1
Exhibit 10.3
[Execution Copy]
SEMINIS, INC.
- and -
HUNGNONG SEED CO., LTD.
SHARE SUBSCRIPTION AGREEMENT
June 12, 1998
▇▇▇ & ▇▇▇▇▇
2
SHARE SUBSCRIPTION AGREEMENT
This Share Subscription Agreement (the "Agreement") is entered into on this 12th
day of June, 1998 ("Effective Date") by and between:
(1) Seminis, Inc., a corporation duly organized and existing under the laws
of the state of Illinois, U.S.A. and having its principal office at
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇. (the
"Subscriber"); and
(2) Hungnong Seed Co., Ltd., a corporation duly organized and existing
under the laws of Korea and having its principal place of business at
▇▇▇▇-▇▇ ▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇-▇▇ ▇▇▇▇▇, ▇▇▇▇▇ (the "Company").
Witnesseth:
WHEREAS, the Subscriber and the shareholders of the Company have entered into a
Share Sale and Purchase Agreement as of even date herewith ("Share Sale and
Purchase Agreement"), the form of which is attached hereto as Attachment I,
whereby the Subscriber shall purchase 271,585 shares of the Company from all of
the shareholders of the Company and such shareholders shall cause the Company to
issue new shares to the Subscriber so that the Subscriber may acquire a 70%
interest in the Company on a fully diluted basis;
WHEREAS, the Company also desires to issue new shares of the Company to the
Subscriber as provided in the Share Sale and Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants stated
below, the Subscriber and the Company hereby agree as follows:
Article 1. Definitions
Unless otherwise defined herein, all capitalized terms shall have the same
meaning as in the Share Sale and Purchase Agreement.
Article 2. Subscription for and Issuance of the Shares
2.1 On the Closing Date, the Company shall issue to the Subscriber and the
Subscriber shall acquire from the Company, 1,428,050 shares of the
Company (the "New Shares") in accordance with the terms and conditions
of this Agreement and the Share Sale and Purchase Agreement.
2.2 The subscription price for the New Shares will be 107,793,000,000
("Subscription Price").
2.3 The Subscription price shall be paid to the Company on the Closing
Date.
2.4 The share certificates representing the New Shares shall bear the date
of the day immediately following the Closing Date.
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Article 3. Conditions Precedent to Issuance of the Shares
All obligations of the Company to issue to the Subscriber, and of the Subscriber
to purchase from the Company, the New Shares pursuant hereto are subject to and
conditioned upon fulfillment of each of the following conditions:
(a) The Subscriber is satisfied that all representations and
warranties made by the Company under Article 4 were true when
made and are true and accurate in all respects on the Closing
Date;
(b) The Company is satisfied that all representations and
warranties made by the Subscriber under Article 5 were true
when made and are true and accurate in all respects on the
Closing Date;
(c) All conditions precedent under Article 9 of the Share Sale and
Purchase Agreement shall have been satisfied.
Article 4. Representations and Warranties of the Company
4.1 The Company hereby represents and warrants to the Subscriber as
follows:
(a) This Agreement has been duly authorized, executed and
delivered by the Company after respectively taking all
required corporate actions including approval by their
respective boards of directors and (assuming due
authorization, execution and delivery thereof by the
Subscriber) constitutes the valid and legally binding
obligations of the Company.
(b) The Company has full power and authority to enter into and
perform its obligations under this Agreement.
(c) There are no outstanding securities convertible into or
exchangeable for, or warrants, rights or options to purchase
from the Company, or obligations of the Company to issue,
capital stock.
(d) The execution and delivery of this Agreement and the issuance
of the New Shares will not infringe and will not be contrary
to any law or regulation of any Korean governmental or
regulatory body and will not result in any breach of the terms
of the Articles of Incorporation of the Company or constitute
a default under any deed, agreement, mortgage or other
instrument to which the Company is a party.
(e) Except as otherwise disclosed to the Subscriber, there is no
option, right to acquire, mortgage, charge, pledge, or lien or
other form of security or encumbrance on, over or affecting
the issued share capital of the Company and no agreement to
give or create any of the foregoing except for such statutory
pre-emotive rights to acquire shares as conferred by law.
(f) The New Shares, together with 271,585 shares purchased by the
Subscriber through the Share Sale and Purchase Agreement,
shall represent 70% of the total
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number of issued and outstanding shares of the Company after
the subscription hereby, on a fully diluted basis.
Article 5. Representations and Warranties of the Subscriber
The Subscriber hereby represents and warrants as follows:
5.1 The Subscriber is a corporation duly organized and validly existing
under the laws of Illinois, U.S.A. with requisite corporate power and
authority to make, execute, deliver and perform this Agreement.
5.2 This Agreement has been duly authorized, executed and delivered by the
Subscriber and (assuming due authorization, execution and delivery
thereof by the Company) constitutes the valid and legally binding
obligations of the Subscriber.
Article 6. Covenants of the Company
The Company hereby covenants and warrants as follows:
(a) The Company shall take any and all actions necessary to issue
the New Shares as contemplated in this Agreement, including
but not limited to the adoption of its Board of Directors
resolution and amendment of its Articles of Incorporation to
restrict the pre-emptive rights of its existing shareholders.
(b) The Company shall perform, execute, and achieve those acts
which the Shareholders promised to "cause" Hungnong to do
under the Share Sale and Purchase Agreement.
Article 7. Indemnification
The Company agrees to indemnify, defend and hold harmless the Subscriber (and
its directors, officers, employees, Affiliates, agents, representatives,
successors and assigns) from and against any and all losses, liabilities,
damages, deficiencies, demands, claims, actions, judgments or causes of action,
assessments, costs or expenses (including, without limitation, bonds, interest,
penalties and reasonable attorneys' fees and disbursements) ("Losses") based
upon, arising out of or otherwise in respect of any inaccuracy in or any breach
of any representation, warranty, covenant or agreement of the Company contained
in this Agreement, or any document or other papers delivered by the Company or
its Affiliate(s) to the Subscriber in connection with this Agreement.
