SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and Rule
13e-3 thereunder)
______________________________
BIOTECHNICA INTERNATIONAL, INC.
(Name of Issuer)
LIMAGRAIN GENETICS CORP.
BTI MERGER CORP.
(Name of Persons Filing Statement)
______________________________
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
______________________________
090915109
(CUSIP Number of Class of Securities)
______________________________
Bruno Carette
4001 North War Memorial Drive
Peoria, Illinois 61614
(309) 681-0300
with copies to:
Kevin R. Sweeney, Esq.
Shook, Hardy & Bacon L.L.P.
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105-2118
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and
Communications on Behalf of Persons Filing Statement)
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH
TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This statement is filed in connection with (check the appropriate box):
a. [ ] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c)
under the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933.
c. [ ] A tender offer.
d. [x] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [ ]
Calculation of Filing Fee
- -----------------------------------------------------------------------
Transaction valuation* Amount of filing fee**
$238,920 $48
- -----------------------------------------------------------------------
* Calculated, for purposes of determining the filing fee only, and in
accordance with Rule 0-11(b)(2) under the Securities Exchange
Act of 1934, as amended, by multiplying 4,778,399 (the number
of shares of Common Stock held by stockholders other than
Limagrain Genetics Corp., BTI Merger Corp. or the issuer) by
$.05, the price to be paid per share.
** Calculated as 1/50 of 1% of the transaction value (minimum filing
fee).
[ ] Check box if any part of the fee is offset as provided by Rule 0-11
(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
Amount Previously Paid: Not applicable
Form or Registration No.: Not applicable
Filing Party: Not applicable
Date Filed: Not applicable
INTRODUCTION
This Introduction is qualified in its entirety by the more detailed
information appearing elsewhere in this Transaction Statement. Investors
should carefully consider the information set forth under the caption "Special
Factors."
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Transaction Statement") is being filed jointly by Limagrain Genetics Corp., a
Delaware corporation ("LG Corp.") and BTI Merger Corp., a Delaware
corporation and wholly-owned subsidiary of LG Corp. ("Mergerco"). LG Corp.
is a majority-owned subsidiary of Groupe Limagrain Holding S.A., a societe
anonyme organized in the Republic of France ("Limagrain"). All of the shares
of Limagrain are held by Societe Cooperative Agricole Limagrain, a
cooperative organized in the Republic of France (the "Cooperative").
Limagrain and its affiliates are referred to herein collectively as the
"Limagrain Group". LG Corp. is a holding company for the operations of the
Limagrain Group in North America. Mergerco is a newly incorporated corporation
organized to effect the Merger (as defined herein).
Mergerco owns approximately 95% of the common stock of
BioTechnica International, Inc., a Delaware corporation (the "Company"). The
Company will be merged with and into Mergerco pursuant to Section 253 of
the General Corporation Law of the State of Delaware (the "DGCL") via a
"short form merger" (the "Merger"). Under the DGCL, because Mergerco
owns more than 90% of the Company, no action will be required of the
stockholders of the Company, other than Mergerco (through its board of
directors), for the Merger to become effective. The effective date of the
Merger will be [date] (the "Effective Date"). Prior to the consummation of
the merger, LG Corp. and Mergerco reserve the right to cancel the
merger for any reason, including without limitation if (i) any stockholder
of the Company seeks to enjoin the merger or (ii) in their judgment, the
anticipated cost of the merger would be materially increased by the
number of stockholders of the Company seeking their appraisal remedy.
Mergerco will be the surviving corporation in the Merger and, as
a result of the Merger, the separate corporate existence of the Company will
cease to exist. Upon consummation of the Merger, each of the outstanding
shares of common stock of the Company (other than shares held by
Mergerco, the Company and holders who properly exercise dissenters' rights
under the DGCL) will be automatically converted into the right to receive $.05
in cash, without interest, upon surrender of the certificate for such share to
Harris Trust and Savings Bank (the "Paying Agent"). Both the redemption
procedure and the statutory appraisal rights are described in fuller detail
in the Notice of Merger and Appraisal Rights and the accompanying Letter of
Transmittal, which documents accompany this Transaction Statement and
should be studied with care.
SPECIAL FACTORS
THE INFORMATION CONTAINED IN ITEMS 7, 8 AND 9 OF THIS
TRANSACTION STATEMENT CONSTITUTE SPECIAL FACTORS, AND
SPECIAL CONSIDERATION SHOULD BE GIVEN THERETO.
Item 1. Issuer and Class of Security Subject to the Transaction
The name of the issuer is BioTechnica International, Inc., a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is 4001 North War Memorial Drive, Peoria, Illinois
61614. The exact title of the class of security which is the subject of the
Rule 13e-3 transaction is common stock, par value $.01 per share (the "Common
Stock"). The number of shares of Common Stock outstanding as of
September 1, 1998 was 103,055,577 and the approximate number of holders
of record as of September 1, 1998 was 516.
Prior to April 17, 1997, the Common Stock was traded on the
National Association of Securities Dealers National Market System (the
"NMS") under the symbol BIOT. On that date the Common Stock was de-
listed due to the failure of the Company to maintain the NMS's Tangible Net
Worth requirement of $4,000,000 as of December 31, 1996 and the failure to
meet the minimum bid price or alternative minimum bid price requirements.
This action was taken after appeals by the Company to remain listed on the
NMS. These appeals were denied by the NMS. Since April 17, 1997, the
Common Stock has been traded on the Over-the-Counter Electronic Bulletin
Board sponsored by the National Association of Securities Dealers. The
Common Stock has retained the BIOT trading symbol.
The following table sets forth, for the fiscal quarters indicated, the
high and low sale prices per share of Common Stock during the past two
years.
Period Covered High Close Low Close
Fiscal 1999
First Quarter through September 18, 1998 $0.1000 $0.0210
Fiscal 1998
Fourth Quarter Ended June 30, 1998 $0.1300 $0.0800
Third Quarter Ended March 31, 1998 0.1875 0.0625
Second Quarter Ended December 31, 1997 0.5000 0.0625
First Quarter Ended September 30, 1997 0.1875 0.0625
Fiscal 1997
Fourth Quarter Ended June 30, 1997 0.2500 0.0700
Third Quarter Ended March 31, 1997 0.3750 0.1250
Second Quarter Ended December 31, 1996 0.5000 0.1250
First Quarter Ended September 30, 1996 0.7500 0.3750
The source of these prices is from the NMS for the period prior to April 17,
1997 and from America Online stock quotation data for the period subsequent
to that date. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE COMMON STOCK.
The Company has never declared or paid dividends. The
Company's debt agreements prohibit the payment of dividends in excess of
current income.
Neither the Company nor any affiliate filing this Transaction
Statement has made an underwritten public offering of the Common Stock for
cash during the past 3 years which was registered under the Securities Act of
1933 or exempt from registration thereunder pursuant to Regulation A.
Since June 30, 1996, the Company has engaged in the following
repurchase transactions with respect its Common Stock: (i) on June 6, 1997,
the Company repurchased 11,324,051 shares of Common Stock for an
aggregate purchase price of $181,184.81 ($0.016 per share) and (ii) on
February 2, 1998, the Company repurchased 1,000,000 shares of Common
Stock for an aggregate purchase price of $10,000 ($0.01 per share). Since
June 30, 1996, no affiliate of the Company has purchased any Common
Stock.
Item 2. Identity and Background
This Transaction Statement is being filed jointly by LG Corp. and
Mergerco, each of which are Delaware corporations. The address of the
principal executive offices of LG Corp. and Mergerco is 4001 North War
Memorial Drive, Peoria, Illinois 61614.
LG Corp. is a majority-owned subsidiary of Limagrain. All of the
shares of Limagrain are held by the Cooperative. The Limagrain Group
engages in seed research, seed production and seed marketing, as well as
biotechnology research and applications. LG Corp. is a holding company for
the operations of the Limagrain Group in North America. Mergerco is a newly
incorporated corporation organized to effect the Merger. Upon consummation
of the Merger, Mergerco will be a wholly-owned subsidiary of LG Corp.
The executive officers and directors of the Cooperative are set forth
in Appendix I attached hereto. The executive officers and directors of
Limagrain are set forth in Appendix II attached hereto. The executive officers
and directors of LG Corp. are set forth in Appendix III attached hereto. The
executive officers and directors of Mergerco are set forth in Appendix IV
attached hereto.
During the last five years, neither the Cooperative, Limagrain, LG
Corp., Mergerco nor any of their executive officers or directors, has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations
Past Transactions
The Company has contractual relationships with a number of other
Limagrain affiliated companies. The terms of these contracts are negotiated
annually between the Company and each individual affiliated company. The
Company's management believes that such contracts (i) are reasonable,
necessary and in the best interests of all of the stockholders of the Company,
and (ii) are on terms no less favorable to the Company than the Company
could obtain from non-affiliated third parties or on which the Company could
internally perform the services provided in such contracts. The Audit
Committee of the board of directors of the Company has independently
reviewed the basis for these contracts and has recommended that the board
of directors of the Company approve and ratify such contracts as are in effect.
The board of directors of the Company, including all of the Directors
unaffiliated with Limagrain, has unanimously voted to approve and ratify such
contracts as are in effect for the current fiscal year. Since June 30, 1996,
the only material transactions between the Company, on the one hand, and
Limagrain, LG Corp., Mergerco, or their respective executive officers,
directors, controlling persons or subsidiaries, on the other hand, have been
the following:
- - The Company produces and sells seed corn grown in the United
States to affiliates of Limagrain in Europe. These agreements are
renegotiated each year, based on product conditions at the time,
availability of extra capacity at the Company's production and
processing facilities, and the needs of the European affiliates of
Limagrain. Such negotiations are conducted on an arms-length
basis by management of the Company and a representative of the
respective affiliate. These agreements specifically identify the
product to be produced by the Company, the quantity to be
purchased, and the quality and specifications for that product. The
Company's management believes that these contracts are a
benefit to the Company in that they cover the variable costs
involved, contribute to absorbing fixed operating costs and
augment the profits of the Company. The total sales made under
these contracts amounted to $2,984,000 during fiscal year 1998
and $2,977,000 during fiscal year 1997.
- - The Company has entered into an agreement with LG Corp. to
allow the Company to market various proprietary hybrid corn
genetics developed through the LG Corp. research program. In
exchange for the right to sell these proprietary genetics, the
Company has agreed to pay royalties to LG Corp. The amount of
these royalties was approximately $87,000 for fiscal year 1998 and
approximately $71,000 for fiscal year 1997. The Company's
management believes the royalties paid under this agreement are
as or more favorable to the Company as compared to the royalties
paid in the seed corn industry generally for the use of proprietary
genetic material.
- - The Company has entered into an agreement with LG Corp. to
allow the Company to market various proprietary soybean products
developed through LG Corp.'s soybean research program. In
exchange for the right to sell these products, the Company has
agreed to pay royalties to LG Corp. The amount of these royalties
for fiscal year 1998 was approximately $31,000 and approximately
$44,000 for fiscal year 1997. LG Corp. makes the same type of
products available to non-affiliated competitor companies in the
seed industry. The Company's management believes the royalty
rates charged to the Company are as favorable to the Company as
compared to the royalty rates charged to non-affiliated customers
of LG Corp. and as compared to royalty rates that the Company
pays to non-affiliated suppliers.
- - The Company has entered into an agreement with BIOCEM S.A.
("BIOCEM") (an affiliate of Limagrain) to provide access to the
biotechnology research conducted by Limagrain around the world.
Through this agreement, the Company not only has access to the
results of the research but also has the right to propose topics for
future study. The Corporation paid $50,000 to BIOCEM under the
terms of this agreement for each of fiscal year 1998 and fiscal year
1997. The Company's management believes that the fees paid
pursuant to this agreement are as or more favorable to the
Company as compared to (i) the fees that the Company would
have to pay to a non-affiliated party for substantially similar
services and (ii) the costs required to perform such services
internally.
- - The Company has entered into an agreement with Limagrain
whereby Limagrain will provide various administrative, financial and
accounting services to the Company that the Company does not
otherwise provide for itself. Significant items covered under this
agreement are:
Guarantee of Debt
Limagrain and LG Corp. each guarantee the Company's line of
credit with its principal bank. Without this guarantee, the
Company's management believe that the Company would be
unable to borrow operating funds at the at the rates available to it,
if at all.
Strategic planning and control
Limagrain monitors the economic environment of the Company,
and the seed industry in general, and provides advice and
guidance to management in developing long-term plans and
objectives. In addition, Limagrain assists in the preparation and
review of the annual long-term planning documents of the
Company.
Human resources and benefits
Limagrain provides assistance to the Company in the form of
recruitment services, career evaluation, training opportunities, and
compensation evaluation. In addition, Limagrain coordinates and
evaluates the benefit programs offered by Limagrain companies
in North America.
Financing/treasury activities
Limagrain provides technical support for the Company's
negotiations with its bankers. In addition, Limagrain provides
short-term financing to the Company to meet cash flow
requirements. Limagrain has been critical in negotiating favorable
interest rates and financing terms.
Auditing services
Limagrain assists the Company in negotiations with its outside
auditors regarding the cost of services. Limagrain also provides
internal audit services to the Company.
The Corporation paid $150,000 to Limagrain under this service
agreement for each of fiscal year 1998 and fiscal year 1997. The
Company's management believes that the fees paid pursuant to this
agreement are as or more favorable to the Company as compared to
(i) the fees that the Company would have to pay to a non-affiliated
party for substantially similar services and (ii) the costs required to
perform such services internally.
- - The Company has entered into an agreement with Limagrain Genetics
International ("LGI") (an affiliate of Limagrain) whereby LGI will
provide various administrative, technical and marketing services to the
Company. LGI is the "division" of Limagrain responsible for the
operations of the Company.
Board of Directors
In their capacity as Board members of LGI, five directors of LGI
are representatives of Limagrain on the board of directors of the
Company. No fees or costs are paid by the Company for the
services of these directors.
