "Registration Rights Agreement") pursuant to which the
Company agreed to provide certain registration rights for the Conversion Shares
under the Securities Exchange Act of 1933 Act, as amended (the "1933 Act"), and
the rules and regulations promulgated thereunder, and applicable state
securities laws.
B. The Company wishes to repurchase and each Buyer wishes to allow the
Company to repurchase, upon the terms and conditions set forth in this
Agreement, all of the Debentures.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. REPURCHASE OF-DEBENTURES.
a. Repurchase of Debentures. Subject to satisfaction (or waiver) of the
conditions set forth in Sections 5 and 6, the Company shall repurchase from the
Buyers and the Buyers severally shall permit the Company to repurchase the
Debentures in the respective principal amounts set forth opposite each Buyer's
name on the Schedule of Buyers (the "Closing"). The repurchase price (the
"Repurchase Price") of each Debenture at the Closing shall be equal to the sum
of (i) the principal amount of the Debenture then outstanding, plus (ii) accrued
and unpaid interest on the Debenture through and including the Closing Date,
plus (iii) the product of (A) .2, multiplied by (B) the quotient of (x) N
divided by (y) 180, multiplied by (C) the principal amount of the Debenture then
outstanding. For purposes of the foregoing sentence, "N" means the number of
days during the period beginning on and excluding the day on which the Debenture
was issued and ending on and including the Closing Date.
<PAGE>
b. The Closing Date. The date and time of the Closing (the "Closing Date")
shall be 2:00 p.m. Eastern Time, May 28, 1999, subject to satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 5 and 6 (or such
later date as is mutually agreed to by the Company and the Buyers). Except as
otherwise specified herein, the Closing shall occur by the exchange and release
of signed facsimile copies of this Agreement, the certificates and opinion
specified in Sections 5 and 6.
c. Form of Payment. On the Closing Date, (i) the Company shall pay to each
Buyer the repurchase price for each Debenture being repurchased by the Company
from such Buyer at the Closing, by wire transfer of immediately available funds
in accordance with each such Buyer's written wire instructions, and (ii)-Akin,
Gump, Strauss, Hauer & Feld, L.L.P. (the "Escrow Agent") shall deliver to the
Company, the Debenture(s) representing such principal amount of the Debentures
which the Company is repurchasing from such Buyer at the Closing.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. Authorization; Enforcement. Such Buyer has the requisite power,
corporate or otherwise, to enter into and consummate the transactions
contemplated by this Agreement. No further consent or authorization is required
by such Buyer or holders of any equity interest therein. This Agreement has been
duly executed and delivered by such Buyer. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
b. No Conflicts. The execution, delivery and performance of this Agreement
by the such Buyer and the consummation by such Buyer of the transactions
contemplated hereby will not (i) result in a violation of such Buyer's charter
documents or any Certificate of Designations, preferences and rights of any
outstanding series of equity security of such Buyer; (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which such Buyer is a party; or (iii) result in a violation of any
material law, rule, regulation, order, judgment or decree applicable to such
Buyer by reason of its line of business or regulatory status. Such Buyer is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement.
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c. Schedule of Buyers. The information contained in the Schedule of Buyers
attached hereto relating to such Buyer is complete with respect to the matters
stated therein and correct in all respects.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company is a corporation duly
organized and validly existing in good standing under the laws of the State of
Nevada, and has the requisite corporate power and authorization to own its
properties and to carry on its business as now being conducted. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under this Agreement.
b. Authorization; Enforcement; Compliance with Other Instruments. (i) The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, and to repurchase the Debentures in accordance with the
terms hereof, (ii) the execution and delivery of this Agreement by the Company
and the consummation by it of the transactions contemplated hereby and thereby,
including without limitation the repurchase of the Debentures in accordance with
the terms hereof, have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) this Agreement has been duly executed and
delivered by the Company and (iv) this Agreement constitutes the valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, subject as to enforceability to general principles of equity
and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
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c. No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the repurchase
of the Debentures will not (i) result in a violation of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof,
the Company's By-laws, as amended and as in effect on the date hereof, or any
Certificate of Designations, preferences and rights of any outstanding series of
preferred stock of the Company; (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party; or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the principal
market or exchange on which the Common Stock is traded or listed) applicable to
the Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected, in each case, in a
manner that would be reasonably expected to have a Material Adverse Effect. The
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement.
4. COVENANTS AND OTHER AGREEMENTS.
a. Best Efforts. Each party shall use its best efforts to satisfy each of
the conditions to be satisfied by it as provided in Sections 5 and 6 of this
Agreement on or before the Closing Date.
b. Suspension of Registration Rights. The Company's obligation to file a
registration statement under the Amended and Restated Registration Rights
Agreement dated as of January 5, 1998 among the Company and the other parties
thereto during the 45-day period preceding a reset of the conversion price, or
otherwise in anticipation of any conversion price adjustment, shall be suspended
until June 7, 1999.
c. Filing of Form 8-K. On or before the third (3rd) business day following
the Closing Date, the Company shall issue a press release announcing the
repurchase of the Debentures. On or before the fifth (5th) business day
following the Closing Date, the Company shall file such press release (or the
information contained therein) on a Form 8-K with the SEC in the form required
by the 1934 Act and regulations.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO REPURCHASE. The obligation of
the Company hereunder to repurchase the Debentures from each Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
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<PAGE>
a. Each Buyer shall have executed this Agreement and delivered the same to
the Company.
b. Each Buyer shall have delivered to the Escrow Agent the Debenture(s)
representing the principal amount of the Debentures held by such Buyer.
c. The representations and warranties of such Buyer shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date), and such Buyer shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Closing Date.
6. CONDITIONS TO BUYER'S OBLIGATION TO PERMIT REPURCHASE. The obligation of
each Buyer hereunder to permit the Company to repurchase the Debentures at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:
a. The Company and each of the other Buyers shall have executed this
Agreement and delivered the same to such Buyer.
b. During the period beginning on and including the date of this Agreement
and ending on and including the Closing Date (A) no Event of Default (as defined
in the Debentures) shall have occurred and be continuing, (B) no event that with
the passage of time would constitute an Event of Default shall have occurred and
be continuing, and (C) no Change of Control (as defined in the Debentures), or
agreement by the Company to consummate a Change of Control shall have occurred.
c. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief Executive Officer
or Chief Financial Officer of the Company, dated as of the Closing Date, to the
foregoing effect.