Article 8. Miscellaneous
8.1 The following Articles of the Share Sale and Purchase Agreement shall
be made a part hereof; provided, however, that the references to the
Shareholders in such Articles shall be considered references to the
Company for such purposes: Articles 15, 16, 18, 19, 20, 21, 22, 23, 24,
25, 26, 27, 28 and 29.
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8.2 If the Share Sale and Purchase Agreement is terminated for whatever
reason, this Agreement shall also terminate without any further action
by either party hereto.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.
SUBSCRIBER: Seminis, Inc.
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorney-in-fact
COMPANY: Hungnong Seed Co., Ltd.
----------------------------
Name: ▇▇▇-▇▇▇▇ ▇▇▇
Attorney-in-fact
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ATTACHMENT I
Share Sale and Purchase Agreement
8
SHARE SALE AND PURCHASE AGREEMENT
This Share Sale and Purchase Agreement ("Agreement") is entered into on this
12th day of June, 1998 ("Effective Date") by and between:
(1) Seminis, Inc., a corporation duly organized and existing under the laws
of the state of Illinois, U.S.A. and having its principal office at
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇▇.
("Seminis"); and
(2) the individuals identified on the signature page of this Agreement
(collectively referred to as ("Shareholders").
Witnesseth:
WHEREAS, Hungnong Seed Co., Ltd. ("Hungnong") is engaged in the development and
sales of seeds through various breeding centers, branch offices and subsidiaries
in Korea, China, Indonesia and the U.S.A.;
WHEREAS, the Shareholders own and control 1,000,000 common shares of Hungnong,
having a par value of five thousand (5,000) Korean Won per share, representing
100% of the shares of Hungnong issued and outstanding (these shares being owned
by the Shareholders are referred to as the "Existing Shares");
WHEREAS, Seminis wishes to acquired a 70% interest in Hungnong, and the
Shareholders desire that Seminis acquire a 70% interest in Hungnong on a fully
diluted basis; and
WHEREAS, Seminis and the Shareholders desire that Seminis acquire such 70%
interest in Hungnong through the purchase of 271,585 Existing Shares from the
Shareholders in accordance with this Agreement and the purchase of 1,428,050
newly issued shares of Hungnong ("New Shares") pursuant to this Agreement and a
share subscription agreement to be entered into between Seminis and Hungnong as
of even date herewith ("Share Subscription Agreement").
NOW, THEREFORE, in consideration of the mutual promises and covenants stated
below, the Shareholders and Seminis hereby agree as follows:
Article 1. Sale and Purchase of Sales
1.1. Subject to the terms and conditions of this Agreement, on the Closing
Date (as hereinafter defined) Shareholders shall sell, assign, convey,
and transfer to Seminis, and Seminis shall purchase from Shareholders,
271,585 Existing Shares which are set forth in detail in Attachment I
hereto (the Existing Shares so purchased shall hereinafter be referred
to as the "Purchased Shares"; of the Purchased Shares, the shares which
are pledged to Seminis pursuant to the Pledge Agreement between Seminis
and the Shareholders dated April 8, 1998, and amended on May 21, 1998,
are referred to as the "Pledged Purchased Shares" and listed in
Attachment I-1 hereto; of the Purchased Shares,
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the shares which are not pledged are referred to as the "Non-Pledged
Purchased Shares" and listed in Attachment I-2 hereto).
1.2 In consideration for the sale and purchase of the Purchased Shares,
Seminis shall pay to Shareholders twenty billion five hundred million
(20,500,000,000) Korean Won (the "Purchase Price"); provided that
Purchase Price shall be paid to the Shareholders subject to the
Adjustments (as defined in Article 2) and other terms and conditions of
this Agreement.
Article 2. Adjustments
2.1 Except as provided in Attachment II, Seminis shall make adjustments to
the Purchase Price to the extent that it is determined by Seminis that
the Shareholders have breached any of the representations and
warranties in Attachment III hereof or any of the covenants and
agreements under this Agreement ("Adjustments"). The Adjustments may be
made any multitude of times, within nine months after the Closing Date.
The determination as to whether to make the Adjustments as well as the
amount thereof shall be determined by Seminis. After Seminis has
notified the Shareholders of its determination regarding the
Adjustments, the Shareholders shall respond within ten (10) calendar
days of such notice. If the Shareholders do not respond within ten (10)
calendar days, Seminis' proposed Adjustment shall be considered to be
accepted by the Shareholders and the Purchase Price shall be adjusted
in accordance with Seminis' determination. If the Shareholders timely
object to Seminis' proposed Adjustment, and the parties cannot reach a
mutually acceptable Adjustment within twenty (20) calendar days the
parties shall receive their differences in accordance with Section 15.2
hereof.
2.2 The adjustments shall be subject to the following:
(a) Adjustments shall include, but not be limited to: (i)
Hungnong's obsolete and slow moving inventories as of the
Closing Date, as defined under Korean GAAP and the
International seed industry practices ("Written-off
Inventories"), and (ii) Hungnong's receivables outstanding as
of the Closing Date which are not collected 90 days past the
contractual due date (if no contractual due date exists, 90
days past the date by which payments are customarily paid in
the Korean seed business) ("Written-off Receivables").
However, there shall be no Adjustment with respect to the
Written-Off Receivables and Written-Off Inventories if such
write-offs are not in the aggregate five hundred million
(500,000,000) won greater than the write-offs calculated as of
December 31, 1997. Written-off Receivables shall not include
those receivables which are proven upon due diligence to
Seminis' satisfaction to be fully secured with collateral.
(b) Hungnong's investments in, and loans (including advances and
receivables) to, its subsidiaries or affiliates, which are set
forth in detail in Attachment IV hereto (the companies listed
in the same Attachment being hereinafter referred to as
"Affiliate Companies" and together with Hungnong, "Hungnong
Companies"), shall not be considered in making the
Adjustments.