Research
LGI coordinates the traditional plant breeding programs of the
Company for the crops the Company markets. The Company
receives information on the results of these activities and has the
opportunity to provide suggestions on potential avenues of future
research.
Product Development
LGI (through LG Corp.) conducts extensive product testing and
field trial analysis throughout the Midwest. The results of these
tests are provided to the Company at no charge. This information
is used by the Company to decide on future and current product
offerings.
Marketing planning
LGI provides advice and planning services to the Company in
regard to the development of business and marketing plans and
strategies.
Export Sales Contacts
LGI, through its contacts with the Limagrain Group, assists the
Company in obtaining export sales contracts.
Administrative/accounting support
LGI provides expertise to the Company in monitoring short-term
planning and month-to-month financial analysis and control.
Brand name
LGI allows the Company to use the "LG" brand name and logo in
its marketing efforts.
The Company paid $200,000 to LGI under this service agreement for
fiscal year 1998 and $100,000 for fiscal year 1997. The Company's
management believes that the fees paid pursuant to this agreement
are as or more favorable to the Company as compared to (i) the fees
that the Company would have to pay to a non-affiliated party for
substantially similar services and (ii) the costs required to perform
such services internally.
- - LGI pays retirement and certain other benefits provided for under
French law on behalf of French citizens employed by the Company.
The Company reimburses these benefit costs to LGI. For fiscal year
1998, these costs amounted to $61,000 and provided benefits for two
employees of the Company, and $62,000 for fiscal year 1997 and
provided benefits for two employees.
- - The Company has entered into an agreement with Nickerson SA
("Nickerson") (an affiliate of Limagrain) whereby the Company will
provide office space and one employee to Nickerson for use in
monitoring its business in the United States. The agreement also
calls for the Company to pay invoices on behalf of Nickerson, which
Nickerson reimburses to the Company on a monthly basis. Under the
terms of this agreement, in addition to the reimbursement of direct
expenses as described above, Nickerson was invoiced $43,000 and
$47,000 by the Corporation for fiscal year 1998 and fiscal year 1997,
respectively.
- - The Company has provided various accounting, administrative and
human resource services to LG Corp. beginning in November 1997.
LG Corp. reimbursed the Company for actual amounts spent on its
behalf.
- - At June 30, 1998, LG Corp. had five outstanding loans to the
Company: (i) a two-year note in the amount of $3,260,846. The note
is subordinated to all debt outstanding to the Company's principal
bank. The note bears interest at five percent (5%) per annum and is
due July 1, 2000; (ii) a two-year note in the amount of $1,000,000.
The note is subordinated to all debt outstanding to the Company's
principal bank. The note bears interest at five percent (5%) per
annum and is due July 1, 2000; (iii) a two-year note in the amount of
$1,000,000. The note bears interest at five percent (5%) per annum
and is due July 1, 2000; (iv) a two-year note in the amount of
$1,500,000. The note is subordinated to all outstanding debt to the
Company's principal bank. The note bears interest at Canadian prime
plus .18%, or 6.5%, whichever is lower, and is due July 1, 2000; and
(v) a demand note in the amount of $3,000,000. The note bears
interest at Canadian prime plus .18% or 6.5%, whichever is lower, and
is due at any time within 10 days notice. In addition, from time to time
during fiscal year 1998, LG Corp. and other Limagrain affiliates
advanced cash to the Company to allow the Company to meet
covenants under the revolving credit arrangement with its principal
bank. The Company reimbursed LG Corp. and other Limagrain
affiliates for actual interest costs and fees incurred to borrow these
funds or paid interest at the same rate at which LG Corp. or such
Limagrain affiliate could have invested these funds in short-term
investments. As of June 30, 1998, LG Corp. had advanced $600,000
to the Company, repayable on demand, bearing interest at 5%, the
rate at which LG Corp. could have invested this amount with its bank
on a short-term basis. The Company's management believe these
loans bear interest at or below a rate which the Company would be
able to obtain from an unaffiliated lender for an unsecured loan.
- - The Company, LG Corp., and each of LG Corp.'s other subsidiaries
entered into a Tax Sharing Agreement as of November 30, 1994.
The purpose of this Tax Sharing Agreement is to provide for an
annual system of allocating federal tax liabilities and certain state and
local tax liabilities of LG Corp., the Company, and each of LG Corp.'s
other subsidiaries for purposes of computing each member's annual
earnings and profits and making cash payments between the
members to reflect the allocation of such tax liabilities. Generally, the
parties to the Tax Sharing Agreement have agreed to allocate their
consolidated income tax liabilities in accordance with the method
provided in Section 1552 (a) (1) of the Internal Revenue Code, as
amended, and the regulations promulgated thereunder.
Past Contacts
On September 24, 1997, the Company issued a press release noting
that (i) because LG Corp. held 94% of the Company's Common Stock, under
the DGCL it could effect a cash-out merger of the minority stockholders of the
Company without a stockholder vote and (ii) at that time, the Company and LG
Corp. had had no discussions regarding such a merger.
On October 7, 1997, Bruno Carette (President and CEO of LG Corp.
and the Company) and Edward Germain (Vice President and CFO of the
Company) met to discuss the results of a meeting between Mr. Carette and
representatives of Limagrain, in France. At that meeting, Mr. Carette informed
Mr. Germain of the possibility of Limagrain's interest in taking the Company
private via a cash-out merger of the minority stockholders.
On October 24, 1997, Mr. Carette, Mr. Germain and Claude Lescoffit
(an executive officer of Limagrain and a member of the board of directors of
LG Corp. and the Company) met with the Company's outside legal counsel to
discuss the legal standards applicable to a cash-out merger and the various
methodologies that Limagrain would likely employ in effecting a cash-out
merger, and the advantages and disadvantages of and the length of time
required for each of the various methodologies.
On November 10, 1997, the Company was notified by Limagrain that
Limagrain had begun preliminary internal discussions regarding the possibility
of a cash-out merger. On November 13, 1997, the Company issued a press
release reiterating its prior statements that, from time to time, LG Corp.
evaluates its strategic alternatives with respect to its investment in the
Company and stating that (i) such alternatives include, among other things, a
possible cash-out merger of the minority stockholders of the Company, (ii)
although the Company and LG Corp. have had no substantive discussions
regarding such a merger, LG Corp. has informed the Company that its has
begun preliminary internal discussions regarding the possibility of such a
merger and that it may consider such a merger in the future, (iii) the Company
and its board of directors have discussed the possible legal structure of such
a transaction among themselves and with representatives of LG Corp. and (iv)
as a part of these discussions, the Company's Board was informed that such
a merger could be effected by LG Corp. without any action or approval by the
Company's board of directors or its stockholders.
On July 6, 1998, Mr. Carette was informed by Limagrain that, after
internal discussions and following a review of the preliminary results of
fiscal year 1998 of the Company, a special committee of the board of directors
of LG Corp. (the "Special Committee") would be established to formally
consider a cash-out merger of the minority stockholders of the Company.
On August 17, 1998, the Special Committee met with its legal counsel
and investment banker to discuss, among other things, the possible structure
of a cash-out merger and the various methodologies to be considered in
determining a fair price to be paid to the minority stockholders of the Company
in such a cash-out merger. The Special Committee resolved to deliberate
regarding such matters and to report to the board of directors of LG Corp.
On September 21, 1998, the Special Committee recommended to the
board of directors of LG Corp. that LG Corp., through its wholly owned
subsidiary Mergerco, cash out the minority stockholders of the Company via
a short form merger pursuant to Section 253 of the DGCL. The Special
Committee determined that a cash-out price of $.05 per share would be fair
to the minority stockholders of the Company. The board of directors of LG
Corp. and Mergerco unanimously approved the short-form merger and ratified
the Special Committee's determination that a cash-out price of $.05 per share
would be fair to the minority stockholders of the Company.
Item 4. Terms of the Transaction
On September 21, 1998, LG Corp., which had been the 95% owner
of the Common Stock of the Company, contributed 100% of its holdings of
Common Stock to Mergerco, its newly incorporated and wholly owned
Delaware subsidiary. The Company will be merged with and into Mergerco
pursuant to Section 253 of the DGCL via a "short form" merger. Under the
DGCL, because Mergerco owns more than 90% of the Company, no action
will be required by the stockholders of the Company, other than Mergerco
(through its board of directors), for the Merger to become effective. The
effective date of the Merger will be [date]. Prior to the consummation of the
merger, LG Corp. and Mergerco reserve the right to cancel the merger for
any reason, including without limitation if (i) any stockholder of the
Company seeks to enjoin the merger or (ii) in their judgment, the
anticipated cost of the merger would be materially increased by the
number of stockholders of the Company seeking their appraisal remedy.
Mergerco will be the surviving corporation in the Merger and, as a
result of the Merger, the separate corporate existence of the Company will
cease. Upon consummation of the Merger, each of the outstanding shares of
Common Stock of the Company (other than shares held by Mergerco, the
Company and holders who properly exercise dissenters' rights under the
DGCL) will be automatically converted into the right to receive $.05 in cash,
without interest, upon surrender of the certificate for such Share to the
Paying Agent. Both the redemption procedure and the statutory appraisal
rights are described in fuller detail in the Notice of Merger and Appraisal
Rights and the accompanying Letter of Transmittal, which documents accompany
this Transaction Statement and should be studied with care.
Item 5. Plans or Proposals of the Issuer or Affiliate
As a result of the Merger, the Company will be merged into Mergerco
and the Company will cease to exist as a separate entity. As soon as
practicable after the Merger, Mergerco will be merged into LG Seeds, Inc., a
Delaware corporation and a wholly owned subsidiary of the Company ("LG
Seeds"). As a result of these transactions, LG Seeds will be a wholly owned
subsidiary of LG Corp., containing all of the rights, obligations, assets and
liabilities of the Company and Mergerco.
Limagrain has informed LG Corp. that, after the consummation of the
transactions described above, Limagrain will consider a restructuring of its
entire North American operations. These North American operations consist
of LG Corp. and all of its affiliates in the United States and Canada, which
include the Company and LG Seeds. Limagrain has informed LG Corp. that
it will not include the Company or LG Seeds in any of these restructuring plans
unless it controls 100% of the Company. In connection with any such
restructuring, Limagrain may pursue a variety of transactions, including but
not limited to (i) a merger of LG Seeds with LG Corp., (ii) a merger of LG
Seeds with other affiliates of LG Corp. or (iii) the formation of a strategic
alliance between LG Corp. and its affiliates and a third party. At this time,
Limagrain has not finalized its plans with respect to its North American
operations, but it is conducting discussions internally and negotiations with
third parties regarding such plans. Some of these negotiations have
progressed to the stage of understandings and outlines on how synergies and
opportunities could be developed though the formation of such alliances.
However, at this time, there can be no assurance as to the timing of any such
alliance or whether any such alliance will occur at all. Other than as
described above, neither LG Corp. nor any of its affiliates has any definitive
plan or proposal regarding a sale or transfer of a material amount of assets
of the Company or any of its subsidiaries subsequent to the Merger.
As a result of the transactions described above, there will be no
directors or executive officers of the Company or Mergerco, because such
entities will cease to exist. LG Corp. has not determined at this time which
individuals will serve as directors or executive officers of LG Seeds.
However, it is anticipated that such directors and executive officers will be
limited to those individuals who are currently affiliated with LG Seeds and/or
LG Corp. The current independent directors of the Company (i.e., those that
are not affiliated with Limagrain) will not be directors of LG Seeds or LG
Corp. after the Merger. No current executive officer of the Company is a
party to an employment contract with the Company.
As a result of the transactions described above, the equity
capitalization of the Company will be changed, although the debt capitalization
will be unaffected by the Merger. Immediately following such transactions, the
equity of the Mergerco will consist of 1,000 shares of common stock, $.01 par
value per share, all of which will be owned by LG Corp. It is also anticipated
that following such transactions the preferred stock of the Company (all of
which is owned by LG Corp.) will be retired in return for additional shares of
common stock of Mergerco. Neither the Company, LG Corp. nor any of their
affiliates has any current plan or proposal to make any material change in the
present dividend rate or policy of the Company.
After the completion of the Merger, the Common Stock would become
eligible for termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), because
the Company would cease to exist and the common stock of its ultimate
successor, LG Seeds, would be held of record by less than three hundred
persons. LG Corp. currently intends to cause LG Seeds to terminate such
registration. Upon such termination, the Company's obligation to file reports
with the Securities and Exchange Commission pursuant to Section 15(d) of
the Exchange Act would be suspended.
Item 6. Source and Amounts of Funds or Other Consideration
The total amount of funds required to consummate the Merger and to
pay related fees and expenses is estimated to be approximately $500,000.
The Merger will be funded through LG Corp.'s available liquid assets.
The estimated fees and expenses incurred and to be incurred by LG
Corp., Mergerco and the Company in connection with the Merger will be paid
by LG Corp. and are as follows:
Legal fees $150,000
Filing fees $ 100
Accounting fees 5,000
Appraisal fees $ 50,000
Printing and mailing costs $ 25,000
Miscellaneous $ 20,000
No part of the funds or other consideration to be used in the Merger (i) will
be paid by or be an obligation of the Company or (ii) is expected to be
directly or indirectly borrowed from another person or entity (including a
bank as defined by Section 3(a)(6) of the Exchange Act).
Item 7. Purpose(s), Alternatives, Reasons and Effects
Reasons
Since LG Corp. acquired a controlling interest in the Company in
March 1994, the Company has incurred net losses from operations as follows:
Fiscal year 1995 Loss of $2,394,000
Fiscal year 1996 Loss of $2,685,000
Fiscal year 1997 Loss of $1,449,000
Fiscal year 1998 Loss of $2,994,000
During these years, LG Corp. attempted to stabilize the Company and return
it to profitability through infusions of cash ($10,361,000 loaned to the
Company, $9,000,000 contributed in the form of preferred stock),
management expertise and new products, as well as guaranteeing the
Company's line of credit. Despite such investments, the Company has
continued to suffer net losses. LG Corp. has determined that it can no longer
support the Company and subsidize its losses and guarantee the line of credit,
unless LG Corp. owns 100% of the securities of the Company. Without the
support and guarantee of LG Corp., it is unlikely that the Company could
continue as a going concern
LG Corp. has determined that the most effective method of returning
the Company to profitability is to increase its volume of sales and to decrease
operating expenses and production costs. The various methods considered
to achieve this objective have been (i) internal growth, (ii) combining the
operations of the Company with the other operations of LG Corp. in North
America, (iii) acquiring other seed companies and (iv) a strategic alliance
with the Company and/or other Limagrain affiliates and a third party.