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d. Such Buyer shall have received an opinion Gordan & Silver, LTD., special
Nevada counsel to the Company, dated as of the Closing Date in substantially the
form of Exhibit A.
e. The Company shall have paid the Repurchase Price for the Debentures
being repurchased by the Company from such Buyer at the Closing.
f. The Board of Directors of the Company shall have adopted resolutions
authorizing the execution and delivery of this Agreement (the "Resolutions").
g. The Company shall have delivered to such Buyer a certificate evidencing
the incorporation and good standing of the Company in the State of Nevada within
ten days of the Closing Date.
h. The Company shall have delivered to such Buyer a secretary's certificate
certifying as to (A) the Resolutions, (B) certified copies of its Certificate of
Incorporation and (C) the By-laws, each as in effect at the Closing Date.
7. MODIFICATION; TERMINATION OF AGREEMENTS. Upon payment in full of the
Repurchase Price by the Company, the Debentures shall be paid in full and the
Company shall have no further obligation thereunder and the Company shall have
no further obligation to register with the Securities and Exchange Commission
any of the Debentures or any securities into which the repurchased Debentures
are convertible. Upon payment in full of the Repurchase Price by the Company,
the Company shall have no further obligations under Sections 3.4, 3.6 , 3.7, 3.9
and 3.16 under the Purchase Agreement to the extent such provisions relate to
the Debentures or the Debenture Shares (as such term is defined in the
Debentures). Except as provided in the two preceding sentences, the Purchase
Agreement, the Registration Rights Agreement, and the Warrants shall remain in
full force and effect. If and to the extent that any provision of the Purchase
Agreement, Debentures or Registration rights Agreement, is inconsistent with any
provisions of this Repurchase Agreement or otherwise prohibits the repurchase of
the Convertible Debentures by the Company pursuant to the terms hereof or any
other transaction contemplated hereby, each such provision is hereby deemed
modified to eliminate any such inconsistency or prohibition.
6
<PAGE>
8. INDEMNIFICATION. In consideration of each Buyer's execution and delivery
of this Agreement and permitting the Company to redeem the Debentures hereunder,
the Company shall defend, protect, indemnify and hold harmless each Buyer and
all of their stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or any certificate to be delivered in connection
herewith, (b) any breach of any covenant, agreement or obligation of the Company
contained in this Agreement or (c) any cause of action, suit or claim brought or
made against such Indemnitee and arising out of or resulting from the execution,
delivery, performance, breach or enforcement of this Agreement. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to the principles of conflict of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
7
<PAGE>
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other prior
oral or written agreements between the Buyers, the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and each of
the Buyers, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.
f. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Buyers. A Buyer may assign some
or all of its rights hereunder without the consent of the Company; provided,
however, that any such assignment shall not release such Buyer from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption.
g. No Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
h. Survival. Unless this Agreement is terminated under Section 9(k), the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4 and 8,
shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
8
<PAGE>
i. Publicity. The Company and each Buyer shall have the right to approve
before issuance any press releases or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of any Buyer, to make any press
release or other public disclosure with respect to such transactions that is
necessary or desirable under applicable law.
j. Termination. In the event that the Closing shall not have occurred with
respect to a Buyer on or before May 28, 1999, this Agreement shall automatically
terminate.
k. Remedies. Any person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
l. Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or the Buyers enforce or exercise their rights
hereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
* * * * * *
9
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused this Repurchase
Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
AGRIBIOTECH, INC. BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By: By:
Name: Name:
Title: Title:
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By:
Name:
Title:
BROWN SIMPSON-ORD INVESTMENTS LLC
By:
Name:
Title:
BAY HARBOR INVESTMENTS, INC.
By:
Name:
Title:
LBI GROUP INC.
By:
Name:
Title:
<PAGE>
[signature page to Repurchase Agreement - p. 2 of 2]
HFTP INVESTMENTS LLC
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:
Name: Jamie F. O'Brien, Jr.
Title: Managing Member
<PAGE>
<TABLE>
SCHEDULE OF BUYERS
- ---------------------------------------------------------------------------------------------------
rincipal Amount
of Convertible Principal Amount of
Debentures Convertible Debentures
Issued at First Issued at Second
Investor Address Closing Under Closing Under Purchase
Purchase Agreement
Investor Name P Agreement
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Brown Simpson 152 West 57th Street, 40th Floor $1,025,068 $139,782
Strategic Growth New York, NY 10019
Fund, L.P. Attn: Paul Gustus
Fax: (212) 247-1329
Residence: New York, New York
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Brown Simpson 152 West 57th Street, 40th Floor $2,236,512 $326,158
Strategic Growth New York, NY 10019
Fund, Ltd. Attn: Paul Gustus
Fax: (212) 247-1329
Residence: Grand Cayman, Cayman
Islands
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Brown Simpson-ORD 152 West 57th Street, 40th Floor $1,397,820 $1,863,760
Investment LLC New York, NY 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Residence:
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
LBI Investments LLC c/o Lehman Brothers, Inc. $4,659,400 $1,863,760
3 World Financial Center
New York, NY 10285
Attn: Steve Weinstein
Fax: (212) 526-7255
Residence, New York, New York
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Bay Harbor c/o Robinson Silverman Pearce $4,659,400 $1,863,760
Investments, Inc. Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
FAX: (212) 541-4630
Attn: Kenneth L. Henderson
Eric Cohen
Residence: British Virgin Islands
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
HFTP Investments LLC c/o Promethean Investment Group, 0 $3,261,580
L.L.C.
740 Lexington Avenue, 22nd Floor
New York,, NY 10022
FAX: (212) 758-9334
Attn: James F. O'Brien, Jr.