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(c) Except as provided in Section 12.1 hereof, if any Adjustment
is made due to Losses (defined in Article 12 hereof) incurred
directly by Seminis as a result of any breach by the
Shareholders of any representation, warranty, covenant and
agreement hereto, the Adjustment shall equal the entire amount
of the Losses; however, if any Adjustment is made due to
Losses incurred by Hungnong, the Adjustment shall equal 70% of
the Losses, provided that the Shareholders' interest in
Hungnong falls below 30%, the Adjustments shall be increased
in inverse proportion to the Shareholders' interest).
Article 3. New Share Issuance
Subject to the terms of this Agreement and the Share Subscription Agreement, the
Shareholders shall cause Hungnong to arrange for the issuance of 1,428,050 New
Shares to Seminis at a price of approximately 75,483 Won per share, which
comprise of five thousand (5,000) Won par value per share plus a premium of
approximately 70,483 Won shall be referred to as "Subscription Price") so that
Seminis may subscribe and pay for such New Shares on the Closing Date. The New
Shares, together with the Purchased Shares, shall constitute 70% of the total
issued and outstanding shares of Hungnong after the issuance of New Shares on a
fully diluted basis.
Article 4. Closing
4.1 The closing of the purchase of the Existing Shares and subscription of
the New Shares provided hereunder, shall take place on July 15, 1998,
or on such other date (the "Closing Date"), at the offices of ▇▇▇ &
▇▇▇▇▇ or on such other place as the Shareholders and Seminis may agree
(the "Closing").
4.2 On the Closing Date, the Shareholders shall (a) properly execute and
deliver to Seminis, the share certificates representing the Purchased
Shares, and take all other actions and deliver all other documents
necessary to transfer the Purchased Shares to Seminis, and (b) cause
Hungnong to duly issue the New Shares to Seminis in accordance with the
terms of this Agreement and the Share Subscription Agreement.
With respect to the Non-Pledged Purchased Shares, the Shareholders
shall physically deliver to Seminis the share certificates representing
such shares. With respect to the Pledged Purchased Shares, Seminis
shall continue to retain the share certificates representing such
shares for the purpose of acquiring such shares under this Agreement,
and the Shareholders shall be deemed to have delivered the share
certificates representing the Pledged Purchased Shares pursuant to this
Agreement.
4.3 On the Closing Date, in exchange for the Shareholders' transfer of the
Purchased Shares and Hungnong's issuance of New Shares, as set forth in
4.2 above, Seminis shall:
(a) Pay twelve billion and five hundred million (12,500,000,000)
Won to the Shareholders in an account designated in writing by
the Shareholders;
(b) Deposit eight billion (8,000,000,000) Won into an escrow
account ("Escrow Account") to be established pursuant to an
escrow agreement ("Escrow
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Agreement") which shall be entered into by and among Seminis,
the Shareholders and Citibank, N.A., acting through its Seoul
Branch, or another an escrow agent to be appointed by mutual
consent Seminis and the Shareholders, on or prior to the
Closing Date. A form of the Escrow Agreement is attached
hereto as Attachment V. The funds in the Escrow Account shall
be released to the Shareholders and/or Seminis in accordance
with the terms of the Escrow Agreement;
(c) Pay to Hungnong the Subscription Price, in accordance with the
Share Subscription Agreement; and
(d) Except for the certificates representing the Pledged Purchased
Shares, release to the Shareholders the share certificates
representing the shares of Hungnong which were pledged to
Seminis pursuant to the Pledge Agreement and the Amendment
thereto, entered into by and among the Shareholders and
Seminis as of April 8, 1998 and May 21, 1998, respectively;
provided however, that the certificates shall be retained by
Seminis to the extent necessary for Seminis to receive the
securities with respect to the Young I1 Pledge Related Shares
(as defined below) under the Young I1 Guarantee and Pledge
Agreement.
Article 5. Representations and Warranties
5.1 Representations and Warranties of Shareholders. The Shareholders'
representations and warranties are set forth in Attachment III hereof.
5.2 Representations and Warranties of Seminis. Seminis' representations and
warranties are set forth in Attachment VI hereof.
Article 6. Restructuring of Affiliate Companies
6.1 Prior to the Closing Date, the Shareholders shall cause certain
Affiliate Companies to be restructured, as more fully described in this
Article. The Hungnong Companies set forth in subsections (b), (e), (f)
and (g) below, along with Hungnong, Hungnong U.S.A. Inc., Hungnong Seed
(Beijing) Co., Ltd., and Hanmi Plug Co., Ltd. shall be defined as the
"Remaining Hungnong Companies."
(a) Young Il Chemical Co., Ltd. ("Young Il")
The Shareholders shall cause Hungnong and Hungnong Industry
Co., Ltd. to transfer to the Shareholders all of the shares in
Young Il held by Hungnong and Hungnong Industry Co., Ltd.
(i.e., 169,228 common shares representing approximately 33.8%
of the total issued and outstanding shares).
(b) Hungnong International Co., Ltd.
The Shareholders shall transfer, or shall cause to be
transferred, all of the shares in Hungnong International Co.,
Ltd. held by the Shareholders, Young Il and
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Handok Electronics Co., Ltd. (i.e., 44,390 common shares
representing approximately 37.7% of the total shares issued
and outstanding) to Hungnong.
(c) Simon Telecom Co., Ltd.
The Shareholders shall cause Hungnong to transfer to the
Shareholders all of Hungnong's shares in Simon Telecom Co.,
Ltd. (i.e., 5,000 common shares representing approximately
16.7% of the total shares issued and outstanding).
(d) Sehung Finance Co., Ltd.
The Shareholders shall cause Hungnong International Co., Ltd.
to transfer to the Shareholders all of the shares held by
Hungnong International Co., Ltd. in Sehung Finance Co., Ltd.
(i.e., 20,000 common shares representing approximately 20.0%
of the total shares issued and outstanding).