Attempts at internal growth have been insufficient, as evidenced by the
Company's history of losses. The transaction costs involved in combining
LG Corp.'s other privately held operations with the publicly held operations
of the Company are prohibitive, as compared to the relatively immaterial
incremental benefit to LG Corp. in such a combination. Because the Company
cannot access the equity and debt markets to raise capital (due to the history
of losses, the low share price and the small public float), the Company is
not in a financial position to acquire other seed companies. Since March
1994, no third party has approached the Company expressing an interest in a
strategic alliance with the Company (although, as described above, Limagrain
has been approached regarding a strategic alliance with its North American
field seed operations, which include the Company).
LG Corp. has also determined that terminating the Company's publicly
held status, and thereby terminating the Company's obligation to file reports
with the Securities and Exchange Commission, would result in substantial
annual cost savings in reduced accounting, legal, management and other
costs.
For the above stated reasons, LG Corp. has decided to undertake the
Merger at this time.
Purposes
The purposes of the Merger are (i) to enhance operating flexibility,
simplify the control structure and improve management decisionmaking by
consolidating ownership and terminating all minority stockholder interest in
the Company; (ii) to provide the minority stockholders of the Company with an
opportunity to receive, in exchange for their Common Stock, a cash amount;
and (iii) to reduce the number of stockholders of record of the Company to less
than 300 so that the Company may terminate its registration under the
Exchange Act, and thereby relieve itself of the burdens and costs associated
with the regulatory and reporting requirements of the Exchange Act and the
rules and regulations of the Securities and Exchange Commission issued
thereunder.
Alternatives
LG Corp. considered means other than a short-form merger for
terminating the minority stockholder interest from the Company, including a
tender offer, reverse stock split and "long-form" merger. The tender offer was
rejected because it did not meet LG Corp.'s objective of terminating the entire
minority stockholder interest from the Company. The reverse stock split and
long-form merger were rejected because they would entail a vote of the
stockholders of the Company and the related expense of preparation of a
proxy statement and/or information statement. Other than as stated herein
and under the caption "Reasons" above, no alternative means were
considered to accomplish the purposes stated above.
Reasons for the Structure of the Merger
LG Corp. and Mergerco are structuring the transaction as a "short-
form" merger under Section 253 of the DGCL to minimize the costs associated
with effecting the Merger.
Certain Effects
General.
Upon consummation of the Merger, (i) the minority stockholders of the
Company (other than persons who have properly exercised dissenters' rights
under the DGCL) will have the right to receive $.05 per share of Common
Stock in cash, without interest, upon surrender of the certificate for such
share of Common Stock, (ii) the Company will be merged into Mergerco, which
will be a wholly owned subsidiary of LG Corp. and (iii) the corporate existence
of the Company will cease. In addition, LG Corp. intends to de-register the
Common Stock under the Exchange Act, thereby relieving the Company of its
obligation to file reports with the Securities and Exchange Commission.
Certain Federal Income Tax Consequences
The following discussion summarizes the material United States
federal income tax consequences of the Merger, based on the Internal
Revenue Code of 1986, as amended (the "Code"), currently applicable
Treasury regulations, and judicial and administrative decisions and rulings.
Future legislative, judicial or administrative changes or interpretations could
alter or modify the statements and conclusions set forth herein, and any such
changes or interpretations could be retroactive and could affect the tax
consequences to holders of Common Stock.
The discussion below does not purport to deal with all aspects of
United States federal income taxation that may affect particular stockholders
in light of their individual circumstances, and does not deal with stockholders
subject to special treatment under the federal income tax law (including
insurance companies, tax-exempt organizations, financial institutions, broker-
dealers, foreign persons, stockholders who hold their shares of Common
Stock as part of a hedge, appreciated financial position, straddle or
conversion transaction, stockholders who do not hold their stock as capital
assets and stockholders who have acquired their shares of Common Stock
upon the exercise of employee options or otherwise as compensation).
A stockholder whose shares of Common Stock are converted,
pursuant to the Merger, into a right to receive cash will recognize gain or
loss equal to the difference between (i) the amount of cash that such
stockholder receives in the Merger and (ii) such stockholder's adjusted tax
basis in such shares, assuming that such stockholder redeems all of the shares
that such stockholder actually owns or constructively owns under Section 318 of
the Code. Such gain or loss will be capital gain or loss, and generally will be
long-term capital gain or loss if at the effective date of the Merger the
stockholder"s holding period for the shares of Common Stock is more than one
year. Holders of shares of Common Stock should be aware that the Paying Agent
will be required in certain cases to withhold and remit to the United States
Treasury 31% of amounts payable in the Merger to any stockholder that (i) has
provided either an incorrect taxpayer identification number or no number at
all, (ii) is subject to backup withholding by the Internal Revenue Service for
failure to report the receipt of interest or dividend income properly, or (iii)
has failed to certify to the Paying Agent that such stockholder is not subject
to backup withholding or that such stockholder is an "Exempt Recipient."
Backup withholding is not an additional tax, but rather may be credited against
the taxpayer's tax liability for the year.
Neither the Cooperative, Limagrain, LG Corp., Mergerco nor the
Company expects to recognize any gain, loss or income by reason of the
Merger.
EACH HOLDER OF SHARES OF COMMON STOCK IS STRONGLY
URGED TO CONSULT WITH SUCH HOLDER'S TAX ADVISER TO
DETERMINE THE PARTICULAR UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER IN
LIGHT OF SUCH HOLDER'S SPECIFIC CIRCUMSTANCES, AS WELL
AS THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND
FOREIGN TAX LAWS.
Item 8. Fairness of the Transaction
Both LG Corp. and Mergerco believe that the Merger is fair to the
minority stockholders of the Company. No director of LG Corp. or Mergerco
dissented to or abstained from voting on the Merger. To assist LG Corp. and
Mergerco in their fairness determinations, the board of directors of LG Corp.
engaged Stern Brothers Valuation Advisers, Inc. ("Stern Brothers") to advise
LG Corp. and Mergerco with respect to a fair price to be paid to the minority
stockholders of the Company in the Merger. Stern Brothers provided an oral
presentation to LG Corp. on August 15, 1998 (the "Stern Brothers
Presentation"), at which time they summarized the various valuation
approaches and indicated a preliminary fair value range of between $.03 and
$.05 per share. LG Corp. and Mergerco considered each of the following
valuation approaches utilized by Stern Brothers to determine whether the
merger consideration of $.05 per share is fair to the minority stockholders of
the Company: (i) the market comparison approach; (ii) the discounted future
returns approach; and (iii) the underlying assets approach. After consideration
of the Stern Brothers Presentation, the directors of LG Corp. and Mergerco
were unable to weigh each factor separately, but they did note that under all
factors considered the merger consideration of $.05 per share is the upper
limit determined by the above approaches. The directors of LG Corp. and
Mergerco also noted that (i) the net book value of the Company as of June 30,
1998 was $.0004 (as calculated as described in Item 14 hereof) and (ii) since
June 6, 1997 the Company has repurchased significant blocks of stock from
sophisticated investors for prices substantially below the merger consideration
of $.05 per share. The directors of LG Corp. and Mergerco also considered
the current and historical trading prices of the Common Stock, but accorded
no weight to these factors because of (i) the weight accorded to the above
approaches, (ii) the consistent downward trend of these trading prices and
(iii) the thin trading volume of the Common Stock.
The Merger will be effected pursuant to Section 253 of the DGCL, the
Delaware "short-form" merger statute, since Mergerco currently owns more
than 90% of the Common Stock. Therefore, the approval of the stockholders
or the board of directors of the Company is not required, nor was any such
approval obtained.
Because no approval of the board of directors of the Company is
required, the outside directors of the Company (i.e., those who are neither
employees of the Company nor affiliated with LG Corp.) did not retain an
unaffiliated representative to act solely on behalf of unaffiliated
stockholders for the purposes of negotiating the terms of the Merger or
preparing a report concerning the fairness of the Merger.
No firm offer has been made by any unaffiliated person during the
preceding eighteen months for (A) the merger or consolidation of the
Company into or with such person or of such person into or with the Company,
(B) the sale or other transfer of all or any substantial part of the assets of
the Company or (C) securities of the Company which would enable the holder
thereof to exercise control of the issuer.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations
The board of directors of LG Corp. engaged and requested the
opinion of Stern Brothers as to the fairness, from a financial point of view,
to the minority stockholders of the Company of the merger consideration of
$.05 per share to be received in connection with the Merger. Stern Brothers
delivered a written opinion (the "Opinion") to the boards of directors of LG
Corp. and Mergerco dated as of September 21, 1998, a copy of which is
attached hereto as Exhibit (B). Stern Brothers is a national business
valuation and financial advisory firm engaged in, among other things, corporate
finance, business valuation, financial advisory and litigation support services
for a wide variety of public and private businesses throughout the United
States, representing virtually every industry. Since 1985, it has performed
over 1,200 valuation assignments. Stern Brothers was selected for this
assignment, after LG Corp. considered other valuation experts, based upon its
expertise, its past experience and an interview with representatives of LG Corp.
In the course of Stern Brothers' analysis for purposes of rendering the
Opinion, Stern Brothers (i) visited the Company's headquarters; (ii)
interviewed key management employees concerning the background,
operations, financial performance and prospects of the Company; (iii)
reviewed and considered the following information regarding the Company:
(a) audited financial statements (Forms 10-K) of the Company for the periods
ended December 31, 1986 through 1991, July 31, 1992 through 1993, June
30, 1994 through 1997 and a draft of the June 30, 1998 audited financial
statements; (b) Form 10-Q quarterly financial statements of the Company as
of September 30, 1997, December 31, 1997 and March 31, 1998; (c) proxy
information as of March 7, 1994, November 15, 1995, November 12, 1996 and
November 12, 1997; (d) recent press releases; (e) income tax returns filed by
the Company for 1996 and 1997; (f) the Company's financial forecasts for the
years ended June 30, 1999 through June 30, 2008 and its Short Term
Financial Plan; (g) minutes from the Company's board of directors meetings;
(h) an asset list and valuation worksheet; (i) a list of stockholders and
number of shares owned by each stockholder; (j) stock purchases and trades
over the previous five years; (k) the articles of incorporation and bylaws of
the Company; and (l) such other information Stern Brothers deemed relevant;
(iv) reviewed and considered the following information provided to Stern
Brothers by others: (a) annual reports, interim reports, Forms 10-K, Forms 10-Q
and other published information on publicly traded companies as nearly
comparable to the Company as Stern Brothers could find; (b) publications by
Standard & Poor's and Bloomberg Financial Services, The Value Line
Investment Survey, the Federal Reserve Bulletin, the Wall Street Journal,
Directory of Companies Required to File Annual Reports with the Securities
and Exchange Commission, Stock Bonds, Bills and Inflation 1997 Yearbook
by Ibbotson Associates and Mergerstat Review 1997 by Houlihan Lokey
Howard & Zukin; and (c) interviews with the Company's outside accountant,
banker and attorney; (v) conducted an analysis of the value of the Common
Stock using the market comparison approach and the discounted future
returns approach; and (vi) conducted such other studies, analyses, inquiries
and investigations as Stern Brothers deemed appropriate. The foregoing is
only a summary of the information reviewed and factors considered by Stern
Brothers which have influenced their Opinion and does not recite in detail all
of such information and factors that they have taken into consideration in
connection with the Opinion.
In rendering the Opinion, the Company and its representatives
warranted to Stern Brothers that the information they provided was complete
and accurate to the best of their knowledge and that the financial statement
information reflects the Company's results of operations and financial
condition in accordance with generally accepted accounting principles, unless
otherwise noted. Stern Brothers has assumed no responsibility for
independent verification of information and financial forecasts supplied by the
Company and its representatives (and Stern Brothers expresses no opinion
on that information). Stern Brothers has not obtained any independent
appraisal of the assets of the Company, nor have they attempted to verify the
information furnished to Stern Brothers by the Company. Stern Brothers used
public information and industry and statistical data from sources which they
deem to be reliable; however, they make no representation as to the accuracy
or completeness of such information and have accepted such information
without further verification. Stern Brothers was not authorized to solicit,
and did not solicit, interest from any party with respect to a merger or other
business combination transaction involving the Company or any of its assets,
nor did they have any discussion or negotiation with any parties, other than
the Company, in connection with the purchase of the Company's shares. The
Opinion is valid only for the purposes and standard of value specified therein.
The Opinion is based on a going concern value. The Opinion contemplates
facts and conditions existing as of the opinion date. Events, conditions and
circumstances occurring after that date have not been considered, and Stern
Brothers has no obligation to update their opinion for such events and
conditions.
Stern Brothers performed certain financial analyses which it
considered relevant in determining the fair value of the Company's Common
Stock, each of which are described in the Opinion.
THE FULL TEXT OF THE OPINION AS OF SEPTEMBER 21, 1998,
WHICH SETS FORTH THE DESCRIPTION OF THE ASSIGNMENT, THE
SCOPE OF THE WORK, THE ASSUMPTIONS AND LIMITING CONDITIONS,
THE CERTIFICATIONS AND THE CONCLUSION, IS ATTACHED HERETO
AS EXHIBIT (B) AND IS INCORPORATED HEREIN BY REFERENCE. THE
MINORITY STOCKHOLDERS OF THE COMPANY ARE URGED TO READ
THE OPINION, TOGETHER WITH THE ASSUMPTIONS AND LIMITING
CONDITIONS SET FORTH THEREIN, IN ITS ENTIRETY. THE OPINION, AS
EXPRESSED HEREIN AND THEREIN, IN ANY EVENT, IS LIMITED TO THE
FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL
POINT OF VIEW TO THE MINORITY STOCKHOLDERS OF THE COMPANY
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SUCH
MINORITY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VIEW THE MERGER. THE SUMMARY OF THE OPINION SET FORTH IN
THIS TRANSACTION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION ATTACHED
HERETO AS EXHIBIT (B).