Residence:
- ----------------------------------------------------------------------------------------------------
</TABLE>
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT (the "Guarantee") dated June 26, 1998 (the "Closing
Date") by and between each of Daniel Swindell, Robert M. Trask, William D.
Trask, Eino M. Hendrickson, Gary J. Marostica and Gerry Inouye (each or whom
shall be individually referred to as "Seller" and collectively as the
"Sellers"), James R. Billings ("Billings"), and AgriBioTech, Inc., a Nevada
corporation ("ABT") and Arnold-Thomas Seed Service, Inc. a Nevada corporation
and wholly-owned subsidiary of ABT (the "Buyer").
W I T N E S S E T H:
WHEREAS, Buyer has agreed to purchase from the Sellers an aggregate of 100
shares of the common stock of W-D Seed Growers, Inc., an Idaho corporation (the
"Company"), pursuant to a Stock Purchase Agreement dated June 26, 1998 (the
"Stock Purchase Agreement") by and among the Sellers, the Company, the Buyer and
ABT;
WHEREAS, Buyer has agreed to purchase from Billings all of the issued and
outstanding shares of capital stock of Stanford Holding Ltd., a Delaware
corporation ("Stanford"), pursuant to a Stock Purchase Agreement dated June 26,
1998 (the "Stanford Stock Purchase Agreement") by and among Billings, Stanford,
the Buyer, and ABT;
WHEREAS, pursuant to Section 3(a) of the Stock Purchase Agreement, ABT will
transfer to the Sellers Sixty Eight Thousand One Hundred Eighty Two (68,182)
shares of the Common Stock of ABT;
WHEREAS, pursuant to Section 3(a) of the Stanford Stock Purchase Agreement,
ABT will transfer to Billings Sixty Eight Thousand One Hundred Eighty Two
(68,182) shares of the Common Stock of ABT (which, together with the shares of
ABT common stock transferred to the Sellers shall collectively be referred to as
the "ABT Shares");
WHEREAS, pursuant to Section 3(c) of the Stock Purchase Agreement, the
Sellers have entered into a Lock-Up Agreement (the "Lock-Up") pursuant to which
they have agreed that they shall not sell, transfer or otherwise dispose of the
ABT Shares except as specified in the Lock-Up;
WHEREAS, pursuant to Section 3(c) of the Stanford Stock Purchase Agreement,
Billings has entered into a Lock-Up Agreement (the "Lock-Up") pursuant to which
he has agreed that he shall not sell, transfer or otherwise dispose of the ABT
Shares except as specified in the Lock-Up;
WHEREAS, pursuant to Section 3(d) of the Stock Purchase Agreement, ABT has
guaranteed the Net Proceeds (as defined below) from the sale of the ABT Shares
when sold pursuant to the Lock-Up; and
<PAGE>
WHEREAS, pursuant to Section 3(d) of the Stanford Stock Purchase Agreement,
ABT has guaranteed the Net Proceeds (as defined below) from the sale of the ABT
Shares when sold pursuant to the Lock-Up; and
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions
and mutual covenants appearing in this Guaranty, the parties hereto hereby agree
as follows:
Section 1.
(a) The ABT Shares, if sold pursuant to the Lock-Up, shall have
Guaranteed Net Proceeds (defined as gross sales price less
customary sales commissions and any applicable stock transfer and
sales taxes) of no less than $22.00 per share (the "Guaranteed
Price/Share").
(b) Buyer and ABT further agree that until the Sellers and
Billings have received an aggregate of $3,000,000 from all sales
of ABT Shares made pursuant to the Lock-Up, they shall be secured
by a first lien, wherever reasonably possible, on the fixed
assets and equipment of the Corporation pursuant to the terms of
a security agreement (the "Security Agreement").
(c) In consideration of the guarantee granted hereby and the
Security Agreement, each of the Sellers and Billings hereby
agrees that all Net Proceeds from all sales of ABT Shares at a
price per share greater than the Guaranteed Price/Share shall be
paid to ABT.
Section 2.
(a) The Net Proceeds shall be determined on a quarterly basis
according to ABT's fiscal calender.
(b) To the extent that sales of ABT Shares pursuant to the
Lock-Up are made at prices per Share that are lower than the
Guaranteed Price/Share, ABT shall pay to each of the Sellers and
Billings cash for any shortfalls in the Guaranteed Net Proceeds
resulting from their individual sales of the ABT Shares on the
last day of the month following the end of the fiscal quarter in
which such shortfall occurred; provided, however, that any
shortfalls shall be calculated on a cumulative basis during such
fiscal quarter such that any shortfalls in the guaranteed
Price/Share shall be offset against any surplus in the Guaranteed
Price/Share.
(c) To the extent that sales of ABT Shares pursuant to the
Lock-Up are made at prices per Share that are greater than the
Guaranteed Price/Share, each of the Sellers and Billings ABT
shall pay to ABT cash for any surplus in the Guaranteed Net
Proceeds resulting from their individual sales of the ABT Shares
on the last day of the month following the end of the fiscal
quarter in which such surplus occurred; provided, however, that
any surplus shall be calculated on a cumulative basis during such
fiscal quarter such that any surplus in the Guaranteed
Price/Share shall be offset against any shortfalls in the
Guaranteed Price/Share.
2
<PAGE>
(d) Sellers and Billings shall prepare and deliver to ABT within
two weeks of the end of each fiscal quarter a cumulative
statement, supported by documentation reflecting all sales of ABT
Shares by each of them during such quarter, and stating the mount
to be paid by ABT to each of them pursuant to the terms of this
guarantee or the amount to be paid by each them to ABT pursuant
to the terms of this guarantee. In the event of a surplus in the
Guaranteed Price/Share during any fiscal quarter, ABT, in its
sole discretion, may elect to maintain such surplus without
receiving cash payment therefor, to be offset against any future
deficits in the Guaranteed Price/Share, by providing the Sellers
and Billings with written notice of such election prior to the
date upon which a payment of such surplus would otherwise be due.