(e) Hungnong Soil Research Co., Ltd.
The Shareholders shall transfer to Hungnong all of the shares
in Hungnong Soil Research Co., Ltd. held by the Shareholders
(i.e., 8,000 common shares representing approximately 10.0% of
the total shares issued and outstanding).
(f) Hungnong Industry Co., Ltd.
The Shareholders shall transfer, and shall cause Young Il to
transfer, to Hungnong all of the shares in Hungnong Industry
Co., Ltd. held by the Shareholders and Young Il (i.e., 35,000
common shares representing approximately 11.7% of the total
shares issued and outstanding).
(g) Handock Electronics
The Shareholders shall transfer to Hungnong all of the shares
in Handock Electronics held by the Shareholders (i.e., 82,500
common shares representing approximately 14.6% of the total
shares issued and outstanding).
(h) The Nong Min Journal Co., Ltd.
Hungnong International Co., Ltd. shall transfer to the
Shareholders all of the shares in The Nong Min Journal Co.,
Ltd. held by Hungnong International Co., Ltd. (i.e., 9,000
common shares representing approximately 30% of the total
shares issued and outstanding).
6.2 The transfer of the shares set forth in Section 6.1 above shall be made
without payment of any further consideration other than as provided
herein. Any tax liability to be incurred by such share transfer shall
be borne by the party which is primarily liable for such tax under the
relevant tax laws and regulations. To the extent legal and practicable,
and without causing any undue burden, each party hereto shall cooperate
with the other parties to legally reduce taxes caused by this
transaction.
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6.3 The parties agree that (i) Seminis shall provide a loan to Young Il in
the amount of approximately forty-three million (43,000,000) U.S.
Dollars on the Closing Date in accordance with a loan agreement entered
into by and between Seminis and Young Il as of the date hereof ("Young
Il Loan Agreement"), (ii) the Shareholders shall jointly and severally
guarantee Young Il's performance of its obligations under the Young Il
Loan Agreement and shall establish the first priority and perfected
pledge interest, among other things, over 607,013 shares of Hungnong
which are owned by the Shareholders, in accordance with a guarantee and
pledge agreement entered into by and between Seminis and the
Shareholders as of even date hereof ("Young Il Guarantee and Pledge
Agreement", the shares subject to such pledge as described in detail in
Young Il Guarantee and Pledge Agreement shall be referred to as the
"Young Il Pledge Related Shares"), (iii) under the Young Il loan
Agreement, Young Il is obliged to (x) repay the 6 billion loan provided
by Hungnong to Young Il under a loan agreement between Young Il and
Hungnong as of May 14, 1998 within one Banking Day from the Closing,
and (y) clear any and all of the guarantees provided by Hungnong in
connection with the debts owed by Young Il to certain financial
institutions in Korea within thirty (30) days from the Closing, (iv)
the failure by Young Il of its obligations under (iii) above shall
constitute an event of default under the Young Il Loan Agreement, which
in turn entitles the Seminis to enforce its pledge right in accordance
with Young Il Guarantee and Pledge Agreement, and (v) Seminis may
acquire title to the Young Il Pledge Related Shares, if it exercises
its pledge right under the Young Il Guarantee and Pledge Agreement.
6.4 Without waiving or adversely affecting Seminis' rights, under the Young
Il Loan Agreement and Young Il Guarantee and Pledge Agreement as
aforementioned, the Shareholders shall, within thirty (30) days from
the Closing, clear all the cross guarantees provided by Hungnong in
connection with Young Il's debts owed to financial institutions and
shall cause Young Il to repay the 6 billion loan to Hungnong. The
Shareholders shall provide to Seminis a certificate from the
appropriate banks certifying that aforementioned cross guarantees have
been cleared.
Article 7. Seminis' Covenant
7.1 On or soon after the Closing Date, Seminis shall cause Hungnong to
transfer the guest house, which is located in Chochiwon, as more fully
described in Attachment VII hereto (the "Guest House"), to ▇▇▇-▇▇▇▇ ▇▇▇
for no consideration. Notwithstanding any provision herein to the
contrary, the Shareholders shall bear all taxes imposed on the
Shareholders together with any and all transaction costs related to
such transfer. In consideration for the free transfer of the Guest
House to the Shareholders, Hungnong shall be permitted to use the Guest
House for no consideration provided Hungnong shall bear the costs to
maintain the Guest House, such as utility charges therefor. Further.
Hungnong's use shall be similar to the manner in which the Shareholders
and/or Hungnong used the guest house prior to the Closing, or such use
is reasonably necessary to carry out the business of Hungnong. Hungnong
shall also be permitted to use the Guest House for as long as it
desires. Furthermore, the Shareholders shall neither (i) sell the Guest
House to any third party unless they first offer to sell the Guest
House to Seminis or Hungnong for 116,287,073 Won nor (ii) allow any
encumbrances to be placed
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on the Guest House. In addition, immediately after the title transfer
under this Section 7.1, ▇▇▇-▇▇▇▇ ▇▇▇ shall allow a provisional
registration of the transfer of the title to the Guest House in favor
of Hungnong so that it may secure its priority with respect to the
Guest House.
7.2 As long as the Shareholders have not breached a representation or
warranty, covenants or agreement hereunder which requires an indemnity
obligation by the Shareholders in excess of ten (10) billion Won, for a
period of 2 years after Closing, Seminis shall not cause Hungnong to
dilute the Shareholders' interest in Hungnong.
7.3 On or soon after the Closing Date, Seminis shall cause Hungnong to pay
off the loans listed in Attachment VIII.
7.4 If Seminis desires to change the name of Hungnong during the first
three (3) year period after Closing, Seminis shall consult with the
Shareholders prior to such name change; provided however, that Seminis
shall not be bound by such consultation.