The following is a summary of certain of the financial analyses used
by Stern Brothers in connection with providing its oral presentation to the
Special Committee. Stern Brothers used substantially the same type of
financial analyses in connection with providing the written Opinion attached
hereto as Exhibit (B).
Market Comparison Approach
Stern Brothers analyzed and compared certain financial information
relating to the Company with publicly-available financial and operating
information of ten publicly traded companies engaged in the agricultural
industry (collectively, the "Selected Companies"). None of the Selected
Companies used in Stern Brothers' analysis is identical to the Company.
Stern Brothers' analysis involves complex considerations and judgments
concerning differences in the potential financial and operating characteristics
of the Selected Companies and other factors regarding the trading values of
the Selected Companies.
In conducting its analyses, Stern Brothers reviewed and considered
a variety of multiples and ratios. However, because of the Company's history
of losses, Stern Brothers' analyses indicated that the only relevant measures
of value are (i) the range and median of the Selected Companies stock price
per share as a multiple of the most recent four fiscal quarters (i.e., last
twelve months or "LTM") sales per share (the "LTM Sales Per Share Multiple"),
(ii) the range and median of the Selected Companies invested capital per share
as a multiple of LTM sales per share (the "Invested Capital Per Share
Multiple") and (iii) the similarity of the Selected Companies to the Company.
Stern Brothers analyses indicated that the Selected Companies' LTM
Sales Per Share Multiple ranged from .08x to 8.96x, with an average multiple
(excluding the high and low) of 2.02x and a median of 1.27x, compared with
an LTM Sales Per Share Multiple for the Company ranging from a low of .15x
to a high of.24x. The Company's LTM sales per share for the year ended
June 30, 1998 was $.21. Accordingly, the results of this analysis indicated a
value range for the Company's Common Stock of $.03 ($.21 multiplied by .15)
to $.05 ($.21 multiplied by .24) per share.
Stern Brothers analyses indicated that the Selected Companies'
Invested Capital Per Share Multiple ranged from .22x to 9.38x, with an
average multiple (excluding the high and low) of 2.61x and a median of 2.18x,
compared with an Invested Capital Per Share Multiple for the Company
ranging from a low of 1.13x to a high of 1.63x. The Company's invested
capital per share ranged from a low of $.23 ($.21 LTM sales per share
multiplied by 1.13) to a high of $.34 ($.21 LTM sales per share multiplied by
1.63). The Company's weighted average number of shares outstanding for
1998 was 103,650,098. Therefore, the Company's invested capital ranged
from a low of $23,839,523 to a high of $35,241,033. To determine stock price
per share from invested capital, Stern Brothers subtracted from invested
capital (i) the debt ($18,061,000), (ii) preferred stock ($9,000,000) and (iii)
cumulative preferred stock dividends ($2,425,000) of the Company as of June
30, 1998, and divided that result (low of $0.00, high of $5,755,033) by the
number of shares outstanding as of June 30, 1998 (103,055,577).
Accordingly, the results of this analysis indicated a value range for the
Company's Common Stock of $.00 to $.05 per share.
Stern Brothers determined that the cumulative results of the market
comparison approach indicated a value range for the Company's Common
Stock of $.03 to $.05 per share.
Discounted Future Returns Approach
Stern Brothers performed a discounted future returns analysis of the
projected future returns of the Company to calculate the present value per
share of the Company's Common Stock using (i) the financial projections
prepared by management of the Company for the fiscal years 1999 through
2003, (ii) a discount rate of 14% (calculated by assuming a United States
Treasury risk free rate of 5.75%, a large cap stock risk premium of 7.80% and
a risk premium for the Company of .45%) and (iii) a terminal value of the
Company as of August 12, 2003 of $8,979,300 (calculated by a market
comparison analysis of .3x multiplied by projected fiscal year 2003 net sales).
The results of this discounted future returns approach indicated a value for
the Company's Common Stock of $.05 per share.
Underlying Assets Approach
Stern Brothers performed an analysis of the fair market value of the
underlying assets of the Company to calculate the implied value per share of
the common stockholders equity. Stern Brothers examined the balance sheet
of the Company as of June 30, 1998 and made the following adjustments to
fair market value: (i) decreased net property, plant and equipment by
$1,719,917 to reflect management of the Company's estimate of the orderly
sale value of the property, plant and equipment; (ii) increased other assets by
$478,535 to reflect the Company's investment in Illinois Foundation Seeds,
Inc., which was valued at book value; (iii) decreased goodwill, which is an
unidentifiable intangible asset with no fair market value, by $7,793,000; and
(iv) increased other liabilities by $2,425,000 to reflect the cumulative
undeclared preferred dividends. The net effect of these adjustments was to
decrease total common stockholders' equity by $11,459,382 from $2,469,000
to a negative $8,990,382. The results of this underlying assets approach
indicated a value for the Company's Common Stock of negative $.09 per
share.
The summary of the Opinion set forth above does not purport to be a
complete description of the analyses performed, or the matters considered, by
Stern Brothers in rendering the Opinion. Stern Brothers believes that its
analyses and the summary set forth above must be considered as a whole
and that selecting portions of such analyses, without considering all of the
analyses, or of the above summary, would create an incomplete view of the
processes underlying the analyses set forth in the Opinion. The fact that any
specific analyses has been referred to in the summary above is not meant to
indicate that such analysis was given greater weight by Stern Brothers than
any of the other analyses.
The preparation of the Opinion is not necessarily susceptible to partial
analyses or summary. In rendering the Opinion, Stern Brothers applied its
judgment to a variety of complex analyses and assumptions. Stern Brothers
may have given various analyses more or less wight than other analyses, and
may have deemed various assumptions more or less probable than other
assumptions. The assumptions made, and the judgments applied, by Stern
Brothers in rendering the Opinion are not readily susceptible to description
beyond that set forth in the written text of the Opinion itself.
In performing its analyses, Stern Brothers made numerous
assumptions with respect to industry performance and general business and
economic considerations, which are beyond the control of the Company. The
analyses performed by Stern Brothers are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared
solely as part of Stern Brothers' analysis of the merger consideration, from a
financial point of view, to the minority stockholders of the Company, and were
provided to the Special Committee in connection with the Stern Brothers
Presentation and to the boards of directors of LG Corp. and Mergerco in
connection with the delivery of the Opinion. In addition, as described above,
the Opinion and the Stern Brothers Presentation were factors taken into
consideration by the boards of directors of LG Corp. and Mergerco in making
the determination to approve the Merger.
The terms of engagement of Stern Brothers by LG Corp. are set forth
in a letter agreement between Stern Brothers and LG Corp. (the "Engagement
Letter"). Pursuant to the terms of the Engagement Letter, as compensation
for rendering its financial advisory services and its Opinion to the boards of
directors of LG Corp. and Mergerco, LG Corp. agreed to pay Stern Brothers
$150 per hour, plus out-of-pocket expenses. In addition, LG Corp. has agreed
to indemnify Stern Brothers against certain liabilities and expenses in
connection with the engagement of Stern Brothers. The Opinion is subject to
the understanding that the obligations of Stern Brothers in the Opinion are
solely corporate obligations, and no officer, director, employee, agent,
shareholder or controlling person of Stern Brothers shall be subjected to any
personal liability whatsoever to any person, nor will any such claim be
asserted by or on behalf of LG Corp. or its affiliates.
Item 10. Interest in Securities of the Issuer
As of September 21, 1998, the following affiliates of Limagrain, LG Corp.
and/or the Company owned the following amounts and percentages of
Common Stock:
Mergerco beneficially owned 98,277,178 shares of Common Stock,
which represented approximately 95.36% of the outstanding shares of
Common Stock (Mergerco is a wholly owned subsidiary of LG Corp.,
which is a majority owned subsidiary of Limagrain);
Ralph W. F. Hardy, a member of the board of directors of the Company,
beneficially owned 4,850 shares of Common Stock, which represented
0.0047% of the outstanding shares of Common Stock;
Edward M. Germain, Vice President and CFO of the Company,
beneficially owned 5,000 shares of Common Stock, which represented
0.0049% of the outstanding shares of Common Stock; and
Larry D. Rieffel, Vice President - Production and Logistics of the
Company, beneficially owned 1,250 shares of Common Stock, which
represented 0.0012% of the outstanding shares of Common Stock.
Except as described above, no other affiliate of Limagrain, LG Corp.
or the Company owned any Common Stock. With the exception of the
contribution of the shares of Common Stock from LG Corp. to Mergerco on
September 21, 1998, none of the shares of Common Stock described above
was acquired in the past 60 days.
Item 11. Contracts, Arrangements or Understandings with Respect to
the Issuer's Securities
Neither Limagrain, LG Corp., nor Mergerco, nor any of their affiliates,
is a party to any contract, arrangement, understanding or relationship in
connection with the Merger with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or the giving or withholding of proxies,
consents or authorizations.
Item 12. Present Intention and Recommendation of Certain Persons
with Regard to the Transaction
Edward M. Germain, Vice President and CFO of the Company, and
Larry D. Rieffel, Vice President - Production and Logistics of the Company,
intend to tender their shares of Common Stock to Mergerco pursuant to the
terms of the Merger. Ralph W.F. Hardy, a member of the board of directors
of the Company, will not make a decision regarding whether to tender his
shares of Common Stock to Mergerco until after he has had an opportunity to
review the Transaction Statement and related materials as distributed to the
minority stockholders of the Company.
As a "short form" merger pursuant to Section 253 of the DGCL, the
Merger will not require approval by the board of directors of the Company or
by any of the Company's stockholders other than Mergerco (by action of its
board of directors). None of the individuals named above has made a
recommendation in support of or opposed to the Merger.
Item 13. Other Provisions of the Transaction
Holders of shares of Common Stock are entitled to appraisal rights
under Section 262 of the DGCL. A person having a beneficial interest in
shares of Common Stock held of record in the name of another person, such
as a broker or nominee, must act promptly to cause the record holder to follow
the steps summarized below properly and in a timely manner to perfect
whatever appraisal rights the beneficial owner may have. Prior to the
consummation of the merger, LG Corp. and Mergerco reserve the right
to cancel the merger for any reason, including without limitation if (i) any
stockholder of the Company seeks to enjoin the merger or (ii) in their
judgment, the anticipated cost of the merger would be materially
increased by the number of stockholders of the Company seeking their
appraisal remedy.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE
STATEMENT OF THE LAW PERTAINING TO APPRAISAL RIGHTS UNDER
THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF
SECTION 262, WHICH IS REPRINTED IN ITS ENTIRETY AS APPENDIX A
TO THE NOTICE OF MERGER AND APPRAISAL RIGHTS ATTACHED TO
THIS TRANSACTION STATEMENT AS EXHIBIT (D) .
All references in Section 262 and in this summary to a "stockholder"
are to the record holder of the shares of Common Stock as to which appraisal
rights are asserted. As used herein, "Surviving Corporation" means Mergerco
as the corporation surviving the Merger.
Under the DGCL, holders of shares of Common Stock who do not
wish to accept pursuant to the Merger the consideration of $.05 per share and
who follow the procedures set forth in Section 262 will be entitled to have
their shares of Common Stock appraised by the Delaware Court of Chancery and
to receive payment in cash of the "fair value" of such shares of Common
Stock, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, as
determined by such court. Any holder of shares of Common Stock who
wishes to exercise such appraisal rights, or who wishes to preserve his right
to do so, should review carefully the following discussion, the Notice of
Merger and Appraisal Rights and the Appendix A thereto, because failure to
timely and properly comply with the procedures specified will result in the
loss of appraisal rights under the DGCL.
A holder of Shares wishing to exercise his appraisal rights must
deliver to the Secretary of the Company, ON OR BEFORE _________, 1998,
a written demand for appraisal of his shares of Common Stock. A demand for
appraisal should be delivered to the Company at the following address:
BioTechnica International, Inc.
4001 North War Memorial Drive
Peoria, Illinois 61614
Attention: Secretary
As provided under Section 262, failure of a holder of shares of
Common Stock to make a written demand for appraisal (or a beneficial owner
of shares of Common Stock who fails to cause the record holder of such
shares of Common Stock to demand an appraisal of such shares of Common
Stock) within such time limit will result in the loss of such holder's
appraisal rights.
Only a holder of record of the shares of Common Stock is entitled to
assert appraisal rights for the shares of Common Stock registered in that
holder's name. A demand for appraisal must be executed by or on behalf of
the holder of record, fully and correctly, as his or her name appears on the
stock certificates for the shares of Common Stock. If the shares of Common
Stock are owned of record in a fiduciary or representative capacity, such as
by a trustee, guardian or custodian, execution of the demand should be made
in that capacity, and if the shares of Common Stock are owned of record by
more than one person, as in a joint tenancy and tenancy in common, the
demand should be executed by or on behalf of all joint owners. An authorized
agent, including one or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, the agent is agent for such owner or owners. A record holder such
as a broker who holds shares of Common Stock as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares of
Common Stock held for one or more beneficial owners while not exercising
such rights with respect to the shares of Common Stock held for other
beneficial owners; in such case, the written demand should set forth the
number of shares of Common Stock as to which appraisal is sought and when
no number of shares of Common Stock is expressly mentioned the demand
will be presumed to cover all shares of Common Stock held in the name of
the record owner. Stockholders who hold their shares of Common Stock in
brokerage accounts or other nominee forms and who wish to exercise
appraisal rights are urged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal by such a
nominee.