(e) In the event that any of the Sellers or Billings offers,
sells, transfers or otherwise disposes of the ABT Shares in
violation of the Lock-Up, without the prior written consent of
ABT, (i) the Guarantee shall not apply to the Net Proceeds
received from such sale and the Guarantee shall from that time be
null and void, and (ii) all proceeds in excess of $15.50 per
share from the sale of all ABT Shares by such individual,
regardless of whether such proceeds derive from sales made prior
to, concurrent with or subsequent to such event of default, shall
be paid to ABT.
Section 3. Subject to Section 6 hereunder, this Agreement shall inure to the
benefit of and be binding upon ABT, its successors and assigns, and upon the
Sellers, Billings, their heirs, executors, administrators, legatees and legal
representatives.
Section 4. Should any part of this Guarantee, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Guarantee had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Guarantee without including therein any portion which
may for any reason be declared invalid.
Section 5. This Guarantee shall be construed and enforced in accordance with the
laws of the State of Nevada applicable to agreements made and to be performed in
such State without application of the principles of conflicts of laws of such
State.
Section 6. This Guarantee and all rights hereunder are personal to the parties
and shall not be assignable, and any purported assignment in violation thereof
shall be null and void.
3
<PAGE>
Section 7.
(a) All notices, requests, consents, and demands by the parties
hereunder shall be delivered by hand, recognized national overnight
courier or by deposit in the United States Mail, postage prepaid, by
registered or certified mail, return receipt requested, addressed to
the party to be notified at the address set forth below:
(i) if to the Sellers or Billings to:
Stanford Holdings, Ltd.
11 Summer Street
Buffalo, NY 14209
Attn: Mr. James R. Billings
Telecopier No.: 716-883-1510
with a copy to:
Phillips, Lytle, Hitchcock, Blaine
& Huber LLP
3400 Marine Midland Center
Buffalo, NY 14203
Attn: David A. Clemens, Esq.
Telecopier No.: 716-852-6100
(ii) if to the Buyer or ABT to:
Arnold-Thomas Seed Service, Inc.
AgriBioTech, Inc.
120 Corporate Park Drive
Henderson, Nevada 89014
Attention: Johnny R. Thomas, President
Telecopier No.: (888) 800-4841
with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Elliot H. Lutzker, Esq.
Telecopier No.: (212) 949-7052
(b) Notices given by mail shall be deemed effective on the earlier of
the date shown on the proof of receipt of such mail or, unless the
recipient proves that the notice was received later or not received,
three (3) days after the date of mailing thereof. Other notices shall
be deemed given on the date of receipt. Any party hereto may change
the address specified herein by written notice to the other parties
hereto.
4
<PAGE>
Section 8. In the event that ABT fails to make a payment for a shortfall in the
Net Proceeds in accordance with Section 2 hereof within 30 days after receipt of
written notice from Sellers and Billings demanding such payment, ABT shall be in
default under this Guarantee with respect to such payment ("Default Payment").
Upon such default by ABT, Sellers and Billings may declare a default under the
Security Agreement and pursue all remedies to which they are entitled to the
extent necessary to relieve such default. This Guarantee shall otherwise remain
in full force and effect with respect to the payment of any future deficits or
surpluses by ABT or the Sellers and Billings, as the case may be.
Section 9. The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Guarantee shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Guarantee on the part of either
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Guarantee as of
the day and year first written above.
/s/ Daniel Swindell /s/ Gary J. Marostica
- ----------------------------- -------------------------------------
Daniel Swindell Gary J. Marostica
/s/ Robert M. Trask /s/ Jerry T. Inouye
- ----------------------------- -------------------------------------
Robert M. Trask Jerry T. Inouye
/s/ William D. Trask /s/ James R. Billings
- ----------------------------- -------------------------------------
William D. Trask James R. Billings
/s/ Eino M. Hendrickson
- -----------------------------
Eino M. Hendrickson
AGRIBIOTECH, INC.
By: /S/ Kathleen L. Gillespie
-------------------------------------
Kathleen L. Gillespie
Vice President
ARNOLD-THOMAS SEED SERVICE, INC.
By: /s/ Kathleen L. Gillespie
-------------------------------------
Kathleen L. Gillespie
Vice President
GUARANTY AGREEMENT
GUARANTY AGREEMENT (the "Guaranty") dated January 22, 1999 (the "Closing
Date") by and between each of Bill L. Rose, L.L.C., an Oregon limited liability
company (the "Seller"), and AgriBioTech, Inc., a Nevada corporation ("ABT" or
the "Buyer").
W I T N E S S E T H:
WHEREAS, Buyer has agreed to purchase from the Seller an aggregate of
twenty-five (25%) percent of the membership interests of HybriGene, L.L.C., an
Indiana limited liability company (the "Company"), pursuant to a Securities
Purchase Agreement dated January 22, 1999 (the "Securities Purchase Agreement")
by and among the Sellers, the Company, and ABT;
WHEREAS, pursuant to Section 3(a) of the Securities Purchase Agreement, ABT
will transfer to the Seller One Hundred Three Thousand Twelve (103,012) shares
of the Common Stock of ABT (the "ABT Shares");
WHEREAS, pursuant to Section 3(c) of the Securities Purchase Agreement, the
Seller has entered into a Lock-Up Agreement (the "Lock-Up") pursuant to which
they have agreed that they shall not sell, transfer or otherwise dispose of the
ABT Shares except as specified in the Lock-Up;
WHEREAS, pursuant to Section 3(a) of the Securities Purchase Agreement, ABT
has guaranteed the Purchase Price by guaranteeing the Net Proceeds (as defined
below) from the sale of the ABT Shares when sold pursuant to the Lock-Up; and
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions
and mutual covenants appearing in this Guaranty, the parties hereto hereby agree
as follows:
Section 1.
(a) The ABT Shares, if sold pursuant to the Lock-Up, shall have Guaranteed
Net Proceeds (defined as gross sales price less customary sales commissions and
any applicable stock transfer and sales taxes) of no less than $18.45 per share
(the "Guaranteed Price/Share").
(b) ABT further agrees that until the Seller has received an aggregate of
$1,900,000 from all sales of ABT Shares made pursuant to the Lock-Up, Seller
shall be secured pursuant to the terms of a stock pledge agreement (the "Stock
Pledge Agreement").
(c) In consideration of the guarantee granted hereby and the Stock Pledge
Agreement, the Seller hereby agrees that Net Proceeds from sales of ABT Shares
at a price per share greater than the Guaranteed Price/Share shall be paid to
ABT, as set forth below.
Section 2.
(a) The Net Proceeds shall be determined on a quarterly basis according to
ABT's fiscal calendar.
<PAGE>
(b) To the extent that sales of ABT Shares pursuant to the Lock-Up are made
at prices per Share that are lower than the Guaranteed Price/Share, ABT shall
issue to the Seller within ten (10) business days of the parties' quarterly
accounting, additional, duly registered shares of ABT Common Stock that can be
sold immediately for any shortfalls in the Guaranteed Net Proceeds resulting
from its individual sales of the ABT Shares, and in such amounts until the
Seller has received an aggregate of $1,900,000 from all sales of ABT Shares. If
at any time the Seller has received funds exceeding $1,900,000 in the aggregate
from sales of ABT Shares, the Seller shall promptly deliver such excess funds to
ABT.
(c) In the event that the Seller offers, sells, transfers or otherwise
disposes of the ABT Shares in violation of the Lock-Up, without the prior
written consent of ABT, (i) the Guaranty shall not apply to the Net Proceeds
received from such sale and the Guaranty shall from that time be null and void,
and (ii) all proceeds in excess of $10.00 per share from the sale of all ABT
Shares by such individual, regardless of whether such proceeds derive from sales
made prior to, concurrent with or subsequent to such event of default, shall be
paid to ABT.
Section 3. Subject to Section 6 hereunder, this Agreement shall inure to the
benefit of and be binding upon ABT, its successors and assigns (by way of
merger, sale, consolidation, reorganization or similar event), and upon the
Seller, and its successors and assigns.
Section 4. Should any part of this Guaranty, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Guaranty had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Guaranty without including therein any portion which
may for any reason be declared invalid.
Section 5. This Guaranty shall be construed and enforced in accordance with the
laws of the State of Nevada applicable to agreements made and to be performed in
such State without application of the principles of conflicts of laws of such
State.
Section 6. This Guaranty and all rights hereunder shall not be assignable, and
any purported assignment by ABT in violation thereof shall be null and void.
Section 7.
(a) All notices, requests, consents, and demands by the parties hereunder
shall be delivered by hand, recognized national overnight courier or by deposit
in the United States Mail, postage prepaid, by registered or certified mail,
return receipt requested, addressed to the party to be notified at the address
set forth below:
(i) if to the Seller to:
Bill Rose, L.L.C.
P.O. Box 250
Hubbard, Oregon 97032
Attention: Bill L. Rose
Telecopier: (503) 651-2351
2
<PAGE>
with a copy to:
Davis Wright Tremaine LLP
2300 Wells Fargo Tower
1300 SW Fifth Avenue
Portland, Oregon 97201
Attention: Milton Stewart
Telecopier: (503) 778-5299
(ii) if to ABT to:
AgriBioTech, Inc.
120 Corporate Park Drive
Henderson, Nevada 89014
Attention: Johnny R. Thomas, CEO
Telecopier No.: (888) 800-4841
with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Elliot H. Lutzker, Esq.
Telecopier No.: (212) 949-7052
(b) Notices given by mail shall be deemed effective on the earlier of the
date shown on the proof of receipt of such mail or, unless the recipient proves
that the notice was received later or not received, three (3) days after the
date of mailing thereof. Other notices shall be deemed given on the date of
receipt. Any party hereto may change the address specified herein by written
notice to the other parties hereto.
Section 8. In the event that ABT breaches its obligations under Section 2 hereof
within 30 days after receipt of written notice from Seller demanding such
payment, ABT shall be in default under this Guaranty with respect to such
payment ("Default Payment"). Upon such default by ABT, Seller may declare a
default under the Stock Pledge Agreement and pursue all remedies, under the
Stock Pledge Agreement and otherwise, to which it is entitled to the extent
necessary to relieve such default. This Guaranty shall otherwise remain in full
force and effect with respect to the payment of any future deficits or surpluses
by ABT or the Seller, as the case may be.
Section 9. The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Guaranty shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Guaranty on the part of either party
shall be effective for any purpose whatsoever unless such waiver is in writing
and signed by such party.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Guaranty as of
the day and year first written above.
BILL L. ROSE, L.L.C.
By: /S/ Bill L. Rose
----------------
Bill L. Rose,
President and CEO
AGRIBIOTECH, INC.
By: /s/ Kathleen L. Gillespie
-------------------------
Kathleen L. Gillespie
Vice President
4
GUARANTY AGREEMENT
GUARANTY AGREEMENT (the "Guaranty") dated January 22, 1999 (the "Closing
Date") by and between each of Thomas K. Hodges and Halina K. Hodges (each or
whom shall be individually referred to as "Seller" and collectively as the
"Sellers"), and AgriBioTech, Inc., a Nevada corporation ("ABT" or the "Buyer").
W I T N E S S E T H:
WHEREAS, Buyer has agreed to purchase from the Sellers an aggregate of
seventy-five (75%) percent of the membership interests (the "Securities") of
HybriGene, L.L.C., an Indiana limited liability company (the "Company"),
pursuant to a Securities Purchase Agreement dated January 20, 1999 (the
"Securities Purchase Agreement") by and among the Sellers, the Company, and ABT
for a purchase price of $9,500,000 (the "Purchase Price");
WHEREAS, pursuant to Section 3(a) of the Securities Purchase Agreement, ABT
will transfer to the Sellers Five Hundred Fifteen Thousand (515,000) shares of
the Common Stock of ABT (the "ABT Shares"), the net proceeds from the sale of
which shall be credited against the Purchase Price;
WHEREAS, pursuant to Section 3(c) of the Securities Purchase Agreement, the
Sellers have entered into a Lock-Up Agreement (the "Lock-Up") pursuant to which
they have agreed that they shall not sell, transfer or otherwise dispose of the
ABT Shares except as specified in the Lock-Up;
WHEREAS, pursuant to Section 3(a) of the Securities Purchase Agreement, ABT
has guaranteed the Purchase Price by guaranteeing the Net Proceeds (as defined
below) from the sale of the ABT Shares when sold pursuant to the Lock-Up; and
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions
and mutual covenants appearing in this Guaranty, the parties hereto hereby agree
as follows:
Section 1.
(a) The ABT Shares, if sold pursuant to the Lock-Up, shall have Guaranteed
Net Proceeds (defined as gross sales price less customary sales commissions and
any applicable stock transfer and sales taxes) of no less than $18.45 per share
(the "Guaranteed Price/Share").
(b) ABT further agrees that until the Sellers have received an aggregate of
$9,500,000 from all sales of ABT Shares made pursuant to the Lock-Up, they shall
be secured pursuant to the terms of a securities pledge agreement (the
"Securities Pledge Agreement").
(c) In consideration of the guarantee granted hereby and the Securities
Pledge Agreement, each of the Sellers hereby agrees that all Net Proceeds from
all sales of ABT Shares at a price per share greater than the Guaranteed
Price/Share shall be paid to ABT.
1
<PAGE>
Section 2.
(a) The Net Proceeds shall be determined on a quarterly basis according to
ABT's fiscal calendar.
(b) For purposes of this Guaranty a Shortfall is defined as; (i) sales of
ABT Shares pursuant to the Lock-Up made at prices per Share that are lower than
the Guaranteed Price/Share, or (ii) if Sellers are unable to sell the member ABT
Shares in the amounts set forth in paragraph 1(a) of the Lock-Up, in the manner
set forth in Section 1 (b) of the Lock-Up then a Shortfall shall equal the
Guaranteed Price/Share. ABT shall pay to each of the Sellers cash, or at the
option of ABT, ABT shall issue to Sellers additional, duly registered ABT Shares
that can be sold immediately, for any Shortfalls in the Guaranteed Net Proceeds
resulting from their individual sales of the ABT Shares on the last day of the
month following the end of the fiscal quarter in which such Shortfall occurred.
Any cash payment or issuance of ABT Shares shall be made within ten days after
the end of the fiscal quarter. Any Shortfalls shall be calculated on a
cumulative basis during such fiscal quarter such that any Shortfalls in the
Guaranteed Price/Share shall be offset against any surplus in the Guaranteed
Price/Share. Any additional ABT Shares issued to Sellers pursuant to this
Section shall be subject to a Lock-Up agreement which shall provide that such
shares can be sold by Sellers within six months from the date of this Guaranty.
In the event a Shortfall results from Seller's inability to sell ABT Shares as
set forth in this Section, ABT may take possession of said unsold ABT Shares for
that particular fiscal quarter, or at ABT's discretion, seller may retain said
ABT Shares, and any resulting Shortfall or surplus shall be addressed in
accordance with the terms of this Agreement.
(c) To the extent that sales of ABT Shares pursuant to the Lock-Up are made
at prices per Share that are greater than the Guaranteed Price/Share, each of
the Sellers shall pay to ABT cash for any surplus in the Guaranteed Net Proceeds
resulting from their individual sales of the ABT Shares on the last day of the
month following the end of the fiscal quarter in which such surplus occurred;
provided, however, that any surplus shall be calculated on a cumulative basis
during such fiscal quarter such that any surplus in the Guaranteed Price/Share
shall be offset against any Shortfalls in the Guaranteed Price/Share.
(d) Sellers shall prepare and deliver to ABT within two weeks of the end of
each month a cumulative statement, supported by documentation reflecting all
sales of ABT Shares by each of them during such month, if not previously
provided and stating the mount to be paid by ABT to each of them pursuant to the
terms of this guarantee or the amount to be paid by each them to ABT pursuant to
the terms of this guarantee. In the event of a surplus in the Guaranteed
Price/Share during any fiscal quarter, ABT, in its sole discretion, may elect to
maintain such surplus without receiving cash payment therefor, to be offset
against any future deficits in the Guaranteed Price/Share, by providing the
Sellers with written notice of such election prior to the date upon which a
payment of such surplus would otherwise be due.
(e) In the event that any of the Sellers offers, sells, transfers or
otherwise disposes of the ABT Shares in violation of the Lock-Up, without the
prior written consent of ABT, (i) the Guaranty shall not apply to the Net
Proceeds received from such sale and the Guaranty shall from that time be null
and void, and (ii) all net proceeds in excess of $10.00 per share from the sale
of all ABT Shares by such individual, regardless of whether such proceeds derive
from sales made prior to, concurrent with or subsequent to such event of
default, shall be paid to ABT.
2
<PAGE>
Section 3. Subject to Section 6 hereunder, this Agreement shall inure to the
benefit of and be binding upon ABT, its successors and assigns, and upon the
Sellers, their heirs, executors, administrators, legatees and legal
representatives.
Section 4. Should any part of this Guaranty, for any reason whatsoever, be
declared invalid, illegal, or incapable of being enforced in whole or in part,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in full force and effect as if this Guaranty had
been executed with the invalid portion thereof eliminated, and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Guaranty without including therein any portion which
may for any reason be declared invalid.
Section 5. This Guaranty shall be construed and enforced in accordance with the
laws of the State of Nevada applicable to agreements made and to be performed in
such State without application of the principles of conflicts of laws of such
State.
Section 6. This Guaranty and all rights hereunder are personal to the parties
and shall not be assignable, and any purported assignment in violation thereof
shall be null and void.
Section 7.
(a) All notices, requests, consents, and demands by the parties hereunder
shall be delivered by hand, recognized national overnight courier or by deposit
in the United States Mail, postage prepaid, by registered or certified mail,
return receipt requested, addressed to the party to be notified at the address
set forth below:
(i) if to the Sellers to:
Thomas K. Hodges
6038 W. 75 N
West Lafayette, IN 47906
Halina K. Hodges
6038 W. 75 N
West Lafayette, IN 47906
with a copy to:
Henderson, Daily, Withrow & DeVoe
2600 One Indiana Square
Indianapolis, IN 46204
Attention: O. Wayne Davis
Telecopier No.: (317) 639-0191
3
<PAGE>
(ii) if to ABT to:
AgriBioTech, Inc.
120 Corporate Park Drive
Henderson, Nevada 89014
Attention: Johnny R. Thomas, CEO
Telecopier No.: (888) 800-4841
with a copy to:
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158
Attention: Elliot H. Lutzker, Esq.
Telecopier No.: (212) 949-7052
(b) Notices given by mail shall be deemed effective on the earlier of the
date shown on the proof of receipt of such mail or, unless the recipient proves
that the notice was received later or not received, three (3) days after the
date of mailing thereof. Other notices shall be deemed given on the date of
receipt. Any party hereto may change the address specified herein by written
notice to the other parties hereto.
Section 8. In the event that ABT fails to make a payment for a Shortfall in the
Net Proceeds in accordance with Section 2 hereof within 5 days after such
payment is due, ABT shall be in default under this Guaranty with respect to such
payment ("Default Payment"). Upon such default by ABT, Sellers may declare a
default under the Securities Purchase Agreement and the Securities Pledge
Agreement and pursue all remedies to which they are entitled to the extent
necessary to relieve such default. This Guaranty shall otherwise remain in full
force and effect with respect to the payment of any future deficits or surpluses
by ABT or the Sellers, as the case may be, provided that Sellers may set off
amount of any future surpluses against the default payment.
Section 9. The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Guaranty shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or any condition of this Guaranty on the part of either party
shall be effective for any purpose whatsoever unless such waiver is in writing
and signed by such party.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Guaranty as of
the day and year first written above.
/S/ Thomas K. Hodges
--------------------
Thomas K. Hodges
/s/ Halina K. Hodges
--------------------
Halina K. Hodges
AGRIBIOTECH, INC.
By: /s/ Kathleen L. Gillespie
-----------------------------
Kathleen L. Gillespie
Vice President
EXHIBIT 21.1
AGRIBIOTECH, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Other names under
which subsidiary
Subsidiary does business State of incorporation
- ---------- ----------------- ----------------------
<S> <C> <C>
Arnold-Thomas Seed Nevada
Service, Inc.
Arrowhead Enterprises, Inc. J & M Seed Kentucky
Clark Seeds, Inc. Allied Seed Idaho
Discount Farm Center, Inc. South Dakota
E.F. Burlingham & Sons Van Dyke Seed Oregon
Fine Lawn Research, Inc. Kentucky
Garden West Distributors, Inc. Arizona
George W. Hill & Co., Inc. Kentucky
George W. Hill of Indiana, Inc. Indiana
G. W. Burlingham's Inc. Guam
Germain's Seeds,Inc. Nevada
Green SCA Corp. Maryland
Green Seed Company Limited Partnership Maryland
Halsey Seed Company Beachley-Hardy Seed Nevada
HybriGene, LLC Indiana
Kinder Seed, Inc. New York
LaCrosse Seed Company, Inc. Michigan Hybrid Seed Nevada
Seed Mart
Las Vegas Fertilizer Co., Inc. LVF Turf & Irrigation Supply Nevada
Lofts Seed Company, Inc. Lofts Great Western Nevada
Independent Seeds
Ohio Seed Company Ohio Harvest Ohio
Olsen Fennell Seeds, Inc. Oregon
Oseco Inc. Canadian Seed Coaters Ontario
Peterson Exports, Inc. Minnesota
Peterson Seed Company, Inc. Knipple Seed Minnesota
Premium Seed Company, Inc. Minnesota
Precision Seed Coaters Inc. Oseco Arizona
Rothwell Seeds International Nova Scotia
Company
Scott Seed Company Holden Seed Nevada
Sphar Seed
Seed Corporation of America Mock Seed Maryland
Seed Resource, Inc. Hobart Seed Nevada
Sexauer Seed Co. Northern Plains Seed Nevada
Discount Farm
Stanford Holdings, Ltd. New York
W-D Seed Growers Idaho, Inc. Idaho
W-L Research, Inc. Nevada
Wilber's Seed, Inc. Minnesota
Willamette Seed Co. Oregon
Zajac Performance Seeds, Inc. New Jersey
Zajac Performance Seeds Oregon, LLC Oregon
</TABLE>
Exhibit 23.1
AUDITORS' CONSENT
The Board of Directors
AgriBioTech, Inc.:
We consent to incorporation by reference in the registration statements
Nos- 333-33367, 333-13953, 333-47637, 333-61127, 333-71477 and 333-71485 on Form
S-3, No. 333-61097 on Form S-4 and Nos. 333-07123, 333-9336 and 333-9330 on Form
S-8 of AgriBioTech, Inc. of our report dated October 13, 1999, relating to the
consolidated balance sheets of AgriBioTech, Inc. and subsidiaries as of June 30,
1999 and 1998 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1999 and related schedule, which report appears in the
June 30, 1999 Form 10-K of AgriBioTech, Inc.
KPMG LLP
Las Vegas, Nevada
October 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 4,604,739
<SECURITIES> 0
<RECEIVABLES> 52,173,777
<ALLOWANCES> 6,489,753
<INVENTORY> 66,917,763
<CURRENT-ASSETS> 120,650,844
<PP&E> 62,212,326
<DEPRECIATION> 0
<TOTAL-ASSETS> 342,128,711
<CURRENT-LIABILITIES> 119,152,567
<BONDS> 12,198,297
0
0
<COMMON> 47,498
<OTHER-SE> 209,034,188
<TOTAL-LIABILITY-AND-EQUITY> 342,128,711
<SALES> 370,453,411
<TOTAL-REVENUES> 370,453,411
<CGS> 286,210,082
<TOTAL-COSTS> 286,210,082
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,175,488
<INCOME-PRETAX> (44,829,640)
<INCOME-TAX> 1,011,362
<INCOME-CONTINUING> (45,841,002)
<DISCONTINUED> 0
<EXTRAORDINARY> 3,919,305
<CHANGES> 0
<NET-INCOME> (49,760,307)
<EPS-BASIC> (1.22)
<EPS-DILUTED> (1.22)
</TABLE>
Exhibit 99.1
AGRIBIOTECH, INC.
Pro Forma Combined Financial Information
(Unaudited)
The following pro forma combined summary of operations combines the results of
operations of AgriBioTech, Inc. ("ABT"), Oseco Inc. ("Oseco"), Allied Seed
Division of Agway, Inc. ("Allied"), and other individually insignificant
acquisitions since July 1, 1998 (collectively "Other Acquisitions") as if all
acquisitions occurred at the beginning of the period presented. The pro forma
combined summary of operations reflects known changes resulting from the
acquisitions but does not reflect impacts of any changes in operations,
anticipated efficiencies and synergies from consolidation.
A pro forma combined summary balance sheet as of June 30, 1999 is not presented
since the above acquisitions are reflected in ABT's consolidated balance sheet
as of June 30, 1999.
The pro forma combined financial information does not purport to represent what
ABT's financial position or results of operations would actually have been if
such transactions had, in fact, occurred on the above dates and are not
necessarily representative of any future period. The pro forma combined
financial information should be read in conjunction with the historical
financial statements of ABT, Oseco, and Allied included herein or previously
filed with the Securities and Exchange Commission.
<PAGE>
AGRIBIOTECH, INC. ("ABT");
Pro Forma Combined Summary of Operations
(Unaudited)
Year ended June 30, 1999
<TABLE>
<CAPTION>
Other Pro Forma
ABT (A) Oseco (A) Allied (A) Acquistions(A) Adjustments combined
------------- --------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 370,453,411 $ 946,770 $ 727,025 $ 6,966,421 $ (499,684) (E) $ 377,584,398
(1,009,545) (G)
Cost of sales 286,210,082 591,763 707,795 5,968,985 (499,684) (E) 292,071,981
(906,960) (G)
------------- --------- --------- ----------- ----------- -------------
Gross profit 84,243,329 355,007 19,230 997,436 (102,585) 85,512,417
Operating expenses 109,881,470 408,125 363,815 1,745,945 924,673 (B) 112,818,178
(40,790) (F)
(465,060) (G)
Restructuring and special charges 9,751,631 -- -- -- -- 9,751,631
------------- --------- --------- ----------- ----------- -------------
Earnings (loss) from operations (35,389,772) (53,118) (344,585) (748,509) (521,408) (37,057,392)
Interest expense (11,175,488) -- (41,515) (180,046) 1,545,204 (C) (9,786,210)
65,635 (G)
Interest income 543,712 -- -- 5,819 -- 549,531
Earnings of associated entity 726,436 -- -- -- 726,436
Other 465,472 -- 78 (62,445) -- 403,105
------------- --------- --------- ----------- ----------- -------------
Total other income (expense) (9,439,868) -- (41,437) (236,672) 1,610,839 (8,107,138)
Earnings (loss) before income taxes
and extraordinary item (44,829,640) (53,118) (386,022) (985,181) 1,089,431 (45,164,530)
Income tax expense (benefit) 1,011,362 -- -- -- -- 1,011,362
------------- --------- --------- ----------- ----------- -------------
Earnings (loss) before
extraordinary item (45,841,002) (53,118) (386,022) (985,181) 1,089,431 (46,175,892)
Extraordinary loss from early
extinguishment of subordinated
convertible debt 3,919,305 -- -- -- -- 3,919,305
------------- --------- --------- ----------- ----------- -------------
Net earnings (loss) $ (49,760,307) $ (53,118) $(386,022) $ (985,181) $ 1,089,431 $ (50,095,197)
============= ========= ========= =========== =========== =============
Shares of common stock used in computing
earnings (loss) per common share:
Basic 40,825,827 4,163,005 (D) 44,988,832
Diluted 40,825,827 4,163,005 (D) 44,988,832
============= =========== =============
Net earnings (loss) per common share
(basic and diluted):
Earnings (loss) before
extraordinary item $ (1.12) $ (1.03)
Extraordinary item (0.10) (0.09)
------------- -------------
Net earnings (loss) $ (1.22) $ (1.12)
============= =============
</TABLE>
<PAGE>
AGRIBIOTECH, INC.
Notes to Pro Forma Combined Financial Information
(Unaudited)
(A) The year ended June 30, 1999 for ABT includes the operations of Allied from
August 28, 1998 through June 30, 1999, the operations of Oseco from
September 1, 1998 through June 30, 1999, and the operations of Other
Acquisitions for the period from their respective acquisition dates through
June 30, 1999. The amounts in the Oseco, Allied and Other Acquisitions
columns include such acquisitions for periods from July 1, 1998 through
their respective acquisition dates.
(B) To reflect depreciation of property, plant and equipment and amortization
of intangible assets based on market value adjustments in connection with
applying purchase accounting. Intangible assets resulting from the
application of purchase accounting include goodwill (amortized over 10 to
30 years, with a weighted average of 18 years) and covenants not to compete
(amortized over 5 to 10 years).
(C) To adjust interest expense for the cash purchase price of the acquisitions.
Interest expense was computed on the cash purchase price of $50.2 million
for the periods prior to acquisition using an average interest rate of
8.6%. The pro forma interest expense was then reduced to reflect the
assumption that payments required to be made in the acquisitions would be
obtained through approximately $50.2 million of proceeds from the sale of
ABT's common stock in private placement transactions from August 1998
through June 1999.
(D) To reflect the impact on average shares outstanding of shares of ABT common
stock issued in connection with the acquisitions (401,758) and private
placements (3,761,247) of ABT's common stock as if they had been
outstanding for the entire period.
(E) To eliminate intercompany sales and other revenue.
(F) Prospective reductions in compensation of former owners of acquired
entities, employee benefits, management fees, and property rent resulting
from employment agreements, property purchased directly from former owners
and other contractual arrangements entered into in connection with
acquisitions.
(G) To eliminate the operations of the fertilizer division of one of the Other
Acquisitions that when purchased on August 21, 1998 was intended to be sold
and was sold in December 1998.