Article 8. Shareholders' Covenants
Except as otherwise consented to or approved by Seminis in writing, the
Shareholders covenant to and agree with Seminis as follows:
(a) From the Effective Date, the Shareholders shall cause Hungnong
Companies to conduct their businesses in the ordinary course
of business consistent with sound business practices and
preserve such businesses' structure and organization and their
relationships with their customers, employees, suppliers and
others with whom Hungnong Companies deal;
(b) From the Effective Date to and including the Closing Date, the
Shareholders covenant and agree that none of Hungnong
Companies shall (i) issue any shares or any instruments
convertible into shares (ii) incur any liability or
obligations of any nature (whether accrued, absolute,
contingent or otherwise) except in the ordinary course of
business consistent with sound business practice, (iii) permit
any of their assets to be subjected to any mortgage, pledge,
lien, security interest, encumbrance, restriction or charge of
any kind, (iv) except as otherwise provided herein, sell,
transfer or otherwise dispose of any assets, including to
Affiliate Companies, (v) make any capital expenditure or
commitment therefor, (vi) declare or pay any dividend or make
any distribution on any shares of their capital stock or
redeem, purchase or otherwise acquire any shares of their
capital stock or grant any option, warrant or other right to
purchase or acquire any such shares, (vii) make any bonus or
profit sharing distribution or payment of any kind except in
the ordinary course of business consistent with sound business
practices, (viii) increase their indebtedness for borrowed
money other than borrowing under existing lines of credit or
make any loan to any person, (ix) enter into any new service
or employment agreement, or any renewals thereof, with any
executive employees or other employees, or grant any increase
in the rate of wages, salaries, bonuses or other remuneration
of executive employees or other employees, (x)
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cancel or waive any claims or rights of value, (xi) make any
change in any method of accounting or auditing practice, (xii)
extend any guarantees with respect to the obligations of any
of the other Hungnong Companies or of any third party, or make
any loans or investments in, or enter into any agreement or
arrangement with any of the other Hungnong Companies or third
parties, (xiii) breach any of the agreements entered into with
third parties, (xiv) enter into any transactions among
themselves and/or with the Shareholders, (xv) amend any of
their bylaws or Articles of Incorporation, (xvi) acquire by
merging or consolidating with, or by purchasing the assets of,
or by any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof of otherwise acquire any assets (other than
inventory in the ordinary course of business consistent with
sound business practices), (xvii) agree, whether or not in
writing, to do any of the foregoing or (xviii) enter into any
other material transaction;
(c) Shareholders will, upon reasonable prior notice and during
normal business hours, (i) cause Hungnong Companies to give to
Seminis and its authorized representatives full access to all
plants, farms, offices, warehouses, breeding centers and other
facilities and properties and other assets, and such of the
books and records of Hungnong Companies as are necessary or
appropriate for review in connection with the transactions
contemplated hereby and (ii) cause their and/or Hungnong
Companies' officers, advisers and other representatives to
discuss with Seminis and its authorized representatives the
affairs of Hungnong Companies, as Seminis may from time to
time reasonably request;
(d) The Shareholders will, at any time and from time to time, at
the request of Seminis, make, execute and deliver such
assignments, deeds, bills of sale, fillings, conveyances and
other instruments, agreements, consents and assurances and
take or cause to be taken all action as Seminis may reasonably
request for the consummation or confirmation of the transfers
and other transactions contemplated by this Agreement;
(e) From the Effective Date until the Closing Date, Shareholders
shall not, and shall ensure that Hungnong Companies will not,
approve, assist, negotiate, or discuss with any third party to
purchase any shares in Hungnong Companies through whatever
means; and
(f) Shareholders shall cause Hungnong to issue the share
certificates representing the New Shares which shall bear the
date, and be delivered to Seminis, on the date immediately
following the Closing Date.
Article 9. Conditions Precedent to Closing
The Closing contemplated under this Agreement shall be subject to and
conditioned upon satisfaction of the following:
16
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(a) the Government Approvals (as defined in Article 10) should
have been obtained in form and substance satisfactory to both
parties;
(b) all representations and warranties of the Shareholders and
Seminis contained in this Agreement were true when made and
shall be true in all respects as of the Closing Date as if
such representations and warranties were made at and as of
such Closing Date;
(c) Shareholders and Seminis should both have performed and
complied with and should not have breached any agreements and
covenants required by this agreement to be performed or
complied with by them on or prior to the Closing Date;
(d) no action or proceeding shall have been instituted or
threatened before any court or other governmental body or by
any public authority seeking to restrain or prohibit any of
the transactions contemplated by this agreement;
(e) since the Effective date, there shall not have been (i) any
material adverse change in the condition (financial or
otherwise) or prospects of Hungnong Companies, or (ii) any
change in political circumstances, laws and regulations that
will make the transactions contemplated by this agreement
impractical or illegal;
(f) Seminis shall have completed an initial review with respect to
the transactions contemplated by this Agreement, including,
without limitation, legal, financial, accounting,
environmental, operational and engineering matters concerning
Hungnong Companies;
(g) The Shareholders shall have completed the restructuring of
Affiliate Companies, as provided in Section 6.1, hereof, shall
have sent a written notice to Seminis of such restructuring,
and shall make available to Seminis satisfactory evidence of
such restructuring;
(h) The Shareholders shall cause all of the directors (registered
and non-registered) and the statutory auditors of Hungnong
Companies to submit the resignation letters as of the closing
Date and shall cause Hungnong to convene the shareholders
meeting as of the closing Date and shall, as proposed by
Seminis, elect new directors and statutory auditors, and amend
the articles of incorporation; and
(i) The Shareholders shall cause each of Young Il Chemical Co.,
Ltd., Simon telecom Co., Ltd., and Sehung Finance Co., Ltd.
and the Nong Min Journal Co., Ltd. to provide Seminis and the
Remaining Hungnong Companies with a release and
indemnification, the form of which is attached hereto as
Attachment IX.
Each party hereunder may, in its sole discretion, waive any one or more of the
conditions precedent required by this Article for such party's benefit. Such
waiver shall not have any effect on the other party's responsibilities and
liabilities under the representations, warranties, covenants and agreements made
hereunder.