Within 120 calendar days after the effective date of the Merger, but
not thereafter, the Surviving Corporation, or any stockholder who is entitled
to appraisal rights under Section 262 and has complied with the requirements of
Section 262, may file a petition in the Delaware Court of Chancery demanding
a determination of the fair value of the shares of Common Stock. The
Surviving Corporation is under no obligation to and has no present intention
to file a petition in respect to the appraisal of the fair value of the shares
of Common Stock. Accordingly, it is the obligation of the stockholders to
initiate all necessary action to perfect their appraisal rights within the
time prescribed in Section 262. At any time within 60 calendar days after the
effective date of the Merger, any stockholder who has demanded appraisal has
the right to withdraw the demand and accept the consideration offered pursuant
to the Merger.
Within 120 days after the Effective Date of the Merger, any
stockholder who has complied with the requirements under Section 262 for
exercise of appraisal rights will be entitled, upon written request, to receive
from the Surviving Corporation a statement setting forth the aggregate number
of shares of Common Stock with respect to which demands for appraisal have
been received and the aggregate number of holders of such shares of
Common Stock. Such statement must be mailed (a) within 10 calendar days
after a written request therefor has been received by the Surviving
Corporation, or (b) by _______, 1998 (i.e., within 10 calendar days after the
expiration of the period of delivery of demands for appraisal), whichever is
later.
If a petition for an appraisal is duly filed by a holder of shares of
Common Stock, and a copy thereof is delivered to the Surviving Corporation,
the Surviving Corporation will then be obligated within 20 calendar days to
provide the Register in Chancery with a duly verified list containing the names
and addresses of all holders of shares of Common Stock who have
demanded an appraisal of their shares of Common Stock and with whom
agreements as to the value of their shares of Common Stock have not been
reached by the Company. After notice to holders of shares of Common Stock,
the Delaware Court of Chancery is empowered to conduct a hearing on such
petition to determine those holders of shares of Common Stock who have
complied with Section 262 and who have become entitled to appraisal rights.
The Delaware Court of Chancery may require the holders of shares of
Common Stock who have demanded an appraisal for their shares of Common
Stock to submit their stock certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceeding; and if any
holder of shares of Common Stock fails to comply with such direction, the
Delaware Court of Chancery may dismiss the proceedings as to such stockholder.
After determining the stockholders entitled to an appraisal, the
Delaware Court of Chancery will appraise the "fair value" of their shares of
Common Stock, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
The Delaware Supreme Court has stated that "proof of value by any
techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered
in the appraisal proceedings. In addition, Delaware courts have held that the
Section 262 appraisal remedy, depending on factual circumstances, may or
may not be a dissenter's exclusive remedy. The Court will also determine the
amount of interest, if any, to be paid upon the amounts to be received by
persons whose shares of Common Stock have been appraised.
The costs of the appraisal proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in the
circumstances. The Court may also order that all or a portion of the expenses
incurred by any stockholder in connection with an appraisal, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts
utilized in the appraisal proceeding, be charged pro rata against the value of
all the shares of Common Stock entitled to be appraised.
No stockholder, whether or not he has duly demanded an appraisal
in compliance with Section 262, will, from and after the effective date of the
Merger, be entitled to vote any shares of Common Stock for any purpose or
be entitled to the payment of dividends or other distributions on any shares of
Common Stock (except dividends or other distributions payable to
stockholders of record at a date prior to the effective date of the Merger).
If any stockholder who demands appraisal of his shares of Common
Stock under Section 262 fails to perfect, or effectively withdraws or loses,
his or her right to appraisal, as provided in the DGCL, the shares of Common
Stock of such stockholder will be converted into the right to receive $.05 in
cash per share of Common Stock, without interest. Such stockholders must
follow the procedures set forth in the Letter of Transmittal and accompanying
instructions.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE
DGCL FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS
OF SUCH RIGHTS.
No provision has been made by the Cooperative, Limagrain, LG
Corp., Mergerco or the Company in connection with the Merger to allow the
minority stockholders of the Company to obtain access to the corporate files
of such companies or to obtain counsel or appraisal services at the expense
of the issuer or affiliate.
Item 14. Financial Information
The audited financial statements of the Company for the fiscal years
ended June 30, 1997 and 1998, which were required to be filed with the
Company's most recent annual report on Form 10-K, are attached hereto as
Exhibit (G) and are incorporated herein by reference. The Company is not
required to file its quarterly report for the fiscal quarter ending
September 30, 1998 until November 14, 1998.
For fiscal year 1998 and fiscal year 1997, the ratio of earnings to fixed
charges was -1.00 and -4.63, respectively. Book value per common share of
the Company as of June 30, 1998 was $.0004 (calculated by subtracting the
$9,000,000 of preferred stock and $2,425,000 of cumulative preferred stock
dividends in arrears from the total equity of $11,469,000, and dividing that
result by the 103,055,577 common shares outstanding).
Completion of the Merger is not expected to have a material effect on
the Company's balance sheet, earnings or book value per share (other than,
with respect to book value per share, as discussed in Item 5 hereof).
Item 15. Persons and Assets Employed, Retained or Utilized
The officers and employees of the Company will perform tasks which
would be expected to arise in connection with the Merger (e.g., in assisting to
prepare this Transaction Statement). Other than retaining legal counsel and
Stern Brothers, neither the Cooperative, Limagrain, LG Corp. nor Mergerco,
nor any person acting on their behalf, has employed, retained or compensated
any person or class of persons to make solicitations or recommendations in
connection with the Merger.
Item 16. Additional Information
No additional material information is necessary to make the
statements required herein, in light of the circumstances in which they are
made, not materially misleading.
Item 17. Material to Be Filed as Exhibits
The following Exhibits are attached hereto and incorporated herein by
reference:
Exhibit (A) Not applicable
Exhibit (B) Fairness Opinion of Stern Brothers
Exhibit (C) Not applicable
Exhibit (D) Form of Notice of Merger and Appraisal Rights
Exhibit (E) Included in Exhibit (D)
Exhibit (F) Not applicable.
Exhibit (G) Audited financial statements for the fiscal year
ended June 30, 1997 and 1998
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: __________ LIMAGRAIN GENETICS CORP.
By:
_______________________________
Name:
_____________________________
Title:
______________________________
Dated: __________ BTI MERGER CORP.
By:
_______________________________
Name:
_____________________________
Title:
______________________________
Appendix I
Executive Officers and Directors of the Cooperative
Directors
Name Principal Occupation
Claude Agier Farmer
Joel Arnaud Farmer
Philippe Aymard Farmer
Francois Deloche Farmer
Jean-Paul Deschamps Farmer
Raoul Faure Farmer
Christian Gothon Farmer
Francois Heyraud Farmer
Serge Lebreton Farmer
Pierre Pagesse Farmer
Laurent Petoton Farmer
Jean Poulet Farmer
Christian Puissauve Farmer
Andre Quinty Farmer
Gerard Renard Farmer
Executive Officers
Claude Lescoffit 1989 - 1996 Vice President
Engineering Michelin
(Clemont, France)
1996 - 1997 Vice President Groupe
Limagrain Holding
1997 to date General Manager
Limagrain Agro Genetics
Daniel Cheron 1988 - 1994 General Manager
Force Limagrain Germany
1994 to date CEO Limagrain Agro
Industrie
1998 to date Deputy CEO Groupe
Limagrain
Pierre Lefebvre 1990 to date Deputy CEO
Groupe Limagrain
Emmanuel Rougier 1993 - 1997 CEO Limagrain
Field Seeds
1997 to date CEO Limagrain
Vegetables and Flowers
Jean Marc Salabay 1993 to date General Manager
Production de Limagne
Alain Catala Prior to 1997 Deputy CEO
Group Limagrain Holding
1997 to date CEO Groupe
Limagrain Holding
Francis Fontaine 1993 - 1995 General Manager
of Dolisos SA (Paris, France)
1995 to date General Manager of
Pains Jacqet
The business address of each of the above directors and executive officers is
BP1, 63720 Chappes, France.
Each of the above directors and executive officers is a citizen of France.
Appendix II
Executive Officers and Directors of Limagrain
Directors
Name Principal Occupation
Claude Agier Farmer
Joel Arnaud Farmer
Philippe Aymard Farmer
Francois Deloche Farmer
Jean-Paul Deschamps Farmer
Raoul Faure Farmer
Christian Gothon Farmer
Francois Heyraud Farmer
Serge Lebreton Farmer
Pierre Pagesse Farmer
Laurent Petoton Farmer
Jean Poulet Farmer
Christian Puissauve Farmer
Andre Quinty Farmer
Gerard Renard Farmer
Executive Officers
Claude Lescoffi 1989 - 1996 Vice President
Engineering Michelin
(Clemont, France)
1996 - 1997 Vice President Groupe
Limagrain Holding
1997 to date General Manager
Limagrain Agro Genetics
Daniel Cheron 1988 - 1994 General Manager
Force Limagrain Germany
1994 to date CEO Limagrain Agro
Industrie
1998 to date Deputy CEO Groupe
Limagrain
Pierre Lefebvre 1990 to date Deputy CEO
Groupe Limagrain
Emmanuel Rougier 1993 - 1997 CEO Limagrain
Field Seeds
1997 to date CEO Limagrain
Vegetables and Flowers
Jean Marc Salabay 1993 to date General Manager
Production de Limagne
Alain Catala Prior to 1997 Deputy CEO
Group Limagrain Holding
1997 to date CEO Groupe
Limagrain Holding
Francis Fontaine 1993 - 1995 General Manager
of Dolisos SA (Paris, France)
1995 to date General Manager of
Pains Jacqet
The business address of each of the above directors and executive officers is
BP1, 63720 Chappes, France.
Each of the above directors and executive officers is a citizen of France.
Appendix III
Executive Officers and Directors of LG Corp.
Directors
Name Principal Occupation
Claude Agier Farmer
Francois Heyraud Farmer
Serge Lebreton Farmer
Laurent Petoton Farmer
Claude Lescoffit 1989 - 1996 Vice President
Engineering Michelin
(Clemont, France)
1996 - 1997 Vice President Groupe
Limagrain Holding
1997 to date General Manager
Limagrain Agro Genetics
Executive Officers
Bruno Carette, President and CEO 1993 - 1996 VP Sales
and Marketing LG Seeds, Inc.
1996 - 1997 President of LG Seeds, Inc.
1996 to date President of
BioTechnica International, Inc.
1998 to date President and CEO of
Limagrain Genetics Corp.
Craig Newman, Executive Vice President
for Akin Calahan 1994 - 1997 General Manager
of Akin Seed Company (St.
Francisville, Illinois)
1997 to date General Manager of
Akin Calahan (Westfield,
Indiana)
1998 to date Executive VP of
Limagrain Genetics Corp.
James Simon, Executive Vice
President for Canada 1994 to date General Manager
of King Agro (Chatham,
Ontario)
1998 to date Executive VP of
Limagrain Genetics Corp.
Jean-Paul Zink, Executive Vice
President for LG Seeds 1993 - 1997 General Manager of
Limagrain Canada Seeds
1997 to date President of LG
Seeds, Inc.
1998 to date Executive VP of
Limagrain Genetics Corp.
The business address of each of the above directors is BP1, 63720 Chappes,
France, and the business address of each of the above executive officers is
4001 North War Memorial Drive, Peoria, Illinois 61614.
Each of the above directors and executive officers is a citizen of France,
except for Mr. Newman who is a United States citizen and Mr. Simon who is
a Canadian citizen.
Appendix IV
Executive Officers and Directors of Mergerco
Directors
Name Principal Occupation
Claude Agier Farmer
Francois Heyraud Farmer
Serge Lebreton Farmer
Laurent Petoton Farmer
Claude Lescoffit 1989 - 1996 Vice President
Engineering Michelin
(Clemont, France)
1996 - 1997 Vice President Groupe
Limagrain Holding
1997 to date General Manager
Limagrain Agro Genetics
1998 to date Vice President of BTI
Merger Corp.
Executive Officers
Bruno Carette, President 1993 - 1996 VP Sales
and Marketing LG Seeds, Inc.
1996 - 1997 President of LG Seeds, Inc.
1996 to date President of
BioTechnica International, Inc.
1998 to date President and CEO of
Limagrain Genetics Corp.
1998 to date President of BTI
Merger Corp.
Claude Lescoffit, Vice President See above
The business address of each of the above directors and executive officers is
BP1, 63720 Chappes, France, except for Mr. Carette whose business address
is 4001 North War Memorial Drive, Peoria, Illinois 61614.
Each of the above directors and executive officers is a citizen of France.
Exhibit B
Fairness Opinion of Stern Brothers
[Stern Brothers Valuation Advisors Letterhead]
September 21, 1998
Mr. Bruno Carette
Limagrain Genetics Corp.
BTI Merger Corp.
4001 N. War Memorial Drive
Peoria, Illinois 61614
Gentlemen:
Description of the Assignment
Limagrain Genetics Corp. ("LG" or the "Company") has engaged Stern
Brothers Valuation Advisors ("Stern Brothers") for the purpose of rendering our
opinion, as of September 21, 1998, as to the fairness, from a financial point
of view, of the merger consideration to be paid to the public stockholders of
BioTechnica International, Inc. ("BioTechnica") (4,778,399 shares of the
103,055,577 outstanding shares) in connection with the cashing out of such
public stockholders in the merger of BioTechnica into an affiliate of LG.
Scope of Work
In the course of our analysis for purposes of rendering our opinion, we
have, among other things, done the following:
10 Visited BioTechnica's headquarters.
20 Interviewed key management employees concerning the background,
operations, financial performance and prospects of BioTechnica.
30 Reviewed and considered the following information regarding
BioTechnica:
? Audited financial statements (Form 10-K) for BioTechnica for the
periods ended December 31, 1986 through 1991, July 31, 1992
through 1993, June 30, 1994 through 1997 and a draft of the June
30, 1998 audited financial statement. Form 10-Q quarterly financial
statements as of September 30, 1997, December 31, 1997 and
March 31, 1998.
- - Proxy information as of March 7, 1994, November 15, 1995,
November 12, 1996 and November 12, 1997.
- - Recent press releases.
- - Income tax returns filed by BioTechnica for 1996 and 1997.
- - BioTechnica's financial forecasts for the years ended June 30, 1999
through June 30, 2008 and Short Term Financial Plan.
- - Minutes from Board of Directors meetings.
Asset list and valuation worksheet.
- - List of shareholders and number of shares owned by each
shareholder.
- - Stock purchases or trades over the last five years.
- - Articles of Incorporation and Bylaws for BioTechnica.
- - LG Seeds newsletters.
- - LG Seeds Yield Results.
40 Reviewed and considered the following information provided to us by
others:
- - Annual reports, interim reports, 10-Ks, 10-Qs, and other published
information on publicly traded companies as nearly comparable to
BioTechnica as we could find.
- - Publications by Standard & Poor's and Bloomberg Financial
Services; The Value Line Investment Survey; Federal Reserve
Bulletin; The Wall Street Journal; Directory of Companies Required
to File Annual Reports with the Securities and Exchange
Commission; Stocks, Bonds, Bills and Inflation 1997 Yearbook by
Ibbotson Associates; and Mergerstat Review 1997 by Houlihan
Lokey Howard & Zukin.
- - Interviews with BioTechnica's outside accountant, banker and
attorney.
5) Conducted an analysis of the value of BioTechnica's common stock
using the market comparison approach and the discounted
future returns approach.
6) Conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
The foregoing is, of course, only a summary of the information reviewed
and factors considered by us which have influenced our opinion and does not
recite in detail all of such information and factors that we have taken into
consideration in connection with our opinion.
Assumptions and Limiting Conditions
The Company and its representatives warranted to us that the
information they supplied was complete and accurate to the best of their
knowledge and that the financial statement information reflects BioTechnica's
results of operations and financial condition in accordance with generally
accepted accounting principles, unless otherwise noted. We have not
assumed any responsibility for independent verification of information and
financial forecasts supplied by BioTechnica and their representatives (and we
express no opinion on that information). We have not obtained any
independent appraisal of the assets of BioTechnica, nor have we attempted
to verify the information furnished to us by them.
We have used public information and industry and statistical data from
sources which we deem to be reliable; however, we make no representation
as to the accuracy or completeness of such information and have accepted
such information without further verification.
We were not authorized to solicit, and did not solicit, interest from any
party with respect to a merger with or other business combination transaction
involving the BioTechnica or any of its assets, nor did we have any
discussions or negotiations with any parties, other than BioTechnica, in
connection with the purchase of BioTechnica shares.
Possession of this report, or a copy thereof, does not carry with it the
right of publication of all or part of it, nor may it be used for any purpose
by anyone but the client without the previous written consent of the client or
us and, in any event, only with proper attribution.
We are not required to give testimony in court, or be in attendance
during any hearings or depositions, with reference to BioTechnica, unless
previous arrangements have been made.
This opinion is valid only for the purpose(s) and standard of value
specified herein.
This opinion is based on a going concern value.
The opinion contemplates facts and conditions existing as of the opinion
date. Events, conditions, and circumstances occurring after that date, have
not been considered, and we have no obligation to update our opinion for such
events and conditions (except as requested at closing).
This opinion is subject to the understanding that the obligations of Stern
Brothers Valuation Advisors in the opinion are solely corporate obligations,
and no officer, director, employee, agent, shareholder or controlling person of
Stern Brothers Valuation Advisors shall be subjected to any personal liability
whatsoever to any person, nor will any such claim be asserted by or on behalf
of you or your affiliates.
Certifications
We certify that, to the best of our knowledge and belief:
The statements of fact in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal, unbiased
professional analyses, opinions, and conclusions.
Neither Stern Brothers Valuation Advisors nor the individuals involved
with this opinion have any present or contemplated future interest of any
nature whatsoever which might prevent the rendering of an unbiased opinion.
Our fee for this engagement is not contingent on an action or event
resulting from the analyses, opinions, or conclusions, in, or the use of this
report.
No one provided significant professional assistance to the persons
signing this report.
The American Society of Appraisers has a mandatory recertification
program for all of its Senior members. We are in compliance with that
program.
Conclusion
Based upon the foregoing, other matters we consider relevant and our
general knowledge of such matters as independent business appraisers, we
are of the opinion that the merger consideration of $0.05 per share to be paid
by an affiliate of Limagrain Genetics Corp. for the 4,778,399 shares (owned
by the public) of the 103,055,577 outstanding shares of BioTechnica, is fair,
from a financial point of view, to such public stockholders, as of
September 21, 1998.
Sincerely,
STERN BROTHERS VALUATION ADVISORS
John C. Korschot, CFA, ASA, CBA Teresa (Terry) A. Fry, ASA,
CBA
President Vice President
Exhibit D
Form of Notice of Merger and Appraisal Rights
NOTICE OF MERGER AND APPRAISAL RIGHTS
AVAILABLE TO STOCKHOLDERS OF
BIOTECHNICA INTERNATIONAL, INC.
IN CONNECTION WITH THE MERGER OF
BIOTECHNICA INTERNATIONAL, INC.
WITH AND INTO
BTI MERGER CORP.,
A WHOLLY OWNED SUBSIDIARY OF
LIMAGRAIN GENETICS CORP.
TO THE HOLDERS OF CERTIFICATES
REPRESENTING COMMON STOCK OF
BIOTECHNICA INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN pursuant to Section 262(d)(2) of the
General Corporation Law of the State of Delaware (the "DGCL") that effective
on _____________, 1998 (the "Effective Time of the Merger"), BioTechnica
International, Inc., a Delaware corporation (the "Company"), will be merged
(the "Merger") with and into BTI Merger Corp. ("Mergerco"), a Delaware
corporation and wholly-owned subsidiary of Limagrain Genetics Corp., a
Delaware corporation ("LG Corp"), with Mergerco as the surviving corporation
(Mergerco is sometimes referred to herein as the "Surviving Corporation").
The Merger will be effected pursuant to Section 253 of the DGCL when
Mergerco files a Certificate of Ownership and Merger with the Secretary of
State of Delaware. Immediately prior to the Merger, Mergerco will own
approximately 95% of the outstanding shares of common stock, par value $.01
per share (the "Shares"), of the Company. Under the DGCL, no action will be
required by the board of directors or stockholders of the Company, other than
Mergerco (through its Board of Directors), for the Merger to become effective.
Prior to the consummation of the merger, LG Corp. and Mergerco
reserve the right to cancel the merger for any reason, including without
limitation if (i) any stockholder of the Company seeks to enjoin the
merger or (ii) in their judgment, the anticipated cost of the merger would
be materially increased by the number of stockholders of the Company
seeking their appraisal remedy.
As a result of the Merger, the separate corporate existence of the
Company will cease. At the Effective Time of the Merger, each of the
outstanding Shares of the Company (other than Shares held by Mergerco and
Shares held in the treasury of the Company) will be automatically converted,
subject to the appraisal rights described below, into the right to receive $.05
in cash, without interest, upon surrender of the certificate for such Share to
Harris Trust and Savings Bank, as Paying Agent (the "Paying Agent"), as set
forth in the enclosed letter of transmittal (the "Letter of Transmittal").
SURRENDER OF CERTIFICATES
The Paying Agent will accept the surrender of certificates
representing Shares in exchange for the $.05 per Share cash payment.
TO RECEIVE THE $.05 PER SHARE CASH PAYMENT FOR ALL
OR PART OF A STOCKHOLDER'S SHARES, THE STOCKHOLDER OR A
DULY AUTHORIZED REPRESENTATIVE MUST (A) DELIVER THE
ENCLOSED LETTER OF TRANSMITTAL, APPROPRIATELY COMPLETED
AND EXECUTED, TO THE PAYING AGENT AND (B) SURRENDER SUCH
SHARES BY DELIVERING THE STOCK CERTIFICATE OR CERTIFICATES
THAT, PRIOR TO THE MERGER, HAD EVIDENCED SUCH SHARES TO
THE PAYING AGENT, ALL AS SET FORTH IN THE LETTER OF
TRANSMITTAL AND ACCOMPANYING INSTRUCTIONS.
Each person who does NOT plan to seek an appraisal of all such
person's Shares is urged to execute (or, if such person is not the record
holder of such Shares, to arrange for such record holder or such holder's duly
authorized representative to execute) and mail postage paid or deliver a Letter
of Transmittal to the Paying Agent at the address set forth in the Letter of
Transmittal. STOCKHOLDERS SHOULD NOTE THAT SURRENDER TO
THE PAYING AGENT OF CERTIFICATE(S) FOR THEIR SHARES MAY
CONSTITUTE A WAIVER OF APPRAISAL RIGHTS UNDER THE DGCL.
Each Company stockholder should note that the method of
delivery of the Letter of Transmittal, stock certificate(s) and all other
required documents is at the election and risk of the stockholder. IF THE
DECISION IS MADE TO SEND STOCK CERTIFICATE(S) BY MAIL, IT IS
RECOMMENDED THAT SUCH CERTIFICATE(S) BE SENT BY
REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED.
APPRAISAL RIGHTS
Notwithstanding the Merger, Shares held by stockholders of the
Company who (a) do not execute and return (or cause to be executed and
returned) a Letter of Transmittal with respect to such Shares or otherwise
surrender such Shares for the $.05 per Share cash payment, (b) perfect their
rights to appraisal of such Shares in accordance with Section 262 of the DGCL
("Section 262") and (c) do not thereafter withdraw their demands for appraisal
of such Shares or otherwise lose or waive their appraisal rights, in each case
in accordance with the DGCL, shall represent the right to receive from the
Company such payment as the holders thereof may be entitled to receive as
determined by the Delaware Court of Chancery in an appraisal proceeding.
Section 262 provides a procedure by which persons who were
stockholders of the Company at the Effective Time of the Merger may seek an
appraisal of their Shares in lieu of accepting the $.05 per Share cash payment.
A demand for appraisal must be made in writing by or for the stockholder of
record wishing to demand appraisal and must reasonably inform the Company
of the identity of the stockholder making the demand for appraisal and that
such stockholder intends thereby to demand appraisal of his Shares. In any
such appraisal proceeding, the Delaware Court of Chancery would determine
the fair value of the Shares, exclusive of any element of value arising from
the accomplishment or expectation of the Merger. Stockholders should recognize
that such appraisal could result in a determination of a value higher or lower
than or equivalent to $.05 per Share. Following such an appraisal proceeding,
the Delaware Court of Chancery would direct the Surviving Corporation,
pursuant to Section 262, to make payment of such fair value of the Shares,
together with a fair rate of interest, if any, to the former stockholders
entitled thereto who properly demanded appraisal.
APPRAISAL PROCEDURE
This Notice of Merger and Appraisal rights from the Company
affords stockholders of the Company the notice required by Section 262(d)(2)
of the DGCL. The right to appraisal will be lost unless it is perfected by
full and precise satisfaction of the requirements of Section 262, the text of
which is set forth in full in APPENDIX A hereto. MERE FAILURE TO EXECUTE
AND RETURN A LETTER OF TRANSMITTAL TO THE PAYING AGENT
DOES NOT SATISFY THE REQUIREMENTS OF SECTION 262; RATHER,
A SEPARATE WRITTEN DEMAND FOR APPRAISAL MUST BE PROPERLY
EXECUTED AND DELIVERED TO THE COMPANY AS DESCRIBED BELOW.
A stockholder of the Company who wishes to demand appraisal
of his Shares must make a written demand for appraisal ON OR PRIOR TO
_______________, 1998 (i.e., within 20 calendar days after the date of
mailing of this Notice of Merger and Appraisal Rights). A demand for appraisal
should be addressed to the Company at the following address:
BioTechnica International, Inc.
4001 North War Memorial Drive
Peoria, Illinois 61614
Attn: Secretary
As provided under Section 262, failure of a stockholder of the
Company to make a written demand for appraisal (or a beneficial owner of
Shares who fails to cause the record holder of such Shares to demand an
appraisal of such Share) within such time limit will result in the loss of such
stockholder's appraisal rights. The written demand for appraisal must be
executed by or for the stockholder of record, fully and correctly, as such
stockholder's name appears on the certificate(s) for his or her Shares. If the
Shares are owned of record in a fiduciary or representative capacity, such as
by a trustee, executor, administrator, guardian, attorney-in-fact or officer
of a corporation, execution of the demand must be made in such capacity, and
if the Shares are owned of record by more than one person, such as in a joint
tenancy or tenancy in common, the demand must be executed by or for all
joint owners. An authorized agent, including one or two or more joint owners
may execute the demand for appraisal for a stockholder of record; however,
the agent must identify the record owner(s) and expressly disclose the fact
that, in executing the demand, the agent is acting as agent for the record
owner(s).
A beneficial owner of Shares held in "street name" who desires
appraisal should take such actions as may be necessary to ensure that a
timely and proper demand for appraisal is made by the record holder of such
Shares. Shares held through brokerage firms, banks and other financial
institutions are frequently deposited with and held of record in the name of a
nominee of a central security deposit, such as Cede & Co., Philadep and
others. Any beneficial holder desiring appraisal who holds Shares through a
brokerage firm, bank or other financial institution is responsible for ensuring
that the demand for appraisal is made by the record holder. The beneficial
holder of such Shares should instruct such firm, bank or institution that the
demand for appraisal may be made by the record holder of the Shares, which
may be the nominee of a central security depository if the Shares have been
so deposited. As required by Section 262, a demand for appraisal must
reasonably inform the Company of the identity of the holder(s) of record
(which may be a nominee as described above) and of such holder's intention
thereby to demand appraisal of such Shares.
Within 120 calendar days after the Effective Time of the Merger,
the Surviving Corporation or any former stockholder entitled to appraisal
rights under Section 262 who has complied with the provisions thereof may file
a petition in the Delaware Court of Chancery demanding a determination of the
value of the Shares of all such stockholders. The Surviving Corporation is
under no obligation, and has no present intention, to file such a petition.
Accordingly, any stockholder who wishes to perfect his or her appraisal rights
will be required to initiate all necessary action within the time prescribed in
Section 262. At any time within 60 calendar days after the Effective Time of
the Merger, any former stockholder who has demanded appraisal has the right
to withdraw the demand and accept the consideration offered pursuant to the
Merger.
Within 120 calendar days after the Effective Time of the Merger,
any stockholder who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from the
Surviving Corporation a statement setting forth the aggregate number of
Shares with respect to which demands for appraisal have been received and
the aggregate number of holders of such Shares. Such statement must be
mailed (a) within 10 calendar days after a written request therefor has been
received by the Company or (b) by _____________, 1998 (i.e., 10 calendar
days after expiration of the period for delivery of demands for appraisal),
whichever is later.
If a petition for an appraisal is timely filed and a copy thereof is
delivered to the Surviving Corporation, the Surviving Corporation will then be
obligated within 20 calendar days to provide the Register in Chancery with a
duly verified list containing the names and addresses of all former
stockholders of the Company who have demanded an appraisal of their
Shares and with whom agreements as to the value of their Shares have not
been reached by the Surviving Corporation. After notice to such former
stockholders, the Court of Chancery is empowered to conduct a hearing on
such petition to determine those former stockholders who have complied with
Section 262 and who have become entitled to appraisal rights. The Court of
Chancery may require the holders of Shares who have demanded an
appraisal for their Shares to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceeding;
and if any former stockholder fails to comply with such direction, the Court of
Chancery may dismiss the proceedings as to such former stockholder.
After determining the stockholders entitled to an appraisal, the
Court of Chancery will appraise the "fair value" of their Shares, exclusive of
any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. The Delaware Supreme Court has stated
that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered in the appraisal proceedings. In addition,
Delaware courts have held that the Section 262 appraisal remedy, depending on
factual circumstances, may or may not be a dissenter's exclusive remedy.
The costs of the appraisal proceeding may be determined by the
Court of Chancery and taxed upon the parties as the Court of Chancery
deems equitable in the circumstances. The Court of Chancery may also order
that all or a portion of the expenses incurred by any former stockholder in
connection with an appraisal, including, without limitation, reasonable
attorney's fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all the Shares entitled to
be appraised.
No former stockholder, whether or not he or she has duly
demanded an appraisal in compliance with Section 262, will, from and after
the Effective Time of the Merger, be entitled to vote any Share for any purpose
or be entitled to the payment of dividends or other distributions on any Shares
(except dividends or other distributions payable to stockholders of record at
a date prior to the Effective Time of the Merger).
If any stockholder who demands appraisal of his Shares under
Section 262 fails to perfect, or effectively withdraws or loses, his or her
right to appraisal, as provided in the DGCL, the Shares of such stockholder
will, at or after the Effective Time of the Merger, be converted into the right
to receive $.05 in cash per Share, without interest. Such stockholders must
follow the procedures set forth in the Letter of Transmittal and accompanying
instructions.
The foregoing brief summary does not purport to be a complete
description of the applicable provisions of Section 262, and is qualified in
its entirety by reference to Section 262, which is attached hereto in full as
APPENDIX A.
INFORMATION CONCERNING THE COMPANY
Prior to the Effective Time of the Merger, the Company was
subject to the information reporting and other requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, was, and, in certain circumstances, is required to file
reports and other information with the Securities and Exchange Commission
(the "Commission") relating to the Company's business, financial condition
and certain other matters. These reports and other information should be
available for inspection at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and also should be available for inspection and copying at the regional offices
of the Commission located at Seven World Trade Center (Suite 1300), New
York, New York 10048; Northwest Atrium Center, 500 West Madison Street
(Suite 1400), Chicago, Illinois 60661; and 5670 Wilshire Boulevard, 11th Floor,
Los Angeles, California 90036. Copies may also be obtained by mail, upon
payment of the Commission's customary fees, from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains certain reports and other information
regarding registrants that file electronically with the Commission.
Dated: ___________, 1998 BTI MERGER CORP.
By:
Name:
Title:
APPENDIX A
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in favor
of the merger or consolidation nor consented thereto in writing pursuant to
S 228 of this title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation;
and the words "depository receipt" mean a receipt or other instrument issued
by a depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to S 251 (other than a merger effected pursuant to S 251(g)
of this title), S 252, S 254, S 257, S 258, S 263 or S 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of stock,
which stock, or depository receipts in respect thereof, at the record date
fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting of stockholders to act upon the agreement of merger
or consolidation, were either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of S 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation
pursuant to S 251, 252, 254, 257, 258, 263 and 264 of this title to
accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts
in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares of fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under S 253 of this title is not
owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at
a meeting of stockholders, the corporation, not less than 20 days prior
to the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of
such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented
to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to S
228 or S 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective date
of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled
to appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or
series of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or consolidation or (ii)
the surviving or resulting corporation shall send such a second notice to
all such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following
the sending of the first notice, such second notice need only be sent to
each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more
than 10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the effective
date of the merger or consolidation, any stockholder who has complied with
the requirements of subsections (a) and (d) hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number
of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof shall
be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates of stock to the
Register in Chancery if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded such stockholder's appraisal rights as
provided in subsection (d) of this section shall be entitled to vote such stock
for any purpose or to receive payment of dividends or other distributions on
the stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal shall be
filed within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a written
withdrawal of such stockholder's demand for an appraisal and an acceptance
of the merger or consolidation, either within 60 days after the effective date
of the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
Exhibit G
Audited Financial Statements for the Fiscal Year Ended June 30, 1997
and 1998
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements: Number
Independent Auditors' Report
Consolidated Balance Sheets at June 30, 1998 and 1997
Consolidated Statements of Operations for the years
ended June 30, 1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders'
Equity for the years ended June 30, 1998, 1997
and 1996
Consolidated Statements of Cash Flows for the years
ended June 30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
All schedules have been omitted because the required information is not
applicable or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
BioTechnica International, Inc.:
We have audited the consolidated financial statements of BioTechnica
International, Inc. and subsidiary (the "Company") as listed in the
accompanying index. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with 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 BioTechnica
International, Inc. and subsidiary as of June 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1998, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Indianapolis, Indiana
July 17, 199
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, June 30,
ASSETS 1998 1997
Current assets:
Cash and cash equivalents $ 353 $ 207
Accounts receivable, less allowance for doubtful
accounts of $97 9,458 7,068
Inventories 7,761 8,330
Prepaid expenses and other current assets 139 130
Total current assets 17,711 15,735
Net property, plant and equipment 8,040 9,316
Goodwill and other assets, net 7,879 8,385
Total assets $33,630 $33,436
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ 7,700 $10,900
Borrowings from affiliates-current 3,600 --
Accounts payable 489 721
Accrued liabilities 2,936 1,669
Due to affiliates 244 115
Total current liabilities 14,969 13,405
Borrowings from affiliates long-term 6,761 5,261
Other noncurrent liabilities 431 295
Total liabilities $22,161 $18,961
Shareholders' equity:
Preferred stock, Class A, 900,000 shares
Outstanding (involuntary liquidation value of
$9 million at June 30, 1998 and 1997) $ 9 $ 9
Common stock, 103,094,737 and 104,094,737 shares
outstanding at June 30, 1998 and June 30, 1997,
respectively 1,031 1,041
Additional paid-in capital 20,823 20,823
Accumulated deficit (10,299) (7,303)
Treasury stock (95) (95)
Total shareholders' equity $11,469 $14,475
Commitments (note 12)
Total liabilities and shareholders' equity $33,630 $33,436
See accompanying notes to consolidated financial statement
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
---------Years Ended June 30,-----------
1998 1997 1996
Net sales:
Domestic $18,047 $17,004 $ 17,151
Export-Affiliates 2,984 2,977 1,489
Export-Other 309 104 127
21,340 20,085 18,767
Cost of goods sold 14,158 12,319 12,990
Gross margin 7,182 7,766 5,777
Operating expenses:
Sales and marketing 4,710 4,163 4,203
Warehouse and distribution 1,331 1,316 1,196
General and administrative 2,677 2,569 2,473
Amortization of goodwill 499 499 499
9,217 8,547 8,371
Operating loss (2,035) (781) (2,594)
Other income (expense):
Interest expense (966) (880) (832)
Gain (loss) on disposition
of fixed assets (225) 13 405
Other 231 208 321
Loss before income taxes (2,995) (1,440) (2,700)
Income tax expense (benefit) 1 9 (15)
Net loss $(2,996) $ (1,449) $ (2,685)
Net loss per common share $ (.04) $ (.02) $ (0.03)
See accompanying notes to consolidated financial statements
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars, except share data)
Preferred Stock Additional
Class A Non-Voting Common Stock Paid-In
Shares Par Value Shares Par Value Capital
Balance June 30, 1995 700,000 $ 7 115,418,788 $1,154 $18,893
Issuance of Preferred
Stock 200,000 2 -- -- 1,998
Net loss for Fiscal 1996 -- -- -- -- --
Balance June 30, 1996 900,000 $ 9 115,418,788 $1,154 $20,891
Repurchase of common shares -- -- (11,324,051) (113) (68)
Net loss for Fiscal 1997 -- -- -- -- --
Balance June 30, 1997 900,000 $ 9 104,094,737 $1,041 $20,823
Net loss for Fiscal 1998 -- -- -- -- --
Repurchase of common shares -- -- (1,000,000) (10) --
Balance June 30, 1998 900,000 $ 9 103,094,737 $1,031 $20,823
Total
Treasury Stock (Accumulated Shareholders'
Shares Par Value Deficit) Equity
Balance June 30, 1995 (39,160) $(95) $(3,169) $ 16,790
Issuance of Preferred Stock -- -- -- 2,000
Net loss for Fiscal 1996 -- -- (2,685) (2,685)
Balance June 30, 1996 (39,160) $(95) (5,854) $ 16,105
Repurchase of common shares -- -- -- (181)
Net loss for Fiscal 1997 -- -- (1,449) (1,449)
Balance June 30, 1997 (39,160) $(95) $(7,303) $ 14,475
Net loss for Fiscal 1998 -- -- (2,996) (2,996)
Repurchase of common shares -- -- -- (10)
Balance June 30, 1998 (39,160) $(95) $(10,299) 11,469
See accompanying notes to consolidated financial statements
BIOTECHNICA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Years Ended June 30,
1998 1997 1996
Cash Flow from Operating Activities:
Net loss $ (2,996) $ (1,449) $ (2,685)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 940 954 903
Amortization 499 499 499
(Gain) loss on disposition of fixed assets 225 (13) (405)
Changes in assets and liabilities:
Accounts receivable (2,390) 896 (186)
Inventories 569 (2,354) 951
Other assets (2) 87 27
Accounts payable and Accrued
liabilities, and Due to affiliates 1,300 (124) (178)
Net cash provided by (used in)
operating activities (1,855) (1,504) (1,074)
Cash Flow from Investing Activities:
Acquisition of property, plant
and equipment (130) (600) (1,527)
Proceeds from asset sales 241 65 1,078
Net cash provided by (used in)
investing activities 111 (535) (449)
Cash Flow from Financing Activities:
Net borrowing(repayment) under line of credit (3,200) 2,400 (700)
Proceeds (payment) of long-term debt
to affiliates 1,500 2,000 (2,065)
Proceeds (payment) of short-term debt
to affiliates 3,600 (2,060) 2,175
Payments on long-term debt and
notes payable -- (107) (92)
Repurchase of common stock (10) (181) --
Issuance of Class A Preferred Stock -- -- 2,000
Net cash provided by
financing activities 1,890 2,052 1,318
Net increase (decrease) in
cash and cash equivalents 146 13 (205)
Cash and cash equivalents at
beginning of year $ 207 $ 194 $ 399
Cash and cash equivalents at
end of year $ 353 $ 207 $ 194
See accompanying notes to consolidated financial statement
BIOTECHNICA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Business
BioTechnica International, Inc. and its subsidiary, LG Seeds, Inc. (the
"Company"), sell corn, soybean, alfalfa and other agricultural seed to
dealers, distributors and farmers through its seed operations. The Company
operates in a twelve-state region centered in the Midwestern United States.
Sales are generally made on open account to customers. Because of the
geographic concentration of the Company's customers in the Midwest, it is
significantly dependent upon the weather and market conditions in its market
areas. In addition, industry sales levels are dependent upon factors
resulting from governmental agriculture policies and farm programs.
As of June 30, 1998, approximately 95% of the common stock and 100% of the
Preferred Stock of the Company is owned by Limagrain Genetics Corporation
("LG Corp."), which is controlled by Groupe Limagrain Holding ("Limagrain")
of Chappes, France.
B. Principles of Consolidation
The consolidated balance sheets as of June 30, 1998 and 1997, and statements of
operations for the three years ended June 30, 1998, include the Company and its
wholly-owned subsidiary, LG Seeds, Inc. All significant intercompany
balances and transactions have been eliminated in consolidation.
C. Revenue Recognition
Sales of seed products are recorded upon shipment, reduced by a reserve for
estimated returns and discounts.
D. Research and Development Costs
Although the Company has no significant internal research and development
effort, it has access to research conducted by LG Corp. and other Limagrain
affiliates. The cost of this expertise is paid to LG Corp. in the form of
royalties on products sold.
E. Advertising
The Company expenses all advertising in the period incurred. Advertising
expenses for Fiscal 1998, 1997, and 1996 were $166,000, $133,000, and $80,000,
respectively.
F. Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks and short-term investments
with original maturities of three months or less.
G. Inventories
Inventories consist primarily of seed products and supplies. Seed product
inventory is valued at the lower of average cost by crop year or market.
Supply inventory is valued at the lower of cost (using the first-in,
first-out method) or market. Gains or losses, if any, on commodity
hedging transactions are included as a component of inventory.
H. Derivatives
The Company has contractual commitments with seed growers for payments based on
the local commodity prices for soybeans and wheat. To mitigate the impact of
fluctuations in commodity prices on inventory costs, the Company attempts from
time to time to hedge these commitments by using Chicago Board of Trade
futures contracts for the respective crops. The Company matches these
futures contracts to its purchases of inventory, closing out the futures
contracts as payments are made to the seed growers and recognizing the gains
and losses as a component of the product cost in cost of sales. There were
no open futures contracts at either June 30, 1998 or 1997.
I. Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets.
Depreciable lives for asset classes are:
Land improvements 15 years
Buildings and improvements 15 to 32 years
Machinery and equipment 3 to 20 years
J. Goodwill
Goodwill is being amortized using the straight-line method over a period of 20
years. The Company evaluates the existence of goodwill impairment on the basis
of whether the goodwill is fully recoverable from projected, undiscounted
net cash flows.
K. Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes whereby deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company files a Federal consolidated tax return with other corporations
controlled by LG Corp. The related tax sharing agreement provides that
consolidated Federal income tax is allocated among profitable companies.
Companies with operating losses receive benefits in the future by
effectively offsetting taxable income against prior operating losses.
L. Loss Per Common Share
Loss per common share has been computed by dividing the loss applicable to
common shareholders by the weighted-average number of common shares
outstanding. Net loss has been increased by current year cumulative
preferred stock dividends (whether or not declared) to arrive at loss
applicable to common shareholders. The Company has no dilutive potential
common shares.
M. Fair Value of Financial Instruments
Carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable, accrued liabilities, and due to affiliates-current, approximate fair.
The Company's borrowings under its Line of Credit are at variable interest
rates tied to market rates and, accordingly, the Company considers the fair
value to be the same as the carrying value. The estimated fair value
of Borrowings from Affiliates-long-term, based on borrowing rates currently
available to the Company on bank loans with similar terms and maturities would
be $5,919,000.
N. Use of Estimates
Management of the Company has made a number of estimates and assumptions
related to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from these estimates.
2. INVENTORIES
Inventories at June 30, 1998 and 1997 are as follows:
(in thousands of dollars)
1998 1997
Finished seed $ 4,473 $ 4,666
Unfinished seed 2,594 2,955
Supplies and other 694 709
Total inventories $ 7,761 $ 8,330
"Finished seed" consists of bagged product, ready for sale, net of reserves
for obsolescence. "Unfinished seed" consists of bulk product not yet bagged
and the cost associated with the seed crop planted in the spring of the
applicable fiscal year. "Supplies and other" consists of foundation seed,
unused bags, pallets and other supply items.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1998 and 1997 are as follows:
(in thousands of dollars)
1998 1997
Land and improvements $ 577 $ 768
Buildings and improvements 7,869 8,185
Machinery and equipment 5,399 5,312
Construction in progress 13 52
$13,858 $14,317
Less accumulated depreciation 5,818 5,001
Net property, plant and
equipment $ 8,040 $ 9,316
4. LOSS PER SHARE
Loss per share was calculated as follows: (in thousands of dollars)
1998 1997 1996
Net loss $ (2,996) $ (1,449) $ (2,685)
Current year cumulative preferred
stock dividends (undeclared) (675) (675) (608)
Net loss available for common
shares (3,671) (2,124) (3,293)
Weighted average shares outstanding 103,650,098 114,635,033 15,379,628
Net loss per common share (0.04) (0.02) (0.03)
5. GOODWILL AND OTHER ASSETS
Goodwill and other assets consist of the following:
(in thousands of dollars)
1998 1997
Goodwill $ 9,966 $ 9,966
Amortization of goodwill (2,173) (1,674)
Net goodwill $ 7,793 $ 8,292
Deposits and other 86 93
TOTAL $ 7,879 $ 8,385
6. LINE OF CREDIT AND NOTE PAYABLE
The Company has a revolving credit arrangement with its principal bank
("Line of Credit") whereby the Company can borrow up to $12,000,000 based on
a borrowing base formula and subject to certain limitations in availability.
This Line of Credit, which expires December 31, 1998, bears interest (at
the Company's option) based upon (i) the Bank Prime Loan rate, (ii) the
London Interbank Offered Rate ("LIBOR") index or (iii) the Bank Offered Rate.
Borrowings under this Line of Credit are secured by the inventory and accounts
receivable of the Company and its subsidiary and by the guarantees of
Limagrain and LG Corp. The maximum and average amounts outstanding under
this Line of Credit during the year ended June 30, 1998 were $10,900,000 and
$6,177,000, respectively. The weighted average interest rate during Fiscal
1998 was 6.92%.
7. BORROWINGS FROM AFFILIATES
Borrowings from affiliates at June 30, 1998 and 1997 were as follows:
(in thousands of dollars)
1998 1997
Current:
Limagrain Genetics Corp.
Due on demand at an annual interest $ 3,000 $ --
rate of 6.5%
Due on demand at an annual interest
rate of 5% 600 --
Total borrowings from affiliates-current $ 3,600 $ --
Long-term:
Limagrain Genetics Corp.
Due July 1, 2000 at an annual interest $ 1,500 $ --
rate of 6.5%
Due July 1, 2000 at an annual interest
rate of 5% 5,261 5,261
Total borrowings from affiliates-long-term $ 6,761 $ 5,261
In addition to these notes at June 30, 1998 and 1997, the Company owes
affiliates $244,000 and $115,000, respectively, for current items.
8. CAPITAL STOCK
Authorized shares of stock include: 150,000,000 shares of common stock;
11,100,000 shares of Class A common; 11,100,000 shares of Class B common;
and 2,000,000 shares of Class A Preferred.
As of June 30, 1998 and 1997, there were only two classes of stock issued and
outstanding: common stock and Class A Preferred Stock.
On November 30, 1995, the Company retired a long-term note of $2,000,000 in
exchange for $2,000,000 of the Company's Class A Preferred Stock.
On June 6, 1997, the Company repurchased and retired 11,324,051 shares of its
common stock from a shareholder at $0.016 per share. This common stock
represented approximately 9.8% of the total common stock. The price of
$0.016 per share was substantially below the then-current market price and
net book value per share.
On February 2, 1998, the Company repurchased and retired 1,000,000 shares of
its common stock from a shareholder at $0.01 per share. This common stock
represented approximately 1.0% of total common stock outstanding on that
date. The price of $0.01 per share was substantially below the then-current
market price and net book value per share.
The Class A Preferred Stock of the Company (all of which is owned by LG Corp.)
pays a cumulative dividend of $.75 per share per year when declared by the
Board of Directors. No such dividend has been declared by the Board of
Directors. Pursuant to the terms and conditions of the Company's Class A
Preferred Stock, should any dividend be declared or paid on the common stock
of the Company, the holders of Class A Preferred Stock would be entitled to
receive dividends at a rate per share equal to that of the common stock in
addition to their preferred dividends. As of June 30, 1998 and 1997, the
cumulative amount of undeclared dividends on the Class A Preferred Stock
was $2,425,000 and $1,750,000, respectively.
9. STOCK OPTION PLAN
The Company has reserved 1,500,000 shares of common stock for issuance under an
incentive stock option plan. During Fiscal 1996, all outstanding options
were either (i) repurchased by the Company or (ii) determined to have expired.
The cancellation of these options resulted in a reduction of general and
administrative expense of $150,000 during Fiscal 1996. As of June 30, 1998
and 1997, there were no options outstanding.
10. RETIREMENT PLAN
The Company participates in a 401(k) savings retirement plan sponsored by
LG Corp. The plan covers substantially all full-time employees of the
Company with at least one year of service. Vesting occurs over a five-year
period at 20% per year. Employees may contribute up to the lesser of 15% of
their salary or an amount determined annually by Federal income tax
regulations. Company contributions may consist of a basic amount for all
covered employees, a matching contribution for a portion of employee
contributions, and a potential additional discretionary contribution.
Company contributions under the plan were $168,207, $177,064, and $82,145, for
Fiscal 1998, Fiscal 1997, and Fiscal 1996, respectively.
11. INCOME TAXES
On June 30, 1998 and 1997, the Company had pre-acquisition net operating loss
carryforwards of approximately $1,360,000 and $1,496,000, respectively,
which expire at a rate of $136,000 per year through 2008. The Company had
post-acquisition net operating loss carryforwards of approximately $14,886,000
and $13,332,000 on June 30, 1998 and 1997, respectively, which expire through
2018.
The components of income tax expense (benefits) are as follows:
(in thousands of dollars)
1998 1997 1996
Federal $ -- $ -- $(28)
State 1 9 13
Total $ 1 $ 9 $(15)
The actual income tax benefit differed from the expected income tax benefit
(computed by applying the applicable U.S. Federal corporate income tax rate
of 34% to loss before income taxes) as follows:
(in thousands of dollars)
1998 1997 1996
Computed "expected" tax benefit $(1,018) $(490) $(933)
Amortization of goodwill 170 170 170
State income taxes, net of
Federal benefit -- 6 9
Alternative minimum tax -- -- (28)
Other (324) 24 (250)
Change in valuation allowance 1,173 299 1,017
Total $ 1 $ 9 $ (15)
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at June 30, 1998 and 1997 are
presented below.
(in thousands of dollars)
1998 1997
Deferred tax assets:
Net operating loss carryforward
(Pre-acquisition) $ 530 $ 583
Net operating loss carryforward
(Post-acquisition) 5,804 5,199
Allowance for doubtful accounts 38 38
Allowance for inventory valuation 179 121
Accrued compensation, sales allowances
and other expenses 827 295
Total gross deferred tax assets $ 7,378 $ 6,236
Valuation allowance (6,792) (5,623)
Total deferred tax assets 586 613
Deferred tax liability:
Difference between basis of fixed
assets for book and tax purposes $ (586) $ (613)
Net deferred tax assets $ -- $ --
The change in the deferred tax valuation allowance was an increase of
$1,173,000 in Fiscal 1998 compared to an increase of $299,000 in Fiscal 1997,
and an increase of $1,017,000 in Fiscal 1996.
At June 30, 1998 and June 30, 1997, the amount of valuation allowance, which if
realized would result in a reduction of goodwill, aggregated $530,000, and
$583,000, respectively.
12. COMMITMENTS
The Company leases various real and personal property under non-cancelable
operating leases which expire through 2002. Rental expenses charged to
operations were $638,407, $614,321, and $465,000 for the years ended
June 30, 1998, 1997 and 1996, respectively. Future annual minimum
rentals are $573,915, $432,917, $181,506, $46,468, and $739, for Fiscal 1999
through 2003, respectively.
13. RELATED PARTIES
The Company has access to the Limagrain germplasm. The cost to access this
germplasm is paid to LG Corp. as royalties on corn and soybean units sold.
Costs incurred for corn royalties were approximately $87,000, $71,000, and
$94,000 for Fiscal 1998, 1997 and 1996, respectively. The Company accrued
or paid $31,000, $44,000, and $50,000 to LG Corp. for royalties on soybean
genetics for Fiscal 1998, 1997 and 1996, respectively.
The Company has agreements with affiliated companies that provide for certain
administrative and management services. Combined costs incurred under
these agreements were $400,000, $300,000, and $320,000 for Fiscal 1998, 1997
and 1996, respectively. Fees for these arrangements are negotiated annually
by management and approved by the Board of Directors.
The Company sells seed to various affiliated companies in Europe primarily
under production contracts. These contracts are negotiated annually and are
based on market pricing and quantities determined by the affiliates'
requirements. Export sales to affiliates amounted to $2,984,000 for Fiscal
1998, $2,977,000 for Fiscal 1997, and $1,489,000 for Fiscal 1996.
During Fiscal 1996, the Company repurchased 70,000 stock options from officers
and directors for $3,400. The repurchase of the options, with exercise prices
between $1.31 and $3.50 per share, resulted in a reduction of approximately
$66,000 in long-term liabilities. The net result was a reduction of general
and administrative expenses of $62,000.
14. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest aggregated approximately $1,074,000, $880,000 and
$728,000 for Fiscal 1998, 1997, and 1996, respectively.
15. LIQUIDITY
The Company has incurred net operating losses and negative cash flow from
operations for Fiscal 1998, 1997, and 1996. The Company's current line of
credit expires on December 31, 1998, at which time management expects to
renew this credit facility.
Management believes that subsequent to the events described below in "Note 17.
Subsequent Events", that Limagrain and LG Corp. will recapitalize the Company
to make additional capital resources available and take steps to improve the
operations and cash flow. At this time, specific plans and actions are not
known.
16. OTHER INCOME AND EXPENSE
Included in other income and expense are $123,000, $95,000, and $68,000 in
finance charge income on customer accounts for Fiscal 1998, 1997, and 1996,
respectively. Also included in other income and expense for Fiscal 1996 is
$94,000 of gain on the disposal of AgriBioTech, Inc. common stock received
during Fiscal 1995 by the Company as part of the proceeds from the disposal
of its Scott Seed Company operations.
17. SUBSEQUENT EVENTS
On September 21, 1998, the Company received a letter from LG Corp. notifying
the Company of LG Corp.'s intention to cash out the minority stockholders of
the Company via a short form merger effected pursuant to Section 253 of the
General Corporation Law of the State of Delaware (the "DGCL"). The
consideration to be paid to the minority stockholders of the Company in such
merger is $0.05 per share.
Under the DGCL, because LG Corp. owns more than 90% of the Company, no action
will be required of the board of directors of the Company or the stockholders
of the Company (other than LG Corp. acting through its board of directors),
for the merger to become effective. Also, as a "short form" merger, the
board of directors of the Company had no right to a role, nor did they have a
role, in negotiating the cash-out price, and the Company's directors have made
no determination, nor are they required to make a determination, with
respect to the fairness of the cash-out price.
The merger is expected to be consummated prior to December 31, 1998, or as soon
as practicable thereafter. Under the DGCL, minority stockholders of the
Company who do not wish to accept the consideration of $0.05 per share and
who follow the procedures set forth in Section 262 of the DGCL will be
entitled to have their shares of common stock appraised by the Delaware Court
of Chancery and to receive payment in cash of the "fair value" of such shares.
Prior to the consummation of the merger, LG Corp. reserves the right to
cancel the merger for any reason, including without limitation if (i) any
stockholder of the Company seeks to enjoin the merger or (ii) in LG Corp.'s
judgment, the anticipated cost of the merger would be materially increased
by the number of stockholders of the Company seeking their appraisal remedy.