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Article 10. Government Approvals
10.1 Shareholders and Seminis shall cooperated in filing all necessary
reports with and obtaining approvals from the government agencies or
public authorities required for execution of this agreement and
consummation of any transaction contemplated hereunder, including but
not limited to the following:
(a) The approval of the transfer of the Purchased Shares from the
Ministry of finance and Economy ("MOFE") in accordance with
the Foreign Investment and Foreign capital Inducement Law;
(b) Filing of report with, and acceptance by, a foreign exchange
bank, in connection with Seminis; acquisition of New Shares in
accordance with the Foreign Investment and Foreign Capital
Inducement Law;
(c) The approval from the Fair Trade Commission for the
acquisition of the Purchased Shares pursuant to the Monopoly
Regulation and Fair Trade Law;
(d) The approval form MOFE for Young Il Loan Agreement and Young
Il Guarantee and Pledge Agreement.
The reports and approvals described in this Article are herein
collectively referred to as "Government Approvals.".
10.2 Notwithstanding any provision in this Agreement to the contrary, the
parties hereto agree to seek the approval from the Fair Trade
Commission set forth in Section 10.1(c) above after the Closing.
Therefore, although the Shareholders and Seminis shall fully cooperate
with each other to obtain such approval, it shall not be a condition
precedent for purposes of Article 9 hereof.
Article 11. Management of Hungnong
11.1 From the Effective Date until the closing Date, the Shareholders shall
ensure that a representative to be appointed by Seminis
("Representative") be consulted with before any of Hungnong Companies
makes any management decisions through their board of directors' or
shareholders' meetings or otherwise.
11.2 From the closing Date and for so long as the Shareholders maintain a
30% interest in Hungnong, (i) the shareholders shall have the right to
appoint up to but not exceeding 30% of the total board members of
Hungnong, (ii) there shall be at least four (4) directors on the board
of Hungnong, and (iii) the Shareholders and Seminis shall each appoint
one non-standing statutory auditor. The non-standing auditors shall not
receive any compensation from Hungnong.
11.3 Unless otherwise required by Korean law, board and shareholders'
resolutions of Hungnong shall be adopted by affirmative vote of the
simple majority of all directors and all outstanding shares,
respectively.
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11.4 Seminis shall cause Hungnong to appoint ▇▇▇-▇▇▇▇ ▇▇▇ as the Honorary
Chairman of Hungnong for a period of 7 years from the closing Date;
provided, however if the period of non-compete as provided in Article
13 hereof is reduced contractually or by operation of law, the period
of the Honorary Chairman shall be reduced likewise. The title of
Honorary chairman shall to confer upon ▇▇. ▇▇▇-▇▇▇▇ ▇▇▇ any corporate
powers, such as the authority to represent for bind Hungnong or
Hungnong's board of director. During Mr. Duk-hoon ▇▇▇'▇ tenure as
Honorary Chairman he will receive an annual compensation of 100 million
(100,000,000) Won, the use of a company car and driver, a secretary,
and an office.
Article 12. Indemnification
12.1 by Shareholders. With respect to the representations and warranties,
covenants and agreements provided herein, any breach thereto shall
first be resolved by making appropriate adjustments to the Purchase
Price in accordance with Article 2. The shareholders shall indemnify
and hold Seminis or Hungnong and their directors, officers, employees,
agents and representatives harmless from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable
legal fees and expenses), and taxes ("Losses") arising from any false
or misleading representation and warranty, a covenant or agreement made
by shareholders hereunder. Further, any Losses incurred directly by
Seminis as a result of any breach by the shareholders of any
representation, warranty, covenants and agreements hereto, shall be
fully indemnified by the Shareholders; however, if Hungnong incurs such
Losses, the shareholders shall either (i) fully indemnify Hungnong for
the entire amount of the Losses or (ii) fully indemnify Seminis for 70%
of the Losses of Hungnong provided the Shareholders have maintained a
30% interest in Hungnong (if the Shareholders' interest in Hungnong
falls below 30%, the Losses for which Seminis shall be indemnified
shall be increased in inverse proportion to the Shareholders'
interest). Notwithstanding any provision contained herein to the
contrary, if the shareholders breach any of the obligations as set
forth in Section 6.4, and paragraphs 1,2,5,6,7,16,29, and 30 of
Attachment III, any all Losses arising from such breach will not be
limited by the amount of the Purchase Price.
12.2 By Seminis. Seminis shall indemnify and hold Shareholders and their
directors officers, employees, agents and representatives harmless from
and against any and all reasonable legal fees and expenses), arising
from any false or misleading representation and warranty or breach of
covenant by Seminis under this Agreement.
12.3 Survival. The indemnities contained in this Article 12, as well as the
underlying representations and warranties, shall survive the closing of
this Agreement and any adjustments to the Purchase Price . Any claim by
any of the parties hereof for indemnification must be made in writing
an delivered to the other party allegedly liable for such damages.
Article 13. Non-Competition
The Shareholders shall not compete against the business of Remaining Hungnong
Companies, wither directly or indirectly, for a period of 7 years. Further, the
shareholders will dissolve,
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transfer or otherwise terminate all companies or entities engaged in the seed
related businesses owned or controlled directly or indirectly, by the
Shareholders including but not limited to he Seohai Distribution Company.
Article 14. Right of First Refusal
14.1 If any party hereto desires to sell, assign or otherwise transfer all
or any portion of its shares in Hungnong, such party ("Selling Party")
shall offer all such shares by written notice first to the other party
("Offeree") specifying price, terms and conditions of sale.
(a) If Offeree does not accept the offer within sixty (60) days
from the date of the receipt of such offer ("Acceptance
Period"), then the Selling Party shall thereafter be free to
dispose of its shares within a period of sixty (60 ) days
("Free Sale Period") after the expiration of said acceptance
Period; provided, however, that the selling Party shall not
sell such shares to any third party either (i) at a lower
price than the price at which such shares were offered to
Offeree, or (ii) on other terms or conditions more favorable
than those on which shares were offered to Offeree, except for
such other terms and conditions as are reasonably necessary to
meet foreign exchange or foreign investment regulations of
Korea.
(b) If the shares are not sold or transferred to third parties
upon the terms established herein and within the Free Sale
Period, then they shall automatically become subject once more
to the terms of this Article 14 as if they had never before
been offered for sale.
(c) Offeree shall have the right to designate a third party
acceptable to the Korean Government who may exercise the right
granted to Offeree under this Article 14.
14.2 Notwithstanding anything to the contrary herein, any sale or transfer
contemplated by this Article 14 shall be subject to Government
Approval, if required. If necessary, the Acceptance period and/or the
Free Sale Period referred to in Section 14.1 above shall be extended
until such Government Approval has been obtained or officially and
finally denied, provided that the party seeking to extend such
Acceptance Period shall have used its reasonable efforts in soliciting
such Government Approval.
14.3 Notwithstanding any other rights which may be granted by this agreement
or otherwise, the shareholders hereby agree that they shall not sell or
otherwise transfer, or cause to be sold or transferred, its ownership,
or any part of its ownership, in Hungnong to a potential competitor of
Hungnong or Seminis or any other person or entity whose participation
in Hungnong might interfere with t he business of Hungnong and/or
Seminis.
14.4 If the selling Party shall sell or otherwise transfer all or any part
of his, her or its shares to a third party (other than Offeree's
designee), pursuant to the terms of this Article 14, such Selling Party
shall cause the third party acquiring such shares, as a condition of
such acquisition, to furnish written undertaking to Offeree and
Hungnong agreeing to observe and be bound by all provisions of this
agreement as if it had executed this agreement in place of the party
who sold the shares. In addition, such selling Party shall (so long as
he, she or they own(s) any shares in Hungnong) be responsible to
Offeree in respect of such
20
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purchaser or transferee, to secure complete and timely observance of
the provisions of this Agreement by such purchaser or transferee.
14.5 Either party shall not pledge or hypothecate the shares of Hungnong or
otherwise use them as collateral or for any other purpose which could
result in an involuntary transfer or assignment of such party's shares
to third parties, endless consent to such pledge, hypothecation or
other application has been received in writing from the other party.
14.6 Notwithstanding any other provision contained herein to the contrary,
Seminis shall have the right to transfer its shares in Hungnong to
Seminis' affiliates ("Seminis' Affiliates") without having to comply
with this Article 14. "Seminis' Affiliates" shall mean any partnership,
joint venture, corporation or other form of enterprise that directly or
indirectly controls, is controlled by, or is under common control with,
such Seminis. For purposes of this Section 14.6, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, partnership,
joint venture, corporation or other form of enterprise, whether through
the ownership of voting securities, by contract or otherwise.
Article 15. Dispute Resolution
15.1 The parties hereto agree to carry out this Agreement in a spirit of
mutual cooperation and good faith, and that they shall attempt to
resolve any differences, disputes or controversies which may arise
between them amicably. As to any disagreement, dispute, controversy or
claim arising out of or relating this agreement, or the interpretation
hereof or any arrangements relating hereto or contemplated herein or
the breach, termination or invalidity thereof which cannot be resolved
amicably, both parties shall submit to the exclusive jurisdiction of
the Seoul District Court.
15.2 Notwithstanding the foregoing Section 15.1, if the parties hereto
cannot agree as to the amount of the Adjustments to the Purchase Price,
the parties shall resolve their differences in the following manner:
a. Seminis shall name two from the following Korean affiliates of
the six accounting firms: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Coopers & ▇▇▇▇▇▇▇,
Deloitte & Touch, Ernst & Young, KPMG, and Price Waterhouse;
provided, however, that Seminis shall not name those firms
which provided services to either party hereof in the
transactions contemplated herein.
b. The Shareholders shall choose one of the two accounting firms
selected by Seminis (the "Arbitrator") within one week after
Seminis' selection. If the shareholders fail to choose the
Arbitrator within such period of time, Seminis shall have the
right to choose the Arbitrator.
c. The Shareholders and Seminis shall each submit a report to the
Arbitrator indicating the proposed amount of Adjustments
within two weeks after the selection of the Arbitrator. If
either the Shareholders or Seminis fails to submit such a
report within such period of time, the other party's report
will be automatically adopted by the Arbitrator.
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d. The Arbitrator shall select the report which is closer to the
Arbitrator's calculation of the Adjustments within one month
after the submission of the reports. The Arbitrator shall not
make any modifications to the reports submitted by the
parties, but shall select one of the reports as is.
e. The parties hereof shall be bound by the report which is
selected by the Arbitrator as the final decision as to the
Adjustments.
f. Notwithstanding Section 2.1 hereof, if an adjustment cannot be
completed within one year from Closing due to an unresolved
dispute as to the amount of the Adjustments, the period during
which Adjustments can be made shall be extended until such
time such dispute has been resolved in accordance with this
Section 15.2.
Article 16. Taxes
Each party shall be liable for taxes primarily attributable to that party, under
the relevant tax laws and regulations. If, for any reason, a party that is not
primarily liable is required to pay the other party's taxes (and costs
associated therewith), the party which paid the taxes shall be fully indemnified
by the other party for such taxes (and costs) paid.
Article 17. Relationship among the Shareholders
For purposes of this Agreement, the shareholders shall be considered one party.
Each of the Shareholders shall be jointly and severally responsible for all
obligations and covenants hereunder and jointly and severally liable for any and
all damages or liabilities relating to this agreement. The Shareholders hereby
irrevocably appoint ▇▇. ▇▇▇-▇▇▇▇ ▇▇▇ as their representative with full power and
authority to act vis-a-vis Seminis on behalf each of them in relation to this
Agreement, including but not limited to conducting negotiations and entering
into agreements with, receiving payments from, and delivering or receiving any
notice to or from, Seminis. Any money or consideration payable to the
Shareholders under this agreement or under the Escrow Agreement shall be paid to
an account designated by the Shareholders. Seminis shall not bear any
responsibility connection with, the payment to ▇▇. ▇▇▇-▇▇▇▇ ▇▇▇ or with respect
to the fairness or fraud in connection with the subsequent distribution among
the Shareholders.
Article 18. Entire Agreement
This Agreement, together with other agreements specifically mentioned herein,
contains the entire understanding between the parties hereto with respect to the
subject matter contained in the respective agreements and supersede all prior
agreements and undertaking s between the parties hereto.
Article 19. Confidentiality
Each party hereto shall keep confidential and not use, reveal, provide or
transfer to any person any information it obtains or has obtained concerning the
transactions contemplated by this Agreement, and in the case of the
Shareholders, any information related to the business and operation of Remaining
Hungnong Companies, except: (i) to the extent that disclosure to a third
22
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party is required by applicable law or regulation; (ii) to the extent that
disclosures to a third party am be strictly necessary in connection with the
execution or performance of this Agreement; (iii) information which, at the time
of disclosure, is generally available to the public (other than as a result of a
beach of this Agreement), as evidenced by generally available documents or
publications; (iv) disclosures to their respective directors, officers,
employees, agents and advisors, who need to know or have access to such
information; (v) information that was in the possession of the recipient prior
to disclosure (as evidenced by appropriate written materials) and was not
acquired directly or indirectly from the disclosing party; (vi) Seminis may
release such confidential information to its subsidiaries and affiliates for the
purpose of developing the seed business of Hungnong.
The term "information" shall include information concerning the property,
operations, business and proprietary, confidential, trade secrets and other
non-public information and data.
Prior to closing, neither party may declare or conduct a press release
announcing the transactions contemplated herein without the consent of the other
party.
Article 20. Further Assurances
From time to time after the Effective Date, each party at the request of the
other party and without further consideration, agrees to execute and deliver at
its expense such other documents and instruments and take such other action as
reasonably may be requested so as to more effectively achieve the objectives of
this Agreement.
Article 21. Notices
All notices, consents and other communications under this agreement shall be in
writing and shall be deemed to have been duly given (a) when delivered by hand,
(b) when sent by telecopier (with receipt confirmed), provided that a copy is
promptly thereafter mailed by first class postage prepaid registered or
certified mail, return receipt requested, (c) when received by the addressee, if
sent by air courier (receipt requested) or by such other means as the parties
may agree from time to time or (d) twenty (20) business days after being mailed,
by first class postage prepaid registered or certified mail, return receipt
requested; in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate as to itself by notice to the other party):
(a) if to Shareholders:
▇▇▇-▇▇▇▇ ▇▇▇
▇▇▇▇-▇▇ ▇▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇-▇▇, ▇▇▇▇▇, ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇▇-▇▇▇▇
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(b) if to Seminis:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Seminis, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Article 22. Force Majeure
If the performance of any party is affected by any event of force majeure,
including act of God, actions or directive of a court or public authority or
government, war or civil disturbance, fire, explosion, flood, shortage of fuel,
power or raw materials, disruption of transportation or communications, strikes
or other labor disruption, failure or destruction of machinery or equipment, or
any other natural or man-made event beyond the reasonable control of such party,
such party shall immediately notify the other parties, in writing, giving
details of the majeure shall be suspended only for as long as the event of force
majeure continues, but the parties shall consult and will use their best efforts
to find alternative means of accomplishing such performance. Immediately upon
cessation of the event of force majeure, the part affected by force majeure will
notify the other parties in writing and will take steps to recommence or
continue the performance that was suspended.
Article 23. No Waiver
The delay or failure on the part of any party hereto to insist, in any one
instance or more, upon strict performance of any of the terms or conditions of
this agreement, or to exercise any right or privilege herein conferred shall not
be construed as a waiver of any such terms, conditions, rights or privileges but
the same shall continue and remain in full force and effect. All rights and
remedies shall be cumulative.
Article 24. Section Headings
The article, section and clause headings contained in this agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this agreement.
Article 25. Counterparts
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.
Article 26. Severability
In case any provision of this agreement shall be held invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this agreement will not in any way be affected or impaired
thereby.
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Article 27. Parties in Interest
This Agreement shall insure to the benefit of and be binding upon the
shareholders and Seminis and their respective affiliates, successors and
assigns, but subject to Article 14, may not be assigned or otherwise transferred
by operation of law or otherwise without the prior written consent of ally the
parties hereto and except as specified herein shall not create any rights on the
part of any other person. Any such assignment or transfer without such consent
shall be void.
Article 28. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of
republic of Korea.
Article 29. Language
The English language text of this Agreement shall prevail over any translation
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized representatives as of the date first hereinabove
set forth.
SHAREHOLDERS:
Name: ▇▇▇-▇▇▇▇ ▇▇▇
Name: Suk-▇▇▇▇ ▇▇▇
Attorney-in-fact: ▇▇▇-▇▇▇▇ ▇▇▇
Name: Duk-in ▇▇▇
Attorney-in-fact: ▇▇▇-▇▇▇▇ ▇▇▇
Name: ▇▇▇-▇▇▇ ▇▇▇
Attorney-in-fact: ▇▇▇-▇▇▇▇ ▇▇▇
Name: ▇▇▇▇-▇▇▇▇ ▇▇▇
Attorney-in-fact: ▇▇▇-▇▇▇▇ ▇▇▇
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Name: Ai-▇▇▇ ▇▇▇
Attorney-in-fact: ▇▇▇-▇▇▇▇ ▇▇▇
Name: Won-▇▇▇▇ ▇▇▇
Attorney-in-fact: ▇▇▇-▇▇▇▇ ▇▇▇
SEMINIS, INC.:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorney-in-fact
Reviewed and Accepted:
HUNGNONG SEED CO., LTD.
Name:
Title: