FORM F-1
REGISTRATION STATEMENT
UNDER
BUNGE LIMITED
(Exact name of Registrant as specified in its charter)
BERMUDA 2070 N/A
(PROVINCE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.,
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IF APPLICABLE)
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50 MAIN STREET
WHITE PLAINS, NEW YORK 10606
(914) 684-2800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
BUNGE LIMITED
50 MAIN STREET
WHITE PLAINS, NEW YORK 10606
ATTENTION: WILLIAM M. WELLS, CHIEF FINANCIAL OFFICER
(914) 684-2800
Copies to:
ANDREW B. JANSZKY JEFFREY SMALL
SHEARMAN & STERLING DAVIS POLK & WARDWELL
599 LEXINGTON AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
(212) 848-4000 (212) 450-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 of the Securities Act, check the following box. / /
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED BE REGISTERED(1)(2) PER SHARE(3) OFFERING PRICE(3) REGISTRATION FEE
Common Shares, par value $.01 per 20,240,000 common $18 $364,320,000 $91,080
share................................ shares
Series A Preference Share Purchase N/A N/A N/A N/A
Rights(4)............................
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(1) A portion of the shares registered represents shares that are to be offered outside the United States but that may be resold from time to time in the United States. Such shares are not being registered for the purpose of sales outside the United States.
(2) Includes 2,640,000 common shares that the underwriters have the option to purchase to cover over-allotments, if any.
(3) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A) OF THE ACT, MAY DETERMINE.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JULY 13, 2001
17,600,000 SHARES
[LOGO]
BUNGE LIMITED
COMMON SHARES
BUNGE LIMITED IS OFFERING 17,600,000 OF ITS COMMON SHARES. THIS IS OUR INITIAL
PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $16 AND $18 PER SHARE.
WE HAVE APPLIED TO LIST OUR COMMON SHARES ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "BG."
PRICE $ A SHARE
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS BUNGE LIMITED
------------------- ------------------- -------------------
PER SHARE................................ $ $ $
TOTAL.................................... $ $ $
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WE HAVE GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP TO AN ADDITIONAL
2,640,000 COMMON SHARES TO COVER OVER-ALLOTMENTS.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MORGAN STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE SHARES TO PURCHASERS
ON , 2001.
MORGAN STANLEY CREDIT SUISSE FIRST BOSTON
-----------------
DEUTSCHE BANC ALEX. BROWN
MERRILL LYNCH & CO.
PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY
, 2001
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TABLE OF CONTENTS
PAGE
--------
Summary.............................. 3
Risk Factors......................... 13
Special Note Regarding
Forward-Looking Statements and
Industry Data...................... 22
Use of Proceeds...................... 23
Dividend Policy...................... 23
Capitalization....................... 24
Dilution............................. 25
Selected Consolidated Financial
Data............................... 26
Unaudited Pro Forma Consolidated
Financial Information.............. 29
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 32
Industry Overview.................... 52
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Business............................. 58
Management........................... 75
PAGE
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Principal Shareholders............... 83
Related Party Transactions........... 84
Description of Share Capital......... 85
Shares Eligible for Future Sale...... 94
Taxation............................. 95
Underwriters......................... 99
Enforcement of Civil Liabilities..... 103
Legal Matters........................ 103
Experts.............................. 103
Where You Can Find Additional
Information........................ 104
Index to Consolidated Financial
Statements......................... F-1
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You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, our common shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common shares.
WE HAVE NOT TAKEN ANY ACTION TO PERMIT A PUBLIC OFFERING OF THE COMMON SHARES OUTSIDE THE UNITED STATES OR TO PERMIT THE POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS OUTSIDE THE UNITED STATES. PERSONS OUTSIDE THE UNITED STATES WHO HAVE COME INTO POSSESSION OF THIS PROSPECTUS MUST INFORM THEMSELVES ABOUT AND OBSERVE RESTRICTIONS RELATING TO THE OFFERING OF THE COMMON SHARES AND THE DISTRIBUTION OF THIS PROSPECTUS OUTSIDE OF THE UNITED STATES.
UNTIL , 2001, 25 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON SHARES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
CONSENT UNDER THE EXCHANGE CONTROL ACT 1972 (AND ITS RELATED REGULATIONS) HAS BEEN OBTAINED FROM THE BERMUDA MONETARY AUTHORITY FOR THE ISSUE AND TRANSFER OF THE COMMON SHARES TO AND BETWEEN NON-RESIDENTS OF BERMUDA FOR EXCHANGE CONTROL PURPOSES PROVIDED OUR SHARES REMAIN LISTED ON AN APPOINTED STOCK EXCHANGE, WHICH INCLUDES THE NEW YORK STOCK EXCHANGE. PRIOR TO THIS OFFERING, THIS PROSPECTUS WILL BE FILED WITH THE REGISTRAR OF COMPANIES IN BERMUDA IN ACCORDANCE WITH BERMUDA LAW. IN GRANTING SUCH CONSENT AND IN ACCEPTING THIS PROSPECTUS FOR FILING, NEITHER THE BERMUDA MONETARY AUTHORITY NOR THE REGISTRAR OF COMPANIES IN BERMUDA ACCEPTS ANY RESPONSIBILITY FOR OUR FINANCIAL SOUNDNESS OR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THIS PROSPECTUS.
SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS"
SECTION AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THOSE FINANCIAL STATEMENTS, BEFORE DECIDING WHETHER OR NOT TO PURCHASE OUR COMMON SHARES. IN THIS PROSPECTUS, THE TERMS "BUNGE," "WE," "US" AND "OUR" MEAN BUNGE LIMITED, OUR CONSOLIDATED SUBSIDIARIES AND PREDECESSOR COMPANIES, UNLESS WE INDICATE OTHERWISE.
BUNGE LIMITED
OVERVIEW
We are an integrated, global agribusiness and food company operating in the farm-to-consumer food chain, which ranges from raw materials such as grains and fertilizers to retail food products such as flour and margarine. We have primary operations in North and South America and worldwide distribution capabilities. We conduct our operations in three divisions: agribusiness, fertilizer and food products. In 2000, we had total net sales of $9,667 million and in the first quarter of 2001, we had total net sales of $2,472 million. We believe we are:
- the largest processor of soybeans in the Americas and among the world's leading exporters of soybean products based on volumes;
- the largest fertilizer producer and supplier to farmers in Latin America based on volumes;
- the market leader in edible oils and shortenings in Brazil and in premium edible oils in the United States based on sales;
- among the world's largest corn dry millers and the largest wheat miller in Latin America based on volumes; and
- one of three major manufacturers of isolated soybean protein worldwide based on sales and volumes.
OUR BUSINESS
AGRIBUSINESS
Our agribusiness division consists of three business lines: grain origination, oilseed processing and international marketing. Our grain origination activities include buying, storing and merchandising agricultural commodities. Our oilseed processing operations involve crushing soybeans to produce meal and oil. Our international marketing operations link our grain origination and oilseed processing operations with our overseas customers while also providing value-added financial, transportation and other services to those customers. Our primary grain origination and oilseed processing assets are located in the United States, Brazil and Argentina. We have international marketing offices in 17 countries. Net sales in our agribusiness division were $6,327 million in 2000, or 65% of our total net sales, and $1,765 million in the first quarter of 2001, or 71% of our total net sales.
FERTILIZER
Our fertilizer division is involved in every stage of the fertilizer industry, from mining of raw materials to sales of mixed fertilizer formulas. Our fertilizer activities are located primarily in Brazil, and we are currently the only integrated fertilizer producer in Brazil. We are also the leading producer of phosphate-based animal feed ingredients in South America in terms of tonnage. Net sales in our fertilizer division were $1,466 million in 2000, or 15% of our total net sales, and $283 million in the first quarter of 2001, or 11% of our total net sales.
FOOD PRODUCTS
Our food products division consists of four business lines: edible oil products, wheat milling and bakery products, soy ingredients and corn products. These businesses produce and sell food products such
as shortenings, edible oils, margarine, mayonnaise, milled products, bakery mixes, baked goods and food ingredients to food processors, foodservice companies and retail outlets. Our food products division, primarily located in the United States and in Brazil, benefits from a stable source of soybeans, crude vegetable oils, wheat and corn provided by our agribusiness operations. Net sales in our food products division were $1,874 million in 2000, or 20% of our total net sales, and $424 million in the first quarter of 2001, or 18% of our total net sales.
INDUSTRY OVERVIEW
Key industry trends that are expanding our business opportunities include:
AGRIBUSINESS
- GROWTH IN INCOME AND POPULATION. Income and population are the most important factors affecting the demand for food and animal feed. As incomes rise, food consumption increases, diets diversify to include more products such as edible oils and meats, and consumption patterns change to include processed foods and foods prepared away from home which typically make higher use of edible oils.
- GROWING GLOBAL DEMAND FOR FOOD. The global demand for food continues to grow. As a result, global consumption of agricultural commodities is growing despite regional economic downturns and adverse political conditions.
- SOYBEANS PROVIDE THE PRINCIPAL PROTEIN MEAL AND MOST WIDELY USED EDIBLE OIL. Soybean meal is the preferred and dominant protein source for many animal feed industries, particularly pork and poultry. The recent concern over mad cow disease and the European Union ban on the use of meat and bone meal in animal feed reinforces these preferences. In addition, soybean oil is the most widely used edible oil, representing 29% of the total edible oil consumed worldwide.
- INFLUENCE OF GEOGRAPHIC FACTORS. The availability of arable land, suitable climate and adequate infrastructure are essential to successful agricultural production. Countries such as the United States, Brazil and Argentina that can produce surplus crops cost-effectively and efficiently, supply those countries that have production deficits. We believe that an increase in global demand for agricultural commodities should result in an increase in exports of agricultural commodities and commodity products from these countries.
- EFFECTS OF CYCLICALITY ON THE OILSEED PROCESSING INDUSTRY. Profitability in the oilseed processing industry is cyclical in nature. Although the oilseed processing industry has recently experienced a period of excess industry capacity resulting in a decline in profitability, this industry has recently begun showing signs of recovery.
- BARRIERS TO ENTRY IN THE AGRIBUSINESS INDUSTRY. The scale and global reach required to compete effectively in the agribusiness industry, as well as the need for extensive logistics capabilities, a reliable supply of agricultural commodities inventory and significant intellectual capital, represent barriers to entry into the agribusiness industry and create a more favorable competitive environment for established market participants.
FERTILIZER
- LOW CROP YIELDS AND EXPANSION OF ARABLE LAND IN THE BRAZILIAN AGRICULTURAL SECTOR. Although Brazil is the fastest growing major fertilizer consumption market in the world, Brazil's fertilizer consumption is still significantly lower per hectare than in developed countries. According to the Brazilian Ministry of Agriculture, the use of fertilizers in Brazil is expected to continue to increase, primarily due to the continued conversion of Brazil's large reserve of arable land to agricultural production and efforts to increase low crop yields in areas currently under cultivation.
- LOGISTICS MANAGEMENT AND ACCESS TO DOMESTIC RAW MATERIALS. An efficient logistics network is important in the Brazilian fertilizer industry, as the Brazilian transportation infrastructure is not as
advanced as in developed countries. In addition, access to a domestic supply of raw materials and the ability to back-haul, or transport goods such as agricultural commodities from inland locations to export-import points, can create significant cost advantages for companies in this industry.
- CONSOLIDATION IN THE BRAZILIAN FERTILIZER INDUSTRY. The Brazilian fertilizer industry has experienced consolidation as a result of mergers and the exit from the market of a number of small, regional retail companies.
FOOD PRODUCTS
- CHANGING CONSUMER CONSUMPTION PATTERNS. Changes in population, income levels and other demographic factors affect the demand for food products. As buying decisions become more convenience-oriented, consumption of prepared foods and foods eaten away from home increases.
- CUSTOMER CONSOLIDATION AND MIGRATION. The trend towards consolidation of the supermarket sector in the United States and Latin America and the emergence of club stores have stimulated the private label market. In addition, the United States in-store bakery market has experienced a migration from the use of baking mixes to frozen dough, partially-baked and thaw-and-serve products.
- IMPORTANCE OF DISTRIBUTION CHANNELS. The ability to sell multiple products through the same distribution channels represents a significant advantage. While a well-established domestic food distribution system exists in the United States, food distribution channels in Brazil are still developing and are a growth area in the food products industry.
- GROWING DEMAND FOR FOODS OFFERING HEALTH BENEFITS. Soy proteins are an important substitute for animal protein and have functional characteristics with wide applications in the processed meat and bakery industries. Soy-based food ingredients are also at the forefront of the growing nutraceutical foods market that offers favorable profit margins. Nutraceutical foods are intended to produce specific health benefits.
OUR COMPETITIVE STRENGTHS
We believe our business benefits from the following competitive strengths:
- SIGNIFICANT SYNERGIES WITHIN AND AMONG OUR BUSINESSES. By operating in complementary businesses throughout the food supply chain, we enjoy significant operating advantages and logistical efficiencies.
- GEOGRAPHIC BALANCE AND POSITIONING. We have substantial agricultural commodities origination facilities in both the northern and southern hemispheres and are the only agricultural commodities company with a near equal balance between them, ensuring a year-round supply of oilseeds and grains.
- DOLLAR-DENOMINATED OR DOLLAR-LINKED GLOBAL BUSINESS. Our net sales in our agribusiness and U.S.-based food products divisions are either denominated in, or linked to, the U.S. dollar. Furthermore, the Brazilian fertilizer industry has historically been able to adjust its sales prices in response to the effects of exchange rate fluctuations on imported raw material costs.
- SCALE, QUALITY AND STRATEGIC LOCATION OF OUR FACILITIES. We operate large, efficient and well maintained agricultural commodities storage and oilseed processing facilities, generating economies of scale and reducing overall costs. We have also selectively located many of our facilities in close proximity to our suppliers, domestic customers, edible oil refineries and key export points to reduce transportation costs and delivery times for our products.
- WELL-POSITIONED IN HIGHER GROWTH AREAS OF OUR MARKETS. We believe that we are well-positioned in the higher growth areas of the markets in which we operate. For example, in our agribusiness division, we have a leading position in originating and processing soybeans in our principal markets and exporting soybean products, the consumption of which is rising faster than other oilseeds or grains. In our fertilizer division, our market leadership position in the Brazilian fertilizer industry will
enable us to capitalize on anticipated accelerated growth in the Brazilian fertilizer market. In our food products division, we are well-positioned in the fast-growing soy ingredients market due to our significant production of isolated soybean proteins.
- BROAD RANGE OF PRODUCTS AND SERVICES PROVIDED TO CUSTOMERS. We offer multiple services and support to our customers in each of our divisions, enabling us to expand our revenue base and customer relationships. Our agribusiness division provides financing, storage, freight services, trade finance, risk management and the ability to procure fertilizer products for customers. Our fertilizer business provides technical assistance to farmers by assisting in the application of fertilizers. In our food products division, we work with customers on product applications and new product development.
OUR BUSINESS STRATEGY
Our objective is to continue expanding our business and increasing our profitability by focusing on the following key strategies:
- EXPAND OUR CORE BUSINESSES THROUGH INTERNAL GROWTH. We intend to continue to grow by selectively expanding and extending our operations in each of our divisions. For example, we plan to continue to expand our global distribution capabilities in our agribusiness division through our growing network of international marketing offices. We also intend to expand our fertilizer operations into Argentina.
- PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We have a long record of expansion through acquisitions and intend to continue to pursue selective strategic acquisitions and alliances. Most recently, in 2000 we acquired a controlling interest in Manah, S.A., a Brazilian fertilizer company, which solidified our leading market share position in the Brazilian fertilizer industry and improved our access to raw materials.
- INCREASE OUR PRODUCTION OF SOYBEAN-BASED FUNCTIONAL INGREDIENTS AND NUTRACEUTICALS. We intend to apply our significant capital resources and expertise to expand our manufacturing capacity of soy ingredients and pursue acquisitions and alliances in order to achieve greater market presence in this high margin, fast-growing business. We also plan to expand our product capabilities to include a new line of soybean-based micro-ingredients to be used in the production of nutraceutical foods.
- EXPAND INTO HIGHER GROWTH ASIAN MARKETS. We intend to increase our existing presence in China and India, countries that are expected to generate much of the world's demand for grains and oilseed products. For example, we are currently exploring grain origination and oilseed processing opportunities in India.
- IMPROVE OUR ASSET EFFICIENCY. We intend to continue to increase our capacity utilization by improving our operating efficiency and expanding efficient facilities. We also plan to further develop our logistics and transportation capabilities in order to reduce costs and have undertaken several Internet-based initiatives designed to improve customer contact.
- OPTIMIZE OUR CORPORATE CAPITAL STRUCTURE. We began restructuring our outstanding debt in 2000 by raising $1 billion in the international capital markets, which was used primarily to reduce high-cost third party borrowings of our Brazilian subsidiaries. We intend to become more efficient in our use of working capital, lower our interest costs, reduce our foreign exchange transaction risk, increase our access to international capital markets and pursue other means of lowering our cost of capital.
Our business and profitability are affected by trends in international prices and demand for agricultural commodities, as well as industry-wide levels of processing capacity for those commodities. Our profitability is also affected by currency fluctuations. In 1999, primarily as a result of adverse industry conditions and the effects of the devaluation of the Brazilian REAL, we incurred a net loss of $5 million. The industries in which we operate are also highly competitive and require high levels of working capital. These factors could make it difficult for us to achieve our goals. For a more detailed discussion of the risks we face, you should read "Risk Factors."
CORPORATE STRUCTURE
The following diagram shows our corporate structure and our material subsidiaries as of March 31, 2001:
[CHART]
Our principal executive offices are located at 50 Main Street, White Plains, New York 10606 and our telephone number is (914) 684-2800. Our registered office is located at 2 Church Street, Hamilton, Bermuda. Our web site address is www.bunge.com. Information contained in or connected to our web site is not a part of this prospectus.
This prospectus contains our trademarks, including our logo. Each trademark, trade name or service mark of any other company appearing in this prospectus belongs to its respective holder.
THE OFFERING
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS DO NOT EXERCISE THEIR OVER-ALLOTMENT OPTION AND GIVES EFFECT TO AN EXCHANGE OF OUR 12,000 COMMON SHARES, PAR VALUE US$1 PER SHARE, FOR 1.2 MILLION COMMON SHARES, PAR VALUE US$.01 PER SHARE, WITH OUR SOLE SHAREHOLDER AND A 52.65-FOR-1 SHARE DIVIDEND EFFECTED IN JULY 2001.
Common shares offered........................ 17,600,000 shares
Common shares to be outstanding after this
offering................................... 81,980,000 shares
Over-allotment option........................ 2,640,000 shares
Use of proceeds.............................. We expect to receive net proceeds from this
offering of approximately $278 million. We
intend to use the net proceeds to reduce
indebtedness under our commercial paper
program.
Dividend policy.............................. We intend to pay cash dividends to our share-
holders on an annual basis. Any determination
to pay dividends will, subject to the
provisions of Bermuda law, be at the
discretion of our board of directors and will
depend on a variety of factors.
Proposed New York Stock Exchange symbol...... BG
Expected timetable
Commencement of marketing of the
offering............................... July 13, 2001
Announcement of offer price and
allocations............................ Week of July 30, 2001
Allocation of common shares.............. Week of July 30, 2001
Listing of the common shares on the New
York Stock Exchange.................... Week of July 30, 2001
Settlement and delivery of common
shares................................. Week of August 6, 2001
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Depending on market conditions, this expected timetable may be modified.
The number of common shares to be outstanding after this offering does not include stock appreciation rights and phantom units outstanding as of June 30, 2001 that we intend to convert into stock options and restricted stock awards representing an estimated 1,245,403 common shares at the closing of this offering.
SUMMARY FINANCIAL DATA
The following table summarizes our consolidated financial information. You should read this information together with "Management's Discussion and Analysis of Financial Condition and Results of Operations", our audited consolidated financial statements, our unaudited consolidated interim financial statements and the notes to our consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared in U.S. dollars and in accordance with accounting principles generally accepted in the United States of America.
The pro forma consolidated statements of income data gives effect to our acquisition of Manah S.A. as if it had occurred on January 1, 2000. For more information regarding this pro forma information, you should read "Unaudited Pro Forma Consolidated Financial Information." The historical as adjusted per share data and the consolidated balance sheet data give effect to this offering, at an assumed initial public offering price of $17 per share, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. The pro forma as adjusted per share data give effect to this offering and our acquisition of Manah S.A.
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
PRO FORMA
1997 1998 1999 2000 2000
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS
OF INCOME DATA:
Net sales.............. $ 7,484 $ 9,103 $ 8,075 $ 9,667 $ 9,782
Cost of goods sold..... 7,026 8,433 7,463 8,935 9,029
Impairment and
restructuring
charges.............. -- -- -- 49 49
----------- ----------- ----------- ---------- -----------
Gross profit........... 458 670 612 683 704
Selling, general and
administrative
expenses............. 338 374 332 387 400
----------- ----------- ----------- ---------- -----------
Income from
operations........... 120 296 280 296 304
Non-operating income
(expense)--net....... 19 (120) (296) (225) (229)
----------- ----------- ----------- ---------- -----------
Income (loss) before
income tax, minority
interest,
discontinued
operations,
extraordinary item
and cumulative effect
of change in
accounting
principle............ 139 176 (16) 71 75
Income tax (expense)
benefit.............. (38) (43) 27 (12) (13)
----------- ----------- ----------- ---------- -----------
Income before minority
interest,
discontinued
operations,
extraordinary item
and cumulative effect
of change in
accounting
principle............ 101 133 11 59 62
Minority interest...... (3) (33) 4 (37) (44)
----------- ----------- ----------- ---------- -----------
Income (loss) before
discontinued
operations,
extraordinary item
and cumulative effect
of change in
accounting
principle............ 98 100 15 22 18
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
PRO FORMA
2000 2000 2001
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS
OF INCOME DATA:
Net sales.............. $ 2,005 2,120 $ 2,472
Cost of goods sold..... 1,911 2,005 2,316
Impairment and
restructuring
charges.............. -- -- --
----------- ----------- -----------
Gross profit........... 94 115 156
Selling, general and
administrative
expenses............. 80 93 82
----------- ----------- -----------
Income from
operations........... 14 22 74
Non-operating income
(expense)--net....... (12) (16) (73)
----------- ----------- -----------
Income (loss) before
income tax, minority
interest,
discontinued
operations,
extraordinary item
and cumulative effect
of change in
accounting
principle............ 2 6 1
Income tax (expense)
benefit.............. (1) (2) --
----------- ----------- -----------
Income before minority
interest,
discontinued
operations,
extraordinary item
and cumulative effect
of change in
accounting
principle............ 1 4 1
Minority interest...... (6) (13) (5)
----------- ----------- -----------
Income (loss) before
discontinued
operations,
extraordinary item
and cumulative effect
of change in
accounting
principle............ (5) (9) (4)
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YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
PRO FORMA
1997 1998 1999 2000 2000
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
Loss from discontinued
operations, net of
tax benefit of $0
(1997), $7 (1998), $3
(1999), $1 (2000), $0
(March 31, 2000)..... (2) (8) (20) (10)
Gain on disposal of
discontinued
operations, net of
tax of $0............ -- -- -- --
----------- ----------- ----------- ----------
Income (loss) before
extraordinary item
and cumulative effect
of change in
accounting
principle............ 96 92 (5) 12
Extraordinary item-loss
on early
extinguishment of
debt................. (13) -- -- --
----------- ----------- ----------- ----------
Net income (loss)
before cumulative
effect of change in
accounting
principle............ 83 92 (5) 12
Cumulative effect of
change in accounting
principle, net of tax
of $4................ -- -- -- --
----------- ----------- ----------- ----------
Net income (loss)...... $ 83 $ 92 $ (5) $ 12
=========== =========== =========== ==========
PER SHARE DATA:
Earnings per common
share--basic and
diluted:
Income (loss) before
discontinued
operations,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... $ 1.52 $ 1.55 $ .23 $ .34 $ .28
Discontinued
operations......... (.03) (.12) (.31) (.15)
Extraordinary item... (.20) -- -- --
Cumulative effect of
change in
accounting
principle.......... -- -- -- --
----------- ----------- ----------- ----------
Net income (loss) per
share................ $ 1.29 $ 1.43 $ (.08) $ .19
=========== =========== =========== ==========
Cash dividends per
common share......... $ -- $ .31 $ -- $ --
Weighted average common
shares outstanding... 64,380,000 64,380,000 64,380,000 64,380,000 64,380,000
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
PRO FORMA
2000 2000 2001
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
Loss from discontinued
operations, net of
tax benefit of $0
(1997), $7 (1998), $3
(1999), $1 (2000), $0
(March 31, 2000)..... (3) --
Gain on disposal of
discontinued
operations, net of
tax of $0............ -- 3
----------- -----------
Income (loss) before
extraordinary item
and cumulative effect
of change in
accounting
principle............ (8) (1)
Extraordinary item-loss
on early
extinguishment of
debt................. -- --
----------- -----------
Net income (loss)
before cumulative
effect of change in
accounting
principle............ (8) (1)
Cumulative effect of
change in accounting
principle, net of tax
of $4................ -- 7
----------- -----------
Net income (loss)...... $ (8) $ 6
=========== ===========
PER SHARE DATA:
Earnings per common
share--basic and
diluted:
Income (loss) before
discontinued
operations,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... $ (.08) $ (.14) $ (.06)
Discontinued
operations......... (.04) .04
Extraordinary item... -- --
Cumulative effect of
change in
accounting
principle.......... -- .11
----------- -----------
Net income (loss) per
share................ $ (.12) $ .09
=========== ===========
Cash dividends per
common share......... $ -- $ --
Weighted average common
shares outstanding... 64,380,000 64,380,000 64,380,000
|
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
PRO FORMA
1997 1998 1999 2000 2000
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
AS ADJUSTED PER SHARE
DATA (1):
Earnings per common
share--basic and
diluted:
Income (loss) before
discontinued
operations,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... $ 0.34 $ 0.29
Discontinued
operations......... (0.12)
Extraordinary item... --
Cumulative effect of
change in
accounting
principle.......... --
----------
Net income (loss) per
share.............. $ 0.22
==========
Weighted average common
shares outstanding... 81,980,000 81,980,000
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
PRO FORMA
2000 2000 2001
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
AS ADJUSTED PER SHARE
DATA (1):
Earnings per common
share--basic and
diluted:
Income (loss) before
discontinued
operations,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... $ (0.06) $ (0.11) $ --
Discontinued
operations......... (0.04) 0.03
Extraordinary item... -- --
Cumulative effect of
change in
accounting
principle.......... -- 0.09
----------- -----------
Net income (loss) per
share.............. $ (0.10) $ 0.12
=========== ===========
Weighted average common
shares outstanding... 81,980,000 81,980,000 81,980,000
|
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------- ----------------------------
1997 1998 1999 2000 2000 2001
-------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(US$ IN MILLIONS)
OTHER DATA:
EBITDA(2).............................. $ 198 $ 440 $ 381 $ 445 $ 37 $ 112
Depreciation, depletion and
amortization......................... 78 144 101 149 23 38
Cash provided by (used for) operating
activities........................... 210 150 37 (521) (308) 291
Cash provided by (used for) investing
activities........................... 17 (529) (108) (91) (38) (13)
Cash provided by (used for) financing
activities........................... $ 450 $ (45) $ (253) $ 709 $ 317 $ (375)
Volumes (in millions of metric tons):
Agribusiness......................... 18.0 29.1 31.9 46.3 9.2 11.1
Fertilizer........................... 2.6 3.5 4.2 10.2 .7 1.6
Food products:
Edible oil products................ .9 1.5 1.6 1.6 .4 .4
Wheat milling and bakery
products......................... 1.4 1.5 2.0 1.9 .4 .5
Other.............................. 0.7 1.2 1.1 1.1 .1 .1
------ ------ ------ ------ ------ ------
Total.............................. 23.6 36.8 40.8 61.1 10.8 13.7
====== ====== ====== ====== ====== ======
|
AS OF MARCH 31, 2001
----------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
(UNAUDITED) (UNAUDITED)
(US$ IN MILLIONS)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 324 $ 324
Inventories(3).............................................. 1,169 1,169
Working capital............................................. 616 616
Total assets................................................ 5,147 5,147
Short-term debt............................................. 914 636
Long-term debt, including current portion................... 1,198 1,198
Redeemable preferred stock.................................. 173 173
Common shares and additional paid in capital, net of 1,319 1,597
shareholder receivable....................................
Shareholders' equity........................................ $1,076 $1,354
|
(1) The as adjusted per share data and the consolidated balance sheet data have been prepared assuming that the net proceeds from this offering were $278 million based upon an assumed initial offering price of $17.00 per share as described under "Use of Proceeds." For purposes of the as adjusted per share data, interest expense, net of the applicable Bermuda statutory tax rate of 0%, was reduced by $6 million for the year ended December 31, 2000 for both historical and pro forma amounts, reduced by $0 for the three months ended March 31, 2000 for both historical and pro forma amounts, and reduced by $4 million for the three months ended March 31, 2001. The as adjusted per share data assumes that the offering occurred on January 1, 2000. The as adjusted balance sheet data assumes that the offering occurred on March 31, 2001.
(2) Earnings before interest, taxes, depreciation and amortization ("EBITDA") is income from operations plus depreciation, depletion and amortization. We believe EBITDA is an appropriate measure for investors to consider when analyzing our business as it is a measure commonly used by securities analysts and investors in the agribusiness industry. However, EBITDA should not be considered by investors in isolation as an alternative to operating income measures, as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity. EBITDA as presented in this prospectus may not be comparable to other similarly titled measures of other companies. EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America. EBITDA may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results.
(3) Included in inventories were readily marketable inventories of $738 million at March 31, 2001. Readily marketable inventories are agricultural commodities inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW BEFORE MAKING AN INVESTMENT IN OUR COMMON SHARES. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED BY ANY OF THESE RISKS. THE TRADING PRICE OF OUR COMMON SHARES COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR
PART OF YOUR INVESTMENT.
RISKS RELATING TO OUR BUSINESS AND INDUSTRIES
WE ARE VULNERABLE TO CYCLICALITY IN THE AGRICULTURAL COMMODITIES INDUSTRY
AND INCREASES IN RAW MATERIAL PRICES.
Our business is affected by variations in global supply and processing capacity for the primary agricultural commodity products that we sell and use. These variations have resulted in cyclical fluctuations in our profitability. In recent years, excess processing capacity has depressed margins across several commodity sectors, especially oilseed processing. In the late 1990s, significant additional oilseed processing capacity became operational just as demand growth was slowing for soybean meal and oil in developing countries as a result of the Asian financial crisis. During the same time, China, a large importer of soybean meal and soybean oil, changed its import duties, which reduced its demand for imported soybean meal and oil. The combination of these factors caused industry-wide oilseed processing margins to decrease significantly. As a result, in 1998 and 1999, our income from operations from our oilseed processing activities declined. Oilseed processing margins may continue to fluctuate and may not return to historic levels.
In addition, our food products and fertilizer divisions may be adversely affected by increases in the price of agricultural commodities and fertilizer raw materials that are caused by market fluctuations outside of our control. Because of competitive conditions in our industries, we may not be able to recoup any future increases in the cost of raw materials through increases in sales prices for our products, which would adversely affect our profitability.
ADVERSE WEATHER CONDITIONS IN THE COUNTRIES IN WHICH WE OPERATE MAY HAVE A SIGNIFICANT IMPACT ON THE AVAILABILITY AND PRICES OF AGRICULTURAL COMMODITIES AND REDUCE DEMAND FOR OUR FERTILIZER PRODUCTS.
Weather conditions have historically caused volatility in the agricultural commodities industry and consequently in our operating results by causing crop failures or significantly reduced harvests. Flood, drought or frost can affect the supply and pricing of the agricultural commodities that we sell and use in our business, reduce the demand for our fertilizer products and negatively affect the creditworthiness of our customers. For example, the recent drought in Brazil may reduce overall crop yields and, as a result, the amount of agricultural commodities that are available to us. Reduced supply of agricultural commodities due to weather related factors could adversely affect our revenues and profitability.
WE ARE SUBJECT TO THE ECONOMIC, POLITICAL AND SOCIAL INSTABILITY RISKS OF
DOING BUSINESS IN EMERGING MARKETS.
We are a global business and derive a substantial portion of our revenue from our non-U.S. operations. Our operations in Brazil and Argentina are a fundamental part of our business. In addition, a key part of our strategy involves expanding our business in several emerging markets, including China and India.
We are exposed to currency exchange rate fluctuations, as a significant portion of our net sales is denominated in currencies other than the U.S. dollar. Changes in exchange rates between the U.S. dollar and other currencies, particularly the Brazilian REAL, have in the past adversely affected our operating results and may continue to adversely affect our gross profit and the value of our assets located outside of the United States.
We are also exposed to other risks of international operations, including:
- increased governmental ownership and regulation of the economy in the markets where we operate;
- inflation and adverse economic conditions stemming from governmental attempts to reduce inflation, such as imposition of higher interest rates and wage and price controls;
- increased trade barriers, such as higher tariffs and taxes on imports of agricultural commodities and commodity products;
- exchange controls or other currency restrictions; and
- civil unrest or significant political instability.
The occurrence of any of these events in the markets where we operate or in other developing markets could jeopardize or limit our ability to transact business in those markets in the manner we expect and could adversely affect our revenues and operating results.
In addition, volatile economic and market conditions in Brazil, Argentina and other emerging market countries may have a negative impact on financial and securities markets worldwide and on our share price in particular. For example, the economic crisis that occurred in several Asian countries in 1997, the debt moratorium in Russia in 1998 and the devaluation of the Brazilian REAL in 1999 each had a negative impact on financial markets worldwide, particularly in emerging market countries and on companies with significant assets or business operations in those countries.
DUE TO OUR SIGNIFICANT OPERATIONS IN BRAZIL AND ARGENTINA, OUR BUSINESS IS PARTICULARLY EXPOSED TO RISKS ASSOCIATED WITH ADVERSE ECONOMIC AND POLITICAL CONDITIONS IN THOSE COUNTRIES.
A substantial portion of our business is conducted in Brazil and Argentina. In recent years, both Brazil and Argentina have been negatively affected by volatile economic and political conditions. These volatile conditions pose many risks to our business, including the risks described in the preceding risk factor, and we may be adversely affected by negative events in the future.
BRAZIL. Historically, the Brazilian government has intervened in the economy by devaluing the currency and imposing exchange, wage and price controls. In early 1999, the Brazilian government allowed the REAL to float freely, resulting in a 32% devaluation of the REAL against the dollar during 1999, most of which occurred shortly after the government's action. Since 1999, the REAL has continued to decline significantly in value against the U.S. dollar. For example, in the first six months of 2001, the REAL experienced a period of significant volatility, principally due to the economic uncertainties in Argentina, and depreciated against the U.S. dollar by 15.2% in that six month period. In July 2001, the REAL fell to its lowest level since 1999. These and prior devaluations have had a negative effect on our operating results. In addition, currency devaluations can also create inflationary pressures and Brazil has intermittently experienced periods of hyperinflation. Inflation itself, as well as some governmental measures to combat inflation, have in the past had significant negative effects on the Brazilian economy.
ARGENTINA. Argentina has also experienced economic and political volatility in recent years and its economy is currently in its third year of recession. In July 2001, the Argentine government had to offer three-month treasury bills at the highest interest rate since 1996, making its foreign debt more costly to service. In June 2001, the Argentine government announced that export transactions would be exempted from Argentina's existing one-to-one PESO/dollar exchange rate and would be subject to an exchange rate based on the average of the euro and the U.S. dollar. This policy is intended to stimulate the economy by lowering the value of the PESO compared to the U.S. dollar, thereby making it cheaper to sell Argentine goods abroad. The Argentine Central Bank's continued ability to support the current fixed PESO/U.S. dollar exchange rate for non-export transactions will depend upon several factors, including low levels of inflation and economic growth. Should the Argentine government be forced to devalue the PESO or take other economic austerity measures in the future, our operating results could be adversely affected.
GOVERNMENT POLICIES AND REGULATIONS AFFECTING THE AGRICULTURAL SECTOR AND RELATED INDUSTRIES COULD RESULT IN THE IMPOSITION OF OR CHANGES IN TARIFFS, DUTIES, SUBSIDIES AND IMPORT AND EXPORT RESTRICTIONS THAT MAY LIMIT OUR ABILITY TO CONDUCT OUR BUSINESS AND AFFECT OUR PROFITABILITY.
Agricultural production and trade flows are significantly affected by government actions. Policies in the major crop producing and consuming countries that change the economic relationship between domestic growing and importing of particular crops can influence crop production. In addition, government policies can favor one crop or use of agricultural resources over another or can negatively affect the ability of industry participants to access new growing areas. Examples include tariffs, duties, subsidies and import and export restrictions that favor some products or countries of origin over others. Another risk of government action that may affect us is an outright embargo on trade between two or more countries. Recently imposed government policies that have had an impact on our industry and our business include:
- CHINA. A change in trade policy favoring the import of soybeans instead of processed soy products resulted in reduced import demand for soybean meal and oil.
- BRAZIL. The removal of a tax that favored the export of processed soybean products over soybeans resulted in a significant increase in soybean exports and reduced domestic oilseed processing margins.
- UNITED STATES. A federal law enacted in 1996 gave farmers considerable flexibility by removing crop-specific acreage restrictions, resulting in an increase in soybean acreage and increased supply of soybeans. This legislation expires in 2002 and might not be extended.
Future government policies may restrict our ability to conduct our business in our existing and target markets and could cause our financial results to suffer.
WE ARE DEPENDENT UPON ACCESS TO EXTERNAL SOURCES OF FINANCING TO ACQUIRE AND MAINTAIN THE INVENTORY, FACILITIES AND EQUIPMENT NECESSARY TO RUN OUR BUSINESS.
We require significant amounts of capital to operate our business and fund capital expenditures. We require significant working capital to purchase, process and market our agricultural commodities inventories. An interruption of our access to short-term credit or a significant increase in the cost of credit could materially impair our profit margins. For example, if our credit ratings are lowered, our financing alternatives may become more expensive or limited.
In addition, we operate an extensive network of storage facilities, processing plants, refineries, mills, mines, ports, transportation assets and other facilities as part of our business. We are required to make substantial capital expenditures to maintain, upgrade and expand these facilities in order to keep apace of competitive developments, technological advances and changing safety standards. Significant unbudgeted increases in our capital expenditures could adversely affect our operating results. In addition, if we are unable to continue devoting substantial resources to maintaining and enhancing our infrastructure, we may not be able to compete effectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" for more information.
Our future funding requirements will depend in large part upon our working capital requirements and the nature of the capital expenditures we are required to make. If we incur significant additional indebtedness, we may also be subject to restrictive financial covenants and the risks of increased leverage. This may limit our ability to run our business and use our resources in the manner in which we would like.
INSUFFICIENT ENERGY SUPPLY AND INCREASED ENERGY COSTS IN BRAZIL AND THE UNITED STATES COULD HAMPER OUR OPERATIONS AND INCREASE OUR OPERATING EXPENSES.
We utilize substantial amounts of energy in connection with the operation of our facilities. Recently, energy costs have been rising in Brazil and the United States due to supply and demand factors and the recent energy crisis in Brazil. A significant increase in the cost of energy could adversely affect our operating results and our profitability.
The Brazilian government has recently unveiled an energy rationing plan aimed at averting rolling blackouts. As part of these measures, we will be required to reduce our energy consumption and may be forced to reduce operations at our Brazilian facilities. In addition, the government has imposed a temporary freeze on all new industrial energy requests, which could delay or limit our plans to expand our facilities or construct new facilities in Brazil. Finally, if the government's rationing measures are not successful, we may be affected by temporary interruptions in power or other conservation measures imposed by the Brazilian government, which could significantly hamper our operations.
In addition to the adverse effects on our company described above, lower industrial output as a result of the energy crisis could harm the Brazilian economy as a whole by leading to lower GDP growth, higher imports, higher unemployment, a larger trade deficit and higher inflation. Our business may be adversely affected by the occurrence of these negative economic events in Brazil.
OUR RISK MANAGEMENT STRATEGY MAY NOT BE EFFECTIVE.
Our business is affected by fluctuations in agricultural commodities prices and in foreign currency exchange rates. For example, the 32% devaluation of the REAL that occurred in 1999 and the continued volatility of the REAL in 2000 and 2001 have adversely affected our operating results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Quantitative and Qualitative Disclosures About Market Risk." We engage in hedging transactions to manage these risks. However, our hedging strategy may not be successful in minimizing our exposure to these fluctuations. In addition, the control procedures and risk management policies we have implemented may not be effective in preventing our traders from entering into unauthorized transactions that have the potential to significantly harm our financial position.
WE SELL AGRICULTURAL COMMODITIES AND FOOD PRODUCTS THAT CONTAIN GENETICALLY MODIFIED INGREDIENTS; IF WE DO NOT ADEQUATELY SEPARATE THESE PRODUCTS, OUR REPUTATION COULD BE DAMAGED AND WE COULD LOSE CUSTOMERS.
The use of genetically modified organisms (GMOs) in food and in animal feed has been met with varying acceptance in the different markets in which we operate. The United States and Argentina, for example, have approved the use of GMOs in food products and animal feed, and GMO and non-GMO grain is produced and frequently commingled during the grain origination process. The Brazilian government, however, has not approved the commercial planting of GMO crops. In addition, adverse publicity about genetically modified food has led to governmental regulation that limits or prevents sales of GMO products in some of the markets where we sell our products, including the European Union and its constituent nations. It is possible that new restrictions on GMO products will be imposed in major markets for our products or that our customers will decide to purchase lower levels of GMO products or not to buy GMO products.
In general, we do not test our agricultural commodities inventory for the presence of GMOs. We conduct no GMO testing in our Brazilian or Argentine operations, and our United States facilities are able to test only representative samples of our inventory, such as for the needs of those customers that request GMO-free products. It is possible that we may inadvertently deliver products that contain GMOs to those customers. As a result, we could lose customers and may incur liability. If our current testing and segregation procedures are not effective, we may incur significant expenses related to upgrading our procedures and facilities. Recent events have also illustrated how GMO products that have not received regulatory approval may enter the food chain. For example, in 2000, we discovered that some of our corn inventory intended for human use contained a genetically modified variety called StarLink that U.S. regulators had approved only for animal consumption. These types of incidents can be costly and time-consuming to rectify and may damage our reputation. If regulators in the countries that restrict or prohibit the sale of GMO products or customers who request GMO-free products do not have confidence in our products, we could lose customers and could be prohibited from selling our products in some countries.
BECAUSE WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUES FROM SALES OF ANIMAL FEED INGREDIENTS, CONSUMER CONCERNS ABOUT THE SAFETY AND QUALITY OF MEAT PRODUCTS COULD RESULT IN DECREASED DEMAND FOR SOME OF OUR PRODUCTS AND ADVERSELY AFFECT OUR REVENUES.
Our business could be adversely affected if consumers in our principal markets lose confidence in the safety and quality of certain food products. For example, there has been recent adverse publicity about the safety of meat due to outbreaks of mad cow disease and foot and mouth disease in Europe, South America, Asia and Africa. This may discourage consumers from eating meat products such as beef, pork and poultry and result in reduced demand for our soybean meal and dicalcium phosphate, as well as some of our corn products and wheat, which are used as ingredients in animal feed. If there is a significant reduction in the demand for animal feed, our revenues could be materially and adversely affected.
WE FACE INTENSE COMPETITION IN OUR AGRIBUSINESS AND FOOD PRODUCTS DIVISIONS.
We face significant competition in each of our divisions. We face numerous competitors, some of which may be larger and have greater financial resources than we have. In addition, we face the following significant competitive challenges in our agribusiness and food products divisions.
AGRIBUSINESS. The markets for our agricultural commodities products are highly price competitive and are sensitive to product substitution. We compete against large multinational, regional and national suppliers, processors and distributors and farm cooperatives. Our principal competitors are Archer Daniels Midland Co. (ADM) and Cargill, Inc. Competition with these and other suppliers, processors and distributors is based on price, service offerings and geographic location.
In the agribusiness industry, it is essential to have reliable access to agricultural commodities. To remain competitive, we may need to strategically expand our geographic presence and enhance in a timely and cost-effective manner the services we offer. We expect to face competition in implementing these strategies. Our inability to implement these strategies may result in a loss of suppliers or customers or a decrease in our revenues and profitability.
FOOD PRODUCTS. Several of the markets in which our food products division operates, particularly those in which we sell retail products, are mature and highly competitive, and our revenues in our food products division have been declining over the past several years partly due to competitive conditions in these markets. In addition, consolidation in the supermarket industry has resulted in our retail customers demanding lower prices and reducing the number of suppliers with which they do business. In order to compete effectively in our food products division, we must be able to:
- establish and maintain favorable brand recognition;
- efficiently manage distribution;
- gain sufficient market share;
- develop products sought by consumers and other customers;
- implement appropriate pricing;
- provide marketing support; and
- obtain access to retail outlets and sufficient shelf space for our retail products.
Competition could cause us to lose market share, increase expenditures or reduce pricing, which could have a material adverse effect on our revenues and profitability.
IF WE ARE UNABLE TO MANAGE POTENTIAL PROBLEMS AND RISKS RELATED TO
ACQUISITIONS AND ALLIANCES, OUR BUSINESS AND GROWTH PROSPECTS COULD SUFFER.
We have been an active acquirer of other companies, especially in Latin America, and we have strategic alliances with several partners. Part of our growth strategy involves acquisitions and alliances designed to expand and enhance our business. Our ability to continue to expand successfully through
acquisitions and alliances depends on many factors, including our ability to identify acquisition or alliance prospects and negotiate and close transactions. Even if we complete future acquisitions or alliances:
- we could fail to successfully integrate the operations, services and products of any acquired company;
- we could fail to select the best alliance partners or fail to effectively plan and manage any alliance strategy;
- our management's attention could be diverted from other business concerns; and
- we could lose key employees of the acquired company.
Acquisitions also pose the risk that we may be exposed to successor liability relating to actions by an acquired company and its management before the acquisition. The due diligence we conduct in connection with an acquisition and any contractual guarantees or indemnities that we receive from the sellers of acquired companies may not be sufficient to protect us from actual liability. A material liability associated with an acquisition could adversely affect our reputation and results of operations and reduce the benefits of the acquisition.
Many companies compete for acquisition and alliance opportunities in our industries. Some of our competitors have greater financial and other resources than we do. This may reduce the likelihood that we will be successful in completing acquisitions and alliances necessary to the expansion of our business. In addition, any major acquisition we consider may be subject to regulatory approval in the various countries where we operate. We may not be successful in obtaining required regulatory approvals on a timely basis or at all.
WE HAVE NOT YET RECEIVED APPROVAL FROM THE BRAZILIAN ANTITRUST AUTHORITIES
FOR OUR ACQUISITION OF MANAH.
In April 2000, we acquired Manah S.A., a Brazilian fertilizer company. This acquisition remains subject to approval by the Brazilian antitrust commission. In April 2001, an office of the Brazilian Ministry of Finance issued a non-binding advisory opinion recommending approval of the acquisition subject to the divestiture of either one of our existing phosphate facilities or Manah's additional equity interest in Fosfertil, a Brazilian phosphate mining company. We may not receive antitrust approval of the Manah acquisition or this approval may be issued subject to conditions that may significantly reduce the benefits of the acquisition to us.
WE ARE SUBJECT TO REGULATION AND MAY BE EXPOSED TO LIABILITY AS A RESULT OF
OUR HANDLING OF HAZARDOUS MATERIALS AND COMMODITIES STORAGE OPERATIONS.
Our business involves the handling and use of hazardous materials. In addition, the storage and processing of our products may create hazardous conditions. For example, we use hexane in our oilseed processing operations, and hexane can cause explosions that could harm our employees or damage our facilities. Our agricultural commodities storage operations also create dust that has caused explosions in our grain elevators. In addition, our mining operations and manufacturing of fertilizers requires compliance with environmental regulations. Our operations are regulated by environmental laws and regulations in the countries where we operate, including those governing the labeling, use, storage, discharge and disposal of hazardous materials. These laws and regulations require us to implement procedures for the handling of hazardous materials and for operating in potentially hazardous conditions, and they impose liability on us for the clean-up of any environmental contamination. In addition, Brazilian law allocates liability for noncompliance with environmental laws by an acquired company to the acquiror for an indefinite period of time. Because we use and handle hazardous substances in our business, changes in environmental requirements or an unanticipated significant adverse environmental event could have a material adverse effect on our business. See "Business--Government Regulation and Environmental Matters" for more information.
RISKS RELATING TO THIS OFFERING AND OUR COMMON SHARES
WE ARE A BERMUDA COMPANY AND IT MAY BE DIFFICULT FOR YOU TO ENFORCE
JUDGMENTS AGAINST US OR OUR DIRECTORS AND EXECUTIVE OFFICERS.
We are a Bermuda exempted company. As a result, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. Many of our directors and some of the named experts referred to in this prospectus are not residents of the United States, and a substantial portion of our assets are located outside the United States As a result, it may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. We have been advised by our Bermuda counsel, Conyers Dill & Pearman, that uncertainty exists as to whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.
OUR BYE-LAWS RESTRICT SHAREHOLDERS FROM BRINGING LEGAL ACTION AGAINST OUR
OFFICERS AND DIRECTORS.
Our bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty. See "Description of Share Capital--Waiver of Claims by Shareholders; Indemnification of Directors and Officers" for more information.
OUR DIRECTORS AND EXECUTIVE OFFICERS MAY HAVE CONFLICTS OF INTEREST BECAUSE
OF THEIR CONTINUING INVOLVEMENT WITH BUNGE INTERNATIONAL LIMITED.
A majority of our directors and executive officers will continue to serve in the same capacity for Bunge International Limited, our sole shareholder prior to this offering. These ties could create, or appear to create, potential conflicts of interest when our directors and executive officers are faced with decisions that could have different implications for Bunge International Limited and us. For example, Bunge International Limited has outstanding debt to us of $110 million. The timing and amounts of the repayment of this debt may be modified by the common directors and executive officers of Bunge International Limited and us in a way that may not be favorable to us.
WE HAVE ANTI-TAKEOVER PROVISIONS IN OUR BYE-LAWS AND INTEND TO ADOPT A
SHAREHOLDER RIGHTS PLAN THAT MAY DISCOURAGE A CHANGE OF CONTROL.
Our bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors. These provisions provide for:
- a classified board of directors with staggered three-year terms;
- directors to be removed without cause only upon the affirmative vote of at least 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution;
- restrictions on the time period in which directors may be nominated;
- our board of directors to determine the powers, preferences and rights of our preference shares and to issue the preference shares without shareholder approval; and
- an affirmative vote of 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution for some business combination transactions which have not been approved by our board of directors.
See "Description of Share Capital--Amendment of Memorandum of Association and Bye-laws" and "--Election and Removal of Directors" for more information.
In addition, our board of directors has adopted a shareholder rights plan which will entitle shareholders to purchase our Series A Preference Shares if a third party acquires beneficial ownership of 20% or more of our common shares. In some circumstances, shareholders are also entitled to purchase the common stock of (1) a company issuing shares in exchange for our common shares in a merger, amalgamation or tender offer or (2) a company acquiring most of our assets.
These provisions could make it more difficult for a third party to acquire us, even if the third party's offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.
AN ACTIVE MARKET FOR OUR COMMON SHARES MAY NOT DEVELOP.
Before this offering, no public market for our common shares has existed. The initial public offering price for our common shares will be determined by negotiations between us and the representatives for the underwriters. An active public market for our shares may not develop or be sustained after this offering. Even if an active market develops, the market price for our shares may fall below the initial public offering price. The market price of our shares could be subject to significant fluctuations due to a variety of factors, including actual or anticipated fluctuations in our operating results and financial performance, economic downturns in our industries or changes in financial estimates by securities analysts.
INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The estimated initial public offering price of our common shares is substantially higher than the net tangible book value per share of our common shares immediately prior to the offering. If you purchase common shares in this offering, you will experience immediate and substantial dilution in the net tangible book value per share from the public offering price.
SUBSTANTIAL SALES OF OUR COMMON SHARES AFTER THIS OFFERING MAY ADVERSELY
AFFECT OUR SHARE PRICE.
The market for our shares could decline as a result of sales of our common shares by our shareholders after this offering, or the perception that these sales could occur. These sales also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
The shares being sold in this offering will be freely transferable under the U.S. securities laws immediately after issuance, except for any shares sold to our affiliates. Our management and shareholders of our parent company who will own our shares after this offering have agreed under written lock-up agreements that they will not sell their shares for 180 days following the date of this prospectus without the prior written consent of Morgan Stanley & Co. Incorporated. However, after the expiration of the lock-up agreements, a large number of additional shares held by our shareholders will be transferable without restriction and eligible for sale to the public.
In addition, we have granted registration rights to the shareholders of our parent company who will own our shares after the closing of this offering. These rights will be exercisable beginning 180 days after the date of this prospectus. See "Shares Eligible For Future Sale" for more information.
WE MAY BECOME A PASSIVE FOREIGN INVESTMENT COMPANY, OR PFIC, WHICH COULD
RESULT IN ADVERSE U.S. TAX CONSEQUENCES TO U.S. INVESTORS.
Since PFIC status will be determined by us on an annual basis and will depend on the composition of our income and assets, from time to time (as further discussed below), we cannot assure you that we will not be considered a PFIC for any taxable year. Such a characterization could result in adverse U.S. tax consequences to you if you are a U.S. investor. In particular, absent an election described below, a U.S. investor would be subject to U.S. federal income tax at ordinary income rates, plus a possible interest charge, in respect of gain derived from a disposition of our shares, as well as certain distributions by us. In
addition, a step-up in the tax basis of our shares would not be available upon the death of an individual shareholder. For this reason, if we are treated as a PFIC for any taxable year and you are a U.S. investor, you may desire to make an election to treat us as a "qualified electing fund" with respect to your shares (a "QEF election"), in which case you will be required to take into account a PRO-RATA share of our earnings and net capital gain for each year, regardless of whether we make any distributions to you. As an alternative to the QEF election, a U.S. investor may be able to make an election to "mark-to-market" our shares each taxable year and recognize ordinary income pursuant to such election based upon increases in the value of our shares. We will be classified as a PFIC for U.S. federal income tax purposes if 50% or more of our assets, including goodwill (based on an annual quarterly average), are passive assets, or 75% or more of our annual gross income is derived from passive assets. The calculation of goodwill will be based, in part, on the then market value of our common shares, which is subject to change. In addition, the composition of our income and assets will be affected by how we spend the cash we raise in this offering. See "Taxation--United States Federal Income Tax Consequences--Passive Foreign Investment Company Status" for more information.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This prospectus includes forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. This prospectus also contains forward-looking statements attributed to third parties relating to their estimates regarding growth of our markets. We have tried to identify these forward-looking statements by using words including "may," "will," "expect," "anticipate," "believe," "intend," "estimate" and "continue" and similar expressions. These forward-looking statements are subject to a number of risks and uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these forward-looking statements. These factors include the risks, uncertainties and other factors discussed under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this prospectus. Examples of forward-looking statements include all statements that are not historical in nature, including statements regarding:
- our operations, competitive position, strategy and prospects;
- estimated demand for the commodities and other products that we sell and use in our business;
- industry conditions, including cyclicality of the agribusiness industry;
- the effects of adverse economic conditions and changes in foreign exchange rates in Brazil;
- the effects of adverse economic conditions and changes in foreign exchange policy in Argentina;
- the impact of the drought and energy crisis in Brazil on our operations;
- the outcome of pending regulatory and legal proceedings and labor matters;
- governmental policies affecting our business, including agricultural and trade policies and laws governing environmental liabilities; and
- our funding needs and financing sources.
This prospectus contains industry data related to our business and the industries in which we operate. This industry data includes projections that are based on a number of assumptions. If these assumptions turn out to be incorrect, actual results could differ from the projections based on those assumptions.
In light of these risks, uncertainties and assumptions, you should not place undue reliance on any forward-looking statements. Additional risks that we may currently deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in this prospectus not to occur. Except as otherwise required by federal securities law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this prospectus.
The information presented herein and identified as having been extracted from government publications has been presented on the authority of such official documents.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $278 million from this offering, or approximately $320 million if the underwriters exercise their over-allotment option in full, based on an assumed initial public offering price of $17 per share, the midpoint of the estimated price range indicated on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and expenses payable by us.
We intend to use the net proceeds to reduce indebtedness under our commercial paper program, which carried a weighted average interest rate of 4.9% as of June 30, 2001. We used the proceeds from the commercial paper program to reduce third party U.S. dollar-denominated debt of our Brazilian subsidiaries and for working capital purposes.
DIVIDEND POLICY
From 1996 to 2000 we did not pay any cash dividends on our common shares, except in 1998 when we paid a total cash dividend of approximately $20 million to our sole shareholder, Bunge International Limited.
We intend to pay cash dividends to our shareholders on an annual basis. However, any future determination to pay dividends will be at the discretion of our board of directors and will depend upon then existing conditions, including our financial condition, results of operations, contractual and other relevant legal or regulatory restrictions, capital requirements, business prospects and other factors our board of directors deems relevant. See "Description of Share Capital--Dividend Rights."
CAPITALIZATION
The table below shows our capitalization as of May 31, 2001 on an actual basis and on an as adjusted basis to give effect to this offering at an assumed initial public offering price of $17 per share, after deducting the estimated underwriting discounts and commissions and offering expenses payable by us, and the application of the net proceeds from this offering as described under "Use of Proceeds." This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this prospectus.
AS OF MAY 31, 2001
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(UNAUDITED)
(US$ IN MILLIONS,
EXCEPT SHARE DATA)
Debt:
Short-term debt....................................... $1,274 $ 996
Long-term debt:
Secured; including current portion.................. 450 450
Unsecured; including current portion................ 665 665
Guarantees.......................................... 26 26
------ ------
Total debt........................................ 2,415 2,137
------ ------
Redeemable preferred stock............................ 175 175
Minority interest in subsidiaries..................... 274 274
Shareholders' equity:
Preference shares, $.01 par value; 10,000,000 shares
authorized; 0 shares issued and outstanding, actual;
0 shares issued and outstanding, as adjusted........ -- --
Common shares, $.01 par value; 240,000,000 shares
authorized; 64,380,000 shares issued and
outstanding, actual; 81,980,000 shares issued and
outstanding, as adjusted, and additional paid-in
capital............................................. 1,429 1,707
Shareholder receivable................................ (110) (110)
Retained earnings..................................... 331 331
Accumulated other comprehensive loss.................. (643) (643)
------ ------
Total shareholders' equity.......................... 1,007 1,285
------ ------
Total capitalization.............................. $3,871 $3,871
====== ======
|
DILUTION
Our net tangible book value as of March 31, 2001 was $890 million or $13.82 per share. Net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of common shares outstanding. After giving effect to the sale of 17,600,000 common shares in this offering at an assumed initial public offering price of $17 per share, the midpoint of the offering range, and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us, our adjusted net tangible book value as of March 31, 2001 would have been $1,168 million, or $14.25 per share.
Dilution per share represents the difference between the price per share paid by new investors for the shares issued in this offering and the net tangible book value per share immediately after the completion of the offering. The following table illustrates this per share dilution:
Assumed initial public offering price per share............. $17.00
Net tangible book value per share as of March 31, 2001.... $13.82
Increase per share attributable to this offering.......... .43
------
Adjusted net tangible book value per share after this
offering.................................................. 14.25
------
Dilution per share to new investors......................... $ 2.75
======
|
The following table summarizes, on a pro forma basis as of March 31, 2001, the number of common shares purchased from us, the total consideration paid and the average price per share paid by our existing shareholder and by new investors purchasing common shares from us in this offering at an assumed initial public offering price of $17 per share, before deduction of estimated underwriting discounts and commissions and offering expenses payable by us.
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
---------------------- ------------------------- VALUE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- -------- -------------- -------- ---------
Existing shareholder.... 64,380,000 79% $1,319,000,000 82% $20.49
New investors........... 17,600,000 21 299,200,000 18 17.00
----------- ----- -------------- -----
Total............... 81,980,000 100.0% $1,618,200,000 100.0%
=========== ===== ============== =====
|
The tables above assume no exercise of stock appreciation rights and phantom units outstanding as of June 30, 2001 that we intend to convert into stock options and restricted stock awards representing an estimated 1,245,403 common shares at the closing of this offering. To the extent that any of these options or awards are exercised, you will be further diluted.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial information for the periods indicated. The consolidated statements of income data for the three years ended December 31, 2000 and the consolidated balance sheet data as of December 31, 1999 and 2000 are derived from our audited consolidated financial statements and notes to the consolidated financial statements included elsewhere in this prospectus. The consolidated statements of income data for the year ended December 31, 1997 and the consolidated balance sheet data as of December 31, 1997 and 1998 are derived from our audited consolidated financial statements which are not included in this prospectus. The financial information for the three months ended March 31, 2001 and 2000 is derived from our unaudited consolidated interim financial statements included elsewhere in this prospectus.
You should read this information together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP. We began to prepare our financial information on a U.S. GAAP basis in 1997. Information for 1996 has been excluded because this information could not be provided without unreasonable effort and expense.
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -------------------------
1997 1998 1999 2000 2000 2001
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF INCOME
DATA:
Net sales......................... $ 7,484 $ 9,103 $ 8,075 $ 9,667 $ 2,005 $ 2,472
Cost of goods sold................ 7,026 8,433 7,463 8,935 1,911 2,316
Impairment and restructuring
charges......................... -- -- -- 49 -- --
----------- ----------- ----------- ----------- ----------- -----------
Gross profit...................... 458 670 612 683 94 156
Selling, general and
administrative expenses......... 338 374 332 387 80 82
----------- ----------- ----------- ----------- ----------- -----------
Income from operations............ 120 296 280 296 14 74
Non-operating income
(expense)--net.................. 19 (120) (296) (225) (12) (73)
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income tax,
minority interest, discontinued
operations, extraordinary item
and cumulative effect of change
in accounting principle......... 139 176 (16) 71 2 1
Income tax (expense) benefit...... (38) (43) 27 (12) (1) --
----------- ----------- ----------- ----------- ----------- -----------
Income before minority interest,
discontinued operations,
extraordinary item and
cumulative effect of change in
accounting principle............ 101 133 11 59 1 1
Minority interest................. (3) (33) 4 (37) (6) (5)
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before discontinued
operations, extraordinary item
and cumulative effect of change
in accounting principle......... 98 100 15 22 (5) (4)
Loss from discontinued operations,
net of tax benefit of $0 (1997),
$7 (1998), $3 (1999), $1 (2000)
and $0 (March 31, 2000)......... (2) (8) (20) (10) (3) --
Gain on disposal of discontinued
operations, net of tax of $0.... -- -- -- -- -- 3
----------- ----------- ----------- ----------- ----------- -----------
|
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -------------------------
1997 1998 1999 2000 2000 2001
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
Income (loss) before extraordinary
item and cumulative effect of
change in accounting
principle....................... 96 92 (5) 12 (8) (1)
Extraordinary item--loss on early
extinguishment of debt.......... (13) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before cumulative
effect of change in accounting
principle....................... 83 92 (5) 12 (8) (1)
Cumulative effect of change in
accounting principle, net of tax
of $4........................... -- -- -- -- -- 7
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)................. $ 83 $ 92 $ (5) $ 12 $ (8) $ 6
=========== =========== =========== =========== =========== ===========
PER SHARE DATA:
Earnings per common share--basic
and diluted:
Income (loss) before
discontinued operations,
extraordinary item and
cumulative effect of change in
accounting principle.......... $ 1.52 $ 1.55 $ .23 $ .34 $ (.08) $ (.06)
Discontinued operations......... (.03) (.12) (.31) (.15) (.04) .04
Extraordinary item.............. (.20) -- -- -- -- --
Cumulative effect of change in
accounting principle.......... -- -- -- -- -- .11
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) per share..... $ 1.29 $ 1.43 $ (.08) $ .19 $ (.12) $ .09
=========== =========== =========== =========== =========== ===========
Cash dividends per common share... $ -- $ .31 $ -- $ -- $ -- $ --
Weighted average common shares
outstanding..................... 64,380,000 64,380,000 64,380,000 64,380,000 64,380,000 64,380,000
OTHER DATA:
EBITDA(1)......................... $ 198 $ 440 $ 381 $ 445 $ 37 $ 112
Depreciation, depletion and
amortization.................... 78 144 101 149 23 38
Cash provided by (used for)
operating activities............ 210 150 37 (521) (308) 291
Cash provided by (used for)
investing activities............ 17 (529) (108) (91) (38) (13)
Cash provided by (used for)
financing activities............ $ 450 $ (45) $ (253) $ 709 $ 317 $ (375)
Volumes (in millions of metric
tons):
Agribusiness.................... 18.0 29.1 31.9 46.3 9.2 11.1
Fertilizer...................... 2.6 3.5 4.2 10.2 .7 1.6
Food products:
Edible oil products........... .9 1.5 1.6 1.6 .4 .4
Wheat milling and bakery
products.................... 1.4 1.5 2.0 1.9 .4 .5
Other......................... .7 1.2 1.1 1.1 .1 .1
----------- ----------- ----------- ----------- ----------- -----------
Total......................... 23.6 36.8 40.8 61.1 10.8 13.7
=========== =========== =========== =========== =========== ===========
|
AS OF
AS OF DECEMBER 31, MARCH 31,
----------------------------------------- -----------
1997 1998 1999 2000 2001
-------- -------- -------- -------- -----------
(UNAUDITED)
(US$ IN MILLIONS)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................ $1,370 $ 864 $ 363 $ 423 $ 324
Inventories(2)........................................... 1,051 978 923 1,311 1,169
Working capital.......................................... 1,084 548 295 681 616
Total assets............................................. 6,092 5,814 4,611 5,854 5,147
Short-term debt.......................................... 605 1,203 708 1,268 914
Long-term debt, including current portion................ 1,735 1,210 1,121 1,257 1,198
Redeemable preferred stock............................... -- -- -- 170 173
Common shares and additional paid in capital, net of
shareholder receivable................................. 1,223 1,210 1,303 1,303 1,319
Shareholders' equity..................................... $1,453 $1,495 $1,197 $1,139 $1,076
|
(1) EBITDA is income from operations plus depreciation, depletion and amortization. We believe EBITDA is an appropriate measure for investors to consider when analyzing our business as it is a measure commonly used by securities analysts and investors in the agribusiness industry. However, EBITDA should not be considered by investors in isolation as an alternative to operating income measures, as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity. EBITDA as presented in this prospectus may not be comparable to other similarly titled measures of other companies. EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America. EBITDA may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results.
(2) Included in inventories were readily marketable inventories of $779 million, $692 million, $642 million, $876 million and $738 million at December 31, 1997, 1998, 1999 and 2000 and March 31, 2001, respectively. Readily marketable inventories are agricultural commodities inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
In April 2000, we acquired a 21% interest in, representing 57% of the voting power and thus control of, Manah S.A., for $47 million in cash, net of $36 million in acquired cash. In August 2000, we completed a merger between Manah and Fertilizantes Serrana S.A., or Serrana, one of our existing fertilizer subsidiaries, through a share exchange between Manah and the shareholders of Serrana. The share exchange resulted in our acquiring the remaining 9.7% of Serrana held by minority shareholders. We accounted for this share exchange as an acquisition of a minority interest. The fair value of the shares exchanged was $53 million. Subsequent to the acquisition and merger, we had a 72% interest in the combined entity, which we renamed Bunge Fertilizantes S.A.
As a result of these transactions, we also obtained a controlling interest in Fertifos Administracao e Participacao S.A. and its subsidiaries, Fosfertil S.A. and Ultrafertil S.A. Except where we indicate otherwise, we refer to these three companies collectively as Fosfertil. Prior to the Manah acquisition, both we and Manah had a minority equity investment in Fosfertil.
We accounted for the Manah acquisition and merger of Manah and Serrana under the purchase method, which entailed allocating the purchase price to the fair values of our share of the assets and liabilities acquired. Additionally, as a result of obtaining control of Fosfertil, we began consolidating its assets and liabilities, which we previously had accounted for as a net investment under the equity method.
The following table summarizes the allocation of the purchase price in these transactions and the consolidation of Fosfertil:
US$ IN MILLIONS
---------------
CALCULATION OF PURCHASE PRICE:
Cash paid................................................... $ 83
Shares issued............................................... 53
Current liabilities assumed................................. 288
Other liabilities assumed................................... 417
-----
$ 841
=====
ALLOCATION OF PURCHASE PRICE:
Current assets.............................................. $ 340
Property, plant and equipment (excluding mining 542
properties)...............................................
Mining properties........................................... 204
Other assets................................................ 50
Minority interest........................................... (179)
-----
957
Previous net investment in Fosfertil under the equity (116)
method....................................................
-----
$ 841
=====
|
The operations of Manah and Fosfertil have been consolidated since April 1, 2000 in our historical financial statements.
The unaudited pro forma financial information below consists of pro forma statements of income which give effect to the above transactions as if they had been consummated as of January 1, 2000, including the effects of the purchase price allocation described above.
The unaudited pro forma consolidated financial information presented below does not purport to represent what our consolidated results of operations actually would have been if these transactions had occurred as of the dates indicated or what our results will be for any future periods. The unaudited pro forma consolidated financial information should be read in conjunction with, and is qualified in its entirety by, reference to the following information contained in this prospectus:
- our audited consolidated financial statements;
- our unaudited consolidated interim financial statements;
- Manah's audited consolidated financial statements;
- Fosfertil's audited consolidated financial statements; and
- "Management's Discussion and Analysis of Financial Condition and Results of Operations."
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
--------------------------------------------------------------------
BUNGE PRO FORMA PRO FORMA
LIMITED(A) MANAH(B) FOSFERTIL(C) ADJUSTMENTS CONSOLIDATED
---------- -------- ------------ ----------- ------------
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
Net sales................................. $9,667 $ 48 $ 82 $ (15)(d) $9,782
Cost of goods sold........................ 8,935 46 60 (12)(e) 9,029
Impairment and restructuring charges...... 49 -- -- -- 49
--------- -------- -------- -------- ----------
Gross profit.............................. 683 2 22 (3) 704
Selling, general and administrative
expenses................................ 387 5 8 -- 400
--------- -------- -------- -------- ----------
Income from operations.................... 296 (3) 14 (3) 304
Non-operating income (expense)--net....... (225) 1 (3) (2)(f) (229)
--------- -------- -------- -------- ----------
Income (loss) before income tax, minority
interest and discontinued operations.... 71 (2) 11 (5) 75
Income tax (expense) benefit.............. (12) -- (2) 1 (g) (13)
--------- -------- -------- -------- ----------
Income (loss) before minority interest and
discontinued operations................. 59 (2) 9 (4) 62
Minority interest......................... (37) -- (4) (3)(h) (44)
--------- -------- -------- -------- ----------
Income (loss) before discontinued
operations.............................. $ 22 $ (2) $ 5 $ (7) $ 18
========= ======== ======== ======== ==========
Earnings per share--basic and diluted:
Income (loss) before discontinued
operations per share.................... $ .34 $ .28
Weighted-average number of share
outstanding--basic and diluted.......... 64,380,000 64,380,000
|
FOR THE THREE MONTHS ENDED MARCH 31, 2000
--------------------------------------------------------------------
BUNGE PRO FORMA PRO FORMA
LIMITED(I) MANAH(B) FOSFERTIL(C) ADJUSTMENTS CONSOLIDATED
---------- -------- ------------ ----------- ------------
(US$ IN MILLIONS, EXCEPT PER SHARE DATA)
Net sales................................. $2,005 $ 48 $ 82 $ (15)(d) $2,120
Cost of goods sold........................ 1,911 46 60 (12)(e) 2,005
Impairment and restructuring charges...... -- -- -- -- --
--------- -------- -------- -------- ----------
Gross profit.............................. 94 2 22 (3) 115
Selling, general and administrative
expenses................................ 80 5 8 -- 93
--------- -------- -------- -------- ----------
Income from operations.................... 14 (3) 14 (3) 22
Non-operating income (expense)--net....... (12) 1 (3) (2)(f) (16)
--------- -------- -------- -------- ----------
Income (loss) before income tax, minority
interest and discontinued operations.... 2 (2) 11 (5) 6
Income tax (expense) benefit.............. (1) -- (2) 1 (g) (2)
--------- -------- -------- -------- ----------
Income (loss) before minority interest and
discontinued operations................. 1 (2) 9 (4) 4
Minority interest......................... (6) -- (4) (3)(h) (13)
--------- -------- -------- -------- ----------
Income (loss) before discontinued
operations.............................. $ (5) $ (2) $ 5 $ (7) $ (9)
========= ======== ======== ======== ==========
Earnings per share--basic and diluted:
Income (loss) before discontinued
operations per share.................... $ (.08) $ (.14)
Weighted-average number of share
outstanding--basic and diluted.......... 64,380,000 64,380,000
|
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION:
(a) The income statement amounts were derived from our audited consolidated financial statements for the year ended December 31, 2000 contained elsewhere in this prospectus.
(b) The income statement amounts were derived from the audited consolidated financial statements for the three months ended March 31, 2000 for Manah contained elsewhere in this prospectus.
(c) The income statement amounts were derived from the audited consolidated financial statements for the three months ended March 31, 2000 for Fosfertil contained elsewhere in this prospectus.
(d) Adjustment represents the elimination of intercompany sales during the three-month period ended March 31, 2000.
(e) Adjustment represents the elimination of (1) cost of goods sold on intercompany sales per (d) above and (2) the depreciation and depletion of the fair value adjustments recorded as a result of the purchase price allocation.
(f) Adjustment represents the elimination of our and Manah's interest in earnings of Fosfertil for the three-month period ended March 31, 2000.
(g) Adjustment represents the tax effect, calculated using the statutory rate of 34% in effect during the period, of the depreciation and depletion adjustments discussed in item (e) above.
(h) Adjustment represents the recording of the minority interest in the earnings of Manah and Fosfertil for the three-month period ended March 31, 2000.
(i) The income statement amounts were derived from our unaudited consolidated interim financial statements for the three months ended March 31, 2000 included elsewhere in this prospectus.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION ALONG WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES TO OUR CONSOLIDATED FINANCIAL STATEMENTS
INCLUDED ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING DISCUSSION CONTAINS
FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS, UNCERTAINTIES AND
ASSUMPTIONS, INCLUDING THOSE DISCUSSED UNDER "RISK FACTORS" AND DESCRIBED IN
THIS PROSPECTUS GENERALLY. OUR ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED IN, OR IMPLIED BY, THESE FORWARD-LOOKING
STATEMENTS. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY
DATA."
INTRODUCTION
Bunge is an integrated, global agribusiness and food company. We conduct our operations in three divisions: agribusiness, fertilizers and food products.
AGRIBUSINESS. Our agribusiness division consists of three business lines:
grain origination, oilseed processing and international marketing, which we
aggregate for reporting purposes. We operate grain origination and oilseed
processing facilities primarily in the United States, Brazil and Argentina. We
have international marketing offices in North America, South America, Europe and
Asia.
FERTILIZER. Our fertilizer division spans the entire fertilizer industry, including phosphate mining and production of phosphate-based products used primarily in animal feed, production of intermediate fertilizer products and production of retail agricultural fertilizers. In addition, as part of our fertilizer business we provide technical support services related to the use of our fertilizer products to our customers. Our fertilizer operations are principally located in Brazil.
FOOD PRODUCTS. Our food products division produces and sells finished food products and food ingredients to food processors, foodservice companies and retail outlets principally in the United States and Brazil. Our food products operations consist of four business lines: edible oil products, wheat milling and bakery products, soy ingredients and corn products. For purposes of our segment reporting, we report our edible oil products and wheat milling and bakery products business lines separately and combine our soy ingredients and corn products business lines together in "other." For the year ended December 31, 2000 and the three months ended March 31, 2001, 59.4% and 58.4%, respectively, of our food products division net sales were made in Brazil and 40.6% and 41.6%, respectively, were made in the United States.
Bunge Limited is a holding company incorporated in Bermuda whose principal assets are its equity interests in its operating subsidiaries.
Over the past three years, we refocused our business to concentrate on building our core business areas. In pursuing this strategy, we divested ourselves of non-strategic operations, made substantial new investments in our core business lines and in 2000 implemented initiatives to improve our capital structure. Significant changes we have made during the periods under discussion that have had, or will have, an impact on our operating results include:
MERGERS AND ACQUISITIONS. In 2000, we took a significant step to consolidate our leading position in the Brazilian fertilizer industry by acquiring a controlling interest in Manah, a Brazilian fertilizer company, for $47 million in cash, net of cash acquired of $36 million. As a result of the acquisition of Manah, we also obtained a controlling interest in Fosfertil, which is involved in phosphate mining and production of intermediate fertilizer products. We accounted for the acquisition of Manah and Fosfertil under the purchase method. Manah's and Fosfertil's results are included in our results of operations beginning in April 2000. During the past three years, we have also increased our ownership in several of our Brazilian subsidiaries through share exchanges with the minority shareholders of those entities. We have also merged several of our Brazilian subsidiaries in order to reduce costs and expenses, rationalize our facilities and reduce our turnover tax liability in Brazil, which is based on sales between legal entities, including legal
entities under common control. See "Business--Recent Acquisitions and Divestitures" for more information about these transactions.
EXPANSION OF INTERNATIONAL MARKETING ACTIVITIES. In 1999, we initiated our strategy to expand our agribusiness international marketing activities. This area of our business grew significantly in 2000 and the first quarter of 2001, as we opened new offices in the United States, Europe and Asia and substantially increased the number of employees in this business worldwide. This expansion resulted in increased sales volumes, gross profit, selling, general and administrative expenses and working capital in 2000 and the first quarter of 2001.
RESTRUCTURING PROGRAM. We conducted restructuring initiatives in 2000, primarily in response to a downturn in profitability in the global agricultural commodities industry which had begun in 1998. See "--Industry Economic Conditions and Cyclicality" below for a description of the causes of this downturn. Our restructuring program was primarily focused on reducing overcapacity in our oilseed processing business. During 2000, we closed three oilseed processing plants in Brazil and one plant in the United States. We also wrote down some assets in our edible oil products and corn products businesses that had become obsolete due to advances in technology in some of our product lines, such as our shift from cans to clear plastic containers for bottled oils. These actions resulted in our recording of impairment and restructuring charges of $49 million in 2000, which consisted of a $44 million non-cash write-down of property, plant and equipment and goodwill, as well as $5 million in employee termination costs.
FINANCING INITIATIVES. Prior to 2000, we obtained most of our financing on a decentralized basis at subsidiary levels. In 2000, we took steps to coordinate our financing activities at the parent company level. These steps included the establishment of a $700 million commercial paper program, the issuance of $170 million of redeemable preferred stock by a special purpose subsidiary and $125 million of fixed rate trust certificates. We used the proceeds from these financings to refinance the indebtedness of our Brazilian subsidiaries and lower our foreign currency exposure and interest costs. These initiatives had a positive impact on our results of operations in the fourth quarter of 2000 and the first quarter of 2001 and we expect them to have a continuing positive impact in future periods. See "--Liquidity and Capital Resources" and "--Quantitative and Qualitative Disclosures About Market Risk."
DIVESTITURES. In March 1998, we disposed of our Brazilian meat and poultry division by transferring our $52 million investment in this business to Bunge International Limited, our sole shareholder. In addition, in March 2001 we sold our consumer bread products division in Brazil for a gain of approximately $3 million to a third party. We divested these operations as they were not part of our core business strategy.
OPERATING PERFORMANCE
In each of our business divisions, operating performance is affected by the following key factors.
AGRIBUSINESS
In the agribusiness division, we purchase, store, process, transport, merchandise and finance agricultural commodities, principally soybeans, soybean meal and soybean oil, which we collectively refer to as soy commodity products. In our grain origination, oilseed processing and international marketing operations, soy commodity products represent 70%, 100% and 70%, respectively, of our total sales volumes for these business lines. In this division, profitability is principally affected by the price of soy commodity products, the volatility of the prices for these products and the relationship among those prices. Prices, in turn, are affected by the perceived and actual availability of, and demand for, soy commodity products. Availability is affected by weather conditions in North America, Brazil and Argentina, governmental trade policies and growing patterns, including substitution by farmers of other agricultural commodities for soybeans. Demand is affected by growth in worldwide consumption of food products and the price of substitute agricultural products. In addition, the high capital costs and time required to
construct oilseed processing facilities may cause imbalances between industry-wide levels of oilseed processing capacity and demand for soy commodity products. The relationship among soybean prices and soybean meal and soybean oil prices may be affected by these imbalances. The effect of these factors on soybean, soybean meal and soybean oil prices will affect our decisions regarding whether and when to purchase, store, process, transport or merchandise these commodities.
Because agricultural commodity prices are often volatile, we believe net sales are not a reliable indicator of performance in the agribusiness division. Gross profit is a key measure we use to evaluate the success of this division. Gross profit reflects the net margin we earn on the difference between the purchase and sales prices of agricultural commodities, less the costs of storing, processing and transporting those agricultural commodities based upon the volumes we transact.
FERTILIZER
In the fertilizer division, demand for our products is affected by the profitability of the Brazilian agricultural sector, agricultural commodity prices, the types of crops planted, the number of acres planted and weather related issues affecting the success of the harvest. The continued development of the Brazilian agricultural sector has had, and we expect will continue to have, a positive impact on demand for our fertilizer products. Our cost of goods sold in the fertilizer business principally comprises the cost of our primary raw materials, which are nitrogen, phosphate and potassium.
FOOD PRODUCTS
In the food products division, our net sales are affected by competition, changes in eating habits, Brazilian currency fluctuations and changes in general economic conditions in our principal markets, the United States and Brazil. During an economic downturn, such as the one experienced in Brazil after the 1999 devaluation of the REAL, consumers tend to purchase less expensive food products in lieu of premium brands, thus negatively impacting our net sales and gross profit. Competition in this industry has intensified in the past several years due to consolidation in the supermarket industry. Profitability in this division is also affected by the mix of products that we sell. Our cost of goods sold in our food products division is principally impacted by fluctuations in agricultural commodity prices.
INDUSTRY ECONOMIC CONDITIONS AND CYCLICALITY
Demand for agricultural commodities has continued to increase due to growth in world population despite the occurrence of regional economic downturns. However, beginning in the latter half of 1998, gross profit margins in our oilseed processing business declined significantly due to excessive industry-wide processing capacity. The effects of these adverse industry conditions on our business were exacerbated by increases in consumption of non-soy oils, particularly palm and rapeseed, and by China's shift to oilseed purchases in lieu of meal and oil.
During 2000, we and other global oilseed processors responded to these events by closing older, less efficient facilities. This has resulted in a reduction in industry overcapacity. In addition, we expect the recent European ban on the use of meat and bone meal in animal feed and improvements in Asian economies to increase long-term demand for soybean meal. These factors resulted in an improvement in our oilseed processing gross profit margins beginning in the fourth quarter of 2000 as indicated by the 13% improvement in our oilseed processing margins in the fourth quarter of 2000 compared to the third quarter of 2000.
EFFECTS OF RECENT DROUGHT IN BRAZIL
While the recent drought in Brazil has adversely affected certain agricultural growing areas, the reduced production in these areas has been offset by increased production in other growing areas of Brazil. We are currently assessing the current and potential impact of the drought in Brazil on our financial
position and results of operations. However, we currently expect that the reduced production from the drought-affected growing areas will not have a material adverse impact on our business in 2001.
The drought in Brazil has also resulted in a severe energy shortage in that country as approximately 95% of Brazil's electricity supply is derived from hydroelectric power. In May 2001, the Brazilian government announced a rationing plan pursuant to which all consumers must reduce their consumption of electricity by 20% compared to the same period in the prior year or face fines and/or forced interruption of power. In addition, the reduced supply of energy in Brazil has resulted in higher market prices for electricity. We have implemented energy conservation measures which we believe should allow us to meet the quotas imposed by the government without significant disruption in our operations or a material increase in our energy costs.
EFFECTS OF CURRENCY FLUCTUATIONS ON OUR BUSINESS
Over 75% of our net sales, comprised of our agribusiness division and our U.S.-based food products division net sales, are invoiced in U.S. dollars or linked to dollar prices. In addition, the value of our agricultural commodities inventories is linked to dollar prices. Furthermore, the Brazilian fertilizer industry, due to its relationship to the agricultural sector which derives its profitability from dollar-based international commodity prices, has historically been able to adjust its sales prices in response to the effects of exchange rate fluctuations on imported raw material costs. However, our food products division's net sales in Brazil, which comprise approximately 11% of our total net sales, are denominated in Brazilian REAIS.
BRAZIL
In early 1999, the Brazilian government allowed the REAL to float freely, resulting in a 32% devaluation against the U.S. dollar during 1999. This change in monetary policy has continued to cause volatility in exchange rates and in 2000 and the first three months of 2001, the REAL declined an additional 9% and 10%, respectively, in value against the U.S. dollar. A devaluation of the REAL affects our consolidated financial statements by:
- reducing our REAL-denominated net sales as a result of the translation of those amounts into U.S. dollars for consolidation purposes at weakening exchange rates;
- reducing our REAL-denominated selling, general and administrative and depreciation, depletion and amortization expenses, as well as other REAL-denominated operating costs as a result of the translation of those amounts for consolidation purposes into U.S. dollars at weakening exchange rates;
- generating foreign exchange transaction gains or losses on U.S. dollar-denominated monetary assets and liabilities of our Brazilian subsidiaries, which are reflected in our consolidated statements of income;
- generating economic gains or losses based on changes in market value of our readily marketable agricultural inventories, which are linked to U.S. dollar prices;
- increasing our foreign currency hedging costs due to higher risk premiums, which increases are reflected in our consolidated statements of income; and
- generating foreign currency translation losses on the net assets of our Brazilian subsidiaries, which are reflected in other comprehensive income (loss).
Since March 31, 2001, the REAL has continued to decline significantly in value against the U.S. dollar, and we expect that this devaluation will negatively impact our results of operations for the second quarter of 2001. Continued weakness of the REAL may negatively impact our results of operations for the remainder of 2001 as well.
During 2000, we initiated measures to reduce our exposure to foreign currency fluctuations, particularly their effects on our results of operations. These measures included replacing third party U.S. dollar-denominated debt of our Brazilian subsidiaries with permanently invested long-term intercompany loans. These loans do not require cash payment of principal and are treated as analogous to equity for accounting purposes. Therefore, the foreign exchange gains or losses on these intercompany loans are recorded in other comprehensive income (loss) in contrast to foreign exchange gains or losses on third party debt, which are recorded in non-operating income (expense)-net in our consolidated statements of income.
ARGENTINA
In June 2001, the Argentine government announced that export transactions would be exempted from Argentina's existing one-to-one PESO/dollar exchange rate and would be subject to an exchange rate based on the average of the euro and the U.S. dollar. This policy is intended to stimulate the economy by lowering the value of the PESO compared to the U.S. dollar, thereby making it it cheaper to sell Argentine goods abroad. Our Argentine operations are principally agribusiness related and thus are linked to the U.S. dollar-based international pricing of agricultural commodities. In addition, substantially all of our Argentine net sales are exports. Therefore, we do not expect that this change in exchange rate policy will have a material impact on our consolidated results of operations or financial position.
SEASONALITY
In our agribusiness division, our sales volumes and distribution activities do not experience material seasonal fluctuations since we are widely diversified in the global agribusiness market. The worldwide need for food is not seasonal and increases together with growing populations. The geographic balance of our grain origination assets in North and South America also assures us a more consistent supply of agricultural commodities throughout the year. However, there is a degree of seasonality in our gross profit, as our higher margin oilseed processing operations experience higher volumes in the second, third and fourth quarters due to the timing of the soybean harvests. In addition, price and margin variations and increased availability of agricultural commodities at harvest times often cause fluctuations in our inventories and short-term borrowings.
In our fertilizer division, we are subject to consistent seasonal trends based on the agricultural growing cycle in Brazil. As a result, fertilizer sales are significantly higher in the third and fourth quarters of our fiscal year.
In our food products division, there are no significant seasonal impacts on our business.
INCOME TAXES
As a Bermuda exempted company, we are not subject to income taxes in our jurisdiction of incorporation. However, our subsidiaries, which operate in several tax jurisdictions, principally the United States and Brazil, are subject to income taxes at various statutory rates.
Our United States export sales of agricultural commodities and certain food products have been subject to favorable U.S. tax treatment, thus lowering our overall tax liabilities. However, this favorable tax treatment has recently been challenged by the European Union before the World Trade Organization, or WTO, and in June 2001, a committee of the WTO issued an interim report recommending that the WTO rule against the United States with respect to this issue. An unfavorable ruling by the WTO could ultimately result in a loss of the favorable tax treatment on our U.S. agricultural commodities export sales, which benefit represented approximately $10 million in 2000.
In Brazil, our operations have generated a significant amount of net operating losses, a large portion of which are attributable to the devaluation of the Brazilian REAL in 1999. However, we are required to
reduce portions of these net operating losses through valuation allowances based on our assessment of the likelihood of their realization. As of December 31, 2000, we had deferred tax assets related to net operating losses of $172 million, which we reduced by $95 million in valuation allowances. The utilization of these net operating losses will reduce our future tax liabilities.
RESULTS OF OPERATIONS
A summary of certain items in our consolidated statements of income and volumes by reportable segment for the periods indicated follows.
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -------------------
1998 1999 2000 2000 2001
-------- -------- -------- -------- --------
(US$ IN MILLIONS, EXCEPT VOLUMES)
NET SALES:
Agribusiness.............................. $5,894 $5,517 $6,327 $1,407 $1,765
Fertilizer................................ 625 605 1,466 129 283
Edible oil products....................... 1,923 1,109 1,019 269 217
Wheat milling and bakery products......... 447 579 527 133 122
Other..................................... 214 265 328 67 85
------ ------ ------ ------ ------
Total................................... $9,103 $8,075 $9,667 $2,005 $2,472
====== ====== ====== ====== ======
COST OF GOODS SOLD:
Agribusiness.............................. $5,600 $5,314 $6,065 $1,396 $1,696
Fertilizer................................ 535 457 1,228 111 245
Edible oil products....................... 1,741 970 871 231 190
Wheat milling and bakery products......... 390 494 476 113 109
Other..................................... 167 228 295 60 76
Impairment and restructuring charges...... -- -- 49 -- --
------ ------ ------ ------ ------
Total................................... $8,433 $7,463 $8,984 $1,911 $2,316
====== ====== ====== ====== ======
GROSS PROFIT:
Agribusiness.............................. $ 294 $ 203 $ 223 $ 11 $ 69
Fertilizer................................ 90 148 238 18 38
Edible oil products....................... 182 139 143 38 27
Wheat milling and bakery products......... 57 85 51 20 13
Other..................................... 47 37 28 7 9
------ ------ ------ ------ ------
Total................................... $ 670 $ 612 $ 683 $ 94 $ 156
====== ====== ====== ====== ======
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
Agribusiness.............................. $ 132 $ 111 $ 132 $ 28 $ 34
Fertilizer................................ 43 42 85 5 12
Edible oil products....................... 128 98 109 24 18
Wheat milling and bakery products......... 54 61 41 15 11
Other..................................... 21 10 20 4 3
Unallocated............................... (4) 10 -- 4 4
------ ------ ------ ------ ------
Total................................... $ 374 $ 332 $ 387 $ 80 $ 82
====== ====== ====== ====== ======
|
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -------------------
1998 1999 2000 2000 2001
-------- -------- -------- -------- --------
(US$ IN MILLIONS, EXCEPT VOLUMES)
INCOME FROM OPERATIONS:
Agribusiness.............................. $ 162 $ 92 $ 91 $ (17) $ 35
Fertilizer................................ 47 106 153 13 26
Edible oil products....................... 54 41 34 14 9
Wheat milling and bakery products......... 3 24 10 5 2
Other..................................... 26 27 8 3 6
Unallocated............................... 4 (10) -- (4) (4)
------ ------ ------ ------ ------
Total................................... $ 296 $ 280 $ 296 $ 14 $ 74
====== ====== ====== ====== ======
NET INCOME (LOSS)......................... $ 92 $ (5) $ 12 $ (8) $ 6
====== ====== ====== ====== ======
VOLUMES (IN MILLIONS OF METRIC TONS):
Agribusiness.............................. 29.1 31.9 46.3 9.2 11.1
Fertilizer................................ 3.5 4.2 10.2 .7 1.6
Edible oil products....................... 1.5 1.6 1.6 .4 .4
Wheat milling and bakery products......... 1.5 2.0 1.9 .4 .5
Other..................................... 1.2 1.1 1.1 .1 .1
------ ------ ------ ------ ------
Total................................... 36.8 40.8 61.1 10.8 13.7
====== ====== ====== ====== ======
|
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
2001
NET SALES. Net sales increased by $467 million, or 23.3%, to $2,472 million for the three months ended March 31, 2001 from $2,005 million for the three months ended March 31, 2000.
Net sales in our agribusiness segment grew by $358 million, or 25.4%, to $1,765 million for the three months ended March 31, 2001 from $1,407 million for the three months ended March 31, 2000. Agribusiness segment net sales increased primarily due to higher sales volumes and higher average prices for soy commodity prices. The increase in sales volumes was largely due to growth in our international marketing operations, which increased sales volumes by 1.8 million metric tons, or 69.2%, for the three months ended March 31, 2001 compared to the three months ended March 31, 2000. Average selling prices of soy commodity products were higher due to increased demand for soybean meal resulting from the recent European ban on the use of meat and bone meal in animal feed.
Net sales in our fertilizer segment increased by $154 million, or 119.4%, to $283 million for the three months ended March 31, 2001 from $129 million for the three months ended March 31, 2000. Fertilizer segment net sales increased significantly due to higher sales volumes as a result of the acquisition of Manah and Fosfertil. Average selling prices of our fertilizer products remained relatively flat for the three months ended March 31, 2001 compared to the three months ended March 31, 2000.
Net sales in our edible oil products segment decreased by $52 million, or 19.3%, to $217 million for the three months ended March 31, 2001 from $269 million for the three months ended March 31, 2000. This decrease in net sales was primarily due to decreases in average selling prices of our edible oil products in 2001. The decline in average selling prices of our edible oil products was attributable to the adverse effects of the REAL devaluation in the first quarter of 2001 and competitive pressures in our markets.
Net sales in our wheat milling and bakery products segment decreased by $11 million, or 8.3%, to $122 million for the three months ended March 31, 2001 from $133 million for the three months ended March 31, 2000. This decrease in net sales was primarily due to decreases in average selling prices for our
wheat milling and bakery products. The decline in average selling price for our wheat milling and bakery products was attributable to the adverse effects of the REAL devaluation in the first quarter of 2001.
Net sales in our other segment increased by $18 million, or 26.9%, to $85 million for the three months ended March 31, 2001 from $67 million for the three months ended March 31, 2000. The increase in net sales is primarily due to higher sales volumes in our soy ingredients and corn products businesses partially offset by decreases in average selling prices.
COST OF GOODS SOLD. Cost of goods sold increased by $405 million, or 21.2%, to $2,316 million for the three months ended March 31, 2000 from $1,911 million for the three months ended March 31, 2000. Included in cost of goods sold were $38 million and $23 million of depreciation, depletion and amortization expenses for the three months ended March 31, 2001 and the three months ended March 31, 2000, respectively.
Cost of goods sold in our agribusiness segment increased by $300 million, or 21.5%, to $1,696 million for the three months ended March 31, 2001 from $1,396 million for the three months ended March 31, 2000. This increase was primarily due to higher sales volumes in international marketing.
Cost of goods sold in our fertilizer segment increased by $134 million, or 120.7%, to $245 million for the three months ended March 31, 2001 from $111 million for the three months ended March 31, 2000. This increase was primarily due to higher sales volumes as a result of the acquisition of Manah and Fosfertil. In addition, depreciation and depletion costs increased by $14 million to $17 million for the three months ended March 31, 2001 compared to $3 million for the three months ended March 31, 2000 due to the acquisition of Manah and Fosfertil.
Costs of goods sold in our edible oil products segment declined by $41 million, or 17.8%, to $190 million for the three months ended March 31, 2001 from $231 million for the three months ended March 31, 2000. This decline was primarily due to the REAL devaluation and lower raw material costs.
Costs of goods sold in our wheat milling and bakery products segment declined by $4 million, or 3.5%, to $109 million for the three months ended March 31, 2001 from $113 million for the three months ended March 31, 2000. This decline was primarily due to the REAL devaluation offset by an increase in raw material costs.
Costs of goods sold in our other segment increased by $16 million, or 26.7%, to $76 million for the three months ended March 31, 2001 from $60 million for the three months ended March 31, 2000. This increase was primarily due to higher sales volumes in our soy ingredients and corn products businesses.
GROSS PROFIT. Gross profit increased by $62 million, or 66.0%, to $156 million for the three months ended March 31, 2001 from $94 million for the three months ended March 31, 2000.
Gross profit in our agribusiness segment increased by $58 million, or 527.3%, to $69 million for the three months ended March 31, 2001 compared to $11 million for the three months ended March 31, 2000. This increase was primarily due to improved profitability in our grain origination and oilseed processing business lines and growth in our international marketing operations. The improvement in gross profit in grain origination and oilseed processing was due to higher gross profit margins that resulted from the industry-wide capacity reductions, including our own restructuring initiatives in the second half of 2000, and increased demand for soybean meal resulting from the recent European ban on the use of meat and bone meal in animal feed.
Gross profit in our fertilizer segment increased by $20 million, or 111.1%, to $38 million for the three months ended March 31, 2001 from $18 million for the three months ended March 31, 2000. This increase was primarily due to the acquisition of Manah and Fosfertil.
Gross profit in our edible oil products segment declined by $11 million, or 29.0%, to $27 million for the three months ended March 31, 2001 from $38 million for the three months ended March 31, 2000. This
decrease was due to the effects of the REAL devaluation and lower average selling prices offset by lower raw material costs.
Gross profit in our wheat milling and bakery products segment declined by $7 million, or 35.0%, to $13 million for the three months ended March 31, 2001 from $20 million for the three months ended March 31, 2000. This decrease was due to the effects of the REAL devaluation and higher raw material costs.
Gross profit in our other segment increased by $2 million, or 28.6%, to $9 million for the three months ended March 31, 2001 from $7 million for the three months ended March 31, 2000. This increase was due to higher sales volumes in our soy ingredients and corn products businesses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses, or SG&A, increased by $2 million, or 2.5%, to $82 million for the three months ended March 31, 2001 from $80 million for the three months ended March 31, 2000. SG&A increased by $6 million in the agribusiness segment principally due to the expansion of our South American grain origination operations, partially offset by the effects of the REAL devaluation. In addition, SG&A increased by $7 million in the fertilizer segment due to the acquisition of Manah and Fosfertil. SG&A in the edible oil products and wheat milling and bakery segments decreased by $6 million and $4 million, respectively, due to the effects of the REAL devaluation and our cost reduction programs.
INCOME FROM OPERATIONS. Income from operations increased by $60 million, or 428.6%, to $74 million for the three months ended March 31, 2001 from $14 million for the three months ended March 31, 2000. The increase was primarily a result of higher agribusiness segment gross profit and growth in our international marketing operations in the agribusiness segment and the acquisitions of Manah and Fosfertil, while income from operations in the edible oil products and wheat milling and bakery products segments declined primarily due to the effects of the REAL devaluation.
NON-OPERATING ITEMS. A summary of significant non-operating items for the periods indicated follows.
THREE MONTHS
ENDED MARCH 31,
----------------------
2000 2001
-------- --------
(US$ IN MILLIONS)
Interest income............................................. $ 31 $ 41
Interest expense............................................ (36) (62)
Interest expense on readily marketable inventories.......... (14) (11)
Foreign exchange............................................ 3 (43)
Other income................................................ 4 2
---- ----
Total................................................. $(12) $(73)
==== ====
|
Interest income increased by $10 million to $41 million for the three months ended March 31, 2001 from $31 million for the three months ended March 31, 2000, primarily due to higher short-term investments. Interest expense increased by $26 million to $62 million for the three months ended March 31, 2001 from $36 million for the three months ended March 31, 2000 because of higher levels of debt assumed as a result of the Manah and Fosfertil acquisitions. Average interest rates on our debt for the three months ended March 31, 2001 compared to March 31, 2000 were lower as a result of the financing initiatives we implemented in 2000. Interest expense on short-term debt used to finance readily marketable inventories, which are our agricultural commodities inventories, decreased by $3 million to $11 million for the three months ended March 31, 2001 from $14 million for the three months ended March 31, 2000. The decrease in interest expense on readily marketable inventories was due to lower average levels of readily marketable inventories and associated short-term debt in the first quarter of 2001 compared to 2000.
Foreign exchange losses increased by $46 million to a loss of $43 million for the three months ended March 31, 2001 from a gain of $3 million for the three months ended March 31, 2000. This increase was primarily due to changes in exchange rates between the REAL and the U.S. dollar, as the REAL declined in value against the U.S. dollar by 10% for the three months ended March 31, 2001 compared to a 3% appreciation for the three months ended March 31, 2000. Our use of permanently invested long-term intercompany loans diminished our foreign exchange losses by $35 million. Permanently invested intercompany loans will not be repaid and therefore are treated as analogous to equity for accounting purposes. The foreign exchange losses related to these intercompany loans were recorded in other comprehensive income (loss) in our consolidated balance sheet for the three months ended March 31, 2001. Our use of these intercompany loans was not significant during the three-months ended March 31, 2000.
Income tax expense was $.3 million for the three months ended March 31, 2001 compared to an expense of $1 million recorded in the three months ended March 31, 2000. Income tax expense for the first three months of 2001 was lower compared to the first three months of 2000 primarily due to lower taxable income.
Minority interest was an expense of $5 million for the three months ended March 31, 2001 compared to an expense of $6 million for the three months ended March 31, 2000. This change was primarily a result of lower earnings of our Brazilian subsidiaries due to the REAL devaluation offset by increased expenses associated with minority interest in Manah and Fosfertil and $3 million of preferred stock dividends recorded in the first quarter of 2001.
NET INCOME. Net income was $6 million for the three months ended March 31, 2001 compared to a net loss of $8 million for the three months ended March 31, 2000. Net income for the three months ended March 31, 2001 was affected by a $7 million cumulative effect of a change in accounting principle related to the adoption of SFAS No. 133. As a result of this adoption, commencing in 2001, we have elected to begin recording unrealized gains and losses on previously unrecognized forward purchase and sales contracts as a component of cost of goods sold over the term of these contracts rather than on the delivery date for the underlying commodity. See "--Recent Accounting Pronouncements." In addition, we recorded a $3 million gain on the disposal of our consumer bread products division in Brazil for the three months ended March 31, 2001 compared to a loss relating to this division for the three months ended March 31, 2000. We sold this division to a third party in March 2001 for $64 million.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO DECEMBER 31, 2000
NET SALES. Net sales increased by $1,592 million, or 19.7%, to $9,667 million in 2000 from $8,075 million in 1999.
Net sales in our agribusiness segment grew by $810 million, or 14.7%, to $6,327 million in 2000 from $5,517 million in 1999. Agribusiness segment net sales increased primarily due to higher sales volumes, partially offset by lower average agricultural commodity prices. The increase in sales volumes was caused by rapid growth in our international marketing operations, which increased sales volumes by 9.5 million metric tons compared to 1999, as well as an increase of 4.8 million metric tons in our grain origination business. The increase in volumes was due in part to higher sales of soybeans as a result of our decision to sell soybeans rather than process them into soybean meal and soybean oil. This decision was made because margins on soybean export sales were more favorable than margins available on soybean meal and soybean oil. Average selling prices of soy commodity products declined in our grain origination, oilseed processing and international marketing business lines due primarily to changes in China's import policies for soy commodity products and excess industry-wide oilseed processing capacity. See "--Industry Economic Conditions and Cyclicality."
Net sales in our fertilizer segment increased by $861 million, or 142.3%, to $1,466 million in 2000 from $605 million in 1999. Fertilizer segment net sales increased significantly as a result of the acquisition of
Manah and Fosfertil and internal growth in our business. Average selling prices of our fertilizer products remained flat during 2000 compared to 1999. Excluding the effects of the acquisition of Manah and Fosfertil, sales volumes in our fertilizer segment increased by 14.3% in 2000 compared to 1999 driven by growth in the Brazilian agricultural sector. The acquisition of Manah and Fosfertil increased our sales volumes by 5.4 million metric tons in 2000.
Net sales in our edible oil products segment decreased by $90 million, or 8.1%, to $1,019 million in 2000 from $1,109 million in 1999. This decrease was primarily attributable to the adverse effects of the REAL devaluation and lower average selling prices due to competitive pressures in Brazil.
Net sales in our wheat milling and bakery products segment decreased by $52 million, or 9.0%, to $527 million in 2000 from $579 million in 1999. This decrease was primarily attributable to lower sales volumes and the adverse effects of the REAL devaluation.
Net sales in our other segment increased by $63 million, or 23.8%, to $328 million in 2000 from $265 million in 1999. The increase was primarily due to higher average selling prices in our soy ingredients and corn products businesses.
COST OF GOODS SOLD. Cost of goods sold, including impairment and restructuring charges of $49 million, increased by $1,521 million, or 20.4%, to $8,984 million in 2000 from $7,463 million in 1999. Included in cost of goods sold were $149 million and $101 million of depreciation, depletion and amortization expenses in 2000 and 1999, respectively.
Cost of goods sold in our agribusiness segment, excluding impairment and restructuring charges of $39 million recorded in 2000, increased by $751 million, or 14.1%, to $6,065 million in 2000 from $5,314 million in 1999. This increase was primarily due to higher sales volumes in our grain origination and international marketing operations, offset by lower average prices of soy commodity products.
Cost of goods sold in our fertilizer segment increased by $771 million, or 168.7%, to $1,228 million in 2000 from $457 million in 1999. This increase was primarily because of higher sales volumes due to internal growth, the acquisition of Manah and Fosfertil and higher production costs. The higher production costs were attributable to our acquisition of Manah and Fosfertil. In addition, depreciation and depletion costs increased by $41 million in 2000 compared to 1999 due to the acquisition of Manah and Fosfertil.
Cost of goods sold in our edible oil products segment, excluding impairment and restructuring charges of $5 million recorded in 2000, declined by $99 million, or 10.2%, to $871 million in 2000 from $970 million in 1999. This decline was primarily due to lower raw material costs and the effects of the REAL devaluation.
Cost of goods sold in our wheat milling and bakery products segment declined by $18 million, or 3.6%, to $476 million in 2000 from $494 million in 1999. This decline was due to the effects of the REAL devaluation and lower sales volumes.
Cost of goods sold in our other segment, excluding impairment and restructuring charges of $5 million recorded in 2000, increased by $67 million, or 29.4%, to $295 million in 2000 from $228 million in 1999. This increase was primarily due to higher raw material costs in our soy ingredients and corn products businesses.
GROSS PROFIT. Gross profit increased by $71 million, or 11.6%, to $683 million in 2000 from $612 million in 1999.
Gross profit in our agribusiness segment increased by $20 million, or 9.9%, to $223 million in 2000 compared to $203 million in 1999. Excluding $39 million in impairment and restructuring charges recorded in 2000, gross profit in the agribusiness segment increased by $59 million, or 29.1%. This increase was primarily due to growth in sales volumes in our grain origination and international marketing operations. A portion of the increase in volumes was due to our decision to sell more soybeans rather than process them into soybean meal and soybean oil.
Fertilizer segment gross profit increased by $90 million, or 60.8%, to $238 million in 2000 from $148 million in 1999. This increase was primarily due to the acquisition during 2000 of Manah and Fosfertil and internal growth in our business.
Gross profit in our edible oil products segment increased by $4 million, or 2.9%, to $143 million in 2000 from $139 million in 1999. Excluding $5 million in impairment and restructuring charges recorded in 2000, gross profit in the edible oil products segment increased by $9 million, or 6.5%. The increase was primarily due to lower raw material costs partially offset by lower average selling prices and the effects of the REAL devaluation.
Gross profit in our wheat milling and bakery products segment declined by $34 million, or 40.0%, to $51 million in 2000 from $85 million in 1999. The decline was due primarily to decreases in sales volumes and the adverse effects of the REAL devaluation.
Gross profit in our other segment declined by $9 million, or 24.3%, to $28 million in 2000 from $37 million in 1999. Excluding $5 million in impairment and restructuring charges recorded in 2000, gross profit in our other segment declined by $4 million, or 10.8%. The decline was due primarily to higher raw material costs partially offset by higher average selling prices in our soy ingredients and corn products businesses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased by $55 million, or 16.6%, to $387 million in 2000 from $332 million in 1999. SG&A increased by $21 million in the agribusiness segment principally due to the full year of operations in 2000 of our Council Bluffs, Iowa oilseed processing facility and growth of our international marketing operations and by $43 million in the fertilizer segment due to the acquisition of Manah and Fosfertil, while the edible oil products segment increased by $11 million due to higher advertising and promotional expenses. SG&A in the wheat milling and bakery products segment decreased by $20 million primarily due to the effects of the REAL devaluation. SG&A expenses in our other segment increased primarily due to higher promotional expenses relating to our soy ingredients and corn products businesses.
INCOME FROM OPERATIONS. Income from operations increased by $16 million, or 5.7%, to $296 million in 2000 from $280 million in 1999. Income from operations in our agribusiness segment remained flat as a result of higher gross profit in our grain origination and international marketing operations, offset by higher SG&A relating to the full year of operations of our Council Bluffs, Iowa oilseed processing facility and the growth of our international marketing operations. The increase was due to the acquisitions during 2000 of Manah and Fosfertil and internal growth in our fertilizer segment. The increase was partially offset by a decrease in income from operations in edible oil products which declined due to increases in SG&A expenses and decreases in wheat milling and bakery products due to a decline in sales volumes and the adverse effects of the REAL devaluation. Income from operations in our other segment decreased primarily due to lower average selling prices in our corn products business.
NON-OPERATING ITEMS. A summary of significant non-operating items for the periods indicated follows.
YEAR ENDED
DECEMBER 31,
----------------------
1999 2000
-------- --------
(US$ IN MILLIONS)
Interest income............................................ $ 156 $ 138
Interest expense........................................... (166) (202)
Interest expense on readily marketable inventories......... (40) (52)
Foreign exchange........................................... (255) (116)
Other income............................................... 9 7
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Total.................................................... $(296) $(225)
===== =====
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Interest income decreased by $18 million to $138 million in 2000 from $156 million in 1999, primarily due to lower levels of invested cash. Interest expense increased by $36 million to $202 million in 2000 from $166 million in 1999 because of higher levels of debt assumed as a result of the Manah and Fosfertil acquisitions and higher working capital level requirements attributable to higher accounts receivable generated by growth in our international marketing operations. Interest expense on short-term debt used to finance readily marketable inventories increased by $12 million to $52 million from $40 million as a result of growth in our international marketing activities.
Foreign exchange losses declined by $139 million to $116 million in 2000 from $255 million in 1999. This was primarily due to changes in exchange rates between the REAL and the U.S. dollar, as the REAL declined in value against the U.S. dollar by 9% in 2000 compared to 32% in 1999. The decline was also attributable to lower hedging costs due to our utilization of alternative hedging instruments such as options and lower swap costs due to lower interest rates in Brazil.
Income tax expenses were $12 million in 2000 compared to an income tax benefit of $27 million recorded in 1999. Income tax expenses in 2000 were higher than 1999 due to the improved operating results of our subsidiaries. The income tax benefit in 1999 was a result of the tax losses recorded by our Brazilian subsidiaries due primarily to the devaluation of the REAL. This tax benefit was partially offset by the recording of valuation allowances in 1999.
Minority interest was an expense of $37 million in 2000 compared to income of $4 million in 1999. This change was primarily due to the additional minority interest in Manah and Fosfertil.
NET INCOME. Net income was $12 million in 2000 compared to a net loss of $5 million in 1999 due to the aforementioned factors. Loss on discontinued operations of our Brazilian consumer bread products division was $10 million in 2000 and $20 million in 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1999
NET SALES. Net sales decreased by $1,028 million, or 11.3%, to $8,075 million in 1999 from $9,103 million in 1998.
Net sales in our agribusiness segment declined by $377 million, or 6.4%, to $5,517 million in 1999 from $5,894 million in 1998. Agribusiness segment net sales decreased primarily due to lower average selling prices for soy commodity products, offset by higher sales volumes. Sales volumes increased by 2.8 million metric tons in 1999 compared to 1998 primarily as a result of the commencement of our international marketing operations in 1999.
Fertilizer segment net sales decreased by $20 million, or 3.2%, to $605 million in 1999 from $625 million in 1998. Sales volumes in our fertilizer segment increased by .7 million metric tons, or 20.0%, in 1999 compared to 1998. Additionally, average selling prices increased by 12.1% in 1999 compared to 1998 due to industry-wide price increases to recover higher imported raw material costs. The increase in volumes and prices was offset by the devaluation of the REAL, which resulted in a weaker exchange rate for the conversion of our REAL-denominated sales into U.S. dollars for consolidation purposes.
Net sales in our edible oil products segment decreased by $814 million, or 42.3%, to $1,109 million in 1999 from $1,923 million in 1998. This decrease was primarily due to the devaluation of the REAL and a decrease in average selling prices. This decrease was partially offset by increases in sales volumes of .1 million metric tons, or 6.7%, in 1999 compared to 1998.
Net sales in our wheat milling and bakery products segment increased by $132 million, or 29.5%, to $579 million in 1999 from $447 million in 1998. This increase was primarily due to higher sales volumes which increased by .5 million metric tons, or 33.3%, in 1999 compared to 1998. The increase in net sales was partially offset by the REAL devaluation.
Net sales in our other segment increased by $51 million, or 23.8%, to $265 million in 1999 from $214 million in 1998. This increase was primarily due to higher average selling prices in our soy ingredients business.
COST OF GOODS SOLD. Cost of goods sold decreased by $970 million, or 11.5%, to $7,463 million in 1999 from $8,433 million in 1998. Depreciation, depletion and amortization expenses, included in cost of goods sold, decreased by $43 million, or 29.9%, to $101 million in 1999 from $144 million in 1998. The majority of this decline was due to the devaluation of the REAL. Depreciation, depletion and amortization expenses declined by $12 million, $10 million, $12 million, $4 million and $3 million in our agribusiness, fertilizer, edible oil products and wheat milling and bakery segments and our other segment, respectively, due primarily to the REAL devaluation.
Cost of goods sold in our agribusiness segment decreased by $286 million, or 5.1%, to $5,314 million in 1999 from $5,600 million in 1998. This decrease was primarily due to lower average prices for soy commodity products in the agribusiness segment, partially offset by higher sales volumes.
Cost of goods sold in our fertilizer segment decreased by $78 million, or 14.6%, to $457 million in 1999 from $535 million in 1998. This decrease was primarily due to the devaluation of the REAL, offset in part by increased costs associated with higher sales volumes and increased costs of imported raw materials.
Cost of goods sold in our edible oil products segment declined by $771 million, or 44.3%, to $970 million in 1999 from $1,741 million in 1998. This decrease was primarily due to the devaluation of the REAL and lower raw material costs.
Cost of goods sold in our wheat milling and bakery products segment increased by $104 million, or 26.7%, to $494 million in 1999 from $390 million in 1998. This increase was primarily due to increased costs associated with higher sales volumes offset in part by the devaluation of the REAL.
Cost of goods sold in our other segment increased by $61 million, or 36.5%, to $228 million in 1999 from $167 million in 1998. This increase was primarily due to higher raw material costs in our soy ingredients business.
GROSS PROFIT. Gross profit decreased by $58 million, or 8.7%, to $612 million in 1999 from $670 million in 1998.
Gross profit in our agribusiness segment decreased by $91 million, or 31.0%, to $203 million in 1999 compared to $294 million in 1998. Gross profit in our grain origination and oilseed processing businesses declined due to lower average prices for soy commodity products. Prices for soy commodity products decreased due to overcapacity in the oilseed processing industry and the substitution of other agricultural commodities for soy commodity products, which reduced demand for those products. Gross profit in our oilseed processing business also declined due to start-up costs of our Council Bluffs, Iowa oilseed processing facility. In 1999, we commenced our international marketing operations, resulting in gross profit of $24 million in this business in 1999.
Gross profit in our fertilizer segment increased by $58 million, or 64.4%, to $148 million in 1999 from $90 million in 1998. This increase was primarily due to higher sales volumes, higher sales prices and lower cost of goods sold.
Gross profit in our edible oil products segment declined by $43 million, or 23.6%, to $139 million in 1999 from $182 million in 1998. This decline was primarily the result of the devaluation of the REAL and a decrease in average selling prices, partially offset by increased sales volumes and lower raw material costs.
Gross profit in our wheat milling and bakery products segment increased by $28 million, or 49.1%, to $85 million in 1999 from $57 million in 1998. The increase was primarily due to higher sales volumes.
Gross profit in our other segment declined by $10 million, or 21.3%, to $37 million in 1999 from $47 million in 1998. This decline was the result of increased raw materials costs in our soy ingredients
business and the adverse effect of the REAL devaluation, partially offset by increased selling prices in our soy ingredients business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A decreased by $42 million, or 11.2%, to $332 million in 1999 from $374 million in 1998. The decrease in SG&A was attributable to lower expenses in our Brazilian operations due to the devaluation of the REAL. This decrease was offset by increased SG&A of $25 million in international marketing due to the start-up of these operations and $7 million in wheat milling and bakery products primarily due to the higher sales volumes.
INCOME FROM OPERATIONS. Income from operations decreased by $16 million, or 5.4%, to $280 million in 1999 from $296 million in 1998. The decrease was attributable to our agribusiness segment, in which gross profit declined due to lower gross profit in grain origination and oilseed processing and start-up costs of our international marketing operations. This decrease was partially offset by an increase in income from operations in our fertilizer segment primarily due to higher sales volumes, higher sales prices and lower cost of goods sold. Additionally, income from operations in our edible oil products segment decreased primarily due to the devaluation of the REAL. Income from operations in our wheat milling and bakery products segment increased primarily due to higher sales volumes. The decline in income from operations in our other segment is primarily due to the devaluation of the REAL and higher raw material costs in our soy ingredients business.
NON-OPERATING ITEMS. A summary of significant non-operating items for the periods indicated follows.
YEAR ENDED
DECEMBER 31,
----------------------
1998 1999
-------- --------
(US$ IN MILLIONS)
Interest income............................................ $ 268 $ 156
Interest expense........................................... (144) (166)
Interest expense on readily marketable inventories......... (36) (40)
Foreign exchange........................................... (236) (255)
Other income............................................... 28 9
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Total.................................................... $(120) $(296)
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Interest income decreased by $112 million to $156 million in 1999 from $268 million in 1998. The decrease was primarily due to lower levels of invested cash. Interest expense increased by $22 million to $166 million in 1999 from $144 million in 1998 because of higher interest rates in Brazil caused by the devaluation of the REAL, offset by a decline in overall debt levels. Interest expense on short-term debt used to finance readily marketable inventories increased by $4 million to $40 million in 1999 from $36 million in 1998 as the average levels of readily marketable inventories increased slightly.
Foreign exchange losses increased by $19 million to $255 million in 1999 from $236 million in 1998. This increase was primarily due to the devaluation of the REAL in 1999, offset by a reduction in foreign currency exposure.
We recorded an income tax benefit of $27 million in 1999 compared to an expense of $43 million in 1998. The benefit in 1999 was attributable to pretax losses, a $10 million tax credit related to a redetermination of foreign sales corporation benefits for prior years and earnings of non-U.S. subsidiaries taxed at lower rates, partially offset by the recording of valuation allowances.
Minority interest was income of $4 million in 1999 compared to an expense of $33 million in 1998. This change was primarily due to operating losses incurred by subsidiaries in which we owned less than 100% of the equity during 1999.
NET LOSS. Net loss in 1999 was $5 million compared to net income of $92 million in 1998 due to the aforementioned factors. Loss on discontinued operations of our Brazilian consumer bread products division was $20 million in 1999 and $5 million in 1998. In addition, 1998 included a $3 million net loss on our Brazilian meat and poultry division, which we divested in December 1998.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures were $70 million and $29 million for the three months ended March 31, 2001 and the three months ended March 31, 2000, respectively, and $184 million, $140 million and $279 million for the years ended December 31, 2000, 1999 and 1998, respectively. The majority of these capital expenditures related to efficiency improvements to reduce costs and upgrade equipment due to changes in technology. In the three months ended March 31, 2001, we continued a number of revenue enhancing projects which we began in 2000, including constructing additional agricultural commodities storage facilities in Brazil and a sulfuric acid plant in Brazil for our fertilizer segment, as well as the continued upgrade of our Destrehan, Louisiana export elevator which we began in 1999. In 1999, we completed the construction of our oilseed processing facility at Council Bluffs, Iowa which we began in 1998, and also built an edible oil refinery in Decatur, Alabama. In addition, in 1998, we began the construction of our soy ingredients plant in Esteio, Brazil, which we completed at the end of 1999. Although we have no current material commitments for capital expenditures, we intend to invest approximately $250 million in capital projects in 2001, primarily for efficiency improvements and technological upgrades to our existing facilities.
In the first quarter of 2001, we acquired an additional 3% interest in Fosfertil S.A. for $21 million, of which $3 million consisted of cash and the remainder consisted of a variable interest rate note payable in seven installments ending July 2002. During 2000, we acquired Manah for $47 million in cash, net of cash acquired of $36 million, and paid $24 million in cash to acquire the remaining 13% of one of our Brazilian food products subsidiaries that we did not already own. In 1998, we acquired the remaining 44% of one of our Argentine agribusiness subsidiaries that we did not already own for $39 million. In addition, in 1998 we spent $27 million, including $15 million in cash, to acquire an additional 20% interest in one of our fertilizer subsidiaries. In 1998, we also acquired two frozen bakery product businesses in the United States for $35 million. Finally, in 1998, we completed several other small acquisitions for a total of $57 million in cash. See "Business--Recent Acquisitions and Divestitures" for more information regarding these transactions.
Proceeds from disposal of property, plant and equipment in 1998 were $103 million, which included the sale-leaseback of barges in our agribusiness segment and proceeds from the sale of three non-strategic facilities in our wheat milling and bakery products segment. Proceeds from disposal of property, plant and equipment were not significant in the first quarter of 2001 or in the years ended December 31, 2000 and 1999.
Our principal sources of liquidity are cash flow from operations and borrowings under various short-term and long-term bank facilities and lines of credit. Prior to 2000, we obtained most of our financing on a decentralized basis at subsidiary levels. In 2000, we implemented several new initiatives to coordinate our funding activities at the parent company level and access the international capital markets, raising a total of $1 billion. These initiatives are designed to allow us to take advantage of lower financing costs worldwide. In December 2000, we received net proceeds of $163 million from the issuance of $170 million of redeemable preferred stock by a special purpose subsidiary. Cash dividends on the preferred stock are payable quarterly based on three-month LIBOR plus a variable spread. As of March 31, 2001, we have accrued dividends of $3 million on the redeemable preferred stock. We entered into a $700 million commercial paper facility in September 2000, under which $441 million was outstanding as of March 31, 2001 at a weighted average interest rate of 5.9%. Our commercial paper program was rated investment grade by the three principal credit rating agencies. We also issued $107 million of 8.51% three-year trust certificates and $18 million of 8.61% five-year trust certificates in December 2000. In addition, in 2000, Bunge International contributed $126 million of capital to us in the form of a secured
note payable. During the first three months of 2001, Bunge International repaid $16 million of the principal amount of this note to us.
Cash and cash equivalents at March 31, 2001 and December 31, 2000, were $324 million and $423 million. Included in our inventory were readily marketable commodity inventories of $738 million and $876 million at March 31, 2001 and December 31, 2000, respectively. These agricultural commodities, which are financed with short-term debt, are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms. Our current ratio, defined as current assets divided by current liabilities, was 1.28 and 1.25 at March 31, 2001 and December 31, 2000, respectively. Due to our cash levels and the liquidity of our agricultural commodities inventory, we believe our working capital levels satisfy our present business needs.
At March 31, 2001, we had $289 million outstanding and approximately $250 million available borrowing capacity under short-term lines of credit with a number of lending institutions. In addition, we have various long-term debt facilities at fixed and variable interest rates denominated in both U.S. dollars and REAIS, most of which mature between 2001 and 2005. As of March 31, 2001, we had $1,198 million outstanding under these long-term credit facilities. Of this amount, $450 million was secured by some of our assets. Annual maturities of long-term debt for the five years after December 31, 2000 are $254 million, $283 million, $268 million, $101 million and $117 million. In June 2001, we defeased $60 million of our outstanding long-term debt by depositing cash and U.S. treasury securities in an amount sufficient to make payments of interest and principal on the scheduled payment dates in trust for the benefit of the lenders. The debt instrument defeased was an export financing contract which required us to export our products to certain customers. As a result of changes in our business, principally the expansion of our international marketing operations, this debt agreement was no longer commercially attractive to us. These funds will be held in trust until the final maturity of the debt in 2003. Our long-term debt agreements require us to comply with specified financial covenants related to minimum net worth and working capital and a maximum long-term debt to net worth ratio. We do not expect any legal or contractual restrictions on the ability of our subsidiaries to transfer funds to us to have any impact on our ability to meet our cash obligations.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2001, we adopted Financial Accounting Standards Board (FASB) SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. As a result of this adoption, in the first quarter of 2001 our net income increased by $7 million, net of $4 million of tax expense for the fair value of previously unrecognized derivative instruments. We also recorded a loss in other comprehensive income (loss) of $3 million, net of $2 million tax benefit for derivatives which hedge the variable cash flows of certain forecasted transactions. These adjustments are reported as a cumulative effect of a change in accounting principle as of March 31, 2001.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, as amended, REVENUE RECOGNITION IN FINANCIAL STATEMENTS (SAB 101), which provides an interpretation of when the SEC's revenue recognition criteria have been met. If a transaction is within the scope of specific authoritative literature that provides revenue recognition guidance, that literature should continue to be applied. However, in the absence of authoritative literature addressing a specific arrangement or a specific industry, SAB 101 provides additional guidance as to the criteria applied by the SEC. The additional guidance of SAB 101 has not had any effect on our revenue recognition policies.
In March 2000, the FASB issued Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION--AN INTERPRETATION OF APB 25 (FIN 44). This Interpretation clarifies (1) the definition of an employee for purposes of applying Opinion No. 25, (2) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (3) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award and
(4) the accounting for an exchange of stock compensation awards in a business
combination. The adoption of FIN 44 did not have an effect on our financial
position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
RISK MANAGEMENT
As a result of our global operating and financing activities, we are exposed to changes in agricultural commodity prices, interest rates and foreign currency exchange rates, which may affect our results of operations and financial position. We use derivative financial instruments for the purpose of minimizing the risks and/or costs associated with fluctuations in commodity prices and foreign exchange rates. While these hedging instruments are subject to fluctuations in value, those fluctuations are generally offset by the value of the underlying exposures being hedged. The counterparties to these contractual arrangements are primarily major financial institutions or, in the case of commodity futures and options, a commodity exchange. As a result, credit risk arising from these contracts is not significant and we do not anticipate any significant losses. We do not expect the net cash requirements arising from our risk management activities to be material. Our overall risk management policies and risk limits have been reviewed periodically and revised as market conditions dictate by a committee of the board of directors of Bunge International Limited, our sole shareholder prior to this offering, and will be supervised on an ongoing basis by our risk management committee once it is established. We hold derivative financial instruments solely for purposes other than trading. We are not a party to leveraged derivatives.
COMMODITIES RISK
We operate in many areas of the food industry from agricultural raw materials to production and sale of branded food products. As a result, we use and produce various materials, many of which are agricultural commodities, including soybeans, soybean oil, soybean meal, wheat and corn. Agricultural commodities are subject to price fluctuations due to a number of unpredictable factors that may create price risk. We enter into various derivative contracts, primarily exchange traded futures and options, with the objective of managing our exposure to adverse price movements in the agricultural commodities used for our business operations. We have established policies that limit the amount of unhedged fixed price agricultural commodity positions permissible for our operating companies, which are a combination of quantity and value at risk limits. We measure and review our sensitivity to our net commodities position on a daily basis.
We have prepared a sensitivity analysis to estimate our exposure to market risk on our agricultural commodity position. The daily net agricultural commodity position consists of inventory, related purchase and sale contracts, and exchange-traded contracts, including those used to hedge portions of our production requirements. The fair value of that position is a summation of the fair values calculated for each agricultural commodity by valuing each net position at quoted futures prices. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in prices. The results of this analysis, which may differ from actual results, are as follows:
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1999 2000
------------------------ ------------------------
FAIR VALUE MARKET RISK FAIR VALUE MARKET RISK
---------- ----------- ---------- -----------
(US$ IN MILLIONS)
Highest long position............. $268 $27 $243 $24
Highest short position............ 101 10 79 8
Average position long (short)..... $175 $17 $ 76 $ 8
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The decrease in fair value of the average position for 2000 compared to 1999 was principally a result of a decrease in our daily net agricultural commodity position.
CURRENCY RISK
Our global operations require active participation in foreign exchange markets. In order to reduce the risk of foreign exchange rate fluctuations, we follow a policy of hedging net monetary assets and liabilities denominated in currencies other than the functional currencies applicable to each of our various subsidiaries. Our primary exposure is related to our businesses located in Brazil and to a lesser extent Argentina, Europe and Asia. To minimize the adverse impact of currency movements, we enter into foreign exchange swap and purchased option contracts to hedge currency exposures.
When determining our exposure, we exclude intercompany loans that are deemed to be permanently invested. Permanently invested intercompany loans will not be repaid and therefore are treated as analogous to equity for accounting purposes. As a result, the foreign exchange gains and losses on these borrowings are excluded from the determination of net income and recorded as a component of accumulated other comprehensive income (loss). The balance of permanently invested intercompany borrowings was $290 million and $0 as of December 31, 2000 and 1999, respectively.
For risk management purposes and to determine the overall level of hedging required, we further reduce the foreign exchange exposure determined above by the value of our agricultural commodities inventories. Our agricultural commodities inventories, because of their international pricing in U.S. dollars, provide a natural hedge to our currency exposure.
Our net currency position, including cross-currency swaps and currency options, and our market risk, which is the potential loss from an adverse 10% change in foreign currency exchange rates, is set forth in the following table. In addition, we have provided an analysis of our foreign currency exposure after reducing the exposure for our agricultural commodities inventory. Actual results may differ from the information set forth below.
AS OF DECEMBER 31,
-----------------------
1999 2000
-------- --------
(US$ IN MILLIONS)
BRAZILIAN OPERATIONS:
Net currency position, from financial instruments,
including derivatives.............................. $ 616 $ 665
Market risk.......................................... 62 67
Agricultural commodities inventories................. 428 637
Net currency position, less agricultural commodities
inventories........................................ 188 28
Market risk.......................................... 19 3
OTHER:
Net currency position, from financial instruments,
including derivatives.............................. 67 223
Market risk.......................................... 7 22
Agricultural commodities inventories................. 58 208
Net currency position less agricultural commodities
inventories........................................ 9 15
Market risk.......................................... 1 2
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The decrease in net currency position in 2000 compared to 1999 was due to our ongoing effort to reduce foreign currency exposures, including the reorganization of the capital structure of many of our Brazilian subsidiaries through the use of permanently invested intercompany loans.
INTEREST RATE RISK
The fair value of our long-term debt is estimated below using discounted future cash flows based on our current borrowing arrangements. Market risk is estimated as the potential change in fair value resulting from a hypothetical one percentage point change in interest rates.
AS OF DECEMBER 31,
-----------------------
1999 2000
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(US$ IN MILLIONS)
Fair value of long-term debt, including current
portion.............................................. $1,035 $1,206
Excess of carrying value over fair value............... 86 51
Market risk............................................ $ 9 $ 7
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The increase in fair value of long-term debt in 2000 over 1999 was due to our increased debt levels resulting from the acquisition of Manah and Fosfertil in 2000.
There have been no significant changes in our commodities, currency or interest rate market risk since December 31, 2000, except for an increase in our permanently invested intercompany loans to $493 million as of March 31, 2001 from $290 million as of December 31, 2000, which will serve to further reduce our exposure to foreign exchange gains and losses.
INDUSTRY OVERVIEW
The farm-to-consumer food supply chain stretches from raw materials, such as seeds, fertilizers and agricultural commodities, to animal feed products to retail food products. Agricultural commodities have two primary end uses: food or animal feed ingredients. Production processes for all agricultural commodities are capital-intensive and similar in nature. These processes involve grinding, crushing or milling with further value added through extraction, refining and other methods. Generally, a commodity can be processed by any of these methods to produce additional value-added products ranging from vegetable oils, flour, meal and nutritional ingredients to finished food products such as margarine, bread and other bakery products and breakfast cereals. The food supply chain involves numerous industry participants, including farmers, fertilizer producers and other raw material suppliers, grain originators, feed and livestock producers, food and beverage processors, food distributors, retail outlets and, ultimately, consumers. The following diagram illustrates the range of our operations within this supply chain.
THE FOOD SUPPLY CHAIN
[DIAGRAM]
FERTILIZER.............. AGRIBUSINESS................................. FOOD PRODUCTS....................... |
AGRIBUSINESS
GENERAL
Oil bearing crops, including oilseeds such as soybeans, cottonseed, peanuts, canola and sunflower, and other crops such as palm and coconut, and grains, including wheat, rice, corn, barley, oats and rye, are a fundamental part of the diet of humans and livestock. Oil bearing crops are the primary source of protein meals, which are used in animal feed, and edible oils. Soybeans are the principal oil bearing crop produced globally. Wheat is one of the world's principal food grains, while corn is the world's most important animal feed grain. The following chart shows the global production for 1999/2000 of the principal grains and oil bearing crops, including oilseeds, as well as the amount produced by the United States, Brazil and Argentina.
USA BRAZIL ARGENTINA WORLD
-------- -------- --------- --------
(MILLIONS OF METRIC TONS)
Soybeans........................................ 72 34 21 159
Oilseeds (including soybeans)................... 82 35 28 302
Wheat........................................... 63 2 16 588
Corn............................................ 240 32 17 606
Rice (milled)................................... 7 8 1 408
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SOURCE: USDA WORLD AGRICULTURAL PRODUCTION - MARCH 2001
According to the United States Department of Agriculture, known as the USDA, soybeans represent over 50% of global oilseed production. Soybeans are crushed to produce meal and oil, producing approximately 82% meal and hulls and 18% oil. From 1996 to 2000, global volumes of soybeans crushed increased at a compound annual growth rate of 4%. In 2000, approximately 109 million metric tons of soybean meal and 25 million metric tons of soybean oil were produced worldwide. The USDA forecasts that these numbers will increase to 138 and 31 million metric tons, respectively, by 2010.
The following factors affect the market for agricultural commodities, as well as growth and profitability in the agribusiness industry.
GROWTH IN INCOME AND POPULATION
Income and population are the most important factors affecting the demand for food and animal feed. Studies have shown that as incomes rise in developing countries, food consumption increases and diets diversify to include more products such as edible oils and meats. As incomes further increase, consumption patterns change to include processed foods and food prepared away from home. Increased demand for edible oils requires an increase in the production of oil-bearing crops. An increase in meat consumption requires more livestock to meet the demand, which in turn creates a corresponding increase in the consumption of animal feed.
The United Nations Food and Agricultural Organization, known as the FAO, predicts that by 2030, the world's population will increase by over 2 billion people, a 35% increase from 1999. The FAO also predicts that rising population and income levels over the next 30 years will cause worldwide edible oil consumption to increase by approximately 44%, and worldwide meat consumption to increase by approximately 27%. This growth in consumption of oils and meats is expected to require almost a doubling of production of oil bearing crops and will lead to an increase in the production of wheat and coarse grains of approximately 55% over the same period. In addition, the increasing deficit in developing countries between domestic production and demand for grains, oilseeds and related products will be addressed in large part through imports.
GROWING GLOBAL DEMAND FOR FOOD
The demand for food continues to grow in the world market. As a result, global consumption of agricultural commodities is growing despite regional economic downturns and adverse political conditions.
SOYBEANS PROVIDE THE PRINCIPAL PROTEIN MEAL AND MOST WIDELY USED EDIBLE OIL
Soybean meal is the preferred and dominant protein source for many animal feed industries, particularly the poultry and pork industries, representing 65% of global protein meal consumption. According to the USDA, poultry is the leading meat consumed in the United States and the production of U.S. poultry grew at a rate of 2.8% per year from 1996 to 2001, compared to the beef industry which grew at 0.5% per year over the same period. Soybean meal has a high protein content, an amino acid profile that is favorable for animal nutrition and is a viable substitute for more expensive protein sources in animal feed. Recently, concern over mad cow disease and the European Union ban on the use of meat and bone meal in animal feed have reinforced existing preferences for soybean meal and prompted additional farmers and animal feed producers to seek alternative protein sources for animal feed. Soybean meal is the most readily available and easily substitutable vegetable protein and is therefore positioned to benefit from a ban on the use of meat and bone meal. According to Oilworld, an edible oil industry trade publication, global soybean meal consumption grew at a compound annual growth rate of 4% from 1996 to 2000.
Soybean oil is also the most widely used edible oil, representing 29% of total edible oil consumption worldwide. It is the dominant edible oil used in the United States and Brazil, representing 81% of all fats and oils consumed in the United States and over 80% of all edible oils consumed in Brazil. According to Oilworld, world soybean oil consumption grew at a compound annual growth rate of 4.2% from 1996 to 2000. The following graph illustrates historical and anticipated growth in global volumes of soybeans processed.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
In Millions of
Metric Tons
1976-80 63 1996-00 126 2016-20 201 |
SOURCE: OILWORLD 2020 - OCTOBER 1999
INFLUENCE OF GEOGRAPHIC FACTORS
The availability of arable land, suitable climate and adequate infrastructure are essential to successful agricultural production. Countries that can produce surplus crops cost-effectively and efficiently, such as the United States, Brazil and Argentina, supply those that have production deficits. In 1999/2000, the United States, Brazil and Argentina accounted for 81% of global soybean production, 13% of wheat production and 47% of corn production. These three countries also accounted for 81% of world soybean and soy product exports, 80% of world corn exports and 54% of world wheat exports. Due to differences in growing seasons, northern and southern hemisphere nations generally supply the world market for oil bearing crops and grains at different times of the year. Agricultural products from the United States are most plentiful from September to November, while southern hemisphere products are more plentiful from April to August.
We believe that increased demand for edible oils, protein meals and grains will require increased production by, and exports from, the United States, Brazil and Argentina. In addition, increases in arable land will be needed to meet anticipated growth in global food demand. Brazil has a large reserve of arable land. Estimates of the unforested arable land available for agricultural development in Brazil range from approximately 130 to 140 million hectares. In comparison, current land used in agricultural production in the United States totals 102 million hectares.
The following country-specific geographic factors also influence the agricultural commodities industry in the countries in which we operate.
- In Brazil, soybean production over the past ten years has been increasing in areas north of the traditional growing areas located in the southern states. Land in these northern Brazilian growing regions is cheaper than in the traditional growing areas, has a favorable climate for soybean growing and provides above average soybean yields.
- In the United States, an efficient shipping, storing and handling infrastructure, utilizing barges, trains, trucks and abundant storage facilities moves in excess of 400 million metric tons of grains and oilseeds annually from the major production regions to the principal export port located in New Orleans, through which over 65% of U.S. grain exports are shipped.
- In Argentina, the soybean industry has historically been export-oriented, with over 95% of domestic soybean oil and soybean meal production exported in 2000.
EFFECTS OF CYCLICALITY ON THE OILSEED PROCESSING INDUSTRY
Profitability in the global oilseed processing industry is cyclical in nature. While growth in demand for soybean products has continued over time, this has also encouraged industry participants to make capacity additions which in the short term can exceed increases in demand. Because of the two to three years required to build an oilseed processing plant and the inability of a party constructing a new facility to predict when other industry capacity increases may become operational, capacity levels may not correspond with actual demand growth. In addition, the location of a soybean processing plant, including its proximity to the growing areas and access to export-import facilities, is a critical factor affecting profitability in the industry. In periods when industry capacity exceeds the growth in demand, profitability declines and inefficient and poorly located facilities are generally closed. Most recently in the late 1990's, significant additional soybean processing capacity became operational just as demand growth for soybean meal and oil in developing countries was slowing as a result of the Asian financial crisis. During the same time, China, a large importer of soybean meal and soybean oil, changed its import duties, which reduced its demand for imported soybean meal and oil. The combination of these factors caused industry-wide oilseed processing margins to decrease significantly. Recently, the oilseed processing industry has shown signs of emerging from this latest down cycle, as the closure of less efficient oilseed processing facilities in the United States and Brazil has contributed to an improved balance in industry capacity.
BARRIERS TO ENTRY IN THE AGRIBUSINESS INDUSTRY
We believe that the scale and global reach required to compete effectively in the agribusiness industry present barriers to entry and are advantageous to established market participants. High capital costs are incurred in building, acquiring and upgrading necessary facilities and equipment while substantial short-term credit is needed to acquire and store sufficient levels of inventory. Assembling the logistics capabilities and assets needed to transport products is difficult, as is marketing these services to customers. A reliable supply of agricultural commodities inventory must also be established, which necessitates direct relationships with grain producers. In addition, geographic and product balance, which is difficult and expensive to achieve, is essential to success in the agribusiness industry. Finally, the complexities associated with risk management require significant intellectual capital which is generally challenging and time consuming to create in, or transfer to, new organizations. These factors favor companies with multiple sources of supply, a diversified customer base and value-added activities over companies with a regional or pure trading focus. Increasingly, many smaller companies are either being acquired by larger competitors or exiting the business.
FERTILIZER
GENERAL
Nitrogen, phosphate and potassium, collectively referred to as NPK, are the main ingredients used in the composition of most agricultural fertilizers. Fertilizer producers create different mixes of these ingredients based on the soil conditions and crops on which the fertilizers will be used. There are two components to the NPK fertilizer industry: nutrients and retail. The nutrients component includes the mining, extraction or production of basic raw materials such as phosphate rock, natural gas and potash, and the production of intermediate products, such as low and high concentration phosphates, phosphoric acid, urea, ammonia and potassium nitrate, which are derived from these raw materials. This area also includes the sale of some of the by-products of the raw material production process that are used in animal feed rather than plant food formulations. The retail component refers to the production and sale of agricultural fertilizers to farmers and other users. The fertilizer industry is very capital intensive and requires knowledge of and experience with technological production processes, as well as the ability to access raw materials in a cost effective manner. Fertilizer producers also need to develop extensive logistics systems to effectively sell and market retail fertilizer products.
THE BRAZILIAN FERTILIZER INDUSTRY
While Brazil's base of developed arable land continues to increase, its crop yields, which are improving as a result of increased use of fertilizers, remain relatively low. Brazil is the fastest growing major fertilizer consumption market in the world, with a compound annual growth rate of over 7% between 1991 and 2000 according to the Associacao Nacional para Difusao de Adubos (ANDA), a Brazilian fertilizer industry association. Despite these significant increases, Brazil's fertilizer consumption is still significantly lower per hectare than in developed countries, such as the United States, which are characterized by low growth in fertilizer consumption. In 2000, Brazil was the world's fourth largest retail fertilizer market in terms of sales volume. According to the Brazilian Ministry of Agriculture, the use of fertilizers in Brazil is expected to continue to increase, primarily due to the continued conversion of its large reserve of arable land to agricultural production and efforts to increase low crop yields in areas currently under cultivation.
The following chart illustrates crop yields per hectare for selected agricultural commodities in Brazil and the United States:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Kilograms per hectare
BRAZIL USA
Rice 2,745 6,852
Corn 2,634 7,997
Soybeans 2,293 2,527
Wheat 1,757 2,440
Cotton 453 794
|
Source: International Fertilizer Association - May 1998
The requirements for fertilizer in Brazil also differ from other major fertilizer markets in the type and preparation of raw materials that are used. For example, the percentage of nitrogen used in NPK fertilizer mixes in Brazil is much lower than in the United States. This is primarily due to differences in soil quality and lower production of crops such as corn, which require fertilizers containing more nitrogen.
The major phosphate-based raw material consumed by Brazilian farmers is single super phosphate, a product manufactured using phosphate rock and sulfuric acid. Brazilian agriculture uses more single super phosphate than other phosphate-based fertilizer raw materials such as monoammonium phosphate and diammonium phosphate, which are more commonly used in other major fertilizer markets. The preference for single super phosphate is due to the need for sulfur and calcium in Brazil's soil.
Logistics management is important in the Brazilian fertilizer industry as the Brazilian transportation infrastructure is not as efficient as in developed countries. Transporting some fertilizer raw materials such as phosphate rock can be expensive due to their volume and weight. Since the majority of Brazilian fertilizer raw materials are imported, transporting these raw materials inland to the growing areas also adds significant transportation costs to this business. Significant cost advantages can be achieved by having access to local raw materials, as well as the ability to back-haul or transport goods such as agricultural commodities from inland locations to export-import points.
In recent years, the Brazilian fertilizer industry has experienced consolidation, as a number of companies have merged and some small, regional retail companies have exited the market. Currently, four companies account for more than half of the total production of fertilizers in Brazil.
FOOD PRODUCTS
GENERAL
The food products industry is extremely broad and encompasses businesses involved in the production and sale of finished and semi-finished food products, including food products sold to retail stores and the foodservice industry, as well as food ingredients sold to food processors.
The following factors affect the markets in which our food products division competes:
CHANGING CONSUMER CONSUMPTION PATTERNS
As with agricultural commodities, the demand for food products is affected by changes in population, income levels and other demographic factors. Patterns of consumption change as buying decisions become convenience oriented, leading to consumption of more prepared foods and foods eaten away from home, both of which are prepared and sold by the retail and foodservice sectors. In the United States, more than 50% of food expenditures are made for food prepared away from home. In Brazil, the percentage is half that of the United States but is growing more rapidly.
CUSTOMER CONSOLIDATION AND MIGRATION
The supermarket sector in the United States and Latin America is experiencing consolidation. As supermarket operators have grown, they have reduced the number of suppliers with which they do business and have been able to exert greater purchasing power over branded food companies. The consolidation of supermarkets and the emergence of club stores have also stimulated the private label market, providing supermarkets with the ability to differentiate themselves from their competitors and capture higher margins. In addition, the U.S. in-store bakery market has begun to mature. In order to improve profitability and quality and to reduce labor costs, many in-store bakeries have migrated from using baking mixes to frozen dough, partially-baked and thaw-and-serve products, which allows suppliers such as ourselves to capture additional margins from these higher value-added products.
IMPORTANCE OF DISTRIBUTION CHANNELS
The ability to sell multiple products through the same distribution channels is an important advantage in the food products industry. In the United States, there is a well established domestic food distribution system, and although it is not essential for food companies to have their own distribution capabilities, relationships with distributors are very important. In Brazil, food distribution channels are still developing and represent a growth area in the food products industry. Therefore, food companies that have distribution capability in Brazil possess a significant competitive advantage.
GROWING DEMAND FOR FOODS OFFERING HEALTH BENEFITS
Soy proteins are an important substitute for animal protein and have functional characteristics with wide applications in the processed meat and bakery industries. In addition, soy-based food ingredients are at the forefront of the growing nutraceutical foods, or foods intended to produce specific health benefits, market which is fueled by consumer concern over diet, an aging population and increasing health care costs. In 1999, the FDA publicly recognized the role isolated soy proteins can play in lowering the incidence of coronary heart disease. The soy ingredients market offers favorable profit margins. We estimate that global sales of soy protein products will reach $1.7 billion in 2001, and will grow at a rate in excess of 10% per year for the next five years.
BUSINESS
OVERVIEW
We are an integrated, global agribusiness and food company operating in the farm-to-consumer food chain which ranges from raw materials such as grains and fertilizers to retail food products such as flour and margarine. We have primary operations in North and South America and worldwide distribution capabilities. We conduct our operations in three divisions: agribusiness, fertilizer and food products. In 2000 and the first three months of 2001, we had total net sales of $9,667 million and $2,472 million, income from operations of $296 million and $74 million and EBITDA of $445 million and $112 million. We believe we are:
- the largest processor of soybeans in the Americas and among the world's leading exporters of soybean products based on volumes;
- the largest producer and supplier of fertilizers to farmers in Latin America based on volumes;
- the market leader in edible oils and shortenings in Brazil and in premium edible oils in the United States based on sales;
- among the world's largest corn dry millers and the largest wheat miller in Latin America based on volumes; and
- one of three major manufacturers of isolated soybean protein worldwide based on sales and volumes.
Our agribusiness division consists of three business lines: grain origination, oilseed processing and international marketing. Our primary grain origination and oilseed processing assets are located in the United States, Brazil and Argentina. We have international marketing offices in 17 countries. In 2000 and the first three months of 2001, net sales in our agribusiness division were $6,327 million and $1,765 million, respectively, representing 65% and 71% of our total net sales, respectively.
Our fertilizer division is involved in every stage of the fertilizer business, from mining of raw materials to sales of mixed fertilizer formulas. Our fertilizer activities are primarily located in Brazil. In 2000 and the first three months of 2001, net sales in our fertilizer division were $1,466 million and $283 million, respectively, representing 15% and 11% of our total net sales, respectively.
Our food products division consists of four business lines: edible oil products, wheat milling and bakery products, soy ingredients and corn products. These businesses produce and sell food products such as shortenings, edible oils, margarine, mayonnaise, milled products, bakery mixes and baked goods and food ingredients to food processors, foodservice companies and retail outlets. Our food products division, primarily located in the United States and in Brazil, benefits from a stable source of soybeans, crude vegetable oil, wheat and corn provided by our agribusiness operations. In 2000 and the first three months of 2001, net sales in our food products division were $1,874 million and $424 million, respectively, representing 20% and 18% of our total net sales, respectively.
We were founded in 1818 in Amsterdam, The Netherlands as a grain trading company. During the second half of the 1800's, we expanded our grain operations in Europe and also entered the South American agricultural commodities market. In 1903, we entered the South American food products industry and in 1938, we entered the fertilizer industry in Brazil. We started our United States operations in 1923 and in 1999 moved our corporate headquarters to their current location in the United States.
In the early 1990's, our management team developed and began to carry out a strategy of selling non-core assets and focusing our efforts on growth in agribusiness. As part of this strategy, we acquired two major Latin American soybean processing companies to become the leading soybean processor in the Americas. We also acquired eight Brazilian fertilizer companies between 1996 and 2000 to become the largest and only vertically integrated fertilizer company in Brazil. In 1999, we developed an international
marketing operation which has resulted in significant growth in our agribusiness operations. This focused strategy and its implementation have allowed us to grow significantly into the leadership position we presently occupy in each of our business divisions. See "--Recent Acquisitions and Divestitures."
OUR COMPETITIVE STRENGTHS
We believe our business benefits from the following competitive strengths:
- SIGNIFICANT SYNERGIES WITHIN AND AMONG OUR BUSINESSES. By operating in complementary businesses throughout the food supply chain, we enjoy significant operating advantages and logistical efficiencies. For example:
- In our agribusiness division, we use our geographically balanced supply relationships, storage and processing facilities and logistics infrastructure to provide our domestic and international marketing operations with a diverse set of grains and oilseeds such as soybeans, wheat, corn and sorghum, for sale to our customers.
- In our fertilizer division, we supply fertilizers to Brazilian farmers as part of our crop financing initiatives. The farmers repay us with crops, providing us with a significant supply of soybeans and other grains for our agribusiness and food products divisions. This reinforces our relationships with farmers and preserves cash for other uses. Our fertilizer operations also benefit from our internal sources of raw materials.
- In our food products division, we are able to capitalize on synergies with our agribusiness division by supplying a significant portion of our raw material requirements from our agribusiness operations, such as crude vegetable oils for our edible oil products and wheat and corn for our wheat milling and bakery products and corn products businesses, thereby ensuring an adequate supply of raw materials for these businesses.
- We also enjoy significant operating efficiencies as a result of our ability to share transportation and logistics infrastructure among our businesses.
- GEOGRAPHIC BALANCE AND POSITIONING. We have substantial agricultural commodities origination facilities in both the northern and southern hemispheres and are the only agricultural commodities company with a near equal balance between them. Our international marketing operations thus benefit from having a constant supply of grains and oilseeds throughout the year to satisfy customer orders. The geographic balance of our operations also mitigates the risks of exposure to any one particular region. For example, should one of the areas in which we operate experience drought or a crop shortfall, our operations in other regions could continue to provide a steady supply of products while benefiting from any resulting price increases. Additionally, we have access to products from both GMO and GMO-free regions, thereby allowing us to meet individual customers' GMO order specifications.
- DOLLAR-DENOMINATED OR DOLLAR-LINKED GLOBAL BUSINESS. Our net sales in our agribusiness and U.S.-based food products divisions are either denominated in, or linked to, the U.S. dollar. Furthermore, the Brazilian fertilizer industry, due to its relationship to the agriculture sector which derives its profitability from dollar-based international commodity prices, has historically been able to adjust its sales prices in response to the effects of exchange rate fluctuations on imported raw material costs. Consequently, the impact of a currency devaluation on profitability in our agribusiness and fertilizer operations is limited. In addition, currency fluctuations can also have a positive effect on our results of operations through margin expansion resulting from reductions in local currency- denominated costs and a stable U.S. dollar-based revenue stream. In addition, we are insulated from reduced demand for our agricultural commodity products in the United States and Brazil caused by economic downturns in those countries because of our ability to rapidly shift the balance of our sales between domestic and export markets.
- SCALE, QUALITY AND STRATEGIC LOCATION OF OUR FACILITIES. We operate large, efficient and well maintained agricultural commodities storage and oilseed processing facilities, generating economies of scale and reducing overall costs. We have also selectively located many of our facilities in close proximity to our suppliers, domestic customers, edible oil refineries and key export points to reduce transportation costs and delivery times for our products. For example, our United States storage facilities are primarily located along the Mississippi River, facilitating efficient transportation of soybeans and grains from their production areas to the principal export port of New Orleans. In Brazil, we have storage facilities in all 14 soybean producing states and the number and location of these facilities gives us the storage capacity necessary to take advantage of the wide seasonal fluctuations in inland transportation costs. In Argentina, our oilseed processing plants are located in or near export ports and close to major soybean growing areas.
- WELL-POSITIONED IN HIGHER GROWTH AREAS OF OUR MARKETS. We believe that we are well-positioned in the higher growth areas of the markets in which we operate. For example, in our agribusiness division, we have a leading position in originating and processing soybeans in our principal markets and exporting soybean products, the consumption of which is rising faster than other oilseeds. Our leadership position in the Brazilian soybean origination and processing markets will allow us to benefit from anticipated growth in Brazilian agricultural output, while our significant share of agricultural commodities storage capacity along the southern Mississippi River in the United States positions us to benefit from expected continued future growth in United States agricultural commodity exports. In our fertilizer division, our market leadership position in the Brazilian fertilizer industry will enable us to capitalize on anticipated accelerated growth in the Brazilian fertilizer market. In our food products division, we are well-positioned in our soy ingredients business due to our significant production of isolated soybean proteins, the demand for which is expected to grow in excess of 10% per year for the next five years. In our edible oil products business, our leading retail market position in Brazil and foodservice market position in the United States will allow us to benefit from increases in per capita oil consumption in Brazil and the growth of private label products and food products prepared and eaten away from home in Brazil and the United States. Our frozen bakery expertise allows us to benefit from the migration of retail and foodservice customers from fresh baking to higher margin frozen baked goods.
- BROAD RANGE OF PRODUCTS AND SERVICES PROVIDED TO CUSTOMERS. We offer multiple services and support to our customers in each of our divisions, enabling us to expand our revenue base and customer relationships. Our agribusiness division provides storage, freight services, trade finance, risk management and the ability to procure fertilizer products for customers. Our fertilizer division provides technical assistance to farmers by assisting in the application of fertilizers. In our food products division, we work with customers on product application and new product development.
OUR BUSINESS STRATEGY
Our objective is to continue growing our business and increasing our profitability by focusing on the following key strategies:
- EXPAND OUR CORE BUSINESSES THROUGH INTERNAL GROWTH. We intend to continue to grow by selectively expanding and extending our operations in each of our divisions. For example, we plan to continue to expand our global distribution capabilities in our agribusiness division through our growing network of international marketing offices. In 2000 and 2001, we established ten international marketing offices, giving us a total of 19 offices in 17 countries. As a result of this expansion, we have become a significant exporter of protein meal to Europe and edible oils to India and a significant exporter of soybeans to China. We also have announced our intention to capitalize on our leading market position in the fertilizer industry in Brazil to expand our fertilizer operations into Argentina. In addition, we entered the United States frozen bakery market in 1998 and since
then have expanded our frozen bakery capacity and output to meet increased customer demand for frozen products in their efforts to reduce costs.
- PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We intend to continue to pursue selective strategic acquisitions and alliances. We have a long record of expansion through acquisition. Most recently, in 2000, we acquired a controlling interest in Manah which solidified our leading market share in the Brazilian fertilizer industry and improved our access to raw materials. In 1997, we acquired Ceval Alimentos S.A., a predecessor of Bunge Alimentos, and, as a result, we became the leading soybean processor in the Americas. In addition, we have an alliance with Aceitera General Deheza S.A., the fourth largest soybean processor in Argentina, which gives us the leading position in the Argentine oilseed processing market and joint ownership of strategically-located ports and soybean processing facilities. The key characteristics of our acquisition candidates and business partners will include companies that can:
- add additional or complementary product or distribution capabilities;
- broaden our geographic presence, enhance our scale or increase penetration of existing markets; and
- complement our current businesses and thereby become part of our integrated business.
- INCREASE OUR PRODUCTION OF SOYBEAN-BASED FUNCTIONAL INGREDIENTS AND NUTRACEUTICALS. We are one of only three major manufacturers of isolated soy proteins in the world and are an established lecithin producer. We intend to apply our significant capital resources and expertise to expand our manufacturing capacity of soy ingredients and pursue acquisitions and alliances in order to achieve greater market presence in this high margin, fast-growing business. We also plan to expand our product capabilities in this business to include a new line of soybean-based micro-ingredients, such as sterols, tocopherols and isoflavones, to meet growing market demand for nutraceutical food products containing these ingredients.
- EXPAND INTO HIGHER GROWTH ASIAN MARKETS. We intend to increase our existing presence in China and India, countries that are expected to generate much of the world's demand for grains and oilseed products. After China, India is the world's largest import market for edible oil. We currently operate in India through an oilseed processing joint venture which we plan to expand, with a particular focus on edible oils. We are also currently exploring grain origination and other oilseed processing opportunities in India. We participate in the Asian palm oil market through merchandising operations in Indonesia, Singapore and Kuala Lumpur.
- IMPROVE OUR ASSET EFFICIENCY. We intend to continue to increase our capacity utilization by improving our operating efficiency and shifting production to more efficient facilities. We closed four oilseed processing facilities in the United States and Brazil in 2000. In addition, we plan to further develop our logistics and transportation capabilities in order to reduce costs, as evidenced by our current Destrehan, Louisiana export elevator upgrade. We have also undertaken several Internet-based initiatives designed to improve our levels of customer contact and service while reducing costs.
- OPTIMIZE OUR CORPORATE CAPITAL STRUCTURE. We are restructuring our outstanding debt in an effort to create a more efficient capital structure. We began this restructuring in 2000 by raising $1 billion in the international capital markets, which was used primarily to reduce high-cost third party borrowings of our Brazilian subsidiaries. Using these funds and the proceeds from this offering, we intend to become more efficient in our use of working capital, lower our interest costs, reduce our foreign exchange transaction risk, increase our access to international capital markets and pursue other means of lowering our cost of capital, such as reducing borrowings by our emerging markets subsidiaries. We believe that a low cost of capital will facilitate additional internal and external growth in a cost-effective manner.
AGRIBUSINESS
Our agribusiness division consists of three business lines: grain origination, oilseed processing and international marketing. In 2000, we originated, processed and marketed 46.3 million metric tons of grains and oilseeds.
GRAIN ORIGINATION
OVERVIEW. Grain origination involves purchasing, storing and merchandising oilseeds and grains. The principal agricultural commodities that we handle in our grain origination operations are soybeans, wheat, corn and sorghum. We purchase oilseeds and grains at market prices. We sell oilseeds and grains to both domestic and international oilseed processors, feed manufacturers, millers, livestock producers and intermediaries, as well as to our own oilseed processing operations and food products division.
In 2000, we used 53% of the oilseeds and grains that we originated in our own oilseed processing operations, and the balance was either exported through our international marketing network or sold domestically. Of the total amount of agricultural commodities we originated in 2000, 68% was soybeans, 24% was corn or sorghum, 7% was wheat and the remainder consisted of barley, oats and rapeseed. In 2000, we originated approximately 45% of our soybeans in the United States, 43% in Brazil and 12% in Argentina. We are the leading soybean originator in Brazil, particularly in the new growing areas.
We obtain all of our oilseeds and grains from third parties, either directly through individual relationships and purchase contracts with farmers, or indirectly through intermediaries. We do not engage in any farming operations. We purchase the large majority of our oilseeds and grains at elevators that we operate. Elevators are facilities that serve as consolidation and storage points for harvested oilseeds and grains. We also purchase oilseeds and grains from intermediaries or other suppliers in those areas where we do not currently have origination facilities. Farmers generally sell their production to the closest elevator in order to minimize their transportation costs. While location and price are the key factors in origination, we strive to maintain the best possible relationships with those farmers from whom we buy grain by offering flexibility in our purchasing contracts, fast decision making and providing quick and reliable discharging service.
In addition, in Brazil, where there are fewer sources of crop financing than in the United States, we are directly involved in providing financing services to farmers. Since 1985, we have offered crop financing in Brazil without experiencing material write-offs. Our crop financing loans are typically secured by the farmer's crop and a mortgage on the farmer's land and other assets. The amount of each advance is limited to a predetermined fraction of the individual farmer's historical average output in order to contain our exposure to crop shortfalls. These loans carry market interest rates and are repaid in soybeans or other grains, the value of which is pegged to the U.S. dollar due to the international pricing of these agricultural commodities, thereby reducing any transfer or convertibility risk. As of March 31, 2001, our total secured advances to farmers were $187 million. We also supply fertilizers to farmers as part of our crop financing initiatives, a feature that affords us greater financial flexibility by allowing us to retain cash internally. In 2000, over 5% of our fertilizer net sales were made in conjunction with crop financing transactions.
FACILITIES. In the United States, we have 63 inland and export grain elevators. Our United States elevators are primarily located south of St. Louis, Missouri along the Mississippi River and its tributaries, an efficient location for export, where we have a significant share of that area's total elevator storage capacity. We also have storage facilities at our soybean and corn processing plants where we originate oilseeds and grains from farmers and other sellers directly for processing.
In Brazil, we have extensive coverage of the growing areas with storage facilities in all 14 soybean producing states. We operate more than 176 elevators in Brazil. We were one of the first companies to operate storage facilities in the newer growing regions of Brazil. In Argentina, we have four storage facilities, all located in the agricultural growing areas.
DISTRIBUTION. Once purchased, oilseeds and grains are either transported to one of our storage or processing facilities, or sold to other companies in either the export or domestic markets. In the United States, we use approximately 4,000 rail cars, 450 river barges and three chartered tugboats to move oilseeds and grains from our elevators along the Mississippi River and its tributaries to export terminals in New Orleans and to our processing facilities with river access. In Brazil, where there is limited rail infrastructure, we contract with independent trucking services, making us one of the largest consumers of logistics services in the country. In Argentina, we transport oilseeds and grains principally by truck and, to a lesser extent, by rail and barge, along the Parana River from the growing areas to export points in the provinces of Santa Fe and Buenos Aires.
Because of the importance of exports to our business, we operate a number of strategically located export facilities.
- We are involved in the operation of two export elevators in New Orleans, owning one and having access to another through an alliance with the United States subsidiary of Zen-Noh, the largest Japanese agricultural cooperative.
- We operate seven export facilities in Brazil which handle soybean, soybean meal and oil exports, as well as fertilizer raw material and wheat imports.
- In Argentina, we have a joint venture for operating two upriver ports in the province of Sante Fe, Terminal 6 for exporting oilseeds, grains, meal, and oil, and Guide for exporting edible oil. We also operate the port of Bahia Blanca in the province of Buenos Aires for exporting oilseeds and grains. The Terminal 6 and Bahia Blanca export facilities are among the largest in Argentina.
- In Quebec City, Canada, we operate the only grain handling facility with rail access and a deep-water berth on the St. Lawrence Seaway.
OILSEED PROCESSING
OVERVIEW. Oilseed processing involves crushing oilseeds to produce meal, hulls and crude oil. Soybeans are the world's most important oilcrop and the primary focus of our oilseed processing operations. We believe we were the largest soybean processor in the Americas and the third largest in the United States in 2000. We believe we are the largest soybean processor in Brazil and, through our alliance with Aceitera General Deheza S.A., the largest soybean processor in Argentina. Virtually all soybeans used in our oilseed processing operations are supplied by our own grain origination operations.
FACILITIES. In the United States, we operate seven oilseed processing facilities. Our facilities are strategically located in the primary poultry producing areas, the primary soybean growing areas and the primary river tributary for export. We built our Council Bluffs, Iowa plant in 1999 to take advantage of increased soybean production in Minnesota, North and South Dakota, Iowa and Nebraska, as well as convenient rail access, low-cost electrical power and a well-educated workforce. We believe the Council Bluffs plant is one of the largest and most modern oilseed processing facilities in the United States. Two of our U.S. oilseed processing facilities have adjacent or attached edible oil refineries, thereby eliminating the transportation expenses which we would otherwise incur in shipping crude oil to our edible oil refineries. The edible oils produced in our refineries are generally packaged and sold to customers as part of our food products division's edible oils product line.
We operate a total of nine oilseed processing facilities in Brazil. In Brazil, as in the grain origination industry, we initiated the move of the oilseed processing industry into the newer growing areas, securing advantageous locations for our facilities. Approximately 56% of our Brazilian oilseed processing assets are now located in the newer growing regions of Brazil.
In Brazil, we believe we have, on average, among the largest oilseed processing facilities in the industry. Several of our Brazilian oilseed processing facilities also have attached edible oil refineries.
In Argentina, we operate three oilseed processing facilities. These plants are located in or near export ports and close to major soybean growing areas. Our plant at Terminal 6 in the port of Rosario, Sante Fe is one of Argentina's largest and most modern. We also lease oilseed processing and storage capacity at an additional oilseed processing plant in Argentina from a third party. One of our plants has a small attached edible oil refinery that produces and sells bulk refined soybean, safflower and peanut oils.
DISTRIBUTION. The principal purchasers of our soybean meal and hulls include feed manufacturers and livestock, poultry and aquaculture producers that use these products as animal feed ingredients. In 2000, our sales of soybean meal were approximately $2,000 million. The principal purchasers of our soybean oil are edible oil processing companies, including our own food products division, which accounted for approximately 20% of our total output of crude vegetable oil in 2000. In the United States, we export approximately 30% of our soybean meal production and 20% of our soybean oil production and sell the remainder domestically. In Brazil, we export approximately 77% of our soybean meal production and 65% of our soybean oil production and sell the remainder domestically. In Brazil, we have export facilities located in the traditional southern export points, but are also able to ship from northeast export points, allowing us to take advantage of shorter distances to Europe. Our Argentine export facilities are strategically located at both that country's northern river export points and a southern coastal export point.
In both the United States and Brazil, some domestically produced soybean meal is used in the production of meat and poultry that is ultimately exported. As a result, our oilseed processing operations in those countries benefit from global demand for United States and Brazilian poultry and pork exports. In Argentina, where the domestic population base is proportionally small compared to the availability of agricultural resources, the agricultural commodities industry has traditionally been export oriented. Approximately 90% of our net sales in Argentina are made to foreign markets.
INTERNATIONAL MARKETING
Our international marketing operations link our grain origination and oilseed processing operations with our overseas customers while managing commodity, credit, freight and political risks. We also provide the trade finance and ocean transportation services required by our customers.
Historically, we sold significant amounts of agricultural commodities to dealers, many of whom were also our direct competitors. In recent years, privatization within the agricultural sector in many emerging market countries has increased the number of consumers who purchase their agricultural commodities directly in the international markets, creating a more diversified customer base that prefers to deal directly with suppliers to ensure consistent quality and that seeks a reliable, year-round supply and a variety of associated logistical and financial services. To capitalize on the opportunities created by privatization in many emerging markets and to capture additional margins and maximize the value of our origination and processing assets, we developed an international distribution and marketing business in 1999. Our international marketing operations have grown to 19 offices and 221 employees in 17 countries as of March 31, 2001.
We are currently focusing on expanding our international marketing initiatives in Europe and Asia, where we seek to differentiate our product quality and service capabilities by maintaining a local presence in order to understand and capitalize on local purchasing patterns. Europe is the world's largest soybean meal import market. Southern Europe and the Mediterranean are characterized by numerous small buyers with extensive service needs, while northern Europe is a more mature market dominated by large, price-sensitive cooperatives. Through our offices in Europe, we target these markets and seek to meet their specific needs. With offices in eastern Asia and India, we intend to increase our total market share in potential higher growth Asian markets. The number of dealers participating in the international marketing business has decreased since we began our trading and marketing operations.
In addition, to expand the scope of our distribution and marketing capabilities, we engage in the origination of palm oil and Indian soybean meal for shipment to Asia and Europe and lease warehouse
space at several destination points. In Italy and Portugal, we have entered into toll crush, or lease term, agreements to supply raw materials and merchandize the resulting meal and oil products.
COMPETITION
Our major competitors in the grain origination business include ADM, Cargill, Cenex Harvest States Cooperatives, ConAgra, Consolidated Grain and Barge Company, other agricultural cooperatives and trading companies such as Louis Dreyfus Group. Our major competitors in the oilseed processing business include ADM, Cargill and the Central Soya Company, Inc., a subsidiary of Cereol S.A., and regional participants such as Ag Processing Inc. in the United States and Louis Dreyfus in Argentina and Brazil. Our major competitors in the international marketing area include ADM, Cargill, Louis Dreyfus and Tradigrain Inc.
FERTILIZER
OVERVIEW
We are currently the only integrated fertilizer producer in Brazil, participating in all stages of the business, from mining of raw materials to selling of mixed fertilizers, with an annual output of approximately 10.2 million metric tons of fertilizer products.
Since 1996, we have made eight acquisitions in the Brazilian fertilizer industry to expand our product lines, improve our access to raw materials and broaden our market share. The most significant of these acquisitions was our acquisition of Manah in April 2000. See "--Recent Acquisitions and Divestitures." We currently account for over 30% of the NPK retail market in Brazil in terms of tonnage.
OUR FERTILIZER PRODUCTS AND SERVICES
Our fertilizer division is comprised of nutrients and retail operations. Our nutrients operations include the mining and processing of phosphate ore and the production and sale of intermediate products to fertilizer mixers and cooperatives. The primary products we produce in our nutrients operations are single super phosphate, dicalcium phosphate and phosphoric acid. We are the leading producer of phosphate-based animal feed ingredients in South America and the leading manufacturer of dicalcium phosphate in Brazil. Our sales of dicalcium phosphate were approximately $212 million in 2000. Dicalcium phosphate is one of two major sources of calcium used in animal feed for livestock production. The other major source of calcium used in animal feed is meat and bone meal, the use of which has recently been banned in the European Union due to its linkage to mad cow disease.
Our retail operations consist of producing, distributing and selling mixed NPK formulas, mixed nutrients and liquid fertilizer products directly to retailers, processing and trading companies and farmers. We market our fertilizers under the SERRANA, MANAH, OURO VERDE and IAP brands. We also provide fertilizer application services to farmers in Brazil using a technique called precision agriculture, a system currently used in developed countries such as the United States. Precision agriculture involves using sophisticated software, global positioning systems and automated equipment to tailor, map and apply fertilizer to farmland. This service is economically attractive for the farmer since it reduces fixed equipment and labor costs.
Over 5% of our total fertilizer sales in 2000 were made in conjunction with Brazilian crop financing transactions. Our agribusiness division uses the fertilizers produced in our fertilizer operations to make crop financing loans. See "--Agribusiness--Grain Origination--Overview."
MINES AND FACILITIES
We operate five phosphate mines through our subsidiaries in Brazil. We also operate 15 processing plants in this division. Our mines and processing plants produced sufficient phosphate rock to supply
approximately 80% of our total phosphate requirements in 2000. Our facilities are strategically located in the key fertilizer consumption regions of Brazil, reducing transportation costs to our end user customers. Our mines are operated under concessions from the Brazilian government. The following table sets forth information about our mining properties.
ANNUAL PRODUCTION NUMBER OF
FOR THE YEARS
YEAR ENDED UNTIL RESERVE
NAME AND LOCATION PRODUCT MINED DECEMBER 31, 2000 DEPLETION
----------------- ------------- ----------------- -------------
(MILLIONS OF METRIC TONS)
Araxa (Brazil)................................... phosphate .8 21(a)
Cajati (Brazil).................................. phosphate .6 22(a)
Catalao (Brazil)................................. phosphate 5.2 38
Tapira (Brazil).................................. phosphate 12.5 60
Salitre (Brazil)................................. phosphate (b) (b)
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(a) The Araxa and Cajati mines operate under concession contracts which expire in 2022 and 2023, respectively, but may be renewed at our option for consecutive ten-year periods thereafter through the useful life of the mines. The number of years until reserve depletion represents the number of years until the initial expiration of the concession contracts.
(b) Production at the Salitre mine is scheduled to begin in 2002, at which time annual production is expected to be 4.8 million metric tons per year. This would result in projected depletion of the reserves in 97 years.
LOGISTICS AND DISTRIBUTION
The lack of an efficient transportation infrastructure, the expense of transporting raw materials and the fact that the majority of fertilizer raw materials are imported to Brazil make logistics management essential to success in the Brazilian fertilizer industry. Our phosphate mining operations in Brazil allow us to reduce our logistics costs by reducing our use of imported raw materials and associated transportation expenses. In addition, our agribusiness operations provide us the opportunity to back-haul agricultural commodities from inland locations once imported raw materials have been delivered to us, thereby reducing our transportation expenses and improving our margins. Our retail fertilizer operations also benefit from our established relationships with farmers. We supply over 60,000 customers in our retail fertilizer operations.
RAW MATERIALS
In 2000, we purchased a total of 4.2 million metric tons, or $530 million, of our basic raw materials, including phosphate, sulfuric acid and nitrogen, to meet the demands of our fertilizer business. Of this amount, $410 million, or approximately 77%, was imported.
Our phosphate rock needs are mostly satisfied by the production from our mines. We import the balance of our demand for phosphate from Morocco. Our sulfuric acid requirements are partially met by our internal production at two acidulation plants. In December 2001, we plan to begin operating a third acidulation plant, which is expected to fully satisfy our internal sulfuric acid needs. Fosfertil supplies approximately 27% of our internal demand for nitrogen, and we purchase the remainder from third party suppliers. Our internal need for potash is fully satisfied from third party suppliers.
The prices of phosphate rock, sulfuric acid, nitrogen and potash are determined by reference to international prices as a result of supply and demand factors. Each of these raw materials is readily available in the international marketplace from multiple sources.
COMPETITION
Our main competitor in the Brazilian nutrients market is Copebras. Our largest retail fertilizer competitors include Cargill (through its Solorrico and Fertiza brands) and Heringer.
FOOD PRODUCTS
OVERVIEW
Our food products division consists of four business lines: edible oil products, wheat milling and bakery products, soy ingredients and corn products. These businesses produce and sell food products and food ingredients. In the year 2000 and the first three months of 2001, we had net sales of $1,113 million and $248 million, respectively, in our food products division in Brazil and $761 million and $176 million, respectively, in the United States.
We selectively participate in food products markets where we can realize synergies with our agribusiness operations, compete effectively and participate in higher growth and higher margin markets. In addition, we believe the raw material procurement activities and risk management strategies of our food products division benefit from being part of an integrated, global agribusiness enterprise.
Our food products are sold either under our own brand names, private labels or manufacturer brand names. These products are sold to three customer types, or market channels: food processors, foodservice companies and retail outlets. We have a large customer base in our food products division, none of which represents more than 5% of our total net sales.
Food processors manufacture food and beverage products such as snack foods, cereal, beer, candy, breads, cake mixes, meat products and pasta. Foodservice businesses include restaurants, quick-serve restaurants, bakeries, institutional dining facilities and catering companies that serve or distribute food for consumption away from home. Retail outlets include supermarkets and club and grocery stores that sell products directly to consumers.
We have organized our sales force along market channel lines in order to sell multiple products to the same customers. Operating with a market channel focus also enables us to share marketing and operational knowledge across our international operations. For example, as the food processor and food service industries in Brazil develop, we are able to utilize our experience in the United States food products industry to better position ourselves in the Brazilian market. In the United States, we distribute our products both through our own sales force and through relationships with national foodservice distribution companies. In Brazil, we currently distribute our own products to approximately 70,000 customers. We are considering expanding our extensive distribution activities in Brazil to distribute food products produced by other manufacturers. Due to our logistical expertise and extensive transportation network in Brazil, we believe we are ideally positioned to offer much needed distribution services in that country to third parties.
The principal raw materials that we use in our food products division are soybeans, wheat, corn and various oils, particularly soybean oil. Our food products division obtains a substantial portion of its raw materials from our agribusiness division. As these raw materials are all agricultural commodities or commodity products, we expect supply to be adequate for our operational needs.
EDIBLE OIL PRODUCTS
PRODUCTS. Our edible oil products include shortenings and oils, margarine, mayonnaise and other products derived from the vegetable oil refining process. We primarily use soybean oil that we produce in our oilseed processing operations but also use smaller amounts of canola, corn, cottonseed, palm, peanut and other oils, as well as lard and tallow to make specialty shortenings and oils. We are particularly focused
on the premium sector of the edible oil market as it is characterized by higher margins and more custom-formulated products.
DISTRIBUTION AND CUSTOMERS. Our U.S. food processor customers include baked goods companies such as The Pillsbury Company, McKee Foods Corporation and The Earthgrains Company. Our Brazilian food processor customers include Nestle, Groupe Danone and Nabisco. Premium edible oil products comprise the majority of our sales to the foodservice sector and many of our products are custom formulations developed to meet the needs of specific customers. In Brazil, we are a major supplier of frying and baking shortening to McDonald's. In the United States, our foodservice customers include Tricon Global Restaurants Inc.'s Taco Bell and KFC restaurant chains, Ruby Tuesday's, Inc., Outback Steakhouse Inc., Sam's Club stores (a division of Wal-Mart Stores, Inc.) and Walt Disney Company theme parks.
We sell our retail edible oil products in Brazil under a number of our own brands. Our retail sales in the United States are made to private label retail outlets and include bottled oils and packaged shortenings. We have the top retail bottled oil brand in Brazil, which is SOYA, and the leading market share in Brazilian retail bottled oil sales. We have the top foodservice shortening brand in Brazil, which is CUKIN. We have the top foodservice brand family of edible oil products in the United States, which is ELITE, and have been named the top edible oil supplier to the U.S. foodservice industry by ID, a leading foodservice industry trade periodical.
COMPETITION. In 2000, our principal competitors in the edible oil products business in Brazil were ADM, Cargill, Sadia S.A. and Unilever. Our main competitor in the Brazilian margarine market is Unilever. Our major competitors in shortenings in Brazil include Agropalma S.A., Cargill and Maeda S.A. In the United States, we compete in the premium vegetable oil market with ACH Food Companies, Inc. and Ventura Foods, LLC and with ADM and Cargill in other sectors of the vegetable oil market.
SOY INGREDIENTS
PRODUCTS. Our soy ingredients business consists of the production of soy functional ingredients and nutraceuticals. Soy functional ingredients are food ingredients derived from soybeans which perform specific functions in the food manufacturing process. Nutraceuticals are food ingredients that are intended to produce specific health benefits. Our primary products in this business, lecithins and isolated soy protein, can be used both as functional ingredients or nutraceuticals. In addition to these products, our soy ingredients products include other soy proteins such as soy concentrate, textured vegetable protein and defatted soy flours used in bakery products and fermentation and dietary fiber used in breads. Soy protein products are used widely in the processed meat and baking industries for their binding, emulsification and flavor-enhancing functional capabilities. Soy proteins are also an important and cost-effective supplement or replacement for animal protein and are used in baked goods, nutritional beverages and medicinal applications. We are one of three major producers of isolated soy protein in the world. Lecithin is used as an emulsifier in chocolate, margarine, cookies and beverages, as well as in other commercial products such as cosmetics and paint.
We produce soy protein products in Brazil and lecithin in Brazil and Argentina. We produce soybean oil distillate at our refineries in Argentina, Brazil and the United States, which is used to produce vitamin E and sterols. We are planning to add a new line of soybean-based micro-ingredients that will include isoflavones, sterols, and tocopherols to be used in the production of nutraceutical foods.
DISTRIBUTION AND CUSTOMERS. Virtually all of our soy ingredients products are sold to the global food processing industry. We export approximately 54% of our soy ingredients products, principally to Europe and Japan. We have over 2,000 customers worldwide, including Ajinomoto and Nestle.
COMPETITION. In soy proteins, we compete with ADM, Dupont and Central Soya Company, Inc. In lecithin, we compete with Central Soya, ADM and SKW Biosystems, Inc.
WHEAT MILLING AND BAKERY PRODUCTS
PRODUCTS. Our wheat milling and bakery products include flours, bakery and other mixes and frozen baked and unbaked products that are sold in the United States, Brazil and Mexico. We also produce dry pasta in Brazil. We are the leading wheat miller in Brazil. In Mexico, we have a minority interest in the second largest flourmill in the country and a majority interest in an adjacent dry mix facility.
DISTRIBUTION AND CUSTOMERS. In Brazil, our wheat milling and bakery products include a variety of bakery flours and bakery mixes. Food processor customers of our wheat milling and bakery products in Brazil include Nestle, Groupe Danone and Nabisco. In the United States, our food processor customers include Entenmann's Inc. and Interstate Bakeries Corp. Our Brazilian foodservice customers include Carrefour, Pao de Acucar and Bompreco. In the United States, in addition to bakery mixes, we produce and sell frozen baked and unbaked products to foodservice customers. For example, we supply frozen dough products to Au Bon Pain stores, and are the largest supplier of thaw-and-serve cakes and muffins to Albertson's, Inc. We also sell our bakery mixes and frozen bakery products to Safeway, Inc., and Sam's Club stores. We also manufacture a diversified line of branded and private label fresh and frozen bakery products and dry pasta for retail sales in Brazil.
COMPETITION. The wheat milling industry in Brazil is highly competitive with many small regional producers. Most of our wheat milling and bakery products compete with similar products, and competition within markets is largely based on price, quality and product availability. Our major competitors in Brazil in the flour and bakery mixes product lines are J. Macedo Alimentos S.A., Pena Branca Alimentos, M. Dias Branco S.A. and Moinho Pacifico.
CORN PRODUCTS
PRODUCTS. Our corn products, which are dry milled, consist of corn grits and meal, flours and, in the United States, corn products such as corn meal, soya-fortified corn meal and corn-soy blend that we sell to the United States government for humanitarian relief programs. We also produce corn oil and corn feed products. In 2000, we had the leading market share of the U.S. corn dry milling industry based on sales. We believe that our mill in Danville, Illinois is the largest corn dry mill in the world. We also have corn milling operations in Canada and Mexico.
DISTRIBUTION AND CUSTOMERS. Our corn products are predominantly sold into the food processing sector. Our corn grits and meal are used primarily in the cereal, snack food and brewing industries. Our flours are sold to the baking industry and other food processors, as well as in retail markets. Our corn oil and feed products are sold to edible oil processors and animal feed markets. Our United States customers include Anheuser-Busch, Inc., Frito Lay, Inc., General Mills, Inc. and Kellogg Company. In Mexico, we are the sole supplier of corn flaking grits to Kellogg Company.
COMPETITION. Our corn products compete with virtually identical products and derivatives manufactured by other companies in the industry. The United States corn products market includes competitors such as ADM, Cargill, ConAgra and J.R. Short Milling Co. In addition, corn dry millers such as ourselves compete with corn wet millers on sales and marketing of certain products. Competition is largely based on price, quality and product availability.
RECENT ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
Over the past several years, we have made acquisitions within each of our business divisions, particularly fertilizer and agribusiness, to expand our businesses and product lines, increase our market share and enhance our access to raw materials. The following is a description of our principal recent acquisitions.
BUNGE FERTILIZANTES. In November 1997, we purchased 71% of the capital stock of Serrana, formerly IAP S.A., a Brazilian fertilizer company, for an aggregate purchase price of $44 million. We accounted for this acquisition under the purchase method. In 1998, we increased our ownership of Serrana from 71% to 91% and merged Serrana with another of our fertilizer subsidiaries in Brazil. This transaction was valued at $27 million, including $15 million paid in cash, and we accounted for it as a purchase of a minority interest.
In April 2000, we acquired a 21% interest in, representing 57% of the voting power of, Manah for $47 million in cash, net of cash acquired of $36 million. In August 2000, we merged Manah with Serrana in a public share exchange. The share exchange resulted in our acquiring the remaining 9.7% of Serrana that we did not already own. The fair value of the remaining shares of Serrana that we acquired in the share exchange was $53 million, and we accounted for this transaction as an acquisition of a minority interest. As a result of this transaction, we now control approximately 72% of the combined company, which we renamed Bunge Fertilizantes S.A.
As a result of the Manah acquisition, we also obtained a controlling interest in Fosfertil, a Brazilian phosphate mining company and producer of intermediate fertilizer products. Fosfertil operates three phosphate mines in Brazil and supplies a portion of the phosphate and nitrogen needs of our fertilizer operations. In the first quarter of 2001, we acquired an additional 3% interest in Fosfertil S.A. for $21 million, of which $3 million consisted of cash and the remainder consisted of a variable interest rate note payable in seven installments ending July 2002.
BUNGE ALIMENTOS. In November 1997, we purchased 56% of the capital stock of Ceval Alimentos S.A. through a simultaneous cash purchase and merger with one of our existing Brazilian agribusiness subsidiaries. Ceval Alimentos was a soybean processor in Latin America. It also produced vegetable oil, margarine and specialty oils. The aggregate purchase price of $466 million included a cash payment of $400 million and fair value of shares exchanged of $66 million. We accounted for this acquisition under the purchase method. In 1998, we acquired an additional 5% interest in Ceval Alimentos for $13 million.
In September 2000, we effected a merger between Ceval Alimentos and Santista Alimentos S.A., one of our Brazilian subsidiaries, in a public share exchange which resulted in our acquiring the remaining 13% of Santista that we did not already own. As part of this merger, the shareholders of Santista also had the right to put their interest in Santista to Ceval Alimentos at a predetermined value. The fair value of the shares we acquired, including the put option, was approximately $24 million. We accounted for this transaction as an acquisition of a minority interest. After the acquisition, we renamed this company Bunge Alimentos S.A.
OTHER ACQUISITIONS. In 1998, we also completed the following acquisitions:
- we acquired the remaining 44% interest that we did not already own of Bunge Ceval S.A., an Argentine soybean crushing and grain merchandising company, for approximately $39 million in cash;
- we acquired two frozen bakery product facilities in the United States for approximately $35 million; and
- we acquired a controlling interest in the Argentine port facility Terminal Bahia Blanca and made a number of small acquisitions in Brazil, including acquiring the remaining equity in a Brazilian pasta producer that we did not already own and controlling interests in two Brazilian fertilizer companies, for a total of $44 million.
DIVESTITURES
Over the past three years we have also disposed of non-core assets and businesses that we deemed not to be complementary to our business strategy. In March 2001, we divested our Brazilian consumer bread
products division, Plus Vita S.A., through a sale to a third party. The net assets of this division were valued at approximately $59 million as of December 31, 2000. In 1998, we divested our meat and poultry operations by transferring our approximately $52 million investment in this business to our sole shareholder.
RISK MANAGEMENT
Effective risk management is a fundamental aspect of our business. Correctly anticipating market developments to optimize timing of purchases, sales and hedging is essential for maximizing the return on our assets. We engage in commodity price hedging in our agribusiness and food products divisions in order to reduce the impact of volatility in the prices of the principal agricultural commodities we use in those divisions. We also engage in foreign currency and interest rate hedging. Our trading decisions take place in local markets but position limits are set and monitored at a centralized level. For foreign exchange risk, we require our positions to be hedged in accordance with our foreign exchange policies. A committee of the board of directors of Bunge International Limited, our sole shareholder prior to the offering, has in the past overseen our risk management practices. We have recently established a finance and risk management committee that will assume this role and supervise these practices on an ongoing basis. In addition, we regularly review our risk management policies, procedures and systems with outside consultants. For more information on our risk management activities, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Quantitative and Qualitative Disclosures about Market Risk."
RESEARCH AND DEVELOPMENT
Our research and development activities are focused on developing products and techniques that will drive growth or otherwise add value to our core business lines.
In our food products division, we have established two regional centers of excellence, one located in the United States and the other in Brazil, to develop and enhance technology and processes associated with food products and marketing. Our center in the United States focuses on edible oil products and our center in Brazil focuses on soy ingredients. In addition, we have a regional research and development bakery center in the United States.
Our total research and development expenses were $5 million in 2000, $4 million in 1999 and $6 million in 1998. As of December 31, 2000, our research and development organization consisted of approximately 60 employees worldwide.
E-BUSINESS INITIATIVES
In 2000, we completed a less than 1% investment in Rooster.com, an Internet agriculture portal focused on North America, and a 20% investment in Mega-Agro, an agriculture portal focused on Mercosur for approximately $3 million in the aggregate. We have also begun the installation of a common set of web development tools to be used in our internal operations and are undertaking various web-based projects to improve customer service and reduce costs.
TRADEMARKS AND INTELLECTUAL PROPERTY
We own trademarks on the majority of the brands we produce in our food products and fertilizer divisions. We typically obtain long-term licenses for the remainder. We recognize that consumer knowledge of and loyalty to our brand names and trademarks are vital to our long-term success. We have patents covering some of our products and manufacturing processes; however we do not consider any of these patents to be material to our business.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
We are subject to regulation under United States federal, state and local laws, as well as foreign laws in the jurisdictions in which we operate. These regulations govern various aspects of our business, including storage, crushing and distribution of our agricultural commodity products, food handling and storage, mining and port operations and environmental matters. To operate our facilities, we must obtain and maintain numerous permits, licenses and approvals from governmental agencies. In addition, our facilities are subject to periodic inspection by governmental agencies, including the USDA, FDA and EPA in the United States.
In Argentina, we operate the Bahia Blanca port facility pursuant to a 30-year concession granted by the Argentine Ministry of Economy and Public Works to us in 1994. The terms of the concession require us to make monthly payments to the Argentine government based on volumes shipped. We must also comply with specified operating and maintenance requirements.
In Brazil, we operate the mines that supply raw materials for our fertilizer business under concessions granted by the Brazilian Ministry of Mines and Energy. The concessions for the Araxa and Cajati mines expire in 2022 and 2023, respectively, but may be renewed at our option for consecutive ten-year periods thereafter through the useful life of the mines. The concessions for the other mines have no specified termination dates and are granted for the useful life of the mines.
We are subject to various environmental protection and occupational health and safety laws and regulations in the countries in which we operate. In addition, in our oilseed processing and fertilizer operations, we have handled and disposed of, and will continue to handle and dispose of, hexane and other materials and wastes classified as hazardous or toxic by one or more regulatory agencies. There are inherent risks in handling hazardous or toxic materials and wastes, and we incur costs to comply with health, safety and environmental regulations applicable to our operations.
In late 2000, we discovered that we had purchased genetically modified corn known as StarLink and voluntarily recalled the affected corn products manufactured at our Crete, Nebraska facility. U.S. regulators had approved StarLink for animal, but not human, consumption. We had sold the corn products containing StarLink to two customers, a brewer and a redistributor. We have instituted rigorous testing procedures at our corn dry milling facilities since the recall and have notified our customers that our corn may not be free of StarLink. We currently anticipate reimbursement from the manufacturer of StarLink for expenses and other losses related to this recall.
We are aware of possible carbon tetrachloride and hydrocarbon groundwater contamination at some of our former properties in Kansas. Based on currently available information, we do not believe that any costs or liabilities relating to such contamination will materially adversely affect our business, financial condition or results of operations.
Our total environmental compliance expenses were approximately $3 million in 2000, $3 million in 1999 and $1 million in 1998. Compliance with environmental laws and regulations did not materially affect our 2000 capital expenditures, earnings or competitive position, and, based on current laws and regulations, we do not expect that they will do so in 2001 or 2002.
EMPLOYEES
The following tables indicate the distribution of our employees by segment and geographic region at the dates indicated.
EMPLOYEES BY DIVISION
AS OF DECEMBER 31,
------------------------------
1998 1999 2000
-------- -------- --------
Agribusiness........................................... 4,343 4,434 4,243
Fertilizer............................................. 2,145 2,193 5,994
Food products.......................................... 8,918 8,233 7,861
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EMPLOYEES BY GEOGRAPHIC REGION
AS OF DECEMBER 31,
------------------------------
1998 1999 2000
-------- -------- --------
North America....................................... 3,246 3,563 3,275
South America....................................... 12,198 11,337 14,800
Europe.............................................. 14 19 47
Asia/Pacific........................................ 0 0 26
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Many of our employees in the United States, Brazil and Argentina are represented by labor unions. Our collective bargaining agreement covering approximately 200 employees at our Danville, Illinois corn mill and soybean processing plant expired in May 2001 and to date we have not reached a new agreement with the union. On May 16, 2001, the union employees initiated a strike which continues to be in effect at the plant. We are currently operating the corn mill at the plant with non-union workers and have suspended operations at the soybean processing plant. We believe that the strike affecting this facility should not have a material adverse effect on our business or financial results in 2001.
The collective bargaining agreement covering approximately 90 employees at our edible oil refining plant in Fort Worth, Texas will expire in July 2001. If we are unable to enter into a mutually acceptable new collective bargaining agreement with the union, our union employees may strike and we may be forced to suspend operations at this facility. In general, we consider our employee relations to be good.
PROPERTIES
The following tables provide information on our principal operating facilities.
FACILITIES BY DIVISION
AGGREGATE DAILY PRODUCTIVE AND
TYPE OF FACILITY AGGREGATE SIZE STORAGE CAPACITY
---------------- -------------- ------------------------------
(M(2)) (MILLIONS OF METRIC TONS)
Agribusiness.......................... 1,827,778 8,522,067
Fertilizer............................ 1,067,854 1,644,657
Food products......................... 1,484,005 1,048,655
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FACILITIES BY GEOGRAPHIC REGION
AGGREGATE DAILY PRODUCTIVE AND
TYPE OF FACILITY AGGREGATE SIZE STORAGE CAPACITY
---------------- -------------- ------------------------------
(M(2)) (MILLIONS OF METRIC TONS)
North America......................... 692,117 2,920,272
South America......................... 3,687,520 8,295,107
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We own the majority of our principal facilities and lease the others under long-term leases, the earliest of which expires in October 2001. In addition, we have access to port facilities in the United States and
Argentina through alliances and joint ventures. Our corporate headquarters in White Plains, New York occupy approximately 19,000 square feet of space under a lease that expires in February 2004. We also lease offices for our international marketing operations in Miami, Rotterdam, Rome, Istanbul, Saint Nazaire (France), Tilbury (United Kingdom), Hamburg, Barcelona, Lisbon, Geneva, Singapore, Shanghai, Jakarta and Medan (Indonesia), Bangkok, Kuala Lumpur, Hyderabad and Manila.
We believe that our facilities are adequate to address our current operational requirements.
LEGAL PROCEEDINGS
We are party to various legal proceedings in the ordinary course of our business. Although we cannot accurately predict the amount of any liability that may arise with respect to any of these matters, we do not expect any proceeding, if determined adversely to us, to have a material adverse effect on our consolidated financial position, results of operations or cash flows. Although we vigorously defend all claims, we make provision for potential liabilities when we deem them probable and reasonably estimable. These provisions are based on current information and legal advice and are adjusted from time to time according to developments.
We are subject to pending tax claims by Brazilian federal, state and local tax authorities, numbering approximately 700 individual cases, representing in the aggregate approximately $292 million and averaging approximately $400,000 per claim. The Brazilian tax claims relate to income tax claims, value added tax claims and sales tax claims. The determination of the manner in which various Brazilian federal, state and municipal taxes apply to our operations is subject to varying interpretations arising from the complex nature of Brazilian tax laws and changes in those laws. In addition, we have legal proceedings pending against Brazilian federal, state and local tax authorities to recover taxes previously paid by us. We have approximately 130 individual claims outstanding, representing in the aggregate approximately $141 million and averaging approximately $1 million per claim.
We are also party to a number of labor claims relating to our Brazilian operations. Court rulings under labor laws in Brazil have historically ruled in favor of the employee-plaintiff. We have reserved $81 million as of March 31, 2001 in respect of these claims. The labor claims primarily relate to dismissals, severance, health and safety, salary adjustments and supplementary retirement benefits.
We have not yet received approval from the Brazilian antitrust commission for our acquisition of Manah. In April 2001, an office of the Brazilian Ministry of Finance issued a non-binding advisory opinion recommending approval of the Manah acquisition subject to the divestiture of either one of our existing phosphate facilities or Manah's equity interest in Fosfertil. The opinion was based on a finding of potential anticompetitive effects in the central region of Brazil. The opinion also recommended that the Brazilian antitrust commission initiate an administrative action against Ultrafertil S.A., a subsidiary of Fosfertil, in a pending, unrelated antitrust matter. In addition to the opinion of the office of the Ministry of Finance, Brazilian law provides for the issuance of additional non-binding opinions from the Ministry of Justice and the Attorney General of the Brazilian antitrust commission before the antitrust commission issues its final decision. The timing of the approval process is uncertain and may not be forthcoming until 2003 or later.
The Brazilian securities commission is currently investigating Bunge Alimentos and its former and current management for possible non-compliance with Brazilian accounting rules and procedures that occurred prior to our acquisition of Bunge Alimentos in 1997. This investigation was initiated by minority shareholders of Bunge Alimentos after we, pursuant to applicable Brazilian accounting regulations, reduced the company's corporate capital after acquiring Bunge Alimentos.
In May 2001, the Brazilian securities commission notified Bunge Alimentos and Bunge Fertilizantes that it is reviewing their accounting for deferred income taxes, particularly the valuation allowances recorded against net operating losses, asserting that the valuation allowances should be higher. As accounting rules under generally accepted accounting principles in Brazil differ from generally accepted accounting principles in the United States with respect to accounting for deferred tax valuation allowances, we expect that the ultimate outcome of this review will not impact our consolidated financial statements.
MANAGEMENT
BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
Our bye-laws provide that our business is to be managed and conducted by our board of directors. Our board of directors will initially consist of eleven directors. Six of our directors will continue to serve as directors of our former parent company, Bunge International Limited, after the completion of this offering. The Chairman of our board, Alberto Weisser, as well as Messrs. Bachrach, Boilini, Bulkin and Schmitt-Rhaden, will cease to be directors of Bunge International Limited following the completion of this offering. Our bye-laws provide that the lesser of one-third or two of our directors may be employed by us or by any entity in our group.
Our board is divided into three classes that are, as nearly as possible, of equal size. Each class of directors is elected for a three-year term of office, and the terms are staggered so that the term of only one class of directors expires at each annual general meeting. Messrs. Born, Caraballo, de La Tour d'Auvergne Lauraguais and Engels are our Class I directors, and their term expires in May 2004. Messrs. Coppinger, Braun Saint and Weisser are our Class II directors and their term expires in May 2003. Messrs. Bachrach, Boilini, Bulkin and Schmitt-Rhaden are our Class III directors and their term expires in May 2002. There is no requirement in our bye-laws or Bermuda law that our directors must retire at a certain age.
The following table sets forth information for each of our directors, executive officers and other key employees. Unless otherwise stated, the address for our directors, executive officers and key employees is c/o Bunge Limited, 50 Main Street, White Plains, New York 10606.
NAME POSITION
---- -----------------------------------------
Alberto Weisser.......................... Chairman of the Board of Directors and
Chief Executive Officer
Jorge Born, Jr........................... Deputy Chairman and Director
Ernest G. Bachrach....................... Director
Enrique Boilini.......................... Director
Michael H. Bulkin........................ Director
Octavio Caraballo........................ Director
Francis Coppinger........................ Director
Bernard de La Tour d'Auvergne Director
Lauraguais.............................
William Engels........................... Director
Carlos Braun Saint....................... Director
Ludwig Schmitt-Rhaden.................... Director
William M. Wells......................... Chief Financial Officer
Flavio Sa Carvalho....................... Chief Personnel Officer
Joao Fernando Kfouri..................... Managing Director, Food Products
Division, Bunge Limited
Archibald Gwathmey....................... Managing Director, Bunge Global Markets,
Ltd.
John Klein............................... President, Bunge North America
Incorporated
Vilmar de Oliveira Schurmann............. President, Bunge Alimentos S.A.
Sergio Roberto Waldrich.................. President, Ceval Division, Bunge
Alimentos S.A.
Jose Julio Cardoso de Lucena............. President, Santista Division, Bunge
Alimentos S.A.
Mario A. Barbosa Neto.................... President and Chief Executive Officer,
Bunge
Fertilizantes S.A.
Raul Padilla............................. Chief Executive Officer, Bunge Ceval S.A.
|
ALBERTO WEISSER is the Chairman of our board of directors and our Chief Executive Officer. He is also the Chairman and Chief Executive Officer of Bunge International Limited. Mr. Weisser has been with Bunge since July 1993. He has been a member of our board of directors since 1995, was appointed our Chief Executive Officer in January 1999 and became Chairman of the board of directors in July 1999. Prior to that, Mr. Weisser held the position of Chief Financial Officer. Prior to joining Bunge, Mr. Weisser worked for the BASF Group in various finance-related positions for 15 years. Mr. Weisser is also a member of the board of directors of Ferro Corporation and a member of the North American Agribusiness Advisory Board of Rabobank. Mr. Weisser has a bachelor's degree in Business Administration from the University of Sao Paulo, Brazil and has participated in several post-graduate programs at Harvard Business School. He also attended INSEAD's Management Development Program in France.
JORGE BORN, JR. has been a member of our board of directors and our Deputy Chairman since 2001. He is also a director and Deputy Chairman of Bunge International Limited. Mr. Born is President and Chief Executive Officer of Bomagra S.A., a privately held company involved in the real estate, technology and communications equipment, hotel construction and management, farming and waste management industries in Argentina. He is also President of Hoteles Australes S.A., a joint venture with Accor S.A. of France, involved in the development, construction and managment of hotels in Argentina and Uruguay. Prior to joining Bomagra in 1997, Mr. Born spent all of his professional life working for Bunge in various capacities in the commodities trading, oilseed processing and food products areas in Argentina, Brazil, the United States and Europe. He also served as head of Bunge's European operations from 1992 to 1997. Mr. Born is a graduate of the Wharton School of the University of Pennsylvania and a member of Wharton's Latin American Executive Board.
ERNEST G. BACHRACH has been a member of our board of directors since 2001. He is also a member of the board of directors of Bunge International Limited. Mr. Bachrach has been the Chief Executive Officer for Latin America of Advent International Corporation, a private investment firm, since 1990. Prior to joining Advent, Mr. Bachrach worked as Senior Partner, European Investments, for Morningside Group, a private investment group. Mr. Bachrach also serves as a member of the boards of CardSystem Upsi S.A., Aeroplazas S.A. de C.V., Consultoria Internacional S.A. de C.V., Arabela Holding S.A. de C.V., Farmacologia Argentina de Avanzada, Atgal Investments Corporation and Fort Demider S.A. He is also the President of Universal Assistance S.A. He has a B.S. in Chemical Engineering from Lehigh University and an M.B.A. from Harvard Graduate School of Business Administration.
ENRIQUE BOILINI has been a member of our board of directors since 2001. He is also a director of Bunge International Limited. Mr. Boilini has been a Managing Member of Farallon Capital Management, LLC and Farallon Partners, LLC, two investment management companies, since October 1996. Mr. Boilini joined Farallon in March 1995 as a Managing Director. Prior to that, Mr. Boilini had worked at Metallgessellschaft Corporation, where he had been the head trader of emerging market debt and equity securities since 1991. From 1989 to 1991, he was a Vice President at The First Boston Corporation, where he was responsible for that company's activities in Argentina. Prior to his tenure at First Boston, he worked for Manufacturers Hanover Trust Company. Mr. Boilini received an M.B.A. from Columbia Business School in 1988 and a Civil Engineering degree from the University of Buenos Aires School of Engineering.
MICHAEL H. BULKIN has been a member of our board of directors since 2001. He is also a director of Bunge International Limited. Mr. Bulkin is a private investor. He retired as a Director of McKinsey & Company in 1993 after 30 years of service in which he served as a board member and in a variety of senior positions, most recently as head of McKinsey's New York and Northeast offices. Mr. Bulkin also serves as a member of the boards of Ferro Corporation, American Bridge Company, Specified Technologies Inc. and the Global Vacation Group. He holds a Bachelor of Engineering Science degree from Pratt Institute, and a Master of Industrial Administration from Yale University.
OCTAVIO CARABALLO has been a member of our board of directors since 2001. He is also a director of Bunge International Limited and has served as Chairman of the Board and President of Bunge International Limited. Mr. Caraballo is President of Las Lilas S.A., an Argentine company. Mr. Caraballo
joined Bunge in 1967, serving in various divisions over the course of his career, including as head of the Bunge group's paints, chemicals and mining division. Prior to joining Bunge, he worked for several financial institutions in Europe. Mr. Caraballo received a Business Administration degree from Babson College and is a member of the Board of Trustees of Babson College.
FRANCIS COPPINGER has been a member of our board of directors since 2001. He is also a director of Bunge International Limited. He is Chief Executive Officer of Publicite Internationale Intermedia Plc, (PII) a joint-venture he established with the Michelin Group in December 1992. Based in Brussels, PII coordinates the media activities of the Michelin Group in Europe. Prior to his career with PII, Mr. Coppinger held a number of senior executive positions, including General Manager and Chairman, with Intermedia, a media buying agency based in Paris. He is currently a member of the board of directors of Intermedia. He holds a Bachelors degree in Economics from the University of Paris and attended the Institut d'Etudes Politiques de Paris.
BERNARD DE LA TOUR D'AUVERGNE LAURAGUAIS has been a member of our board of directors since 2001. He is also a director of Bunge International Limited. Mr. de La Tour d'Auvergne Lauraguais joined Bunge in 1970 and held various senior executive positions in Argentina, Brazil and Europe in the agribusiness and food products divisions until his retirement in 1994. Mr. de La Tour d'Auvergne Lauraguais has a degree in Civil Engineering from the Federal Polytechnic School of the University of Lausanne, Switzerland and an M.B.A. from the Wharton School of the University of Pennsylvania.
WILLIAM ENGELS has been a member of our board of directors since 2001. He is also a director of Bunge International Limited. He is Group Controller for Quinsa, a Luxembourg-based holding company listed on the New York Stock Exchange, a position he has held since 1998. Prior to that, he served as Manager of Corporate Finance at Quinsa and as Vice President at Citibank, N.A. in London, responsible for European sales of Latin American investment products. Mr. Engels holds a B.S. from Babson College, an M.A. from the University of Pennsylvania and an M.B.A. from The Wharton School of the University of Pennsylvania.
CARLOS BRAUN SAINT has been a member of our board of directors since 2001. He is also a director of Bunge International Limited. Mr. Braun Saint is a Vice President and director of Agroexpress S.A., an agribusiness company in Argentina, a position he has held since January 2001. Mr. Braun Saint is also employed by Bellamar Estancias S.A., another Argentine agribusiness company, where he has worked since February 1999. Prior to that, he worked for the Private Banking division of Banco Bilbao Vizcaya Argentaria for two years. Prior to that, Mr. Braun Saint attended Belgrano University in Argentina for four years.
LUDWIG SCHMITT-RHADEN has been a member of our board of directors since 2001. He is also a member of the board of directors of Bunge International Limited and served as Chairman of the Board of Bunge International Limited from May 1997 to May 2001. Prior to serving as Chairman, Mr. Schmitt-Rhaden had been the Chief Executive Officer of Bunge International Limited since 1994. He joined Bunge International Limited in 1992, and before that served in various senior management and executive positions at Degussa AG in Germany, England, Canada, Italy, the Netherlands and United States, over a period of 18 years. Mr. Schmitt-Rhaden is also a member of the board of management of Buehler AG.
WILLIAM M. WELLS has been our Chief Financial Officer and the Chief Financial Officer of Bunge International Limited since January 2000. Prior to that, Mr. Wells was with McDonald's Corporation for ten years, where he served in numerous capacities, including Chief Executive of System Capital Corporation, which is McDonald's dedicated finance company, Chief Financial Officer of McDonald's Brazil and Director of both U.S. and Latin American finance. Before McDonald's Mr. Wells was with Citibank in Brazil and New York. He has a Master's Degree in International Business from the University of South Carolina.
FLAVIO SA CARVALHO has been our Chief Personnel Officer and the Chief Personnel Officer of Bunge International Limited since 1998. Prior to joining Bunge, he served as Vice President of Human Resources at Aetna International, Inc. since 1994. Prior to that, he was with Bank of America in multiple capacities
during his 12-year tenure, including Director of Human Resources for their Latin American operations, International Compensation and Benefits, Corporate Staffing and Planning and finally, Vice President of International Human Resources. Mr. Carvalho studied Mass Communications in Brazil and holds a M.S. in Education Research and Development from Florida State University.
JOAO FERNANDO KFOURI has been the Managing Director of our food products division since May 1, 2001. Prior to that, Mr. Kfouri was employed for 18 years with Joseph E. Seagram and Sons Ltd., most recently as President of the Americas division, with responsibility for North and South American operations. Prior to that, Mr. Kfouri worked for General Foods Corp., where he served in numerous capacities, including General Manager of Venezuelan operations. Mr. Kfouri received a degree in Business from the Sao Paulo School of Business Administration of the Getulio Vargas Foundation.
ARCHIBALD GWATHMEY has been the Managing Director of Bunge Global Markets, our international marketing division, since 1999. Mr. Gwathmey joined Bunge North America Corporation in 1975 as a trainee and has over 25 years experience in commodities trading and oilseed processing. During his career with Bunge, he has served as head of the U.S. grain division and head of the U.S. oilseed processing division. Mr. Gwathmey graduated from Harvard College with a B.A. in Classics and English. He has also served as a Director of the National Oilseed Processors Association.
JOHN KLEIN has served as President and Chief Executive Officer of Bunge North America for 15 years. He has spent 25 years with the Bunge group, serving in Antwerp, Rotterdam, London, Sao Paulo, Buenos Aires, New York and St. Louis. Prior to joining Bunge, Mr. Klein practiced law for the New York law firm of Sullivan & Cromwell. Mr. Klein is a graduate of Princeton University and the University of Michigan Law School.
VILMAR DE OLIVEIRA SCHURMANN is the President of Bunge Alimentos S.A., a company he founded in 1973, and has spent virtually his entire career in soybean and food processing. Prior to the founding of Ceval Alimentos, the predecessor company of Bunge Alimentos, Mr. Schurmann was a Project Engineer with the Brazilian Regional Development Bank for four years. His first professional position was with the Bunge group subsidiary of Samrig, where he served as a Chemical Engineer from 1964 to 1968. Mr. Schurmann received a B.S. in Chemical Engineering from Parana State University.
SERGIO ROBERTO WALDRICH has been the President of the Ceval Division of Bunge Alimentos S.A. since 2000. He joined Ceval Alimentos as a trainee in 1972. Mr. Waldrich worked in various production positions over his career with the company, eventually serving as head of the poultry division. When the poultry division was spun-off by Bunge into a separate company, Seara Alimentos S.A., Mr. Waldrich was named Vice President and General Manager of that company. He rejoined Ceval Alimentos in August 2000 as General Director and has been its President since the formation of Bunge Alimentos. Mr. Waldrich has a degree in Chemical Engineering from Blumenau and an M.B.A. from the University of Florianopolis. Mr. Waldrich is the former President of Brazilian Pork Industry Association and the Brazilian Port Export Association.
JOSE JULIO CARDOSO DE LUCENA has been the President of the Santista Division of Bunge Alimentos S.A. since 1997. He joined the Bunge group in 1994, as President of Coral Paints, serving subsequently as Country Manager and Chief Executive Officer of Imperial Chemical Industries (ICI) when Coral Paints was sold to ICI. Mr. Cardoso has worked in corporate marketing positions for over 30 years, including positions at J. Walter Thompson, General Foods, Gillette and Phillip Morris. He received his Law Degree from the University of Sao Paulo and a graduate degree in Marketing from the Escola Superior de Propaganda e Marketing.
MARIO A. BARBOSA NETO has been President and Chief Executive Officer of Bunge Fertilizantes S.A. since 1996 with the formation of Fertilizantes Serrana S.A., the predecessor company of Bunge Fertilizantes S.A. Mr. Barbosa Neto has over 20 years experience in the Brazilian fertilizer industry. Prior to joining Serrana, he served as superintendent of Fosfertil S.A. from 1992 to 1996 and was the Chief Financial Officer of Manah S.A. from 1980 to 1992. Mr. Barbosa Neto has a B.S. in Engineering from the
University of Sao Paulo and an M.B.A. from the Getulio Vargas Foundation. In addition to serving on the board of directors of Bunge Fertilizantes, he serves as President of the Administrative Council of Fosbrasil S.A., and is a board member of Fertifos, Ultrafertil, Alpargatas Santista Textil and Bunge Alimentos. Mr. Barbosa Neto is also Vice President of the International Fertilizer Association.
RAUL PADILLA is the Chief Executive Officer of Bunge Ceval S.A., our oilseed processing and grain origination subsidiary in Argentina. He joined the company in 1991, becoming Chief Executive Officer and Commercial Director in 1999. Mr. Padilla has over 23 years experience in the oilseed processing and grain handling industries in Argentina, beginning his career with La Plata Cereal in 1977. He currently serves as President of the Argentinean National Oilseed Crushers Association, Vice President of the International Association of Seed Crushers and is a director of the Buenos Aires Cereal Exchange and the Rosario Futures Exchange. Mr. Padilla is a graduate of the University of Buenos Aires.
COMMITTEES OF THE BOARD OF DIRECTORS
Our bye-laws give our board of directors the authority to delegate its powers to a committee appointed by the board. Committees may consist partly or entirely of non-directors, except for the audit committee, and are required to conduct meetings and take action only in accordance with guidelines imposed by the board and the provisions of our bye-laws.
COMPENSATION COMMITTEE
We have formed a compensation committee that reviews and approves the compensation and benefits for our executive officers and other key executives, makes recommendations to the board regarding compensation matters and is responsible for awarding equity-based compensation to our executive officers and other employees under our employee equity incentive plan. The committee also has the discretion to interpret the terms of the plan, to amend the plan and take all other actions necessary to administer the plan in our best interests. See "--Employee Equity Incentive Plan." The members of our compensation committee are Messrs. Bachrach, Bulkin, Coppinger and Schmitt-Rhaden.
AUDIT COMMITTEE
We have formed an audit committee that will be responsible for advising the board about the selection of independent auditors, reviewing the scope of the audit and other services provided by our independent auditors and evaluating our internal controls. The members of our audit committee are Messrs. Bachrach, Boilini, Coppinger and de La Tour d'Auvergne Lauraguais.
FINANCE AND RISK MANAGEMENT COMMITTEE
We also have formed a finance and risk management committee that will be responsible for reviewing and updating our risk management policies and risk limits on a periodic basis and advising the board on financial and risk management practices. The members of our finance and risk management committee are Messrs. Boilini, Born, de La Tour d'Auvergne Lauraguais and Engels.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The aggregate amount of compensation that we paid to our directors and executive officers as a group (seven persons in all), for services in all capacities during the year ended December 31, 2000, was approximately $3 million. Part of this amount was in the form of performance related bonuses paid to our executive officers, based on the achievement of financial and strategic objectives. The aggregate amount that we set aside or accrued to provide pension, retirement or similar benefits for these individuals was approximately $69,000.
The remuneration of our directors is determined by our board of directors, and there is no requirement that a specified number or percentage of "independent" directors must approve any such
determination. We also reimburse directors for reasonable expenses incurred in attending meetings of the board, meetings of committees of the board and our general meetings. There are no director's service contracts with Bunge or its subsidiaries providing for benefits upon termination of employment.
EMPLOYEE EQUITY INCENTIVE PLAN
We have adopted the Bunge Limited equity incentive plan. The plan is effective as of October 10, 2000 and has been adopted by the board and approved by our sole shareholder. We have reserved up to 4,099,000 common shares for issuance under our equity incentive plan. The plan is intended to attract, retain and motivate our officers and employees, link compensation to the overall performance of the company in order to promote cooperation among our diverse areas of business and to create an ownership interest in the company with respect to these officers and employees in order align their interests with the interests of our shareholders. Under the plan, the compensation committee of the board may award equity-based compensation to our officers and other employees who make or are anticipated to make significant contributions to the company. Awards under the plan may be in the form of either qualified or nonqualified stock options, restricted stock or other awards that are based on the value of our common shares. The specific terms of each award made under the plan, including how such award will vest, will be described in an individual award agreement.
ADMINISTRATION OF THE PLAN
The plan is administered by the compensation committee of the board. The committee has the discretion to determine who will receive awards under the plan as well as the terms of each individual award. The committee also has the discretion to interpret the terms of the plan and any corresponding award agreement, to amend the plan, and generally take all other actions necessary to administer the plan in our best interests. However, any power that may be exercised by the committee under the plan may also be exercised by the board.
OPTIONS AND RESTRICTED SHARES
Stock options granted under the plan, upon vesting, will be exercisable for our common shares. The vesting period will be set forth in the individual award agreements. The exercise price per share will generally be the fair market value of a share on the date the stock option is granted. At the time our employment relationship with an officer or other employee terminates, such officer or employee will have a limited period of time to exercise any vested stock options he or she then holds. The period varies according to the reasons for the termination of employment.
An award of restricted shares represents an award of shares to an officer or other employee that are subject to restrictions. The restrictions may be vesting restrictions, similar to those imposed on stock options, or performance-based restrictions. Until the restrictions lapse, the officer or employee holding an award of restricted stock risks forfeiture of the grant and he or she cannot transfer the shares subject to a restricted stock grant until the restrictions lapse. To date, we have not issued any stock options or restricted shares under the plan.
STOCK APPRECIATION RIGHTS AND PHANTOM UNITS
Our board has in the past approved awards of stock appreciation rights and phantom units under the plan. These awards were granted to a few of our senior executives. A stock appreciation right, upon vesting and exercise, entitles the holder to a cash value equal in value to the difference between the fair value of a share at the time the stock appreciation right was granted and the fair value at the time it is exercised. A phantom unit, upon vesting, will entitle the holder to receive a cash amount equal to the fair market value of a unit within thirty days after the unit becomes vested.
In May 2000, our board granted 199,207 phantom units and 569,060 stock appreciation rights having a grant price of $18.87 per share. In May 2001, our board granted 124,324 phantom units and 352,812 stock appreciation rights having a grant price of $15.87 per share.
According to the terms of the award agreements under which the stock appreciation rights and phantom units were granted, at the time this offering becomes effective the committee may elect to replace the stock appreciation rights with stock options and convert the phantom units to restricted stock. In the event that the committee makes this election, the committee must make such equitable adjustments as it considers necessary so that the replacement or conversion is neither detrimental nor advantageous to any holder of stock appreciation rights or phantom units. In other words, after the replacement or conversion, the holder will be in the same economic position as prior to the replacement or conversion. In this regard, the committee may adjust the number of stock options exchanged for each stock appreciation right, the applicable exercise price, and the number of shares into which each phantom unit is converted. Otherwise, the same terms applicable to the stock appreciation rights and the phantom units will apply to the stock options and the restricted stock, respectively. We intend to convert the stock appreciation rights and phantom units that we have previously issued into stock options and restricted stock awards at the time of this offering. We estimate that the outstanding awards as of May 31, 2001 will convert into stock options exercisable for 921,872 common shares and restricted stock representing 323,531 shares.
The stock appreciation rights vest in equal portions of one-third beginning on the first anniversary of the date of grant and continuing until the third anniversary of the date of grant, if the holder continues to be employed on each vesting date and, once vested, may be exercised by the holder until the tenth anniversary of the date of grant. On the tenth anniversary of the date of grant, any unexercised stock appreciation rights will expire. Upon the termination of employment of a holder of one or more stock appreciation rights, his or her rights with respect to any unexercised stock appreciation rights depend on the reason for the termination. For example, if the holder is terminated for misconduct, all of the holder's vested and unvested stock appreciation rights will immediately become void. However, if the holder retires, dies or becomes disabled, any unvested stock appreciation rights he or she holds vest at the time of the holder's termination from employment and remain exercisable by the holder for three years.
The extent to which the phantom units vest depends upon the achievement of certain performance goals as of the third anniversary of the date of grant. The performance goals are based on the cumulative growth of our earnings per share from continuing operations over the three-year vesting period, adjusted for non-recurring items at the discretion of the compensation committee. If the cumulative growth rate of our adjusted earnings per share from continuing operations after three years is less than four percent, all of the phantom units will lapse without vesting. If the average annual growth rate after three years is four percent or more, between 50% to 150% of the phantom units will vest, according to the performance level achieved, and any remaining unvested units will lapse without vesting.
Upon the termination of employment of a holder of phantom units prior to the third anniversary of the date of grant, his or her rights with respect to such phantom units depend on the reason for the termination. If the holder is terminated for misconduct or the holder resigns for any reason, all the holder's phantom units will become void on the termination date. If the employment of a holder of phantom units terminates prior to the third anniversary date for any other reason, on the third anniversary date such holder will become entitled to receive a pro rata portion of any of his or her phantom units that vest on such date, based on the period of time that the holder was employed while the award was outstanding.
We have reserved the right to adjust the number of phantom units subject to each award so that any given award is increased or decreased by up to 20%. We may also adjust the percentage thresholds of the performance goals if certain extraordinary events occur.
Each employee who receives a grant of phantom units and stock appreciation rights will be required to agree not to inappropriately use or reveal any confidential information about our company or business. In addition, each such employee will be restricted from competing with us or soliciting any of our
employees or customers during the employee's employment with us and for one year after the termination of such employment.
NON-TRANSFERABILITY OF AWARDS; ADJUSTMENTS UPON MERGER OR CHANGE OF CONTROL
Some restrictions apply to awards made under the plan. Awards are not transferable by the officer or other employee except in very limited circumstances and any shares received in connection with an award made under the plan may be subject to trading restrictions. Also, the committee has the right to modify the terms of the plan and any award granted thereunder in the event that we engage in a merger transaction or any corporate reorganization process.
NON-EMPLOYEE DIRECTORS' EQUITY INCENTIVE PLAN
In addition to the employee equity incentive plan we have adopted for our employees, in order to align all of our directors' interests with those of our shareholders and to appropriately incentivize our directors, we intend to adopt a non-employee directors' equity incentive plan after the closing of this offering. Under this plan, we intend to periodically award stock options to members of the board who are not otherwise employees of Bunge or its subsidiaries as part of their director's compensation. We anticipate that each eligible non-employee director will receive approximately sixty percent of his or her annual director's fees in cash and approximately forty percent in the form of stock options. In addition, each non-employee director will receive an award of stock options under the plan at the time he or she initially becomes a member of the board. At the time the plan is adopted, the eligible non-employee directors who are then serving on the board will also receive an initial grant of stock options. We will grant only nonqualified stock options under our non-employee directors' equity incentive plan and the exercise price per share will be equal to the fair market value of a share at the time of grant. We anticipate that less than one percent of our outstanding share capital will be reserved for issuance under the non-employee directors' equity incentive plan.
PRINCIPAL SHAREHOLDERS
All of our common shares are currently owned by Bunge International Limited, a privately held company incorporated in Bermuda. Immediately prior to the closing of this offering, Bunge International Limited will effect a series of transactions that will result in the pro rata distribution of our common shares to its current shareholders in a spin-off transaction. The following table sets forth information regarding the beneficial ownership of our common shares as of the date of this prospectus and after giving effect to the proposed spin-off of our shares to the Bunge International Limited shareholders and the sale of the common shares in this offering (assuming no exercise of the underwriters' over-allotment option), by Bunge International Limited and each of the members of our board of directors and executive officers. For purposes of the table below, we deem stock appreciation rights and phantom units that, when converted into options or restricted stock awards at the closing of this offering, will be immediately exercisable or exercisable within 60 days of the date of this prospectus to be outstanding and to be beneficially owned by the person holding the options or awards.
To our knowledge, as of the date of this prospectus and after giving effect to the proposed distribution of our shares to the Bunge International Limited shareholders, there will be no shareholders who beneficially own 5% or more of our common shares. Except as otherwise indicated in the footnotes to this table, we believe that the persons named in this table have sole voting and investment power with respect to the common shares indicated. To our knowledge, as of March 31, 2001, 7,312,527, or less than one percent, of Bunge International Limited's common shares were held by six record holders in the United States. Unless otherwise stated, the address for each shareholder is: c/o Bunge Limited, 50 Main Street, White Plains, New York 10606.
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING AFTER OFFERING
AND SPIN-OFF AND SPIN-OFF
------------------------------------------- -----------------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
---------------------------- --------------------- ------------------- ------------------- -------------------
Bunge International
Limited................... 64,380,000 100% 672,358 *
Alberto Weisser(1).......... -- * 50,453 *
Jorge Born, Jr.............. -- * -- *
Ernest Bachrach............. -- * -- *
Enrique Boilini............. -- * -- *
Michael Bulkin.............. -- * -- *
Octavio Caraballo(2)........ -- * 346,309 *
Francis Coppinger(3)........ -- * 913,861 1%
Bernard de La Tour
d'Auvergne
Lauraguais(4)............. -- * 554,314 *
William Engels.............. -- * -- *
Carlos Braun Saint.......... -- * -- *
Ludwig Schmitt-Rhaden....... -- * -- *
William M. Wells(1)......... -- * 6,800 *
Flavio Sa Carvalho(1)....... -- * 13,280 *
Joao Fernando Kfouri........ -- * -- *
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* Less than 1%.
(1) Common share amounts represent vested stock appreciation rights that we intend to convert into stock options.
(2) Includes 340,625 common shares held directly and 5,684 common shares held by his wife, as to which he disclaims beneficial ownership.
(3) Includes 3,264 common shares held by his wife and 910,597 common shares held by a company owned by his wife. Mr. Coppinger shares voting and investment power with his wife over these securities.
(4) Includes 254,575 common shares held directly, 5 common shares held by his wife, as to which he disclaims beneficial ownership, and 299,734 common shares over which Mr. de La Tour d'Auvergne Lauraguais receives the economic benefits of ownership but has no voting or investing power.
RELATED PARTY TRANSACTIONS
FINANCING TRANSACTIONS AND CAPITAL CONTRIBUTIONS
We have, from time to time, entered into financing arrangements with Bunge International Limited, our sole shareholder prior to this offering, and other affiliates, both as borrower and lender. These loans bear interest at various rates generally based on LIBOR plus a spread and are payable on demand. The amount of the largest individual transaction since 1998 was $114 million, consisting of a 10% bond issued to us by a subsidiary of Bunge International Limited. The largest aggregate amount outstanding during this period was $374 million. We believe that each of these transactions was made on terms at least as favorable to us as would have been obtained with unaffiliated third parties. As of December 31, 2000, no related party loans were outstanding.
Bunge International Limited has also guaranteed some of our subsidiaries' intercompany debt. As of March 31, 2001, none of these guarantees were outstanding. We have also provided guarantees for the payment of long-term loans by our joint ventures. As of March 31, 2001, our obligations under these guarantees totaled approximately $26 million.
In 2000, Bunge International Limited contributed $126 million of capital to us in the form of a long-term secured note. During the first three months of 2001, Bunge International repaid $16 million of the principal amount of this note to us. Bunge International Limited also made capital contributions to us of $93 million in 1999 and $39 million in 1998.
CORPORATE AND ADMINISTRATIVE SERVICES
Prior to this offering, Bunge International Limited allocated some general corporate overhead costs to us. The corporate overhead costs allocated to us were $22 million, $25 million and $20 million in 2000, 1999 and 1998, respectively. We believe that the allocation of these costs to us were not materially different from the actual expenses we would have incurred as a stand-alone entity.
We have entered into an administrative services agreement with Bunge International Limited under which we will provide corporate and administrative services to Bunge International Limited, including financial, legal, tax, accounting, human resources administration, insurance, employee benefits plans administration, corporate communication and management information system services beginning July 1, 2001. The agreement has a quarterly term that is automatically renewable unless terminated by either party. Bunge International will pay us for the services rendered on a quarterly basis based on our direct and indirect costs of providing the services.
PRODUCT SALES
We sell soybean meal and fertilizer products at market prices to Seara Alimentos S.A., a subsidiary of Bunge International Limited engaged in meat and poultry production. The amounts of these sales were $6 million in the three months ended March 31, 2001, $20 million in 2000, $4 million in 1999 and $4 million in 1998.
DESCRIPTION OF SHARE CAPITAL
THE FOLLOWING DESCRIPTION OF OUR SHARE CAPITAL SUMMARIZES CERTAIN PROVISIONS OF OUR MEMORANDUM OF ASSOCIATION AND OUR BYE-LAWS THAT WILL BECOME EFFECTIVE AS OF THE CLOSING OF THIS OFFERING. SUCH SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, ALL OF THE PROVISIONS OF OUR MEMORANDUM OF ASSOCIATION AND BYE-LAWS, COPIES OF WHICH HAVE BEEN FILED AS EXHIBITS TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS FORMS A PART. PROSPECTIVE INVESTORS ARE URGED TO READ THE EXHIBITS FOR A COMPLETE UNDERSTANDING OF OUR MEMORANDUM OF ASSOCIATION AND BYE-LAWS.
GENERAL
We are a limited liability company incorporated under the laws of Bermuda. We are registered with the Registrar of Companies in Bermuda under registration number 20791. We were incorporated on May 18, 1995 under the name Bunge Agribusiness Limited, and our name was changed to Bunge Limited on February 5, 1999. Our registered office is located at 2 Church Street, Hamilton, Bermuda.
The objects of our business were amended on April 6, 2001 and are set out in paragraph 6 of our memorandum of association. Our objects include:
- to carry on the business of the production, development, processing, manufacturing, purchasing, handling, selling and trading of, and otherwise dealing in, all types of agricultural produce and commodities and their derivatives and all types of animals and animal products and their derivatives and all types of branded food products;
- to carry on the business of seed crushing, oil extraction by crushing and any other processes and milling;
- to carry on the business of mining and quarrying of fertilizer raw materials and the production, development, processing, manufacturing, purchasing, handling, selling and trading of, and otherwise dealing in, fertilizers of every description;
- to carry on the business of logistics and transportation services;
- to do any of the foregoing by electronic means, including over the Internet;
- to act and perform all of the functions of a holding company;
- to acquire and own securities and other property with a view to investment;
- to provide financing and financial services and to make financial accommodation and to advance and lend money or other property to any entity in our group; and
- other financing and general objects.
In July 2001, our sole shareholder approved certain amendments to our bye-laws. The following description reflects those amendments.
Since 1998, other than increasing our authorized share capital, effecting a share exchange with our sole shareholder to reduce the par value of our common shares, authorizing a 52.65-to-1 share dividend in respect of our contributed surplus, and authorizing the creation of preference shares in connection with this offering, there have been no material changes to our share capital. There have been no bankruptcy, receivership or similar proceedings with respect to us or our subsidiaries.
There have been no public takeover offers by third parties for our shares nor have we made any public takeover offers for the shares of another company during the last or current financial years, except as described under "Business--Recent Acquisitions and Divestitures."
SHARE CAPITAL
Immediately following the completion of this offering, our authorized share capital will consist of 240,000,000 common shares, par value $.01 per share, 240,000 Series A Preference Shares, par value $.01 per share, and 9,760,000 undesignated preference shares, par value $.01 per share. Upon completion of this offering, there will be 81,980,000 common shares issued and outstanding, excluding stock appreciation rights and phantom units outstanding as of June 30, 2001 that we intend to convert into stock options and restricted stock awards representing an estimated 1,245,403 common shares at the closing of this offering. As of June 30, 2001, no preference shares were issued and outstanding. All of our issued and outstanding common shares prior to completion of this offering are and will be fully paid, and all of our shares to be issued in this offering will be issued fully paid.
Pursuant to our bye-laws, and subject to the requirements of any stock exchange on which our shares are listed, our board of directors is authorized to issue any of our authorized but unissued shares. Any issuance, however, of common shares or securities convertible into common shares in excess of 20% of the voting power or number of the common shares outstanding before such issuance requires shareholder approval. There are no limitations on the right of non-Bermudians or non-residents of Bermuda to hold or vote our shares.
COMMON SHARES
Holders of common shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of common shares are entitled to one vote per share on all matters submitted to a vote of holders of common shares. Unless a different majority is required by law or by our bye-laws, resolutions to be approved by holders of common shares require approval by a simple majority of votes cast at a meeting at which a quorum is present.
In the event of our liquidation, dissolution or winding-up, the holders of common shares are entitled to share equally and ratably in our assets, if any, remaining after the payment of all of our debts and liabilities, subject to any liquidation preference on any outstanding preference shares.
PREFERENCE SHARES
Pursuant to Bermuda law and our bye-laws, our board of directors by resolution may establish one or more series of preference shares having such number of shares, designations, dividend rates, relative voting rights, conversion or exchange rights, redemption rights, liquidation rights and other relative participation, optional or other special rights, qualifications, limitations or restrictions as may be fixed by the board without any further shareholder approval. Such rights, preferences, powers and limitations as may be established could also have the effect of discouraging an attempt to obtain control of us. See "Shareholder Rights Plan" below.
Our board of directors has designated 240,000 preference shares as Series A Preference Shares, par value $.01 per share. Other than the issuance of the Series A Preference Shares authorized by the board in connection with our shareholder rights plan, we have no present plans to issue any preference shares. The terms of the Series A Preference Shares are summarized below under "--Shareholder Rights Plan."
DIVIDEND RIGHTS
Under Bermuda law, a company's board of directors may declare and pay dividends from time to time unless there are reasonable grounds for believing that the company is or would, after the payment, be unable to pay its liabilities as they become due or that the realizable value of its assets would thereby be less than the aggregate of its liabilities and issued share capital and share premium accounts. Under our bye-laws, each common share is entitled to dividends if, as and when dividends are declared by our board of directors, subject to any preferred dividend right of the holders of any preference shares. There are no
restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in or out of Bermuda or to pay dividends to U.S. residents who are holders of our common shares.
Any cash dividends payable to holders of our common shares quoted on the New York Stock Exchange will be paid to Mellon Investor Services L.L.C., our transfer agent in the United States for disbursement to those holders.
VARIATION OF RIGHTS
If at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms of issue of the relevant class, may be varied either: (1) with the consent in writing of the holders of 75% of the issued shares of that class; or (2) with the sanction of a majority of the votes cast at a general meeting of the relevant class of shareholders at which a quorum shall be two or more persons holding or representing by proxy one-third of the issued shares of the class. Our bye-laws specify that the creation or issue of shares ranking equally with existing shares will not, unless expressly provided by the terms of issue of those shares, vary the rights attached to existing shares.
TRANSFER OF SHARES
Our board of directors may in its absolute discretion and without assigning any reason refuse to register the transfer of a share that it is not fully paid. Our board of directors may also refuse to recognize an instrument of transfer of a share unless it is accompanied by the relevant share certificate and such other evidence of the transferor's right to make the transfer as our board of directors shall reasonably require. Subject to these restrictions, a holder of common shares may transfer the title to all or any of his common shares by completing a form of transfer in the form set out in our bye-laws (or as near thereto as circumstances admit) or in such other common form as the board may accept. The instrument of transfer must be signed by the transferor and transferee, although in the case of a fully paid share, our board of directors may accept the instrument signed only by the transferor. The board may also accept mechanically executed transfers.
MEETINGS OF SHAREHOLDERS
Under Bermuda law, a company is required to convene at least one general meeting of shareholders each calendar year. Bermuda law provides that a special general meeting of shareholders may be called by the board of directors of a company and must be called upon the request of shareholders holding not less than 10% of the paid-up capital of the company carrying the right to vote. Bermuda law also requires that shareholders be given at least five days' advance notice of a general meeting, but the accidental omission to give notice to any person does not invalidate the proceedings at a meeting. Our bye-laws provide that either the chairman or our board of directors may convene an annual general meeting or a special general meeting. Under our bye-laws, at least 21 days' notice of an annual general meeting or a special general meeting must be given to each shareholder entitled to vote at such meeting. This notice requirement is subject to the ability to hold such meetings on shorter notice if such notice is agreed: (i) in the case of an annual general meeting, by all of the shareholders entitled to attend and vote at such meeting; or (ii) in the case of a special general meeting, by a majority in number of the shareholders entitled to attend and vote at the meeting holding not less than 95% of the shares entitled to vote at such meeting. The quorum required for a general meeting of shareholders is two or more persons present in person at the start of the meeting and representing in person or by proxy in excess of 50% of the paid-up voting share capital.
ACCESS TO BOOKS AND RECORDS AND DISSEMINATION OF INFORMATION
Members of the general public have the right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda. These documents include the company's memorandum of association, including its objects and powers, and any alteration to its memorandum of association. The shareholders have the additional right to inspect the bye-laws of the company, minutes of
general meetings and the company's audited financial statements, which must be presented at the annual general meeting. The register of shareholders of a company is also open to inspection by shareholders without charge and by members of the general public on the payment of a fee. The register of shareholders is required to be open for inspection for not less than two hours in any business day (subject to the ability of a company to close the register of shareholders for not more than thirty days in a year). A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act 1981, establish a branch register outside Bermuda. A company is required to keep at its registered office a register of directors and officers that is open for inspection for not less than two hours in any business day by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records.
ELECTION AND REMOVAL OF DIRECTORS
Our bye-laws provide that our board shall consist of between five and eleven directors or such greater number as the board and the shareholders may determine. Our board of directors will initially consist of eleven directors. The lesser of one-third or two of our directors may be employed by us or by any other entity in our group. Our board is divided into three classes that are, as nearly as possible, of equal size. Each class of directors is elected for a three-year term of office, but the terms are staggered so that the term of only one class of directors expires at each annual general meeting. There is also no requirement in our bye-laws or Bermuda law that our directors must retire at a certain age.
Any shareholder wishing to propose for election as a director a person who is not an existing director or is not proposed by our board must give notice to the company of the intention to propose that person for election. The notice must be given not later than 90 days before the first anniversary of the last annual general meeting, or ten days after the notice of the general meeting at which the directors will be elected, whichever is earlier.
A director may be removed for cause by a majority of shareholder votes cast at a meeting at which a quorum is present, provided notice is given to the director of the shareholders' meeting convened to remove the director. A director may be removed without cause upon the affirmative vote of at least 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution, provided notice is given to the director of the shareholders' meeting convened to remove the director. The notice must contain a statement of the intention to remove the director and a summary of the facts justifying the removal and must be served on the director not less than fourteen days before the meeting. The director is entitled to attend the meeting and be heard on the motion for his removal.
Our board of directors can fill any vacancy occurring as a result of the removal, resignation, insolvency, death or incapacity of a director.
PROCEEDINGS OF BOARD OF DIRECTORS
Our bye-laws provide that our business is to be managed and conducted by our board of directors. Bermuda law requires that our directors be individuals, but there is no requirement in our bye-laws or Bermuda law that directors hold any of our shares.
The remuneration of our directors is determined by our board of directors, and there is no requirement that a specified number or percentage of "independent" directors must approve any such determination. Our directors may also be paid all travel, hotel and other expenses properly incurred by them in connection with our business or their duties as directors.
Provided a director discloses a direct or indirect interest in any contract or arrangement with us as required by Bermuda law, such director is entitled to vote in respect of any such contract or arrangement in which he or she is interested unless he or she is disqualified from voting by the chairman of the relevant board meeting. Under Bermuda law, a director (including the spouse or children of the director or any company of which such director, spouse or children own or control more than 20% of the capital or loan
debt) cannot borrow from us, (except loans made to directors who are bona fide employees or former employees pursuant to an employees' share scheme) unless shareholders holding 90% of the total voting rights have consented to the loan.
WAIVER OF CLAIMS BY SHAREHOLDERS; INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our bye-laws contain a provision by virtue of which our shareholders waive any claim or right of action that they have, both individually and on our behalf, against any director or officer in relation to any action or failure to take action by such director or officer, except in respect of any fraud or dishonesty of such director or officer. We have been advised by the SEC that in the opinion of the SEC, the operation of this provision as a waiver of the right to sue for violations of federal securities laws would likely be unenforceable in U.S. courts. Our bye-laws also indemnify our directors and officers in respect of their actions and omissions, except in respect of their fraud or dishonesty.
MERGER, AMALGAMATIONS AND BUSINESS COMBINATIONS
The merger or amalgamation of a Bermuda company with another company or corporation (other than certain affiliated companies) requires the merger or amalgamation agreement to be approved by the company's board of directors and by its shareholders. Such shareholder approval, unless the bye-laws otherwise provide, requires 75% of the shareholders voting at such meeting in respect of which the quorum shall be two persons holding or representing at least one-third of the issued shares of the company. Our bye-laws provide that a merger or amalgamation (other than with a wholly-owned subsidiary) that has been approved by our board must only be approved by a majority of the votes cast at a general meeting of our shareholders at which the quorum shall be two or more persons representing more than one-half of the paid-up share capital carrying the right to vote. Any merger or amalgamation or other business combination (as defined in our bye-laws) not approved by our board must be approved by the holders of not less than 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution.
AMENDMENT OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS
Bermuda law provides that the memorandum of association of a company may be amended by a resolution passed at a general meeting of shareholders of which due notice has been given. An amendment to the memorandum of association that alters the company's business objects may require the approval of the Bermuda Minister of Finance, who may grant or withhold approval at his or her discretion. Our bye-laws provide that no bye-law shall be rescinded, altered or amended, and no new bye-law shall be made, unless it shall have been approved by a resolution of our board of directors and by a resolution of the shareholders. In the case of the bye-laws relating to election of directors, approval of business combinations and amendment of bye-law provisions, the required resolutions must include the affirmative vote of at least 66% of our directors then in office and of at least 66% percent of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution, and, in the case of the bye-law relating to the removal of directors, the requisite affirmative votes are a simple majority of the directors then in office and at least 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution, and in the case of the bye-laws relating to the issuance of unissued shares or other securities or instruments, the requisite affirmative votes are a simple majority of the directors then in office and at least 66% of the shares voting.
Under Bermuda law, the holders of an aggregate of not less than 20% in par value of any class of the company's share capital have the right to apply to the Bermuda courts for an annulment of any amendment of the memorandum of association adopted by shareholders at any general meeting, other than an amendment which alters or reduces a company's share capital as provided in the Companies Act 1981. Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda court. An application for an annulment of an amendment of the memorandum of association must be made within twenty-one days after the date on which the resolution altering the
company's memorandum of association is passed and may be made on behalf of persons entitled to make the application by one or more of their number as they may appoint in writing for the purpose. No application may be made by shareholders voting in favor of the amendment.
APPRAISAL RIGHTS AND SHAREHOLDER SUITS
Under Bermuda law, in the event of an amalgamation of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who is not satisfied that fair value has been offered for such shareholder's shares may apply to a Bermuda court within one month of notice of the shareholders meeting to appraise the fair value of those shares.
Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or is illegal or would result in the violation of the company's memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company's shareholders than that which actually approved it.
When the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to a Bermuda court, which may make such order as it sees fit, including an order regulating the conduct of the company's affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.
CAPITALIZATION OF PROFITS AND RESERVES
Pursuant to our bye-laws, our board of directors may capitalize any part of the amount of our share premium or other reserve accounts or any amount credited to our profit and loss account or otherwise available for distribution by either: (1) by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro-rata (except in connection with the conversion of shares) to the shareholders; or (2) paying up in full partly paid shares of those shareholders who would have been entitled to such sums if they were distributed by way of dividend or distribution.
REGISTRAR OR TRANSFER AGENT
A register of holders of the common shares will be maintained by Codan Services Limited in Bermuda, and a branch register will be maintained in the United States by Mellon Investor Services L.L.C., who will serve as branch registrar and transfer agent.
UNTRACED SHAREHOLDERS
Our bye-laws provide that our board of directors may forfeit any dividend or other monies payable in respect of any shares which remain unclaimed for twelve years from the date when such monies became due for payment. In addition, we are entitled to cease sending dividend warrants and checks by post or otherwise to a shareholder if such instruments have been returned undelivered to, or left uncashed by, such shareholder on at least two consecutive occasions or, following one such occasion, reasonable inquires have failed to establish the shareholder's new address. This entitlement ceases if the shareholder claims a dividend or cashes a dividend check or a warrant.
CERTAIN PROVISIONS OF BERMUDA LAW
We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows us to engage in transactions in currencies other than
the Bermuda dollar, and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents who are holders of our common shares.
The Bermuda Monetary Authority has given its consent for the issue and free transferability of all of the common shares that are the subject of this offering to and between non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock exchange, which includes the New York Stock Exchange. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda Monetary Authority as to our performance or our creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or default of our business or for the correctness of any opinions or statements expressed in this prospectus. Certain issues and transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes require the specific consent of the Bermuda Monetary Authority.
In accordance with Bermuda law, share certificates are only issued in the names of companies, partnerships or individuals. In the case of a shareholder acting in a special capacity (for example as a trustee), certificates may, at the request of the shareholder, record the capacity in which the shareholder is acting. Notwithstanding such recording of any special capacity, we are not bound to investigate or see to the execution of any such trust. We will take no notice of any trust applicable to any of our shares, whether or not we have been notified of such trust.
SHAREHOLDER RIGHTS PLAN
Our board is planning to adopt a shareholder rights plan prior to the closing of this offering. Under the rights plan, one right will be issued and will attach to each outstanding common share. Each right will entitle the holder, in circumstances described below, to purchase from our company a unit consisting of one one-thousandth of a Series A Preference Share at an exercise price of $29.02 per right, subject to adjustment in certain events.
Initially, the rights will be attached to all outstanding common shares and will be transferred only with these shares. The rights will become exercisable and separately certificated only upon the distribution date, which will occur upon the earlier of the following:
- ten days after the date of a public announcement that a person or group of affiliated or associated persons (other than the company, any subsidiary of the company or any employee benefit plan of the company or such subsidiary) has acquired, obtained the right to acquire or otherwise obtained beneficial ownership of 20% or more of our outstanding common shares; and
- ten business days (or such later date as may be determined by action of our board of directors prior to any person or group of affiliated or associated persons acquiring, obtaining the right to acquire or otherwise obtaining beneficial ownership of 20% or more of our outstanding common shares) after the commencement or announcement of an intention to commence a tender offer or exchange offer, the consummation of which would result in a person or group of affiliated or associated persons acquiring, obtaining the right to acquire or otherwise obtaining beneficial ownership of 20% or more of our outstanding common shares.
As soon as practicable after the distribution date, separate certificates will be mailed to holders of record of common shares as of the close of business on the distribution date. From and after the distribution date, the separate certificates alone will represent the rights. Prior to the distribution date, all common shares issued, including the shares to be issued by us in this offering, will be issued with rights. After the distribution date, any common shares issued will be issued without rights.
The rights will expire in July 2004 unless earlier redeemed or exchanged by us as described below. The final expiration date under the rights agreement can also be extended by the affirmative vote of at least 66% of the shares voting to do so.
In the event that:
- we are the surviving or continuing company in a merger or amalgamation with a person or group of affiliated or associated persons that has acquired, obtained the right to acquire or otherwise obtained beneficial ownership of 20% or more of our outstanding common shares and our common shares remain outstanding after the completion of the merger or amalgamation, or
- any person or group of affiliated or associated persons acquires, obtains the right to acquire or otherwise obtains beneficial ownership of 20% or more of our outstanding common shares, or
- a person or group of affiliated or associated persons that has acquired, obtained the right to acquire or otherwise obtained beneficial ownership of 20% or more of our outstanding common shares engages in one or more "self-dealing" transactions as set forth in the rights plan, or
- during such time as there is a person or group of affiliated or associated persons that has acquired, obtained the right to acquire or otherwise obtained beneficial ownership of 20% or more of our outstanding common shares, an event occurs which results in the acquiring person's or group's ownership interest being increased by more than 1% (e.g., a reverse stock split),
then, each holder of a right will have the right to receive, upon exercise, Series A Preference Shares (or, in certain circumstances, cash, property or other securities of our company) having a value equal to two times the exercise price of the right; provided that following the occurrence of any of the events set forth above in this paragraph, all rights that are beneficially owned by the person or group of affiliated or associated persons that has acquired, obtained the right to acquire or otherwise obtained beneficial ownership of 20% or more of our outstanding common shares will be null and void.
In the event that, at any time following the tenth day after a person or group of affiliated or associated persons has acquired, obtained the right to acquire or otherwise obtained beneficial ownership of 20% of our outstanding common shares:
- we are acquired in a merger or amalgamation or other business combination transaction and we are not the surviving or continuing company (other than a merger or amalgamation described in the immediately preceding paragraph),
- any person consolidates, amalgamates or merges with us and all or part of our common shares are converted or exchanged for securities, cash or property of any other person, or
- 50% or more of our assets or earning power is sold or transferred,
then, each holder of a right shall have the right to receive, upon exercise, common stock of the ultimate parent of the acquiring person having a value equal to two times the exercise price of the right; provided that following the occurrence of any of the events set forth above in this paragraph, all rights that are beneficially owned by the person or group of affiliated or associated persons that has acquired, obtained the right to acquire or otherwise obtained beneficial ownership of 20% or more of our outstanding common shares will be null and void.
The purchase price payable, and the number of Series A Preference Shares, common shares or other securities issuable upon exercise of the rights are subject to adjustment from time to time to prevent dilution (a) in the event of a bonus issue on, or a subdivision, consolidation or reclassification of, the Series A Preference Shares, (b) upon the grant to holders of the Series A Preference Shares of some rights or warrants to subscribe for or purchase Series A Preference Shares at a price, or securities convertible into Series A Preference Shares with a conversion price, less than the then current market price of the Series A Preference Shares or (c) upon the distribution to the holders of the Series A Preference Shares of evidences of indebtedness, cash or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the purchase price will be required until cumulative adjustments amount to at least 1% of the purchase price. The company is not required to issue fractions of
the units of one one-thousandth of a Series A Preference Share. In lieu of fractional units, an adjustment in cash may be made based on the market price of the Series A Preference Shares prior to the date of exercise.
The number of outstanding rights and the number of units of one one-thousandths of a Series A Preference Share issuable upon exercise of each right are also subject to adjustment in the event of a subdivision of the common shares or a bonus issue of common shares or some other adjustments to the common shares which occur prior to the distribution date.
Any Series A Preference Shares purchased upon the exercise of the rights will not be redeemable and will be subordinate to any other preference shares that may be issued by the company. Each Series A Preference Share will be entitled to a minimum preferential quarterly dividend payment, or, if greater, an aggregate dividend per share of 1,000 times the dividend declared in respect of a common share. In the event of liquidation, the holders of Series A Preference Shares will be entitled to a minimum preferential liquidation payment, or, if greater, 1,000 times the per share amount paid in respect of a common share. Each Series A Preference Share will have 1,000 votes, subject to adjustment, and will generally vote together with holders of common shares as a single class. Finally, in the event of any merger, amalgamation, consolidation or other transaction in which common shares are exchanged, each Series A Preference Share will be entitled to receive 1,000 times the amount paid in respect of a common share. These rights are protected by antidilution provisions.
At any time prior to the earlier to occur of (a) the distribution date or
(b) the expiration of the rights, and under some other circumstances, our board
may redeem the rights in whole, but not in part, for nominal consideration
payable, at the option of our board of directors, in cash or common shares,
which redemption will be effective on an action of our board of directors. Our
board of directors, at its option, may exchange each right for (a) one
one-thousandth of a Series A Preference Share or (b) such number of units of one
one-thousandth of a Series A Preference Share as will equal the spread between
the market price of each such unit to be issued and the purchase price of such
unit.
All of the provisions of the rights agreement may be amended by our board of directors prior to the distribution date except that any reduction of the 20% thresholds described above or any extension of the final expiration date under the rights agreement requires the affirmative vote of at least 66% of the shares voting on a resolution to do so. After the distribution date, the provisions of the rights agreement may be amended by our board in order to cure any ambiguity, defect or inconsistency, to make changes which do not adversely affect the interests of holders of rights or, subject to some limitations, to shorten or lengthen any time period under the rights agreement. Until a right is exercised, the holder will have no rights as a shareholder, including, without limitation, the right to vote or to receive dividends.
The rights will have certain anti-takeover effects. The rights will cause substantial dilution to any person or group that attempts to acquire our company without the approval or our board. As a result, the overall effect of the rights may be to render more difficult or discourage any attempt to acquire our company, even if such acquisition may be in the interest of our shareholders. Because our board can redeem the rights, the rights will not interfere with a merger, amalgamation or other business combination approved by our board. Under our bye-laws, our board may not adopt any other shareholder rights plan or similar device or agreement without the affirmative vote of at least 66% of the shares voting on a resolution.
SHARES ELIGIBLE FOR FUTURE SALE
After this offering, we will have 81,980,000 common shares outstanding, assuming no exercise of the underwriters' over-allotment option and excluding 4,099,000 common shares reserved for issuance under our employee equity incentive plan. All of the common shares sold in this offering will be freely tradeable under the Securities Act, unless held by our "affiliates," as that term is defined by the SEC. In addition, all of the remaining common shares that will be held by the current shareholders of Bunge International Limited immediately after this offering who are not our affiliates will be freely tradeable under the Securities Act upon the expiration of the lock-up agreements described below.
Shares that are owned by our affiliates may be sold in the public market subject to the restrictions of Rule 144 under the Securities Act. To our knowledge, approximately 2,181,419 of our common shares will be beneficially owned by our directors, executive officers and other affiliates after this offering. In general, Rule 144 as currently in effect permits an affiliate who beneficially owns our common shares to sell in any three-month period a number of common shares that does not exceed the greater of:
- 1% of the number of common shares then outstanding, or approximately 819,800 common shares immediately after this offering, or
- the average weekly trading volume of the common shares on the New York Stock Exchange during the four calendar weeks immediately preceding the date on which such sale is made.
Sales under Rule 144 are subject to certain requirements relating to manner of sale, notice and availability of current public information about us.
We and our directors and executive officers and shareholders of Bunge International Limited have agreed with the underwriters pursuant to lock-up agreements that, subject to limited exceptions described in "Underwriters," for a period of 180 days after the date of this prospectus, we and they will not directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase or otherwise dispose of any common shares or any securities convertible into or exercisable or exchangeable for common shares, or in any manner transfer all or a portion of the economic consequences associated with the ownership of the common shares, or cause a registration statement covering any common shares to be filed, without the prior written consent of Morgan Stanley & Co. Incorporated. After the expiration of the lock-up agreements, these shares will be freely eligible for sale in the public market as described above. The underwriters do not have any intention or arrangement at the present time to release any of the common shares subject to lock-up agreements prior to the expiration of the lock-up period.
We have granted to the current shareholders of Bunge International Limited demand and piggyback registration rights under a registration rights agreement. The demand registration rights provide the holders with the right, subject to some conditions and limitations, to request that we effect a registration of all or a portion of their shares on up to three occasions over a three-year period beginning 180 days after the date of this prospectus. The piggyback registration rights provide the holders with the right, subject to some conditions and limitations, to include common shares owned by them in any registration of common shares made by us for our own account or the account of other shareholders over a five-year period beginning 180 days after the date of this prospectus.
We intend to file registration statements on Form S-8 covering the sale of the common shares issued under our employee equity incentive plan and, when adopted, our non-employee directors' equity incentive plan. Accordingly, common shares registered under those registrations will be available for sale in the public market upon issuance of common shares pursuant to those plans, unless those shares are subject to vesting restrictions or subject to limitation on resale by "affiliates" pursuant to Rule 144 and under the lock-up agreements described above.
TAXATION
BERMUDA TAX CONSEQUENCES
The following discussion is the opinion of Conyers Dill & Pearman, our special Bermuda tax counsel. At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares. We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not until March 28, 2016, be applicable to us or to any of our operations or to our shares or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property or leasehold interests in Bermuda held by us.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion, except for the specific discussion regarding Bunge's possible U.S. federal income tax characterization as a PFIC under the caption "--Passive Foreign Investment Company Status," is the opinion of Shearman & Sterling, our special federal tax counsel, as to the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our shares that may be relevant to you if you are a U.S. holder (as defined below). For purposes of this discussion, a U.S. holder is a beneficial owner of our shares that, for U.S. federal income tax purposes is (i) a U.S. citizen or resident alien individual, (ii) a corporation or other entity taxed as a corporation for U.S. federal income tax purposes, organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust if a court within the U.S. is able to exercise primary supervision over its administration, and one or more U.S. persons have the authority to control all of its substantial decisions.
This discussion does not address all of the U.S. federal income tax consequences that may be relevant to you in light of your particular circumstances, and does not discuss any aspect of state, local or non-U.S. tax law. Moreover, this discussion deals only with our shares that you will hold as capital assets (generally, property held for investment), and it does not apply if you are subject to special tax rules, such as banks, insurance companies, securities dealers, partnerships or other entities classified as partnerships for U.S. federal income tax purposes, tax-exempt organizations, persons that hold our shares as part of an integrated investment (including a straddle), persons owning, directly, indirectly or constructively, 10% or more of our voting stock and persons whose "functional currency" is not the U.S. dollar. This discussion is based on provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as now in effect, and all of which are subject to change, possibly with retroactive effect, and to different interpretations. If you are considering buying our shares, we urge you to consult your own tax advisor as to the tax consequences relevant to the ownership of our shares in light of your particular circumstances, including the effect of any state, local or non-U.S. laws.
DISTRIBUTIONS
A distribution of cash or property received by you in respect of our shares generally will be considered a taxable dividend to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). In the event that a distribution by us exceeds the amount of such current and accumulated earnings and profits, the excess will be treated first as a nontaxable return of capital to the extent of your tax basis in our shares, and thereafter as capital gain.
The gross amount of any taxable dividend will be subject to U.S. federal income tax as ordinary dividend income and will not be eligible for the corporate dividends-received deduction. For foreign tax
credit purposes, the dividend will be income from sources outside the United States. The limitation on foreign taxes eligible for the credit is calculated separately with respect to specific classes of income. For this purpose, dividends paid by us generally will constitute "passive income" or in the case of certain U.S. holders "financial services income". Taxable dividends paid in a currency other than the U.S. dollar will be included in your gross income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date you receive the dividend, regardless of whether such currency is actually converted into U.S. dollars. Gain or loss, if any, that you realize on a sale or other disposition of the foreign currency will be ordinary income or loss. We urge you to consult your own tax advisor concerning the possibility of foreign currency gain or loss if any such currency is not converted into U.S. dollars on the date of receipt.
DISPOSITIONS
Upon a sale or other taxable disposition of our shares, you will recognize gain or loss in an amount equal to the difference between the amount realized on the disposition and your adjusted tax basis in our shares. Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if you held our shares for more than one year at the time of disposition. Certain non-corporate U.S. holders (including individuals) are eligible for preferential rates of U.S. federal income taxation in respect of long-term capital gains. The deduction of capital losses is subject to certain limitations under the Code. Any gain or loss you recognize on a sale or other taxable disposition of our shares generally will be treated as derived from U.S. sources for U.S. federal income tax purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding and information reporting requirements may apply to you with respect to distributions by us, or to the proceeds of a sale or redemption of our shares. Under the backup withholding rules, we or any paying agent may be required to withhold tax from any such payment if you fail to furnish your correct taxpayer identification number, to certify that you are not subject to backup withholding, or to otherwise comply with the applicable requirements of the backup withholding rules. Certain U.S. holders (including, among others, corporations) are exempt from the backup withholding requirements. Any amounts withheld under the backup withholding rules generally may be claimed as a credit against your U.S. federal income tax liability and may entitle you to receive a refund provided that the required information is furnished to the Internal Revenue Service (the "IRS").
PASSIVE FOREIGN INVESTMENT COMPANY STATUS
Special U.S. federal income tax rules apply to U.S. persons owning shares of a "passive foreign investment company" (a "PFIC").
A non-U.S. corporation generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying relevant look-through rules with respect to the income and assets of subsidiaries, either:
- at least 75% of its gross income is "passive income"; or
- on average at least 50% of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income.
For this purpose, passive income generally includes, among other things, dividends, interest, rents, royalties, gains from the disposition of passive assets and gains from commodities transactions, other than gains derived from "qualified active sales" of commodities and "qualified hedging transactions" involving commodities, within the meaning of applicable Treasury regulations (the "Commodity Exception"). Based on certain estimates of our gross income and gross assets and relying on the Commodity Exception, we do not believe that we currently are a PFIC, and do not anticipate becoming a PFIC in the foreseeable future. However, since PFIC status will be determined by us on an annual basis and depends upon the
composition of our income and assets (including, among others, less than 25% owned equity investments), and the nature of our activities (including our ability to qualify for the commodities and similar exceptions), from time to time, there can be no assurance that we will not be considered a PFIC for any taxable year. Moreover, we will not obtain an opinion of counsel, and no ruling will be sought from the IRS, regarding our U.S. federal income tax characterization as a PFIC.
If we are treated as a PFIC for any taxable year during which a U.S. holder held our shares, certain adverse consequences could apply to the U.S. holder (SEE discussion below). For this reason, if we are treated as a PFIC for any taxable year, a U.S. holder of our shares may desire to make an election to treat us as a "qualified electing fund" (a "QEF") with respect to such U.S. holder. Generally, a QEF election should be made on or before the due date for filing the electing U.S. holder's U.S. federal income tax return for the first taxable year in which our shares are held by such U.S. holder and we are treated as a PFIC.
If a timely QEF election is made, the electing U.S. holder will be required to annually include in gross income (i) as ordinary income, a PRO-RATA share of our ordinary earnings, and (ii) as long-term capital gain, a PRO-RATA share of our net capital gain in either case, whether or not distributed by us. An electing U.S. holder that is a corporation will not be eligible for the dividends-received deduction in respect of such income or gain. In addition, in the event that we incur a net loss for a taxable year, such loss will not be available as a deduction to an electing U.S. holder, and may not be carried forward or back in computing our ordinary earnings and net capital gain in other taxable years.
In certain cases in which a QEF does not distribute all of its earnings in a taxable year, electing U.S. holders may also be permitted to elect to defer the payment of some or all of their U.S. federal income taxes on the QEF's undistributed earnings, subject to an interest charge on the deferred tax amount.
If we are treated as a PFIC for any taxable year during which a U.S. holder held our shares, we will provide to a U.S. holder, upon written request, all information and documentation that the U.S. holder is required to obtain in connection with its making a QEF election for U.S. federal income tax purposes.
In general, if a U.S. holder of our shares fails to make a timely QEF election (or mark-to-market election, see discussion below) for any taxable year that we are treated as a PFIC, the U.S. federal income tax consequences to such U.S. holder will be determined under the so-called "interest charge" method. Under such regime, (i) any gain derived from the disposition of PFIC stock (possibly including a gift, exchange in a corporate reorganization or grant as security for a loan), as well as any "excess distribution" that is received from the PFIC (I.E., a distribution that exceeds 125% of the average distributions from the shorter of: the prior three years, or the U.S. holder's holding period for the stock), would be treated as ordinary income that was earned ratably over each day in the U.S. holder's holding period for the PFIC stock, (ii) the portion of such gain or distribution that is allocable to prior taxable years, other than any year before we became a PFIC, would be subject to U.S. federal income tax at the highest rate applicable to ordinary income for the relevant taxable years, regardless of the tax rate otherwise applicable to the U.S. holder, and (iii) an interest charge would be imposed on the resulting U.S. federal income tax liability as if such liability represented a tax deficiency for the past taxable years, other than any year before we became a PFIC. In addition, a step-up in the tax basis of the PFIC stock may not be available upon the death of an individual U.S. holder.
IN MANY CASES, APPLICATION OF THE INTEREST CHARGE REGIME WILL HAVE SUBSTANTIALLY MORE ONEROUS U.S. FEDERAL INCOME TAX CONSEQUENCES THAN WOULD RESULT TO A U.S. HOLDER IF A TIMELY QEF ELECTION IS MADE. ACCORDINGLY, IF WE ARE TREATED AS A PFIC FOR ANY TAXABLE YEAR, WE URGE U.S. HOLDERS OF OUR SHARES TO CONSIDER CAREFULLY WHETHER TO MAKE A QEF ELECTION, AND THE CONSEQUENCES OF NOT MAKING SUCH AN ELECTION, WITH RESPECT TO AN INVESTMENT IN OUR SHARES
As an alternative to the QEF election, a U.S. holder of "marketable stock" in a PFIC may make a "mark-to-market" election, provided the PFIC stock is regularly traded on a "qualified exchange." Under applicable Treasury regulations, a "qualified exchange" includes a national securities exchange that is registered with the SEC or the national market system established under the Securities Exchange Act of 1934. Under applicable Treasury Regulations, PFIC stock traded on a qualified exchange is regularly traded on such exchange for any calendar year during which such stock is traded, other than in DE MINIMIS quantities, on at least 15 days during each calendar quarter. We cannot assure you that our stock will be treated as regularly traded stock in a PFIC.
If the mark-to-market election is made, the electing U.S. holder generally would (i) include in gross income, entirely as ordinary income, an amount equal to the difference between the fair market value of the PFIC stock as of the close of such taxable year and its adjusted basis, and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the PFIC stock over its fair market value at the end of the taxable year, but only to the extent of the amount previously included in income as a result of the mark-to-market election.
The mark-to-market election is made with respect to marketable stock in a PFIC on a shareholder-by-shareholder basis and, once made, can only be revoked with the consent of the IRS. Special rules would apply if the mark-to-market election is not made for the first taxable year in which a U.S. person owns stock of a PFIC.
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, Credit Suisse First Boston Corporation, Deutsche Banc Alex. Brown Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Prudential Securities Incorporated and Salomon Smith Barney Inc. are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of common shares set forth opposite the names of the underwriters below:
NUMBER OF
NAME SHARES
---- ----------
Morgan Stanley & Co. Incorporated...........................
Credit Suisse First Boston Corporation......................
Deutsche Banc Alex. Brown Inc...............................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Prudential Securities Incorporated..........................
Salomon Smith Barney Inc....................................
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Total...............................................
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You may contact the representatives of the underwriters at the addresses set forth below for information on how to purchase common shares in this offering. You may contact Morgan Stanley & Co. Incorporated at 1585 Broadway, New York, New York 10036; Credit Suisse First Boston Corporation at 11 Madison Avenue, New York, New York 10010; Deutsche Banc Alex. Brown Inc. at One South Street, Baltimore, Maryland 21202; Merrill Lynch, Pierce, Fenner & Smith Incorporated at 4 World Financial Center, 250 Vesey Street, New York, New York, 10080; Prudential Securities Incorporated at One New York Plaza, New York, New York 10292; and Salomon Smith Barney Inc. at 388 Greenwich Street, New York, New York 10013.
The underwriters are offering the common shares subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the common shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the common shares offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters' over-allotment option described below.
The underwriters initially propose to offer part of the common shares directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ a share under the public offering price. Any underwriter may allow, and such dealers may reallow, a concession not in excess of $ a share to other underwriters or to other dealers. After the initial offering of the common shares, the offering price and other selling terms may from time to time be varied by the representatives. It is anticipated that Morgan Stanley DW Inc., an affiliate of Morgan Stanley & Co. Incorporated, through Morgan Stanley Online, its online service, and CSFBdirect, an affiliate of Credit Suisse First Boston Corporation, may be a member of the syndicate or selling group and engage in electronic offers, sales and distribution of the shares being offered.
A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the lead manager to underwriters that may make Internet distributions on the same basis as other allocations.
Pursuant to the underwriting agreement, we have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of 2,640,000 additional common shares at the public offering price listed on the cover page of this prospectus, less underwriting
discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the common shares offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to specified conditions, to purchase about the same percentage of the additional common shares as the number listed next to the underwriter's name in the preceding table bears to the total number of common shares listed next to the names of all underwriters in the preceding table. If the underwriters' option is exercised in full, the total price to the public would be approximately $344.1 million, the total underwriters' discounts and commissions would be approximately $20.2 million and our total proceeds would be approximately $323.9 million.
The following table details the estimated offering expenses payable by us.
Securities and Exchange Commission registration fee......... $ 91,080
National Association of Securities Dealers, Inc. filing
fee....................................................... 30,500
New York Stock Exchange listing fee......................... 150,000
Printing and engraving expenses............................. 300,000
Legal fees and expenses..................................... 1,800,000
Accounting fees and expenses................................ 1,000,000
Transfer agent fees and expenses............................ 3,000
Miscellaneous............................................... 500,000
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Total................................................... $3,874,580
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The underwriters have agreed to reimburse some of Bunge's offering expenses.
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed five percent of the total number of common shares offered by them.
We have applied to list our common shares on the New York Stock Exchange under the symbol "BG".
We, our directors and executive officers and shareholders of Bunge International Limited who will own our common shares after this offering have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, they will not, during the period ending 180 days after the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of directly or indirectly, any common shares or any securities convertible into or exercisable or exchangeable for common shares; or
- enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common shares,
whether any transaction described above is to be settled by delivery of the common shares or such other securities, in cash or otherwise.
The restrictions described in the preceding paragraph do not apply to:
- the sale of the shares to the underwriters;
- the issuance by us of common shares upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing;
- issuances by us of common shares in connection with the merger or amalgamation with or acquisition of another company or the acquisition of the assets or property of a company and the related entry into a merger, amalgamation or acquisition agreement, so long as recipients of the common shares agree to be bound by the lock-up restrictions described in this prospectus for the remainder of the lock-up period; however, if we are unable to obtain signed, written lock-up agreements from the recipients of common shares in connection with a merger, amalgamation or acquisition as described in this bullet point, then we may only enter into a merger, amalgamation or
acquisition agreement, make a public announcement of the transaction and make the related filing of a registration statement but we may not make the related issuance of our common shares;
- the issuance by us of stock options, restricted stock or other awards granted pursuant to our employee equity incentive plan or non-employee directors' equity incentive plan; provided that such awards do not become exercisable or vest during such 180-day period;
- transactions by any person other than us relating to common shares or other securities acquired in open market transactions after the completion of this offering;
- transfers of common shares by any person other than us by gift, will or intestacy, including transfers to such person's family members or to a settlement or trust;
- transfers by any person other than us to affiliates (as defined in Regulation C under the Securities Act of 1933) of such person;
- transfers by any person other than us as a distribution to limited partners, members or shareholders of such person, and, in the case of a settlement or trust, to the trust beneficiaries;
- transfers occurring by operation of law;
- pledges of common shares by any person other than us to a bank or other financial institution; or
- transfers by any person other than us to other shareholders of Bunge that have executed the same lock-up agreements in connection with the offering,
provided, that any recipient, transferee or pledgee pursuant to the sixth through eleventh bullet points above who is not already bound by a lock-up agreement will be required to execute a lock-up agreement in substantially the same form covering the remainder of the 180-day period.
From time to time, Morgan Stanley & Co. Incorporated and Credit Suisse First Boston Corporation have provided, and continue to provide, investment banking services to us.
We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
In order to facilitate the offering of the common shares, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common shares. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is "covered" if the short position is no greater than the number of shares available for purchase by the underwriters under the over allotment option. The underwriters can close out a covered short sale by exercising the over allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over allotment option. The underwriters may also sell shares in excess of the over allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market after pricing that could adversely affect investors who purchase in the offering. As an additional means of facilitating the offering, the underwriters may bid for, and purchase, common shares in the open market to stabilize the price of our common shares. The underwriting syndicate may also reclaim selling concessions allowed to an underwriter or a dealer for distributing the common shares in the offering, if the syndicate repurchases previously distributed common shares to cover syndicate short positions or to stabilize the price of the common shares. These activities may raise or maintain the market price of the common shares above independent market levels. The underwriters are not required to engage in these activities, and may end any of these activities at any time.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the common shares. The initial public offering price will be determined by negotiations between us and the representatives. The material factors to be considered in determining the initial public offering price will be:
- our sales, earnings and results of operations in recent periods;
- our current financial position;
- our future prospects and our industries in general;
- the price-earnings ratios, price-sales ratios and market prices of securities; and
- financial and operating information of companies engaged in businesses similar to ours.
Because some of the underwriters are lenders under the commercial paper program to be repaid by us and will receive more than 10% of the net proceeds of this offering, those underwriters may be deemed to have a "conflict of interest" under Rule 2710(c)(8) of the Conduct Rules of the National Association of Securities Dealers. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 2720 of the Conduct Rules. In accordance with this rule, the initial public offering price can be no higher than that recommended by a "qualified independent underwriter" meeting certain standards. In accordance with this requirement, Morgan Stanley & Co. Incorporated has assumed the responsibilities of acting as a qualified independent underwriter and will recommend a price in compliance with the requirements of Rule 2720. Morgan Stanley & Co. Incorporated, in its role as qualified independent underwriter, has performed due diligence investigations and reviewed and participated in the preparation of this prospectus and the registration statement of which this prospectus is a part. Morgan Stanley & Co. Incorporated will receive no compensation for acting in this capacity; however, we have agreed to indemnify Morgan Stanley & Co. Incorporated for acting as a qualified independent underwriter against specified liabilities under the Securities Act.
ENFORCEMENT OF CIVIL LIABILITIES
We are a Bermuda exempted company. As a result, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. Most of our directors and officers and some of the named experts referred to in this prospectus are not residents of the United States, and a substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States and to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. We have been advised by our Bermuda counsel, Conyers Dill & Pearman, that uncertainty exists as to whether courts in Bermuda will enforce judgments obtained in other jurisdictions (including the United States) against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.
We have expressly submitted to the jurisdiction of the U.S. federal and New York state courts sitting in the City of New York for the purpose of any suit, action or proceeding arising out of this offering, and we have appointed our principal executive offices in White Plains, New York to accept service of process in any such action.
This prospectus has been filed with the Registrar of Companies in Bermuda pursuant to Part III of the Companies Act 1981 of Bermuda. The Bermuda Monetary Authority has given its consent for the issue and free transferability of all of the common shares that are the subject of this offering to and between non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock exchange, which includes the New York Stock Exchange. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda Monetary Authority as to our performance or our creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or default of our business or for the correctness of any opinions or statements expressed in this prospectus. Certain issues and transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes require the specific consent of the Bermuda Monetary Authority.
LEGAL MATTERS
The validity of the common shares offered in this prospectus and other legal matters relating to Bermuda law will be passed upon for us by Conyers Dill & Pearman, Hamilton, Bermuda. Nicholas P. Johnson, a partner of Conyers Dill & Pearman, serves as our corporate secretary. Various U.S. law matters relating to this offering will be passed upon for us by Shearman & Sterling, New York, New York, special U.S. counsel, and for the underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements of Bunge Limited and subsidiaries as of December 31, 1999 and 2000 and for each of the three years in the period ended December 31, 2000 included in this prospectus have been audited by Deloitte & Touche, independent auditors, as stated in their report appearing herein and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Fertifos Administracao e Participacao S.A. and subsidiaries as of December 31, 1999 and March 31, 2000 and for the year ended December 31, 1999 and the three month period ended March 31, 2000 and the consolidated financial statements of Manah S.A. and subsidiaries as of December 31, 1999 and March 31, 2000 and for the year ended December 31, 1999 and the three month period ended March 31, 2000 included in this prospectus have been audited by Deloitte Touche Tohmatsu, independent auditors, as stated in their reports appearing herein and have been so
included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
You may contact Deloitte & Touche at Corner House, Church-Parliament Streets, Hamilton HM12, Bermuda and Deloitte Touche Tohmatsu at Rua Bela Cintra, 881, CEP-01415-910, Sao Paulo-S.P., Brazil.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the common shares to be sold in this offering. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information pertaining to us and our common shares to be sold in this offering, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit. The registration statement, including exhibits and schedules thereto, may be inspected without charge at the SEC's public reference rooms at:
- Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
- Seven World Trade Center, 13th Floor, New York, New York 10048; or
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of all or any part of the registration statement may be obtained from such office after payment of fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. In addition, the SEC maintains an Internet web site at www.sec.gov, from which you can electronically access the registration statement and its exhibits. When the common shares begin trading on the New York Stock Exchange, copies of reports and other information may also be inspected in the offices of the NYSE, 20 Broad Street, New York, New York 10005.
As a result of this offering, we will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and will file reports, including annual reports on Form 20-F, and other information with the SEC. However, as a foreign private issuer, we are exempt from the rules under the Exchange Act relating to the furnishing and content of proxy statements and relating to short swing profits reporting and liability. In addition, we are not required to file annual, quarterly or current reports and financial statements as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we will file, as long as we are required to do so, within 180 days after the end of each fiscal year, an annual report on Form 20-F containing consolidated financial statements audited by an independent public accounting firm. We also intend to file quarterly reports on Form 6-K with the SEC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
--------------------------
BUNGE LIMITED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets at December 31, 1999 and 2000... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1999 and 2000.......................... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1999 and 2000.......................... F-5
Consolidated Statements for Shareholder's Equity for the
Years Ended December 31, 1998, 1999, and 2000............. F-6
Notes to Consolidated Financial Statements.................. F-7
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Consolidated Interim Balance Sheets at December 31, 2000 and
March 31, 2001............................................ F-32
Consolidated Interim Statements of Income for the Three
Months Ended March 31, 2000 and 2001...................... F-33
Consolidated Interim Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 2001...................... F-34
Notes to Consolidated Interim Financial Statements.......... F-35
MANAH S.A. AND SUBSIDIARIES
Independent Auditors' Report................................ F-42
Consolidated Balance Sheets at December 31, 1999 and March
31, 2000.................................................. F-43
Consolidated Statements of Income for the Year Ended
December 31, 1999 and the Three Months Ended March 31,
2000...................................................... F-44
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1999 and the Three Months Ended March 31,
2000...................................................... F-45
Consolidated Statements of Shareholders' Equity for the Year
Ended December 31, 1999 and the Three Months Ended March
31, 2000.................................................. F-46
Notes to Consolidated Financial Statements.................. F-47
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
Independent Auditors' Report................................ F-54
Consolidated Balance Sheets at December 31, 1999 and March
31, 2000.................................................. F-55
Consolidated Statements of Income for the Year Ended
December 31, 1999 and the Three Months Ended March 31,
2000...................................................... F-56
Consolidated Statements of Cash Flows for the Year Ended
December 31, 1999 and the Three Months Ended March 31,
2000...................................................... F-57
Consolidated Statements of Shareholders' Equity for the Year
Ended December 31, 1999 and the Three Months Ended March
31, 2000.................................................. F-58
Notes to Consolidated Financial Statements.................. F-59
|
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Bunge Limited and Subsidiaries
Bermuda
We have audited the accompanying consolidated balance sheets of Bunge Limited and Subsidiaries (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholder's equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the companies at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE Hamilton, Bermuda April 2, 2001 (July 12, 2001 as to the effects of the share exchange and share dividend described in Note 18 and 20) |
BUNGE LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNITED STATES DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
DECEMBER 31,
-------------------------
1999 2000
-------- --------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 363 $ 423
Marketable securities..................................... -- 61
Trade accounts receivable (less allowance of $57 and
$59)...................................................... 511 873
Inventories (Note 4)...................................... 923 1,311
Recoverable taxes......................................... 152 225
Deferred income taxes (Note 7)............................ 9 21
Other current assets (Note 5)............................. 483 513
------ ------
Total current assets........................................ 2,441 3,427
------ ------
Property, plant and equipment, net (Note 6)................. 1,268 1,859
Goodwill and other intangible assets, net................... 206 200
Investments in affiliates................................... 166 54
Deferred income taxes (Note 7).............................. 146 169
Receivables from related parties (Note 12).................. 239 --
Other non-current assets.................................... 145 145
------ ------
TOTAL ASSETS................................................ $4,611 $5,854
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Short-term debt (Note 9).................................. $ 708 $1,268
Current portion of long-term debt (Note 10)............... 328 254
Trade accounts payable.................................... 748 839
Other current liabilities................................. 362 385
------ ------
Total current liabilities................................... 2,146 2,746
------ ------
Long-term debt (Note 10).................................... 793 1,003
Deferred income taxes (Note 7).............................. 37 141
Payable to related party (Note 12).......................... 41 --
Other non-current liabilities (Note 13)..................... 214 282
Commitments and contingencies (Note 13)
Minority interest in subsidiaries (Note 14)................. 183 543
Shareholder's equity:
Common stock, par value $.01; 240,000,000 authorized,
64,380,000 issued and outstanding shares and additional
paid-in capital......................................... 1,303 1,429
Shareholder receivable (Note 12).......................... -- (126)
Retained earnings......................................... 297 309
Accumulated other comprehensive loss...................... (403) (473)
------ ------
Total shareholder's equity.................................. 1,197 1,139
------ ------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................. $4,611 $5,854
====== ======
|
The accompanying notes are an integral part of these consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNITED STATES DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1999 2000
----------- ----------- -----------
Net sales............................................. $ 9,103 $ 8,075 $ 9,667
Cost of goods sold.................................... 8,433 7,463 8,935
Impairment and restructuring charges (Note 16)........ -- -- 49
----------- ----------- -----------
GROSS PROFIT.......................................... 670 612 683
Selling, general and administrative expenses.......... 374 332 387
----------- ----------- -----------
INCOME FROM OPERATIONS................................ 296 280 296
Non-operating income (expense)--net (Note 17)......... (120) (296) (225)
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX, MINORITY INTERESTS,
AND DISCONTINUED OPERATIONS......................... 176 (16) 71
Income tax (expense) benefit (Note 7)................. (43) 27 (12)
----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST AND DISCONTINUED
OPERATIONS.......................................... 133 11 59
Minority interest..................................... (33) 4 (37)
----------- ----------- -----------
INCOME BEFORE DISCONTINUED OPERATIONS................. 100 15 22
Discontinued operations (Note 3)
Loss from discontinued operations, net of tax
benefit of $1 (2000) $3 (1999) and $7 (1998)........ (8) (20) (10)
----------- ----------- -----------
NET INCOME (LOSS)..................................... $ 92 $ (5) $ 12
=========== =========== ===========
EARNINGS PER COMMON SHARE--BASIC AND DILUTED:
Income before discontinued operations............... $ 1.55 $ .23 $ .34
Discontinued operations............................. (.12) (.31) (.15)
----------- ----------- -----------
Net income (loss) per share........................... $ 1.43 $ (.08) $ .19
=========== =========== ===========
Weighted-average number of shares outstanding--basic
and diluted......................................... 64,380,000 64,380,000 64,380,000
|
The accompanying notes are an integral part of these consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNITED STATES DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1999 2000
--------- --------- ---------
OPERATING ACTIVITIES
Net income (loss)........................................... $ 92 $ (5) $ 12
Adjustment to reconcile net income to cash provided by (used
for) operating activities:
Unrealized foreign exchange (gain) loss................... 85 74 (16)
Unrealized gain on marketable securities.................. -- -- (6)
Bad debt expense.......................................... 16 15 7
Depreciation, depletion and amortization.................. 144 101 149
Deferred income taxes..................................... (2) (29) (17)
Impairment and restructuring charges...................... -- -- 44
Gain on sale of property, plant and equipment and
investments............................................. (16) -- (6)
Discontinued operations................................... 8 20 10
Equity in earnings of affiliates.......................... (11) -- (4)
Minority interest......................................... 33 (4) 37
Changes in operating assets and liabilities, excluding the
effects of acquisitions:
Marketable securities................................... (53) 54 (7)
Trade accounts receivable............................... (61) (67) (336)
Inventories............................................. 20 (20) (311)
Recoverable taxes....................................... (10) 28 (72)
Trade accounts payable.................................. (26) (138) (6)
Other--net.............................................. (69) 8 1
------ ----- -----
Cash provided by (used for) operating activities...... 150 37 (521)
INVESTING ACTIVITIES
Payments made for capital expenditures...................... (279) (140) (184)
Proceeds from disposal of property, plant and equipment..... 103 7 7
Business acquisitions, net of cash acquired................. (146) (2) (78)
Investments in affiliates................................... -- (12) (2)
(Investments in) repayments of related party loans.......... (207) 39 166
------ ----- -----
Cash used for investing activities.................... (529) (108) (91)
FINANCING ACTIVITIES
Net change in short-term debt............................... 553 (231) 612
Proceeds from long-term debt................................ 271 388 389
Repayment of long-term debt................................. (888) (501) (447)
Net proceeds from issuance of redeemable preferred stock by
subsidiary................................................ -- -- 163
Dividends paid to shareholder............................... (20) -- --
Dividends paid to minority interest......................... -- (3) (18)
Capital contributions from shareholder...................... 39 93 --
Capital contributions from minority interest................ -- 1 10
------ ----- -----
Cash (used for) provided by financing activities...... (45) (253) 709
Effect of exchange rate changes on cash and cash
equivalents............................................... (83) (177) (37)
------ ----- -----
Net (decrease) increase in cash and cash equivalents........ (507) (501) 60
Cash and cash equivalents, beginning of year................ 1,371 864 363
------ ----- -----
Cash and cash equivalents, end of year...................... $ 864 $ 363 $ 423
====== ===== =====
|
The accompanying notes are an integral part of these consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(UNITED STATES DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
COMMON
STOCK
AND ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN SHAREHOLDER RETAINED COMPREHENSIVE SHAREHOLDER'S COMPREHENSIVE
SHARES CAPITAL RECEIVABLE EARNINGS INCOME (LOSS) EQUITY INCOME (LOSS)
---------- ---------- ----------- -------- -------------- ------------- --------------
Balances, at January 1,
1998....................... 64,380,000 $1,223 $ -- $230 $ -- $1,453
---------- ------ ----- ---- ----- ------
Comprehensive income--1998:
Net income................. -- -- -- 92 -- 92 $ 92
Other comprehensive income
(loss):
Foreign exchange
translation
adjustment............. -- -- -- -- (42) -- (42)
Recognition of deferred
tax assets on change in
functional currency.... -- -- -- -- 25 -- 25
----- -----
Total comprehensive income
(loss)................... -- -- -- -- (17) (17) $ 75
----- =====
Dividend paid................ -- -- -- (20) -- (20)
Return of capital
(Note 3)................... -- (52) -- -- -- (52)
Capital contribution
(Note 12).................. -- 39 -- -- -- 39
---------- ------ ----- ---- ----- ------
Balances, December 31,
1998....................... 64,380,000 1,210 -- 302 (17) 1,495
---------- ------ ----- ---- ----- ------
Comprehensive loss--1999:
Net loss................... -- -- -- (5) -- (5) $ (5)
Other comprehensive loss:
Foreign exchange
translation
adjustment............. -- -- -- -- (386) -- (386)
----- -----
Total comprehensive loss... -- -- -- -- (386) (386) $(391)
----- =====
Capital contribution
(Note 12).................. -- 93 -- -- -- 93
---------- ------ ----- ---- ----- ------
Balances, December 31,
1999....................... 64,380,000 1,303 -- 297 (403) 1,197
---------- ------ ----- ---- ----- ------
Comprehensive income (loss)--
2000:
Net income................. -- -- -- 12 -- 12 $ 12
Other comprehensive loss:
Foreign exchange
translation
adjustment............. -- -- -- -- (70) -- (70)
----- -----
Total comprehensive loss... -- -- -- -- (70) (70) $ (58)
----- =====
Capital contribution
(Note 12).................. -- 126 (126) -- -- --
---------- ------ ----- ---- ----- ------
Balances, December 31,
2000....................... 64,380,000 $1,429 $(126) $309 $(473) $1,139
========== ====== ===== ==== ===== ======
|
The accompanying notes are an integral part of these consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES GENERAL
DESCRIPTION OF BUSINESS--Bunge Limited is a Bermuda holding company incorporated in May 1995 and is a wholly-owned subsidiary of Bunge International Limited ("Bunge International"), a privately held Bermuda company.
Bunge Limited and Subsidiaries (collectively, "Bunge") is an integrated,
global agribusiness and food company with primary operations in North and South
America and worldwide distribution capabilities. Bunge operates in eight
business segments, which are aggregated into five reporting segments:
agribusiness, fertilizer, edible oil products, wheat milling and bakery products
and other.
AGRIBUSINESS--Bunge's agribusiness activities include grain origination, oilseed processing and international marketing. Bunge's primary grain origination and oilseed processing assets are located in the United States, Brazil and Argentina.
FERTILIZER--Bunge's fertilizer segment is involved in every stage of the fertilizer business, from mining of raw materials to sales of mixed fertilizer formulas. Bunge's fertilizer activities are located in Brazil.
EDIBLE OIL PRODUCTS--Bunge's edible oil products segment consists of producing and selling edible oil products, such as shortenings and oils, margarine, mayonnaise and other products derived from refined vegetable oil. Bunge's edible oil products segment is located in the United States and in Brazil.
WHEAT MILLING AND BAKERY PRODUCTS--Bunge's wheat milling and bakery products segment consists of producing and selling flours, bakery mixes and baked goods. Bunge's wheat milling and bakery products segment is located in the United States and in Brazil.
OTHER--The other segment includes the soy ingredients business and the corn products business. The soy ingredients business consists of producing and selling soy functional ingredients and nutraceuticals. The corn products business consists of producing and selling products derived from corn.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which Bunge exercises control and for which control is other than temporary. Intercompany transactions and balances are eliminated in consolidation. Bunge has no non-consolidated majority owned subsidiaries.
Investments in 20% to 50% affiliates in which Bunge has the ability to exercise significant influence are accounted for by the equity method of accounting whereby the investment is carried at acquisition cost, plus Bunge's equity in undistributed earnings or losses since acquisition. Investments in less than 20% owned affiliates are accounted for by the cost method.
Bunge periodically reviews its non-current investments for which fair value is less than the carrying value to determine if the decline in value is other than temporary. If the decline in value is judged to be other than temporary, the carrying value of the investment is written down to fair value. The amount of any write-down is included in the results of operations.
In 1998, Bunge International announced its intention to segregate certain of its agribusiness related subsidiaries into Bunge. Consequently, Bunge International contributed certain subsidiaries to Bunge and arranged the divestment of others. Simultaneously, Bunge formalized its plan to divest certain divisions of the subsidiaries contributed by Bunge International (see Note 3). The planned legal reorganization was completed in 2000. The consolidated financial statements reflect the results of operations, financial
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES GENERAL
(CONTINUED)
position, changes in shareholder's equity and cash flows of the subsidiaries
that have been contributed to Bunge on an as if pooling basis for all periods
presented.
General corporate overhead cost incurred by Bunge International on behalf of Bunge have been allocated to Bunge based on an assessment of the actual expenses incurred to support Bunge's operations. The costs allocated to Bunge were $22 million, $25 million, and $20 million in 2000, 1999 and 1998, respectively, and are reported in selling, general and administrative expenses in the consolidated statements of income. The costs of these services allocated to Bunge are not necessarily indicative of the costs that would have been incurred if Bunge had performed these functions as a stand-alone entity. Bunge believes the allocation method is reasonable.
USE OF ESTIMATES AND CERTAIN CONCENTRATIONS--The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and require management to make certain estimates and assumptions. These may affect the reported amounts of assets and liabilities at the date of the financial statements. They may also affect the reported amounts of revenues and expenses during the reporting period. Amounts affected include, but are not limited to, allowances for doubtful accounts, useful lives of property, plant and equipment and intangible assets, contingent liabilities, income tax valuation allowance, other accrued expenses and fair value of financial instruments. Actual amounts may vary from those estimates.
The availability and price of agricultural commodities used in Bunge's operations are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, changes in global demand created by population growth and higher standards of living, and global production of similar and competitive crops.
Bunge has a significant portion of its operations in the United States and Brazil, which represented 52% and 40%, respectively, of consolidated net sales in 2000.
TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS--The functional currency of all foreign subsidiaries of Bunge is the local currency and, as such, amounts included in the consolidated statements of income are translated at rates which approximate actual exchange rates at the date of the transaction (weighted average rates). Assets and liabilities are translated at year-end exchange rates and resulting foreign exchange translation adjustments are recorded in the consolidated balance sheets as a component of accumulated other comprehensive income (loss).
In July 1997, the Brazilian economy ceased to be considered hyperinflationary. As a result, Bunge's Brazilian operations began to use the Brazilian REAL as their functional currency effective January 1, 1998. As a result of conversion to the Brazilian REAL as the functional currency Bunge recognized a deferred tax asset of $25 million in other comprehensive income related to previously unrecognized deferred tax assets on book to tax basis differences on long-lived assets.
FOREIGN CURRENCY TRANSACTIONS--Monetary assets and liabilities of Bunge and its subsidiaries denominated in currencies other than their functional currency are remeasured into their respective functional currencies at exchange rates in effect at the balance sheet date. The resulting exchange gains or losses are included in the consolidated statements of income.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include time deposits and readily marketable securities with original maturity dates of three months or less.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES GENERAL
(CONTINUED)
MARKETABLE SECURITIES--Marketable securities are classified as trading
securities and are reported at fair value based on quoted market prices with
unrealized gains and losses included in non-operating expenses--net in the
consolidated statements of income.
DERIVATIVES--Bunge enters into agricultural commodity derivative contracts, including exchange-traded futures and options, to hedge its related inventories, purchase and sale contracts and production requirements. These contracts are predominantly settled in cash.
For those contracts that hedge inventories, the contracts are recorded at market values as a component of inventory with the associated changes in market values recorded as a component of costs of goods sold.
Bunge's oilseed processing business defers and reflects commodity contract gains and losses, which hedge anticipated transactions, as adjustments to the basis of underlying hedge commodities purchased; gains or losses are recognized in the statement of earnings as a component of cost of goods sold upon sale of the hedge commodity.
In general, derivatives used as hedges must be effective at reducing the
risk associated with the exposure being hedged and must be designated as a hedge
at the inception of the contract. Changes in market values of derivative
instruments must be highly correlated with changes in market value of underlying
hedged items both at inception of the hedge and over the life of the hedge
contract. Deferred gains or losses related to any instrument 1) designated, but
ineffective as a hedge of existing assets, liabilities, or firm commitments, or
2) designated as a hedge of an anticipated transaction which is no longer likely
to occur, are recognized immediately in the statement of earnings.
Bunge also enters into derivative financial instruments, including foreign currency swaps and purchased call options to limit exposures to changes in foreign currency exchange rates with respect to its recorded foreign currency denominated assets and liabilities. Realized and unrealized gains and losses on foreign exchange swap contracts and changes in the intrinsic value of option contracts are recognized currently as a component of foreign exchange in the consolidated statements of income. The forward rate differential on swaps and the time value premium of the options are recognized over the life of the contract.
Bunge does not enter into derivative contracts for purposes of trading.
INVENTORIES--Inventories in the agribusiness segment, which consist of merchandisable agricultural commodities, are stated at market value (net realizable value) adjusted for gains and losses on forward purchase and sale contracts and exchange traded futures. The merchandisable agricultural commodities are interchangeable, have immediately quoted market prices, may be sold without significant further processing and have predictable insignificant costs of disposal. Changes in the market values of merchandisable agricultural commodities inventories are recognized in earnings immediately as a component of cost of goods sold.
Inventories in the fertilizer and the other business segments are stated at the lower of cost or market. All other inventories are stated at the lower of cost or market. Cost is determined using the weighted-average cost method.
RECOVERABLE TAXES--Recoverable taxes represent Value Added Taxes paid on the acquisition of raw materials and other services which can be offset against similar future taxes due on sales.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES GENERAL
(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT, NET--Property, plant and equipment net is
stated at cost less accumulated depreciation and depletion. Major renewals and
improvements are capitalized, while maintenance and repairs are expensed as
incurred. Depreciation is computed on the straight-line method based on the
estimated useful lives of the assets. Included in property, plant, and equipment
are mining properties that are stated at cost less accumulated depletion.
Depletion is computed using the unit-of-production method based on proven and
probable reserves. Useful lives for property, plant and equipment are as
follows:
YEARS
--------
Buildings................................................... 10-50
Machinery and equipment..................................... 7-15
Furniture, fixtures and other............................... 3-10
|
Bunge capitalizes interest on borrowings during the construction period of major capital projects. The capitalized interest is recorded as part of the asset to which it relates and is depreciated over the asset's estimated useful life.
GOODWILL AND OTHER INTANGIBLE ASSETS, NET--Goodwill relates to the excess of the purchase price over the fair value of tangible and identifiable intangible net assets acquired in an acquisition. It is amortized on a straight-line basis over its estimated useful life of 40 years. Other intangible assets include brands and trademarks recorded at fair value at the date of acquisition. They are amortized on a straight-line basis over their estimated useful lives, ranging from 10 to 40 years. Accumulated amortization for goodwill, and other intangible assets was $42 million and $34 million at December 31, 2000 and 1999, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS--Bunge reviews for impairment its long lived assets and identified intangibles whenever events or changes in circumstances indicate that carrying amounts of an asset may not be recoverable. In performing the review for recoverability, Bunge estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest changes) is less than the carrying amount of the asset, an impairment loss is recognized; otherwise, no impairment loss is recognized. Measurement of an impairment loss to be recognized for long-lived assets and identifiable intangibles that Bunge expects to hold and use is based on the excess of carrying value over the fair value of the asset.
Long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
The recoverability of goodwill not identified with impaired assets is evaluated on the basis of management's estimates of the future undiscounted cash flows associated with the related acquired business.
STOCK BASED COMPENSATION--Bunge uses APB Opinion 25 and FIN 28 to account for stock based compensation, accruing costs over the vesting/performance period and adjusting costs for subsequent changes in the fair market value of the awards.
EARNINGS PER SHARE--Basic earnings per common share (EPS) amounts are computed by dividing consolidated net income by the weighed average number of common shares outstanding (64,380,000 for 2000, 1999 and 1998). Diluted EPS amounts are computed assuming the issuance of common stock for all potentially dilutive securities outstanding. There were no potentially dilutive securities outstanding for the years ended December 31, 2000, 1999, and 1998.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES GENERAL
(CONTINUED)
INCOME TAXES--Income tax expenses are recognized based on the tax
jurisdictions within which Bunge's subsidiaries operate. Under current Bermuda
law, Bunge is not required to pay taxes in Bermuda on either income or capital
gains. The major tax jurisdictions in which Bunge operates are the U.S. and
Brazil. The provision for income taxes includes income taxes currently payable
and deferred income taxes arising as a result of temporary differences between
financial and tax reporting. Deferred tax assets are offset by valuation
allowances if it is determined that realization is unlikely.
REVENUE RECOGNITION--Sales of agricultural commodities, fertilizers and all other products are recognized as risk and title to the product transfer to the customer, which occurs at the time the shipment is made. Net sales are gross sales less discounts related to promotional programs and sales taxes.
Fertilizer products delivered under secured advances to suppliers of agricultural commodities, which are repaid through the delivery of soybeans, are accounted for as sales at the date of delivery of the fertilizer product. The value of the sale is determined based upon the fair value of the fertilizer product. Bunge recorded sales of fertilizer products sold under secured advances to suppliers totaling $78 million, $41 million and $28 million in 2000, 1999 and 1998, respectively, as a component of net sales. Bunge has no standing barter agreements. Had these advances been made in cash rather than fertilizer, consolidated operating cash flows would have been reduced by $34 million, $16 million and $30 million in 2000, 1999 and 1998, respectively.
RESEARCH AND DEVELOPMENT--Research and development costs are expensed as incurred. Research and development expenses were $5 million, $4 million and $6 million in 2000, 1999 and 1998, respectively.
NEW ACCOUNTING PRONOUNCEMENTS--Effective January 1, 2001, Bunge will adopt Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standard ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 133 established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. As a result of this adoption, Bunge will record, in the first quarter of 2001, an adjustment to income as a cumulative effect of change in accounting principle of $7 million, net of $4 million tax expense, for the fair value of previously unrecognized derivative instruments. Bunge will also record an adjustment to other comprehensive income (loss) of $(3) million, net of $2 million tax benefit, for derivatives which hedge the variable cash flows of certain forecasted transactions, which were previously classified in inventory.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101, as amended, Revenue Recognition in Financial Statements ("SAB 101"), which provides an interpretation of when the revenue recognition criteria have been met. If a transaction is within the scope of specific authoritative literature that provides revenue recognition guidance, that literature should continue to be applied. However, in the absence of authoritative literature addressing a specific arrangement or a specific industry, SAB 101 provides additional guidance as to the criteria applied by the SEC. The additional guidance of SAB 101 did not have any effect on Bunge's revenue recognition policies.
In March 2000, the FASB issued Interpretation No. 44: Accounting for Certain Transactions Involving Stock Compensation--an Interpretation of APB 25 ("FIN 44"). This Interpretation clarifies (a) the definition of an employee for purposes of applying Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a non-compensatory plan, (c) the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES GENERAL
(CONTINUED)
exchange of stock compensation awards in a business combination. The adoption of
FIN 44 did not have an effect on Bunge's financial position or results of
operations.
2. BUSINESS ACQUISITIONS
BUNGE FERTILIZANTES S.A.--In July 1998, Bunge affected a merger, through a share exchange, between two of its subsidiaries resulting in the acquisition of Fertisul S.A., a Brazilian fertilizer company, by Fertilizantes Serrana S.A. The shareholders of Fertisul S.A. were given a put right, which expired 30 days after the date of the merger, for their interest in the combined entity. Bunge has accounted for the merger as an acquisition of a minority interest. The fair value of the consideration given, including the cash paid on the exercised put rights of $15 million, was $27 million. Subsequent to the merger, Bunge had a 91% interest in the combined entity Fertilizantes Serrana S.A. No goodwill was recorded as a result of the above transactions.
In April 2000, Bunge acquired a 21% interest in, representing 57% of the voting stock and thus control of, Manah S.A. ("Manah"), a Brazilian fertilizer company for $47 million in cash, net of cash acquired of $36 million.
In August 2000, Bunge affected a merger, through a share exchange, between two of its subsidiaries resulting in the acquisition of Fertilizantes Serrana S.A. by Manah. The shareholders of Fertilizantes Serrana S.A. were given a put right, which expired unexercised 30 days after the date of the merger, for their interest in the combined entity. Bunge has accounted for the merger as an acquisition of a minority interest. The fair value of the consideration given was $53 million. Subsequent to the transaction Bunge had a 72% interest in the combined entity that was renamed Bunge Fertilizantes S.A.
Prior to the acquisition, both Bunge and Manah had an equity investment in Fertifos Administracao e Participacao S.A and subsidiaries ("Fosfertil"). As a result of the acquisition of Manah, Bunge obtained a controlling interest in Fosfertil, a Brazilian phosphate mining company and producer of intermediary fertilizer products. Bunge has consolidated the results of operations of Manah and Fosfertil since April 2000.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BUSINESS ACQUISITIONS (CONTINUED) The following table summarizes the allocation of the purchase price in the April 2000 Manah acquisition, the August 2000 merger of Fertilizantes Serrana S.A. and Manah, and the consolidation of Fosfertil:
CALCULATION OF PURCHASE PRICE:
Cash paid................................................. $ 83
Shares issued............................................. 53
Current liabilities assumed............................... 288
Other liabilities assumed................................. 417
-----
$ 841
=====
ALLOCATION OF PURCHASE PRICE:
Current assets............................................ $ 340
Property, plant and equipment (excluding mining
properties)............................................... 542
Mining properties......................................... 204
Other assets.............................................. 50
Minority interest......................................... (179)
-----
957
Previous net investment in Fosfertil under the equity
method.................................................... (116)
-----
$ 841
=====
|
BUNGE ALIMENTOS S.A.--In September 2000, Bunge affected a merger, through a share exchange, between two of its subsidiaries resulting in the acquisition of Santista Alimentos S.A. ("Santista"), representing Bunge's Brazilian edible oil products and wheat milling and bakery operations, by Ceval Alimentos S.A. ("Ceval"), representing Bunge's Brazilian agribusiness operations. The shareholders of Santista were given a put right, which expired 30 days after the date of the merger for their interest in the combined entity. Bunge has accounted for the merger as an acquisition of minority interest. The fair value of the consideration given, including the cash paid on the exercised put rights of $24 million, was $25 million. Subsequent to the merger Bunge had a 71% interest in the combined entity that was renamed Bunge Alimentos S.A. Goodwill of $3 million was recorded as a result of the transaction.
OTHER--In 1998, Bunge acquired two frozen bakery product facilities for a total cost of $35 million. These acquisitions were accounted for using the purchase method and resulted in goodwill of $26 million, which is being amortized over 40 years. The results of operations of these facilities were consolidated from the date of acquisition.
In 1998, Bunge acquired the remaining 44% of Bunge Ceval, an Argentine soy crushing and grain merchandising concern, for cash of $39 million. This acquisition was accounted for as a purchase and resulted in goodwill of $17 million, which is being amortized over 40 years. This acquisition was funded through a capital contribution from Bunge International in the same amount.
In 1998, Bunge completed several other acquisitions that included an additional 5% interest in Ceval, a controlling interest in the Argentine port facility Terminal Bahia Blanca, the remaining interest in Barilla, a Brazilian pasta concern, and controlling interests in the Brazilian fertilizer concerns Anhanguera and Takenaka. These acquisitions, totaling $57 million, were paid for in cash. Goodwill of $2 million was recognized as a result of these transactions.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. BUSINESS ACQUISITIONS (CONTINUED) The following unaudited pro forma summary reflects the results of operations as if the above acquisitions had been consummated as of January 1, 1998, after including the impact of certain adjustments such as depreciation and depletion on assets acquired.
YEAR ENDED DECEMBER 31,
--------------------------------------------
(US$ IN MILLIONS EXCEPT PER SHARE DATA) 1998 1999 2000
--------------------------------------- ---- ---- ----
Net sales................................. $10,041 $ 8,838 $9,782
Net income (loss)......................... $ 78 $ (54) $ 8
Net income (loss) per common share........ $ 1.21 $ (.84) $ .12
|
The unaudited pro forma results are not necessarily indicative of what actually might have occurred if the acquisitions had been completed as of the beginning of the periods presented. In addition, they are not intended to be a projection of future results of operations and do not reflect any of the synergies that might be achieved from combined operations.
3. DISCONTINUED OPERATIONS
In March 2001, Bunge committed to a divestiture plan and sold its Brazilian baked goods division, Plus Vita S.A. to a third party. The divestiture resulted in a gain to Bunge of approximately $3 million, which will be recorded in 2001. The net assets of the division at December 31, 2000 and 1999 were $59 million and $88 million, respectively, and are classified in other current assets.
In March 1998, Bunge formalized its plan to divest the meat and poultry division of Bunge Alimentos S.A. through a capital return at book value to Bunge International. The divestiture was completed in December 1998 through a capital return of $52 million to Bunge International.
Accordingly, the operating results for the divisions disposed have been separately classified and reported for all periods presented.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. DISCONTINUED OPERATIONS (CONTINUED)
The following table summarizes the financial information related to the discontinued operations:
YEAR ENDED DECEMBER 31,
------------------------------------
(US$ IN MILLIONS) 1998 1999 2000
----------------- -------- -------- --------
Net sales:
Baked goods division...................................... $117 $ 64 $ 68
Meat and poultry division................................. $703 $ -- $ --
Net loss:
Baked goods division...................................... $ (5) $(20) $(10)
Meat and poultry division................................. $ (3) $ -- $ --
|
4. INVENTORIES
Inventories consist of the following:
DECEMBER 31,
----------------------
(US$ IN MILLIONS) 1999 2000
----------------- -------- --------
Agribusiness--Readily marketable inventories at market
value..................................................... $ 642 $ 876
Fertilizer.................................................. 117 298
Edible oils................................................. 77 60
Wheat milling and bakery.................................... 16 17
Other....................................................... 71 60
------ ------
Total....................................................... $ 923 $1,311
====== ======
|
READILY MARKETABLE INVENTORIES AT MARKET VALUE-- Readily marketable inventories are agricultural commodities inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms. Included in readily marketable inventories was unrealized gains (losses) on related derivative contracts of $7 million and $(7) million as of December 31, 2000 and 1999, respectively.
5. OTHER CURRENT ASSETS
Other current assets consist of the following:
DECEMBER 31,
-------------------
(US$ IN MILLIONS) 1999 2000
----------------- -------- --------
Prepaid commodity purchase contracts........................ $101 $106
Secured advances to suppliers............................... 148 190
Net assets of discontinued operations (Note 3).............. 88 59
Other....................................................... 146 158
---- ----
Total..................................................... $483 $513
==== ====
|
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. OTHER CURRENT ASSETS (CONTINUED) PREPAID COMMODITY PURCHASE CONTRACTS--Prepaid commodity purchase contracts represent payments to producers in advance of delivery of the underlying commodities. Prepaid commodity purchase contracts are recorded at the lower of cost or market.
SECURED ADVANCES TO SUPPLIERS--Bunge provides cash advances or fertilizer to suppliers of soybeans to finance a portion of the suppliers' production cost. The advances are generally collateralized by physical assets of the supplier, carry a market interest rate and are repaid through the delivery of soybeans. Secured advances to suppliers are stated at the original value of the advance plus accrued interest, less allowances for uncollectible advances, which were $0 as of December 31, 2000 and 1999.
6. PROPERTY, PLANT AND EQUIPMENT, NET
DECEMBER 31,
----------------------
(US$ IN MILLIONS) 1999 2000
----------------- -------- --------
Land........................................................ $ 67 $ 87
Mining properties........................................... -- 182
Buildings................................................... 600 777
Machinery and equipment..................................... 1,652 1,830
Furniture, fixtures and other............................... 53 127
------ ------
2,372 3,003
Less accumulated depreciation and depletion................. (1,204) (1,324)
Plus construction in process................................ 100 180
------ ------
Total....................................................... $1,268 $1,859
====== ======
|
Bunge capitalized interest on construction in progress in the amount of $5 million, $6 million and $16 million in 2000, 1999 and 1998, respectively. Depreciation and depletion expense was $141 million, $94 million and $116 million in 2000, 1999 and 1998, respectively.
Bunge identified certain assets which are held for sale and have not been used in its operations since the date of identification as held for sale. These assets, which are classified as other non-current assets, have a carrying value of $5 million ($2 million fertilizer segment, $3 million edible oil products segment) and $17 million ($8 million agribusiness segment, $6 million fertilizer segment, $3 million edible oil products segment) as of December 31, 2000 and 1999, respectively, consisting of, land, buildings, machinery and equipment. Bunge has recorded pre-tax charges of $0 million, $6 million and $7 million during 2000, 1999 and 1998, respectively, to adjust the carrying value of these assets to estimated fair value. The fair values of these assets were determined based on appraised sales values less the cost to sell. Depreciation of these assets was terminated upon transfer to the "held for sale" category. Bunge has developed a plan to dispose of these assets and actions have been taken to complete these plans, including an active plan to find buyers. However, the eventual sale is dependent upon prevailing market conditions.
7. INCOME TAXES
Bunge's principal operations are in the U.S. and Brazil. Bunge has elected to use the U.S. income tax rates to reconcile between the actual provision for income taxes and that computed by applying the U.S. statutory rates.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED) The components of the income tax (expense) benefit are:
YEAR ENDED DECEMBER 31,
--------------------------------------
(US$ IN MILLIONS) 1998 1999 2000
----------------- -------- -------- --------
Current:
United States............................................ $(26) $19 $ 7
Brazil................................................... (14) (19) (25)
Other.................................................... (5) (2) (11)
---- --- ----
(45) (2) (29)
Deferred:
United States............................................ (5) (13) (2)
Brazil................................................... 11 45 18
Other.................................................... (4) (3) 1
---- --- ----
2 29 17
---- --- ----
$(43) $27 $(12)
==== === ====
|
The components of pre-tax income (loss) before minority interests and discontinued operations are as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
(US$ IN MILLIONS) 1998 1999 2000
----------------- -------- -------- --------
United States............................................... $ 92 $ 21 $ 9
Brazil...................................................... 59 (39) 45
Other....................................................... 25 2 17
---- ---- ---
Total....................................................... $176 $(16) $71
==== ==== ===
|
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED) Reconciliation of the income tax benefit (expense) at the U.S. statutory rate to the effective rate is as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
(US$ IN MILLIONS) 1998 1999 2000
----------------- -------- -------- --------
Income (loss) before income tax, minority interests and
discontinued operations................................... $176 $(16) $ 71
Income tax rate............................................. 35% 35% 35%
---- ---- ----
Income tax (expense) benefit at statutory rate.............. (62) 6 (25)
Adjustment to derive effective rate:
Nondeductible items:
Goodwill amortization..................................... (6) (3) (6)
Other..................................................... (8) (4) 7
Other items:
Change in valuation allowance............................. (4) (32) (9)
Adjustment resulting from the finalization of prior year
tax returns............................................. 4 15 4
Earnings of subsidiaries taxed at different statutory
rates..................................................... 23 40 11
Other....................................................... 10 5 6
---- ---- ----
Income tax (expense) benefit................................ $(43) $ 27 $(12)
==== ==== ====
|
During 1999, a U.S.-based wholly owned subsidiary of Bunge recognized a $10 million tax credit relating to a redetermination of foreign sales corporation benefits for prior years. This amount is included in the above line item adjustment resulting from the finalization of prior year tax return.
Certain subsidiaries of Bunge have subsidiaries with undistributed earnings amounting to approximately $505 million at December 31, 2000. These are considered to be permanently reinvested and, accordingly, no provision for income taxes has been provided. It is not practicable to determine the deferred tax liability for temporary differences related to these undistributed earnings.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
The primary components of the deferred tax assets and liabilities and the related valuation allowance are as follows:
DECEMBER 31,
-------------------
(US$ IN MILLIONS) 1999 2000
----------------- -------- --------
Deferred income tax assets:
Net operating loss carry-forwards........................... $175 $172
Excess of tax basis over financial statement basis of
property, plant and equipment............................. 23 18
Accrued retirement costs (pension and post-retirement cost)
and other accrued employee compensation................... 26 23
Other accruals and reserves not currently deductible for tax
purposes.................................................. 99 161
Other....................................................... 18 6
---- ----
Total deferred tax assets................................... 341 380
Less valuation allowance.................................... (125) (95)
---- ----
Net deferred tax assets..................................... 216 285
---- ----
Deferred tax liabilities:
Excess of financial statement basis over tax basis of
property, plant and equipment............................. 80 207
Other....................................................... 18 31
---- ----
Total deferred tax liabilities.............................. 98 238
---- ----
Net deferred tax assets..................................... $118 $ 47
==== ====
|
Such assets and liabilities are reflected on Bunge's consolidated balance sheets, as follows:
DECEMBER 31,
-------------------
(US$ IN MILLIONS) 1999 2000
----------------- -------- --------
Current deferred income tax assets.......................... $ 9 $ 21
Non-current deferred tax assets............................. 146 169
Other current liabilities................................... -- (2)
Non-current deferred tax liabilities........................ (37) (141)
---- ----
Net deferred tax assets..................................... $118 $ 47
==== ====
|
Bunge's gross tax loss carry-forwards totaled $407 million as of December 31, 2000 of which $340 million have no expiration. However, applicable income tax regulations limit some of these tax losses available for offset of future taxable income to 30% of annual pre-tax income. The remaining tax loss carry-forwards expire at various periods through the year 2020.
Bunge continually reviews the adequacy of the valuation allowance and is recognizing these tax benefits only as reassessment indicates that it is more likely than not that the benefits will be realized. The valuation allowance recorded relates to net operating loss carry-forwards in Bunge's Brazilian subsidiaries. Brazilian tax law does not provide for the filing of a consolidated tax return. Therefore, taxable income at one legal entity cannot be offset with tax losses at another. As such, Bunge records a valuation allowance for the net operating loss carry-forwards generated at legal entities in Brazil for which management
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED) believes that it is more likely than not that an asset will not be realized. Bunge increased the valuation allowance by $9 million in 2000 due to the net operating loss carry-forwards generated at these entities.
In 2000, 1999 and 1998, Bunge paid (received) income taxes, net of refunds, of $20 million, $(4) million and $54 million, respectively.
8. FINANCIAL INSTRUMENTS
Bunge uses various financial instruments in the course of its operations, including certain components of working capital such as cash and cash equivalents, accounts receivable and accounts payable. Additionally, Bunge uses short-term and long-term debt to fund operating requirements and derivative financial instruments to manage its foreign exchange and commodity price risk exposures. The counterparties to these financial instruments are primarily major financial institutions and BNDES (Banco Nacional de Desenvolvimento Economico e Social) of the Brazilian government, or in the case of commodity futures and options, a commodity exchange. Bunge continually evaluates the creditworthiness of its counterparties and has not experienced, nor does it anticipate, nonperformance by any of these institutions. Bunge had no significant concentration of credit risk at December 31, 2000. The cash requirements arising from derivative contracts are not expected to be significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts and fair values of financial instruments are as follows:
DECEMBER 31,
-----------------------------------------
1999 2000
------------------- -------------------
CARRYING FAIR CARRYING FAIR
(US$ IN MILLIONS) VALUE VALUE VALUE VALUE
----------------- -------- -------- -------- --------
Cash and cash equivalents.................................. $ 363 $ 363 $ 423 $ 423
Marketable securities...................................... -- -- 61 61
Short-term debt............................................ 708 708 1,268 1,268
Long-term debt, including current portion.................. 1,121 1,035 1,257 1,206
Guarantees................................................. $ -- $ 76 $ -- $ 26
|
CASH AND CASH EQUIVALENTS--The carrying value approximates the fair value. All investment instruments with a maturity of three months or less are considered cash equivalents.
MARKETABLE SECURITIES--The fair value was determined based on quoted market prices.
SHORT-TERM DEBT--The carrying value approximates the fair value because of the short-term maturity of those instruments.
LONG-TERM DEBT--The fair value of long-term loans was calculated based on interest rates currently available to Bunge for similar borrowings.
GUARANTEES--The fair value of the guarantees for the payment of long-term loans of affiliated companies was $26 million (see Note 12). The fair value of these guarantees was calculated based on interest rates currently available to Bunge.
FOREIGN CURRENCY RISK MANAGEMENT--At December 31, 2000 and 1999, Bunge had cross-currency swaps outstanding with notional principal amounts of $245 million and $461 million, respectively. At December 31, 2000 and 1999, Bunge had foreign currency options with notional principal amounts of
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. FINANCIAL INSTRUMENTS (CONTINUED) $145 million and zero outstanding, respectively. The average maturity of Bunge's position at December 31, 2000 was less than one year.
The following reflects the various types of foreign currency contracts used by Bunge to manage its foreign currency risk:
DECEMBER 31,
-----------------------------------------
1999 2000
------------------- -------------------
CARRYING FAIR CARRYING FAIR
(US$ IN MILLIONS) VALUE VALUE VALUE VALUE
----------------- -------- -------- -------- --------
Foreign currency swaps...................................... $(27) $(25) $4 $4
Foreign currency options.................................... $ -- $ -- $1 $1
|
9. SHORT-TERM DEBT AND CREDIT FACILITIES
Short-term borrowing consists of the following:
DECEMBER 31,
-------------------
(US$ IN MILLIONS) 1999 2000
----------------- -------- --------
Commercial paper with an average interest rate of 6.7% at
December 31, 2000......................................... $ -- $ 590
Lines of credit:
Unsecured variable and fixed interest rates from 6.8% to
16.0%................................................... 671 603
Other....................................................... 37 75
---- ------
Total short-term borrowings................................. $708 $1,268
==== ======
|
In 2000, Bunge initiated a commercial paper program totaling $700 million, to fund working capital requirements.
Bunge's short-term borrowings, predominately held with commercial banks, are primarily used to fund readily marketable inventories and other working capital requirements. The weighted average interest rate on short-term borrowings outstanding as of December 31, 2000 and 1999 was 7.4% and 7.8%, respectively.
At December 31, 2000, Bunge had approximately $531 million available borrowing capacity under lines of credit with a number of lending institutions.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LONG-TERM DEBT
Long-term obligations are summarized below:
DECEMBER 31,
-------------------
(US$ IN MILLIONS) 1999 2000
----------------- -------- --------
PAYABLE IN U.S. CURRENCY (DOLLAR):
Senior notes, fixed interest rates from 7.23% to 7.94%
maturing through 2018..................................... $ 177 $ 172
Trust certificates, fixed interest rates from 8.51% to 8.61%
payable 2003 to 2005...................................... -- 125
Note collateralized by future export commodity contracts,
fixed interest rate
9.25% due 2002............................................ 225 169
Other notes payable, fixed interest rates from 6.75% to
13.4%, payable
through 2006.............................................. 408 224
Long-term debt, variable interest rates indexed to LIBOR(1)
plus 2.5% to 3.87%,
payable through 2008...................................... 145 244
Other....................................................... 24 7
PAYABLE IN BRAZILIAN CURRENCY (REAL):
BNDES(2) loans, variable interest rate indexed to IGPM(3)
plus 6.5%, payable
through 2007.............................................. 49 241
Long-term variable interest rate indexed to TJLP(4) plus
4.5% to 10%, payable through 2007......................... 79 66
Other....................................................... 14 9
------ ------
1,121 1,257
Less: Installments due within one year...................... (328) (254)
------ ------
Total long-term debt........................................ $ 793 $1,003
====== ======
|
(1) LIBOR as of December 31, 2000 and 1999 was 6.2% and 6.1%, respectively.
(2) "BNDES" (Banco Nacional de Desenvolvimento Economico e Social) loans are Brazilian government industrial development loans.
(3) "IGPM" is a Brazilian inflation index published by Fundacao Getulio Vargas. The annualized rate for the year ended December 31, 2000 and 1999 was 9.95% and 20.1%, respectively.
(4) "TJLP" is a long-term interest rate reset by the Brazilian government on a quarterly basis. The annualized rate for the year ended December 31, 2000 and 1999 was 12.0% and 13.2%, respectively.
Certain land, property, equipment, investments in consolidated subsidiaries and export commodity contracts, having a net carrying value of approximately $498 million at December 21, 2000 have been mortgaged or otherwise pledged against long-term debt of $450 million at December 31, 2000.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LONG-TERM DEBT (CONTINUED) Principal maturities of long-term debt as of December 31, 2000 are as follows:
(US$ IN MILLIONS)
-----------------
2001........................................................ $ 254
2002........................................................ 283
2003........................................................ 268
2004........................................................ 101
2005........................................................ 117
Later years................................................. 234
------
$1,257
======
|
Bunge is in compliance with various restrictive covenants in the long-term debt agreements which require satisfaction of certain financial covenants related to minimum net worth and working capital and a maximum long-term debt to net worth ratio.
In December 2000, Bunge issued $125 million of trust certificates due between 2003 and 2005. Interest is fixed at rates between 8.51% and 8.61%. The net proceeds were used to repay existing short-term indebtedness.
11. EMPLOYEE BENEFIT PLANS
EMPLOYEE DEFINED BENEFIT PLAN--A U.S.-based wholly owned subsidiary of Bunge sponsors noncontributory defined benefit pension plans covering substantially all employees of the wholly owned subsidiary. The plans provide benefits based primarily on participants' salary and length of service.
The subsidiary's funding policy for the defined benefit pension plan is to fund at least those amounts required by the Employee Retirement Income Security Act of 1974 and no more than those amounts permitted by the Internal Revenue Code. The plans' assets are primarily held in fixed income and equity investments.
POSTRETIREMENT HEALTHCARE BENEFIT PLAN--A U.S.-based wholly owned subsidiary of Bunge has a benefit plan to provide certain healthcare benefits to eligible retired employees. The plan requires minimum employee contributions and defines the maximum amount the subsidiary will pay.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFIT PLANS (CONTINUED) A reconciliation of the changes in the plans' benefit obligation, assets and funded status as of December 31, 2000 and 1999 follows:
PENSION BENEFITS OTHER BENEFITS
DECEMBER 31, DECEMBER 31,
------------------- -------------------
(US$ IN MILLIONS) 1999 2000 1999 2000
----------------- -------- -------- -------- --------
Change in benefit obligations:
Benefit obligation as of beginning of year............... $ 95 $101 $ 22 $ 23
Service cost............................................. 3 3 1 1
Interest cost............................................ 7 7 1 1
Actuarial losses (gains), net............................ 1 (4) -- 1
Benefits paid............................................ (5) (5) (1) (1)
---- ---- ---- ----
Benefit obligation as of end of year....................... $101 $102 $ 23 $ 25
==== ==== ==== ====
Change in plan assets:
Fair value of plan assets as of beginning of year........ $106 $110 $ -- $ --
Actual return on plan assets............................. 8 14 -- --
Employer contributions................................... 1 1 1 1
Benefits paid............................................ (5) (5) (1) (1)
---- ---- ---- ----
Fair value of plan assets as of end of year................ $110 $120 $ -- $ --
==== ==== ==== ====
Funded status and net amounts recognized:
Plan assets in excess of (less than) benefit obligation.... $ 9 $ 18 $(23) $(25)
Unrecognized net actuarial gain............................ (11) (21) (1) --
Unrecognized net transition asset.......................... (3) (3) -- --
---- ---- ---- ----
Net liability recognized in the balance sheet.............. $ (5) $ (6) $(24) $(25)
==== ==== ==== ====
Amounts recognized in the balance sheet consist of:
Prepaid benefit costs...................................... $ 6 $ 6 $ -- $ --
Accrued benefit costs...................................... (11) (12) (24) (25)
---- ---- ---- ----
Net liability recognized in other non-current
liabilities.............................................. $ (5) $ (6) $(24) $(25)
==== ==== ==== ====
|
The components of net periodic costs are as follows:
PENSION BENEFITS OTHER BENEFITS
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------ ------------------------------
(US$ IN MILLIONS) 1998 1999 2000 1998 1999 2000
----------------- -------- -------- -------- -------- -------- --------
Service cost.................................... $ 3 $ 3 $ 3 $1 $1 $1
Interest cost................................... 7 7 7 1 1 1
Expected return on plan assets.................. (8) (8) (8) -- -- --
Amortization of transition obligation........... (1) (1) (1) -- -- --
--- --- --- -- -- --
Net periodic benefit costs...................... $ 1 $ 1 $ 1 $2 $2 $2
=== === === == == ==
|
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EMPLOYEE BENEFIT PLANS (CONTINUED) The assumptions used in determining the actuarial present value of the projected benefit obligations under the defined benefit pension plan at December 31, 2000, 1999 and 1998 are as follows:
1998 1999 2000
-------- -------- --------
Discount rate............................................... 7.0% 7.0% 7.5%
Increase in future compensation levels...................... 4.5% 4.5% 5.0%
Expected long-term rate of return on assets................. 9.0% 9.0% 9.0%
|
For measurement purposes, an 8% annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2001. The rate was assumed to decrease gradually to 6% for 2003 and remain at that level thereafter.
A one-percentage point change in assumed health care cost trend rates would have the following effects as of December 31, 2000:
ONE-PERCENTAGE ONE-PERCENTAGE
POINT POINT
(US$ IN MILLIONS) INCREASE DECREASE
----------------- -------------- --------------
Effect on total service and interest cost components........ $ - $ -
Effect on postretirement benefit obligation................. $ 2 $ 2
|
EMPLOYEE DEFINED CONTRIBUTION PLANS--Bunge also makes contributions to qualified defined contribution plans for eligible employees. Contributions amounted to $4 million, $4 million, and $4 million in 2000, 1999 and 1998 respectively.
12. RELATED PARTY TRANSACTIONS
Bunge and its affiliates have lent funds to each other on a revolving basis at various interest rates generally based on LIBOR plus a spread. These borrowings, other than the subordinated notes, were payable on demand at the option of the lender. Balances with related parties are as follows:
DECEMBER 31,
BALANCE SHEET -------------------
(US$ IN MILLIONS) RELATIONSHIP TRANSACTION TYPE CLASSIFICATION 1999 2000
----------------- ------------ ------------------------------ --------------------- -------- --------
Bunge International........... Shareholder Related party loan-var. Non-current assets $105 $ --
interest rate
Seara Alimentos S.A.,......... Affiliate Related party loan-10% Non-current assets 109 --
interest bearing
Other affiliates.............. Affiliates Related party loan-var. Non-current assets 25 --
interest rate
---- ----
$239 $ --
==== ====
Bunge International........... Shareholder Subordinated notes--5% Long-term liabilities 41 --
interest bearing $ $
==== ====
|
Bunge recorded net interest income (expense) relating to these related party loans totaling $4 million, $7 million, and $(4) million for the year ended December 31, 2000, 1999 and 1998, respectively. Shareholder's equity at December 31, 2000 includes long-term note receivable from Bunge International relating to a $126 million capital contribution. During 1999 and 1998, Bunge International contributed additional capital of $93 million and $39 million, respectively.
Bunge sells soybean meal and fertilizer products to Seara Alimentos S.A., a subsidiary of Bunge International, engaged in the business of meat and poultry production. These sales were $20 million, $4 million and $4 million for the year ended December 31, 2000, 1999 and 1998, respectively.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES
Bunge is party to a large number of claims and lawsuits, primarily tax and labor claims, arising in the normal course of business. After taking into account the liabilities recorded for the foregoing matters, management believes that the ultimate resolution of such matters will not have a material adverse affect on Bunge's financial condition, results of operations or liquidity. Included in other non-current liabilities as of December 31, 2000 and 1999 are the following accrued liabilities:
DECEMBER 31,
-----------------------
1999 2000
-------- --------
(US$ IN MILLIONS)
Tax claims................................................ $ 78 $131
Labor claims.............................................. 64 86
Civil and other........................................... 23 19
---- ----
Total..................................................... $165 $236
==== ====
|
TAX CLAIMS--The tax claims relate principally to claims against Bunge's Brazilian subsidiaries, including income tax claims, value added tax claims (ICMS and IPI) and sales tax claims (PIS and COFINS). The determination of the manner in which various Brazilian federal, state and municipal taxes apply to the operations of Bunge is subject to varying interpretations arising from the complex nature of Brazilian tax law as well as changes in tax laws introduced by the PLANO REAL in 1994 and the current Brazilian constitution established in 1988.
LABOR CLAIMS--The labor claims relate principally to claims against Bunge's Brazilian subsidiaries. Court rulings under Brazilian labor laws have historically been in favor of the employee-plaintiff. The labor claims primarily relate to dismissals, severance, health and safety, salary adjustments and supplementary retirement benefits.
CIVIL AND OTHER--The civil and other claims relate to various disputes with suppliers and customers.
Bunge has issued several direct and indirect guarantees for the payment of long-term loans of its joint ventures totaling approximately $26 million and $76 million at December 31, 2000 and 1999, respectively. Management believes that these guarantees will not adversely affect Bunge's financial condition, results of operations or liquidity.
14. REDEEMABLE PREFERRED STOCK
In December 2000, Bunge First Capital Limited ("First Capital"), a special-purpose subsidiary of Bunge, issued 170,000, $.01 cent par value shares of cumulative variable rate redeemable preferred shares to private investors for $170 million. First Capital used the proceeds to make loans to subsidiaries of Bunge for their working capital requirements. The results of First Capital are included in Bunge's consolidated financial statements and all intercompany transactions are eliminated. The holders of the preferred shares are entitled to receive cumulative variable rate cash dividends paid quarterly which is calculated based on three-month LIBOR plus a variable spread. If more than one quarterly dividend is unpaid, and upon the occurrence of certain other events, the preferred shareholders may require First Capital to arrange for the sale of the preferred stock to third parties on behalf of the preferred shareholders based on the issue price plus accrued and unpaid dividends, or take certain other actions to protect the interests of the preferred shareholders.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. REDEEMABLE PREFERRED STOCK (CONTINUED)
First Capital may redeem the preferred stock, in whole or in part, for the
issue price plus accrued and unpaid dividends, at the earliest of
(i) January 31, 2002, (ii) receipt of notice that the preferred shareholders
intend to exercise their rights described above, (iii) the date Bunge files a
registration statement related to an initial public offering of Bunge stock, and
(iv) certain other events.
First Capital is a separate legal entity from Bunge and has separate assets and liabilities. The carrying value of these shares at December 31, 2000 was $170 million and is reflected in minority interest in the consolidated balance sheet.
15. LEASE COMMITMENTS
Bunge routinely leases storage facilities, transportation equipment and office facilities under operating leases.
Minimum lease payments under non-cancelable operating leases as of December 31, 2000 are as follows:
(US$ IN MILLIONS)
-----------------
2001........................................................ $ 25
2002........................................................ 22
2003........................................................ 17
2004........................................................ 12
2005........................................................ 6
Thereafter.................................................. 20
----
$102
====
|
Rent expense under non-cancelable operating leases was $32 million, $31 million and $22 million for 2000, 1999 and 1998, respectively.
16. IMPAIRMENT AND RESTRUCTURING CHARGES
Bunge recorded $49 million of impairment and restructuring charges in 2000, principally related to the write-downs of certain long-lived assets, including four oilseed processing facilities. The write-downs were taken in response to a downturn in the agribusiness industry and the advancement in technology in certain product lines within the edible oil products segment and the corn products segment. The majority of the assets continue to be utilized in the business and are not currently held for sale. The charges included $44 million of non-cash write-down of property, plant and equipment and employee termination costs paid of $5 million. The carrying value of these assets was written down to their estimated fair value.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. NON-OPERATING INCOME (EXPENSE)--NET
Non-operating expenses--net consists of income and (expense) items as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
(US$ IN MILLIONS) 1998 1999 2000
----------------- -------- -------- --------
Interest income.................................... $ 268 $ 156 $ 138
Interest expense................................... (144) (166) (202)
Interest expense on readily marketable
inventories...................................... (36) (40) (52)
Foreign exchange................................... (236) (255) (116)
Other income....................................... 28 9 7
----- ----- -----
Total non-operating income (expense)--net $(120) $(296) $(225)
===== ===== =====
|
INTEREST EXPENSE ON READILY MARKETABLE INVENTORIES--Readily marketable inventories are agricultural commodities inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms. Bunge attributes interest expense to these inventories based on the average interest rates incurred on the short-term debt used to finance these inventories.
In 2000, 1999 and 1998, Bunge paid interest, net of interest capitalized, of $244 million, $220 million and $212 million, respectively.
18. STOCK BASED COMPENSATION
In 2000, Bunge established the Bunge Limited Equity Incentive Plan. Under the plan, the compensation committee of the board may award equity-based compensation to officers and other employees. Awards under the plan may be in the form of either qualified or nonqualified stock options, restricted stock or other awards. The specific terms of each award made under the plan, including how such award will vest, will be described in the participant's award agreement.
As of December 31, 2000, Bunge had not issued any stock options or restricted shares under the plan. Other awards granted during 2000 included stock appreciation rights ("SARs") and performance based phantom units ("Phantom Units").
The SARs and Phantom Units do not represent the right to receive Bunge stock, do not provide the right to vote on shareholder matters or receive dividends, and are settled in cash at the exercise date. The number of SARs and Phantom Units granted during 2000 and their fair values were adjusted to give effect to the changes in Bunge's capital structure described in Note 20.
SARS--SARs are granted at market value on the grant date and vest on a pro-rata basis over a three-year period on the anniversary date of the grant (the "grant price"). SARs entitle the participant upon exercise of vested SARs to a cash payment for the difference between the fair value of the SAR at the exercise date and the grant price. However, vesting may be accelerated in certain situations such as a change in control of Bunge. The SARs expire 10 years after the date of grant if unexercised. Bunge granted 569,060 SARs in 2000 at a grant price of $18.87 per share, all of which remained outstanding at December 31, 2000.
PHANTOM UNITS--Phantom Units are awarded at the beginning of a three-year performance period and are earned as vested. Vesting is dependent upon Bunge obtaining certain targeted cumulative earnings per share ("EPS") growth during the three-year period. The targeted cumulative EPS under the plan is based
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. STOCK BASED COMPENSATION (CONTINUED) on income per share from continuing operations adjusted for non-recurring charges and other one time events at the discretion of the compensation committee. Vesting may be accelerated in certain situations such as a change in control of Bunge. The actual award is calculated based on a sliding scale whereby 50% of the granted Phantom Units vest if the minimum target is achieved and 150% of the granted Phantom Units vest if the maximum target is achieved. No vesting occurs if cumulative EPS growth is less than the minimum target and the award is capped at 150% of the grant for cumulative EPS performance in excess of the maximum target. Bunge granted 199,207 Phantom Units in 2000 related to the 2000-2002 performance period.
In the event of a public offering, Bunge's compensation committee at its sole discretion may, after giving effect proportionally to changes in Bunge's capital structure, elect to convert the SARs into nonqualified stock options and/or convert the Phantom Units into restricted stock. In the event of such a conversion, the vesting schedule of the stock options and/or restricted stock will remain as set in the award agreement.
For the year ended December 31, 2000, total compensation expense recognized for all stock based compensation awards was approximately $1 million.
19. OPERATING SEGMENTS AND GEOGRAPHIC AREAS
Bunge has five reporting segments, which are organized based upon similar economic characteristics and are similar in nature of products and services offered, the nature of production processes, the type and class of customer and distribution methods. The agribusiness segment is characterized by both inputs and outputs being agricultural commodities and thus high volume and low margin. The activities of the fertilizer segment include raw material mining, mixing fertilizer components and marketing products. The edible oil products segment involves the manufacturing and marketing of products derived from vegetable oils. The wheat milling and bakery products segment involves the manufacturing and marketing of products derived primarily from wheat. The other segment consists of the soy ingredients and corn products businesses.
The "Unallocated" column in the following table contains the reconciliation between the totals for reportable segments and Bunge consolidated totals, which consists primarily of corporate items not allocated to the operating segments and intersegment eliminations. Transfers between the segments are generally valued at market. The revenues generated from these transfers are shown in the following table as "Intersegment revenues."
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. OPERATING SEGMENTS AND GEOGRAPHIC AREAS (CONTINUED) OPERATING SEGMENT INFORMATION
EDIBLE WHEAT MILLING
OIL AND BAKERY
(US$ IN MILLIONS) AGRIBUSINESS FERTILIZER PRODUCTS PRODUCTS OTHER UNALLOCATED TOTAL
----------------- ------------ ---------- ---------- ------------- -------- ----------- --------
1998
Net sales to external
customers.................... $5,894 $ 625 $1,923 $447 $ 214 $ -- $9,103
Intersegment revenues.......... 431 -- -- -- -- (431) --
Gross profit................... 294 90 182 57 47 -- 670
Income from operations......... 162 47 54 3 26 4 296
EBITDA(1)...................... 220 68 86 18 49 (1) 440
Depreciation, depletion and
amortization................. 58 21 32 15 13 5 144
Investments in affiliates...... 41 99 -- 7 -- -- 147
Total assets................... 3,115 810 793 526 239 331 5,814
Capital expenditures........... 141 38 61 10 29 -- 279
1999
Net sales to external
customers.................... $5,517 $ 605 $1,109 $579 $ 265 $ -- $8,075
Intersegment revenues.......... 280 -- -- -- -- (280) --
Gross profit................... 203 148 139 85 37 -- 612
Income from operations......... 92 106 41 24 27 (10) 280
EBITDA(1)...................... 138 117 61 35 37 (7) 381
Depreciation, depletion and
amortization................. 46 11 20 11 10 3 101
Investments in affiliates...... 29 130 -- 7 -- -- 166
Total assets................... 2,595 694 431 433 204 254 4,611
Capital expenditures........... 74 16 39 7 4 -- 140
2000
Net sales to external
customers.................... $6,327 $1,466 $1,019 $527 $ 328 $ -- $9,667
Intersegment revenues.......... 213 -- -- -- -- (213) --
Gross profit................... 223 238 143 51 28 -- 683
Income from operations......... 91 153 34 10 8 -- 296
EBITDA(1)...................... 144 205 50 25 19 2 445
Depreciation, depletion and
amortization................. 53 52 16 15 11 2 149
Impairment and restructuring
charges...................... 39 -- 5 -- 5 -- 49
Investments in affiliates...... 24 22 -- 8 -- -- 54
Total assets................... 2,938 1,731 480 286 190 229 5,854
Capital expenditures........... 56 90 17 17 4 -- 184
|
(1) Earnings before interest, taxes, depreciation and amortization, ("EBITDA") equals income from operations plus depreciation, depletion and amortization.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. OPERATING SEGMENTS AND GEOGRAPHIC AREAS (CONTINUED) Net sales by product group to external customers were as follows:
(US$ MILLIONS) 1998 1999 2000
-------------- -------- -------- --------
Agricultural commodities products........................... $5,894 $5,517 $6,327
Fertilizer products......................................... 625 605 1,466
Edible oil products......................................... 1,923 1,109 1,019
Wheat milling and bakery products........................... 447 579 527
Soy ingredient products..................................... 15 56 71
Corn products............................................... 199 209 257
------ ------ ------
$9,103 $8,075 $9,667
====== ====== ======
|
Geographic area information for net sales to external customers, determined based on the country of origin, and long-lived assets follows:
(US$ IN MILLIONS) 1998 1999 2000
----------------- -------- -------- --------
Net sales to external customers:
United States............................................. $5,084 $4,786 $5,027
Brazil.................................................... 3,580 2,904 3,894
Rest of world............................................. 439 385 746
------ ------ ------
$9,103 $8,075 $9,667
====== ====== ======
Long-lived assets(a):
United States............................................. $ 462 $ 489 $ 489
Brazil.................................................... 1,439 1,023 1,503
Rest of world............................................. 141 128 121
------ ------ ------
$2,042 $1,640 $2,113
====== ====== ======
|
(a) Long-lived assets include net property, plant and equipment, net, goodwill and other intangible assets, net and investments in affiliates.
20. SUBSEQUENT EVENTS
Between July 5, 2001 and July 12, 2001, Bunge's Board of Directors approved:
(i) the exchange of 12,000 common shares, par value $1.00 per share, for
1.2 million common shares, par value $.01 per share with Bunge International,
(ii) the declaration and payment of a 52.65-for-1 share dividend, (iii) an
increase in Bunge's authorized share capital to 240 million common shares, par
value $.01 per share, (iv) the authorization of 9,760,000 shares of undesignated
preference shares and (v) the authorization of 240,000 shares of Series A
Preference Shares.
The common shares data presented herein has been restated for all periods to reflect the effects of the share exchange and share dividend above.
BUNGE LIMITED AND SUBSIDIARIES
CONSOLIDATED INTERIM BALANCE SHEETS
(UNITED STATES DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
DECEMBER 31, MARCH 31,
2000 2001
------------ -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 423 $ 324
Marketable securities..................................... 61 23
Trade accounts receivables (less allowance of $59 and
$57).................................................... 873 742
Inventories (Note 3)...................................... 1,311 1,169
Recoverable taxes......................................... 225 174
Deferred income taxes..................................... 21 23
Other current assets...................................... 513 388
------ ------
Total current assets........................................ 3,427 2,843
------ ------
Property, plant and equipment, net.......................... 1,859 1,765
Goodwill and other intangible assets, net................... 200 186
Investments in affiliates................................... 54 55
Deferred income taxes....................................... 169 156
Other non-current assets.................................... 145 142
------ ------
TOTAL ASSETS................................................ $5,854 $5,147
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Short-term debt........................................... $1,268 $ 914
Current portion of long-term debt......................... 254 248
Trade accounts payable.................................... 839 705
Other current liabilities................................. 385 360
------ ------
Total current liabilities................................... 2,746 2,227
------ ------
Long-term debt.............................................. 1,003 950
Deferred income taxes....................................... 141 127
Other non-current liabilities............................... 282 283
Commitments and contingencies (Note 7)
Minority interest in subsidiaries........................... 543 484
Shareholder's equity:
Common stock, par value $.01; 240,000,000 authorized,
64,380,000 issued and outstanding shares and additional
paid-in capital......................................... 1,429 1,429
Shareholder receivable (Note 6)........................... (126) (110)
Retained earnings......................................... 309 315
Accumulated other comprehensive loss...................... (473) (558)
------ ------
Total shareholder's equity.................................. 1,139 1,076
------ ------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................. $5,854 $5,147
====== ======
|
The accompanying notes are an integral part of these consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF INCOME
(UNITED STATES DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 2001
---- ----
(UNAUDITED) (UNAUDITED)
Net sales................................................... $ 2,005 $ 2,472
Cost of goods sold.......................................... 1,911 2,316
----------- -----------
GROSS PROFIT................................................ 94 156
Selling, general and administrative expenses................ 80 82
----------- -----------
INCOME FROM OPERATIONS...................................... 14 74
Non-operating income (expense)--net (Note 8)................ (12) (73)
----------- -----------
INCOME BEFORE INCOME TAX, MINORITY INTEREST, DISCONTINUED
OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE................................................. 2 1
Income tax expense.......................................... (1) --
----------- -----------
INCOME BEFORE MINORITY INTEREST, DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE....... 1 1
Minority interest........................................... (6) (5)
----------- -----------
LOSS BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE............................ (5) (4)
Discontinued operations (Note 5)
Loss from discontinued operations, net of tax benefit of
$0...................................................... (3) --
Gain on disposal of discontinued operations, net of tax of
$0...................................................... -- 3
----------- -----------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE................................................. (8) (1)
Cumulative effect of change in accounting principle, net of
tax of $4 (Note 2)........................................ -- 7
----------- -----------
NET (LOSS) INCOME........................................... $ (8) $ 6
=========== ===========
EARNINGS PER COMMON SHARE--BASIC AND DILUTED:
Loss before discontinued operations and cumulative effect
of change in accounting principle....................... $ (.08) $ (.06)
Discontinued operations................................... (.04) .04
Cumulative effect of change in accounting principle....... -- .11
----------- -----------
Net (loss) income per share................................. $ (.12) $ .09
=========== ===========
Weighted-average number of shares outstanding--basic and
diluted................................................... 64,380,000 64,380,000
|
The accompanying notes are an integral part of these consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(UNITED STATES DOLLARS IN MILLIONS)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 2001
---- ----
(UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES
Net income (loss)........................................... $ (8) $ 6
Adjustment to reconcile net income to cash (used for)
provided by operating activities:
Unrealized foreign exchange (gain) loss................... (32) 27
Bad debt expense.......................................... 5 2
Depreciation, depletion and amortization.................. 23 38
Deferred income taxes..................................... 1 (1)
Gain on sale of property, plant and equipment and
investments............................................. (4) (1)
Discontinued operations................................... 3 (3)
Minority interest......................................... 6 5
Changes in operating assets and liabilities, excluding the
effects of acquisitions:
Marketable securities................................... -- 40
Trade accounts receivables.............................. (104) 82
Inventories............................................. (181) 81
Recoverable taxes....................................... (9) 31
Trade accounts payable.................................. (13) (83)
Other--net.............................................. 5 67
---- ----
Cash (used for) provided by operating activities.... (308) 291
INVESTING ACTIVITIES
Payments made for capital expenditures...................... (29) (70)
Proceeds from disposal of property, plant and equipment..... 3 3
Proceeds from sale of discontinued operations............... -- 58
Business acquisitions, net of cash acquired................. (5) (4)
Repayments of (investments in) related party loans.......... (7) --
---- ----
Cash used for investing activities.................. (38) (13)
FINANCING ACTIVITIES
Net change in short-term debt............................... 252 (332)
Proceeds from long-term debt................................ 167 9
Repayment of long-term debt................................. (102) (57)
Dividends paid to minority interest......................... -- (11)
Proceeds from shareholder loan.............................. -- 16
---- ----
Cash provided by (used for) financing activities.... 317 (375)
Effect of exchange rate changes on cash and cash
equivalents............................................... (1) (2)
---- ----
Net decrease in cash and cash equivalents................... (30) (99)
Cash and cash equivalents, beginning of period.............. 363 423
---- ----
Cash and cash equivalents, end of period.................... $333 $324
==== ====
|
The accompanying notes are an integral part of these consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for the complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation have been included. The consolidated balance sheet at December 31, 2000 has been derived from the Company's audited financial statements at that date. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results to be expected for the year ending December 31, 2001. The financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto for Bunge Limited for the years ended December 31, 2000, 1999, and 1998, included elsewhere in this Prospectus.
2. ADOPTION OF NEW ACCOUNTING STANDARD
Effective January 1, 2001 Bunge adopted Financial Accounting Standards Board
(FASB) SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS 133 establishes accounting and reporting standards for
derivative instruments including certain derivative instruments embedded in
other contracts and hedging activities. As a result of this adoption, in the
first quarter of 2001 Bunge's net income increased by $7 million, net of
$4 million of tax expense for the fair value of previously unrecognized
derivative instruments. Bunge also recorded a loss in other comprehensive income
(loss) of $(3) million, net of $2 million tax benefit for derivatives which
hedge the variable cash flows of certain forecasted transactions. These
adjustments are reported as a cumulative change in accounting principle as of
March 31, 2001.
Bunge follows a policy to reduce price risk caused by market fluctuations by using exchange traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward cash purchase and sale contracts. Inventories of merchandisable agricultural commodity inventories are stated at market value. Exchange-traded futures and options contracts, forward purchase contracts and forward sale contracts are valued at the quoted market price as required under SFAS 133. Changes in the market value of inventories of merchandisable agricultural commodity inventories, forward purchase and sale contracts, and exchange-traded futures and options contracts, are recognized in earnings immediately as a component of cost of goods sold.
In addition, Bunge occasionally will hedge portions of its oilseed processing business production requirements including purchases of soybeans and sales of soybean meal and soybean oil. The instruments used are readily marketable exchange traded futures contracts, which are designated as cash flow hedges. The changes in the market value of such futures contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Gains or losses arising from open and closed hedging transactions are deferred in other comprehensive income (loss), net of applicable taxes, and are recognized in cost of goods sold when the products associated with the hedged item are sold.
Unrealized gains/losses on the exchange-traded futures and options contracts, forward purchase and sale contracts and foreign currency swaps and options are classified on the balance sheet in other current assets or other current liabilities, except for derivative contracts related to readily marketable inventories (see Note 3).
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES
Inventories consist of the following:
DECEMBER 31, MARCH 31,
2000 2001
------------ -----------
(UNAUDITED)
(US$ IN MILLIONS)
Agribusiness--Readily marketable inventories at market
value................................................ $ 876 $ 738
Fertilizer............................................. 298 303
Edible oils............................................ 60 52
Wheat milling and bakery............................... 17 7
Other.................................................. 60 69
------ ------
Total.................................................. $1,311 $1,169
====== ======
|
READILY MARKETABLE INVENTORIES AT MARKET VALUE-- Readily marketable inventories are agricultural commodities inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms. Included in readily marketable inventories was unrealized gains (losses) on related derivative contracts of $(2) million and $7 million as of March 31, 2001 and December 31, 2000, respectively.
4. BUSINESS ACQUISITIONS
BUNGE FERTILIZANTES S.A.--In April 2000, Bunge acquired a 21% interest, representing 57% of the voting stock and thus control of Manah S.A. ("Manah"), a Brazilian fertilizer company for $47 million in cash, net of cash acquired of $36 million.
In August 2000, Bunge affected a merger, through a share exchange, between two of its subsidiaries resulting in the acquisition of Fertilizantes Serrana S.A. by Manah. The shareholders of Fertilizantes Serrana S.A. were given a put right, which expired 30 days after the merger, for their interest in the combined entity. Bunge has accounted for the merger as an acquisition of a minority interest. The fair value of the consideration given was $53 million. Subsequent to the transaction Bunge had a 72% interest in the combined entity that was renamed Bunge Fertilizantes S.A.
Prior to the acquisition, both Bunge and Manah had an equity investment in Fertifos Administracao e Participacao S.A and subsidiaries ("Fosfertil"). As a result of the acquisition of Manah, Bunge obtained a controlling interest in Fosfertil, a Brazilian phosphate mining company and producer of intermediary fertilizer products. Bunge has consolidated the results of operations of Manah and Fosfertil since April 2000.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
4. BUSINESS ACQUISITIONS (CONTINUED) The following table summarizes the allocation of the purchase price in the April 2000 Manah acquisition, the August 2000 merger of Fertilizantes Serrana S.A. and Manah, and the consolidation of Fosfertil:
CALCULATION OF PURCHASE PRICE:
Cash paid................................................. $ 83
Shares issued............................................. 53
Current liabilities assumed............................... 288
Other liabilities assumed................................. 417
-----
$ 841
=====
ALLOCATION OF PURCHASE PRICE:
Current assets............................................ $ 340
Property, plant and equipment (excluding mining
properties)............................................... 542
Mining properties......................................... 204
Other assets.............................................. 50
Minority interest......................................... (179)
-----
957
Previous net investment in Fosfertil under the equity
method.................................................... (116)
-----
$ 841
=====
|
In March 2001, Bunge, through a subsidiary, increased its interest in Fosfertil S.A. by 3% through an acquisition of shares for $21 million. The purchase price paid was $3 million in cash and the remainder in a note bearing a variable interest rate of IGPM, a Brazilian inflation index, plus six percent to be repaid in seven installments through July 2002. No goodwill was recognized as result of this transaction.
The following unaudited pro forma summary reflects the results of operations as if the Manah acquisitions had been consummated as of January 1, 2000, after including the impact of certain adjustments such as depreciation and depletion on assets acquired.
THREE MONTHS ENDED
MARCH 31
-------------------------
(US$ IN MILLIONS, EXCEPT PER SHARE DATA) 2000 2001
---------------------------------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
Net sales................................................... $ 2,120 $2,472
Loss before cumulative effect of change in accounting
principle................................................. $ (12) $ (1)
Net (loss) income........................................... $ (12) $ 6
Loss before cumulative effect of change in accounting
principle per share....................................... $ (.19) $ (.02)
Net (loss) income per share................................. $ (.19) $ .09
|
The unaudited pro forma results are not necessarily indicative of what actually might have occurred if the acquisitions had been completed as of the beginning of the periods presented. In addition, they are not intended to be a projection of future results of operations and do not reflect any of the synergies that might be achieved from combined operations.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
5. DISCONTINUED OPERATIONS
In March 2001, Bunge committed to a divestiture plan and sold its Brazilian baked goods division, Plus Vita S.A. to a third party. The divestiture resulted in a gain to Bunge of $3 million. The net assets of the division as of December 31, 2000 were $59 million and were classified in other current assets.
Accordingly, the operating results for the disposed division have been separately classified and reported for all periods presented.
The following table summarizes the financial information related to the discontinued operations:
THREE MONTHS ENDED
MARCH 31,
-------------------------
(US$ IN MILLIONS) 2000 2001
----------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
Net sales:
Baked goods division................................ $18 $11
Net loss:
Baked goods division................................ $(3) $--
|
6. RELATED PARTY TRANSACTIONS
Bunge recorded net interest income relating to related party loans totaling $1 million and $3 million for the three months ended March 31, 2001 and 2000, respectively. Shareholder's equity includes a long-term note receivable from Bunge International relating to a capital contribution in the amount of $110 million and $126 million at March 31, 2001 and December 31, 2000, respectively.
Bunge sells soybean meal and fertilizer products to Seara Alimentos S.A. engaged in the business of meat and poultry production. These sales were $6 million and $2 million for the three months ended March 31, 2001 and 2000, respectively.
7. COMMITMENTS AND CONTINGENCIES
Bunge is party to a large number of claims and lawsuits, primarily tax and labor claims, arising out of the normal course of business. After taking into account the liabilities recorded for the foregoing matters, management believes that the ultimate resolution of such matters will not have a material adverse affect on Bunge's financial condition, results of operations or liquidity. Included in other non-current liabilities as of March 31, 2000 and December 31, 2000 are the following accrued liabilities:
DECEMBER 31, MARCH 31,
2000 2001
------------ -----------
(UNAUDITED)
(US$ IN MILLIONS)
Tax claims........................................... $131 $126
Labor claims......................................... 86 81
Civil and other...................................... 19 18
---- ----
Total................................................ $236 $225
==== ====
|
TAX CLAIMS--The tax claims relate principally to claims against Bunge's Brazilian subsidiaries, including income tax claims, value added tax claims (ICMS and IPI) and sales tax claims (PIS and COFINS). The determination of the manner in which various Brazilian federal, state and municipal taxes
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED) apply to the operations of Bunge is subject to varying interpretations arising from the complex nature of Brazilian tax law as well as changes in tax laws introduced by the PLANO REAL in 1994 and the current Brazilian constitution established in 1988.
LABOR CLAIMS--The labor claims relate principally to labor claims against Bunge's Brazilian subsidiaries. Court rulings under Brazilian labor laws have historically been in favor of the employee-plaintiff. The labor claims primarily relate to dismissals, severance, health and safety, salary adjustments and supplementary retirement benefits.
CIVIL AND OTHER--The civil and other claims relate to various disputes with suppliers and customers.
Bunge has issued several direct and indirect guarantees for the payment of long-term loans of affiliated companies totaling approximately $26 million as of March 31, 2001 and December 31, 2000. Management believes that these guarantees will not adversely affect Bunge's financial condition, results of operations or liquidity.
8. NON-OPERATING INCOME (EXPENSE)--NET
Non-operating expenses--net consists of income and (expense) items as follows:
THREE MONTHS ENDED
MARCH 31,
-------------------------
(US$ IN MILLIONS) 2000 2001
----------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
Interest income....................................... $ 31 $ 41
Interest expense...................................... (36) (62)
Interest expense on readily marketable inventories.... (14) (11)
Foreign exchange...................................... 3 (43)
Other income.......................................... 4 2
---- ----
Total non-operating income (expense)--net............. $(12) $(73)
==== ====
|
INTEREST EXPENSE ON READILY MARKETABLE INVENTORIES--Readily marketable inventories are agricultural commodities inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms. Bunge attributes interest expense to these inventories based on the average interest rates incurred on the short-term debt used to finance these inventories.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
9. COMPREHENSIVE INCOME (LOSS)
Total comprehensive loss was $(79) million and $(1) million for the three months ended March 31, 2001 and 2000, respectively. The following table summarizes the components of comprehensive income (loss):
THREE MONTHS ENDED
MARCH 31,
-------------------------
(US$ IN MILLIONS) 2000 2001
----------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
Net (loss) income..................................... $ (8) $ 6
Other comprehensive income (loss):
Foreign exchange translation adjustment............. 7 (84)
Cumulative effect of a change in accounting
principle, net of tax of $2....................... -- (3)
Unrealized gain on commodity futures, net of tax of
$1................................................ -- 2
---- ----
Total comprehensive loss.............................. $ (1) $(79)
==== ====
|
10. SEGMENT INFORMATION
Bunge has five reporting segments, which are organized based upon similar economic characteristics and are similar in nature of products and services offered, the nature of production processes, the type and class of customer and distribution methods. The agribusiness segment is characterized by both inputs and outputs being agricultural commodities and thus high volume and low margin. The activities of the fertilizer segment include raw material mining, mixing fertilizer components and marketing products. The edible oil products segment involves the manufacturing and marketing of products derived from vegetable oils. The wheat milling and bakery products segment involves the manufacturing and marketing of products derived primarily from wheat. The other segment consists of the soy ingredients and corn products businesses.
The "Unallocated" column in the following table contains the reconciliation between the totals for reportable segments and Bunge consolidated totals, which consists primarily of corporate items not allocated to the operating segments and intersegment eliminations. Transfers between the segments are generally valued at market. The revenues generated from these transfers are shown in the following table as "Intersegment revenues."
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
10. SEGMENT INFORMATION (CONTINUED) OPERATING SEGMENT INFORMATION
EDIBLE WHEAT MILLING
OIL AND BAKERY
(US$ IN MILLIONS) AGRIBUSINESS FERTILIZERS PRODUCTS PRODUCTS OTHER UNALLOCATED TOTAL
----------------- ------------ ----------- -------- ------------- -------- ----------- --------
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 2000
Net sales to external
customers.............. $1,407 $129 $269 $133 $ 67 $ -- $2,005
Intersegment revenues.... 22 -- -- -- -- (22) --
Gross profit............. 11 18 38 20 7 -- 94
Income from operations... (17) 13 14 5 3 (4) 14
EBITDA(1)................ (6) 16 17 8 6 (4) 37
Depreciation and
amortization........... 11 3 3 3 3 -- 23
THREE MONTHS ENDED
MARCH 31, 2001
Net sales to external
customers.............. $1,765 $283 $217 $122 $ 85 $ -- $2,472
Intersegment revenues.... 36 -- -- -- -- (36) --
Gross profit............. 69 38 27 13 9 -- 156
Income from operations... 35 26 9 2 6 (4) 74
EBITDA(1)................ 46 43 14 4 9 (4) 112
Depreciation, depletion
and amortization....... 11 17 5 2 3 -- 38
|
(1) Earnings before interest, taxes, depreciation and amortization, ("EBITDA") equals income from operations plus depreciation, depletion and amortization.
11. SUBSEQUENT EVENTS
Between July 5, 2001 and July 12, 2001, Bunge's Board of Directors approved:
(i) the exchange of 12,000 common shares, par value $1.00 per share for
1.2 million common shares, par value $.01 per share with Bunge International,
(ii) the declaration and payment of a 52.65-for-1 share dividend, (iii) an
increase in Bunge's authorized share capital to 240 million common shares, par
value $.01 per share, (iv) the authorization of 9,760,000 shares of undesignated
preference shares and (v) the authorization of 240,000 shares of Series A
Preference Shares.
The common shares data presented herein has been restated for all periods to reflect the effects of the share exchange and share dividend above.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders' of Manah S.A. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Manah S.A. and Subsidiaries (the "Company") as of March 31, 2000 and December 31, 1999, and the related consolidated statements of operations, cash flows and changes in shareholders' equity for the three months ended March 31, 2000 and the year ended December 31, 1999, all expressed in United States dollars. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Manah S.A. and Subsidiaries as of March 31, 2000 and December 31, 1999, and the results of its operations and its cash flows for the three months ended March 31, 2000 and the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE TOUCHE TOHMATSU Auditores Independentes Sao Paulo, Brazil January 12, 2001 |
MANAH S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNITED STATES DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, MARCH 31,
1999 2000
------------ ---------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 16,534 $ 2,108
Trade accounts receivable (less allowance of $12,466 and
$12,764)................................................ 45,348 46,863
Inventories (Note 2)...................................... 43,428 28,770
Recoverable taxes......................................... 8,707 9,587
Other current assets...................................... 1,488 2,185
-------- --------
Total current assets........................................ 115,505 89,513
-------- --------
Property, plant and equipment, net (Note 3)................. 103,133 103,270
Investments in affiliates (Note 4).......................... 36,501 33,089
Other non-current assets.................................... 5,561 5,754
-------- --------
TOTAL ASSETS................................................ $260,700 $231,626
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 6)................ $ 35,075 $ 43,425
Trade accounts payable.................................... 123,495 100,332
Payable to related party (Note 9)......................... 12,274 2
Other current liabilities................................. 6,981 6,900
-------- --------
Total current liabilities................................... 177,825 150,659
Long-term debt (Note 6)..................................... 43,753 42,625
Provisions for claims and lawsuits (Note 10)................ 22,313 23,450
Other non-current liabilities............................... 1,435 1,414
Commitments and contingencies (Note 10)
Shareholders' equity:
Preferred stock, no par value, 1,981,147,326 authorized,
issued and outstanding shares and additional paid-in
capital................................................. 38,402 38,402
Common stock, no par value, 1,165,898,112 authorized,
issued and outstanding shares and additional paid-in
capital................................................. 29,215 29,215
Retained deficit.......................................... (11,851) (14,018)
Accumulated other comprehensive loss...................... (40,392) (40,121)
-------- --------
Total shareholders' equity.................................. 15,374 13,478
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $260,700 $231,626
======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
MANAH S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNITED STATES DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------- --------------
1999 2000
-------------- --------------
Net sales................................................... $ 289,973 $ 47,947
Cost of goods sold.......................................... 255,558 45,875
-------------- --------------
GROSS PROFIT................................................ 34,415 2,072
Selling, general and administrative expenses................ 16,630 5,129
-------------- --------------
INCOME (LOSS) FROM OPERATIONS............................... 17,785 (3,057)
Non-operating income (expense)--net (Note 11)............... (75,340) 890
-------------- --------------
NET LOSS.................................................... $ (57,555) $ (2,167)
============== ==============
EARNINGS PER SHARE--BASIC AND DILUTED:
Net loss per share--preferred............................... $ (0.02) $ --
Net loss per share--common.................................. $ (0.02) $ --
Weighted-average number of shares outstanding--preferred.... 1,981,147,326 1,981,147,326
Weighted-average number of shares outstanding--common....... 1,165,898,112 1,165,898,112
|
The accompanying notes are an integral part of these consolidated financial statements.
MANAH S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNITED STATES DOLLARS IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
OPERATING ACTIVITIES
Net loss.................................................... $(57,555) $ (2,167)
Adjustment to reconcile net loss to cash used for
operating activities:
Unrealized foreign exchange............................... (973) (645)
Depreciation.............................................. 7,977 2,499
Bad debt expense.......................................... 3,898 -
Equity in earnings of affiliates.......................... (4,971) (1,139)
Dividends received from investments in affiliates......... 2,977 3,916
Changes in operating assets and liabilities:
Trade accounts receivable............................... 22,281 (426)
Inventories............................................. 2,191 15,461
Recoverable taxes....................................... (1,980) (662)
Trade accounts payable.................................. 9,396 (25,722)
Payable to related party................................ 12,100 (12,378)
Other current assets.................................... 2,122 (580)
Other current liabilities............................... 1,798 164
-------- --------
Cash used for operating activities.................... (739) (21,679)
INVESTING ACTIVITIES
Payments made for capital expenditures...................... (6,107) (206)
(Investments in) distributions from affiliates.............. (1,647) 1,336
-------- --------
Cash (used for) provided by investing activities...... (7,754) 1,130
FINANCING ACTIVITIES
Proceeds from long-term debt................................ 85,725 32,150
Repayment of long-term debt................................. (85,085) (26,199)
-------- --------
Cash provided by financing activities................. 640 5,951
Effect of exchange rate changes on cash and cash
equivalents............................................... (11,854) 172
-------- --------
Net decrease in cash and cash equivalents................... (19,707) (14,426)
Cash and cash equivalents, beginning of period.............. 36,241 16,534
-------- --------
Cash and cash equivalents, end of period.................... $ 16,534 $ 2,108
======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
MANAH S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNITED STATES DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
PREFERRED COMMON
STOCK AND STOCK AND
ADDITIONAL ADDITIONAL RETAINED
PREFERRED PAID-IN COMMON PAID-IN EARNINGS
SHARES CAPITAL SHARES CAPITAL (DEFICIT)
-------------- ----------- ------------- ----------- ---------
Balances, at January 1,
1999................... 1,981,147,326 $38,402 1,165,898,112 $29,215 $ 45,704
-------------- ------- ------------- ------- --------
Comprehensive loss--1999:
Net loss................. -- -- -- -- (57,555)
Other comprehensive loss:
Foreign exchange
translation
adjustment........... -- -- -- -- --
Total comprehensive
loss................... -- -- -- -- --
-------------- ------- ------------- ------- --------
Balances, December 31,
1999................... 1,981,147,326 38,402 1,165,898,112 29,215 (11,851)
============== ======= ============= ======= ========
Comprehensive income
(loss)--three months
ended March 31, 2000:
Net loss................. -- -- -- -- (2,167)
Other comprehensive
income:
Foreign exchange
translation
adjustment........... -- -- -- -- --
Total comprehensive
loss................... -- -- -- -- --
-------------- ------- ------------- ------- --------
Balances, March 31,
2000................... 1,981,147,326 $38,402 1,165,898,112 $29,215 $(14,018)
============== ======= ============= ======= ========
ACCUMULATED
OTHER
COMPREHENSIVE TOTAL
INCOME SHAREHOLDER'S COMPREHENSIVE
(LOSS) EQUITY INCOME (LOSS)
-------------- ------------- --------------
Balances, at January 1,
1999................... $ (3,909) $109,412
-------- --------
Comprehensive loss--1999:
Net loss................. -- (57,555) $(57,555)
Other comprehensive loss:
Foreign exchange
translation
adjustment........... (36,483) -- (36,483)
-------- --------
Total comprehensive
loss................... (36,483) (36,483) $(94,038)
-------- -------- ========
Balances, December 31,
1999................... (40,392) 15,374
======== ========
Comprehensive income
(loss)--three months
ended March 31, 2000:
Net loss................. -- (2,167) $ (2,167)
Other comprehensive
income:
Foreign exchange
translation
adjustment........... 271 -- 271
-------- --------
Total comprehensive
loss................... 271 271 $ (1,896)
-------- -------- ========
Balances, March 31,
2000................... $(40,121) $ 13,478
======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
MANAH S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS--Manah S.A. and Subsidiaries ("Manah" or the "Company") are engaged in the production of fertilizer and a wide range of products from raw materials such as phosphate and sulfuric acid to agricultural fertilizers and animal feeds. Manah's operations are located in Brazil. Manah operates in one operating segment, the production and sale of fertilizers.
As a result of Manah's highly leveraged capital structure the Company would not be able to continue as a going concern without additional capitalization. Manah's controlling shareholder effected a sale of the Company on April 1, 2000. Bunge acquired a controlling stake in Manah during 2000 and affected the needed re-capitalization of the Company.
BASIS OF PRESENTATION--The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which Manah exercises control and for which control is other than temporary. Intercompany transactions and balances are eliminated in consolidation.
Investments in 20% to 50% owned affiliates in which Manah has the ability to exercise significant influence are accounted for by the equity method of accounting whereby the investment is carried at acquisition cost, plus Manah's equity in undistributed earnings and losses since acquisition.
USE OF ESTIMATES--The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and require management to make certain estimates and assumptions. These may affect the reported amounts of assets and liabilities at the date of the financial statements. They may also affect the reported amounts of revenues and expenses during the reporting period. Amounts affected include, but are not limited to, allowances for doubtful accounts, useful lives of property, plant and equipment and intangible assets, contingent liabilities, income tax valuation allowances, other accrued expenses and fair value of financial instruments. Actual amounts may vary from those estimates
TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS--The functional currency of Manah is the Brazilian REAL, which is the currency of its principal operations, and, as such, amounts included in the statement of operations are translated at rates which approximate actual exchange rates at the date of the transaction (average rate). Assets and liabilities are translated at year-end exchange rates. The resulting translation adjustments are a component of accumulated other comprehensive income (loss).
FOREIGN CURRENCY TRANSACTIONS--Monetary assets and liabilities of Manah, denominated in currencies other than its functional currency, are remeasured into the functional currency at exchange rates in effect at the balance sheet date. The resulting exchange gains or losses are included in the consolidated statements of income.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include time deposits and readily marketable securities with original maturity dates of three months or less.
INVENTORIES--Inventories are stated at the lower of cost or market. Cost is determined using the weighted average cost method.
RECOVERABLE TAXES--Recoverable taxes represent, principally, Value Added Taxes paid on the acquisition of raw materials and other services which can be offset against future like taxes due on sales.
PROPERTY, PLANT AND EQUIPMENT, NET--Property, plant and equipment net is stated at cost less accumulated depreciation. Major renewals and improvements are capitalized, while maintenance and repairs are
MANAH S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) expensed as incurred. Depreciation is computed on the straight-line method based on the estimated useful lives of assets. Useful lives for property, plant and equipment are as follows:
YEARS
--------
Buildings................................................... 20-30
Machinery and equipment..................................... 3-13
Furniture, fixtures and other............................... 3-8
|
Manah capitalizes interest on borrowings during the construction period of major capital projects. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful life.
IMPAIRMENT OF LONG-LIVED ASSETS--Manah reviews for impairment its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, Manah estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest changes) is less than the carrying amount of the asset, an impairment loss is recognized; for the difference between the carrying value and the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
EARNINGS PER SHARE--Each common and preferred share entitles the shareholder to participate in earnings; however, pursuant to the terms of the preferred shares, such holders are entitled to a 6% non-cumulative dividend based on the total capital of the Company. In calculating earnings per share, the Company adopted a two-class method with preferred shares being treated as a participating security. This method is an earnings allocation formula that determines earnings per share for each class of common and preferred security according to dividends declared and participating rights to undistributed earnings. Under this method, net income is first reduced by the amount of dividends declared in the current period for each class of stock; the remaining earnings are then allocated to common stock and participating securities to the extent that each security may share in earnings. The total earnings allocated to each security (i.e. actual dividends declared and the amount allocated for the participation feature) is then divided by the weighted average number of shares for each class of security outstanding during the period. Common and preferred shareholders share equally in undistributed losses
INCOME TAXES--Manah has not historically generated taxable income and thus has not been required to make payments of income taxes. Recently, Manah has sustained substantial operating and tax losses. As realization of the tax assets generated is unlikely, Manah has recorded a valuation allowance against all deferred income tax balances. Manah has $59,152 thousand and $55,508 thousand as of March 31, 2000 and December 31, 1999 in tax loss carryforwards, which carry no expiration, however utilization is limited to 30% of current period taxable income. Manah, additionally, had $4,225 thousand and $1,150 thousand as of March 31, 2000 and December 31, 1999, respectively, of deferred tax assets related to temporary differences related to provisions and basis differences in book verses tax basis of fixed assets.
REVENUE RECOGNITION--Sales of fertilizer products are recognized as risk and title to the product transfer to the customer, which occurs at the time the shipment is made. Gross sales are reduced by discounts related to promotional programs and sales taxes to arrive at net sales.
NEW ACCOUNTING PRONOUNCEMENTS--In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 137, Accounting for Derivative
MANAH S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Instruments and Hedging Activities--Deferral of the Effective Date of FASB SFAS
No. 133, which defers the effective date of SFAS No. 133 to all fiscal quarters
of all fiscal years beginning after June 15, 2000. SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, issued in June 1998 as amended by
SFAS No. 138 Accounting for Derivative Instruments and Hedging Activities,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and hedging
activities. It requires an entity to recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. The adoption of SFAS 133 will not impact the
consolidated financial statements of Manah.
Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 101, as amended, Revenue Recognition in Financial Statements ("SAB 101"), was issued in December 1999 and provides an interpretation of when the revenue recognition criteria have been met. If a transaction is within the scope of specific authoritative literature that provides revenue recognition guidance, that literature should continue to be applied. However, in the absence of authoritative literature addressing specific arrangement or a specific industry, SAB 101 is designed to provide additional guidance as to the criteria that will be applied by the SEC. The additional guidance of SAB 101 will not have any effect on the Company's revenue recognition policies.
2. INVENTORIES
Inventories consist of the following:
(US$ IN THOUSANDS) DECEMBER 31, 1999 MARCH 31, 2000
------------------ ----------------- --------------
Raw Materials.......................................... $35,431 $25,478
Work in process........................................ 1,658 1,891
Finished Goods......................................... 2,987 281
Operating supplies..................................... 3,352 1,120
------- -------
Total................................................ $43,428 $28,770
======= =======
|
3. PROPERTY, PLANT AND EQUIPMENT, NET
(US$ IN THOUSANDS) DECEMBER 31, 1999 MARCH 31, 2000
------------------ ----------------- --------------
Land................................................... $ 14,154 $ 14,492
Buildings.............................................. 35,850 36,705
Machinery and equipment................................ 86,114 88,222
Furniture, fixtures and other.......................... 23,860 24,522
-------- --------
159,978 163,941
Less accumulated depreciation.......................... (63,819) (67,875)
Plus construction in process........................... 6,974 7,204
-------- --------
Total................................................ $103,133 $103,270
======== ========
|
Manah capitalized interest on construction in progress in the amount of $0 and $1,053 thousand during the three months ended March 31, 2000 and the year ended December 31, 1999, respectively.
MANAH S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT, NET (CONTINUED) Depreciation expense was $2,499 thousand and $7,977 thousand during the three months ended March 31, 2000 and the year ended December 31, 1999, respectively.
Manah identified certain assets during 1999, to be disposed of, resulting in a loss of $1,435 thousand, which was recorded in cost of goods sold. These assets consisting of land and buildings, which are classified as other non-current assets, have a net carrying value of $3,263 thousand and $3,187 thousand as of March 31, 2000 and December 31, 1999, respectively. The accumulated reserve as of March 31, 2000 is $1,475 thousand. The fair values of these assets were determined based on appraised selling values less the cost to sell. Depreciation of these assets was terminated upon transfer to the "held for sale" category. Manah has developed a plan to dispose of these assets and actions have been taken to complete these plans, including an active plan to find buyers, however, the eventual sale is dependent upon prevailing market conditions.
4. INVESTMENTS IN AFFILIATES
Included in investments in affiliates, Manah accounts for its 23.06% investment in Fertifos Administracao and Participacao S.A. and subsidiaries ("Fosfertil") under the equity method. Manah's investment, classified in investments in affiliates, in Fosfertil was $27,847 thousand and $30,013 thousand at March 31, 2000 and December 31, 1999, respectively, and its equity in Fosfertil's earnings was $1,053 thousand and $9,022 thousand for the three months ended March 31, 2000 and the year ended December 31, 1999, respectively. The tables below summarize Fosfertil's financial information:
THREE MONTHS
YEAR ENDED ENDED
(US$ IN THOUSANDS) DECEMBER 31, 1999 MARCH 31, 2000
------------------ ----------------- --------------
Net Sales.............................................. $473,049 $81,890
Gross Profit........................................... 196,963 21,683
Net income............................................. 38,385 4,559
|
(US$ IN THOUSANDS) DECEMBER 31, 1999 MARCH 31, 2000 ------------------ ----------------- -------------- Current assets......................................... $302,334 $245,895 Non-current assets..................................... 350,055 368,192 Current liabilities.................................... 155,777 137,374 Non-current liabilities................................ 241,001 240,103 Minority interest...................................... 125,452 115,920 |
5. FINANCIAL INSTRUMENTS
CONCENTRATION OF CREDIT RISK--Manah's businesses principally consists of providing fertilizer products to Brazilian farmers, and as such exposes Manah to credit risk with respect to the performance of the agricultural industry in Brazil. Manah purchases 35% of its raw material supplies, principally phosphate, from Fosfertil. No other significant concentrations of credit risk existed as of March 31, 2000.
MANAH S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. FINANCIAL INSTRUMENTS (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts and fair values of financial instruments are as follows:
DECEMBER 31, 1999 MARCH 31, 2000
------------------- -------------------
CARRYING FAIR CARRYING FAIR
(US$ IN THOUSANDS) VALUE VALUE VALUE VALUE
------------------ -------- -------- -------- --------
Cash and cash equivalents............................... $16,534 $16,534 $2,108 $2,108
Long-term debt, including current portion............... 78,828 78,828 86,050 86,050
|
CASH AND CASH EQUIVALENTS--The fair value of cash and cash equivalents approximates the carrying amount because of the short maturity of those instruments.
LONG-TERM DEBT--The fair value of long-term debt was calculated based on interest rates currently available to Manah for similar borrowings.
6. LONG-TERM DEBT
Long-term obligations are summarized below:
(US$ IN THOUSANDS) DECEMBER 31, 1999 MARCH 31, 2000
------------------ ----------------- --------------
PAYABLE IN U.S. CURRENCY (DOLLAR):
Long-term debt, fixed interest rates from 11% to 17%,
payable through 2006...................................... $ 32,879 $ 26,169
PAYABLE IN BRAZILIAN CURRENCY (REAL):
Long-term debt, variable interest rate indexed to Brazilian
Inter-Bank Deposit Rate (CDI) plus from 2% to 5%(1),
payable through 2000...................................... -- 7,178
Long-term debt, fixed interest rates from 12% to 25%,
payable through 2003...................................... 9,000 16,045
Long-term debt, variable interest rate indexed to TJLP(2)
plus 6% to 13.5%, payable through 2005.................... 9,017 6,841
BNDES(3) loans, variable interest rate indexed to IGPM(4)
plus 6.5%, payable through 2006........................... 27,932 29,817
-------- --------
78,828 86,050
Less: Installments due within one year...................... (35,075) (43,425)
-------- --------
Total long-term debt........................................ $ 43,753 $ 42,625
======== ========
|
(1) "CDI" is the Brazilian Inter-Bank deposit rate maintained by the Brazilian government. The annualized rate for the three months ended March 31, 2000 and the year ended December 31, 1999 was 17.6% and 25.1%, respectively.
(2) "TJLP" is a long-term interest rate reset by the Brazilian government on a quarterly basis. The annualized rate for the three months ended March 31, 2000 and the year ended December 31, 1999 was 22.8% and 14.7%, respectively.
(3) "BNDES"(Banco Nacional de Desenvolvimento Economico e Social) loans are Brazilian government industrial development loans.
(4) "IGPM" is the Brazilian inflation index published by Fundacao Getulio Vargas. The annualized rate for the three months ended March 31, 2000 and the year ended December 31, 1999 was 6.8% and 20.1%, respectively.
MANAH S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
Certain land, property, plant and equipment and the Company's investment in Fosfertil having an aggregate net carrying value of approximately $40,355 thousand have been mortgaged or otherwise pledged against long-term debt of $36,658 thousand as of March 31, 2000.
Principal maturities of long-term debt as of March 2000 are as follows:
(US$ IN THOUSANDS)
------------------
2001........................................................ $43,425
2002........................................................ 12,359
2003........................................................ 5,478
2004........................................................ 5,031
2005........................................................ 4,901
Later years................................................. 14,856
-------
$86,050
=======
|
As a result of the change in control of Manah, $10,000 thousand in long-term debt came due, which was paid on July 25, 2000.
7. SHAREHOLDERS' EQUITY
CAPITAL STRUCTURE--Manah has 1,165,898,112 and 1,981,147,326 authorized and outstanding shares of common stock and preferred stock, respectively. No additional shares of either class of security were authorized or issued or retired during the three months ended March 31, 2000 or the year ended December 31, 1999. No dilutive or anti-dilutive securities were outstanding as of March 31, 2000 or the year ended December 31, 1999.
SECURITY RIGHTS--Common shares have the right to vote at shareholder meetings while preferred shares are non-voting. Preferred shares do, however, have priority in the return of their paid-in capital in the event of liquidation and in the receipt of the mandatory non-cumulative dividend of 25% of consolidated net income as determined in accordance with Brazilian Corporate Law, due both to common and preferred shareholders. In the event that the mandatory dividend is omitted for three consecutive years, the preferred shares acquire voting rights until payment of such dividends is made. The preferred shares are also entitled to a non-cumulative dividend of 6% of Shareholders' Equity as computed based on the Brazilian Corporate Law.
DIVIDENDS--Dividends are payable in Brazilian REAL. Dividends may be converted to U.S. dollars and remitted to shareholders abroad provided that the non-resident shareholder capital is registered with the Brazilian Central Bank. Manah did not declare or pay dividends during the three months ended March 31, 2000 or the year ended December 31, 1999.
8. EMPLOYEE BENEFITS PLAN
Manah participates in a defined contribution plan available to substantially all of Manah's employees. Manah contributed and charged to expense $102 thousand and $519 thousand during the three months ended March 31, 2000 and the year ended December 31, 1999, respectively, related to fund contributions.
MANAH S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. RELATED PARTY TRANSACTIONS AND BALANCES
Transactions with related parties are as follows:
CONSOLIDATED
STATEMENTS OF INCOME
INCOME/(EXPENSES)
-----------------------------------
THREE MONTHS
YEAR ENDED ENDED
(US$ IN THOUSANDS) RELATIONSHIP TRANSACTION TYPE DECEMBER 31, 1999 MARCH 31, 2000
------------------ ------------------- ---------------------- ----------------- ---------------
Fosfertil Equity investee Raw material purchases $84,867 $5,284
|
Balances with related parties are as follows:
CONSOLIDATED
BALANCE SHEETS
----------------------------------
(US$ IN THOUSANDS) RELATIONSHIP BALANCE TYPE DECEMBER 31, 1999 MARCH 31, 2000
------------------ ------------------- ---------------------- ----------------- --------------
Fosfertil Equity investee Current payables $12,274 $2
|
10. COMMITMENTS AND CONTINGENCIES
Manah is party to a number of claims and lawsuits arising out of the normal course of business with respect to commercial matters, including various tax and labor claims. After taking into account liabilities recorded for all of the foregoing matters, management believes that the ultimate resolution of such matters will not have a material adverse affect on Manah's financial condition, results of operations or liquidity. Included in provisions in the consolidated balance sheet is $23,450 thousand and $22,313 thousand at March 31, 2000 and December 31, 1999, respectively, representing management's estimate of the probable loss on the above mentioned claims and lawsuits.
11. NON-OPERATING INCOME (EXPENSE)--NET
Non-operating (expenses) income--net consists of income and (expense) items as follows:
THREE MONTHS
YEAR ENDED ENDED
(US$ IN THOUSANDS) DECEMBER 31, 1999 MARCH 31, 2000
------------------ ------------------ --------------
Equity in earnings of affiliates............................ $ 4,971 $1,139
Interest income............................................. 21,517 1,889
Interest expense............................................ (27,483) (6,187)
Foreign exchange............................................ (72,341) 3,698
Other (expense) income--net................................. (2,004) 351
-------- ------
Total non-operating income (expense)--net................. $(75,340) $ 890
======== ======
|
For the three months ended March 31, 2000, and the year ended December 31, 1999, Manah paid interest, net of interest capitalized, of $1,799 thousand, and $9,108 thousand, respectively.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders' of Fertifos Administracao e Participacao S.A. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Fertifos Administracao e Participacao S.A. and Subsidiaries (the "Company") as of March 31, 2000 and December 31, 1999, and the related consolidated statements of income, cash flows and changes in shareholders' equity for the three months ended March 31, 2000 and the year ended December 31, 1999, all expressed in United States dollars. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Fertifos Administracao e Participacao S.A. and Subsidiaries as of March 31, 2000 and December 31, 1999, and the results of its operations and its cash flows for the three months ended March 31, 2000 and the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE TOUCHE TOHMATSU Auditores Independentes Sao Paulo, Brazil January 12, 2001 |
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNITED STATES DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, MARCH 31,
1999 2000
------------ ---------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 97,030 $ 33,414
Marketable securities..................................... 49,608 49,632
Trade accounts receivable (less allowance of $0 and $0 and
including related parties, $12,509 and $8,459).......... 25,982 19,439
Inventories (Note 2)...................................... 82,476 112,436
Recoverable taxes......................................... 31,698 15,917
Other current assets...................................... 15,540 15,057
-------- --------
Total current assets........................................ 302,334 245,895
-------- --------
Property, plant and equipment, net (Note 3)................. 306,535 324,565
Deferred income taxes (Note 4).............................. 17,585 18,817
Other non-current assets.................................... 25,935 24,810
-------- --------
TOTAL ASSETS................................................ $652,389 $614,087
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt (Note 6).................................. $ 6,524 $ 32,096
Current portion of long-term debt (Note 7)................ 27,707 30,316
Trade accounts payable.................................... 69,381 56,979
Income taxes payable...................................... 28,475 3,067
Accrued payroll and related liabilities................... 14,952 8,340
Other current liabilities................................. 8,738 6,576
-------- --------
Total current liabilities........................... 155,777 137,374
Long-term debt (Note 7)..................................... 213,778 208,154
Other non-current liabilities (Note 11)..................... 27,223 31,949
Commitments and contingencies (Note 11)
Minority interest........................................... 125,452 115,920
Shareholders' equity:
Common stock, no par value, 19,144,363,453 authorized,
issued and outstanding shares and additional paid-in
capital................................................. 121,776 121,776
Legal reserve............................................. 10,342 10,523
Retained earnings......................................... 30,626 18,235
Accumulated other comprehensive loss...................... (32,585) (29,844)
-------- --------
Total shareholders' equity.................................. 130,159 120,690
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $652,389 $614,087
======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNITED STATES DOLLARS IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1999 MARCH 31, 2000
----------------- --------------
Net sales ($290,829 and $53,765 to related parties)......... $473,049 $ 81,890
Cost of goods sold.......................................... 276,086 60,207
-------- --------
GROSS PROFIT................................................ 196,963 21,683
Selling, general and administrative expenses................ 43,750 7,661
-------- --------
INCOME FROM OPERATIONS...................................... 153,213 14,022
Non-operating income (expense)--net (Note 12)............... (49,238) (3,399)
-------- --------
INCOME BEFORE INCOME TAX, AND MINORITY INTEREST............. 103,975 10,623
Income tax expense (Note 4)................................. (27,347) (1,523)
-------- --------
INCOME BEFORE MINORITY INTEREST............................. 76,628 9,100
Minority interest........................................... (38,243) (4,541)
-------- --------
NET INCOME.................................................. $ 38,385 $ 4,559
======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNITED STATES DOLLARS IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------ ------------
1999 2000
------------ ------------
OPERATING ACTIVITIES
Net income.................................................. $ 38,385 $ 4,559
Adjustment to reconcile net income to cash provided by (used
for) operating activities:
Unrealized foreign exchange loss.......................... 22,579 1,677
Unrealized loss indexation of debt........................ 15,419 4,267
Depreciation.............................................. 18,701 6,778
Deferred income taxes..................................... 43 (799)
Minority interest......................................... 38,243 4,541
Changes in operating assets and liabilities:
Marketable securities................................... (48,897) 1,054
Trade accounts receivable............................... (17,423) 7,145
Inventories............................................. (11,035) (27,575)
Recoverable taxes....................................... (7,143) 16,291
Trade accounts payable.................................. 16,795 (13,849)
Income taxes payable.................................... 17,346 (25,699)
Accrued payroll and related liabilities................. 4,608 (6,865)
Other--net.............................................. 16 4,240
-------- --------
Cash provided by (used for) operating activities...... 87,637 (24,235)
INVESTING ACTIVITIES
Payments made for capital expenditures...................... (56,372) (16,231)
-------- --------
Cash used for investing activities.................... (56,372) (16,231)
FINANCING ACTIVITIES
Net change in short-term debt............................... (4,830) 25,167
Proceeds from long-term debt................................ 50,767 -
Repayment of long-term debt................................. (28,014) (15,291)
Dividends paid to shareholders.............................. (12,505) (16,769)
Dividends paid to minority interests in subsidiaries........ (15,560) (16,714)
-------- --------
Cash used for financing activities.................... (10,142) (23,607)
Effect of exchange rate changes on cash and cash
equivalents............................................... (24,376) 457
-------- --------
Net decrease in cash and cash equivalents................... (3,253) (63,616)
Cash and cash equivalents, beginning of period.............. 100,283 97,030
-------- --------
Cash and cash equivalents, end of period.................... $ 97,030 $ 33,414
======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNITED STATES DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
COMMON
STOCK AND ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN LEGAL RETAINED COMPREHENSIVE SHAREHOLDERS' COMPREHENSIVE
SHARES CAPITAL RESERVE EARNINGS INCOME (LOSS) EQUITY INCOME (LOSS)
-------------- ---------- -------- -------- -------------- ------------- --------------
Balances, at January 1,
1999...................... 19,144,363,453 $121,776 $ 8,682 $ 6,406 $ 16,422 $153,286
Comprehensive income
(loss)--1999:
Net income................ -- -- -- 38,385 -- 38,385 $ 38,385
Other comprehensive loss:
Foreign exchange
translation
adjustment............ -- -- -- -- (49,007) -- (49,007)
-------- --------
Total comprehensive
loss.................... -- -- -- -- (49,007) (49,007) $(10,622)
======== ========
Transfer to legal reserve... -- -- 1,660 (1,660) -- --
Dividend paid............... -- -- -- (12,505) -- (12,505)
-------------- -------- ------- -------- -------- --------
Balances, December 31,
1999...................... 19,144,363,453 121,776 10,342 30,626 (32,585) 130,159
-------------- -------- ------- -------- -------- --------
Comprehensive income--three
months ended March 31,
2000:
Net income................ -- -- -- 4,559 -- 4,559 $ 4,559
Other comprehensive
income:
Foreign exchange
translation
adjustment............ -- -- -- -- 2,741 -- 2,741
-------- --------
Total comprehensive
income.................. -- -- -- -- 2,741 2,741 $ 7,300
======== ========
Transfer to legal reserve... -- -- 181 (181) -- --
Dividend paid............... -- -- -- (16,769) -- (16,769)
-------------- -------- ------- -------- -------- --------
Balances, March 31, 2000.... 19,144,363,453 $121,776 $10,523 $18,235 $(29,844) $120,690
============== ======== ======= ======== ======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS--Fertifos Administracao e Participacao S.A., a privately held company, was formed in 1992 to participate in the Brazilian government auction and privatization of its controlling interest in its phosphate mining resources in Brazil. Fertifos Administracao e Participacao S.A. was successful in the privatization acquiring a controlling interest in Fosfertil S.A. and its subsidiary Ultrafertil S.A.
Fertifos Administracao e Participacao S.A., and Subsidiaries ("Fosfertil" or the "Company") is engaged in the production of mineral nutrients including phosphate, which are used in the production of fertilizers. Fosfertil's operations are located in Brazil.
BASIS OF PRESENTATION--The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which Fosfertil exercises control and for which control is other than temporary. Intercompany transactions and balances are eliminated in consolidation.
USE OF ESTIMATES--The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and require management to make certain estimates and assumptions. These may affect the reported amounts of assets and liabilities at the date of the financial statements. They may also affect the reported amounts of revenues and expenses during the reporting period. Amounts affected include, but are not limited to, allowances for doubtful accounts, useful lives of property, plant and equipment and intangible assets, contingent liabilities, income tax valuation allowances, other accrued expenses and fair value of financial instruments. Actual amounts may vary from those estimates.
TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS--The functional currency of Fosfertil is the Brazilian REAL and, as such, amounts included in the statements of operations are translated at rates which approximate actual exchange rates at the date of the transaction. Assets and liabilities are translated at year-end exchange rates (average rate). The resulting translation adjustments are a component of accumulated other comprehensive income (loss).
FOREIGN CURRENCY TRANSACTIONS--Monetary assets and liabilities of Fosfertil, denominated in currencies other than its functional currency, are remeasured into the functional currency at exchange rates in effect at the balance sheet date. The resulting exchange gains or losses are included in the consolidated statements of income.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include time deposits and readily marketable securities with original maturity dates of three months or less.
MARKETABLE SECURITIES--Investments in marketable debt securities are classified as trading and are reported at fair value based on quoted market prices with unrealized gains and losses included in non-operating expense--net in the consolidated statements of income.
DERIVATIVES--Fosfertil enters into various derivative financial instruments to limit exposures to changes in foreign currency fluctuations and interest rates. Realized and unrealized gains and losses on foreign exchange swap contracts are recognized currently as a component of foreign exchange in the statements of operations. Gains and losses on interest rate swaps are recognized using the "settlement" method and included as a component of interest income in the statements of operations.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES--Inventories are stated at the lower of cost or market. Cost is determined using the weighted average cost method.
RECOVERABLE TAXES--Recoverable taxes represent Value Added Taxes paid on the acquisition of raw materials and other services which can be offset against future like taxes due on sales.
PROPERTY, PLANT AND EQUIPMENT, NET--Property, plant and equipment, net is stated at cost less accumulated depreciation. Major renewals and improvements are capitalized, while maintenance and repairs are expensed as incurred. Depreciation is computed on the straight-line method based on the estimated useful lives of assets. Useful lives for property, plant and equipment are as follows:
YEARS
--------
Buildings................................................... 25
Machinery and equipment..................................... 4-25
Furniture, fixtures and other............................... 4-10
|
Fosfertil capitalizes interest on borrowings during the construction period of major capital projects. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful life.
IMPAIRMENT OF LONG-LIVED ASSETS--Fosfertil reviews for impairment its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, Fosfertil estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest changes) is less than the carrying amount of the asset, an impairment loss is recognized; otherwise, no impairment loss is recognized. Measurement of an impairment loss to be recognized for long-lived assets that Fosfertil expects to hold and use is based on the excess of carrying value over the fair value of the asset.
INCOME TAXES--Fosfertil operates in only one tax jurisdiction, which is Brazil. The provision for income taxes includes income taxes currently payable and deferred income taxes arising as a result of temporary differences between financial and tax reporting.
REVENUE RECOGNITION--Sales of mineral products are recognized as risk and title to the product transfer to the customer, which occurs at the time the shipment is made. Gross sales are reduced by sales taxes to arrive at net sales.
NEW ACCOUNTING PRONOUNCEMENTS--In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 137, Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB SFAS No. 133, which defers the effective date of SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, issued in June 1998 as amended by SFAS No. 138, Accounting for Derivative Instruments and Hedging Activities, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The adoption of SFAS 133 will not have a material impact on the Company's financial statements.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities and Exchange Commission ("SEC") Staff Accounting Bulletin
No. 101, as amended, Revenue Recognition in Financial Statements ("SAB 101"),
was issued in December 1999 and provides an interpretation of when the revenue
recognition criteria have been met. If a transaction is within the scope of
specific authoritative literature that provides revenue recognition guidance,
that literature should continue to be applied. However, in the absence of
authoritative literature addressing specific arrangement or a specific industry,
SAB 101 is designed to provide additional guidance as to the criteria that will
be applied by the SEC. The additional guidance of SAB 101 will not have any
effect on the Company's revenue recognition policies.
2. INVENTORIES
Inventories consist of the following:
DECEMBER 31, MARCH 31,
(US$ IN THOUSANDS) 1999 2000
------------------ ------------ ----------
Raw materials...................................... $22,641 $ 27,113
Finished goods..................................... 32,912 55,930
Operating supplies................................. 26,923 29,393
------- --------
Total.............................................. $82,476 $112,436
======= ========
|
3. PROPERTY, PLANT AND EQUIPMENT, NET
DECEMBER 31, MARCH 31,
(US$ IN THOUSANDS) 1999 2000
------------------ ------------- ----------
Land............................................... $ 22,301 $ 22,833
Buildings.......................................... 219,403 224,840
Machinery and equipment............................ 532,051 550,496
Furniture, fixtures and other...................... 46,874 48,179
--------- ---------
820,629 846,348
Less accumulated depreciation...................... (555,693) (575,733)
Plus construction in process....................... 41,599 53,950
--------- ---------
Total.............................................. $ 306,535 $ 324,565
========= =========
|
Fosfertil capitalized interest on construction in progress in the amount of $1,007 thousand and $2,562 thousand during the three months ended March 31, 2000 and the year ended December 31, 1999, respectively. Depreciation expense was $6,778 thousand and $18,701 thousand for the three months ended March 31, 2000 and the year ended December 31, 1999, respectively.
4. INCOME TAXES
The reconciliation between the actual provision for income taxes and that computed by applying the statutory rate is based on Brazil statutory tax rates.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED) The components of the provision for income taxes are:
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
(US$ IN THOUSANDS) 1999 2000
------------------ ------------ ------------
Current............................................ $(27,304) $(2,322)
Deferred........................................... (43) 799
-------- -------
Income tax expense................................. $(27,347) $(1,523)
======== =======
|
Reconciliation of the income tax expense at the Brazilian statutory rate to the effective rate is as follows:
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
(US$ IN THOUSANDS) 1999 2000
------------------ ------------ ------------
Income before income tax and minority interests.... $103,975 $10,623
Statutory income tax rate.......................... 33% 34%
-------- -------
Income tax expense at statutory rate............... 34,312 3,612
Adjustments to derive effective rate:
Income tax effect on interest on own capital..... (7,143) (1,797)
Changes in tax rates............................. -- (716)
Other............................................ 178 424
-------- -------
Income tax expense................................. $ 27,347 $ 1,523
======== =======
|
INTEREST ON OWN CAPITAL--Brazilian corporations are permitted to determine a
tax-deductible notional interest expense associated with shareholders' equity,
which could either be paid in cash in the form of a dividend or used to increase
capital stock in the statutory records. The amount of any such notional interest
expense is generally limited in respect of any particular year to the product of
(a) Brazilian GAAP retained earnings for such year multiplied by (b) the TAXA DE
JUROS DE LONGO PRAZO (TJLP) interest rate, the official rate for government
long-term loans. For financial reporting purposes, interest attributed to
shareholders' equity is reflected as a dividend and charged to retained
earnings.
The components of deferred income taxes are as follows:
DECEMBER 31, MARCH 31,
(US$ IN THOUSANDS) 1999 2000
------------------ ------------ ---------
Deferred income tax assets:
Excess of tax basis over financial statement basis of
property, plant and equipment....................... $ 6,452 $ 5,780
Accruals and reserves not currently deductible for tax
purposes............................................ 11,133 13,037
------- -------
Total deferred income taxes........................... $17,585 $18,817
======= =======
|
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED) For the three months ended March 31, 2000, and the year ended December 31, 1999, Fosfertil paid income taxes of $1,782 thousand, and $28,417 thousand, respectively.
5. FINANCIAL INSTRUMENTS
RISK MANAGEMENT--Fosfertil, as a result of its operating and financing activities, is exposed to changes in Brazilian interest rates and foreign currency exchange rates which may affect its results of operations and financial position. Fosfertil uses derivative financial instruments for the purpose of minimizing the risks and/or costs associated with fluctuations in foreign exchange rates. While these hedging instruments are subject to fluctuations in value, such fluctuations are generally offset by the value of the underlying exposures being hedged. The counterparties to these contractual arrangements are a small group of major financial institutions with which Fosfertil also has other financial relationships. As such, credit risk arising from these contracts is not significant and Fosfertil does not anticipate any significant losses. The cash requirements arising from risk management activities are not expected to be material. Fosfertil is not a party to leveraged derivatives.
CONCENTRATION OF CREDIT RISK--Sales to Manah S.A. and Serrana S.A., both related parties, accounted for 30% and 35% of net sales for the three months ended March 31, 2000 and the year ended December 31, 1999, respectively.
INTEREST RATE RISK MANAGEMENT--Fosfertil enters into fixed for floating interest rate swaps of the Brazilian floating inter-bank rate ("CDI") to hedge its exposure to Brazilian interest rates on fixed rate investments. The Company follows the "settlement" method for accounting for its interest rate swaps as the investments are entered into simultaneously with the hedged fixed rate investment and all terms are matched between the hedged item and the swap. The fixed rate investments, having original maturities of less than 90 days are classified as cash and cash equivalents. As such the carrying value of interest swaps are also classified as cash and cash equivalents.
The total notional amount of pay fixed receive variable interest rate swaps outstanding as of March 31, 2000 and December 31, 1999 was $37,496 thousand and $ 92,986 thousand, respectively. Due to the short-term nature of these swaps their carrying value approximates their fair value.
FOREIGN CURRENCY RISK MANAGEMENT--Fosfertil enters into foreign currency exchange swap contracts to hedge foreign currency exposures. The value of Fosfertil's assets and liabilities denominated in the same currency are netted and only the net exposure is hedged.
As of March 31, 2000, Fosfertil had cross-currency swaps outstanding with notional principal amounts of $3,229 thousand and unrealized gains of $28 thousand, which were recognized in foreign exchange in the statements of operations and offset the gains and losses from the assets and liabilities being hedged. Fosfertil had no outstanding foreign currency derivatives as of December 31, 1999.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. FINANCIAL INSTRUMENTS (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts and fair values of financial instruments are as follows:
DECEMBER 31, 1999 MARCH 31, 2000
------------------- -------------------
CARRYING FAIR CARRYING FAIR
(US$ IN THOUSANDS) VALUE VALUE VALUE VALUE
------------------ -------- -------- -------- --------
Cash and cash equivalents........................... $ 97,030 $ 97,030 $ 33,414 $ 33,414
Marketable securities............................... 49,608 49,608 49,632 49,632
Short-term debt..................................... 6,524 6,524 32,096 32,096
Long-term debt, including current portion........... 241,485 241,485 238,470 238,470
Foreign currency swaps.............................. $ -- $ -- $ 28 $ 28
|
CASH AND CASH EQUIVALENTS--The fair value of cash and cash equivalents, including interest rate swaps, approximates the carrying amount because of the short maturity of those instruments.
MARKETABLE SECURITIES--The fair value of marketable securities was determined based on quoted market prices.
SHORT-TERM DEBT--The fair value of short-term debt approximates carrying value because of the short maturity of those instruments.
LONG-TERM DEBT--The fair value of long-term debt was calculated based on interest rates currently available to Fosfertil for similar borrowings.
6. SHORT-TERM DEBT
Short-term borrowing consists of the following:
DECEMBER 31, MARCH 31,
(US$ IN THOUSANDS) 1999 2000
------------------ ------------ ---------
Secured Import Financing Note from 6.9% to 8.4%............. $6,524 $32,096
------ -------
Total short-term borrowings................................. $6,524 $32,096
====== =======
|
Fosfertil's short-term debt, predominately held with commercial banks is generally used to fund working capital requirements. The weighted average interest rate on short-term debt outstanding as of March 31, 2000 and December 31, 1999 was 7.52% and 7.45%, respectively. The short-term debt is denominated in U.S. dollars.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT
Long-term obligations are summarized below:
DECEMBER 31, MARCH 31,
(US$ IN THOUSANDS) 1999 2000
------------------ ------------ ---------
PAYABLE IN U.S. CURRENCY (DOLLAR):
Long-term debt, variable interest rate indexed to LIBOR(1)
plus 3.75% to 3.87%, payable through 2008............... $ 50,219 $ 49,225
PAYABLE IN BRAZILIAN CURRENCY (REAL):
BNDES(2) loans, variable interest rate indexed to IGPM(3)
plus 6.5%, payable through 2007......................... 158,337 158,207
Long-term debt, variable interest rate indexed to TJLP(4)
plus 8.5% to 10%, payable through 2003.................. 26,533 25,198
Other....................................................... 6,396 5,840
-------- --------
241,485 238,470
Less: Installments due within one year.................... (27,707) (30,316)
-------- --------
Total long-term debt...................................... $213,778 $208,154
======== ========
|
(1) The LIBOR for the three months ended March 31, 2000 and the year ended December 31, 1999 was 6.3% and 5.8%, respectively
(2) "BNDES"(Banco Nacional de Desenvolvimento Economico e Social) loans are Brazilian government industrial development loans.
(3) "IGPM" is the Brazilian inflation index published by Fundacao Getulio Vargas. The annualized rate for the three months ended March 31, 2000 and the year ended December 31, 1999 was 6.8% and 20.1%, respectively.
(4) "TJLP" is a long-term interest rate reset by the Brazilian government on a quarterly basis. The annualized rate for the three months ended March 31, 2000 and the year ended December 31, 1999 was 12.0% and 13.2%, respectively.
Certain land, property, plant and equipment having a net carrying value of approximately $156,540 thousand have been mortgaged or otherwise pledged against long-term debt of $74,423 thousand as of March 31, 2000.
Principal maturities of long-term debt as of March 2000 are as follows:
(US$ IN THOUSANDS)
------------------
2001............................................... $ 30,316
2002............................................... 33,187
2003............................................... 26,487
2004............................................... 33,841
2005............................................... 33,841
Later years........................................ 80,798
--------
$238,470
========
|
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SHAREHOLDERS' EQUITY
CAPITAL STRUCTURE--Fosfertil has 19,144,363,453 authorized and outstanding shares of common stock. No additional shares were authorized, issued or retired during the three months ended March 31, 2000 or the year ended December 31, 1999.
LEGAL RESERVES--As per paragraph 1 of article 193 of Brazilian law 6,404/76, 5% of statutory net income is attributed to a legal reserve up to 20% of total statutory paid-in capital.
DIVIDENDS--Dividends are payable in Brazilian REAL. Dividends may be converted to U.S. dollars and remitted to shareholders abroad provided that the non-resident shareholder's capital is registered with the Brazilian Central Bank.
9. EMPLOYEE BENEFITS PLAN
A Fosfertil subsidiary, Ultrafertil S.A. participates in a multiemployer defined benefit pension plan and other postretirement benefit plans administered by the Petrobras de Seguridade Social--Petros.
A total of 1,831 of Ultrafertil's employees are covered by these plans. Fosfertil contributed and charged to expense $294 thousand and $1,150 thousand during the three months ended March 31, 2000 and the year ended December 31, 1999, respectively, related to pension fund contributions. As a member of the multiemployer plans, Fosfertil's contributions are not segregated in separate accounts or restricted to provide benefits only to employees of Fosfertil.
10. RELATED PARTY TRANSACTIONS AND BALANCES
Fosfertil provides phosphate materials to, mainly, the fertilizer industry in Brazil. Many of Fosfertil's shareholders are engaged in this industry and thus buy a majority of Fosfertil's production. The Company recorded net sales of $53,765 thousand and $290,829 thousand for the three months ended March 31, 2000 and the year ended December 31, 1999, respectively, to its shareholders. Accounts receivable from shareholders were $8,459 thousand and $12,509 thousand at March 31, 2000 and December 31, 1999, respectively.
11. COMMITMENTS AND CONTINGENCIES
Fosfertil is party to a number of claims and lawsuits arising out of the normal course of business with respect to commercial matters, including various tax and labor claims. After taking into account liabilities recorded for all of the foregoing matters, management believes that the ultimate resolution of such matters will not have a material adverse affect on Fosfertil's financial condition, results of operations or liquidity. Provisions for claims and lawsuits of $31,949 thousand and $27,223 thousand at March 31, 2000 and December 31, 1999, respectively, have been recorded representing management's estimate of the probable losses on the above mentioned claims and lawsuits. The Company recorded losses of $4,269 thousand and $15,669 thousand for the three months ended March 31, 2000 and the year ended December 31, 1999, respectively.
FERTIFOS ADMINISTRACAO E PARTICIPACAO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. NON-OPERATING INCOME (EXPENSE)--NET
Non-operating expenses--net consists of income and (expense) items as follows:
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
(US$ IN THOUSANDS) 1999 2000
------------------ ------------- ------------
Interest income............................................ $ 13,373 $ 5,171
Interest expense........................................... (44,729) (9,488)
Foreign exchange........................................... (18,170) 1,387
Other income (expense)--net................................ 288 (469)
-------- -------
Total non-operating income (expense)--net.................. $(49,238) $(3,399)
======== =======
|
For the three months ended March 31, 2000, and the year ended December 31, 1999, Fosfertil paid interest, net of interest capitalized, of $8,329 thousand, and $14,094 thousand, respectively.
[LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 29 and 30 of the bye-laws of Bunge Limited ("Bunge") provide, in part, that Bunge shall indemnify its directors, secretary and officers from and against all actions, costs, charges, losses, damages and expenses which they may incur in the performance of their duties as director, secretary or officer, provided that such indemnification does not extend to any matter in respect of any fraud or dishonesty which may attach to any such persons. Section 98 of the Companies Act 1981, as amended, of Bermuda permits a company to indemnify a director or officer against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted or when he is relieved from liability by the court under section 281 of the Companies Act 1981.
Bunge maintains standard policies of insurance under which coverage is provided (a) to its directors, secretary and officers against loss arising from claims made by reason of breach of duty or other wrongful act, and (b) to Bunge with respect to payments which may be made by Bunge to such directors, secretary and officers pursuant to the above indemnification provision or otherwise as a matter of law.
The proposed form of Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement provides for indemnification of Bunge's directors and officers by the underwriters against certain liabilities.
ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES.
Since 1998, Bunge has made the following sales of unregistered securities:
(a) the issuance of 170,000 shares of $.01 par value redeemable preferred stock by the registrant's wholly owned subsidiary, Bunge First Capital Limited, for $1,000 per share, to one sophisticated, accredited investor in December 2000. Salomon Smith Barney Inc. acted as placement agent in connection with this transaction and received a commission of $5,000,000.
(b) $107,000,000 aggregate principal amount of 8.51% three-year trust certificates and $18,000,000 aggregate principal amount of 8.61% five-year trust certificates issued by a trust established by a subsidiary of the registrant and sold to seven sophisticated, accredited investors, at par value in December 2000.
Such issuances were made in reliance upon an exemption from the registration provisions of the Securities Act set forth in Section 4(2) thereof relative to transactions by an issuer not involving any public offering or the rules and regulations thereunder.
ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
The following exhibits are filed as part of this Registration Statement:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1* Form of Underwriting Agreement
3.1 Memorandum of Association
3.2 Bye-laws
4.1 Form of Common Share Certificate
4.2 Form of Shareholder Rights Plan
5.1 Opinion of Conyers Dill & Pearman
|
II-1
EXHIBIT
NUMBER DESCRIPTION
------- -----------
8.1 Tax Opinion of Conyers Dill & Pearman
8.2 Tax Opinion of Shearman & Sterling
10.1 Administrative Services Agreement dated as of July 1, 2001
between Bunge Limited and Bunge International Limited
10.2 Registration Rights Agreement dated as of June 25, 2001
between Bunge Limited and the shareholders of Bunge
International Limited
10.3 Pooling Agreement, dated as of August 25, 2000, between
Bunge Funding Inc., Bunge Management Services Inc., as
Servicer, and The Chase Manhattan Bank, as Trustee.
10.4 First Amended and Restated Series 2000-1 Supplement, dated
as of July 12, 2001, between Bunge Funding Inc., Bunge
Management Services Inc., as Servicer, Cooperative Centrale
Raiffeisen-BoerenleenBank B.A., "Rabobank International",
New York branch, as Letter of Credit Agent, The Chase
Manhattan Bank, as Administrative Agent, The Bank of New
York, as Collateral Agent and Trustee, and Bunge Asset
Funding Corp., as Series 2001-1 Purchaser.
21.1 Subsidiaries of the Registrant
23.1 Consent and Report on Schedules of Deloitte & Touche
23.2 Consent of Deloitte Touche Tohmatsu
23.3 Consent of Conyers Dill & Pearman (included in Exhibits 5.1
and 8.1)
23.4 Consent of Shearman & Sterling (included in Exhibit 8.2)
24.1 Power of Attorney (included on signature page)
|
Pursuant to Item 601(b)(4) of Regulation S-K, certain instruments with respect to the registrant's long-term debt are not filed with this registration statement. The registrant will furnish a copy of any such long-term debt agreement to the SEC upon request.
* To be filed by amendment.
II-2
(B) FINANCIAL STATEMENT SCHEDULE
BUNGE LIMITED AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(US$ IN MILLIONS)
ADDITIONS
BALANCE AT ---------------------------------
BEGINNING OF CHARGED TO COSTS CHARGED TO DEDUCTIONS BALANCE AT
DESCRIPTION PERIOD AND EXPENSES OTHER ACCOUNTS FROM RESERVES END OF PERIOD
----------- ------------ ---------------- -------------- ------------- -------------
FOR THE YEAR ENDED DECEMBER 31, 1998
Allowance for doubtful accounts... $ 49 16 (3)(a) (7)(b) $ 55
Income tax valuation allowance.... $127 4 (8)(a) -- $123
FOR THE YEAR ENDED DECEMBER 31, 1999
Allowance for doubtful accounts... $ 55 15 (7)(a) (6)(b) $ 57
Income tax valuation allowance.... $123 32 (30)(a) -- $125
FOR THE YEAR ENDED DECEMBER 31, 2000
Allowance for doubtful accounts... $ 57 7 6 (a) (11)(b) $ 59
Income tax valuation allowance.... $125 9 (11)(a) (28)(c) 95
|
(a) Foreign exchange translation adjustments for all periods and effects of acquisitions of subsidiaries for 2000.
(b) Write-off of uncollectible accounts.
(c) Reversal of previously reserved net operating losses resulting from a merger of our Brazilian subsidiaries.
II-3
ITEM 9. UNDERTAKINGS.
(a) The undersigned hereby undertakes that insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to under Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and that offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such determination and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in White Plains, New York on July 13, 2001.
BUNGE LIMITED
By: /s/ ALBERTO WEISSER
-----------------------------------------
Alberto Weisser
Chief Executive Officer and Chairman of
the Board of Directors
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POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Alberto Weisser and William M. Wells his true and lawful attorney-in-fact with the authority to execute in the name of each such person, and to file with the Securities and Exchange Commission and the Bermuda Registrar of Companies, together with any exhibits thereto and other documents therewith, any and all amendments (including without limitation post-effective amendments) to this registration statement and any related Rule 462(b) registration statement or any amendment thereto necessary or advisable to enable the registrant to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission and the Companies Act 1981 of Bermuda in respect thereof, which amendments may make such other changes in the registration statement as the aforesaid attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been duly signed below by the following persons in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ ALBERTO WEISSER Chief Executive Officer and
------------------------------------------- Chairman of the Board of July 13, 2001
Alberto Weisser Directors
/s/ WILLIAM M. WELLS
------------------------------------------- Chief Financial Officer July 13, 2001
William M. Wells
/s/ THEODORE P. FOX, III
------------------------------------------- Controller and Principal July 13, 2001
Theodore P. Fox, III Accounting Officer
/s/ JORGE BORN, JR.
------------------------------------------- Director July 13, 2001
Jorge Born, Jr.
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II-5
NAME TITLE DATE
---- ----- ----
/s/ ERNEST BACHRACH
------------------------------------------- Director July 13, 2001
Ernest Bachrach
/s/ ENRIQUE BOILINI
------------------------------------------- Director July 13, 2001
Enrique Boilini
/s/ MICHAEL BULKIN
------------------------------------------- Director July 13, 2001
Michael Bulkin
/s/ OCTAVIO CARABALLO
------------------------------------------- Director July 13, 2001
Octavio Caraballo
/s/ FRANCIS COPPINGER
------------------------------------------- Director July 13, 2001
Francis Coppinger
/s/ BERNARD DE LA TOUR D'AUVERGNE LAURAGUAIS
------------------------------------------- Director July 13, 2001
Bernard de La Tour d'Auvergne Lauraguais
/s/ WILLIAM ENGELS
------------------------------------------- Director July 13, 2001
William Engels
/s/ CARLOS BRAUN SAINT
------------------------------------------- Director July 13, 2001
Carlos Braun Saint
/s/ LUDWIG SCHMITT-RHADEN
------------------------------------------- Director July 13, 2001
Ludwig Schmitt-Rhaden
/s/ WILLIAM M. WELLS
------------------------------------------- Authorized Representative
Bunge Limited, U.S. office in the United States July 13, 2001
By: William M. Wells, Chief Financial Officer
|
II-6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1* Form of Underwriting Agreement
3.1 Memorandum of Association
3.2 Bye-laws
4.1 Form of Common Share Certificate
4.2 Form of Shareholder Rights Plan
5.1 Opinion of Conyers Dill & Pearman
8.1 Tax Opinion of Conyers Dill & Pearman
8.2 Tax Opinion of Shearman & Sterling
10.1 Administrative Services Agreement dated July 1, 2001 between
Bunge Limited and Bunge International Limited
10.2 Registration Rights Agreement dated June 25, 2001 between
Bunge Limited and the shareholders of Bunge International
Limited
10.3 Pooling Agreement, dated as of August 25, 2000, between
Bunge Funding Inc., Bunge Management Services Inc., as
Servicer, and The Chase Manhattan Bank, as Trustee.
10.4 First Amended and Restated Series 2000-1 Supplement, dated
as of July 12, 2001, between Bunge Funding Inc., Bunge
Management Services Inc., as Servicer, Cooperative Centrale
Raiffeisen-BoerenleenBank B.A., "Rabobank International",
New York branch, as Letter of Credit Agent, The Chase
Manhattan Bank, as Administrative Agent, The Bank of New
York, as Collateral Agent and Trustee, and Bunge Asset
Funding Corp., as Series 2001-1 Purchaser.
21.1 Subsidiaries of the Registrant
23.1 Consent and Report on Schedules of Deloitte & Touche
23.2 Consent of Deloitte Touche Tohmatsu
23.3 Consent of Conyers Dill & Pearman (included in Exhibits 5.1
and 8.1)
23.4 Consent of Shearman & Sterling (included in Exhibit 8.2)
24.1 Power of Attorney (included on signature page)
|
* To be filed by amendment.
EXHIBIT 3.1
Registration No. 20791
[SEAL]
BERMUDA
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
I HEREBY CERTIFY that in accordance with section 10 of THE COMPANIES ACT 1981 BUNGE AGRIBUSINESS LIMITED by resolution and with the approval of the Registrar of Companies has changed its name and was registered as BUNGE LIMITED on the 5TH day of FEBRUARY, 1999.
Given under my hand and the Seal of the
[SEAL] REGISTRAR OF COMPANIES this 9TH
day of FEBRUARY, 1999.
/s/ Illegible
for Registrar of Companies
|
Registration No. 20791
[SEAL]
BERMUDA
CERTIFICATE OF REGISTRATION OF
ALTERED MEMORANDUM OF ASSOCIATION
THIS IS TO CERTIFY that a copy of the Memorandum of Association of
BUNGE LIMITED
altered in accordance with section 12 of THE COMPANIES ACT 1981 ("the Act") and the consent granted by the Minister to section 4A were delivered to the Registrar of Companies and registered on the 6TH day of APRIL, 2001 pursuant to section 12(9) of the Act.
[SEAL] Given under my hand and the Seal of
the REGISTRAR OF COMPANIES
this 11TH day of APRIL, 2001.
/s/ Illegible
for Registrar of Companies
|
FORM NO. 2
[SEAL]
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(Section 7(1) and (2))
AMENDED MEMORANDUM OF ASSOCIATION
OF
Bunge Agribusiness Limited
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount (if any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely,
NAME ADDRESS BERMUDIAN NATIONALITY NUMBER OF
STATUS SHARES
(Yes/No) SUBSCRIBED
Anthony Whaley Clarendon House Yes British One
Church Street
Hamilton
Bermuda
Edwin S. Mortimer " Yes British One
John C.R. Collis " Yes British One
|
do hereby respectively agree to take such number of shares of the Company as may be allotted to us respectively by the provisional directors of the Company, not exceeding the number of shares for which we have respectively subscribed, and to satisfy such calls as may be made by the directors, provisional directors or promoters of the Company in respect of the shares allotted to us respectively.
3. The Company is to be an exempted Company as defined by the Companies Act 1981.
4. The Company has power to hold land situated in Bermuda not exceeding in all, including the following parcels-
N/A
5. The authorised share capital of the Company is US$12,000 divided into shares of US$1.00 each. The minimum subscribed share capital of the Company is US$12,000.
6. The objects for which the Company is formed and incorporated are -
1. * See Schedule Altered 4/6/2001
7. Powers of the Company
1. * See Schedule Altered 4/6/2001
SCHEDULE
That the memorandum of association of the Company be and is hereby altered as follows:
(i) By the replacement of the present objects in paragraph 6 with new objects as follows:-
OBJECTS OF THE COMPANY:
1) to carry on the business of the production, development, processing, manufacturing, purchasing, handling, selling and trading of, and otherwise dealing in, all types of agricultural produce and commodities and their derivatives and all types of animals and animal products and their derivatives and all types of branded food products;
2) to carry on the business of seed crushing, oil extraction by crushing and any other processes and milling;
3) to carry on the business of mining and quarrying of fertilizer raw materials and the production, development, processing, manufacturing, purchasing, handling, selling and trading of, and otherwise dealing in, fertilizers of every description;
4) to carry on the business of logistics and transportation services;
5) to carry on by electronic means, including, but not limited to, by way of the computer network commonly referred to as the Internet, all types of activities relating to those businesses referred to in paragraphs 1 to 4 above;
6) to act and to perform all the functions of a holding company in all its branches and to co-ordinate the policy and administration of any subsidiary company or affiliated company wherever incorporated or carrying on business or of any group of companies of which the Company or any subsidiary company or affiliated company is a member or which are in any manner controlled directly or indirectly by the Company (any of the companies referred to in this paragraph 6 is referred to below as a "group company");
7) to act as an investment company and for that purpose to acquire and hold upon any terms and, either in the name of the Company or that of any nominee, shares, stock, debentures, debenture stock, ownership interests, annuities, notes, mortgages, bonds, obligations and securities, foreign exchange, foreign currency deposits and commodities, issued or guaranteed by any company or partnership wherever incorporated, established or carrying on business, or by any government, sovereign, ruler, commissioners, public body or authority, supreme, municipal, local or otherwise, by original subscription, tender, purchase, exchange, underwriting, participation in syndicates or in any other manner and
whether or not fully paid up, and to make payments thereon as called up or in advance of calls or otherwise and to subscribe for the same, whether conditionally or absolutely, and to hold the same with a view to investment, but with the power to vary any investments, and to exercise and enforce all rights and powers conferred by or incident to the ownership thereof, and to invest and deal with the moneys of the Company not immediately required upon such securities and in such manner as may be from time to time determined;
8) to provide financing and financial services (including, but not limited to, credit enhancement) and to make financial accommodation and to advance and lend money or real, personal and mixed properties with or without interest on cash, credit (including, but not limited to, export finance credit) or other accounts on policies, bonds, debentures, bills of exchange, promissory notes, letters of credit or other obligations to any group company, and to act as agent, broker or intermediary for any group company in the arranging of financial accommodation, loans, advances and financings and the provision of security or collateral related thereto and in the repayment or refinancing of such arrangements and the realisation of such security including the enforcement of guarantees and indemnities and the collection of cheques, bills or notes on behalf of any group company;
9) to carry on business as financial consultants and arrangers in relation to, and the provision of related services for the identification and negotiation of, investments, acquisitions, securitisations and related transactions (including, but not limited to, any of the foregoing involving assets, shares, stocks, joint venture or partnership interests or other ownership interests) and for the identification, evaluation and negotiation of the funding and financial structure of such investments or acquisitions or similar transactions and to provide advisory services in connection with the management of assets or ownership interests throughout the world to any group company;
10) to borrow or raise or secure the payment of money in such manner as the Company may think fit and to secure the same or the repayment or performance of any debt, liability, contract, guarantee or other arrangement incurred or to be entered into by the Company in any way and in particular by the issue of debentures, debenture stock, bonds, obligations and otherwise howsoever whether perpetual or otherwise charged upon all or any of the Company's property and to purchase, redeem or otherwise pay off such securities;
11) to lend or deposit with any person funds or other assets to provide collateral or credit enhancement for loans or other forms of financing provided to any group company and providing collateral by way of mortgage, charge, pledge, lien or promissory note or any other form of security as may be required therefor;
12) to engage in or enter into, or arrange for any group company, all forms of trading in commodities, currencies and property generally including, without limitation, all forms of contracts and agreements (whether spot, forward, swap or otherwise), derivative financial instruments and products and other rate protection transactions and options and futures on the foregoing and on indices derived from the foregoing;
13) as set out in paragraphs (b) to (n) and (p) to (u) inclusive of the Second Schedule to The Companies Act 1981.
(ii) By the replacement of the present powers in paragraph 7 with new powers as follows:-
POWERS OF THE COMPANY;
1) the Company shall, pursuant to Section 42 of The Companies Act 1981, have the power to issue preference shares which are, at the option of the holder, liable to be redeemed;
2) the Company shall have the power to grant pensions, annuities, or other allowances, including allowances on death, to or for the benefit of any directors, officers or employees or former directors, officers or employees of the Company or any group company or former group company or of any predecessor in business of any of them, and to the relations, connections or dependants of any such persons, and to other persons whose service or services have directly or indirectly been of benefit to the Company or whom the Company considers have any moral claim on the Company or to their relations, connections or dependants, and to establish or support or aid in the establishment or support of any associations, institutions, clubs, schools, building and housing schemes, funds and trusts, and to make payments toward insurance or other arrangements likely to benefit any such persons or otherwise advance the interests of the Company or of its Members, and to subscribe, guarantee or pay money for any purpose likely, directly or indirectly, to further the interests of the Company or of its Members or for any national, charitable, benevolent, educational, religious, social, public, general or useful object;
3) the Company shall have the power to establish and operate any plan or scheme for encouraging or facilitating the holding of shares in the Company by or for the benefit of the bona fide employees or former employees (including directors or officers) employed by the Company and any group company, or the wives, husbands, widows, widowers or children or step- children of such employees or former employees and, without limitation, the establishment and operation of any plan or scheme to grant shares or options to acquire shares in the Company to remunerate or provide an incentive to any such employees or former employees;
4) the Company shall not have the power set out in paragraph 8 of the First Schedule to The Companies Act 1981.
Signed by each subscriber in the presence of at least one witness attesting the signature thereof -
-------------------------------------- -------------------------------------
/s/ Anthony Whaley /s/ Karen O'Connor
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/s/ Edwin S. Mortimer /s/ Karen O'Connor
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/s/ John C. R. Collis /s/ Karen O'Connor
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(Subscribers) (Witnesses)
|
SUBSCRIBED this 11th day of May, 1995.
STAMP DUTY (To be affixed)
RC3
THE COMPANIES ACT 1981
FIRST SCHEDULE
A company limited by shares may exercise all or any of the following powers subject to any provision of the law or its memorandum:
1. [Deleted]
2. to acquire or undertake the whole or any part of the business, property and liabilities of any person carrying on any business that he company is authorised to carry on;
3. to apply for register, purchase, lease, acquire, hold, use, control, licence, sell, assign or dispose of patents, patent rights, copyrights, trade makers, formulae, licences, inventions, processes, distinctive makers and similar rights;
4. to enter into partnership or into any arrangement for sharing of profits, union of interests, co-operation, joint venture, reciprocal concession or otherwise with any person carrying on or engaged in or about to carry on or engage in any business or transaction that the company is authorised to carry on or engage in or any business or transaction capable of being conducted so as to benefit the company;
5. to take or otherwise acquire and hold securities in any other body corporate having objects altogether or in part similar to those of the company or carrying on any business capable of being conducted so as to benefit the company;
6. subject to section 96 to lend money to any employee or to any person having dealings with the company or with whom the company proposes to have dealings or to any other body corporate any of those shares are held by the company;
7. to apply for, secure or acquire by grant, legislative enactment, assignment, transfer, purchase or otherwise and to exercise, carry out and enjoy any charter, licence, power, authority, franchise, concession, right or privilege, that any government or authority or any body corporation or other public body may be empowered to grant, and to pay for, aid in and contribute toward carrying it into effect and to assume any liabilities or obligations incidental thereto;
8. to establish and support or aid in the establishment and support of associations, institutions, funds or trusts for the benefit of employees or former employees of the company or its predecessors, or the dependants or connections of such employees or former employees, and grant pensions and allowances, and make payments towards insurance or for any object similar to those set forth in this paragraph, and to subscribe or guarantee money for charitable, benevolent, educational and religious objects or for any exhibition or for any public, general or useful objects;
9. to promote any company for the purpose of acquiring or taking over any of the property and liabilities of the company or for any other purpose that may benefit the company;
10. to purchase, lease, take in exchange, hire or otherwise acquire any personal property and any rights or privileges that the company considers necessary or convenient for the purposes of its business;
11. to construct, maintain, alter, renovate and demolish any buildings or works necessary or convenient for its objects;
12. to take land in Bermuda by way of lease or letting agreement for a term not exceeding twenty-one years, being land "BONA FIDE" required for the purposes of the business of the company and with the consent of the Minister granted in his discretion to take land in Bermuda by way of lease or letting agreement for a similar period in order to provide accommodation or recreational facilities for its officers and employees and when no longer necessary for any of the above purposes to terminate or transfer the lease or letting agreement;
13. except to the extent, if any, as may be otherwise expressly provided in its incorporating Act or memorandum and subject to the provisions of this Act every company shall have power to invest the moneys of the Company by way of mortgage of real or personal property of every description in Bermuda or elsewhere and to sell, exchange, vary, or dispose of such mortgage as the company shall from time to time determine;
14. to construct, improve, maintain, work, manage, carry out or control any roads, ways, tramways, branches or sidings, bridges, reservoirs, watercourses, wharves, factories, warehouses, electric works, shops, stores and other works and conveniences that may advance the interests of the company and contribute to, subsidise or otherwise assist or take part in the construction, improvement, maintenance, working, management, carrying out or control thereof;
15. to raise and assist in raising money for, and aid by way of bonus, loan, promise, endorsement, guarantee or otherwise, any person and guarantee the performance or fulfilment of any contracts or obligations of any person, and in particular guarantee the payment of the principal of and interest on the debt obligations of any such person;
16. to borrow or raise or secure the payment of money in such manner as the company may think fit;
17. to draw, make, accept, endorse, discount, execute and issue bills of exchange, promissory notes, bills of lading, warrants and other negotiable or transferable instruments;
18. when properly authorised to do so, to sell, lease, exchange or otherwise dispose of the undertaking of the company or any part thereof as an entirety or substantially as an entirety for such consideration as the company thinks fit;
19. to sell, improve, manage, develop, exchange, lease, dispose of, turn to account or otherwise deal with the property of the company in the ordinary course of its business;
20. to adopt such means of making known the products of the company as may seem expedient, and in particular by advertising, by purchase and exhibition of works of art or interest, by publication of books and periodicals and by granting prizes and rewards and making donations;
21. to cause the company to be registered and recognised in any foreign jurisdiction, and designate persons therein according to the laws of that foreign jurisdiction or to represent the company and to accept service for and on behalf of the company of any process or suit;
22. to allot and issue fully-paid shares of the company in payment or part payment of any property purchase or otherwise acquired by the company or for any past services performed for the company;
23. to distribute among the members of the company in cash, kind, specie or otherwise as may be resolved, by way of dividend, bonus or in any other manner considered advisable, any property of the company, but not so as to decrease the capital of the company unless the distribution is made for the purpose of enabling the company to be dissolved or the distribution, apart from this paragraph, would be otherwise lawful;
24. to establish agencies and branches;
25. to take or hold mortgages, hypothecs, liens and charges to secure payment of the purchase price, or of any unpaid balance of the purchase price, of any part of the property of the company of whatsoever kind sold by the company, or for any money due to the company from purchasers and others and to sell or otherwise dispose of any such mortgage, hypothec, lien or charge;
26. to pay all costs and expenses of or incidental to the incorporation and organisation of the company;
27. to invest and deal with the moneys of the company not immediately required for the objects of the company in such manner as may be determined;
28. to do any of the things authorised by this subsection and all things authorised by its memorandum as principals, agents, contractors, trustees or otherwise, and either alone or, in conjunction with others;
29. to do all such other things as are incidental or conducive to the attainment of the objects and the exercise of the powers of the company.
Every company may exercise its powers beyond the boundaries of Bermuda to the extent to which the laws in force where the powers are sought to be exercised permit.
THE COMPANIES ACT 1981
SECOND SCHEDULE
A company may by reference include in its memorandum any of the following objects that is to say the business of:
(a) INTENTIONALLY DELETED;
(b) packaging of goods of all kinds;
(c) buying, selling and dealing in goods of all kinds;
(d) designing and manufacturing of goods of all kinds;
(e) mining and quarrying and exploration for metals, minerals, fossil fuels and precious stones of all kinds and their preparation for sale or use;
(f) exploring for, the drilling for, the moving, transporting and re-fining petroleum and hydro carbon products including oil and oil products;
(g) scientific research including the improvement, discovery and development of processes, inventions, patents and designs and the construction, maintenance and operation of laboratories and research centres;
(h) land, sea and air undertakings including the land, ship and air carriage of passengers, mails and goods of all kinds;
(i) ships and aircraft owners, managers, operators, agents, builders and repairers;
(j) acquiring, owning, selling, chartering, repairing or dealing in ships and aircraft;
(k) travel agents, freight contractors and forwarding agents;
(l) dock owners, wharfingers, warehousemen;
(m) ship chandlers and dealing in rope, canvas oil and ship stores of all kinds;
(n) all forms of engineering;
(o) INTENTIONALLY DELETED;
(p) farmers, livestock breeders and keepers, graziers, butchers, tanners and processors of and dealers in all kinds of live and dead stock, wool, hides, tallow, grain, vegetables and other produce;
(q) acquiring by purchase or otherwise and holding as an investment inventions, patents, trade marks, trade names, trade secrets, designs and the like;
(r) buying, selling, hiring, letting and dealing in conveyances of any sort; and
(s) employing, providing, hiring out and acting as agent for artists, actors, entertainers of all sorts, authors, composers, producers, engineers and experts or specialists of any kind.
(t) to acquire by purchase or otherwise hold, sell, dispose of and deal in real property situated outside Bermuda and in personal property of all kinds wheresoever situated.
(u) to enter into any guarantee, contract of indemnity or suretyship and to assure, support or secure with or without consideration or benefit the performance of any obligations of any person or persons and to guarantee the fidelity of individuals filling or about to fill situations of trust or confidence.
FORM NO. la
[SEAL]
BERMUDA
THE COMPANIES ACT 1981
CONSENT
Pursuant to section 6 (1)
In exercise of the powers conferred upon him by section 6 (1) of the Companies Act 1981, the Minister of Finance hereby gives his consent to
BUNGE AGRIBUSINESS LIMITED
to be registered as an exempted Company under the Companies Act 1981, subject to the provisions of the said Act,
Dated this 17th day of May 1995
/s/ John S. Pearman -------------------------- Acting Minister of Finance |
Form No. 5
[SEAL]
BERMUDA
THE COMPANIES ACT 1981
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF ASSOCIATION
AND CONSENT GRANTED BY THE MINISTER
THIS IS TO CERTIFY that a Memorandum of Association of
BUNGE AGRIBUSINESS LIMITED
and the consent granted by the Minister under section 6(1) of the Act was delivered to the Office of the Registrar of Companies on the 18th day of May, 1995 in accordance with the provisions of section 14(2) of the Act.
IN WITNESS WHEREOF I have
hereto set my hand this
/s/ Illegible ---------------------------- for Registrar of Companies |
Minimum Capital of the Company: US$ 12,000.00
-------------
Authorised Capital of the Company: US$ 12,000.00
-------------
|
Exhibit 3.2
BYE-LAWS
of
BUNGE LIMITED
TABLE OF CONTENTS
Bye-Law Page
------- ----
INTERPRETATION
1 Interpretation......................................................1
BOARD OF DIRECTORS
2 Board of Directors..................................................2
3 Management of the Company...........................................3
4 Power to appoint manager............................................3
5 Power to authorise specific actions.................................3
6 Power to appoint attorney...........................................3
7 Power to delegate to a committee....................................3
8 Power to appoint and dismiss employees..............................4
9 Power to borrow and charge property.................................4
10 Exercise of power to purchase shares of
or discontinue the Company.......................................4
11 Election of Directors...............................................4
12 Defects in appointment of Directors.................................5
13 Alternate Directors.................................................5
14 Removal of Directors................................................5
15 Vacancies on the Board..............................................5
16 Notice of meetings of the Board.....................................6
17 Quorum at meetings of the Board.....................................6
18 Meetings of the Board...............................................6
19 Unanimous written resolutions.......................................6
20 Contracts and disclosure of Directors' interests....................7
21 Remuneration of Directors and Members of Committees.................7
OFFICERS
22 Officers of the Company.............................................7
23 Appointment of Officers.............................................7
24 Remuneration of Officers............................................8
25 Duties of Officers..................................................8
26 Chairman of meetings................................................8
27 Register of Directors and Officers..................................8
MINUTES
28 Obligations of Board to keep minutes................................8
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(ii)
INDEMNITY
29 Indemnification of Directors and Officers of the Company.............9
30 Waiver of claim by Member............................................9
MEETINGS
31 Notice of annual general meeting.....................................9
32 Notice of special general meeting....................................9
33 Accidental omission of notice of general meeting....................10
34 Meeting called on requisition of members............................10
35 Short notice........................................................10
36 Postponement and Cancellation of meetings...........................10
37 Quorum for general meeting..........................................10
38 Adjournment of meetings.............................................10
39 Written resolutions.................................................11
40 Attendance of Directors.............................................11
41 Voting at meetings..................................................11
42 Voting by poll......................................................12
43 Manner of taking a poll.............................................12
44 Ballot procedures...................................................12
45 Seniority of joint holders voting...................................12
46 Instrument of proxy.................................................12
47 Representation of corporations at meetings..........................13
48 Security at General Meetings........................................13
SHARE CAPITAL AND SHARES
49 Rights of shares....................................................13
50 Power to issue shares...............................................15
51 Variation of rights, alteration of share capital
and purchase of shares of the Company.............................17
52 Registered holder of shares.........................................17
53 Death of a joint holder.............................................18
54 Share certificates..................................................18
55 Calls on shares.....................................................18
56 Forfeiture of Shares................................................19
REGISTER OF MEMBERS
57 Contents of Register of Members.....................................19
58 Branch Register of Members..........................................20
59 Inspection of Register of Members...................................20
60 Determination of record dates.......................................20
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(iii)
TRANSFER OF SHARES
61 Instrument of transfer..............................................20
62 Restriction on transfer.............................................20
63 Transfers by joint holders..........................................21
TRANSMISSION OF SHARES
64 Representative of deceased Member...................................21
65 Registration on death or bankruptcy.................................21
DIVIDENDS AND OTHER DISTRIBUTIONS
66 Declaration of dividends by Board...................................21
67 Other distributions.................................................21
68 Reserve fund........................................................22
69 Deduction of amounts due to the Company.............................22
CAPITALISATION
70 Issue of bonus shares...............................................22
22
ACCOUNTS AND FINANCIAL STATEMENTS
71 Records of account..................................................22
72 Financial year end..................................................22
73 Financial statements................................................23
AUDIT
74 Appointment of Auditor..............................................23
75 Remuneration of Auditor.............................................23
76 Vacation of office of Auditor.......................................23
77 Access to books of the Company......................................23
78 Report of the Auditor...............................................23
NOTICES
79 Notices to Members of the Company...................................24
80 Notices to joint Members............................................24
81 Service and delivery of notice......................................24
SEAL OF THE COMPANY
82 The seal............................................................24
83 Manner in which seal is to be affixed...............................25
WINDING-UP
84 Winding-up/distribution by liquidator...............................25
BUSINESS COMBINATIONS
85 Business combinations...............................................25
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(iv)
ALTERATION OF BYE-LAWS
86 Alteration of Bye-laws..............................................26
Schedule - Form A (Bye-law 48)................................................27
Schedule - Form B (Bye-law 57)................................................28
Schedule - Form C (Bye-law 61)................................................29
Schedule - Form D (Bye-law 65)................................................30
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INTERPRETATION
1. INTERPRETATION
(1) In these Bye-laws the following words and expressions shall, where not inconsistent with the context, have the following meanings respectively:-
(a) "Act" means the Companies Act 1981 as amended or re-enacted from time to time;
(b) "Auditor" includes any individual or partnership or any other person;
(c) "Board" means the board of directors appointed or elected pursuant to these Bye-laws and acting by resolution in accordance with the Act and these Bye-laws or the Directors present at a meeting of Directors at which there is a quorum;
(d) "Company" means Bunge Limited, being the company for which these Bye-laws are approved and confirmed;
(e) "Director" means a director of the Company;
(f) "Group" means the Company and every company and other entity which is for the time being controlled by the Company (for these purposes, "control" means the power to direct the management or policies of the person in question, whether by means of an ownership interest or otherwise);
(g) "Member" means the person registered in the Register of Members as the holder of shares in the Company and, when two or more persons are so registered as joint holders of shares, means the person whose name stands first in the Register of Members as one of such joint holders or all of such persons as the context so requires;
(h) "notice" means written notice as further defined in these Bye-laws unless otherwise specifically stated;
(i) "Officer" means any person appointed by the Board to hold an office in the Company;
(j) "Register of Directors and Officers" means the register of Directors and Officers referred to in these Bye-laws;
(k) "Register of Members" means the principal register and, where applicable, any branch register of Members referred to in these Bye-laws;
(l) "Registration Office" means such place as the Board may from time to time determine to keep a branch register of Members and where
(except in cases where the Board otherwise directs) the transfers or other documents of title may be lodged for registration;
(m) "Resident Representative" means any person appointed to act as resident representative and includes any deputy or assistant resident representative; and
(n) "Secretary" means the person appointed to perform any or all of the duties of secretary of the Company and includes any deputy or assistant secretary.
(2) In these Bye-laws, where not inconsistent with the context:-
(a) words denoting the plural number include the singular number and vice versa;
(b) words denoting the masculine gender include the feminine gender;
(c) words importing persons include companies, associations or bodies of persons whether corporate or not;
(d) the word:-
(i) "may" shall be construed as permissive;
(ii) "shall" shall be construed as imperative; and
(e) unless otherwise provided herein words or expressions defined in the Act shall bear the same meaning in these Bye-laws.
(3) In these Bye-laws, expressions referring to writing or written shall, unless the contrary intention appears, include facsimile, printing, lithography, photography and other modes of representing words in a visible form.
(4) In these Bye-laws headings are used for convenience only and are not to be used or relied upon in the construction hereof.
BOARD OF DIRECTORS
2. BOARD OF DIRECTORS
The business of the Company shall be managed and conducted by the Board.
3. MANAGEMENT OF THE COMPANY
(1) In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by statute or by these Bye-laws, required to be exercised by the Company in general meeting subject, nevertheless, to these Bye-laws, the provisions of any statute and to such directions as may be prescribed by the Company in general meeting.
(2) No regulation or alteration to these Bye-laws made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not been made.
(3) The Board may from time to time appoint a chief executive officer who shall, subject to the control of the Board, supervise and administer the general business and affairs of the Company.
4. POWER TO APPOINT MANAGER
The Board may appoint a person to act as manager of the Company's day to day business and may entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business.
5. POWER TO AUTHORISE SPECIFIC ACTIONS
The Board may from time to time and at any time authorise any person to act on behalf of the Company for any specific purpose and in connection therewith to execute any agreement, document or instrument on behalf of the Company.
6. POWER TO APPOINT ATTORNEY
The Board may from time to time and at any time by power of attorney appoint any person, whether nominated directly or indirectly by the Board, to be an attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board) and for such period and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney. Such attorney may, if so authorised under the seal of the Company, execute any deed or instrument under such attorney's personal seal with the same effect as the affixation of the seal of the Company.
7. POWER TO DELEGATE TO A COMMITTEE
The Board may delegate any of its powers to a committee appointed by the Board which may consist partly or entirely of non-Directors and every such committee shall conform to such directions as the Board shall impose on them. The meetings and proceedings of any such committee shall be governed by the provisions of these Bye-laws regulating the meetings and proceedings of the Board, so far as the same are applicable and are not superseded by directions imposed by the Board.
8. POWER TO APPOINT AND DISMISS EMPLOYEES
The Board may appoint, suspend or remove any manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties.
9. POWER TO BORROW AND CHARGE PROPERTY
Subject to the requirements of any exchange on which the shares of the Company are listed, the Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party.
10. EXERCISE OF POWER TO PURCHASE SHARES OF OR DISCONTINUE THE COMPANY
(1) The Board may exercise all the powers of the Company to purchase all or any part of its own shares pursuant to section 42A of the Act.
(2) The Board may, with the approval of a resolution of the Members, exercise all the powers of the Company to discontinue the Company to a named country or jurisdiction outside Bermuda pursuant to section 132G of the Act.
11. ELECTION OF DIRECTORS
(1) The Board shall consist of not less than five Directors and not more than eleven Directors or such number in excess thereof as the Board and the Members may from time to time determine. No more than the lesser of (a) one-third of the Directors and (b) two of the Directors shall be employees of the Company or any other entity in the Group. The Directors shall be divided into three classes designated Class I, Class II and Class III. Each class of Directors shall consist, as nearly as possible, of one-third of the total number of Directors constituting the entire Board. At the general meeting at which these Bye-laws are adopted, the Class I Directors shall be elected for a three year term of office, the Class II Directors shall be elected for a two year term of office and the Class III Directors shall be elected for a one year term of office. At each succeeding annual general meeting, successors to the class of Directors whose term expires at that annual general meeting shall be elected for a three year term. If the number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible, and any Director of any class elected to fill a vacancy shall hold office for a term that shall coincide with the remaining term of the other Directors of that class, but in no case shall a decrease in the number of Directors shorten the term of any Director then in office. A Director shall hold office until the annual general meeting for the year in which his term expires, subject to his office being vacated pursuant to Bye-law 15(3).
(2) Where any person, other than a Director retiring at the meeting or a person proposed for re-election or election as a Director by the Board, is to be proposed for election as a Director, notice must be given to the Company of the intention to propose him and of his willingness to serve as a Director. That notice must be given not later than (a) 90 days before the first anniversary of the last annual general meeting prior to the giving of the notice or (b) 10 days
after the notice of the meeting at which Directors are to be elected is given, whichever is the earlier.
12. DEFECTS IN APPOINTMENT OF DIRECTORS
All acts done bona fide by any meeting of the Board or by a committee of the Board or by any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director.
13. ALTERNATE DIRECTORS
No Director may appoint a person or persons to act as a Director in the alternative to himself.
14. REMOVAL OF DIRECTORS
(1) Subject to any provision to the contrary in these Bye-laws, the Members entitled to vote for the election of Directors may, at any special general meeting convened and held in accordance with these Bye-laws, remove a Director with cause, provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and a summary of the facts justifying the removal and be served on such Director not less than 14 days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for such Director's removal.
(2) Subject to any provisions to the contrary in these Bye-laws, the Members may, at any special general meeting convened and held in accordance with these Bye-laws, remove a director without cause by a resolution of the Members including the affirmative votes of not less than 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution in question, provided that the notice for any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director not less than 14 days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for such Director's removal.
(3) A vacancy on the Board created by the removal of a Director under the provisions of subparagraph (1) or sub-paragraph (2) of this Bye-law may be filled by the Members at the meeting at which such Director is removed and, in the absence of such election or appointment, the Board may fill the vacancy.
15. VACANCIES ON THE BOARD
(1) The Board shall have the power from time to time and at any time to appoint any person as a Director to fill a vacancy on the Board occurring pursuant to subparagraph (3) of this Bye-law.
(2) The Board may act notwithstanding any vacancy in its number but, if and so long as its number is reduced below the number fixed by these Bye-laws as the quorum necessary for the transaction of business at meetings of the Board, the continuing Directors or
Director may act for the purpose of (i) summoning a general meeting of the Company or (ii) preserving the assets of the Company.
(3) The office of Director shall be vacated if the Director:-
(a) is removed from office pursuant to these Bye-laws or is prohibited from being a Director by law;
(b) is or becomes bankrupt or makes any arrangement or composition with his creditors generally;
(c) is or becomes of unsound mind or dies;
(d) resigns his office by notice in writing to the Company.
16. NOTICE OF MEETINGS OF THE BOARD
(1) A Director may, and the Secretary on the requisition of a Director shall, at any time summon a meeting of the Board.
(2) Notice of a meeting of the Board shall be deemed to be duly given to a Director if it is given to such Director verbally in person or by telephone or otherwise communicated or sent to such Director by post, courier service, cable, telex, telecopier, facsimile, electronic mail or other mode of representing words in a legible and non-transitory form at such Director's last known address or any other address given by such Director to the Company for this purpose.
17. QUORUM AT MEETINGS OF THE BOARD
The quorum necessary for the transaction of business at a meeting of the Board shall be five Directors or such other number as determined by the Company in general meeting.
18. MEETINGS OF THE BOARD
(1) The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit.
(2) Directors may participate in any meeting of the Board by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting.
(3) A resolution put to the vote at a meeting of the Board shall be carried by the affirmative votes of a majority of the votes cast and, in the case of an equality of votes, the resolution shall fail.
19. UNANIMOUS WRITTEN RESOLUTIONS
A resolution in writing signed by all the Directors which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted, such
resolution to be effective on the date on which the last Director signs the resolution.
20. CONTRACTS AND DISCLOSURE OF DIRECTORS' INTERESTS
(1) Any Director, or any Director's firm, partner or any company with whom any Director is associated, may act in a professional capacity for the Company and such Director or such Director's firm, partner or such company shall be entitled to remuneration for professional services as if such Director were not a Director, provided that nothing herein contained shall authorise a Director or Director's firm, partner or such company to act as Auditor of the Company.
(2) A Director who is directly or indirectly interested in a contract or proposed contract or arrangement with the Company shall declare the nature of such interest as required by the Act.
(3) Following a declaration being made pursuant to this Bye-law, and unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or proposed contract or arrangement in which such Director is interested and may be counted in the quorum at such meeting.
(4) If a declaration is made pursuant to this Bye-law by the
chairman of the relevant Board meeting, he shall not act as chairman in respect
of the conduct of the business at the meeting in which he is interested and the
other Directors shall appoint a chairman (who is not so interested) to act as
chairman in respect of that business. The chairman so appointed may determine
whether to disqualify a Director or not under the provisions of sub-paragraph
(3) of this Bye-law. After the business in which he is interested has been
concluded, the chairman of the relevant Board meeting shall resume his position
as chairman of the meeting.
21. REMUNERATION OF DIRECTORS AND MEMBERS OF COMMITTEES
The remuneration (if any) of the Directors and of any members of any committees appointed by the Board shall be determined by the Board and shall be deemed to accrue from day to day. The Directors and members of committees may also be paid all travel, hotel and other expenses properly incurred by them in attending and returning from meetings of the Board, any committee appointed by the Board, general meetings of the Company, or in connection with the business of the Company or their duties as Directors or committee members generally.
OFFICERS
22. OFFICERS OF THE COMPANY
The Officers of the Company shall consist of a Chairman and a Deputy Chairman, a Secretary and such additional Officers as the Board may from time to time determine all of whom shall be deemed to be Officers for the purposes of these Bye-laws.
23. APPOINTMENT OF OFFICERS
(1) The Board shall appoint a Chairman and a Deputy Chairman, who shall be Directors, for such term as the Board may by resolution determine. The Chairman and Deputy Chairman of the Board shall hold office until their term of office expires whereupon they shall
retire from office but shall be eligible for re-election by the Board. The Board may at any time by resolution dismiss the Chairman or Deputy Chairman respectively and may appoint another Director to the vacated office. The Board may by resolution appoint a Director to fill the office of Chairman or Deputy Chairman vacated by the death or resignation of the existing incumbent.
(2) The Secretary and additional Officers, if any, shall be appointed by the Board from time to time.
24. REMUNERATION OF OFFICERS
The Officers shall receive such remuneration as the Board may from time to time determine.
25. DUTIES OF OFFICERS
The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time.
26. CHAIRMAN OF MEETINGS
Unless otherwise agreed by a majority of those attending and entitled to attend and vote thereat, the Chairman shall act as chairman at all meetings of the Members and of the Board at which such person is present and in his absence the Deputy Chairman, if present, shall act as chairman. In the absence of both of them a chairman shall be appointed or elected by those present at the meeting and entitled to vote.
27. REGISTER OF DIRECTORS AND OFFICERS
The Board shall cause to be kept in one or more books at the registered office of the Company a Register of Directors and Officers and shall enter therein the particulars required by the Act.
MINUTES
28. OBLIGATIONS OF BOARD TO KEEP MINUTES
(1) The Board shall cause minutes to be duly entered in books provided for the purpose:-
(a) of all elections and appointments of Officers;
(b) of the names of the Directors present at each meeting of the Board and of any committee appointed by the Board; and
(c) of all resolutions and proceedings of general meetings of the Members, meetings of the Board and meetings of committees appointed by the Board.
(2) Minutes prepared in accordance with the Act and these Bye-laws shall be kept by the Secretary at the registered office of the Company.
INDEMNITY
29. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
The Directors, Secretary and other Officers (such term to include, for the purposes of Bye-laws 29 and 30, any person appointed to any committee by the Board) for the time being acting in relation to any of the affairs of the Company and the liquidator or trustees (if any) for the time being acting in relation to any of the affairs of the Company and every one of them, and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or other persons with whom any moneys or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any moneys of or belonging to the Company shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, PROVIDED THAT this indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of said persons.
30. WAIVER OF CLAIM BY MEMBER
Each Member agrees to waive any claim or right of action such Member might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or Officer, or the failure of such Director or Officer to take any action in the performance of his duties with or for the Company, PROVIDED THAT such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such Director or Officer.
MEETINGS
31. NOTICE OF ANNUAL GENERAL MEETING
The annual general meeting of the Company shall be held in each year at such time and place as the Chairman or the Board shall appoint. At least 21 days' notice of such meeting shall be given to each Member stating the date, place and time at which the meeting is to be held, that the election of Directors will take place thereat (if applicable), and as far as practicable, the other business to be conducted at the meeting.
32. NOTICE OF SPECIAL GENERAL MEETING
The Chairman or the Board may convene a special general meeting of the Company whenever in their judgment such a meeting is necessary, upon not less than 21 days' notice which shall state the date, time, place and the general nature of the business to be considered at the meeting.
33. ACCIDENTAL OMISSION OF NOTICE OF GENERAL MEETING
The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a general meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.
34. MEETING CALLED ON REQUISITION OF MEMBERS
Notwithstanding anything herein, the Board shall, on the requisition of Members holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up share capital of the Company as at the date of the deposit carries the right to vote at general meetings of the Company, forthwith proceed to convene a special general meeting of the Company and the provisions of section 74 of the Act shall apply.
35. SHORT NOTICE
A general meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in these Bye-laws, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting; and (ii) by a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving a right to attend and vote thereat in the case of a special general meeting.
36. POSTPONEMENT AND CANCELLATION OF MEETINGS
The Secretary may postpone or cancel any general meeting called in accordance with the provisions of these Bye-laws (other than a meeting requisitioned under these Bye-laws) provided that notice of postponement or cancellation is given to each Member before the time for such meeting. Fresh notice of the date, time and place for the postponed meeting shall be given to each Member in accordance with the provisions of these Bye-laws.
37. QUORUM FOR GENERAL MEETING
At any general meeting of the Company two or more persons present in person at the start of the meeting and representing in person or by proxy in excess of one-half of such of the paid-up share capital of the Company as at the date of the general meeting carries the right to vote at general meetings of the Company shall form a quorum for the transaction of business, PROVIDED that if the Company shall at any time have only one Member, one Member present in person or by proxy shall form a quorum for the transaction of business at any general meeting of the Company held during such time. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day one week later, at the same time and place or to such other day, time or place as the Secretary may determine.
38. ADJOURNMENT OF MEETINGS
(1) The chairman of a general meeting may, with the consent of the Members at any general meeting at which a quorum is present (and shall if so directed), adjourn the meeting.
(2) Unless the meeting is adjourned to a specific date, time and place, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Bye-laws. No business shall be transacted at
any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place.
39. WRITTEN RESOLUTIONS
(1) Subject to subparagraph (6) of this Bye-law, anything which may be done by resolution of the Company in general meeting or by resolution of a meeting of any class of the Members of the Company, may, without a meeting and without any previous notice being required, be done by resolution in writing signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, all the Members who at the date of the resolution would be entitled to attend the meeting and vote on the resolution.
(2) A resolution in writing may be signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, all the Members, or any class thereof, in as many counterparts as may be necessary.
(3) For the purposes of this Bye-law, the date of the resolution is the date when the resolution is signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, the last Member to sign and any reference in any Bye-law to the date of passing of a resolution is, in relation to a resolution made in accordance with this Bye-law, a reference to such date.
(4) A resolution in writing made in accordance with this Bye-law is as valid as if it had been passed by the Company in general meeting or by a meeting of the relevant class of Members, as the case may be, and any reference in any Bye-law to a meeting at which a resolution is passed or to Members voting in favour of a resolution shall be construed accordingly.
(5) A resolution in writing made in accordance with this Bye-law shall constitute minutes for the purposes of sections 81 and 82 of the Act.
(6) This Bye-law shall not apply to:-
(a) a resolution passed pursuant to section 89(5) of the Act; or
(b) a resolution passed for the purpose of removing a Director before the expiration of his term of office under these Bye-laws.
40. ATTENDANCE OF DIRECTORS
The Directors of the Company shall be entitled to receive notice of and to attend and be heard at any general meeting.
41. VOTING AT MEETINGS
(1) Subject to the provisions of the Act and these Bye-laws, any question proposed for the consideration of the Members at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with the provisions of these Bye-
laws and in the case of an equality of votes the resolution shall fail.
(2) No Member shall be entitled to vote at any general meeting unless such Member has paid all the calls on all shares held by such Member.
42. VOTING BY POLL
(1) At any general meeting of the Company, all resolutions and all questions proposed for the consideration of the Members shall be decided on a poll.
(2) Where a poll is taken, subject to any rights or restrictions for the time being lawfully attached to any class of shares, every person present at such meeting shall have one vote for each share entitled to be voted on such matter of which such person is the holder or for which such person holds a proxy and such vote shall be counted in the manner set out in Bye-Law 44 and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded. A person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.
43. MANNER OF TAKING A POLL
A poll taken in accordance with the provisions of Bye-law 42, for the purpose of electing a chairman of the meeting or on a question of adjournment, shall be taken forthwith and a poll demanded on any other question shall be taken at such meeting in such manner and at such time and place as the chairman of the meeting (or acting chairman) may direct and any business other than that upon which a poll is to be taken may be proceeded with pending the taking of the poll.
44. BALLOT PROCEDURES
Where a vote is taken by poll, each person present and entitled to vote shall be furnished with a ballot paper on which such person shall record his or her vote in such manner as shall be determined at the meeting having regard to the nature of the question on which the vote is taken, and each ballot paper shall be signed or initialled or otherwise marked so as to identify the voter and the registered holder in the case of a proxy. At the conclusion of the poll, the ballot papers shall be examined and counted as the chairman of the meeting may direct and in default of any direction by a committee of not less than two Members or proxy holders appointed by the chairman of the meeting for the purpose and the result of the poll shall be declared by the chairman of the meeting.
45. SENIORITY OF JOINT HOLDERS VOTING
In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.
46. INSTRUMENT OF PROXY
(1) The instrument appointing a proxy shall be in writing in the form, or as near
thereto as circumstances admit, of Form "A" in the Schedule hereto or in such other form as the Board may determine from time to time, under the hand of the appointor or of the appointor's attorney duly authorised in writing, or if the appointor is a corporation, either under its seal, or under the hand of a duly authorised officer or attorney. The decision of the chairman of any general meeting as to the validity of any instrument of proxy shall be final.
(2) The instrument appointing a proxy and any authority under which it is executed (or a copy of such authority certified notarially or in some other way approved by the Directors) shall be deposited at the registered office or at such other place as is specified in the notice convening the meeting or in any instrument of proxy sent out by the Company in relation to the meeting not less than 48 hours before the time for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, and an instrument of proxy which is not deposited or delivered in the manner so permitted shall be invalid.
(3) Delivery of an instrument of proxy shall not preclude a Member from attending and voting in person at the meeting and, in such event, the proxy shall be deemed to be revoked.
(4) A Member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf.
47. REPRESENTATION OF CORPORATIONS AT MEETINGS
A corporation which is a Member may, by written instrument, authorise such person as it thinks fit to act as its representative at any meeting of the Members and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which such person represents as that corporation could exercise if it were an individual Member, and that Member shall be deemed to be present in person at any such meeting attended by its authorized representative. Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he or she thinks fit as to the right of any person to attend and vote at general meetings on behalf of a corporation which is a Member.
48. SECURITY AT GENERAL MEETINGS
The Board and, at any general meeting, the chairman of such meeting may make any arrangement and impose any requirement or restriction it or he considers appropriate to ensure the security of a general meeting including, without limitation, requirements for evidence of identity to be produced by those attending the meeting, the searching of their personal property and the restriction of items that may be taken into the meeting place. The Board and, at any general meeting, the chairman of such meeting are entitled to refuse entry to a person who refuses to comply with these arrangements, requirements or restrictions.
SHARE CAPITAL AND SHARES
49. RIGHTS OF SHARES
(1) At the date these Bye-laws are adopted, the share capital of the Company shall be divided into two classes: 240,000,000 common shares having a par value of US$0.01 each
(the "Common Shares"), and 10,000,000 preference shares having a par value of US$0.01 each (the "Preference Shares").
(2) The holders of Common Shares shall, subject to the provisions of these Bye-laws (including, without limitation, the rights attaching to the Preference Shares):
(a) be entitled to one vote per share;
(b) be entitled to such dividends as the Board may from time to time declare;
(c) in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganisation or otherwise or upon any distribution of capital, be entitled to the surplus assets of the Company; and
(d) generally be entitled to enjoy all of the rights attaching to shares.
(3) Subject to these Bye-laws and the requirements of any exchange
on which the shares of the Company are listed (including for this purpose
Section 312.03(c) of the New York Stock Exchange Listed Company Manual;
provided, however, that the 20% limitation set forth in such subsection will
continue to apply to the Company notwithstanding any modification of such
limitation by the New York Stock Exchange), and without prejudice to any special
rights previously conferred on the holders of any existing shares or class of
shares, the Board shall have the full power to issue any unissued shares of the
Company on such terms and conditions as it may, in its absolute discretion,
determine.
(4) The Board is authorized to provide for the issuance of the Preference Shares in one or more series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof (and, for the avoidance of doubt, such matters and the issuance of such Preference Shares shall not be deemed to vary the rights attached to the Common Shares); provided, however, that the Board shall not be authorized to issue any Preference Shares as a result of any reduction of the 20% limitation set forth in Section 1(a) of the Rights Agreement of the Company adopted on the same date as the adoption of these Bye-laws or as a result of extending the Final Expiration Date under such Agreement without a resolution of the Members including the affirmative votes of not less than 66% of votes cast on the resolution. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:
(a) the number of shares constituting that series and the distinctive designation of that series;
(b) the dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
(c) whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights, provided that no share shall carry the right to more than one vote;
(d) whether that series shall have conversion or exchange privileges (including, without limitation, conversion into Common Shares), and, if so, the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion or exchange rate in such events as the Board shall determine;
(e) whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the manner of selecting shares for redemption if less than all shares are to be redeemed, the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(f) whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;
(g) the right of the shares of that series to the benefit of conditions and restrictions upon the creation of indebtedness of the Company or any subsidiary, upon the issue of any additional shares (including additional shares of such series or any other series) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisition by the Company or any subsidiary of any outstanding shares of the Company;
(h) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company, and the relative rights of priority, if any, of payment on shares of that series; and
(i) any other relative participating, optional or other special rights, qualifications, limitations or restrictions of that series.
50. POWER TO ISSUE SHARES
(1) Any Preference Shares of any series which have been redeemed (whether through the operation of a sinking fund or otherwise) or which, if convertible or exchangeable,
have been converted into or exchanged for shares of any other class or classes shall have the status of authorized and unissued Preference Shares of the same series and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of Preference Shares to be created by resolution or resolutions of the Board or as part of any other series of Preference Shares, all subject to the conditions and the restrictions on issuance set forth in the resolution or resolutions adopted by the Board providing for the issue of any series of Preference Shares.
(2) At the discretion of the Board, whether or not in connection with the issuance and sale of any of its shares or other securities, the Company may issue securities, contracts, warrants or other instruments evidencing any shares, option rights, securities having conversion or option rights, or obligations on such terms, conditions and other provisions as are fixed by the Board; provided, however, that the Board shall not be authorized to issue any shares or other securities as a result of any reduction of the 20% limitation set forth in Section 1(a) of the Rights Agreement of the Company adopted on the same date as the adoption of these Bye-laws or as a result of extending the Final Expiration Date under such Agreement or adopt any other shareholders rights plan or similar device or agreement without a resolution of the Members including the affirmative votes of not less than 66% of votes cast on the resolution.
(3) The Board shall, in connection with the issue of any share, have the power to pay such commission and brokerage as may be permitted by law.
(4) The Company shall not give, whether directly or indirectly, whether by means of loan, guarantee, provision of security or otherwise, any financial assistance for the purpose of a purchase or subscription made or to be made by any person of or for any shares in the Company, except as permitted by the Act.
(5) The Company may from time to time do any one or more of the following things:
(a) accept from any Member the whole or a part of the amount remaining unpaid on any shares held by such Member, although no part of that amount has been called up;
(b) pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others; and
(c) issue its shares in fractional denominations and deal with such fractions to the same extent as its whole shares and shares in fractional denominations shall have in proportion to the respective fractions represented thereby all of the rights of whole shares including (but without limiting the generality of the foregoing) the right to vote, to receive dividends and distributions and to participate in a winding up.
51. VARIATION OF RIGHTS, ALTERATION OF SHARE CAPITAL AND PURCHASE OF SHARES OF THE COMPANY
(1) Subject to the provisions of sections 42 and 43 of the Act any preference shares may be issued or converted into shares that, at a determinable date or at the option of the Company, are liable to be redeemed on such terms and in such manner as the Company before the issue or conversion may by resolution of the Board determine.
(2) If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class or with the sanction of a resolution passed by a majority of the votes cast at a separate general meeting of the holders of the shares of the class in accordance with section 47(7) of the Act. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
(3) The Company may from time to time if authorized by resolution of the Members change the currency denomination of, increase, alter or reduce its share capital in accordance with the provisions of sections 45 and 46 of the Act. Where, on any alteration of share capital, fractions of shares or some other difficulty would arise, the Board may deal with or resolve the same in such manner as it thinks fit including, without limiting the generality of the foregoing, the issue to Members, as appropriate, of fractions of shares and/or arranging for the sale or transfer of the fractions of shares of Members.
(4) The Company may from time to time purchase its own shares in accordance with the provisions of section 42A of the Act.
52. REGISTERED HOLDER OF SHARES
(1) The Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable or other claim to, or interest in, such share on the part of any other person.
(2) Any dividend or other moneys payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the Member at such Member's address in the Register of Members or, in the case of joint holders, to such address of the holder first named in the Register of Members, or to such person and to such address as the holder or joint holders may in writing direct, or by direct bank transfer to such bank account as such holder or joint holders or person entitled thereto may direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent or to such persons as the holder or joint holders may direct and payment of the cheque or warrant shall be a good discharge to the Company. Every such cheque or warrant shall be sent at the risk of the person entitled to the money represented thereby.
(3) Any dividend or other monies payable in respect of a share which has remained unclaimed for 12 years from the date when it became due for payment shall, if the Board so resolves, be forfeited and cease to remain owing by the Company. The payment of any
unclaimed dividend or other monies payable in respect of a share may (but need not) be paid by the Company into an account separate from the Company's own account. Such payment shall not constitute the Company a trustee in respect of it.
(4) The Company shall be entitled to cease sending dividend warrants and cheques by post or otherwise to a Member if those instruments have been returned undelivered to, or left uncashed by, that Member on at least two consecutive occasions, or, following one such occasion, reasonable enquiries have failed to establish the Member's new address. The entitlement conferred on the Company by this Bye-law in respect of any Member shall cease if the Member claims a dividend or cashes a dividend cheque or warrant.
53. DEATH OF A JOINT HOLDER
Where two or more persons are registered as joint holders of a share or shares then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to the said share or shares and the Company shall recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders.
54. SHARE CERTIFICATES
(1) Every Member shall be entitled to a certificate under the seal of the Company (or a facsimile thereof) specifying the number and, where appropriate, the class of shares held by such Member and whether the same are fully paid up and, if not, how much has been paid thereon. The Board may by resolution determine, either generally or in a particular case, that any or all signatures on certificates may be printed thereon or affixed by mechanical means.
(2) The Company shall be under no obligation to complete and deliver a share certificate unless specifically called upon to do so by the person to whom such shares have been allotted.
(3) If any such certificate shall be proved to the satisfaction of the Board to have been worn out, lost, mislaid, stolen or destroyed the Board may cause a new certificate to be issued and request a bond or an indemnity for the lost, mislaid, stolen or destroyed certificate if it sees fit. If a share certificate is defaced, worn out, lost or destroyed, it may be renewed on such terms (if any) as to evidence and indemnity and payment of any exceptional out-of-pocket expenses reasonably incurred by the Company in investigating evidence and preparing the requisite form of indemnity as the Board may determine but otherwise free of charge, and (in the case of defacement or wearing out) on delivery up of the old certificate.
55. CALLS ON SHARES
(1) The Board may from time to time make such calls as it thinks fit upon the Members in respect of any monies (whether on account of the nominal value of the shares or by way of premium) unpaid on the shares allotted to or held by such Members (and not made payable at fixed times by the conditions of allotment thereof) and, if a call is not paid on or before the day appointed for payment thereof, the Member may at the discretion of the Board be liable to pay the Company interest on the amount of such call at such rate as the Board may determine, from the date when such call was payable up to the actual date of payment. The joint
holders of a share shall be jointly and severally liable to pay all calls in respect thereof.
(2) A person on whom a call is made shall remain liable for calls made on him even if the shares in respect of which the call was made are subsequently transferred.
(3) Any sum which by the terms of issue of a share becomes payable upon allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium, shall for all the purposes of these Bye-laws be deemed to be a call duly made and payable on the date on which, by the terms of issue, the same becomes payable, and in case of non-payment all the relevant provisions of these Bye-laws as to payment of interest, costs, charges and expenses, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified.
(4) The Directors, may, if they think fit, receive from any Member willing to advance the same all or any part of the money unpaid upon the shares held by such Member beyond the sums actually called up thereon as a payment in advance of calls, and such payment in advance of calls shall extinguish so far as the same shall extend, the liability upon the shares in respect of which it is advanced, and upon the money so received or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which it has been received the Company may pay interest at such rate as the Member paying such sum and the Directors by resolution shall agree provided that the Member shall not thereby be entitled to participate in respect thereof in a dividend subsequently declared. The Directors may also at any time repay the amount so advanced upon giving to such Member one month's notice in writing.
56. FORFEITURE OF SHARES
(1) If any Member fails to pay, on the day appointed for payment thereof, any call in respect of any share allotted to or held by such Member, the Board may, at any time thereafter during such time as the call remains unpaid, direct the Secretary to forward to such Member a notice in the form, or as near thereto as circumstances admit, of Form "B" in the Schedule hereto.
(2) If the requirements of such notice are not complied with, any such share may at any time thereafter before the payment of such call and the interest due in respect thereof be forfeited by a resolution of the Board to that effect, and such share shall thereupon become the property of the Company and may be disposed of as the Board shall determine.
(3) A Member whose share or shares have been forfeited as aforesaid shall, notwithstanding such forfeiture, be liable to pay to the Company all calls owing on such share or shares at the time of the forfeiture and all interest due thereon.
REGISTER OF MEMBERS
57. CONTENTS OF REGISTER OF MEMBERS
The Board shall cause to be kept in one or more books a Register of Members and shall enter therein the particulars required by the Act.
58. BRANCH REGISTER OF MEMBERS
Subject to the Act, the Company may keep an overseas branch register of Members, and the Board may make and vary such regulations as it determines in respect of the keeping of any such register and maintaining a Registration Office in connection therewith.
59. INSPECTION OF REGISTER OF MEMBERS
The Register of Members shall be open to inspection on every business day, subject to such reasonable restrictions as the Board may impose, so that not less than two hours in each business day be allowed for inspection. The Register of Members may, after notice has been given by advertisement in an appointed newspaper (or national newspaper in the jurisdiction of a branch register) to that effect, be closed for any time or times not exceeding in the whole thirty days in each year.
60. DETERMINATION OF RECORD DATES
Notwithstanding any other provision of these Bye-laws, the Board may fix any date as the record date for:-
(a) determining the Members entitled to receive any dividend or other distribution; and
(b) determining the Members entitled to receive notice of and to vote at any general meeting of the Company.
TRANSFER OF SHARES
61. INSTRUMENT OF TRANSFER
(1) An instrument of transfer shall be in the form or as near thereto as circumstances admit of Form "C" in the Schedule hereto or in such other common form as the Board may accept. Such instrument of transfer shall be signed by or on behalf of the transferor and transferee provided that, in the case of a fully paid share, the Board may accept the instrument signed by or on behalf of the transferor alone. The Board may also accept mechanically executed transfers. The transferor shall be deemed to remain the holder of such share until the same has been transferred to the transferee in the Register of Members.
(2) The Board may refuse to recognise any instrument of transfer unless it is accompanied by the certificate in respect of the shares to which it relates and by such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer.
62. RESTRICTION ON TRANSFER
(1) The Board may in its absolute discretion and without assigning any reason therefor refuse to register the transfer of a share which is not fully paid.
(2) If the Board refuses to register a transfer of any share the Secretary shall, within two weeks after the date on which the transfer was refused, send to the transferor and transferee notice of the refusal.
63. TRANSFERS BY JOINT HOLDERS
The joint holders of any share or shares may transfer such share or shares to one or more of such joint holders, and the surviving holder or holders of any share or shares previously held by them jointly with a deceased Member may transfer any such share to the executors or administrators of such deceased Member.
TRANSMISSION OF SHARES
64. REPRESENTATIVE OF DECEASED MEMBER
In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only persons recognised by the Company as having any title to the deceased Member's interest in the shares. Nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by such deceased Member with other persons. Subject to the provisions of section 52 of the Act, for the purpose of this Bye-law, legal personal representative means the executor or administrator of a deceased Member or such other person as the Board may in its absolute discretion decide as being properly authorised to deal with the shares of a deceased Member.
65. REGISTRATION ON DEATH OR BANKRUPTCY
Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Board may deem sufficient or may elect to nominate some person to be registered as a transferee of such share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of transfer in the form, or as near thereto as circumstances admit, of Form "D" in the Schedule hereto. On the presentation thereof to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor, the transferee shall be registered as a Member but the Board shall, in either case, have the same right to decline or suspend registration as it would have had in the case of a transfer of the share by that Member before such Member's death or bankruptcy, as the case may be.
DIVIDENDS AND OTHER DISTRIBUTIONS
66. DECLARATION OF DIVIDENDS BY THE BOARD
The Board may, subject to these Bye-laws and in accordance with section 54 of the Act, declare a dividend to be paid to the Members, in proportion to the number of shares held by them, and such dividend may be paid wholly or partly in cash or wholly or partly in specie in which case the Board may fix the value for distribution in specie of any property.
67. OTHER DISTRIBUTIONS
The Board may declare and make such other distributions (in cash or in specie) to the Members as may be lawfully made out of the assets of the Company.
68. RESERVE FUND
The Board may from time to time before declaring a dividend set aside, out of the surplus or profits of the Company, such sum as it thinks proper as a reserve to be used to meet contingencies or for equalising dividends or for any other special purpose.
69. DEDUCTION OF AMOUNTS DUE TO THE COMPANY
The Board may deduct from the dividends or distributions payable to any Member all monies due from such Member to the Company on account of calls or otherwise.
CAPITALISATION
70. ISSUE OF BONUS SHARES
(1) The Board may, subject to these Bye-laws, resolve to capitalise any part of the amount for the time being standing to the credit of any of the Company's share premium or other reserve accounts or to the credit of the profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro rata (except in connection with the conversion of shares of one class to shares of another class) to the Members.
(2) The Company may capitalise any sum standing to the credit of a reserve account or sums otherwise available for dividend or distribution by applying such amounts in paying up in full partly paid shares of those Members who would have been entitled to such sums if they were distributed by way of dividend or distribution.
ACCOUNTS AND FINANCIAL STATEMENTS
71. RECORDS OF ACCOUNT
The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to:-
(a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates;
(b) all sales and purchases of goods by the Company; and
(c) the assets and liabilities of the Company.
Such records of account shall be kept at the registered office of the Company or, subject to section 83 (2) of the Act, at such other place as the Board thinks fit and shall be available for inspection by the Directors during normal business hours.
72. FINANCIAL YEAR END
The financial year end of the Company may be determined by resolution of the Board and failing such resolution shall be 31st December in each year.
73. FINANCIAL STATEMENTS
Financial statements as required by the Act shall be made available to every Member as required by the Act and shall be laid before the Members in general meeting.
AUDIT
74. APPOINTMENT OF AUDITOR
Subject to section 88 of the Act, at the annual general meeting or at a subsequent special general meeting in each year, an independent representative of the Members shall be appointed by them as Auditor of the accounts of the Company. No Member, Director, Officer or employee of the Company shall, during his or its continuance in that capacity, be eligible to act as an Auditor of the Company.
75. REMUNERATION OF AUDITOR
The remuneration of the Auditor shall be fixed by the Board or in such manner as the Members may determine.
76. VACATION OF OFFICE OF AUDITOR
If the office of Auditor becomes vacant by the resignation or death of the Auditor, or by the Auditor becoming incapable of acting by reason of illness or other disability at a time when the Auditor's services are required, the Board shall, as soon as practicable, convene a special general meeting to fill the vacancy thereby created.
77. ACCESS TO BOOKS OF THE COMPANY
The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto, and the Auditor may call on the Directors or Officers of the Company for any information in their possession relating to the books or affairs of the Company.
78. REPORT OF THE AUDITOR
(1) Subject to any rights to waive laying of accounts or appointment of an Auditor pursuant to section 88 of the Act, the accounts of the Company shall be audited at least once in every year.
(2) The financial statements provided for by these Bye-laws shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted to the Members in general meeting.
(3) The generally accepted auditing standards referred to in subparagraph (2) of this Bye-law may be those of a country or jurisdiction other than Bermuda. If so, the financial statements and the report of the Auditor must disclose this fact and identify the standards used.
NOTICES
79. NOTICES TO MEMBERS OF THE COMPANY
A notice may be given by the Company to any Member either by delivering it to such Member in person or by sending it to such Member's address in the Register of Members or to such other address given for the purpose. For the purposes of this Bye-law, a notice may be sent by post, courier service, cable, telex, telecopier, facsimile, electronic mail or other mode of representing words in a legible and non-transitory form. The Company shall be under no obligation to send a notice or other document to the address shown for any particular Member in the Register of Members if the Directors consider that the legal or practical problems under the laws of, or the requirements of any regulatory body or stock exchange in, the territory in which that address is situated are such that it is necessary or expedient not to send the notice or document concerned to such Member at such address and may require a Member with such an address to provide the Company with an alternative acceptable address for delivery of notices by the Company.
80. NOTICES TO JOINT MEMBERS
Any notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient notice to all the holders of such shares.
81. SERVICE AND DELIVERY OF NOTICE
(1) Subject to subparagraph (2) of this Bye-law, any notice shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in proving such service, it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier or to the cable company or transmitted by telex, facsimile, electronic mail or other method as the case may be.
(2) Postal notice shall be deemed to have been served five days after the date on which it is deposited, with postage prepaid, in the United States or Bermuda post or in the post of the jurisdiction in which the Company has its principal place of business for the time being.
(3) Every person who by operation of law, transfer or other means shall become entitled to any share shall be bound by every notice in respect of such share which, prior to his name and address being entered in the Register of Members, shall have been duly given to the person entered in the Register of Members as the holder of such share.
SEAL OF THE COMPANY
82. THE SEAL
The seal of the Company shall be in such form as the Board may from time to time determine. The Board may adopt one or more duplicate seals for use outside Bermuda.
83. MANNER IN WHICH SEAL IS TO BE AFFIXED
The seal of the Company shall not be affixed to any instrument except attested by the signature of a Director and the Secretary or any two Directors, or any person appointed by the Board for the purpose, provided that any Director, Officer or Resident Representative, may affix the seal of the Company attested by such Director, Officer or Resident Representative's signature to any authenticated copies of these Bye-laws, the incorporating documents of the Company, the minutes of any meetings or any other documents required to be authenticated by such Director, Officer or Resident Representative.
WINDING-UP
84. WINDING-UP/DISTRIBUTION BY LIQUIDATOR
If the Company shall be wound up the liquidator may, with the sanction of a resolution of the Members, divide amongst the Members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability.
BUSINESS COMBINATIONS
85. BUSINESS COMBINATIONS
(1) Subject to paragraph (2), the Company shall not engage in any Business Combination unless such Business Combination has been approved by a resolution of the Members including the affirmative votes of not less than 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution in question.
(2) Paragraph (1) shall not apply in respect of any Business Combination approved by the Board, and in respect of any Business Combination approved by the Board which the Act requires to be approved by the Members, the necessary general meeting quorum and Members' approval shall be as set out in Bye-laws 37 and 41 respectively.
(3) In this Bye-law, "Business Combination" means:
(a) any amalgamation, merger, consolidation or similar transaction involving the Company;
(b) any sale or other disposition of all or substantially all of the assets of the Company or of all or substantially all of the assets of any company or other entity in the group.
ALTERATION OF BYE-LAWS
86. ALTERATION OF BYE-LAWS
(1) Subject to paragraphs (2), (3) and 4, no Bye-law shall be rescinded, altered or amended and no new Bye-law shall be made until the same has been approved by a resolution of the Board and by a resolution of the Members.
(2) Bye-laws 11, 85 and 86 shall not be rescinded, altered or amended, and no new Bye law shall be made which would have the effect of rescinding, altering or amending the provisions of such Bye-Laws, until the same has been approved by a resolution of the Board including the affirmative vote of not less than 66 percent of the Directors then in office and by a resolution of the Members including the affirmative votes of not less than 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution in question.
(3) Bye-law 14 shall not be rescinded, altered or amended and no new Bye-law shall be made which would have the effect of rescinding, altering or amending the provisions of such Bye-laws, until the same has been approved by a resolution of the Board including the affirmative vote of not less than a simple majority of the Directors then in office and by a resolution of the Members including the affirmative votes of not less than 66% of all votes attaching to all shares then in issue entitling the holder to attend and vote on the resolution in question.
(4) Bye-laws 49(3), 49(4) and 50(2) shall not be rescinded, altered or amended and no new Bye-law shall be made which would have the effect of rescinding, altering or amending the provisions of such Bye-laws, until the same has been approved by a resolution of the Board including the affirmative vote of not less than a simple majority of the Directors then in office and by a resolution of the Members including the affirmative votes of not less than 66% of votes cast on the resolution.
******
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*
SCHEDULE - FORM A (Bye-law 46)
BUNGE LIMITED
P R O X Y
I/We ........................................................................... of ............................................................................. the holder(s) of ........... share(s) in the above-named company (the "Company") hereby appoint .............................................. or failing him/her |
....................... or failing him/her ..................... as my/our proxy to vote on my/our behalf at the general meeting of the Company to be held on the ................... day of ..............................., ....., and at any adjournment thereof.
Dated this ................ day of ........................, .............
*GIVEN under the seal of the above-named *Signed by the above-named
.............................................
............................................. Witness
*Delete as applicable.
SCHEDULE - FORM B (BYE-LAW 56)
NOTICE OF LIABILITY TO FORFEITURE FOR NON PAYMENT OF CALL
You have failed to pay the call of [amount of call] made on the ..............
day of .................., .......... last, in respect of the [number] share(s)
[numbers in figures] standing in your name in the Register of Members of Bunge
Limited (the "Company"), on the .............. day of ..................., ....
last, the day appointed for payment of such call. You are hereby notified that
unless you pay such call together with interest thereon at the rate of
.......... per annum computed from the said ............... day of
......................, .... last, on or before the ....... day of .........,
...... next at the place of business of the Company the share(s) will be liable
to be forfeited.
Dated this ............ day of ........................, ......
[Signature of Secretary]
By order of the Board
SCHEDULE - FORM C (Bye-law 61)
TRANSFER OF A SHARE OR SHARES
FOR VALUE RECEIVED .................................................... [amount]
................................................................... [transferor]
hereby sell assign and transfer unto .............................. [transferee]
of ................................................................... [address]
............................................................. [number of shares]
shares of Bunge Limited.........................................................
Dated ...................................................
...........................
(Transferor)
In the presence of:
...........................................
(Witness)
...........................
(Transferee)
In the presence of:
...........................................
(Witness)
|
SCHEDULE - FORM D (BYE-LAW 65)
TRANSFER BY A PERSON BECOMING ENTITLED ON DEATH/BANKRUPTCY
OF A MEMBER
I/We having become entitled in consequence of the [death/bankruptcy] of
[name of the deceased Member] to [number] share(s) standing in the
register of members of Bunge Limited in the name of the said [name of
deceased Member] instead of being registered myself/ourselves elect to
have [name of transferee] (the "Transferee") registered as a transferee of
such share(s) and I/we do hereby accordingly transfer the said share(s) to
the Transferee to hold the same unto the Transferee his or her executors
administrators and assigns subject to the conditions on which the same
were held at the time of the execution thereof; and the Transferee does
hereby agree to take the said share(s) subject to the same conditions.
WITNESS our hands this ............ day of ........................., .... Signed by the above-named ) [person or persons entitled] ) in the presence of: ) Signed by the above-named ) [transferee] ) in the presence of: ) |
Exhibit 4.1
Form of Share Certificate
Incorporated in Bermuda
BUNGE LIMITED
This is to certify that
is/are the registered shareholders of:
--------------------------------------------------------------------------------
No. of Shares Type of Share Par Value
--------------------------------------------------------------------------------
Date of Record Certificate Number % Paid
--------------------------------------------------------------------------------
|
The above shares are subject to the Memorandum of Association and Bye-Laws of the Company and transferrable in accordance with therewith.
Given under the Common Seal of the Company
_________________________ Director ___________________________Director/Secretary
EXHIBIT 4.2
BUNGE LIMITED
and
MELLON INVESTOR SERVICES LLC
Rights Agent
Rights Agreement
Dated as of July [ __ ], 2001
TABLE OF CONTENTS
PAGE
SECTION 1. Certain Definitions...............................................1
SECTION 2. Appointment of Rights Agent.......................................5
SECTION 3. Issue of Rights Certificates......................................5
SECTION 4. Form of Rights Certificates.......................................7
SECTION 5. Countersignature and Registration.................................8
SECTION 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates......................................................8
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.....9
SECTION 8. Cancellation and Destruction of Rights Certificates..............11
SECTION 9. Reservation and Availability of Capital Stock....................11
SECTION 10. Preferred Stock Record Date.....................................12
SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights.............................................13
SECTION 12. Certificate of Adjusted Purchase Price or Number of Shares......21
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power...................................................21
SECTION 14. Fractional Rights and Fractional Shares.........................24
SECTION 15. Rights of Action................................................25
SECTION 16. Agreement of Rights Holders.....................................25
SECTION 17. Rights Certificate Holder Not Deemed a Stockholder..............26
SECTION 18. Concerning the Rights Agent.....................................26
SECTION 19. Merger or Consolidation or Change of Name of Rights Agent.......26
SECTION 20. Duties of Rights Agent..........................................27
SECTION 21. Change of Rights Agent..........................................29
SECTION 22. Issuance of New Rights Certificates.............................30
SECTION 23. Redemption and Termination......................................30
SECTION 24. Notice of Certain Events........................................31
SECTION 25. Notices.........................................................32
SECTION 26. Supplements and Amendments......................................32
SECTION 27. Successors......................................................33
SECTION 28. Determinations and Actions by the Board of Directors, Etc.......33
SECTION 29. Benefits of this Agreement......................................33
2
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SECTION 30. Severability....................................................34 SECTION 31. Governing Law...................................................34 SECTION 32. Counterparts....................................................34 SECTION 33. Descriptive Headings............................................34 SECTION 34. Exchange........................................................34 |
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of July [ __ ], 2001 (this "AGREEMENT"), between Bunge Limited, a Bermuda company (the "COMPANY"), and Mellon Investor Services LLC, a [ ] corporation (the "RIGHTS AGENT").
WHEREAS, effective July 12, 2001 (the "RIGHTS DIVIDEND DECLARATION DATE"), the Board of Directors of the Company authorized and granted one Right (each, a "RIGHT") for each common share, par value US$0.01 per share, of the Company (the "COMPANY COMMON STOCK") outstanding at the Close of Business (as defined below) on the date on which the Company issues shares of Company Common Stock pursuant to its initial public offering (the "RECORD DATE"), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant hereto) for each share of Company Common Stock issued between the Record Date and, except as otherwise provided in Section 22, the Distribution Date, each Right initially representing the right to purchase upon the terms and subject to the conditions hereinafter set forth one Unit (as defined below) of Preferred Stock (as defined below);
WHEREAS, the Company desires to set forth certain terms and conditions governing the Rights; and
WHEREAS, the Company desires to appoint the Rights Agent to act as rights agent hereunder, in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which, alone or
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the shares of Company Common Stock then
outstanding, but shall not include (i) the Company, any Subsidiary of the
Company, any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting
in such capacity or (ii) any such Person who has become and is such a
Beneficial Owner solely because (A) of a change in the aggregate number of
shares of the Company Common Stock since the last date on which such
Person acquired Beneficial Ownership of any shares of the Company Common
Stock or (B) it acquired such Beneficial Ownership in the good faith
belief that such acquisition would not (1) cause such Beneficial Ownership
to be equal to or exceed 20% of the shares of the Company Common Stock
then outstanding and such Person relied in good faith in computing the
percentage of its Beneficial Ownership on publicly filed reports or
documents of the Company that are inaccurate or out-of-date or (2)
otherwise cause a Distribution Date or the adjustment provided for in
Section 11(a)(ii) to occur.
Notwithstanding clause (ii)(B) of the prior sentence, if any Person that is not an Acquiring Person due to such clause (ii)(B) does not reduce its percentage of Beneficial Ownership of the Company Common Stock to less than 20% by the Close of Business on the fifth Business Day after notice from the Company (the date on which such notice is first mailed or sent being the first day) that such person's Beneficial Ownership of the Company Common Stock is equal to or exceeds 20%, such Person shall, at the end of such five Business Day period, become an Acquiring Person (and such clause (ii)(B) shall no longer apply to such Person). For purposes of this definition, the determination whether any Person acted in "good faith" shall be conclusively determined by the Board of Directors of the Company, acting by a vote of those directors of the Company whose approval would be required to redeem the Rights under Section 23.
(b) "ADJUSTMENT SHARES" has the meaning set forth in Section 11(a)(ii).
(c) "ADJUSTMENT SPREAD" has the meaning set forth in Section 34(a)(ii).
(d) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the Exchange Act Regulations as in effect on the date of this Agreement.
(e) "AGREEMENT" has the meaning set forth in the preamble to this Agreement.
(f) A Person shall be deemed the "BENEFICIAL OWNER" of, and shall be deemed to "BENEFICIALLY OWN", and shall be deemed to have "BENEFICIAL OWNERSHIP" of, any securities:
(i) of which such Person or any of such Person's Affiliates or
Associates is considered to be a "beneficial owner" under Rule 13d-3
of the Exchange Act Regulations as in effect on the date of this
Agreement; PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own", or to have
"Beneficial Ownership" of, any securities under this subparagraph
(i) as a result of an agreement, arrangement or understanding to (A)
sell such securities if such agreement, arrangement or understanding
arises in connection with a Demand Registration Request (as defined
in the Registration Rights Agreement) pursuant to the Registration
Rights Agreement or (B) vote such securities if such agreement,
arrangement or understanding (1) arises in connection with the
extension of the Final Expiration Date under this Agreement or the
adoption of any other rights agreement or similar device or
agreement or (2)(x) arises solely from a revocable proxy given in
response to a proxy or consent solicitation made in connection with
any annual meeting of members or special meeting of members and (y)
would not be reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(ii) that such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time or upon the satisfaction of
conditions) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise;
PROVIDED, HOWEVER, that under this paragraph (f) a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own", or to have
"Beneficial Ownership" of, (A) securities tendered pursuant to a tender or
exchange offer made in accordance with Exchange Act Regulations by such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (B) securities
that may be issued upon exercise of Rights at any time prior to the
occurrence of a Triggering Event or (C) securities that may be issued upon
exercise of Rights from and after the occurrence of a Triggering Event,
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(c) or Section 22 or pursuant to Section 11(i) in connection with
an adjustment made with respect to any such Rights.
(g) "BERMUDA ACT" has the meaning set forth in Section 9(c).
(h) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in Bermuda or in The City of New York are authorized or obligated by law or executive order to close.
(i) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m., New York City time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day it shall mean 5:00 p.m., New York City time, on the next succeeding Business Day.
(j) "COMMON STOCK" of any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or, if such Person shall have no capital stock, the equity securities or other equity interest having power to control or direct the management of such Person.
(k) "COMPANY" has the meaning set forth in the preamble to this Agreement.
(l) "COMPANY COMMON STOCK" has the meaning set forth in the recitals to this Agreement.
(m) "CURRENT VALUE" has the meaning set forth in Section 11(a)(iii).
(n) "DEPOSITARY AGENT" has the meaning set forth in Section 7(c).
(o) "DISTRIBUTION DATE" has the meaning set forth in Section 3(a).
(p) "EQUIVALENT PREFERRED STOCK" has the meaning set forth in
Section 11(b).
(q) "EXCHANGE ACT" shall mean the United States Securities Exchange Act of 1934, as amended.
(r) "EXCHANGE ACT REGULATIONS" shall mean the General Rules and Regulations under the Exchange Act.
(s) "EXPIRATION DATE" has the meaning set forth in Section 7(a).
(t) "FINAL EXPIRATION DATE" has the meaning set forth in Section 7(a).
(u) "PERSON" shall mean any individual, partnership, limited liability company, firm, corporation, joint venture, association, trust, unincorporated organization or other entity, as well as any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act.
(v) "PREFERRED STOCK" shall mean the Series A Preference Shares, par value US$0.01 per share, of the Company having the voting powers, designation, preferences and relative, participating, optional or other special rights and qualifications, limitations and restrictions described in the Certificate of Designation set forth as Exhibit C hereto.
(w) "PREFERRED STOCK EQUIVALENTS" has the meaning specified in
Section 11(a)(iii).
(x) "PRINCIPAL PARTY" has the meaning set forth in Section 13(b).
(y) "PURCHASE PRICE" has the meaning set forth in Section 7(b).
(z) "RECORD DATE" has the meaning set forth in the recitals to this Agreement.
(aa) "REDEMPTION PRICE" has the meaning set forth in Section 23(a).
(bb) "REGISTERED COMMON STOCK" has the meaning set forth in Section 13(b)(ii).
(cc) "REGISTRATION DATE" has the meaning set forth in Section 9(c).
(dd) "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights Agreement, dated as of July [ __ ], 2001, by and among the Company and the parties listed on Annex A thereto.
(ee) "REGISTRATION STATEMENT" has the meaning set forth in Section 9(c).
(ff) "RIGHT" has the meaning set forth in the recitals to this Agreement.
(gg) "RIGHTS AGENT" has the meaning set forth in the preamble to this Agreement.
(hh) "RIGHTS CERTIFICATES" has the meaning set forth in Section 3(a).
(ii) "RIGHTS DIVIDEND DECLARATION DATE" has the meaning set forth in the recitals to this Agreement.
(jj) "SECTION 11(A)(II) EVENT" has the meaning set forth in Section 11(a)(ii).
(kk) "SECTION 11(A)(III) TRIGGER DATE" has the meaning set forth in
Section 11(a)(iii).
(ll) "SECTION 13 EVENT" has the meaning set forth in Section 13(a).
(mm) "SECTION 34(A)(I) EXCHANGE RATIO" has the meaning set forth in
Section 34(a)(i).
(nn) "SECTION 34(A)(II) EXCHANGE RATIO" has the meaning set forth in
Section 34(a)(ii).
(oo) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(pp) "SPREAD" has the meaning set forth in Section 11(a)(iii).
(qq) "STOCK ACQUISITION DATE" shall mean the first date of public announcement (including, without limitation, the filing of any report pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such.
(rr) "SUBSIDIARY" of any Person shall mean any other Person of which a majority of the voting securities or equity interests is beneficially owned, directly or indirectly, by such Person, or which is otherwise controlled by such Person.
(ss) "SUMMARY OF RIGHTS" has the meaning set forth in Section 3(b).
(tt) "TRADING DAY" has the meaning set forth in Section 11(d)(i).
(uu) "TRIGGERING EVENT" shall mean any Section 11(a)(ii) Event or any Section 13 Event.
(vv) "UNIT" has the meaning set forth in Section 7(b).
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. With the consent of the Rights Agent, the Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable.
SECTION 3. ISSUE OF RIGHTS CERTIFICATES. (a) Until the earlier of
(i) the Close of Business on the tenth day after the Stock Acquisition Date and
(ii) the Close of Business on the tenth Business Day (or such later date as may
be determined by action of the Board of Directors of the Company prior to such
time as any Person becomes an Acquiring Person, and of which the Company will
give the Rights Agent prompt written notice) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity) is commenced within the meaning of Rule 14d-2 of the Exchange Act Regulations or any successor rule, if upon consummation thereof such Person would be the Beneficial Owner of 20% or more of the shares of Company Common Stock then outstanding (the earlier of (i) and (ii) above being the "DISTRIBUTION Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for shares of Company Common Stock registered in the names of the holders of shares of Company Common Stock as of and subsequent to the Record Date (which certificates for shares of Company Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Company Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of shares of Company Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the form of Exhibit A hereto (the "RIGHTS CERTIFICATES"), evidencing one Right for each share of Company Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Company Common Stock has been made pursuant to Section 11(p), at the time of distribution of the Rights Certificates, the Company may make the necessary and appropriate rounding adjustments (in accordance with Section 14(a)) so that Rights Certificates evidencing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in a form that may be appended to certificates that evidence shares of Company Common Stock, in substantially the form attached hereto as Exhibit B (the "SUMMARY OF RIGHTS"), by first-class, postage prepaid mail, to each record holder of shares of Company Common Stock as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company.
(c) Rights shall, without any further action, be issued in respect of all shares of Company Common Stock that are issued after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date. Certificates evidencing such shares of Company Common Stock issued after the Record Date shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement, dated as of July
[__], 2001 (the "Rights Agreement"), between Bunge Limited (the "Company")
and Mellon Investor Services LLC (the "Rights Agent"), the terms of which
are hereby incorporated herein by reference and a copy of which is on file
at the office of the Rights Agent designated for such purpose. Under
certain circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be evidenced
by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of
mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or
any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void."
With respect to certificates evidencing shares of Company Common Stock (whether or not such certificates include the foregoing legend or have appended to them the Summary of Rights), until the earlier of the Distribution Date and the Expiration Date, the Rights associated with the shares of Company Common Stock evidenced by such certificates shall be evidenced by such certificates alone and registered holders of the shares of Company Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the shares of Company Common Stock evidenced by such certificates.
SECTION 4. FORM OF RIGHTS CERTIFICATES. (a) The Rights Certificates (and the forms of election to purchase, assignment and certificate to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or any rule or regulation thereunder or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed or to conform to usage. Subject to the provisions of Section 11 and Section 22, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of Units of Preferred Stock as shall be set forth therein at the price set forth therein, but the amount and type of securities, cash or other assets that may be acquired upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that evidences Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) that becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) that becomes a transferee prior to or concurrently with the Acquiring Person becoming such and that receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or such Associate or Affiliate) or to any Person with whom such Acquiring Person (or such Associate or Affiliate) has any continuing agreement, arrangement or understanding regarding either the transferred Rights, shares of Company Common Stock or the Company or (B) a transfer that a majority of the Board of Directors of the Company has determined to be part of a plan, arrangement or understanding that has as a primary purpose or effect the avoidance of Section 7(e), shall, upon the written direction of a majority of the Board of Directors of the Company, contain (to the extent feasible) the following legend:
"The Rights evidenced by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights evidenced
hereby may become null and void in the circumstances specified in
Section 7(e) of such Agreement."
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. (a) Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, the President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any one or more of these officers on the Rights Certificates may be manual or facsimile. Rights Certificates bearing the manual or facsimile signatures of the individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersignature of such Rights Certificates or did not hold such offices at the date of such Rights Certificates. No Rights Certificate shall be entitled to any benefit under this Agreement or be valid for any purpose unless there appears on such Rights Certificate a countersignature duly executed by the Rights Agent by manual signature of an authorized signatory, and such countersignature upon any Rights Certificate shall be conclusive evidence, and the only evidence, that such Rights Certificate has been duly countersigned as required hereunder.
(b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the name and address of each holder of the Rights Certificates, the number of Rights evidenced on its face by each Rights Certificate and the date of each Rights Certificate.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES. (a) Subject to the provisions of Sections 4(b), 7(e) and 14, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of Units of Preferred Stock (or, following a Triggering Event, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and executed the certificate set forth in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights evidenced by such Rights Certificate or Affiliates or Associates thereof as the Company shall reasonably request; whereupon the Rights Agent shall, subject to the provisions of Sections 4(b), 7(e) and 14, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.
(b) If a Rights Certificate shall be mutilated, destroyed, lost or stolen, upon request by the registered holder of the Rights evidenced thereby and upon payment to the Company and the Rights Agent of all reasonable expenses incident thereto, there shall be issued, in exchange for and upon cancellation of the mutilated Rights Certificate, or in substitution for the lost, stolen or destroyed Rights Certificate, a new Rights Certificate, in substantially the form of the prior Rights Certificate, of like tenor and evidencing the equivalent number of Rights, but, in the case of loss, theft or destruction, only upon receipt of evidence satisfactory to the Company and the Rights Agent of such loss, theft or destruction of such Rights Certificate and, if requested by the Company or the Rights Agent, indemnity also satisfactory to it.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS. (a) Prior to the earlier of (i) the Close of Business on the third anniversary hereof (the "FINAL EXPIRATION DATE") and (ii) the time at which the Rights are redeemed as provided in Section 23 (the earlier of (i) and (ii) being the "EXPIRATION DATE"), the registered holder of any Rights Certificate may, subject to the provisions of Sections 7(e) and 9(c), exercise the Rights evidenced thereby in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price (as hereinafter defined) for the number of Units of Preferred Stock (or, following a Triggering Event, other securities, cash or other assets, as the case may be) for which such surrendered Rights are then exercisable.
(b) The purchase price for each one one-thousandth of a share (each such one one-thousandth of a share being a "UNIT") of Preferred Stock upon exercise of Rights shall be US$29.02, subject to adjustment from time to time as provided in Sections 11 and 13(a) (such purchase price, as so adjusted, being the "PURCHASE PRICE"), and shall be payable in accordance with paragraph (c) below.
(c) As promptly as practicable following the occurrence of the Distribution Date, the Company shall deposit with a corporation in good standing organized under the laws of the United States or any state of the United States, that is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority (such institution being the "DEPOSITARY AGENT"), certificates evidencing the shares of Preferred Stock that may be acquired upon exercise of the Rights and shall cause such Depositary Agent to enter into an agreement pursuant to which the Depositary Agent shall issue receipts evidencing interests in the shares of Preferred Stock so deposited. Upon receipt of a Rights Certificate evidencing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price for the Units of Preferred Stock (or, following a Triggering Event, other securities, cash or other assets, as the case may be) to be purchased thereby as set forth below and an amount equal to any applicable transfer tax or evidence satisfactory to the Company of payment of such tax, the Rights Agent shall, subject to Section 20(k), thereupon promptly (i) requisition from the Depositary Agent depositary receipts or certificates evidencing such number of Units of Preferred Stock as are to be purchased and the Company will direct the Depositary Agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14, (iii) after receipt of such depositary receipts or certificates, cause the same to be delivered to or upon the
order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. In the event that the Company is obligated to issue Company Common Stock, other securities of the Company, pay cash and/or distribute other property pursuant to Section 11(a), the Company will make all arrangements necessary so that such Company Common Stock, other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. Subject to Section 34, the payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)) may be made in cash or by certified or bank check payable to the order of the Company, or by wire transfer of immediately available funds to the account of the Company (provided that notice of such wire transfer shall be given by the holder of the related Right to the Rights Agent).
(d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of any Section 11(a)(ii) Event or Section 13 Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) that becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) that becomes a transferee prior to or concurrently with the Acquiring Person becoming such and that receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or such Associate or Affiliate) or to any Person with whom such Acquiring Person (or such Associate or Affiliate) has any continuing agreement, arrangement or understanding regarding the transferred Rights, shares of Company Common Stock or the Company or (B) a transfer that a majority of the Board of Directors of the Company has determined to be part of a plan, arrangement or understanding that has as a primary purpose or effect the avoidance of this Section 7(e), shall be null and void without any further action, and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) are complied with, but shall have no liability to any holder of Rights or any other Person as a result of the Company's failure to make any determination under this Section 7(e) or Section 4(b) with respect to an Acquiring Person or its Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement or any Rights Certificate to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise by such registered holder unless such registered holder shall have (i) completed and executed the certificate following the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) of the Rights evidenced by such Rights Certificate or Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any Rights Certificates acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. (a) The Company shall at all times prior to the Expiration Date cause to be reserved and kept available, out of its authorized and unissued shares of Preferred Stock, the number of shares of Preferred Stock that, as provided in this Agreement, will be sufficient to permit the exercise in full of all outstanding Rights. Upon the occurrence of any events resulting in an increase in the aggregate number of shares of Preferred Stock (or other equity securities of the Company) issuable upon exercise of all outstanding Rights above the number then reserved, the Company shall make appropriate increases in the number of shares so reserved.
(b) If the shares of Preferred Stock to be issued and delivered upon the exercise of the Rights may be listed on any national securities exchange, the Company shall during the period from the Distribution Date through the Expiration Date use its best efforts to cause all securities reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts (i) as soon as
practicable following the occurrence of a Section 11(a)(ii) Event and a
determination by the Company in accordance with Section 11(a)(iii) of the
consideration to be delivered by the Company upon exercise of the Rights or, if
so required by law, as soon as practicable following the Distribution Date (such
date being the "REGISTRATION DATE"), to file a registration statement on an
appropriate form under the Securities Act and, if appropriate, under the
Companies Act 1981 of Bermuda (the "BERMUDA ACT") with respect to the securities
that may be acquired upon exercise of the Rights (the "REGISTRATION STATEMENT"),
(ii) to cause the Registration Statement to become effective as soon as
practicable after such filing, (iii) to cause the Registration Statement to
continue to be effective (and to include a prospectus complying with the
requirements of the Securities Act and, if appropriate, the Bermuda Act) until
the earlier of (A) the date as of which the Rights are no longer exercisable for
the securities covered by the Registration Statement and (B) the Expiration Date
and (iv) to take as soon as practicable following the Registration Date such
action as may be required to ensure that any acquisition of securities upon
exercise of the Rights complies with any applicable state securities or "blue
sky" laws. If the Registration Statement does not become effective prior to the
Close of Business on the 45th Business Day following the occurrence of a Section
11(a)(ii) Event, the Company shall, unless otherwise determined by a majority of
the
Board of Directors of the Company, on the 46th Business Day following the occurrence of such Section 11(a)(ii) Event, be obligated to exercise the option described in Section 34.
(d) The Company shall take such action as may be necessary to ensure that all shares of Preferred Stock (and, following the occurrence of a Triggering Event, any other securities that may be delivered upon exercise of Rights) shall be, at the time of delivery of the certificates or depositary receipts for such securities, duly and validly authorized and issued and fully paid and non-assessable.
(e) The Company shall pay any documentary, stamp or transfer tax imposed in connection with the issuance or delivery of the Rights Certificates or upon the exercise of Rights; PROVIDED, HOWEVER, that the Company shall not be required to pay any such tax imposed in connection with the issuance or delivery of Units of Preferred Stock, or any certificates or depositary receipts for such Units of Preferred Stock (or, following the occurrence of a Triggering Event, any other securities, cash or assets, as the case may be) to any Person other than the registered holder of the Rights Certificates evidencing the Rights surrendered for exercise. The Company shall not be required to issue or deliver any certificates or depositary receipts for Units of Preferred Stock (or, following the occurrence of a Triggering Event, any other securities, cash or assets, as the case may be) to, or in a name other than that of, the registered holder of the Rights Certificate upon the exercise of any Rights evidenced thereby until any such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due.
SECTION 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any certificate or depositary receipt for Units of Preferred Stock (or, following the occurrence of a Triggering Event, other securities) is issued upon the exercise of Rights shall be registered as the holder of record of the Units of Preferred Stock (or, following the occurrence of a Triggering Event, other securities) evidenced thereby on, and such certificate or depositary receipt shall be dated, the date upon which the Rights Certificate evidencing such Rights is duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) is made; PROVIDED, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or, following the occurrence of a Triggering Event, other securities) register of members is closed, such Person shall be registered as the record holder of such securities on, and such certificate or depositary receipt shall be dated, the next succeeding Business Day on which the Preferred Stock (or, following the occurrence of a Triggering Event, other securities) register of members is open; and FURTHER PROVIDED, HOWEVER, that if delivery of Units of Preferred Stock is delayed as a result of a failure to register such Units of Preferred Stock pursuant to Section 9(c), such Persons shall be registered as the record holders of such Units of Preferred Stock only when such Units first become deliverable. Prior to the registration in the register of members of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a shareholder of the Company with respect to securities for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of securities covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine or consolidate the outstanding Preferred Stock into a smaller
number of shares or (D) issue any shares in a reclassification of the
Preferred Stock (including any such reclassification in connection with a
consolidation, amalgamation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this
Section 11(a), the Purchase Price in effect at the time of the record date
for such dividend or of the effective date of such subdivision,
combination, consolidation or reclassification, and the number and kind of
shares of Preferred Stock or other class of shares, as the case may be,
issuable on such date upon exercise of the Rights, shall be
proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive, upon payment of the Purchase Price
then in effect, the aggregate number and kind of shares of Preferred Stock
or other class of shares, as the case may be, which, if such Right had
been exercised immediately prior to such date, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, consolidation or reclassification. If
an event occurs that would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) In the event:
(A) any Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any time after the date of this Agreement, directly or indirectly, shall (1) merge into the Company or amalgamate or otherwise combine with the Company and the Company shall be the continuing or surviving corporation of such merger, amalgamation or combination and Company Common Stock shall remain outstanding and unchanged, (2) in one transaction or a series of transactions, transfer any assets to the Company or to any of its Subsidiaries in exchange (in whole or in part) for shares of Company Common Stock, for other shares of the Company or any such Subsidiary, or for securities exercisable for or convertible into shares of the Company or any of its Subsidiaries (whether Company Common Stock or otherwise) or otherwise obtain from the Company or any of its Subsidiaries, with or without consideration, any additional shares or securities exercisable for or convertible into such shares (other than pursuant to a pro rata distribution to all holders of Company Common Stock), (3) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one transaction or a series of transactions, to, from or with the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity, assets (including securities) on
terms and conditions less favorable to the Company or such Subsidiary or plan than those that could have been obtained in arm's-length negotiations with an unaffiliated third party, other than pursuant to a transaction set forth in Section 13(a), (4) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one transaction or a series of transactions, to, from or with the Company or any of the Company's Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity (other than transactions, if any, consistent with those engaged in, as of the date hereof, by the Company and such Acquiring Person or such Associate or Affiliate), assets (including securities) having an aggregate fair market value of more than US$5,000,000, other than pursuant to a transaction set forth in Section 13(a), (5) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in one transaction or a series of transactions, to, from or with the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity, any material trademark or material service mark, other than pursuant to a transaction set forth in Section 13(a), (6) receive, or any designee, agent or representative of such Acquiring Person or any Affiliate or Associate of such Acquiring Person shall receive, any compensation from the Company or any of its Subsidiaries other than compensation for full-time employment as a regular employee at rates in accordance with the Company's (or its Subsidiaries') past practices, or (7) receive the benefit, directly or indirectly (except proportionately as a holder of Company Common Stock or as required by law or governmental regulation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantage provided by the Company or any of its Subsidiaries or any employee benefit plan maintained by the Company or any of its Subsidiaries or any trustee or fiduciary with respect to such plan acting in such capacity; or
(B) any Person shall become an Acquiring Person, unless the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a); or
(C) during such time as there is an Acquiring Person, there shall be any reclassification of securities (including any reverse stock split), or recapitalization of the Company, or any amalgamation, merger or consolidation of the Company with any of its Subsidiaries or any other transaction or series of transactions involving the Company or any of its Subsidiaries, other than a transaction or transactions to which the provisions of Section 13(a) apply (whether or not with or into or otherwise involving an Acquiring Person), which has the effect, directly or indirectly, of increasing by more than 1% the proportionate share of the outstanding shares of any class of shares of the Company or any of its Subsidiaries that is directly or indirectly beneficially owned by any Acquiring Person or any Associate or Affiliate of any Acquiring Person;
THEN, immediately upon the date of the occurrence of an event described in Section 11(a)(ii)(A), (B) or (C) (a "SECTION 11(A)(II) EVENT"), proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e)) shall thereafter have the right to receive, upon exercise thereof at the then-current Purchase Price in accordance with the terms of this Agreement, in lieu of the number of Units of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, such number of Units of Preferred Stock as shall equal the result obtained by (x) multiplying the then-current Purchase Price by the then number of Units of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event (such product thereafter being, for all purposes of this Agreement other than Section 13, the "PURCHASE PRICE"), and (y) dividing that product by 50% of the then-current market price (determined pursuant to Section 11(d)) per Unit of Preferred Stock on the date of such first occurrence (such Units of Preferred Stock being the "ADJUSTMENT SHARES").
(iii) In the event that the number of shares of Preferred
Stock that are authorized by the Company's Memorandum of Association
and Bye-laws but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights is not sufficient to
permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the Company, by
the vote of a majority of the Board of Directors of the Company,
shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "CURRENT VALUE")
over (2) the Purchase Price (such excess being the "SPREAD"), and
(B) with respect to each Right, make adequate provision to
substitute for such Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Company Common Stock or other shares of the Company
(including, without limitation, preferred shares, or units of
preferred shares (such other shares being "PREFERRED STOCK
EQUIVALENTS")), (4) debt securities of the Company, (5) other assets
or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has been
determined by a majority of the Board of Directors of the Company,
after receiving advice from a nationally recognized investment
banking firm; PROVIDED, HOWEVER, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B)
above within thirty days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the "SECTION
11(A)(III) TRIGGER DATE"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Units of Preferred Stock
(to the extent available) and then, if necessary, cash, which Units
of Preferred Stock and/or cash shall have an aggregate value equal
to the Spread. To the extent that the Company determines that some
action need be taken pursuant to the first sentence of this Section
11(a)(iii), the Company shall provide, subject to Section 7(e), that
such action shall apply uniformly to all outstanding Rights. For
purposes of this Section 11(a)(iii), the value of a Unit of
Preferred Stock shall be the current market price (as determined
pursuant to Section 11(d)) per Unit of Preferred Stock on the
Section 11(a)(iii) Trigger Date and the value of any preferred stock
equivalent shall be deemed to have the same value as the Preferred
Stock on such date.
(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five calendar days after such record date) shares of Preferred Stock (or shares having substantially the same rights, privileges and preferences as shares of Preferred Stock ("EQUIVALENT PREFERRED STOCK")) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into Preferred Stock or Equivalent Preferred Stock) less than the current market price (as determined pursuant to Section 11(d)) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the sum of the number of shares of Preferred Stock outstanding on such record date plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by a majority of the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by or held for the account of the Company or any Subsidiary shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price that would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all holders of shares of Preferred Stock (including any such distribution made in connection with a consolidation, amalgamation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in shares of Preferred Stock, but including any dividend payable in shares other than Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d)) per share of Preferred Stock on such record date less the fair market value (as determined in good faith by a majority of the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holder of the Rights) of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants distributable in respect of a share of Preferred Stock and
the denominator of which shall be such current market price (as determined pursuant to Section 11(d)) per share of Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price that would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current market price" per share of Company Common Stock or Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such shares for the ten consecutive Trading Days immediately prior to such date; PROVIDED, HOWEVER, that if prior to the expiration of such requisite ten Trading Day period the issuer announces either (A) a dividend or distribution on such shares payable in such shares or securities convertible into such shares (other than the Rights) or (B) any subdivision, combination or reclassification of such shares, then, following the ex-dividend date for such dividend or the record date for such subdivision, combinations or reclassifications, as the case may be, the "current market price" shall be properly adjusted to take into account such event. The closing price for each day shall be, if the shares are listed and admitted to trading on a national securities exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such shares are listed or admitted to trading or, if such shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by The Nasdaq Stock Market Consolidated Quotations Service or such other system then in use, or, if on any such date such shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such shares selected by a majority of the Board of Directors of the Company. If, on any such date no market maker is making a market in such shares, the fair value of such shares on such date as determined in good faith by a majority of the Board of Directors of the Company shall be used. If such shares are not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by a majority of the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. The term "TRADING DAY" shall mean, if such shares are listed or admitted to trading on any national securities exchange, a day on which the principal national securities exchange on which such shares are listed or admitted to trading is open for the transaction of business or, if such shares are not so listed or admitted, a Business Day.
(ii) For the purpose of any computation hereunder, the "current
market price" per share of Preferred Stock shall be determined in the same
manner as set forth above for Company Common Stock in clause (i) of this
Section 11(d) (other than the fourth sentence thereof). If the current
market price per share of Preferred Stock cannot be determined in the
manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section
11(d), the "current market price" per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 1,000 (as such amount may be
appropriately adjusted for such events as share consolidations and
subdivisions, bonus issues, share splits, share dividends and
recapitalizations with respect to Company Common Stock occurring after the date of this Agreement) multiplied by the current market price per share of Company Common Stock. If neither Company Common Stock nor Preferred Stock is publicly held or so listed or traded, "current market price" per share of the Preferred Stock shall mean the fair value per share as determined in good faith by a majority of the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. For all purposes of this Agreement, the "current market price" of a Unit of Preferred Stock shall be equal to the "current market price" of one share of Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one-hundredth of a share of Company Common Stock or Common Stock or other share or hundred-thousandth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction that mandates such adjustment and (ii) the Expiration Date.
(f) If, as a result of an adjustment made pursuant to Section
11(a)(ii) or 13(a), the holder of any Right thereafter exercised shall
become entitled to receive any shares other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k),
(l) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 with
respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of Units of Preferred Stock (or other securities or amount of cash or combination thereof) that may be acquired from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of Units of Preferred Stock (calculated to the nearest one hundred-thousandth of a Unit) obtained by (i) multiplying (x) the number of Units of Preferred Stock covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of Units of Preferred Stock that may be acquired upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of Units of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest hundred-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten days later than the date of such public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the number of Units of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per Unit and the number of Units of Preferred Stock that were expressed in the Initial Rights Certificates issued hereunder without prejudice to any such adjustment or change.
(k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then-par value of the number of Units of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such fully paid and non-assessable number of Units of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date of that number of Units of Preferred Stock and other shares or securities of the
Company, if any, issuable upon such exercise over and above the number of Units of Preferred Stock and other shares or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this Section 11, as
and to the extent that in their good faith judgment a majority of the
Board of Directors of the Company shall determine to be advisable in order
that any (i) consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of any shares of Preferred Stock at less than the
current market price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities that by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends or bonus
issues or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred
Stock, shall not be taxable to such holders or shall reduce the taxes
payable by such holders.
(n) The Company shall not, at any time after the Distribution Date,
(i) consolidate with any other Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(o)), (ii) merge or
amalgamate with or into any other Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(o)), or (iii) sell
or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x) at the
time of or immediately after such consolidation, merger, amalgamation or
sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect that would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights or
(y) prior to, simultaneously with or immediately after such consolidation,
merger, amalgamation or sale, the Person that constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) shall have
distributed or otherwise transferred to its shareholders or other Persons
holding an equity interest in such Person Rights previously owned by such
Person or any of its Affiliates and Associates; PROVIDED, HOWEVER, that
this Section 11(n) shall not affect the ability of any Subsidiary of the
Company to consolidate with, merge or amalgamate with or into, or sell or
transfer assets or earning power to, any other Subsidiary of the Company.
(o) After the Distribution Date, the Company shall not, except as permitted by Section 23 or Section 26, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Company
Common Stock payable in shares of Company Common Stock, (ii) subdivide the outstanding shares of Company Common Stock, (iii) combine or consolidate the outstanding shares of Company Common Stock into a smaller number of shares, or (iv) issue any shares in a reclassification of Company Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), the number of Rights associated with each share of Company Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Company Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Company Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Company Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Company Common Stock outstanding immediately following the occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 or Section 13,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Company Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate evidencing
shares of Company Common Stock) in accordance with Section 25. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such certificate.
SECTION 13. CONSOLIDATION, MERGER, AMALGAMATION OR SALE OR TRANSFER
OF ASSETS OR EARNING POWER. (a) In the event that, following the Stock
Acquisition Date, directly or indirectly, either (x) the Company shall
consolidate with, or merge or amalgamate with and into, any other Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(o)), and the Company shall not be the continuing or surviving corporation of
such consolidation, amalgamation or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o))
shall consolidate with, or merge or amalgamate with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation, amalgamation or merger and, in connection with such
consolidation, amalgamation or merger, all or part of the outstanding shares of
Company Common Stock shall be converted into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer) to any Person or Persons (other than the Company or any
of its Subsidiaries in one or more transactions each of which complies with
Section 11(o)), in one or more transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its
Subsidiaries, taken as a whole (any such event described in clause (x), (y) or
(z) being a "SECTION 13 EVENT"), then, and in each such case, proper provision
shall be made so that: (i) each holder of a Right, except as provided in Section
7(e), shall thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price, such number of validly authorized and issued,
fully paid and non-assessable shares of Common
Stock of the Principal Party, which shares shall not be subject to any liens,
encumbrances, rights of first refusal, transfer restrictions or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of Units of Preferred Stock for which a
Right is exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of such Units for which
a Right would be exercisable hereunder but for the occurrence of such Section
11(a)(ii) Event by the Purchase Price that would be in effect hereunder but for
such first occurrence) and (2) dividing that product (which, following the first
occurrence of a Section 13 Event, shall be the "Purchase Price" for all purposes
of this Agreement) by 50% of the current market price (determined pursuant to
Section 11(d)) per share of the Common Stock of such Principal Party on the date
of consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall, for all purposes of this Agreement, thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 shall apply only to such Principal Party following the
first occurrence of a Section 13 Event; (iv) such Principal Party shall take
such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock) in connection with the consummation of any
such transaction as may be necessary to ensure that the provisions of this
Agreement shall thereafter be applicable to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) shall be of no further effect following the first
occurrence of any Section 13 Event.
(b) "PRINCIPAL PARTY" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), (A) the Person that is the issuer of any securities into which shares of Company Common Stock are converted in such merger, amalgamation or consolidation, or, if there is more than one such issuer, the issuer of Common Stock that has the highest aggregate current market price (determined pursuant to Section 11(d)) and (B) if no securities are so issued, the Person that is the other party to such merger, amalgamation or consolidation, or, if there is more than one such Person, the Person the Common Stock of which has the highest aggregate current market price (determined pursuant to Section 11(d)); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving
the largest portion of the assets or earning power transferred pursuant to
such transaction or transactions, or, if each Person that is a party to
such transaction or transactions receives the same portion of the assets
or earning power transferred pursuant to such transaction or transactions
or if the Person receiving the largest portion of the assets or earning
power cannot be determined, whichever Person the Common Stock of which has
the highest aggregate current market price (determined pursuant to Section
11(d)); PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock
of such Person is not at such time and has not been continuously over the
preceding twelve-month period registered under Section 12 of the Exchange
Act ("REGISTERED COMMON STOCK"), or such Person is not a corporation, and
such Person is a direct or indirect Subsidiary of another Person that has
Registered
Common Stock outstanding, "Principal Party" shall refer to such other Person; (2) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is a direct or indirect Subsidiary of another Person but is not a direct or indirect Subsidiary of another Person that has Registered Common Stock outstanding, "Principal Party" shall refer to the ultimate parent entity of such first-mentioned Person; (3) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and one or more of such other Persons has Registered Common Stock outstanding, "Principal Party" shall refer to whichever of such other Persons is the issuer of the Registered Common Stock having the highest aggregate current market price (determined pursuant to Section 11(d)); and (4) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and none of such other Persons have Registered Common Stock outstanding, "Principal Party" shall refer to whichever ultimate parent entity is the corporation having the greatest shareholders' equity or, if no such ultimate parent entity is a corporation, shall refer to whichever ultimate parent entity is the entity having the greatest net assets.
(c) The Company shall not consummate any such consolidation,
amalgamation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock that have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13, and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that the Principal Party will:
(i) (A) file on an appropriate form, as soon as practicable following the execution of such agreement, a registration statement under the Securities Act, and, if appropriate, the Bermuda Act with respect to the Common Stock that may be acquired upon exercise of the Rights, (B) cause such registration statement to remain effective (and to include a prospectus complying with the requirements of the Securities Act) until the Expiration Date, and (C) as soon as practicable following the execution of such agreement take such action as may be required to ensure that any acquisition of such Common Stock upon the exercise of the Rights complies with any applicable state securities or "blue sky" laws; and
(ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates that comply in all respects with the requirements for registration on Form 10 under the Exchange Act.
(d) In case the Principal Party that is to be a party to a transaction referred to in this Section 13 has a provision in any of its authorized securities or in its Certificate of Incorporation or By-laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than the then current market price per share (determined pursuant to Section 11(d)) or securities exercisable for, or convertible into, Common
Stock of such Principal Party at less than such then current market price (other
than to holders of Rights pursuant to this Section 13) or (ii) providing for any
special payment, tax or similar provisions in connection with the issuance of
the Common Stock of such Principal Party pursuant to the provisions of this
Section 13, then, in such event, the Company shall not consummate any such
transaction unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal Party shall have been
cancelled, waived or amended, or that the authorized securities shall be
redeemed, so that the applicable provision will have no effect in connection
with, or as a consequence of, the consummation of the proposed transaction.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights that have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates that evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the Persons to which such fractional Rights would otherwise be issuable, an amount in cash equal to such fraction of the market value of a whole Right. For purposes of this Section 14(a), the market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be, if the Rights are listed or admitted to trading on a national securities exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by The Nasdaq Stock Market Consolidated Quotations Service or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by a majority of the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by a majority of the Board of Directors of the Company shall be used and such determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
(b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates that evidence such fractional shares of Preferred Stock (other than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock). In lieu of such fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the then current market price of a share of Preferred Stock on the day of exercise, determined in accordance with Section 11(d).
(c) The holder of a Right by the acceptance of such Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, other than rights of action vested in the Rights Agent pursuant to Section 18, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of certificates evidencing shares of Company Common Stock), and the Company hereby unilaterally and irrevocably covenants in favor of such holders to perform all obligations of the Company under this Agreement; and any registered holder of a Rights Certificate (or, prior to the Distribution Date, of a certificate evidencing shares of Company Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of a certificate evidencing shares of Company Common Stock), may, on such registered holder's own behalf and for such registered holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company or any other Person to enforce, or otherwise act in respect of, such registered holder's right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Company Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates duly executed;
(c) subject to Section 6(a) and Section 7(f), the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Company Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Company Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or any
other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree, judgment or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; PROVIDED, HOWEVER, that the Company must use its best efforts to have any such order, decree, judgment or ruling lifted or otherwise overturned as promptly as practicable.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of shares of Preferred Stock or any other securities of the Company that may at any time be issuable on the exercise of the Rights evidenced thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or, except as provided in Section 24, to receive notice of meetings or other actions affecting shareholders, or to receive dividends or subscription rights, or otherwise.
SECTION 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses, including reasonable fees and disbursements of its counsel, incurred in connection with the execution and administration of this Agreement and the exercise and performance of its duties hereunder. The Company shall indemnify the Rights Agent for, and hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability hereunder.
(b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate or depositary receipt for Preferred Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to have been signed, executed and, where necessary, verified or acknowledged by the proper Person or Persons.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or shareholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any document or any further act on the part of any of the parties hereto; provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of "current market price") be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be specified herein) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights
Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any responsibility for the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or for the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or failure by the Company to satisfy conditions contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or Section 13 or for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of the certificate describing any such adjustment contemplated by Section 12); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred Stock or any other securities to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Preferred Stock or any other securities will, when so issued, be validly authorized and issued, fully paid and non-assessable.
(f) The Company shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further acts, instruments and assurances as may reasonably be required by the Rights Agent for the performance by the Rights Agent of its duties under this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any such officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully
and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents.
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of its rights hereunder if the Rights Agent shall have reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed, not signed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. If such certificate has been completed and signed and shows a negative response to clauses 1 and 2 of such certificate, unless previously instructed otherwise in writing by the Company (which instructions may impose on the Rights Agent additional ministerial responsibilities, but no discretionary responsibilities), the Rights Agent may assume without further inquiry that the Rights Certificate is not owned by a person described in Section 4(b) or Section 7(e) and shall not be charged with any knowledge to the contrary.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty days' prior notice in writing mailed to the Company, and to each transfer agent of the Preferred Stock and the Company Common Stock, by registered or certified mail, and to the holders of the Rights Certificates (or certificates for the Company Common Stock prior to the Distribution Date) by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty days' prior notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Preferred Stock and the Company Common Stock, by registered or certified mail, and to the holders of the Rights Certificates (or certificates for the Company Common Stock prior to the Distribution Date) by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate or, prior to the Distribution Date, the holder of a certificate for the Company Common Stock (who shall, with such notice, submit such holder's Rights Certificate or certificate for Company Common Stock, as the case may be, for inspection by the Company), then any registered holder of any Rights Certificate or, prior to the Distribution Date, the holder of a certificate for the Company Common Stock may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or any state of the United States in good standing, shall be authorized to do business as a banking institution in the State of New York, shall be authorized under such laws to exercise corporate trust or stock transfer powers, shall be subject to supervision or examination by federal or state authorities and shall have at the time of its appointment as Rights Agent a combined capital and surplus of at least US$100,000,000 or (b) an Affiliate of a corporation described in clause (a). After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Preferred Stock and the Company Common Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates (or certificates for the Company Common Stock prior to the Distribution Date). Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the provisions of this Agreement or the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by a majority of the Board of Directors of the Company to reflect any adjustment or change made in accordance with the provisions of this Agreement in the Purchase Price or the number or kind or class of shares or other securities or property that may be acquired upon exercise of the Rights. In addition, in connection with the issuance or sale of shares of Company Common Stock following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to shares of Company Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by a majority of the Board of Directors of the Company, issue Rights Certificates evidencing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION AND TERMINATION. (a) Subject to Section 28, the Company may, at its option, by action of a majority of the Board of Directors of the Company, at any time prior to the earlier of (i) the Close of Business on the tenth Day following the Stock Acquisition Date or (ii) the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of US$0.0001 per Right, as such amount may be appropriately adjusted to reflect any stock split, share consolidation or subdivision, bonus issue, stock dividend or similar transaction occurring after the date hereof (such redemption price being the "REDEMPTION PRICE"), and the Company may, at its option, by action of a majority of the Board of Directors of the Company, pay the Redemption Price either in shares of Company
Common Stock (based on the current market price, determined in accordance with
Section 11(d), of the shares of Company Common Stock at the time of redemption)
or cash. Subject to the foregoing, the redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors of the Company in its sole discretion may establish.
(b) Immediately upon the action of a majority of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall be filed with the Rights Agent, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of a majority of the Board of Directors of the Company ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the register of members of the transfer agent for Company Common Stock. Any notice that is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made.
SECTION 24. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend or
bonus issue payable in shares of any class to the holders of Preferred Stock or
to make any other distribution to the holders of Preferred Stock (other than a
regular quarterly cash dividend out of earnings or retained earnings of the
Company), (ii) to offer to the holders of Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or shares
of any class or any other securities, rights or options, (iii) to effect any
reclassification of the Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), (iv) to effect
any consolidation or merger or amalgamation into or with any other Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(o)), or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more transactions,
of more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o)) or (v) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
each holder of a Rights Certificate (or, prior to the Distribution Date, to each
holder of certificates for Company Common Stock), to the extent feasible and in
accordance with Section 25, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, amalgamation, sale, transfer, liquidation, dissolution or winding up is
to take place and the date of participation therein by the holders of the shares
of Preferred Stock, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least 20
days prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least 20 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier; PROVIDED, HOWEVER, that no such notice shall be
required pursuant to this Section 24 if any Subsidiary of the Company effects a
consolidation or merger or
amalgamation with or into, or effects a sale or other transfer of assets or earning power to, any other Subsidiary of the Company.
(b) In case any of the events set forth in Section 11(a)(ii) shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii).
SECTION 25. NOTICES. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing and mailed or sent or delivered (including by facsimile transmission), if to the Company, at its address at:
Bunge Limited
50 Main Street
Suite 635
White Plains, NY 10606
Attention: Chief Financial Officer
and if to the Rights Agent, at its address at:
Notices or demands authorized or required by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates evidencing shares of Company Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Company Common Stock.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution
Date and subject to the penultimate sentence of this Section 26, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
evidencing shares of Company Common Stock. From and after the Distribution Date
and subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(a) to cure any ambiguity, (b) to correct or supplement any provision contained
herein that may be defective or inconsistent with any other provisions herein,
(c) to shorten or lengthen any time period hereunder or (d) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of
the holders of Rights Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); PROVIDED, HOWEVER, that, prior
to the Close of Business on the third anniversary hereof, this Agreement may not
be supplemented or amended to extend the Final Expiration Date except in
accordance with Section 35; and PROVIDED FURTHER, that this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (c) of this sentence,
(i) subject to Section 30, a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable or (ii) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company or, so
long as any Person is an Acquiring Person hereunder, from the majority of the
Board of Directors of the Company, that states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Company Common Stock.
SECTION 27. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. For all purposes of this Agreement, any calculation of the number of shares
of Company Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Company Common Stock of which any Person is the Beneficial Owner, shall be made
in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange Act
Regulations as in effect on the date hereof. Except as otherwise specifically
provided herein, the Board of Directors of the Company shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board of Directors of the Company or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power (i) to interpret
the provisions of this Agreement and (ii) to make all determinations deemed
necessary or advisable for the administration of this Agreement. All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) that
are done or made by the Board of Directors of the Company in good faith shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board of
Directors of the Company or any member thereof to any liability to the holders
of the Rights.
SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of shares of Company Common Stock) any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of shares of Company Common Stock).
SECTION 30. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and a majority of the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement and the Rights shall not then be redeemable, the right of redemption set forth in Section 23 shall be reinstated and shall not expire until the Close of Business on the tenth Business Day following the date of such determination by a majority of the Board of Directors of the Company.
SECTION 31. GOVERNING LAW. This Agreement, each Right and each Rights Certificate issued hereunder shall be governed by, and construed in accordance with, the laws of Bermuda; PROVIDED, HOWEVER, that Sections 18, 19, 20 and 21 shall be governed by, and construed in accordance with, the laws of the State of New York.
SECTION 32. COUNTERPARTS. This Agreement may be executed (including by facsimile) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS. The headings contained in this Agreement are for descriptive purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 34. EXCHANGE. (a) (i) The Company may, at its option, at any
time after any person becomes an Acquiring Person, upon resolution adopted by a
majority of the Board of Directors of the Company, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become null and void pursuant to Section 7(e)) for Units of Preferred Stock
at an exchange ratio of one Unit of Preferred Stock per Right, appropriately
adjusted to reflect any stock split, share consolidation or subdivision, bonus
issue, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "SECTION 34(A)(I)
EXCHANGE RATIO"). Notwithstanding the foregoing, the Company may not effect the
exchange described in this Section 34(a)(i) at any time after any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan
maintained by the Company or any of its Subsidiaries, or any trustee or
fiduciary with respect to such plan acting in such capacity), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the shares of Company Common Stock then outstanding.
(ii) The Company may, at its option, at any time after any person becomes an Acquiring Person, upon resolution adopted by a majority of the Board of Directors of the Company, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to Section 7(e)) for Units of Preferred Stock at an exchange ratio specified in the following sentence, as appropriately adjusted to
reflect any stock split, share consolidation or subdivision, bonus issue, stock
dividend or similar transaction occurring after the date hereof. Subject to such
adjustment, each Right may be exchanged for that number of Units of Preferred
Stock obtained by dividing the Adjustment Spread (as defined below) by the
then-current market price (determined pursuant to Section 11(d)) per Unit of
Preferred Stock on the earlier of (i) the date on which any Person becomes an
Acquiring Person and (ii) the date on which a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan maintained by the Company or any of its Subsidiaries or any trustee
or fiduciary with respect to such plan acting in such capacity) is commenced
within the meaning of Rule 14d-2 of the Exchange Act Regulations or any
successor rule, if upon consummation thereof such Person would be the Beneficial
Owner of 20% or more of the shares of Company Common Stock then outstanding
(such exchange ratio being the "SECTION 34(A)(II) EXCHANGE RATIO"). The
"ADJUSTMENT SPREAD" shall equal (x) the aggregate market price on the date of
such event of the number of Adjustment Shares determined pursuant to Section
11(a)(ii), minus (y) the Purchase Price.
(b) Immediately upon the action of a majority of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to Section
34(a) and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Units of Preferred Stock equal
to the number of such Rights held by such holder multiplied by the Section
34(a)(i) Exchange Ratio or Section 34(a)(ii) Exchange Ratio, as the case may be.
The Company shall promptly give public notice of any such exchange; PROVIDED,
HOWEVER, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
that is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange shall state the
method by which the exchange of Units of Preferred Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights that
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights that have become null and void pursuant to
Section 7(e)) held by each holder of Rights.
(c) In the event that the number of shares of Preferred Stock that
are authorized by the Company's Memorandum of Association and Bye-laws but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit any exchange of Rights as contemplated
in accordance with this Section 34, the Company shall take all such action as
may be necessary to authorize additional shares of Preferred Stock for issuance
upon exchange of the Rights or make adequate provision to substitute (1) cash,
(2) Company Common Stock or other equity securities of the Company, (3) debt
securities of the Company, (4) other assets or (5) any combination of the
foregoing, having an aggregate value equal to the Adjustment Spread, where such
aggregate value has been determined by a majority of the Board of Directors of
the Company.
(d) The Company shall not be required to issue fractions of Units of Preferred Stock or to distribute certificates that evidence fractional Units. In lieu of fractional Units, the Company may pay to the registered holders of Rights Certificates at the time such Rights are
exchanged as herein provided an amount in cash equal to the same fraction of the current market price (determined pursuant to Section 11(d)) of one Unit of Preferred Stock.
SECTION 35. RENEWAL. At least 180 days prior to the Close of Business on the third anniversary hereof, the Chairman of the Board of Directors of the Company or the Board of Directors of the Company may, in accordance with the Company's Bye-laws, convene an annual general meeting or special general meeting of the Company's shareholders for the purpose of considering an amendment to Section 7(a)(i) of this Agreement, which amendment shall provide for an extension of the Final Expiration Date (the "FINAL EXPIRATION DATE AMENDMENT"). The Final Expiration Date Amendment shall become effective upon a resolution of the members including the affirmative vote of not less than 66% of votes cast on the resolution.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their behalf as of the date first above written.
The Common Seal of the Company was affixed hereto in the presence of:
By: ________________________________ Name:
Title:
MELLON INVESTOR SERVICES LLC
By: ________________________________
Name:
Title:
EXHIBIT A
[FORM OF RIGHTS CERTIFICATE]
Certificate No. ____ ____Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
RIGHTS CERTIFICATE
BUNGE LIMITED
This certifies that , or registered assigns, is the registered holder of the number of Rights set forth above, each of which entitles the registered holder thereof, subject to the terms and conditions of the Rights Agreement dated as of July [ __ ], 2001 (the "RIGHTS AGREEMENT"; terms defined therein are used herein with the same meaning unless otherwise defined herein) between Bunge Limited, a Bermuda company (the "COMPANY"), and Mellon Investor Services LLC, as Rights Agent (which term shall include any successor Rights Agent under the Rights Agreement), to purchase from the Company at any time after the Distribution Date and prior to the Expiration Date at the office of the Rights Agent, one-thousandth of a fully paid and non-assessable Series A Preference Share, par value US$0.01 per share (the "PREFERRED STOCK"), of the Company at the Purchase Price initially of US$29.02 per one-thousandth share (each such one-thousandth of a share being a "UNIT") of Preferred Stock, upon presentation and surrender of this Rights Certificate with the Election to Purchase and related Certificate (on the reverse side hereof) properly completed and duly executed. The number of Rights evidenced by this Rights Certificate (and the number of Units that may be purchased upon exercise thereof) set forth above, and the Purchase Price per Unit set forth above shall be subject to adjustment in certain events as provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event or a Section 13
Event, if the Rights evidenced by this Rights Certificate are beneficially owned
by an Acquiring Person or an Affiliate or Associate of any such Acquiring Person
or, under certain circumstances described in the Rights Agreement, a transferee
of any such Acquiring Person, Associate or Affiliate, such Rights shall become
null and void and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Section 11(a)(ii) Event or such
Section 13 Event.
In certain circumstances described in the Rights Agreement, the Rights evidenced hereby may entitle the registered holder thereof to purchase capital stock of an entity other than the Company or to receive common stock, cash or other assets, all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms and conditions of the Rights Agreement, which terms and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the principal office of the Company and are available from the Company upon written request.
This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing an aggregate number of Rights equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company under certain circumstances at its option at a redemption price of US$0.0001 per Right, payable at the Company's option in cash or in common shares of the Company, subject to adjustment in certain events as provided in the Rights Agreement.
No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Preferred Stock or of any other securities that may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement and such holder shall have been entered in the register of members of the Company.
This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of July [ __ ] 2001.
ATTEST: BUNGE LIMITED By:___________________________ By:___________________________ Name: Name: Title: Title: Countersigned: MELLON INVESTOR SERVICES LLC, as Rights Agent By:____________________________ Name: |
Title:
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the Rights.)
FOR VALUE RECEIVED _______________________________________________ hereby sells, assigns and transfers unto __________________________________________ (Please print name and address of transferee) __________________________________________ the Rights represented by this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint , Attorney, to transfer the said Rights on the books of the within-named Company, with full power of substitution.
Dated: ____________ __, 200_
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: _____________ __, 200 ___________________________
Signature
Signature Guaranteed:
|
The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the Company will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in exchange for this Rights Certificate.
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate.)
To: Bunge Limited
The undersigned hereby irrevocably elects to exercise [ ] Rights represented by this Rights Certificate to purchase the Units of Preferred Stock issuable upon the exercise of such Rights (or such other securities of the Company or of any other person or other property that may be issuable upon the exercise of such Rights) and requests that certificates for such Units be issued in the name of and delivered to:
Please insert social security
or other identifying number: _______________________
If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number: _____________________________
Dated: __________ __, 200_
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not beneficially owned by an Acquiring Person or an Affiliate or an Associate thereof (as defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from any person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate thereof.
Dated: __________ __, 200 ___________________________
Signature
Signature Guaranteed:
|
NOTICE
The signature in the foregoing Election to Purchase and Certificate must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the Company will deem the beneficial owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in exchange for this Rights Certificate.
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On July 12, 2001 the Board of Directors of Bunge Limited (the "COMPANY") authorized and granted one Right for each outstanding common share, par value US$0.01 per share, of the Company (the "COMPANY COMMON STOCK") to members of record at the close of business on the date on which the Company issues shares of Company Common Stock pursuant to its initial public offering (the "RECORD DATE") and for each share of Company Common Stock issued by the Company thereafter and prior to the Distribution Date. Each Right entitles the registered holder, subject to the terms of the Rights Agreement (as defined below), to purchase from the Company one one-thousandth (a "UNIT") of a Series A Preference Share, par value US$0.01 per share (the "PREFERRED STOCK"), at a purchase price of US$29.02 per Unit, subject to adjustment (the "PURCHASE PRICE"). The Purchase Price is payable in cash or by certified or bank check payable to the order of the Company or by wire transfer to the account of the Company (provided a notice of such wire transfer is given by the holder of the related Right to the Rights Agent). The description and terms of the Rights are set forth in a Rights Agreement between the Company and Mellon Investor Services LLC as Rights Agent (the "RIGHTS AGREEMENT").
Copies of the Rights Agreement and the Certificate of Designation for the Preferred Stock have been filed with the Securities and Exchange Commission as exhibits to a Registration Statement on Form 8-A. Copies of the Rights Agreement and the Certificate of Designation are available free of charge from the Company. This summary description of the Rights and the Preferred Stock does not purport to be complete and is qualified in its entirety by reference to all the provisions of the Rights Agreement and the Certificate of Designation, including the definitions therein of certain terms, which Rights Agreement and Certificate of Designation are incorporated herein by reference.
THE RIGHTS AGREEMENT
Initially, the Rights will be attached to all outstanding shares of Company Common Stock and no separate Rights Certificates will be distributed. The Rights will separate from the Company Common Stock and the "DISTRIBUTION DATE" will occur upon the earlier of (i) 10 days following a public announcement (the date of such announcement being the "STOCK ACQUISITION DATE") that a person or group of affiliated or associated persons (other than the Company, any subsidiary of the Company or any employee benefit plan of the Company or such subsidiary) (an "ACQUIRING PERSON") has acquired, obtained the right to acquire, or otherwise obtained beneficial ownership of 20% or more of the then outstanding shares of Company Common Stock, and (ii) 10 business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of the then outstanding shares of Company Common Stock. Until the Distribution Date, (i) the Rights will be evidenced by Company Common Stock and will be transferred with and only with the underlying shares of Company Common Stock, (ii) new Company Common Stock certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference and (iii) the surrender for transfer of any Company Common Stock will also constitute the transfer of the Rights associated with the Company Common Stock.
The Rights are not exercisable until the Distribution Date and will expire at the close of business on the third anniversary of the Rights Agreement (the "FINAL EXPIRATION Date") unless earlier redeemed by the Company as described below. The Final Expiration Date can be extended by the affirmative vote of at least 66% of the shares voting on the resolution to do so.
As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of Company Common Stock as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving or continuing corporation in a merger or amalgamation with an Acquiring Person and shares of Company Common Stock shall remain outstanding, (ii) a Person becomes an Acquiring Person, (iii) an Acquiring Person engages in one or more "self-dealing" transactions as set forth in the Rights Agreement, or (iv) during such time as there is an Acquiring Person, an event occurs that results in such Acquiring Person's ownership interest being increased by more than 1% (e.g., by means of a recapitalization) (each such event being a "SECTION 11(A)(II) EVENT"), then, in each such case, each holder of a Right will thereafter have the right to receive, upon exercise, Units of Preferred Stock (or, in certain circumstances, Company Common Stock, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right. The exercise price is the Purchase Price multiplied by the number of Units of Preferred Stock issuable upon exercise of a Right prior to the events described in this paragraph. Notwithstanding any of the foregoing, following the occurrence of any of the events set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or amalgamation (other than a merger or
amalgamation described in the preceding paragraph) or other business combination
transaction and the Company is not the surviving or continuing corporation, (ii)
any Person consolidates, amalgamates or merges with the Company and all or part
of the Company Common Stock is converted or exchanged for securities, cash or
property of any other Person or (iii) 50% or more of the Company's assets or
earning power is sold or transferred, then each holder of a Right (except Rights
which previously have been voided as described above) shall thereafter have the
right to receive, upon exercise, common stock of the ultimate parent of the
Acquiring Person having a value equal to two times the exercise price of the
Right.
The Purchase Price payable, and the number of Units of Preferred Stock issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a bonus issue on, or a subdivision, combination or reclassification
of, the Preferred Stock, (ii) if holders of the Preferred Stock are granted
certain rights or warrants to subscribe for Preferred Stock or convertible
securities at less than the current market price of the Preferred Stock, or
(iii) upon the distribution to the holders of the Preferred Stock of evidences
of indebtedness, cash or assets (excluding regular quarterly cash dividends) or
of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. The Company is not required to issue fractional Units. In lieu thereof, an adjustment in cash may be made based on the market price of the Preferred Stock prior to the date of exercise.
At any time prior to the earlier of (i) ten business days following the Stock Acquisition Date or (ii) the expiration of the Rights, a majority of the Company's Board of Directors may redeem the Rights in whole, but not in part, at a price of US$0.0001 per Right (subject to adjustment in certain events) (the "REDEMPTION PRICE"), payable, at the election of such majority of the Company's Board of Directors, in cash or shares of Company Common Stock. Immediately upon the action of a majority of the Company's Board of Directors ordering the redemption of the Rights, the Rights will terminate and the only remaining right of the holders of Rights will be to receive the Redemption Price.
The Board of Directors, at its option, may, at anytime after a
person becomes an Acquiring Person, exchange each Right for (i) one Unit of
Preferred Stock or (ii) such number of Units of Preferred Stock as will equal
(x) the difference between the aggregate market price of the number of Units of
Preferred Stock to be received upon a Section 11(a)(ii) Event and the purchase
price set forth in the Rights Agreement, divided by (y) the market price per
Unit of Preferred Stock upon a Section 11(a)(ii) Event.
Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends.
Any of the provisions of the Rights Agreement may be amended without the approval of the holders of Company Common Stock at any time prior to the Distribution Date, except that any reduction of the 20% thresholds described above or any extension of the Final Expiration Date requires the affirmative vote of at least 66% of the shares voting on a resolution to do so. After the Distribution Date, the provisions of the Rights Agreement may be amended in order to cure any ambiguity, defect or inconsistency, to make changes that do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement, except that any extension of the Final Expiration Date requires the affirmative vote of at least 66% of the shares voting on a resolution to do so and no amendment to adjust the time period governing redemption can be made at such time as the Rights are not redeemable.
DESCRIPTION OF PREFERRED STOCK
The Units of Preferred Stock that may be acquired upon exercise of the Rights will be nonredeemable and subordinate to any other preferred shares that may be issued by the Company.
Each Unit of Preferred Stock will have a minimum preferential quarterly dividend of US$0.01 per Unit or any higher per share dividend declared on the Company Common Stock.
In the event of liquidation, the holder of a Unit of Preferred Stock will receive a preferred liquidation payment equal to the greater of US$0.01 per Unit and the per share amount paid in respect of a share of Company Common Stock.
Each Unit of Preferred Stock will have one vote, voting together with the Company Common Stock.
In the event of any merger, amalgamation or consolidation or other transaction in which shares of Company Common Stock are exchanged, each Unit of Preferred Stock will be entitled to receive the per share amount paid in respect of each share of Company Common Stock.
The rights of holders of the Preferred Stock to dividends, liquidation and voting, and in the event of mergers, amalgamations and consolidations, are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation and voting rights, the economic value of one Unit of Preferred Stock that may be acquired upon the exercise of each Right is expected to approximate the economic value of one share of Company Common Stock.
EXHIBIT C
CERTIFICATE OF DESIGNATION
OF THE VOTING POWERS, DESIGNATION,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF THE
SERIES A PREFERENCE SHARES
Set out below are the voting powers, designation, relative, participating, optional and other special rights, preferences and qualifications, limitations and restrictions of the series of preference shares of Bunge Limited (the "COMPANY"), par value US $0.01 per share, designated as Series A Preference Shares (the "SERIES A PREFERENCE SHARES") approved by a resolution of the board of directors of the Company (the "BOARD OF DIRECTORS") on July 12, 2001:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as "Series A Preference Shares" and the number of shares constituting such series shall be 240,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS. (A) Subject to the prior and superior rights of the holders of any shares of any other series of preference shares ("PREFERENCE Shares") or any other class of shares of the Company ranking prior and superior to the Series A Preference Shares with respect to dividends, each holder of one one-thousandth (1/1,000) of a Series A Preference Share (a "UNIT") shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for that purpose, (i) quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being a "QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend Payment Date after the first issuance of such Unit, in an amount per Unit (rounded to the nearest cent) equal to the greater of (a) US$0.01 or (b) subject to the provision for adjustment hereinafter set forth, the aggregate per share amount of all cash dividends declared on the common shares of the Company, par value US$0.01 per share (the "COMMON SHARES"), since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Unit, and (ii) subject to the provision for adjustment hereinafter set forth, quarterly distributions (payable in kind) on each Quarterly Dividend Payment Date in an amount per Unit equal to the aggregate per share amount of all non-cash dividends, bonus issues or other distributions (other than a dividend or bonus issue payable in Common Shares or a subdivision of the outstanding Common Shares, by reclassification or otherwise) declared on the Common Shares since the immediately preceding Quarterly Dividend Payment Date, or with respect to the first Quarterly Dividend Payment Date, since the first issuance of a Unit. In the event that the Company shall at any time after July 12, 2001 (the "RIGHTS DECLARATION DATE") (i) declare any dividend or bonus issue on outstanding Common Shares payable in Common Shares, (ii) subdivide outstanding Common Shares or (iii) combine or consolidate outstanding Common Shares into a smaller number of shares, then in each such case the amount to which the holder of a Unit was entitled immediately prior to such event
pursuant to the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of Common Shares that are outstanding immediately after such event and the denominator of which shall be the number of Common Shares that were outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on Units as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Shares (other than a dividend or bonus issue payable in Common Shares); PROVIDED, HOWEVER, that, in the event no dividend or distribution shall have been declared on the Common Shares during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of US$0.01 per Unit shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and shall be cumulative on each outstanding Unit from the Quarterly Dividend Payment Date next preceding the date of issuance of such Unit, unless the date of issuance of such Unit is prior to the record date for the first Quarterly Dividend Payment Date, in which case, dividends on such Unit shall begin to accrue from the date of issuance of such Unit, or unless the date of issuance is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Units entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on Units in an amount less than the aggregate amount of all such dividends at the time accrued and payable on such Units shall be allocated pro rata on a Unit-by-Unit basis among all Units at the time outstanding. The Board of Directors may fix a record date for the determination of holders of Units entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of Units shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each Unit shall entitle the holder thereof to one vote on all matters submitted to a vote of the shareholders of the Company. In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend or bonus issue on outstanding Common Shares payable in Common Shares, (ii) subdivide outstanding Common Shares or (iii) combine or consolidate the outstanding Common Shares into a smaller number of shares, then in each such case the number of votes per Unit to which holders of Units were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which shall be the number of Common Shares outstanding immediately after such event and the denominator of which shall be the number of Common Shares that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of Units and the holders of Common Shares shall vote together as one class on all matters submitted to a vote of shareholders of the Company.
(C) Except as set forth herein or as required by law, holders of Units shall have no special voting rights and their consents shall not be required (except to the extent they are entitled to vote with holders of Common Shares as set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS. (A) Whenever quarterly dividends or other dividends or distributions payable on Units as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding Units shall have been paid in full, the Company shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or repurchase or otherwise acquire for consideration any junior shares;
(ii) declare or pay dividends on or make any other distributions on any parity shares, except dividends paid ratably on Units and all such parity shares on which dividends are payable or in arrears in proportion to the total amounts to which the holders of such Units and all such shares are then entitled;
(iii) redeem or repurchase or otherwise acquire for consideration any parity shares; PROVIDED, HOWEVER, that the Company may at any time redeem, repurchase or otherwise acquire any such parity shares in exchange for any junior shares; or
(iv) repurchase or otherwise acquire for consideration any Units, except in accordance with a repurchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such Units.
(B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of the Company unless the Company could, under paragraph (A) of this Section 4, repurchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any Units repurchased or otherwise acquired by the Company in any manner whatsoever shall be cancelled upon the acquisition thereof. All such Units shall, upon their cancellation, become authorized but unissued Units and may be reissued as part of a new series of Preference Shares to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, no distribution shall be made (i) to the holders of junior shares unless the holders of Units shall have received, subject to adjustment as hereinafter provided in paragraph (B), the greater of either (a) US$0.01 per Unit plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not earned or declared, to the date of such payment, or (b) the amount equal to the aggregate per share amount to be distributed to holders of Common Shares, or (ii) to the holders of parity shares, unless simultaneously therewith distributions are made ratably on Units and all other such parity shares in proportion to the total amounts to which the holders of Units are entitled under
clause (i)(a) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up.
(B) In the event the Company shall, at any time after the Rights
Declaration Date, (i) declare any dividend or bonus issue on outstanding Common
Shares payable in Common Shares, (ii) subdivide outstanding Common Shares, or
(iii) combine or consolidate outstanding Common Shares into a smaller number of
shares, then in each such case the aggregate amount to which holders of Units
were entitled immediately prior to such event pursuant to clause (i)(b) of
paragraph (A) of this Section 6 shall be adjusted by multiplying such amount by
a fraction the numerator of which shall be the number of Common Shares that are
outstanding immediately after such event and the denominator of which shall be
the number of Common Shares that were outstanding immediately prior to such
event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Company shall
enter into any consolidation, merger, amalgamation, combination or other
transaction in which the Common Shares are exchanged for or converted into other
shares, cash and/or any other property, then in any such case Units shall at the
same time be similarly exchanged for or converted into an amount per Unit
(subject to the provision for adjustment hereinafter set forth) equal to the
aggregate amount of shares, cash and/or any other property (payable in kind), as
the case may be, into which or for which each Common Share is converted or
exchanged. In the event the Company shall at any time after the Rights
Declaration Date (i) declare any dividend or bonus issue on outstanding Common
Shares payable in Common Shares, (ii) subdivide outstanding Common Shares, or
(iii) combine or consolidate outstanding Common Shares into a smaller number of
shares, then in each such case the amount set forth in the immediately preceding
sentence with respect to the exchange or conversion of Units shall be adjusted
by multiplying such amount by a fraction the numerator of which shall be the
number of Common Shares that are outstanding immediately after such event and
the denominator of which shall be the number of Common Shares that were
outstanding immediately prior to such event.
Section 8. REDEMPTION. The Units shall not be redeemable.
Section 9. RANKING. The Units shall rank junior to all other series of the Preference Shares and to any other class of preference shares that hereafter may be issued by the Company as to the payment of dividends and the distribution of assets, unless the terms of any such series or class shall provide otherwise.
Section 10. AMENDMENT. The rights of the Series A Preference Shares shall not hereafter be amended, either directly or indirectly, or through merger, consolidation or amalgamation with any other company or companies without the affirmative vote of the holders of a majority or more of the outstanding Units, voting separately as a class.
Section 11. FRACTIONAL SHARES. The Series A Preference Shares may be issued in Units or other fractions of a share, which Units or fractions shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preference Shares.
Section 12. CERTAIN DEFINITIONS. As used herein with respect to the Series A Preference Shares, the following terms shall have the following meanings:
(A) The term "COMMON SHARES" shall mean the class of shares designated as common shares, par value US $0.01 per share, of the Company at the date of the creation of the Series A Preference Shares by resolution of the Board of Directors or any other class of shares resulting from successive changes or reclassification of such common shares.
(B) The term "JUNIOR SHARES" (i) as used in Section 4, shall mean
the Common Shares and any other class or series of shares of the Company
hereafter authorized or issued over which the Series A Preference Shares have
preference or priority as to the payment of dividends and (ii) as used in
Section 6, shall mean the Common Shares and any other class or series of shares
of the Company over which the Series A Preference Shares have preference or
priority in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
(C) The term "PARITY SHARES" (i) as used in Section 4, shall mean any class or series of shares of the Company hereafter authorized or issued ranking PARI PASSU with the Series A Preference Shares as to the payment of dividends and (ii) as used in Section 6, shall mean any class or series of shares ranking PARI PASSU with the Series A Preference Shares in the distribution of assets on any liquidation, dissolution or winding up of the
Company.
Exhibit 5.1
12 July 2001
Bunge Limited
50 Main Street
White Plains, New York 10606
U.S.A.
Dear Sirs
BUNGE LIMITED (THE "COMPANY")
We have acted as special legal counsel in Bermuda to the Company in connection with the Registration Statement on Form F-1 (the "Registration Statement", which term does not include any other document or agreement whether or not specifically referred to therein or attached as an exhibit or schedule thereto) filed with the U.S. Securities and Exchange Commission (the "Commission") on 12 July 2001 relating to the registration under the U.S. Securities Act of 1933, as amended, of an aggregate of 17,600,000 common shares, par value US$0.01 per share together with an additional 2,640,000 common shares, par value US$0.01 per share subject to an over-allotment option granted to the underwriters by the Company (together, the "Common Shares").
For the purposes of giving this opinion, we have examined a copy of the Registration Statement. We have also reviewed the memorandum of association and the bye-laws of the Company, each certified by the Secretary of the Company on 11 July 2001, copies of unanimous written resolutions of the members of the Company and of the board of directors of the Company each dated 11 July 2001 (together, the "Minutes") and such other documents and made such enquires as to questions of law as we have deemed necessary in order to render the opinion set forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the conformity to the originals of all copies (whether or not certified) examined by us and the authenticity and completeness of the originals from which such copies were taken, (b) that where a document has been examined by us in draft form, it will be or has been executed and/or filed in the form of that draft, and where a number of drafts of a document have been examined by us all changes thereto have been marked or otherwise drawn to our attention, (c) the accuracy and completeness of all factual representations made in the Documents and other documents reviewed by us, (d) that the resolutions contained in the Minutes remain in full force and effect and have not been rescinded or amended.
We have made no investigation of and express no opinion in relation to the laws of any jurisdiction other than Bermuda (and assume that such laws would not have any implication in relation to the opinions expressed herein). This opinion is to be governed by and construed in accordance with the laws of Bermuda and is limited to and is given on the basis of the current law and practice in Bermuda. This opinion is issued solely for the purpose set out above and is not to be relied upon in respect of any other matter.
On the basis of and subject to the foregoing, we are of the opinion that when issued and paid for as contemplated by the Registration Statement, the Common Shares will be validly issued, fully paid and non-assessable (meaning that no further sums are required to be paid by the holders thereof in connection with the issue of such shares).
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to our firm under the captions "Risk Factors", "Taxation", "Enforcement of Civil Liberties", and "Legal Matters" in the prospectus forming a part of the Registration Statement.
Yours faithfully
/s/ CONYERS DILL & PEARMAN |
Exhibit 8.1
12 July 2001
Bunge Limited
50 Main Street
White Plains, New York 10606
U.S.A.
Dear Sirs
BUNGE LIMITED (THE "COMPANY")
We have acted as special legal counsel in Bermuda to the Company in connection with the Registration Statement on Form F-1 (the "Registration Statement", which term does not include any other document or agreement whether or not specifically referred to therein or attached as an exhibit or schedule thereto) filed with the U.S. Securities and Exchange Commission (the "Commission") on 12 July 2001 relating to the registration under the U.S. Securities Act of 1933, as amended, of an aggregate of 17,600,000 common shares, par value US$0.01 per share together with an additional 2,640,000 common shares, par value US$0.01 per share subject to an over-allotment option granted to the underwriters by the Company (together, the "Common Shares").
For the purposes of giving this opinion, we have examined a copy of the Registration Statement. We have also reviewed the memorandum of association and the bye-laws of the Company, each certified by the Secretary of the Company on 11 July 2001, copies of unanimous written resolutions of the members of the Company and of the board of directors of the Company each dated 11 July 2001 (together, the "Minutes") and such other documents and made such enquires as to questions of law as we have deemed necessary in order to render the opinion set forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the conformity to the originals of all copies (whether or not certified) examined by us and the authenticity and completeness of the originals from which such copies were taken, (b) that where a document has been examined by us in draft form, it will be or has been executed and/or filed in the form of that draft, and where a number of drafts of a document have been examined by us all changes thereto have been marked or otherwise drawn to our attention, (c) the accuracy and completeness of all factual representations made in the Documents and other documents reviewed by us, (d) that the resolutions contained in the Minutes remain in full force and effect and have not been rescinded or amended.
We have made no investigation of and express no opinion in relation to the laws of any jurisdiction other than Bermuda (and assume that such laws would not have any implication in relation to the opinions expressed herein). This opinion is to be governed by and construed in accordance with the laws of Bermuda and is limited to and is given on the basis of the current law and practice in Bermuda. This opinion is issued solely for the purposes set out above and is not to be relied upon in respect of any other matter.
On the basis of and subject to the foregoing, we are of the opinion that the statements under the captions "Taxation" and "Legal Matters" in the prospectus forming part of the Registration Statement, to the extent that they constitute statements of Bermuda law, are accurate in all material respects and that such statements constitute our opinion.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the captions "Taxation" and "Legal Matters".
Yours faithfully
/s/ CONYERS DILL & PEARMAN |
Exhibit 8.2
[Letterhead of Shearman & Sterling]
(212) 848-4376
July 12, 2001
Bunge Limited
50 Main Street
White Plains, New York 10606
Ladies and Gentlemen:
We have acted as special United States federal income tax counsel to Bunge Limited, a Bermuda corporation (the "Issuer"), in connection with the preparation and filing by the Issuer with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), of a registration statement on Form F-1, and the prospectus included therein (the "Registration Statement"). Pursuant to the Registration Statement, the Issuer is offering 17,600,000 of its common shares to the public (the "Offering").
We hereby confirm that the discussion under the caption "Taxation- United States Federal Income Tax Consequences," insofar as such discussion represents legal conclusions or statements of United States federal income tax law, subject to the limitations and conditions set forth therein, and except for the specific discussion regarding the Issuer's possible U.S. federal income tax characterization as a passive foreign investment company under the caption "--Passive Foreign Investment Company Status," constitutes our opinion as to the material United States federal income tax consequences relevant to the acquisition, ownership and disposition of the common shares in the context of the Offering.
No opinion is expressed as to any other matter, including any aspects of state, local or non-United States tax law. This opinion is based on current United States federal income tax law and administrative practice, and we do not undertake to advise you as to any future changes in such law or practice that may affect our opinion unless we are specifically retained to do so. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to us in the Registration Statement under the captions "Taxation - United States Federal Income Tax Consequences" and "Legal Matters." In giving such consent, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Act, and the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Shearman & Sterling |
Exhibit 10.1
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and entered into as of July 1, 2001 by and between BUNGE LIMITED, a company incorporated under the laws of Bermuda ("Bunge"), and BUNGE INTERNATIONAL LIMITED, a company incorporated under the laws of Bermuda ("Bunge International").
RECITALS
WHEREAS, Bunge is a subsidiary of Bunge International;
WHEREAS, Bunge proposes to issue its common shares in an initial public offering registered under the U.S. Securities Act of 1933, as amended (the "Public Offering");
WHEREAS, prior to the Public Offering, Bunge International has heretofore provided certain administrative and other corporate services to Bunge;
WHEREAS, Bunge has entered into services agreements with subsidiaries of Bunge International, which agreements will be unaffected by this Agreement;
WHEREAS, Bunge International has requested from Bunge that Bunge provide certain administrative and other corporate services to it pursuant to this Agreement after the Public Offering; and
WHEREAS, Bunge agrees to provide or cause Bunge International to be provided with these services on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the above premises and the mutual covenants contained herein, it is agreed by and between the parties as follows:
AGREEMENT
The parties therefore agree as follows:
1. SERVICES. Bunge will provide to Bunge International those particular corporate and administrative services that are listed on Exhibit A hereto (the "Services"), in consideration of the respective charges described in Section 3 below.
2. TERM AND TERMINATION. Beginning as of the date of this Agreement, Bunge agrees to provide the Services on a quarter-to-quarter basis unless and until terminated (a) in whole or in part with respect to particular Services by either party at the end of a specified quarter by means
of at least 180 days' prior written notice or (b) by either party upon written notice to the other party, if the other party shall be adjudged bankrupt, become insolvent, make a general assignment for the benefit of the creditors, have a receiver or trustee appointed for the benefit of creditors generally, file a voluntary petition in bankruptcy or initiate reorganization proceedings or take any step toward liquidation.
3. CHARGES AND PAYMENT. (a) For the Services provided by Bunge, Bunge International will pay the actual costs therefor, including overhead and selling, general and administrative expenses and any reasonable out-of-pocket payments, costs or expenses incurred in connection with, or related to, the Services. Bunge and Bunge International will use reasonable efforts to separately identify such costs. However, where such costs are not separately identifiable and directly measurable, Bunge International will pay that portion of the total cost to Bunge of providing such Services or similar services which shall be attributable to Bunge International under an "Allocation Formula." The "Allocation Formula" shall attribute to Bunge International that portion of the total cost of such Services or similar services which is based on the ratio of the time incurred on behalf of Bunge International by employees of Bunge to the time incurred on behalf of Bunge and all other entities (including Bunge International) for which Bunge provides such Services or similar services. Such costs shall include travel and entertainment expenses directly attributable to Bunge International and an allocable portion of the base compensation (other than benefit plans and employment agreements and arrangements) of the officers and directors of Bunge who serve as executive officers and directors of Bunge International.
(b) Bunge shall submit invoices quarterly in arrears, describing in reasonable detail the Services performed, charges therefor and other charges provided for hereunder. Bunge International shall, within 30 days of receipt of such invoices, remit payment or cause such payment to be remitted, in full to Bunge or its designated agent for the invoiced charges. In addition to these charges, Bunge International shall reimburse or cause such payment to be reimbursed to Bunge or its designated agent on a monthly basis for all reasonable third-party charges incurred by Bunge incident to the rendering of such Services. The parties will review the Services and all cost and usage data at least annually, but any change in the Services will be only by mutual agreement.
(c) At the request and expense of either party, a fairness opinion concerning the aggregate value of all Services rendered during any given fiscal year of Bunge may be obtained from an accounting firm nationally recognized in the United States. If the value of the Services as calculated by the fairness opinion is higher than the actual amounts invoiced by Bunge to Bunge International, Bunge International shall pay to Bunge the difference in these amounts within 60 days of the date of the fairness opinion. If the value of the Services as calculated by the fairness opinion is lower than the actual amounts invoiced by Bunge to Bunge International, Bunge shall pay to Bunge International the difference in these amounts within 60 days of the date of the fairness opinion. Such an opinion can only be requested once by each party in any given fiscal year.
4. ACCESS TO ASSETS AND INFORMATION. Bunge International shall make available to Bunge all such equipment, inventory, supplies, documents and information as may be reasonably necessary for Bunge to perform the Services. Bunge agrees to use Bunge International assets and information solely for the purposes contemplated hereby.
5. PERFORMANCE OF SERVICES. Bunge shall perform the Services with the same degree of care, skill and prudence customarily exercised for its own operations.
6. LIMITATION ON LIABILITY. (a) In the absence of gross negligence or reckless or willful misconduct on the part of Bunge, Bunge shall not be liable for any claims, liabilities, damages, losses, costs, expenses (including reasonable attorney's fees), fines and penalties arising out of or relating to any actual or alleged injury, loss or damage of any nature whatsoever in connection with providing or failing to provide the Services to Bunge International.
(b) Bunge's liability for damages to Bunge International for any cause whatsoever, and regardless of the form of action, whether in contract or in tort, including gross negligence or willful misconduct, shall not exceed in the aggregate an amount equal to five times the total amount paid by Bunge International hereunder for all Services provided during the term of this Agreement.
7. INDEMNIFICATION. (a) Bunge International shall indemnify, defend and hold Bunge, its directors, officers and employees harmless from and against all damages, losses and out-of-pocket expenses (including reasonable attorneys' fees) ("Losses") arising out of or related to the performance or non-performance of any obligation or agreement herein, except for Losses which are the direct and sole result of gross negligence or willful misconduct of the personnel of Bunge. Neither party will be responsible for special, indirect, incidental or consequential damages that the other party or any third party may incur or experience in connection with this Agreement.
(b) Any claim for indemnity under this Section must be made by
written notice to the indemnifying party within one (1) year after the discovery
thereof. Notwithstanding the foregoing, the indemnities contained in this
Section shall survive for a period of three (3) years after the termination of
this agreement.
8. LIMITATIONS ON OBLIGATIONS; SERVICE PROVIDERS. (a) Notwithstanding
anything herein to the contrary, Bunge may, at its sole discretion, decline to
provide any Service hereunder if: (a) the facilities or personnel of Bunge are
not reasonably available to provide such Service; (b) providing such Service
requested by Bunge International would materially interfere with Bunge's conduct
of its business; or (c) could conflict with any applicable law, regulation or
ordinance, could result in a conflict of interest or, in Bunge's good faith
judgment based upon the advice of its tax advisors, could result in significant
tax disadvantages for Bunge. Bunge may, at any time and in its sole discretion,
change in any reasonable respect the manner, scheduling or timing of the
Services, PROVIDED that Bunge shall provide Bunge International at least thirty
(30) days' prior written notice of any such material change. Nothing in this
Agreement shall limit or
restrict the right of Bunge or any of Bunge's directors, officers or employees, agents, subsidiaries or affiliates to engage in any other business or devote their time and attention in part to the management or other aspects of any other business, whether or not of a similar nature, or to limit or restrict the right of Bunge to engage in any other business or to render services of any kind to any entity.
(b) Services to be provided by Bunge hereunder may, in Bunge's sole discretion, be provided by employees or service providers of Bunge or any of its subsidiaries; PROVIDED, HOWEVER, that Bunge shall remain responsible, in accordance with the terms of this Agreement, for the performance of any Service it causes to be so provided.
9. RELATIONSHIP OF THE PARTIES. It is expressly understood and agreed that in rendering the Services Bunge is acting as an independent contractor and that this Agreement does not constitute Bunge as an employee, agent or other representative of Bunge International for any purpose whatsoever. Bunge does not have the right or authority to enter into any contract, warranty, guarantee or other undertaking in the name or for the account of Bunge International, or to assume or create any obligation or liability of any kind, express or implied, on behalf of Bunge International, or to bind Bunge International in any manner whatsoever, or to hold itself out as having any right, power or authority to create any such obligation or liability on behalf of Bunge International or to bind Bunge International in any manner whatsoever (except as to any actions taken by Bunge at the express written request and direction of Bunge International).
10. ASSIGNMENT. Bunge International shall not assign or transfer any of its rights under this Agreement without the prior written consent of Bunge.
11. NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be deemed to have been given (a) on the date on which hand delivered, (b) at the time when mailed in any general or branch office of the United States Postal Service, enclosed in a registered or certified postpaid envelope, or sent by Federal Express or other similar overnight courier service, addressed to the address of the parties stated below or to such changed address as such party may have fixed by notice, or (c) if given by facsimile, when such facsimile is transmitted and a confirmation slip is issued by the transmitting machine indicating that the notice has been transmitted without error:
If to Bunge:
50 Main Street
White Plains, NY 10606
Fax: (914) 684-3499
Attention: Chief Financial Officer
If to Bunge International:
50 Main Street
White Plains, NY 10606
Fax: (914) 684-3499
Attention: Chief Financial Officer
12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. In that context, and without limiting the generality of the foregoing, each of the parties hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal suit, action or proceeding relating to this Agreement or transaction contemplated hereby, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive jurisdiction of the Courts of the State of New York sitting in the County of New York or the United States District Court for the Southern District of New York and appellate courts having jurisdiction of appeals in such courts, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such suit, action, or proceeding may properly be heard and determined in such New York State court or, to the extent permitted by law, in such federal court;
(b) consents that any such suit, action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue or jurisdiction or any such action or proceeding in such court or that such action or proceeding was brought in an inconvenient forum and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party in its address as provided in Section 11 hereof;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by New York law; and
(e) agrees that this Agreement has been entered into in the State of New York and performed in part in the State of New York.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding between the parties and supersedes all prior proposals, commitments, writings, negotiations and understandings, oral and written, and all other prior communications between the parties relating to the subject matter of this Agreement.
14. AMENDMENT; WAIVER. This Agreement may not be amended or otherwise modified except in writing duly executed by all of the parties. No failure or delay by either party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof. A waiver by any party of any breach or violation of this Agreement shall not be deemed or construed as a waiver of any subsequent breach or violation thereof.
15. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same
document.
16. SEVERABILITY. Should any part, term or condition hereof be declared illegal or unenforceable or in conflict with any other law, the validity of the remaining portions or provisions of this Agreement shall not be affected thereby, and the illegal or unenforceable portions of this Agreement shall be and hereby are redrafted to conform with applicable law, while leaving the remaining portions of this Agreement intact.
17. FORCE MAJEURE. No party shall be deemed to have breached this Agreement or be held liable for any failure or delay in the performance of all or any portion of its obligations under this Agreement if prevented from doing so by a cause or causes beyond its control. Without limiting the generality of the foregoing, such causes include acts of God or the public enemy, fires, floods, storms, earthquakes, riots, strikes, lock-outs, wars and war-operations, restraints of government power or communication line failure or other circumstances beyond such party's control, or by reason of the judgment, ruling or order of any court or agency of competent jurisdiction or change of law or regulation subsequent to the execution of this Agreement.
18. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 7, this Agreement is solely for the benefit of the parties and their respective successors and assigns. Nothing herein shall be construed to provide any rights to any other entity or individual.
19. HEADINGS. Section headings are for convenience only and do not control or affect the meaning or interpretation of any terms or provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
BUNGE LIMITED
By /s/ Alberto Weisser ------------------------------ Name: Alberto Weisser Title: CEO |
BUNGE INTERNATIONAL LIMITED
By /s/ William M. Wells ------------------------------ Name: William M. Wells Title: CFO |
EXHIBIT A
THE SERVICES
Bunge will provide the following services to Bunge International:
(i) CASH MANAGEMENT SERVICES: Bunge shall assist Bunge International with certain of its treasury and cash management needs, including foreign currency and hedging activities and the managing and maintenance of its bank accounts.
(ii) HUMAN RESOURCES ADMINISTRATION: Bunge shall provide personnel oversight and services for the ongoing human resource administration requirements of Bunge International, including recruitment and hiring assistance, statutory compliance, compensation recommendations and employee record retention.
(iii) EMPLOYEE BENEFIT PLANS ADMINISTRATION: Bunge shall assist in the administration to certain employees of Bunge International of all employee benefit plans and health insurance plans consistent with the plans currently maintained by Bunge International.
(iv) INSURANCE ADMINISTRATION: Bunge shall extend coverage to Bunge International under Bunge's insurance policies for those types of insurance coverage consistent with Bunge's own insurance coverage by adding (or maintaining) Bunge International as a named insured under policy or policies in question and advancing the applicable premiums necessary to extend such insurance coverage to Bunge International.
(v) ACCOUNTING AND FINANCIAL SERVICES: Bunge shall provide to Bunge International internal audit coordinating and supervising, external audit arranging and managing and shall assist Bunge International with its periodic financial reporting requirements pursuant to applicable securities laws, if any. Bunge shall also provide financial analysis and planning services to Bunge International, including assistance with corporate budgeting, forecasting, actuarial services and mergers and acquisitions analysis, together with assisting Bunge International in executing any mergers, acquisitions or divestitures that Bunge International undertakes. Bunge shall also maintain the accounting books and records of Bunge International.
(vi) TAX SERVICES: Bunge shall provide to Bunge International tax compliance, reporting and planning services for international, U.S. federal, state and local tax matters.
(vii) LEGAL AND REGULATORY SERVICES: Bunge shall provide to Bunge International certain legal services and assist Bunge International with regulatory matters before U.S. federal, state and municipal authorities and foreign authorities.
(viii) CORPORATE COMMUNICATION SERVICES. Bunge shall provide Bunge
International with corporate communication services support, which shall include
(but not be limited to)
general communications to the investment community, trade shows and general corporate media activities, the preparation of any annual reports and letters or communications to shareholders and assisting in coordinating and preparing shareholders' meetings.
(ix) MANAGEMENT INFORMATION SYSTEM SERVICES: Bunge shall provide to Bunge International certain management information system services, including, but not
limited to, data and voice communication services and networks.
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 25, 2001
BY AND AMONG
BUNGE LIMITED
AND
THE PARTIES LISTED IN ANNEX A HERETO
This Registration Rights Agreement (the "AGREEMENT") is dated as of June 25, 2001 by and among Bunge Limited, a limited liability company incorporated under the laws of Bermuda (the "COMPANY"), and those parties listed in Annex A hereto. All parties to this Agreement and any Addendum, with the exception of the Company, are collectively referred to as the "SHAREHOLDERS."
RECITALS
WHEREAS, upon the closing of the Company's Initial Public Offering (as defined herein), the Shareholders will own issued and outstanding common shares of the Company, par value $0.01 per share ("COMMON SHARES"); and
WHEREAS, the Company and the Shareholders have entered into this Agreement for the purpose of designating the registration rights of the Shareholders.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the terms below shall have the following meanings. Any such term, unless the context otherwise requires, may be used in the singular or plural, depending upon reference.
"ADDENDUM" shall have the meaning set forth in Section 8.3(b).
"ADDITIONAL SHAREHOLDER" shall have the meaning set forth in Section 8.3(b).
"BOARD" shall mean the Board of Directors of the Company.
"DEMAND REGISTRATION REQUEST" shall have the meaning set forth in Section 2.1(a).
"DEMAND REGISTRATION RIGHT" shall have the meaning set forth in Section 2.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
"IPO LOCK-UP PERIOD" shall mean the period beginning upon the date of the final prospectus relating to the Initial Public Offering and ending 180 days after such date.
"INDEMNIFIED PARTIES" shall have the meaning set forth in Section 7.1.
"INITIAL PUBLIC OFFERING" shall mean the initial underwritten offering by the Company of Common Shares of the Company that is approved by the Board and registered with the SEC under the Securities Act and after which the Common Shares are listed on the New York Stock Exchange.
"MATERIAL TRANSACTION" shall mean a material transaction in which the Company or any of its subsidiaries proposes to engage or is engaged, including a purchase or sale of assets or securities, financing, merger, amalgamation, consolidation, tender offer or other material corporate development, and with respect to which the Board has reasonably determined in good faith that compliance with this
Agreement may reasonably be expected to either (i) materially interfere with the Company's or such subsidiary's ability to consummate such transaction in a timely fashion or (ii) require the Company to disclose material, non-public information or such material corporate development prior to such time as it would otherwise be required to be disclosed.
"MAXIMUM OFFERING AMOUNT" shall have the meaning set forth in Section 3.2.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing a Registration Statement or similar document in compliance with the Securities Act, and the declaration or ordering of effectiveness of such Registration Statement.
"REGISTRABLE STOCK" shall mean (i) the Shares owned by the Shareholders as of the closing date for the Initial Public Offering and (ii) any Shares issued or issuable with respect to any such shares of Registrable Stock by way of a stock dividend bonus issue, subdivision or stock split in connection with a combination or consolidation of shares, recapitalization, merger, amalgamation, consolidation or other reorganization or otherwise. As to any particular shares of Registrable Stock that have been issued, such securities shall cease to be Registrable Stock when (a) a registration statement with respect to the sale of such Shares shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement, (b) such Shares shall have been sold or distributed to the public or (c) such Shares shall have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with Sections 2.1 and 3.1 of this Agreement,
including without limitation: (i) all SEC and National Association of Securities
Dealers, Inc. registration and filing fees; (ii) all fees and expenses incurred
in connection with complying with state securities or blue sky laws (including
fees and disbursements of counsel for the underwriters in connection with blue
sky qualifications of the securities); (iii) all printing, messenger and
delivery expenses; (iv) all fees and expenses incurred in connection with the
listing of the securities on any securities exchange pursuant to Sections 2.1
and 3.1; (v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any audits and/or
"comfort" letters required by or incident to such performance and compliance;
(vi) the reasonable fees and disbursements of one counsel, other than the
Company's counsel, selected by Shareholders holding a majority of the securities
being registered to represent all the Selling Shareholders in connection with
each registration (it being understood that any Shareholder may, at its own
expense, retain separate counsel to represent it in connection with such
registration); and (vii) the reasonable fees and expenses of any special experts
retained in connection with the requested registration, but excluding Selling
Expenses, if any, incurred by a Selling Shareholder.
"REGISTRATION STATEMENT" shall mean a registration statement filed with the SEC pursuant to the Securities Act.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"SECURITIES ACT" shall mean the U.S. Securities Act of 1933, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
"SELLING EXPENSES" shall mean all underwriting discounts, selling commissions and transfer taxes applicable to the sale of shares of Registrable Stock by a Selling Shareholder.
"SELLING SHAREHOLDER" shall mean a Shareholder who sells shares of Registrable Stock pursuant to the exercise of registration rights granted to such Shareholder pursuant to Article II or III hereof.
"SHARES" shall mean the Common Shares of the Company.
ARTICLE II
REGISTRATION ON REQUEST
2.1 DEMAND REGISTRATION. The Shareholders shall have the right to require the Company, as expeditiously as possible, to use its best efforts to effect the registration of the shares of Registrable Stock that the Shareholders shall request, pursuant to a Registration Statement (the "DEMAND REGISTRATION RIGHTS"), subject to the following limitations:
(a) such Demand Registration Rights shall be exercised by written notice to the Company (a "DEMAND REGISTRATION REQUEST");
(b) the Company shall not be obligated to effect and pay for more than a total of three (3) registrations pursuant to this Section 2.1;
(c) any Demand Registration Request may only be made by Shareholders requesting to sell shares of Registrable Stock that have an aggregate offering price of at least $100 million, based on the closing market price on the New York Stock Exchange on the trading day prior to the date of such request;
(d) the Company shall not be required to file a Registration Statement to register Shares pursuant to this Section 2.1 until after the expiration of the IPO Lock-up Period;
(e) the Company shall not be required to effect a registration pursuant to this Section 2.1 more than once during any consecutive 12-month period; and
(f) the Company shall not be required to effect a registration pursuant to this Section 2.1 if it is requested pursuant to clause (a) above at any time after the third anniversary of the expiration of the IPO Lock-up Period.
No Shareholder may participate in any underwritten registration
pursuant to this Section 2.1 (or exercise its right to register Shares pursuant
to Section 3.1 with respect to any such registration) unless such Shareholder
(i) agrees to sell its Registrable Stock on the basis provided in any
underwriting arrangement approved by the Company, which approval shall not be
unreasonably withheld and (ii) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
2.2 PRIORITY IN DEMAND REGISTRATION. If a registration pursuant to this Article II involves an underwritten offering and the managing underwriter with respect to such offering advises the Shareholders participating in such registration that, in its opinion, the number of Shares which the Shareholders and any other persons intended to be included in such registration exceeds the largest number of Shares which can be sold in such offering without having an adverse effect on the offering of Shares, then the Company will include in such registration such number of shares of Registrable Stock as have been requested to be included in such registration pursuant to this Article II and Article III and which, in the opinion of such managing underwriter, can be sold without having the adverse effect referred to above. The reduced number of Shares shall be allocated pro rata among the Shareholders participating in the Demand Registration Request pursuant to Section 2.1 and any Shareholders who have requested registration of Shares pursuant to Section 3.1, based on the number of Shares proposed to be
sold by each such Shareholder; PROVIDED, HOWEVER, that the number of Shares to be included in such registration shall not be reduced unless all other securities are first excluded entirely from the registration.
ARTICLE III
INCIDENTAL REGISTRATION
3.1 PIGGYBACK REGISTRATION RIGHTS. In connection with any exercise of a
Demand Registration Right and otherwise during the five-year period after the
expiration of the IPO Lock-up Period, each time the Company proposes to register
Shares or equity securities which are convertible into or exchangeable for
Shares under the Securities Act pursuant to a Registration Statement (other than
a registration on Form F-4 or S-8, or any successor or other forms promulgated
for similar purposes), whether or not for sale for its own account, each
Shareholder shall have the right to require the Company to register shares of
Registrable Stock of such Shareholder, subject to the limitations set forth in
Section 3.2. The Company shall give prompt written notice to all Shareholders of
its intention to register Shares or equity securities which are convertible into
or exchangeable for Shares and of the Shareholders' rights under this Section
3.1. Upon the written request of any Shareholder made within 15 days after the
receipt of any such notice (which request shall specify the shares of
Registrable Stock intended to be registered) the Company shall use its best
efforts to effect the registration of such shares of Registrable Stock under the
Securities Act; PROVIDED that, if such registration involves an offering by the
Company of Shares for its own account: (a) if, at any time after giving written
notice of its intention to register any Shares and prior to the effective date
of the Registration Statement filed in connection with such registration, the
Company shall determine for any reason not to proceed with the proposed
registration, the Company may, at its election, give written notice of such
determination to the Shareholders requesting registration pursuant to this
Section 3.1 and thereupon shall be relieved of its obligation to register any
securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any Shareholder to make a Demand Registration Request
under Section 2.1; and (b) if such registration involves an underwritten
offering by the Company, all Shareholders requesting to have shares of
Registrable Stock included in the Company's registration become a party to the
underwriting arrangements agreed to by the Company and the underwriters who
shall have been selected by the Company, on the same terms and conditions as are
applicable to the Company, except for the Company's obligation to pay all
Registration Expenses and any such differences, including those with respect to
indemnification and contribution, as may be customary or appropriate in combined
primary and secondary offerings.
3.2 PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration pursuant to
this Article III involves an underwritten offering and the managing underwriter
with respect to such offering advises the Company that, in its opinion, the
number of Shares and other securities which the Company, the Shareholders and
any other persons intended to be included in such registration exceeds the
largest number of Shares and other securities which can be sold in such offering
without having an adverse effect on the offering of Shares (including, if
applicable, the price at which the Company proposes to sell Shares or other
securities) (the "MAXIMUM OFFERING AMOUNT"), then the Company will include in
such registration, in the following priority up to the Maximum Offering Amount:
(x) FIRST, all of the Shares or other securities proposed to be registered for
offer and sale by the Company, if any, and (y) SECOND, all of the Registrable
Stock requested to be included in such registration by Shareholders pursuant to
this Article III and any other Shares or other securities which are proposed to
be included in such registration; PROVIDED that the Shares and other securities
shall be allocated, if necessary, pro rata among the Shareholders and the
holders of such other Shares or other securities, on the basis of the relative
number of Shares or other securities each such Shareholder or other holder has
requested to be included in such registration.
ARTICLE IV
EXPENSES
4.1 EXPENSES. Except as provided in Section 5.1, the Company shall pay all (and shall promptly reimburse to the Shareholders to the extent they have borne any) Registration Expenses in connection with each registration of shares of Registrable Stock requested under this Agreement, regardless of whether the Registration Statement filed in connection with such registration becomes effective. Each of the Shareholders requesting the registration of shares of Registrable Stock shall pay its respective Selling Expenses.
ARTICLE V
COMPLIANCE WITH REGISTRATION REQUESTS
5.1 EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to
Articles II or III will be deemed to have been made when the Registration
Statement has become effective and remains effective for the period provided in
Section 6.1(b). Any Shareholder shall be permitted to withdraw from a requested
registration at any time prior to the effectiveness of the Registration
Statement by written notice to the Company. If, however, a Shareholder withdraws
shares of Registrable Stock requested to be registered pursuant to Article III,
such withdrawing Shareholder shall be responsible for reimbursing the Company
for any filing fees incurred by the Company as a consequence of making the
registration on behalf of such withdrawing Shareholder. A registration request
pursuant to Article II shall not be deemed to have been effected if (i) after
the Registration Statement has become effective, it becomes subject to any stop
order, injunction or other order or requirement of the SEC or other governmental
agency or court for any reason that is not lifted or released, other than by
reason of an act or omission by the requesting Shareholders with respect thereto
or (ii) if the closing conditions specified in the underwriting agreement
entered into in connection with such registration are not satisfied, other than
by reason of an act or omission by the requesting Shareholders.
5.2 MATERIAL TRANSACTION. The Company may delay (i) the filing or effectiveness of any Registration Statement pursuant to Article II or (ii) for a period of up to 60 days, the preparation of any amended or supplemental prospectus pursuant to Section 6.1(e), in each case, if a Material Transaction exists or is pending at such time. In addition, the Company shall be entitled to delay the filing of any Registration Statement requested pursuant to Section 2.1 after receipt of a Demand Registration Request if the Company is conducting or about to conduct an underwritten public offering in which the Shareholders are entitled to join pursuant to Section 3.1.
In the case of any such delay, the time periods referred to in Article II and Article III shall be tolled during the period of time of any such delay in filing any Registration Statement or furnishing any amended or supplemental prospectus.
If the Company delays the filing of any registration statement or the furnishing of any amended or supplemental prospectus, it shall so notify each Shareholder participating in the registration, indicating that a Material Transaction is pending and the anticipated delay. No Shareholder shall request a registration pursuant to Article II until, pursuant to the immediately following paragraph, the Company has notified the Shareholder that the applicable Material Transaction has been publicly disclosed by the Company or has not materialized.
If the Company delays the filing of any registration statement or the furnishing of any amended or supplemental prospectus pursuant to this Section 5.2 and such Material Transaction is subsequently
publicly disclosed by the Company or does not materialize, the Company shall promptly notify the Shareholders participating in the registration of such fact and any Shareholder may exercise any right that it may have to request a registration pursuant to Article II immediately following its receipt of such notice.
The Company may not delay the filing of any registration statement pursuant to this Section 5.2 for more than an aggregate of 180 days in any consecutive12-month period and the suspension of the filing of any registration statement pursuant to this Section 5.2 shall not prejudice any right that the Shareholder may have to request that the Company effect the registration of the Shareholder's Registrable Stock pursuant to Article II hereto at a later date.
ARTICLE VI
REGISTRATION PROCEDURES
6.1 If and whenever the Company is required to use its best efforts to effect or cause the registration of Shares under the Securities Act as provided in this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement with respect to such Shares on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate, and use its best efforts to cause such Registration Statement to become effective; PROVIDED that before filing such Registration Statement, the Company will furnish to the counsel selected by the holders of Registrable Stock which are to be included in such registration copies of all such documents proposed to be filed, which documents will be subject to the prompt review of such counsel;
(b) prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement and use its best efforts to cause such registration statement to become and remain effective until the earlier of (i) the sale of all such Registrable Stock, or, in the case of an underwritten offering, until each underwriter has completed the distribution of all Registrable Stock included in such offering and (ii) three months after the effective date of such registration statement;
(c) furnish to each Selling Shareholder such number of copies of the Registration Statement and of each amendment and supplement thereto (in each case including all exhibits), the prospectus included in the Registration Statement (including each preliminary prospectus and any amendments or supplements thereto) and such other documents as such Shareholder may reasonably request;
(d) use its best efforts to register or qualify such Shares covered by such Registration Statement under such other state securities or blue sky laws of such jurisdictions within the United States and its possessions and territories as shall be reasonably appropriate for the distribution of the Shares covered by the Registration Statement, PROVIDED, HOWEVER, that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 6.1(d), it would not be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction;
(e) promptly notify each Shareholder of any Shares covered by such Registration Statement, (i) when the Registration Statement and any amendment or supplement has been filed and, in
the case of the Registration Statement or post-effective amendment, declared effective, (ii) of the issuance of any order suspending the effectiveness of a Registration Statement (and the Company shall use its best efforts to obtain the withdrawal of any such order at the earliest practicable time) and (iii) at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the Company's becoming aware that the prospectus included in such Registration Statement, as then in effect, includes or may include an untrue statement of a material fact or omits or may omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such Shareholder, prepare and furnish to such Shareholder a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(f) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to the Shareholders, as soon as reasonably practicable (but not more than eighteen months) after the effective date of the Registration Statement, an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder;
(g) furnish, at the written request of any Holder requesting registration pursuant to Article II, a "comfort letter" from the Company's independent public accountants in customary form and covering such matters with respect to such Registration Statement as are customarily covered in such letters as the managing underwriter or the Shareholders holding a majority of the Registrable Stock included in such registration, as the case may be, may reasonably request;
(h) use its best efforts to list the Registrable Stock covered by such Registration Statement on any securities exchange on which the Shares are then listed;
(i) enter into and perform its obligations under such customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Shares, including, without limitation, in the case of an underwritten demand registration, participating in meetings with potential investors or securities analysts (including "road shows"); and
(j) coordinate with the Selling Shareholders in the preparation of material regarding such Shareholder, which in the reasonable judgment of such Shareholder and its counsel should be included in such Registration Statement.
The Company may require as a condition precedent to the obligations of the Company to take any action pursuant to this Agreement that each Shareholder for which a registration is being effected furnish the Company with such information regarding such Shareholder (pertinent to the disclosure requirements relating to the registration and the distribution of such Shares) and the Registrable Stock held by it as the Company may from time to time reasonably request.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY. In the event of any registration of any Shares under the Securities Act pursuant to Article II or III, the Company shall indemnify and hold harmless each Shareholder of shares of Registrable Stock covered by such registration, each of its directors, officers,
employees, agents, and each person, if any, who controls such Shareholder within the meaning of the Securities Act (and the directors, officers, employees and agents of each such controlling person) (collectively, the "INDEMNIFIED PARTIES"), against any and all losses, claims, damages or liabilities, joint or several, and expenses to which such Indemnified Party may become subject to under the Securities Act or the Exchange Act or other applicable law, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof, whether or not such Indemnified Party is a party thereto) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Shares were registered under the Securities Act, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; and the Company will reimburse such Indemnified Party for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; PROVIDED that the Company shall not be liable to any Indemnified Party in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, any such preliminary, final or summary prospectus, or any amendment or supplement thereto in reliance upon and in conformity with written information with respect to such Indemnified Party furnished to the Company by such Indemnified Party expressly for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Shareholder or any Indemnified Party and shall survive the transfer of such Shares by such Shareholder.
7.2 INDEMNIFICATION BY THE SHAREHOLDERS. Each Shareholder requesting or joining in a registration severally and not jointly shall indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 7.1) the Company and each other Shareholder requesting or joining in a registration, and any of their respective directors, officers, employees, agents and controlling persons (and the directors, officers employees and agents of each such controlling person), with respect to any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Shares were registered under the Securities Act, or any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, if and to the extent such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information with respect to such Shareholder furnished to the Company by such Shareholder expressly for use in the preparation of such Registration Statement, preliminary, final or summary prospectus or amendment or supplement; PROVIDED that no Shareholder shall be liable pursuant to this Section 7.2 for any amount in excess of the net proceeds received by such Shareholder from the sale of Shares covered by the Registration Statement giving rise to the claim for indemnification. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any of the Shareholders, or any of their respective directors, officers, employees, agents or controlling persons and shall survive the transfer of such Shares by such Shareholder.
7.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an Indemnified Party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Article VII, such Indemnified Party will, if a claim in respect thereof is to be made against an Indemnifying Party, give written notice to the latter of the commencement of such action; PROVIDED that the failure of the Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under Section 7.1 or 7.2, except to the extent that the Indemnifying Party is actually materially prejudiced by such failure to give notice. Except as provided below, in case any such action is brought against an Indemnified Party, the
Indemnifying Party will be entitled to participate in and to assume the defense thereof, jointly with any other Indemnifying Party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such Indemnified Party. After notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying Party will not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. If the Indemnified Party has been advised by counsel that having common counsel would result in a conflict of interest between the interests of such indemnified and indemnifying parties, then such Indemnified Party may employ separate counsel reasonably acceptable to the Indemnifying Party to represent or defend such Indemnified Party in such action, it being understood, however, that the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all such Indemnified Parties (and not more than one separate firm of local counsel at any time for all such Indemnified Parties) in such action. No Indemnifying Party will consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect of such claim or litigation.
7.4 CONTRIBUTION. If recovery is not available under the foregoing indemnification provisions of this Article VII for any reason, the parties entitled to indemnification by the terms thereof shall be entitled to contribution for liabilities and expenses. In determining the amount of contribution to which the respective parties are entitled, there shall be considered the relative benefits received by each party from the offering of the Shares (taking into account the portion of the proceeds realized by each), whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or the Indemnified Party, the parties' relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any misstatement or omission and any other equitable considerations appropriate under the circumstances.
The Company and the Shareholders agree that it would not be just and equitable if contribution pursuant to this Section 7.4 were determined by pro rata allocation (even if the sellers of Shares were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the liabilities and expenses referred to in the immediately preceding paragraph shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Article VII, no Selling Shareholder shall be required to contribute any amount in excess of the net proceeds received by such Selling Shareholder from the sale of Shares covered by the Registration Statement giving rise to the claim for contribution. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
7.5 NON-EXCLUSIVITY. The obligations of the parties under this Article VII shall be in addition to any liability that any party may otherwise have to any other party.
ARTICLE VIII
MISCELLANEOUS
8.1 NOTICES. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered; when transmitted, if transmitted by telecopy, electronic or digital transmission method; the day after it is sent, if sent for next day delivery to a domestic address by a
recognized overnight delivery service (e.g., Federal Express); and upon receipt, if sent by registered or certified mail (or any substantially similar form of mail), postage prepaid and return receipt requested. In each case notice shall be sent to:
If to the Company addressed to:
Bunge Limited
50 Main Street
White Plains, NY 10606
Attention: Chief Financial Officer
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Andrew B. Janszky
If to any Shareholder, to such Shareholder at the address indicated in Annex A hereto or on the relevant Addendum. Changes in notice addresses may be made by a notice delivered to the Company pursuant to this Section 8.1.
8.2 SEVERABILITY. In the event that any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement.
8.3 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; ADDITIONAL SHAREHOLDERS.
(a) This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. This Agreement may not be terminated or amended except by an instrument in writing signed by the Company and Shareholders holding at least 66% of the outstanding shares of Registrable Stock; PROVIDED that any amendment that expressly alters the rights of any Shareholder differently from other Shareholders shall require the consent of such affected Shareholder. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
(b) Additional Shareholders (each, an "ADDITIONAL SHAREHOLDER") may be added to this Agreement upon execution of an Addendum to this Agreement (an "ADDENDUM"), a form of which is attached hereto as Annex B. Upon the execution of an Addendum by such Additional Shareholder, the Company shall revise Annex A accordingly.
8.4 SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, legatees, successors and any party to which any Shareholder has transferred or sold its shares of Registrable Stock who becomes an Additional Shareholder pursuant to Section 8.3(b). Except as provided herein, each transferee of Shares from a party hereto shall take such Shares subject to the same restrictions, if any, as existed in the hands of the transferor.
8.5 CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8.6 JURISDICTION; WAIVERS. Each of the parties hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal suit, action or proceeding relating to this Agreement or transaction contemplated hereby, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive jurisdiction of the Courts of the State of New York sitting in the County of New York or the United States District Court for the Southern District of New York and appellate courts having jurisdiction of appeals in such courts, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such suit, action, or proceeding may properly be heard and determined in such New York State court or, to the extent permitted by law, in such federal court;
(b) consents that any such suit, action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue or jurisdiction or any such action or proceeding in such court or that such action or proceeding was brought in an inconvenient forum and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party in its address as provided in Section 8.1 hereof;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by New York law; and
(e) agrees that this Agreement has been entered into in the State of New York and shall be performed in part in the State of New York.
8.7 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.8 FURTHER ASSURANCES. Each of the parties shall execute and deliver such further instruments and documents and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby.
8.9 NO INCONSISTENT AGREEMENTS. Without the prior written consent of the Shareholders holding at least 66% of the outstanding shares of Registrable Stock, the Company will not, on or after the date of this Agreement, enter into any agreement with respect to its securities which is inconsistent with the rights granted in this Agreement or otherwise conflicts with the provisions hereof, other than any lock-up agreement with the underwriters in connection with any registered offering effected hereunder, pursuant to which the Company shall agree not to register for sale, and the Company shall agree not to sell or otherwise dispose of, Shares or any securities convertible into or exercisable or exchangeable for Shares, for a specified period following the registered offering.
8.10 NO MORE FAVORABLE TERMS. The Company shall not grant any registration rights to any person, including the Shareholders, that are senior to or more favorable to such person than the rights granted hereunder to the Shareholders.
8.11 CUMULATIVE REMEDIES. All rights and remedies of each party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies.
8.12 HEADINGS. The titles, captions or headings of the Articles and Sections herein are for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
8.13 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.
BUNGE LIMITED
Title:
ANNEX A
SHAREHOLDERS AND ADDRESSES
ANNEX B
ADDENDUM TO
REGISTRATION RIGHTS AGREEMENT
ADDENDUM, dated as of ___________ __, ____, by and between Bunge Limited (the "Company") and the party listed on the signature page hereto (the "Additional Shareholder").
WHEREAS, the Company and the parties listed in Annex A of the Registration Rights Agreement, dated as of June 25, 2001 (the "Agreement"), entered into the Agreement for the purpose of regulating the registration rights of the Shareholders party to the Agreement;
[Insert additional recitals, if appropriate, relating to the Additional Shareholder.]
NOW THEREFORE, in consideration of the covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is mutually agreed by the parties as follows:
1. DEFINITIONS. Defined terms used herein and not otherwise defined shall have the meanings set forth in the Agreement.
2. ADDITIONAL PARTY TO THE AGREEMENT. Pursuant to Section 8.3(b) of the Agreement, the Company hereby agrees that the Additional Shareholder is, and the Additional Shareholder hereby agrees to be, a party to the Agreement as a Shareholder.
3. COUNTERPARTS. This Addendum may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
4. [If applicable - Modifications to Agreement.]
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly executed by their respective authorized officers as of the date first written above.
BUNGE LIMITED
Title:
Exhibit 10.3
BUNGE MASTER TRUST
POOLING AGREEMENT
Among
BUNGE FUNDING, INC.
BUNGE MANAGEMENT SERVICES, INC.,
as Servicer
and
THE CHASE MANHATTAN BANK,
as Trustee
Dated as of August 25, 2000
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS............................................................1
SECTION 1.01. Definitions...........................................1
SECTION 1.02. Other Definitional Provisions.........................1
ARTICLE II
CONVEYANCE OF LOANS; REPRESENTATIONS,
WARRANTIES AND COVENANTS...............................................3
SECTION 2.01. Conveyance of Loans...................................3
SECTION 2.02. Acceptance by Trustee.................................6
SECTION 2.03. Representations and Warranties of the
Company Relating to the Company.......................6
SECTION 2.04. Representations and Warranties of the
Company Relating to the Purchased Loans..............10
SECTION 2.05. Adjustment Payment for Ineligible Loans..............11
SECTION 2.06. Affirmative Covenants of the Company.................12
SECTION 2.07. Negative Covenants of the Company....................16
ARTICLE III
RIGHTS OF HOLDERS AND ALLOCATION AND
APPLICATION OF COLLECTIONS............................................19
SECTION 3.01. Establishment of Collection Account;
Certain Allocations..................................19
ARTICLE IV
ARTICLE IV IS RESERVED AND MAY BE SPECIFIED IN
ANY SUPPLEMENT WITH RESPECT TO THE SERIES
RELATING THERETO......................................................25
ARTICLE V
THE INVESTOR CERTIFICATES AND EXCHANGEABLE
COMPANY INTEREST......................................................25
SECTION 5.01. The Investor Certificates............................25
SECTION 5.02. Authentication of Certificates.......................26
SECTION 5.03. Registration of Transfer and Exchange of
Investor Certificates................................26
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SECTION 5.04. Mutilated, Destroyed, Lost or Stolen Investor
Certificates.........................................28
SECTION 5.05. Persons Deemed Owners................................28
SECTION 5.06. Appointment of Paying Agent..........................29
SECTION 5.07. Access to List of Investor Certificateholders'
Names and Addresses..................................30
SECTION 5.08. Authenticating Agent.................................30
SECTION 5.09. Tax Treatment........................................32
SECTION 5.10. Exchangeable Company Interest........................32
SECTION 5.11. Book-Entry Certificates..............................35
SECTION 5.12. Notices to Clearing Agency...........................36
SECTION 5.13. Definitive Certificates..............................36
ARTICLE VI
OTHER MATTERS RELATING TO THE COMPANY.................................36
SECTION 6.01. Liability of the Company.............................36
SECTION 6.02. Limitation on Liability of the Company...............37
ARTICLE VII
EARLY AMORTIZATION EVENTS.............................................37
SECTION 7.01. Early Amortization Events............................37
SECTION 7.02. Additional Rights upon the Occurrence of
Certain Events.......................................38
ARTICLE VIII
THE TRUSTEE...........................................................40
SECTION 8.01. Duties of Trustee....................................40
SECTION 8.02. Rights of the Trustee................................42
SECTION 8.03. Trustee Not Liable for Recitals......................43
SECTION 8.04. Trustee May Own Investor Certificates................44
SECTION 8.05. Trustee's Fees and Expenses..........................44
SECTION 8.06. Eligibility Recitals.................................44
SECTION 8.07. Resignation or Removal of Trustee....................45
SECTION 8.08. Successor Trustee....................................46
SECTION 8.09. Merger or Consolidation of Trustee...................46
SECTION 8.10. Appointment of Co-Trustee or Separate
Trustee..............................................46
SECTION 8.11. Tax Returns..........................................48
SECTION 8.12. Trustee May Enforce Claims Without
Possession of Investor Certificates..................48
SECTION 8.13. Suits for Enforcement................................49
SECTION 8.14. Rights of Investor Certificateholders To Direct
Trustee..............................................49
ii
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SECTION 8.15. Representations and Warranties of Trustee............49
SECTION 8.16. Maintenance of Office or Agency......................50
SECTION 8.17. Limitation of Liability..............................50
SECTION 8.18. Consequential Damages................................50
ARTICLE IX
TERMINATION...........................................................50
SECTION 9.01. Termination of Trust.................................50
SECTION 9.02. Optional Purchase and Final Termination Date
of Investor Certificates of Any Series...............51
SECTION 9.03. Final Payment with Respect to Any Series.............53
SECTION 9.04. Company's Termination Rights.........................54
ARTICLE X
MISCELLANEOUS PROVISIONS..............................................54
SECTION 10.01. Amendment............................................54
SECTION 10.02. Protection of Right, Title and Interest to
Trust................................................56
SECTION 10.03. Limitation on Rights of Holders......................57
SECTION 10.04. Governing Law........................................58
SECTION 10.05. Notices..............................................58
SECTION 10.06. Severability of Provisions...........................58
SECTION 10.07. Assignment...........................................58
SECTION 10.08. Investor Certificates Nonassessable and Fully
Paid.................................................58
SECTION 10.09. Further Assurances...................................59
SECTION 10.10. No Waiver; Cumulative Remedies.......................59
SECTION 10.11. Counterparts.........................................59
SECTION 10.12. Third-Party Beneficiaries............................59
SECTION 10.13. Actions by Investor Certificateholders...............59
SECTION 10.14. Merger and Integration...............................60
SECTION 10.15. Headings.............................................60
SECTION 10.16. No Setoff............................................60
SECTION 10.17. No Bankruptcy Petition...............................60
SECTION 10.18. Limitation of Liability..............................60
SECTION 10.19. Certain Information..................................61
SECTION 10.20. Responsible Officer Certificates; No Recourse........61
SECTION 10.21. Chase Conflict Waiver................................61
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EXHIBITS
Exhibit A Internal Operating Procedures Memorandum
SCHEDULES
Schedule 1 Daily Report
Schedule 2 Identification of the Trust Accounts
Schedule 3 Location of Chief Executive Office and Jurisdiction of Formation of
the Company
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ANNEX
Annex X Definitions
POOLING AGREEMENT dated as of August 25, 2000 among BUNGE FUNDING, INC., a Delaware corporation (the "COMPANY"), BUNGE MANAGEMENT SERVICES, INC., a Delaware corporation (in its capacity as servicer, the "SERVICER"), and THE CHASE MANHATTAN BANK, a New York banking corporation, not in its individual capacity, but solely as trustee (in such capacity, the "TRUSTEE").
W I T N E S S E T H:
WHEREAS, as of the date of this Pooling Agreement, (i) the Company and Bunge Finance and Bunge Finance North America, each as Sellers, have entered into a Sale Agreement (as amended, supplemented or otherwise modified from time to time, the "SALE AGREEMENT") and (ii) the Company, the Servicer and the Trustee have entered into a Servicing Agreement (as amended, supplemented or otherwise modified from time to time, the "SERVICING AGREEMENT");
WHEREAS, the parties hereto have entered into this Pooling Agreement in order to create a master trust to which the Company will transfer all its right, title and interest in, to and under the Purchased Loans and other Trust Assets now or hereafter owned by the Company and such master trust shall, from time to time at the direction of the Company (or the Servicer on its behalf), issue one or more Series of Investor Certificates, representing interests in the Purchased Loans and such other Trust Assets as specified in the Supplement related to such Series;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used herein shall, unless otherwise defined or referenced herein, have the meanings assigned to such terms in Annex X attached hereto which Annex X is incorporated by reference herein.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined or incorporated by reference in this Agreement, the Servicing Agreement or in any Supplement shall have such defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined herein or incorporated by reference herein, and accounting terms partly defined herein or incorporated by reference herein to the extent not defined, shall have the respective meanings given to them under GAAP. To the extent that the definitions of accounting terms herein or incorporated by reference herein are inconsistent with the meanings of such terms under GAAP, the definitions contained herein or incorporated by reference herein shall control.
(c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection, Schedule, Exhibit and Appendix references contained in this Agreement are references to Sections, subsections, Schedules, Exhibits and Appendices in or to this Agreement unless otherwise specified.
(d) The definitions contained herein or incorporated by reference herein are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.
(e) Where a definition contained herein or incorporated by reference herein specifies that such term shall have the meaning set forth in the related Supplement, the definition of such term set forth in the related Supplement may be preceded by a prefix indicating the specific Series or Class to which such definition shall apply.
(f) Where reference is made in this Agreement or any related Supplement to the principal amount of Purchased Loans, such reference shall, unless explicitly stated otherwise, be deemed a reference to the Principal Amount (as such term is defined in Annex X attached hereto) of such Purchased Loans.
(g) Any reference herein or in any other Transaction Document to a provision of the Bankruptcy Code, Code, ERISA, 1940 Act or the UCC shall be deemed a reference to any successor provision thereto.
(h) Any reference herein to a Schedule, Exhibit or Appendix to this Agreement shall be deemed to be a reference to such Schedule, Exhibit or Appendix as it may be amended, modified or supplemented from time to time to the extent that such Schedule, Exhibit or Appendix may be amended, modified or supplemented (or any term or provision of any Transaction Document may be amended that would have the effect of amending, modifying or supplementing information contained in such Schedule, Exhibit or Appendix) in compliance with the terms of the Transaction Documents.
(i) Any reference herein to any representation, warranty or covenant "deemed" to have been made is intended to encompass only representations, warranties or covenants that are expressly stated to be repeated on or as of dates following the execution and delivery of this Agreement, and no such reference shall be interpreted as a
reference to any implicit, inferred, tacit or otherwise unexpressed representation, warranty or covenant.
(j) The words "include", "includes" or "including" shall be interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
CONVEYANCE OF
LOANS; REPRESENTATIONS,
WARRANTIES AND COVENANTS
SECTION 2.01. CONVEYANCE OF LOANS.
(a) By execution and delivery of this Agreement, the Company does hereby assign, set over and otherwise convey to the Trust on the Effective Date and from time to time on any Business Day on which the Servicer delivers a Daily Report to the Trustee, for the benefit of the Holders, without recourse (except as specifically provided herein), all its present and future right, title and interest in, to and under:
(i) the Purchased Loans acquired by the Company from the Sellers from time to time prior to but not including the Trust Termination Date as indicated in the Daily Report delivered to the Trustee on the Effective Date or such Business Day;
(ii) the Related Property;
(iii) all Collections;
(iv) all rights (including rescission, replevin or reclamation) relating to any Purchased Loan or arising therefrom;
(v) each of the Sale Agreement and the Servicing Agreement, including in respect of each agreement, (A) all rights of the Company to receive monies due and to become due under or pursuant to such agreement, whether payable as fees, expenses, costs or otherwise, (B) all rights of the Company to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to such agreement, (C) claims of the Company for damages arising out of or for breach of or default under such agreement, (D) the right of the Company to amend, waive or terminate such agreement, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder and (E) all other rights, remedies, powers, privileges and claims of the Company under or in connection with such agreement (whether arising pursuant to such agreement or otherwise available to the Company at law or in equity), including the rights of
the Company to enforce such agreement and to give or withhold any and all consents, requests, notices, directions, approvals, extensions or waivers under or in connection therewith (all of the foregoing set forth in subclauses (v) (A) through (E), inclusive, the "TRANSFERRED AGREEMENTS");
(vi) the Collection Account, including (A) all funds and other evidences of payment held therein and all certificates and instruments, if any, from time to time representing or evidencing the Collection Account or any funds and other evidences of payment held therein, (B) all investments of such funds held in the Collection Account and all certificates and instruments from time to time representing or evidencing such investments, (C) all notes, certificates of deposit and other instruments from time to time hereafter delivered or transferred to, or otherwise possessed by, the Trustee for and on behalf of the Company in substitution for the then existing Collection Account and (D) all interest, dividends, cash, instruments and other property from time to time received, or otherwise distributed in respect of or in exchange for the then existing Collection Account; and
(vii) all proceeds of or payments in respect of any and all of the foregoing clauses (i) through (vi) (including proceeds that constitute property of the types described in clause (vi) above and including Collections).
Such property described in the foregoing clauses (i) through (vii), together with all investments and all monies on deposit in any other bank account or accounts maintained for the benefit of any Holders for payment to the Holders shall constitute the assets of the Trust (collectively, the "TRUST ASSETS").
Subject to SECTION 5.09, although it is the intent of the parties to this Agreement that the conveyance of the Company's right, title and interest in, to and under the Purchased Loans and the other Trust Assets pursuant to this Agreement shall constitute a purchase and sale and not a loan, in the event that such conveyance is deemed to be a loan, the Company hereby grants to the Trustee for the benefit of the Holders to secure the Company Obligations a perfected first priority security interest in all of the Company's present and future right, title and interest in, to and under the Purchased Loans and the other Trust Assets, and that this Agreement shall be deemed to constitute a security agreement under applicable law in favor of the Trustee, for the benefit of the Investor Certificateholders.
(b) The assignment, setover and conveyance to the Trust pursuant to SUBSECTION 2.01(A) shall be made to the Trustee, on behalf of the Trust, and each reference in this Agreement to such assignment, setover and conveyance shall be construed accordingly. In connection with the foregoing assignment, the Company and the Servicer agree to deliver to the Trustee each Trust Asset evidencing a Purchased Loan or any Related Property with respect thereto (including any original document or instrument necessary to effect or to perfect such assignment) in which the transfer of an interest is being perfected under the relevant UCC or otherwise by possession and not by filing a
financing statement or similar document. Without limiting the generality of the foregoing sentence, the Company and the Servicer agree to deliver or cause to be delivered to the Trustee an original of (i) any promissory note or other instrument, including but not limited to each Loan Note, evidencing a Purchased Loan sold to the Trust (endorsed to the order of the Trustee for the benefit of the Holders) and (ii) any chattel paper evidencing a Purchased Loan sold to the Trust (endorsed to the order of the Trustee for the benefit of the Holders).
Notwithstanding the assignment of the Transferred Agreements set forth in SUBSECTION 2.01(A), the Company does not hereby assign or delegate any of its duties or obligations under the Sale Agreement to the Trust or the Trustee, and neither the Trust nor the Trustee accepts such duties or obligations, and the Company shall continue to have the right and the obligation to purchase Eligible Loans sold by the Sellers thereunder from time to time and to consummate the other transactions and take any actions contemplated thereby. The foregoing assignment, set-over and conveyance does not constitute and is not intended to result in a creation or an assumption by the Trust, the Trustee, any Investor Certificateholder or the Company, in its capacity as a Holder, of any obligation of the Servicer, the Company, the Sellers, or any other Person in connection with the Purchased Loans or under any agreement or instrument relating thereto, including, without limitation, any obligation to any Obligor.
In connection with such assignment, the Company agrees to record and file, or cause to be recorded or filed, at its own expense, any financing statements or other similar filings (and continuation statements with respect to such financing statements or other similar filings when applicable), (i) with respect to the Purchased Loans and (ii) with respect to any other Trust Assets for which a security interest may be perfected under the relevant UCC or other applicable laws, legislation or similar statute by such filing, in each case meeting the requirements of applicable law in such manner and in such jurisdictions as are necessary to perfect and maintain perfection of the assignment of the Purchased Loans and such other Trust Assets (excluding returned merchandise) to the Trust, and to deliver a file-stamped copy or certified statement of such financing statement (or other similar filing) or other evidence of such filing to the Trustee on or prior to the date of issuance of any Investor Certificates or the Exchangeable Company Interest. Until the termination of this Agreement, the Company and the Servicer hereby irrevocably authorizes the Trustee to file one or more financing or continuation statements (or other similar filing), and amendments thereto, relative to all or any part of the Purchased Loans and the other Loan Assets sold or to be sold by the Company without the signature of the Company to the extent permitted by applicable law. Notwithstanding the immediately preceding sentence, the Trustee shall be under no obligation whatsoever to file such financing statement (or other similar filing), or a continuation statement to such financing statement (or other similar filing), or to make any other filing under the UCC or other applicable laws, legislation or similar statute in connection with such transfer. The Trustee shall be entitled to conclusively rely on the filings (or other similar filings) made by or on behalf of the Company without any independent investigation and the Company's obligation to make such filings as evidence that such filings have been made.
In connection with such assignment, the Company further agrees, at its own expense, on each Loan Purchase Date, (a) to cause the Servicer to indicate, in the Servicer's computer files maintained on behalf of the Company containing the master database of Purchased Loans and to cause (or cause the Servicer to cause) each Seller to indicate in its records containing its master database of Purchased Loans, that Purchased Loans have been conveyed to the Company or the Trust, as the case may be, pursuant to the Sale Agreement or this Agreement, respectively, for the benefit of the Holders and (b) to deliver or transmit or cause the Servicer on behalf of the Company to deliver or transmit to the Trustee a Daily Report containing at least the information specified in Schedule 1 as to all Purchased Loans, as of each related Loan Purchase Date.
SECTION 2.02. ACCEPTANCE BY TRUSTEE.
(a) The Trustee hereby acknowledges its acceptance on behalf of the Trust of all right, title and interest in, to and under the property, now existing and hereafter created, assigned to the Trust pursuant to SECTION 2.01 and declares that it shall maintain such right, title and interest, upon the trust herein set forth, for the benefit of all Holders. The Trustee shall maintain a copy of each Monthly Settlement Statement and Daily Report, as delivered from time to time, at the Corporate Trust Office.
(b) The Trustee shall have no power to create, assume or incur indebtedness or other liabilities in the name of the Trust other than as contemplated in this Agreement.
SECTION 2.03. REPRESENTATIONS AND WARRANTIES OF THE COMPANY RELATING TO THE COMPANY. The Company hereby represents and warrants to the Trustee and the Trust, for the benefit of the Holders, as of the Effective Date and as of the Issuance Date of each Series, that:
(a) ORGANIZATION; POWERS. The Company (i) is a company duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (iii) is qualified to do business in, and is in good standing in, every jurisdiction where the nature of its business so requires, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect and (iv) has the corporate power and authority to execute, deliver and perform its obligations under each of the Transaction Documents and each other agreement or instrument contemplated hereby to which it is or will be a party.
(b) AUTHORIZATION. The execution, delivery and performance by the Company of each of the Transaction Documents to which it is a party and the performance of the Transactions (i) have been duly authorized by all requisite corporate and, if required, stockholder action and (ii) will not (A) violate (1) any Requirement of Law or (2) any provision of any Transaction Document or any other material Contractual Obligation to which the Company is a party or by which it or any of its property is or
may be bound, (B) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any Transaction Document or any other material Contractual Obligation or (C) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by the Company (other than any Lien created hereunder or contemplated or permitted hereby).
(c) ENFORCEABILITY. This Agreement has been duly executed and delivered by the Company and constitutes, and each other Transaction Document to which the Company is a party when executed and delivered by the Company will constitute, a legal, valid and binding obligation of the Company enforceable against it in accordance with its respective terms, subject (a) to applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors rights generally, from time to time in effect and (b) to general principles of equity (whether enforcement is sought by a proceeding in equity or at law).
(d) GOVERNMENTAL APPROVALS. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (i) the filing of UCC financing statements (or similar filings) in any applicable jurisdictions necessary to perfect the Trust's ownership or security interest in the Purchased Loans, and (ii) such as have been made or obtained and are in full force and effect; PROVIDED, that the Company makes no representation or warranty as to whether any action, consent, or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the distribution of the Certificates and Interests.
(e) LITIGATION; COMPLIANCE WITH LAWS.
(i) There are no actions, suits or proceedings at law or
in equity or by or before any Governmental Authority now pending
or, to the knowledge of the Company, threatened against the
Company or affecting the Company or any properties, revenues or
rights of the Company (i) which involve this Agreement or any of
the other Transaction Documents or any of the Transactions, (ii)
which could reasonably be expected to affect adversely the
income tax or franchise tax attributes of the Trust under the
United States federal or any state or franchise tax systems or
(iii) for which there exists a reasonable possibility of an
outcome that would result in a Material Adverse Effect.
(ii) The Company is not in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, which would reasonably be expected to have a Material Adverse Effect.
(iii) The Company has complied with all applicable provisions of its organizational or governing documents and, in all material respects, any
other Requirements of Law with respect to the Company, its business and properties and the Trust Assets.
(f) AGREEMENTS.
(i) The Company has no Contractual Obligations other than (A) the Transaction Documents to which it is a party and (B) any other agreements or instruments that the Company is not prohibited from entering into by SUBSECTION 2.07(F) and that, in the aggregate, neither contain payment obligations or other liabilities on the part of the Company in excess of $100,000 nor would upon default result in a Material Adverse Effect. Other than the restrictions created by the Transaction Documents, the Company is not subject to any corporate restriction that could reasonably be expected to have a Material Adverse Effect.
(ii) The Company is not in default in any material respect under any provision of any Transaction Document or any other material Contractual Obligation to which it is a party or by which it or any of its properties or assets are or may be bound.
(g) FEDERAL RESERVE REGULATIONS.
(i) The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.
(ii) No part of the proceeds from the issuance of any Investor Certificates will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or X.
(h) INVESTMENT COMPANY ACT. Neither the Company nor the Trust is an "investment company", or a company "controlled" by an "investment company" as defined in, or subject to regulation under, the 1940 Act.
(i) NO EARLY AMORTIZATION EVENT. No Early Amortization Event or Potential Early Amortization Event has occurred and is continuing.
(j) TAX RETURNS. The Company has filed or caused to be filed all material tax returns and has paid or caused to be paid or made adequate provision for all taxes due and payable by it and all assessments received by it except to the extent that any failure to file or nonpayment (i) is being contested in good faith in appropriate proceedings and for which adequate reserves are maintained in accordance with GAAP or (ii) could not reasonably be expected to result in a Material Adverse Effect.
(k) LOCATION OF RECORDS; CHIEF EXECUTIVE OFFICE; JURISDICTION OF
FORMATION. The offices at which the Company keeps its records concerning
the Purchased Loans either (x) are located at the addresses set forth
for the Sellers on Schedule 3 of the Sale Agreement or (y) the Company
has notified the Trustee of the location thereof in accordance with the
provisions of SUBSECTION 2.07(G) of this Agreement. The chief executive
office of the Company is located at the address set forth on Schedule 3
and is the place where the Company is "located" for the purposes of
Section 9-103(3)(d) of the UCC as in effect in the State of New York (or
analogous provision of any other similar applicable statute or
legislation). As of the Effective Date, the state and county where the
chief executive office of the Company is "located" for the purposes of
Section 9-103(3)(d) of the UCC as in effect in the State of New York (or
analogous provision of any other similar applicable statute or
legislation) has not changed in the past four months. The Company was
formed in the State of Delaware.
(l) SOLVENCY. No Insolvency Event with respect to the Company has occurred and the transfer of the Purchased Loans by the Company to the Trust has not been made in contemplation of the occurrence thereof. Both prior to and after giving effect to the transactions occurring on the Effective Date and each Issuance Date, the Company is and will be Solvent. The Company does not intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it and the timing of and amounts of cash to be payable in respect of its Indebtedness.
(m) SUBSIDIARIES. The Company has no Subsidiaries.
(n) NAMES. The legal name of the Company is as set forth in this Agreement. The Company has no trade names, fictitious names, assumed names or "doing business as" names.
(o) LIABILITIES. Other than, (i) the liabilities, commitments or obligations (whether absolute, accrued, contingent or otherwise) arising under or in respect of the Transaction Documents and (ii) immaterial amounts due and payable in the ordinary course of business of a special-purpose company, the Company does not have any liabilities, commitments or obligations (whether absolute, accrued, contingent or otherwise), whether due or to become due.
(p) COLLECTION ACCOUNT. Except to the extent otherwise permitted under the terms of this Agreement, the Collection Account is free and clear of any Lien (except for Trustee Liens).
(q) COMPANY MATERIAL ADVERSE EFFECT. Since the Effective Date no event has occurred which has had a Material Adverse Effect.
(r) BULK SALES. The execution, delivery and performance of this Agreement do not require compliance with any "bulk sales" law by the Company in the United States.
The representations and warranties as of the date made set forth in this SECTION 2.03 shall survive the transfer and assignment of the Trust Assets to the Trust. Upon discovery by a Responsible Officer of the Company or the Servicer or by a Responsible Officer of the Trustee of a breach of any of the foregoing representations and warranties with respect to any Outstanding Series as of the Issuance Date of such Series, the party discovering such breach shall give prompt written notice to the other parties and to the Letter of Credit Agent and the Administrative Agent. The Trustee's obligations in respect of any breach are limited as provided in SUBSECTION 8.02(G).
SECTION 2.04. REPRESENTATIONS AND WARRANTIES OF THE COMPANY RELATING TO THE PURCHASED LOANS. The Company hereby represents and warrants to the Trustee and the Trust, for the benefit of the Holders, with respect to each Purchased Loan transferred to the Trust as of the related Loan Purchase Date, unless, in either case, otherwise stated in the applicable Supplement or unless such representation or warranty expressly relates only to a prior date, that:
(a) LOAN DESCRIPTION. As of the related Loan Purchase Date, the Daily Report delivered or transmitted pursuant to SUBSECTION 2.01(B) sets forth in all material respects a complete listing of all Purchased Loans, aggregated by Obligor, to be sold to the Trust on the related Loan Purchase Date and the information contained therein in accordance with Schedule 1 with respect to each such Purchased Loan is true and correct (except for any errors or omissions that do not result in material impairment of the interests, rights or remedies of the Trustee or the Investor Certificateholders with respect to any Purchased Loan) as of the related Loan Purchase Date.
(b) NO LIENS. Each Purchased Loan existing on the Effective Date or, in the case of Purchased Loans transferred to the Trust after the Effective Date, on the related Loan Purchase Date has been conveyed to the Trust free and clear of any Lien, except for Permitted Liens and Trustee Liens.
(c) ELIGIBLE LOAN. To the best of the Company's knowledge, on the Effective Date, each Purchased Loan transferred to the Trust that is included in the calculation of the initial Aggregate Loan Amount is an Eligible Loan and, in the case of Purchased Loans transferred to the Trust after the Effective Date, on the related Loan Purchase Date, each such Purchased Loan that is included in the calculation of the Aggregate Loan Amount on such related Loan Purchase Date is an Eligible Loan.
(d) FILINGS. All filings and other acts (including but not limited to the acts required by SUBSECTION 2.01(B) and notifying related Obligors of the assignment of a Purchased Loan, except to the extent that the relevant UCC and other similar laws (to the extent applicable) permit the Company (or its assignees) to provide such notification subsequent to the applicable Loan Purchase Date without materially impairing the Trust's
ownership or security interest in the Trust Assets and without incurring material expenses in connection with such notification) necessary or advisable under the relevant UCC or under other applicable laws of jurisdictions outside the United States (to the extent applicable) shall have been made or performed in order to grant the Trust on the applicable Loan Purchase Date a full legal and beneficial ownership or first priority perfected security interest in respect of all Purchased Loans.
The representations and warranties as of the date made set forth in this SECTION 2.04 shall survive the transfer and assignment of the Trust Assets to the Trust. Upon discovery by a Responsible Officer of the Company or the Servicer or a Responsible Officer of the Trustee of a breach of any of the representations and warranties (or of any Purchased Loan encompassed by the representation and warranty in SUBSECTION 2.04(C) not being an Eligible Loan as of the relevant Loan Purchase Date), the party discovering such breach shall give prompt written notice to the other parties and to the Letter of Credit Agent and the Administrative Agent. The Trustee's obligations in respect of any breach are limited as provided in SUBSECTION 8.02(G).
SECTION 2.05. ADJUSTMENT PAYMENT FOR INELIGIBLE LOANS.
(a) ADJUSTMENT PAYMENT OBLIGATION. If (i) any representation or warranty under SUBSECTIONS 2.04(A) or (B) is not true and correct as of the date specified therein with respect to any Purchased Loan transferred to the Trust, or any Purchased Loan encompassed by the representation and warranty in SUBSECTION 2.04(C) is determined not to have been an Eligible Loan as of the relevant Loan Purchase Date, (ii) there is a breach of any covenant under SUBSECTION 2.07(B) with respect to any Purchased Loan or (iii) the Trust's interest in any Purchased Loan is not a first priority perfected ownership or security interest at any time as a result of any action taken by, or the failure to take action by, the Company (any Purchased Loan as to which the conditions specified in any of clause (i), (ii) or (iii) of this SUBSECTION 2.05(A) exists is referred to herein as an "INELIGIBLE PURCHASED LOAN") then, after the earlier (the date on which such earlier event occurs, the "INELIGIBILITY DETERMINATION DATE") to occur of the discovery by the Company of any such event that continues unremedied or receipt by the Company of written notice given by the Trustee or the Servicer of any such event that continues unremedied, the Company shall make an adjustment payment with respect to such Ineligible Purchased Loan on the terms and conditions set forth in SUBSECTION 2.05(B).
(b) ADJUSTMENT PAYMENT AMOUNT. Subject to the last sentence of this SUBSECTION 2.05(B), the Company shall make an adjustment payment with respect to each Ineligible Purchased Loan as required pursuant to SUBSECTION 2.05(A) by depositing in the Collection Account in immediately available funds on the related Ineligibility Determination Date an amount equal to the lesser of (x) the amount by which the Aggregate Target Loan Amount exceeds the Aggregate Loan Amount (after giving effect to the reduction thereof by the Principal Amount of such Ineligible Purchased Loan) and (y) the aggregate outstanding Principal Amount of all such Ineligible Purchased Loans (the "TRANSFER DEPOSIT AMOUNT").
Upon transfer or deposit of the Transfer Deposit Amount, the Trust shall automatically and without further action be deemed to have agreed to pay to the Company, without recourse, representation or warranty, all Collections in respect of each such Ineligible Purchased Loan. Except as otherwise specified in any Supplement, the obligation of the Company to pay such Transfer Deposit Amount with respect to any Ineligible Purchased Loan shall constitute the sole remedy respecting the event giving rise to such obligation available to Investor Certificateholders (or the Trustee on behalf of Investor Certificateholders) unless such obligation is not satisfied in full in accordance with the terms of this Agreement.
SECTION 2.06. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants that, until the Trust Termination Date occurs, the Company shall:
(a) FINANCIAL STATEMENTS, REPORTS, ETC.
(i) Furnish to the Trustee, the Letter of Credit Agent, the Administrative Agent and the Rating Agencies, within 90 days after the end of each fiscal year, the balance sheet and related statements of income, stockholders' equity and cash flows showing the financial condition of the Company as of the close of such fiscal year and the results of its operations during such year, all audited by the Company's Independent Public Accountants and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such financial statements fairly present in all material respects the financial condition and results of operations of the Company in accordance with GAAP consistently applied;
(ii) Furnish to the Trustee, the Letter of Credit Agent, the Administrative Agent and the Rating Agencies, within 45 days after the end of each of the first three fiscal quarters of each fiscal year, the Company's unaudited balance sheet and related statements of income, stockholders' equity and cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by a Responsible Officer of the Company;
(iii) Furnish to the Trustee, the Letter of Credit Agent and the Administrative Agent, together with the financial statements required pursuant to clauses (i) and (ii) above, a compliance certificate signed by a Responsible Officer of the Company stating that (x) the attached financial statements have been prepared in accordance with GAAP and accurately reflect the financial condition of the Company and (y) to the best of such Person's knowledge, no Early Amortization Event or Potential Early Amortization Event exists, or if any Early Amortization Event or Potential Early Amortization Event exists, stating the nature and status thereof;
(iv) Furnish to the Trustee, the Letter of Credit Agent and the Administrative Agent, promptly upon the furnishing thereof to the shareholders of
the Company, copies of all financial statements, financial reports and proxy statements so furnished;
(v) Furnish to the Trustee, the Letter of Credit Agent and the Administrative Agent, promptly, all information, documents, records, reports, certificates, opinions and notices received by the Company from the Sellers under the Sale Agreement; and
(vi) Furnish to the Trustee, the Letter of Credit Agent and the Administrative Agent, promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Company, or compliance with the terms of any Transaction Document, in each case as the Letter of Credit Agent, the Administrative Agent or the Trustee may reasonably request.
(b) PAYMENT OF OBLIGATIONS; COMPLIANCE WITH OBLIGATIONS. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature (including, without limitation, all taxes, assessments, levies and other governmental charges imposed on it), except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company. The Company shall defend the right, title and interest of Trustee and the Holders in, to and under the Purchased Loans and the other Trust Assets, whether now existing or hereafter created, against all claims of third parties claiming through or under the Company, the Sellers or the Servicer. The Company will duly fulfill all material obligations on its part to be fulfilled under or in connection with each Purchased Loan and will do nothing to impair the rights of the Holders in such Purchased Loan.
(c) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper books of records and account in which entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of the Trustee, the Letter of Credit Agent and the Administrative Agent upon reasonable advance notice to visit and inspect any of its properties, examine and make copies and abstracts from any of its books and records during normal business hours on any Business Day and as often as may reasonably be requested, subject to the Company's security and confidentiality requirements, and to discuss the business, operations and financial condition of the Company with officers and employees of the Company and with its Independent Public Accountants. The first such examination or visit during each fiscal year of the Company and any such examination or visit following an Early Amortization Event or Potential Early Amortization Event shall be at the cost and expense of the Company; all other such examinations or visits shall be at the cost and expense of the party or parties making such examination or visit.
(d) COMPLIANCE WITH LAW. Comply with all Requirements of Law, the provisions of the Transaction Documents and all other material Contractual Obligations applicable to the Company except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect.
(e) PURCHASE OF LOANS. Purchase Loans solely in accordance with the Sale Agreement or this Agreement.
(f) DELIVERY OF COLLECTIONS. In the event that the Company receives Collections directly from Obligors, deliver or deposit such Collections into the Collection Account within one Business Day after its receipt thereof.
(g) NOTICES. Promptly (and, in any event, within five Business Days after a Responsible Officer of the Company becomes aware of such event) give written notice to the Trustee, each Rating Agency, the Letter of Credit Agent and the Administrative Agent for any Outstanding Series of:
(i) the occurrence of any Early Amortization Event or Potential Early Amortization Event, the statement of a Responsible Officer of the Company setting forth the details of such Early Amortization Event or Potential Early Amortization Event and the action taken, or which the Company proposes to take, with respect thereto; and
(ii) any Lien not permitted by SUBSECTION 2.07(B)(I) on Purchased Loans or any other Trust Assets.
(h) COLLECTION ACCOUNT. Take all reasonable actions necessary to ensure that the Collection Account shall be free and clear of, and defend the Collection Account against, any writ, order, stay, judgment, warrant of attachment or execution or similar process.
(i) SEPARATE CORPORATE EXISTENCE.
(i) Except as set forth in the Transaction Documents, maintain its own deposit account or accounts, separate from those of any Affiliate, with commercial banking institutions and ensure that the funds of the Company will not be diverted to any other Person or for other than corporate uses of the Company, nor will such funds be commingled with the funds of a Seller or any Subsidiary or Affiliate of a Seller provided that the foregoing restriction shall not preclude the Company from lending its excess cash balances to a Seller or any Subsidiary or Affiliate of the Seller for investment (which may include inter-Affiliate loans made by the Seller or any Subsidiary or Affiliate of the Seller) on a pooled basis as part of the cash management system maintained by a Seller for its consolidated group so long as all such transactions are properly reflected on the
books and records of the Company and the Sellers (and any Subsidiary or Affiliate of the Sellers, if applicable);
(ii) To the extent that it shares the same officers or other employees as any of its stockholders or Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees;
(iii) To the extent that it jointly contracts with any of its stockholders or Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that the Company contracts or does business with vendors or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods or services are provided, and each such entity shall bear its fair share of such costs. All material transactions between the Company and any of its Affiliates, whether currently existing or hereafter entered into, shall be only on an arm's length basis;
(iv) Maintain office space separate from the office space of the Sellers and their Affiliates (but which may be located at the same address as a Seller or one of a Seller's Affiliates). To the extent that the Company and any of its stockholders or Affiliates have offices in the same location, there shall be a fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses;
(v) Issue separate financial statements prepared not less frequently than annually and prepared in accordance with GAAP;
(vi) Conduct its affairs strictly in accordance with its organizational documents and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding regular and special stockholders' and directors, meetings appropriate to authorize all corporate action, keeping separate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts;
(vii) Not assume or guarantee any of the liabilities of the Sellers, the Servicer or any Affiliate thereof; and
(viii) Take, or refrain from taking, as the case may be, all other actions that are necessary to be taken or not to be taken in order to (x) ensure that
the assumptions and factual recitations set forth in the Specified Bankruptcy Opinion Provisions remain true and correct with respect to the Company and (y) comply with those procedures described in such provisions which are applicable to the Company.
(j) PRESERVATION OF CORPORATE EXISTENCE. (i) Except as otherwise permitted by the Transaction Documents, preserve, renew and keep in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except where the failure to maintain the same would not have a Material Adverse Effect.
(k) ASSESSMENTS. Promptly pay and discharge all taxes,
assessments, levies and other governmental charges imposed on it except
such taxes, assessments, levies and other governmental charges that (i)
are being contested in good faith by appropriate proceedings and for
which the Company shall have set aside on its books adequate reserves or
(ii) the failure to pay, satisfy or discharge would not reasonably be
expected to result in a Material Adverse Effect.
(l) OBLIGATIONS. Defend the right, title and interest of the Trust in, to and under the Purchased Loans and the other Trust Assets, whether now existing or hereafter created, against all claims of third parties claiming through the Company. The Company will duly fulfill all obligations on its part to be fulfilled under or in connection with each Purchased Loan and will do nothing to materially impair the rights of the Company in such Purchased Loan.
(m) ENFORCEMENT OF SALE AGREEMENT. The Company shall use its best efforts to enforce all rights held by it under the Sale Agreement.
(n) MAINTENANCE OF PROPERTY. Keep or request the Servicer to keep all property and assets useful and necessary to permit the monitoring and collection of Purchased Loans.
SECTION 2.07. NEGATIVE COVENANTS OF THE COMPANY. The Company hereby covenants that, until the Trust Termination Date occurs, it shall not directly or indirectly:
(a) LIMITATION ON LIABILITIES. Create, incur, assume or suffer to exist any Indebtedness, except (i) liabilities or obligations representing fees, expenses and indemnities payable pursuant to and in accordance with the Transaction Documents and (ii) liabilities or obligations for services supplied or furnished to the Company in an amount not to exceed $100,000 at any time outstanding; PROVIDED that any Indebtedness permitted hereunder and described in clauses (i) and (iii) shall be payable by the Company solely from funds available to the Company which are not otherwise required to be applied to the payment of any amounts by the Company pursuant to any Pooling and Servicing Agreement.
(b) LIMITATION ON TRANSFERS OF PURCHASED LOANS, ETC. Except as otherwise permitted by the Transaction Documents, at any time sell, transfer or otherwise dispose of any of the Purchased Loans, Related Property or the proceeds thereof pursuant to:
(i) any Lien Creation except for Permitted Liens; or
(ii) any Investment except in respect of or in connection with (A) the purchase of Purchased Loans and Related Property from a Seller or its Affiliates, (B) an advance or loan made to a Seller or (C) investments of proceeds as contemplated in any Pooling and Servicing Agreement.
(c) LIMITATION ON GUARANTEE OBLIGATIONS. Become or remain liable, directly or contingently, in connection with any Indebtedness or other liability of any other Person, whether by guarantee, endorsement (other than endorsements of negotiable instruments for deposit or collection in the ordinary course of business), agreement to purchase or repurchase, agreement to supply or advance funds, or otherwise other than under or in connection with any Pooling and Servicing Agreement.
(d) LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or make any material change in its present method of conducting business, or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets other than the assignments and transfers contemplated hereby.
(e) BUSINESS OF THE COMPANY. Engage at any time in any business or business activity other than the acquisition of Loans pursuant to the Sale Agreement, the assignments and transfers hereunder, the other transactions contemplated by the Transaction Documents and any activity incidental to the foregoing and necessary or convenient to accomplish the foregoing, or enter into or be a party to any agreement or instrument other than in connection with the foregoing.
(f) AGREEMENTS. Become a party to any indenture, mortgage, instrument, contract, agreement, lease or other undertaking, except the Transaction Documents, leases of office space, equipment or other facilities for use by the Company in its ordinary course of business, employment agreements, service agreements, agreements relating to shared employees and the other Transaction Documents, and agreements necessary to perform its obligations under the Transaction Documents, (ii) issue any power of attorney (except to the Trustee or the Servicer or except for the purpose of permitting any Person to perform any ministerial functions on behalf of the Company that are not prohibited by or inconsistent with the terms of the Transaction Documents), or (iii) amend, supplement, modify or waive any of the provisions of the Sale Agreement or request, consent or agree to or suffer to exist or permit any such amendment, supplement, modification or waiver or exercise any consent rights granted to
it thereunder unless such amendment, supplement, modification or waiver or such exercise of consent rights would not have a Material Adverse Effect and the Rating Agency Condition shall have been satisfied with respect to any such amendments, supplements, modifications or waivers.
(g) OFFICES. Change the state of its incorporation or move the location of its chief executive office or of any of the offices where it keeps its records with respect to the Purchased Loans, or its legal head office to a new location within or outside the jurisdiction where such office is now located, without (i) thirty (30) days prior written notice to the Trustee, the Letter of Credit Agent, the Administrative Agent and each Rating Agency and (ii) taking all actions reasonably requested by the Trustee (including but not limited to all filings and other acts necessary or advisable under the UCC or other applicable laws or similar statute of each relevant jurisdiction) in order to continue the Trust's first priority perfected ownership or security interest in all Purchased Loans now owned or hereafter created.
(h) CHANGE IN NAME. Change its name, identity or corporate structure in any manner that would or is likely (i) to make any financing statement or continuation statement (or other similar instrument) relating to this Agreement seriously misleading within the meaning of Section 9-402(7) of the New York UCC (or analogous provision of any other similar applicable statute or legislation) or (ii) to impair the perfection of the Trust's interest in any Purchased Loan under any other similar law, without thirty (30) days' prior written notice to the Trustee, the Letter of Credit Agent, the Administrative Agent and each Rating Agency.
(i) CHARTER. Amend or make any change or modification to its certificate of incorporation or its by-laws without first satisfying the Rating Agency Condition and obtaining the consent of the Letter of Credit Agent and the Administrative Agent (PROVIDED that, notwithstanding anything to the contrary in this SECTION 2.07, the Company may make amendments, changes or modifications pursuant to changes in law of the jurisdiction of its incorporation or amendments to change the Company's name (subject to compliance with clause (h) above), registered agent or address of registered office).
(j) ACCOUNTING FOR PURCHASES. Except as otherwise required by law, prepare any financial statements which shall account for the transactions contemplated under the Sale Agreement or hereunder in any manner other than as a sale of the Purchased Loans from the Sellers to the Company and from the Company to the Trust, respectively, or in any other respect account for or treat the transactions contemplated under the Sale Agreement or hereunder (including for financial accounting purposes, except as required by law) in any manner other than as sales of the Purchased Loans from the Sellers to the Company and from the Company to the Trust, respectively; PROVIDED, HOWEVER, that this subsection shall not apply for any tax or tax accounting purposes.
(k) EXTENSION OR AMENDMENT OF PURCHASED LOANS. Extend, rescind, cancel, amend or otherwise modify, or attempt or purport to extend, amend or otherwise modify, the terms of any Purchased Loans, except (a) as required by any Requirement of Law and (b) the Company may extend, amend or otherwise modify the terms of any Purchased Loans so long as the affected Purchased Loan constitutes an Eligible Loan after taking into account such extension, amendment or modification; PROVIDED, HOWEVER, that the Company shall not extend any Purchased Loan to the extent Collections on such Purchased Loan are necessary to repay (i) the aggregate principal and interest due and owing with respect to any Exiting Loans made by Exiting Banks pursuant to SUBSECTION 4.03(C)(II) of the Liquidity Agreement or (ii) the Invested Amount plus accrued and unpaid interest with respect to any Series as to which the Amortization Period shall have occurred and be continuing.
(l) SALE AGREEMENT. Take any action under the Sale Agreement that shall have a Material Adverse Effect.
(m) LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person, except for any Exchangeable Company Interest, the Purchased Loans and the other Trust Assets.
ARTICLE III
RIGHTS OF HOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
THE FOLLOWING PORTION OF THIS ARTICLE III
IS APPLICABLE TO ALL SERIES.
SECTION 3.01. ESTABLISHMENT OF COLLECTION ACCOUNT; CERTAIN ALLOCATIONS.
(a) The Trustee, for the benefit of the Investor Certificateholders, as their interests appear in this Agreement, shall cause to be established and maintained in the name of the Trustee as trustee of the Trust with an Eligible Institution or with the corporate trust department of the Trustee or an Eligible Institution or an affiliate of the Trustee or an Eligible Institution, a segregated trust account (the "COLLECTION ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Investor Certificateholders. Schedule 2, which is hereby incorporated into and made a part of this Agreement, identifies the Collection Account by setting forth the account number of such account, the account designation of such account and the name of the institution with which such account has been established. The Collection Account shall be divided into individual subaccounts for each Outstanding Series (each,
respectively, a "SERIES COLLECTION SUBACCOUNT" and, collectively, the "SERIES COLLECTION SUBACCOUNTS") and for the Company (the "COMPANY COLLECTION SUBACCOUNT"). For administrative purposes only, the Trustee may establish or cause to be established for a Series, so long as such Series is an Outstanding Series, sub-subaccounts of the Series Collection Subaccounts with respect to such Series (respectively, the "SERIES PRINCIPAL COLLECTION SUB-SUBACCOUNT" and "SERIES NON-PRINCIPAL COLLECTION Sub-subaccount" and, collectively, the "SERIES COLLECTION SUB-SUBACCOUNTS").
(b) AUTHORITY OF THE TRUSTEE IN RESPECT OF THE COLLECTION ACCOUNT.
(i) The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Collection Account and in all proceeds thereof. The Collection Account shall be under the sole dominion and control of the Trustee for the benefit of the Investor Certificateholders. If, at any time, the Servicer has actual notice or knowledge that any institution holding the Collection Account has ceased to be an Eligible Institution, the Servicer shall direct the Trustee to establish within thirty (30) days a substitute account therefor with an Eligible Institution, transfer any cash and/or any Eligible Investments to such new account and from the date any such substitute accounts are established, such account shall be the Collection Account. Neither the Company, the Servicer nor any person or entity claiming by, through or under the Company or the Servicer, shall have any right, title or interest in, except to the extent expressly provided under the Transaction Documents, or any right to withdraw any amount from, the Collection Account. Pursuant to the authority granted to the Servicer in SUBSECTION 2.02(A) of the Servicing Agreement, the Servicer shall have the power to instruct the Trustee in writing to make withdrawals from and payments to the Collection Account for the purposes of carrying out the Servicer's or Trustee's duties hereunder.
(ii) The Servicer agrees to give written direction (which may be included within any Monthly Settlement Statement or Daily Report) in a timely manner to the Trustee to apply all Collections with respect to the Purchased Loans and to make all other applications, allocations and distributions described in Article III and in the Supplement with respect to each Outstanding Series.
(iii) Each Series of Investor Certificates shall represent Fractional Undivided Interests as indicated in the Supplement relating to such Series and the right to receive Collections and other amounts at the times and in the amounts specified in this Article III (as supplemented by the Supplement related to such Series) to be deposited in the Collection Account and any other accounts maintained for the benefit of the Investor Certificateholders or paid to the Investor Certificateholders (with respect to each outstanding Series, the "INVESTOR CERTIFICATEHOLDERS' INTEREST"). The Exchangeable Company Interest shall represent the interest in the Trust not represented by any Series of Investor
Certificates then outstanding, including the right to receive Collections and other amounts at the times and in the amounts specified in this Article III to be paid to the Company (the "EXCHANGEABLE COMPANY Interest"); PROVIDED, HOWEVER, that no such Exchangeable Company Interest shall represent any interest in any Trust Account and any other accounts maintained for the benefit of the Investor Certificateholders, except as specifically provided in this Article III.
(c) ADMINISTRATION OF THE COLLECTION ACCOUNT. At the written
direction of the Company (or the Servicer on behalf of the Company),
funds on deposit in the Collection Account and any Series Collection
Subaccount available for investment, shall be invested by the Trustee in
Eligible Investments selected by the Company (or the Servicer on behalf
of the Company). All such Eligible Investments shall be held by the
Trustee for the benefit of the Investor Certificateholders. The Trustee
may liquidate any Eligible Investment when required to make a transfer
of funds or an application pursuant to this Agreement or any related
Supplement. The Company (or the Servicer on behalf of the Company)
agrees to use its reasonable efforts to schedule the maturity of such
Eligible Investments so as to avoid the necessity of liquidating the
same. The Company shall bear the expense of any cost incurred in respect
of liquidation of an investment hereunder. Amounts on deposit in any
sub-subaccounts as specified in the related Supplement shall be invested
in Eligible Investments that mature, or that are payable or redeemable
upon demand of the holder thereof, so that such funds will be available
not later than the date which is specified in any Supplement. The
Trustee, or its nominee or custodian, shall maintain possession of the
negotiable instruments or securities, if any, evidencing any Eligible
Investments from the time of purchase thereof until the time of sale or
maturity. Any earnings (net of losses and investment expenses) (the
"INVESTMENT EARNINGS") on such invested funds in a Series Collection
Subaccount and any other sub-subaccounts as specified in the related
Supplement will be deposited by the Trustee in the Series Collection
Subaccount or in such other sub-subaccount specified in the related
supplement. It is expressly acknowledged and agreed that the Company (or
the Servicer on its behalf) is authorized to direct the purchase of, and
the Trustee may, to the extent permitted by applicable banking laws and
regulations, purchase investments constituting Eligible Investments (i)
from Chase or any other Affiliate of Chase, including securities that
are underwritten, placed or dealt in by Chase or any other Affiliate of
Chase, or (ii) from money market funds or management investment
companies for which Chase or any Affiliate is investment manager,
advisor, administrator, shareholder, servicing agent and/or custodian or
(iii) that involve Chase or an Affiliate of Chase as a participant or
counterparty. It is further acknowledged and agreed that Chase and/or
such Affiliates of Chase may receive advisory fees, referral fees and
other compensation in connection with such services that are distinct
from the fees, charges and expenses of Chase in its various capacities
hereunder.
(d) COLLECTIONS.
(i) Promptly following the receipt of Collections in the form of available funds in a Lock-Box Account, but in no event later than 12:00 (Noon), New York City time, on the Business Day following the Business Day Received, the Servicer shall transfer, or cause to be transferred, all Collections on deposit in the form of available funds in the Lock-Box Accounts directly to the Collection Account.
(ii) If the Daily Report specified in SUBSECTION 3.01(B)(II) is received by the Trustee at or before 12:00 (Noon), New York City time, on any Business Day, the Trustee shall transfer, within a reasonable time on such Business Day, from aggregate Collections deposited in the Collection Account, to the respective Series Collection Subaccount, an amount equal to the product of (x) the applicable Invested Percentage for such Outstanding Series and (y) such aggregate Collections deposited in the Collection Account in accordance with the Daily Report.
(iii) If the Daily Report specified in SUBSECTION 3.01(B)(II) is received by the Trustee at or before 12:00 (Noon), New York City time, on any Business Day, the Trustee shall, if required by the related Supplement, allocate, within a reasonable time on such Business Day, funds transferred to the Series Collection Subaccount for each Outstanding Series pursuant to the preceding SUBSECTION 3.01(D)(II) to the Series Non-Principal Collection Sub-subaccount and the Series Principal Collection Sub-subaccount of each such Series in accordance with the Daily Report and the related Supplement for such Series.
(iv) Except as otherwise provided in a Supplement, if the Daily Report specified in SUBSECTION 3.01(B)(II) is received by the Trustee at or before 12:00 (Noon), New York City time, on such Business Day, the Trustee shall transfer in accordance with such Daily Report, within a reasonable time on such Business Day, to the Company Collection Subaccount the remaining funds, if any, on deposit in the Collection Account on such day after giving effect to transfers to be made pursuant to SUBSECTION 3.01(D)(II).
(e) CERTAIN ALLOCATIONS FOLLOWING AN AMORTIZATION PERIOD.
(i) If, on any Settlement Report Date, an Amortization Period has occurred and is continuing with respect to any Outstanding Series and at such Settlement Report Date, a Revolving Period is still in effect with respect to any other Outstanding Series (a "SPECIAL ALLOCATION SETTLEMENT REPORT DATE"), then the Servicer shall make the following calculations:
(A) the amount (the "ALLOCABLE CHARGED-OFF AMOUNT") equal to the excess, if any, of (I) the aggregate Principal Amount of
Defaulted Loans for the related Settlement Period over
(II) the aggregate Principal Amount of Recoveries
received during the related Settlement Period; and
(B) the amount (the "ALLOCABLE RECOVERIES AMOUNT") equal to the excess, if any, of (I) the aggregate Principal Amount of Recoveries received during the related Settlement Period over (II) the aggregate Principal Amount of Defaulted Loans for the related Settlement Period.
(ii) If, on any Special Allocation Settlement Report Date, either of the Allocable Charged-off Amount or the Allocable Recoveries Amount is greater than zero for the related Settlement Period, the Trustee shall (in accordance with written directions received pursuant to subsection (b)(ii) above) make (A) a pro rata allocation to each Outstanding Series (based on the Invested Percentage for such Series) of a portion (as determined in clause (iii) below) of each such positive amount and (B) an allocation to the Exchangeable Company Interest of the remaining portion of each such positive amount.
(iii) With respect to each portion of the Allocable Charged-off Amount and the Allocable Recoveries Amount which is allocated to an Outstanding Series pursuant to SUBSECTION 3.01(E)(II), the Trustee shall (in accordance with the written direction of the Servicer) apply each such amount to such Series in accordance with the related Supplement for such Series.
(f) ALLOCATIONS FOR THE EXCHANGEABLE COMPANY INTEREST. On each Business Day on which the Servicer delivers a Daily Report to the Trustee, after making all allocations required pursuant to SUBSECTION 3.01(D), the Trustee shall (in accordance with the written direction of the Servicer, upon which the Trustee may conclusively rely) transfer, using its best efforts to transfer within two hours of receipt of Collections and the Daily Report, and, if the Collections and the Daily Report are received by the Trustee no later than 12:00 (Noon), New York City time, making such transfer no later than 4:30 p.m., New York City time, on such Business Day, the amounts on deposit in the Company Collection Subaccount to the holder of the Exchangeable Company Interest or to such accounts or such Persons as the holder of the Exchangeable Company Interest may direct in writing (which direction may consist of standing instructions provided by the holder of the Exchangeable Company Interest that shall remain in effect until changed by the holder of the Exchangeable Company Interest in writing); PROVIDED, HOWEVER, that a transfer for purposes of this SUBSECTION 3.01(F) shall be deemed to have occurred at such time as the Trustee instructs the applicable Federal Reserve Bank, as clearing bank for the Trustee, to debit the Trustee's account in the amount of the outgoing amount; PROVIDED FURTHER that a failure of the Trustee to transfer funds by 4:30 p.m., New York City time, shall not be a breach of this SUBSECTION 3.01(F) if (i) the same bank wire transfer program is not used by both the Company and the Trustee to make such transfers
or (ii) a Trustee Force Majeure Delay occurs, and in either such event the Trustee shall use its best efforts to transfer funds within a reasonable time.
(g) SETOFF. In addition to the provisions of SECTION 8.05, (i) if the Company shall fail to make a payment as provided in this Agreement or any Supplement, the Servicer or the Trustee may set off and apply any amounts otherwise payable to the Company under any Pooling and Servicing Agreement. The Company hereby waives demand, notice or declaration of such setoff and application; PROVIDED that notice will promptly be given to the Company of such setoff and application; PROVIDED FURTHER that failure to give such notice shall not affect the validity of such setoff; and (ii) in the event the Servicer shall fail to make a payment as provided in any Pooling and Servicing Agreement, the Trustee may set off and apply any amounts otherwise payable to the Servicer in its capacity as Servicer under the Transaction Documents on account of such obligation. The Servicer hereby waives demand, notice or declaration of such setoff and application; PROVIDED that notice will promptly be given to the Servicer of such setoff; PROVIDED FURTHER that failure to give such notice shall not affect the validity of such setoff.
(h) ALLOCATION AND APPLICATION OF FUNDS. The Servicer shall
direct the Trustee in writing (which may be given in the form of the
Monthly Settlement Statements or the Daily Reports) to apply all
Collections with respect to the Purchased Loans as described in this
Article III and in the Supplement with respect to each Outstanding
Series. The Servicer shall direct the Trustee in writing to pay
Collections to the holder of the Exchangeable Company Interest to the
extent such Collections are allocated to the Exchangeable Company
Interest under SUBSECTION 3.01(F) and as otherwise provided in Article
III. Unless otherwise provided in one or more Supplements, if the
Trustee receives any Monthly Settlement Statement or Daily Report at or
before 12:00 (Noon), New York City time, on any Business Day, the
Trustee shall make any applications of funds required thereby on the
same Business Day and otherwise on the next succeeding Business Day.
THE REMAINDER OF ARTICLE III SHALL BE SPECIFIED IN THE SUPPLEMENT WITH RESPECT TO EACH SERIES. SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE SERIES RELATING TO THE SUPPLEMENT IN WHICH SUCH REMAINDER APPEARS.
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO.
ARTICLE V
THE INVESTOR CERTIFICATES AND
EXCHANGEABLE COMPANY INTEREST
SECTION 5.01. THE INVESTOR CERTIFICATES. The Investor Certificates of each Series and any Class thereof shall be in fully registered form and shall be substantially in the form of the exhibits with respect thereto attached to the applicable Supplement. The Investor Certificates shall, upon issue, be executed by the Company (on behalf of the Trustee of the Trust and without the Company incurring any personal liability in respect of the Investor Certificates) and delivered to the Trustee for authentication and redelivery as provided in SECTION 5.02. Except as otherwise set forth as to any Series or Class in the related Supplement, the Investor Certificates shall be issued by the Trust in minimum denominations of $1,000,000 and in integral multiples of $100,000 in excess thereof. Unless otherwise specified in any Supplement for any Series, the Investor Certificates shall be issued upon initial issuance as a Book-Entry Certificate pursuant to SECTION 5.11 in an original principal amount equal to the Initial Invested Amount with respect to such Series. The Company is hereby authorized by the Trust to execute and deliver each Investor Certificate and any documents related thereto on behalf of the Trust. In so doing, the Company acts as agent of the Trust and shall incur no personal liability in respect of the Investor Certificates. Each Investor Certificate shall be executed by manual or facsimile signature on behalf of the Company, as agent of the Trust, by a Responsible Officer. Investor Certificates bearing the manual or facsimile signature of the individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Company, as agent of the Trust, shall not be rendered invalid, notwithstanding that such individual has ceased to be so authorized prior to or on the date of the authentication and delivery of such Investor Certificates or does not hold such office at the date of the authentication and delivery of such Investor Certificates. No Investor Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Investor Certificate a certificate of authentication substantially in the form provided for herein executed by or on behalf of the Trustee by the manual signature of a duly authorized signatory, and such certificate of authentication upon any Investor Certificate shall be conclusive evidence, and the only evidence, that such Investor Certificate has been duly authenticated and delivered hereunder. All Investor Certificates shall be dated the date of their authentication but failure to do so shall not render them invalid.
SECTION 5.02. AUTHENTICATION OF CERTIFICATES.
(a) The Trustee shall authenticate and deliver the initial Series of Investor Certificates that is issued upon the written order of the Company (or the Servicer on behalf of the Company) in a form reasonably satisfactory to the Trustee, to the holders of the initial Series of Investor Certificates, against payment to the Company of the Initial Invested Amount. The Investor Certificates shall be duly authenticated by or on behalf of the Trustee in authorized denominations equal to (in the aggregate) the Initial Invested Amount. Upon a Company Exchange as provided in SECTION 5.10 and the satisfaction of certain other conditions specified therein, the Trustee shall authenticate and deliver the Investor Certificates of additional Series (with the designation provided in the applicable Supplement) (or, if provided in any Supplement, the additional Investor Certificates of an existing Series), upon the written order of the Company, to the Persons designated in such Supplement. Upon the written order of the Company (or the Servicer on behalf of the Company), the Investor Certificates of any Series shall be duly authenticated by or on behalf of the Trustee, in authorized denominations equal to (in the aggregate) the Initial Invested Amount of such Series of Investor Certificates.
(b) COMPANY CERTIFICATES. Upon written request of the Company, the Trustee shall authenticate and deliver to the Company one or more certificates representing the Exchangeable Company Interest in a form reasonably satisfactory to the Trustee. Such certificates shall be duly authenticated by or on behalf of the Trustee in denominations as requested by the Company. The Company shall pay all costs associated with such issuance of certificates.
SECTION 5.03. REGISTRATION OF TRANSFER AND EXCHANGE OF INVESTOR CERTIFICATES.
(a) The Trustee shall cause to be kept at the office or agency to be maintained by a transfer agent and registrar (which may be the Trustee) (the "TRANSFER AGENT AND REGISTRAR") in accordance with the provisions of SECTION 8.16 a register (the "CERTIFICATE REGISTER") in which, subject to such reasonable regulations as the Trustee may prescribe, the Transfer Agent and Registrar shall provide for the registration of the Investor Certificates and of transfers and exchanges of the Investor Certificates as herein provided. The Company hereby appoints The Chase Manhattan Bank as Transfer Agent and Registrar for the purpose of registering the Investor Certificates and transfers and exchanges of the Investor Certificates as herein provided. The Chase Manhattan Bank shall be permitted to resign as Transfer Agent and Registrar upon 30 days prior written notice to the Company, the Trustee and the Servicer; PROVIDED, HOWEVER, that such resignation shall not be effective and The Chase Manhattan Bank shall continue to perform its duties as Transfer Agent and Registrar until the Trustee has appointed a successor Transfer Agent and Registrar reasonably acceptable to the Company and such successor Transfer Agent and Registrar has accepted such appointment. The provisions of SECTIONS 8.01, 8.02, 8.03, 8.05 and 10.19 shall apply to The Chase Manhattan Bank (or the Trustee to the extent it is so acting) also in its role as Transfer Agent or Registrar, as
the case may be, for so long as The Chase Manhattan Bank (or the Trustee to the extent it is so acting) shall act as Transfer Agent or Registrar, as the case may be.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
SECTION 8.05, for the payment of any reasonable compensation payable to the
Transfer Agent and Registrar for its services under this SECTION 5.03 and under
SECTION 5.10. The Trustee hereby agrees that, upon the receipt of such funds
from the Company, it shall pay the Transfer Agent and Registrar such amounts.
Upon surrender for registration of transfer of any Investor Certificate at any office or agency of the Transfer Agent and Registrar maintained for such purpose, the Company shall execute (on behalf of the Trust), and the Trustee shall, upon the written order of the Company, and satisfaction of any transfer restrictions set forth herein or in the related Supplement, authenticate and deliver, in the name of the designated transferee or transferees, one or more new Investor Certificates in authorized denominations of the same Series (and Class) representing like aggregate Fractional Undivided Interests and which bear numbers that are not contemporaneously outstanding.
At the option of an Investor Certificateholder, Investor Certificates may be exchanged for other Investor Certificates of the same Series (and Class) in authorized denominations of like aggregate Fractional Undivided Interests, bearing numbers that are not contemporaneously outstanding, upon surrender of the Investor Certificates to be exchanged at any such office or agency of the Transfer Agent and Registrar maintained for such purpose.
Whenever any Investor Certificates of any Series are so surrendered for exchange, the Company shall execute (on behalf of the Trust), and the Trustee shall, upon the written order of the Company, and satisfaction of any transfer restrictions set forth herein or in the related Supplement, authenticate and (unless the Transfer Agent and Registrar is different from the Trustee, in which case the Transfer Agent and Registrar shall) deliver, the Investor Certificates of such Series which the Investor Certificateholder making the exchange is entitled to receive. Every Investor Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer, with sufficient instructions, duly executed by the Investor Certificateholder thereof or his attorney-in-fact duly authorized in writing delivered to the Trustee (unless the Transfer Agent and Registrar is different from the Trustee, in which case to the Transfer Agent and Registrar) and complying with any requirements set forth in the applicable Supplement.
No service charge shall be made for any registration of transfer or exchange of Investor Certificates, but the Transfer Agent and Registrar may require any Investor Certificateholder that is transferring or exchanging one or more Investor Certificates to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Investor Certificates.
All Investor Certificates surrendered for registration of transfer and exchange shall be canceled and disposed of in a customary manner satisfactory to the Trustee.
The Company shall, as agent of the Trust and without incurring personal liability with respect to the Investor Certificates, execute and deliver Investor Certificates to the Trustee or the Transfer Agent and Registrar in such amounts and at such times as are necessary to enable the Trustee and the Transfer Agent and Registrar to fulfill their respective responsibilities under this Agreement and the Investor Certificates.
(b) The Transfer Agent and Registrar will maintain at its expense in Houston, Texas and, subject to SUBSECTION 5.03(A), if specified in the related Supplement for any Series, any other city designated in such Supplement, an office or offices or agency or agencies where Investor Certificates may be surrendered for registration or transfer or exchange.
(c) Unless otherwise stated in any related Supplement, registration of transfer of Investor Certificates containing a legend relating to restrictions on transfer of such Investor Certificates (which legend shall be set forth in the Supplement relating to such Investor Certificates) shall be effected only if the conditions set forth in the related Supplement are complied with.
Investor Certificates issued upon registration or transfer of, or in exchange for, Investor Certificates bearing the legend referred to above shall also bear such legend unless the Company, the Servicer, the Trustee and the Transfer Agent and Registrar receive an Opinion of Counsel satisfactory to each of them, to the effect that such legend may be removed.
SECTION 5.04. MUTILATED, DESTROYED, LOST OR STOLEN INVESTOR CERTIFICATES. If (a) any mutilated Investor Certificate is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Investor Certificate and (b) there is delivered to the Transfer Agent and Registrar and the Trustee such security or indemnity as may be required by them to save the Trust, each of them and the Company harmless, then, in the absence of actual notice to the Trustee or Transfer Agent and Registrar that such Investor Certificate has been acquired by a bona fide purchaser, the Company shall execute on behalf of the Trust and, upon the written request of the Company, the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Investor Certificate, a new Investor Certificate of like tenor and aggregate Fractional Undivided Interest and bearing a number that is not contemporaneously outstanding. In connection with the issuance of any new Investor Certificate under this SECTION 5.04, the Trustee or the Transfer Agent and Registrar may require the payment by the Investor Certificateholder of a sum sufficient to cover any tax or other governmental expenses (including the fees and expenses of the Trustee and Transfer Agent and Registrar) connected therewith. Any duplicate Investor Certificate issued pursuant to this SECTION 5.04 shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Investor Certificate shall be found at any time.
SECTION 5.05. PERSONS DEEMED OWNERS. At all times prior to due presentation of an Investor Certificate for registration of transfer, the Company, the Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent of any of them may treat the
Person in whose name any Investor Certificate is registered as the owner of such Investor Certificate for the purpose of receiving distributions pursuant to Article IV of the related Supplement and for all other purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any of them shall be affected by any notice to the contrary. Notwithstanding the foregoing provisions of this SECTION 5.05, in determining whether the Investor Certificateholders of the requisite Fractional Undivided Interests have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Investor Certificates owned by the Company, the Servicer or any Affiliate thereof, shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Investor Certificates which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Investor Certificates so owned by the Company, the Servicer or any Affiliate thereof which have been pledged in good faith shall not be disregarded and may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Investor Certificates and that the pledgee is not the Company, the Servicer or any Affiliate thereof.
SECTION 5.06. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make distributions to Investor Certificateholders from the Collection Account (and/or any other account or accounts maintained for the benefit of Investor Certificateholders as specified in the related Supplement for any Series) pursuant to Articles III and IV. The Trustee may revoke such power and remove the Paying Agent if the Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. Unless otherwise specified in the related Supplement for any Series and with respect to such Series, the Paying Agent shall initially be The Chase Manhattan Bank and any co-paying agent chosen by The Chase Manhattan Bank. Each Paying Agent shall have a combined capital and surplus of at least $100,000,000. The Paying Agent shall be permitted to resign upon 30 days' prior written notice to the Trustee. In the event that the Paying Agent shall so resign, the Trustee shall appoint a successor to act as Paying Agent (which shall be a depositary institution or trust company) reasonably acceptable to the Company which appointment shall be effective on the date on which the Person so appointed gives the Trustee written notice that it accepts the appointment. Any resignation or removal of the Paying Agent and appointment of successor Paying Agent pursuant to this SECTION 5.06 shall not become effective until acceptance of appointment by the successor Paying Agent, as provided in this SECTION 5.06. The Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Trustee to execute and deliver to the Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustee that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Investor Certificateholders in trust for the benefit of the Investor Certificateholders entitled thereto until such sums shall be paid to such Investor Certificateholders. The Paying Agent shall return all unclaimed funds to the Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Trustee. The provisions of SECTIONS 8.01, 8.02, 8.03, 8.05 and 10.18 shall apply to The Chase Manhattan Bank (or the Trustee to the extent it is so acting) also in its role as Paying Agent, for so long as The Chase Manhattan Bank (or the
Trustee to the extent it is so acting) shall act as Paying Agent. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
SECTION 8.05, for the payment of any reasonable compensation payable to the
Paying Agent for its services under this SECTION 5.06. The Trustee hereby agrees
that, upon the receipt of such funds from the Company, it shall pay the Paying
Agent such amounts.
SECTION 5.07. ACCESS TO LIST OF INVESTOR CERTIFICATEHOLDERS' NAMES AND ADDRESSES. The Trustee will furnish or cause to be furnished by the Transfer Agent and Registrar to the Company, the Servicer or the Paying Agent, within 10 Business Days after receipt by the Trustee of a request therefor from the Company, the Servicer or the Paying Agent, respectively, in writing, a list of the names and addresses of the Investor Certificateholders as then recorded by or on behalf of the Trustee. The costs and expenses incurred in connection with the provision of such list shall constitute Program Costs under the Supplement for the applicable Series. If three or more Investor Certificateholders of record or any Investor Certificateholder of any Series or a group of Investor Certificateholders of record representing Fractional Undivided Interests aggregating not less than 10% of the Invested Amount of the related Outstanding Series (the "APPLICANTS") apply in writing to the Trustee, and such application states that the Applicants desire to communicate with other Investor Certificateholders of any Series with respect to their rights under this Agreement or under the Investor Certificates and is accompanied by a copy of the communication which such Applicants propose to transmit, then the Trustee, after having been adequately indemnified by such Applicants for its costs and expenses, shall transmit or shall cause the Transfer Agent and Registrar to transmit, such communication to the Investor Certificateholders reasonably promptly after the receipt of such application.
Every Investor Certificateholder, by receiving and holding an Investor Certificate, agrees with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor any of their respective agents, officers, directors or employees shall be held accountable by reason of the disclosure or mailing of any such information as to the names and addresses of the Investor Certificateholders hereunder, regardless of the sources from which such information was derived.
As soon as practicable following each Record Date, the Trustee shall provide to the Paying Agent or its designee, a list of Investor Certificateholders in such form as the Paying Agent may reasonably request.
SECTION 5.08. AUTHENTICATING AGENT.
(a) The Trustee may appoint one or more authenticating agents with respect to the Investor Certificates which shall be authorized to act on behalf of the Trustee in authenticating the Investor Certificates in connection with the issuance, delivery, registration of transfer, exchange or repayment of the Investor Certificates; PROVIDED, that each such authenticating agent shall satisfy the conditions set forth in
SECTION 8.06. Whenever reference is made in this Agreement to the authentication of Investor Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an authenticating agent and a certificate of authentication executed on behalf of the Trustee by an authenticating agent.
(b) Any institution succeeding to the corporate trust business of an authenticating agent shall continue to be an authenticating agent without the execution or filing of any paper or any further act on the part of the Trustee or such authenticating agent; PROVIDED such institution satisfies the conditions set forth in SECTION 8.06.
(c) An authenticating agent may at any time resign by giving written notice of resignation to the Trustee. Upon the receipt by the Trustee of any such notice of resignation and upon the giving of any such notice of termination by the Trustee, the Trustee shall immediately give notice of such resignation or termination to the Company. Any resignation of an authenticating agent shall not become effective until acceptance of appointment by the successor authenticating agent as provided in this SECTION 5.08. The Trustee may at any time terminate the agency of an authenticating agent by giving notice of termination to such authenticating agent. Upon receiving such a notice of resignation or upon such a termination, or in case at any time an authenticating agent shall cease to be acceptable to the Trustee or fail to satisfy the conditions set forth in SECTION 8.06, the Trustee promptly may appoint a successor authenticating agent. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an authenticating agent. No successor authenticating agent (other than an Affiliate of the Trustee) shall be appointed unless such authenticating agent (i) is reasonably acceptable to the Trustee and the Company and (ii) satisfies the conditions set forth in SECTION 8.06.
(d) The Company hereby agrees to provide the Trustee from time
to time sufficient funds, on a timely basis and in accordance with and
subject to SECTION 8.05, for the payment of any reasonable compensation
payable to each authenticating agent for its services under this SECTION
5.08. The Trustee hereby agrees that, upon the receipt of such funds
from the Company it shall pay each authenticating agent such amounts.
(e) The provisions of SECTIONS 8.01, 8.02, 8.03, 8.05 and 10.18 shall be applicable to any authenticating agent.
(f) Pursuant to an appointment made under this SECTION 5.08, the Investor Certificates may have endorsed thereon, in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form:
"This is one of the Investor Certificates referred to in the Pooling Agreement dated as of August 25, 2000, among Bunge Funding, Inc., Bunge Management Services, Inc., as Servicer and The Chase Manhattan Bank, as Trustee.
THE CHASE MANHATTAN BANK
as Authenticating Agent
for the Trustee
By _________________________
Authorized Signatory
SECTION 5.09. TAX TREATMENT. It is the intent of the Servicer, the Company, the Investor Certificateholders and the Trustee that, under applicable U.S. Federal, State and local income and franchise tax laws (but for no other purpose), the Investor Certificates will qualify as indebtedness of the Company secured by the Trust Assets and that the Trust will not be characterized as an association or publicly traded partnership taxable as a corporation. The Company, the Servicer and the Trustee, by entering into this Agreement, and each Investor Certificateholder, by its acceptance of its Investor Certificate, agree to treat, except as otherwise required by law, the Investor Certificates for applicable U.S. Federal, State and local income and franchise tax purposes (but for no other purpose) as indebtedness of the Company. The provisions of this Agreement and all related Transaction Documents shall be construed to further these intentions of the parties; PROVIDED, FURTHER that nothing in this SECTION 5.09 shall impose on the Company any personal liability in respect of the Investor Certificates. This SECTION 5.09 shall survive the termination of this Agreement and shall be binding on all transferees of any of the foregoing persons.
SECTION 5.10. EXCHANGEABLE COMPANY INTEREST.
(a) The Company may decrease the amount of the Exchangeable Company Interest in exchange for (i) an increase in the Invested Amount of a Class of Investor Certificates of an Outstanding Series or (ii) one or more newly issued Series of Investor Certificates (any such decrease a "COMPANY EXCHANGE"). (A Company Exchange shall not be necessary in connection with an increase in the Invested Amount of any Investor Certificates issued in a Series with an Invested Amount that may increase or decrease from time to time. Such Investor Certificates are expected to be designated as "VARIABLE FUNDING CERTIFICATES" or "VFC CERTIFICATES"). The Company may perform a Company Exchange by notifying the Trustee, in writing at least five Business Days in advance (an "EXCHANGE NOTICE") of the date upon which the Company Exchange is to occur (an "EXCHANGE DATE"). Any Exchange Notice shall state the designation of any Series to be issued on the Exchange Date and, with respect to each such Series: (a) its additional or Initial Invested Amount, as the case may be, if any, which in the aggregate
at any time may not be greater than the current principal amount of the
Exchangeable Company Interest, if any, at such time and (b) its
Certificate Rate (or the method for allocating interest payments or
other cash flow to such Series), if any. On the Exchange Date, the
Trustee shall only authenticate and deliver any Investor Certificates
evidencing an increase in the Invested Amount of a Class of Investor
Certificates or a newly issued Series upon delivery by the Company (as
agent of the Trust with respect to clause (g) below) to the Trustee of
the following (together with the delivery by the Company to the Trustee
of any additional agreements, instruments or other documents as are
specified in the related Supplement): (a) a Supplement executed by the
Company and specifying the Principal Terms of such Series (PROVIDED that
no such Supplement shall be required for any increase in the Invested
Amount of a Class of Investor Certificates unless it is so required by
the related Supplement), (b) a Tax Opinion addressed to the Trustee and
the Trust, (c) a General Opinion addressed to the Trustee and the Trust,
(d) a Responsible Officer's certificate certifying that all conditions
precedent to the authentication and delivery of such Investor
Certificates have been satisfied and upon which Responsible Officer's
certificate the Trustee may conclusively rely, (e) written confirmation
from each Rating Agency that the Company Exchange will not result in the
Rating Agency reducing or withdrawing its rating on the Commercial Paper
or any then Outstanding Series or any Class of any such Outstanding
Series rated by it, (f) written instructions of an officer of the
Company specifying the amount, Series, Investor Certificates, other
Interests to be issued with respect to such Company Exchange and the
Exchangeable Company Interest following any such Company Exchange and
(g) the applicable Investor Certificates if necessary. Upon delivery of
the items listed in clauses (a) through (g) above and satisfaction of
any conditions set forth in any Supplement for an Outstanding Series,
the existing Exchangeable Company Interest, shall be deemed adjusted as
of the Exchange Date as provided above. The Trustee shall cause to be
kept at the office or agency to be maintained by the Transfer Agent and
Registrar in accordance with the provisions of SECTION 8.16 a register
(the "EXCHANGE REGISTER") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Transfer Agent and
Registrar shall record all Company Exchanges and the amount of the
Exchangeable Company Interest following any such Company Exchange. There
is no limit to the number of Company Exchanges that the Company may
perform under this Agreement. If the Company shall, on any Exchange
Date, retain any Investor Certificates issued on such Exchange Date, it
shall, prior to transferring any such Investor Certificates to another
Person, obtain a Tax Opinion. Additional restrictions relating to a
Company Exchange may be set forth in any Supplement.
(b) Upon any Company Exchange, the Trustee, in accordance with
the written directions of the Company, shall issue to the Company under
SECTION 5.01, for execution, as agent of the Trust, and redelivery to
the Trustee for authentication under SECTION 5.02, (i) one or more
Investor Certificates representing an increase in the Invested Amount of
an Outstanding Series, or (ii) one or more new Series of Investor
Certificates. Any such Investor Certificates shall be substantially in
the form specified in the
applicable Supplement and each shall bear, upon its face, the designation for such Series to which each such Certificate belongs so selected by the Company.
(c) In conjunction with a Company Exchange, the parties hereto
shall, except as otherwise provided in subsection (a) above, execute a
Supplement to this Agreement, which shall define, with respect to any
additional Investor Certificates or newly issued Series, as the case may
be: (i) its name or designation, (ii) its additional or initial
principal amount, as the case may be, (or method for calculating such
amount), (iii) its coupon rate (or formula for the determination
thereof), (iv) the interest payment date or dates and the date or dates
from which interest shall accrue, (v) the method for allocating
Collections to Holders, (vi) the names of any accounts to be used by
such Series and the terms governing the operation of any such accounts,
(vii) the issue and terms of a letter of credit or other form of
Enhancement, if any, with respect thereto, (viii) the terms on which the
Certificates of such Series may be repurchased by the Company or may be
remarketed to other investors, (ix) the Series Termination Date, (x) any
deposit account maintained for the benefit of Holders, (xi) the number
of classes of such Series, and if more than one class, the rights and
priorities of each such Class, (xii) the rights of the holder of the
Exchangeable Company Interest that have been transferred to the holders
of such Series, (xiii) the designation of any Series Accounts and the
terms governing the operation of any such Series Accounts, (xiv)
provisions acceptable to the Trustee concerning the payment of the
Trustee's fees and expenses and (xv) other relevant terms (all such
terms, the "PRINCIPAL TERMS" of such Series). The Supplement executed in
connection with the Company Exchange shall contain administrative
provisions which are reasonably acceptable to the Trustee.
(d) The Company shall not transfer, assign, exchange or otherwise dispose of the Exchangeable Company Interest without (i) the prior satisfaction of the Rating Agency Condition and (ii) delivery of a Tax Opinion. If the Company shall transfer, assign, exchange or otherwise dispose of all or any portion of the Exchangeable Company Interest in accordance with the preceding sentence, the Transfer Agent and Registrar shall record the transfer, assignment, exchange or other disposition of the Exchangeable Company Interest in the Exchange Register. Any Holder who wishes to transfer, assign, exchange or otherwise dispose of all or any portion of the Exchangeable Company Interest held by it shall deliver instructions and a written instrument of transfer, with sufficient instructions, duly executed by the Holder or his attorney-in-fact duly authorized in writing delivered to the Trustee (unless the Transfer Agent and Registrar is different from the Trustee, in which case to the Transfer Agent and Registrar) and complying with any requirements set forth in the applicable Supplement. No service charge shall be made for any registration of transfer or exchange of all or any portion of the Exchangeable Company Interest, but the Transfer Agent and Registrar may require any Holder that is transferring or exchanging all or any portion of the Exchangeable Company Interest to pay a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of all or any portion of the Exchangeable Company Interest.
(e) Except as specified in any Supplement for a related Series, all Investor Certificates of any Series shall be equally and ratably entitled as provided herein to the benefits hereof without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Agreement and the applicable Supplement.
SECTION 5.11. BOOK-ENTRY CERTIFICATES. If specified in any related
Supplement, the Investor Certificates, or any portion thereof, upon original
issuance, shall be issued in the form of one or more typewritten Investor
Certificates representing the Book-Entry Certificates, to be delivered to the
Depository specified in such Supplement which shall be the Clearing Agency,
specified by, or on behalf of, the Company for such Series. The Investor
Certificates shall initially be registered on the Certificate Register in the
name of the nominee of such Clearing Agency, and no Certificate Book-Entry
Holder will receive a definitive certificate representing such Certificate
Book-Entry Holder's interest in the Investor Certificates, except as provided in
SECTION 5.13. Unless and until definitive, fully registered Investor
Certificates ("DEFINITIVE CERTIFICATES") have been issued to Investor
Certificateholders pursuant to SECTION 5.13 or the related Supplement:
(a) the provisions of this SECTION 5.11 shall be in full force and effect;
(b) the Company, the Servicer and the Trustee may deal with each Clearing Agency for all purposes (including the making of distributions on the Investor Certificates) as the Investor Certificateholder without respect to whether there has been any actual authorization of such actions by the Certificate Book-Entry Holders with respect to such actions;
(c) to the extent that the provisions of this SECTION 5.11 conflict with any other provisions of this Agreement, the provisions of this SECTION 5.11 shall control; and
(d) the rights of Certificate Book-Entry Holders shall be exercised only through the Clearing Agency and the related Clearing Agency Participants and shall be limited to those established by law and agreements between such related Certificate Book-Entry Holders and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Depository Agreement, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the Investor Certificates to such Clearing Agency Participants.
Notwithstanding the foregoing, no Class or Series of Investor Certificates may be issued as Book-Entry Certificates (but, instead, shall be issued as Definitive Certificates) unless at the time of issuance of such Class or Series, the Company and the Trustee receive a Tax Opinion.
SECTION 5.12. NOTICES TO CLEARING AGENCY. Whenever notice or other communication to the Investor Certificateholders is required under this Agreement, unless and until Definitive Certificates shall have been issued to Certificate Book-Entry Holders pursuant to SECTION 5.13, the Trustee shall give all such notices and communications specified herein to be given to the Investor Certificateholders to the Clearing Agencies.
SECTION 5.13. DEFINITIVE CERTIFICATES. If (a)(i) the Company advises the Trustee in writing that any Clearing Agency is no longer willing or able to properly discharge its responsibilities under the applicable Depository Agreement, and (ii) the Company is unable to locate a qualified successor, (b) the Company, at its option, advises the Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of a Servicer Default or an Early Amortization Event, Certificate Book-Entry Holders representing Fractional Undivided Interests aggregating more than 50% of the Invested Amount held by such Certificate Book-Entry Holders of each affected Series then issued and outstanding (and, if applicable, the Majority Letter of Credit Banks and the Majority Liquidity Banks) advise the Clearing Agency through the Clearing Agency Participants in writing, and the Clearing Agency shall so notify the Trustee, that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Certificate Book-Entry Holders, the Trustee shall notify the Clearing Agency, which shall be responsible to notify the Certificate Book-Entry Holders, of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Book-Entry Holders requesting the same. Upon surrender to the Trustee of the Book-Entry Certificates by the Clearing Agency, accompanied by registration instructions from the Clearing Agency for registration, the Trustee shall issue the Definitive Certificates. Neither the Company nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions.
ARTICLE VI
OTHER MATTERS RELATING TO THE COMPANY
SECTION 6.01. LIABILITY OF THE COMPANY. Except as set forth below in this SECTION 6.01, the Company shall be liable for all obligations, covenants, representations and warranties of the Company arising under or related to this Agreement or any Supplement. Except as provided in the preceding sentence and otherwise herein, the Company shall be liable only to the extent of the obligations specifically undertaken by it in its capacity as Company hereunder and shall not be liable for any act or omission of the Paying Agent, an authenticating agent, the Transfer Agent and Registrar or the Trustee. Notwithstanding any other provision hereof or of any Supplement, the sole remedy of the Trust, the Trustee (in its individual capacity or as Trustee), the Holders or any other Person in respect of any obligation, covenant, representation, warranty or agreement of the Company under or related to this Agreement or any Supplement shall be against the assets of the Company. Neither the Trust, the Trustee, the Holders nor any other Person shall have any claim against the Company to the extent that such
assets are insufficient to meet such obligations, covenant, representation, warranty or agreement (the difference being referred to herein as a "SHORTFALL") and all claims in respect of the shortfall shall be extinguished.
SECTION 6.02. LIMITATION ON LIABILITY OF THE COMPANY. Subject to SECTIONS 6.01 and 10.19, neither the Company nor any of its directors or officers or employees or agents shall be under any liability to the Trust, the Trustee, the Holders or any other Person for any action taken or for refraining from the taking of any action pursuant to this Agreement whether or not such action or inaction arises from express or implied duties under any Transaction Document; PROVIDED, HOWEVER, that this provision shall not protect the Company against any liability which would otherwise be imposed by reason of willful misconduct, bad faith or gross negligence in the performance of any duties or by reason of reckless disregard of any obligations and duties hereunder. The Company and any director or officer or employee or agent of the Company may rely in good faith on any document of any kind PRIMA FACIE properly executed and submitted by any Person (other than, in the case of the Company, the Company or the Servicer) respecting any matters arising hereunder.
ARTICLE VII
EARLY AMORTIZATION EVENTS
SECTION 7.01. EARLY AMORTIZATION EVENTS. Unless modified with respect to any Series of Investor Certificates by any related Supplement, if any one of the following events (each, an "EARLY AMORTIZATION EVENT") shall occur:
(a) an Insolvency Event shall have occurred with respect to the Company;
(b) the Trust or the Company shall become an "investment company" within the meaning of the 1940 Act;
(c) the Trust shall receive a written notice from the Internal Revenue Service taking the position that the Trust should be characterized for United States federal income tax purposes as a "publicly traded partnership" or as an association taxable as a corporation and counsel to the Company cannot provide an opinion addressed to the Trustee and reasonably acceptable to the Letter of Credit Agent and the Administrative Agent that such claim is without merit; or
(d) the Trustee shall be appointed Successor Servicer pursuant to the Servicing Agreement;
then, an "Early Amortization Period" with respect to all Outstanding Series shall commence without any notice or other action on the part of the Trustee, any Investor Certificateholder, the Letter of Credit Agent, any Letter of Credit Bank, the Administrative Agent or any Liquidity
Bank immediately upon the occurrence of such event. The Servicer shall notify each Rating Agency, the Letter of Credit Agent, the Administrative Agent and the Trustee in writing of the occurrence of any Early Amortization Period, specifying the cause thereof. Upon the commencement against the Company of a case, proceeding or other action described in clause (ii) of the definition of "Insolvency Event", the Company shall cease to purchase Loans from any Seller and cease to transfer Purchased Loans to the Trust, until such time, if any, as such case, proceeding or other action is vacated, discharged, or stayed or bonded pending appeal. If an Insolvency Event with respect to the Company occurs, the Company shall immediately cease to transfer Purchased Loans to the Trust (or, if the Company has previously suspended the transfer of Purchased Loans to the Trust to comply with the preceding sentence, such suspension shall become a permanent cessation of the transfer of Purchased Loans to the Trust) and shall promptly give written notice to the Trustee of such occurrence. Notwithstanding any cessation of the transfer to the Trust of additional Purchased Loans, Purchased Loans transferred to the Trust prior to the occurrence of such Insolvency Event and Collections in respect of such Purchased Loans and interest, whenever created, accrued in respect of such Purchased Loans, shall continue to be a part of the Trust.
Additional Early Amortization Events and the consequences thereof may be set forth in each Supplement with respect to the Series relating thereto.
SECTION 7.02. ADDITIONAL RIGHTS UPON THE OCCURRENCE OF CERTAIN EVENTS.
(a) If after the occurrence of an Insolvency Event with respect to the Company, the Aggregate Invested Amount and all accrued and unpaid interest thereon have not been paid to the Investor Certificateholders, the Trustee in accordance with the written direction of the Servicer shall (i) publish a notice in the Wall Street Journal (the "AUTHORIZED NEWSPAPER") that an Insolvency Event has occurred and that the Trustee intends to sell, dispose of or otherwise liquidate the Purchased Loans in a commercially reasonable manner and (ii) send written notice to the Investor Certificateholders, the Letter of Credit Agent and the Administrative Agent and request instructions from such Persons, which notice shall request each Certificateholder, the Letter of Credit Agent and the Administrative Agent to advise the Trustee in writing that it elects one of the following options: (A) the Investor Certificateholder, the Letter of Credit Agent and the Administrative Agent wishes the Trustee not to sell, dispose of or otherwise liquidate the Purchased Loans; (B) the Investor Certificateholder, the Letter of Credit Agent and the Administrative Agent wishes the Trustee to sell, dispose of or otherwise liquidate the Purchased Loans; or (C) the Investor Certificateholder, the Letter of Credit Agent and the Administrative Agent refuses to advise the Trustee as to the specific action the Trustee should take. If after 60 days from the day notice pursuant to clause (i) above is first published (the "PUBLICATION DATE"), the Trustee shall not have received written instructions selecting option (A) above from (x) except as otherwise provided in a Supplement with respect to any Series, Investor Certificateholders representing more than 50% of the Invested Amount of each Series (or, in the case of a Series having more than one Class of Investor Certificates, Investor Certificateholders representing more than
50% of the Invested Amount of each Class of such Series) and, if applicable, the Majority Letter of Credit Banks and the Majority Liquidity Banks and (y) if there are any Holders of the Exchangeable Company Interest other than the Company, the Holders of the Exchangeable Company Interest representing more than 50% of the Company Interest not held by the Company, the Trustee shall proceed to sell, dispose of, or otherwise liquidate the Purchased Loans in a commercially reasonable manner and on commercially reasonable terms, which shall include the solicitation of competitive bids and the Trustee shall proceed to consummate the sale, liquidation or disposition of the Purchased Loans as provided above with the highest bidder for the Purchased Loans. The Company or any of its Affiliates shall be permitted to bid for the Purchased Loans. In addition, the Company or any of its Affiliates shall have the right to match any bid by a third person and be granted the right to purchase the Purchased Loans at such matched bid price. All reasonable costs and expenses incurred by the Trustee in such sale shall be reimbursable to the Trustee as provided in SECTION 8.05. After the appointment of the Trustee as Successor Servicer pursuant to the Servicing Agreement, the Trustee shall proceed to sell, dispose of, or otherwise liquidate the Purchased Loans in a commercially reasonable manner and on commercially reasonable terms, which shall include the solicitation of competitive bids and the Trustee shall proceed to consummate the sale, liquidation or disposition of the Purchased Loans as provided above with the highest bidder for the Purchased Loans. The Company or any of its Affiliates shall be permitted to bid for the Purchased Loans. In addition, the Company or any of its Affiliates shall have the right to match any bid by a third person and be granted the right to purchase the Purchased Loans at such matched bid price. The provisions of SECTIONS 7.01 and 7.02 shall be cumulative. All reasonable costs and expenses incurred by the Trustee in such sale shall be reimbursable to the Trustee as provided in SECTION 8.05.
(b) The proceeds from the sale, disposition or liquidation of the Purchased Loans pursuant to subsection (a) above shall be treated as Collections on the Purchased Loans and such proceeds shall be released to the Trustee in an amount equal to the amount of any expenses incurred by the Trustee acting in its capacity either as Trustee or as liquidating agent under this SECTION 7.02 that have not otherwise been reimbursed and the remainder, if any, will be distributed to Investor Certificateholders of each Series after immediately being deposited in the Collection Account, in accordance with the provisions of SUBSECTION 3.01(D) and the related Supplement for such Series. After giving effect to all such distributions, the remainder, if any, shall be allocated to the Exchangeable Company Interest and shall be released to the Holders of the Exchangeable Company Interest pro-rata based on the amount of the Exchangeable Company Interest held by each Holder thereof.
ARTICLE VIII
THE TRUSTEE
SECTION 8.01. DUTIES OF TRUSTEE.
(a) The Trustee, prior to the occurrence of a Servicer Default or Early Amortization Event of which a Responsible Officer of the Trustee has actual knowledge and after the curing of all Servicer Defaults and Early Amortization Events which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in the Pooling and Servicing Agreements or any Supplement and no implied covenants or obligations shall be read into such Pooling and Servicing Agreements against the Trustee. If a Servicer Default or Early Amortization Event of which a Responsible Officer of the Trustee has actual knowledge occurred (which has not been cured or waived), the Trustee shall exercise the rights and powers vested in it by any Pooling and Servicing Agreement or any Supplement and shall use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
(b) The Trustee may conclusively rely as to the truth of the statements and the correctness of the opinions expressed therein upon resolutions, certificates, statements, opinions, reports (including the Daily Report and the Monthly Settlement Statement), documents, orders or other instruments furnished to the Trustee; PROVIDED, that (i) in the case of any of the above which are specifically required to be furnished to the Trustee pursuant to any provision of the Pooling and Servicing Agreements, the Trustee shall, subject to SECTION 8.02, examine them to determine whether they appear on their face to conform to the requirements of this Agreement and (ii) in the case of any of the above as to which the Trustee is required to perform procedures pursuant to the Internal Operating Procedures Memorandum, the Trustee shall perform said procedures in accordance with the Internal Operating Procedures Memorandum.
(c) Subject to SUBSECTION 8.01(A), no provision of this Agreement or any Supplement shall be construed to relieve the Trustee from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct; PROVIDED, HOWEVER, that:
(i) the Trustee shall not be liable for an error of judgment unless it shall be proved that the Trustee was grossly negligent, or acted in bad faith, in ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any action taken, suffered or omitted to be taken by it in good faith;
(iii) the Trustee shall not be charged with knowledge of any failure by the Servicer to comply with any of its obligations or any other Potential
Servicer Default, unless a Responsible Officer of the Trustee obtains actual knowledge of such failure or the Trustee receives written notice of such failure from the Servicer, the Letter of Credit Agent, the Administrative Agent or any Investor Certificateholder;
(iv) the Trustee shall not be charged with knowledge of a Servicer Default, Early Amortization Event, Purchase Termination Event, Potential Purchase Termination Event or Potential Early Amortization Event unless a Responsible Officer of the Trustee obtains actual knowledge of such event or the Trustee receives written notice of such default or event from the Servicer, the Letter of Credit Agent, the Administrative Agent or any Holder of Investor Certificates;
(v) the Trustee shall not be liable for any investment losses resulting from any investments of funds on deposit in the Collection Account or any subaccounts thereof (PROVIDED that such investments are Eligible Investments); and
(vi) the Trustee shall have no duty to monitor the performance of the Servicer, nor shall it have any liability in connection with malfeasance or nonfeasance by the Servicer; the Trustee shall have no liability in connection with compliance of the Servicer or the Company with statutory or regulatory requirements related to the Purchased Loans; and the Trustee shall have no duty to perform, except as otherwise required pursuant to the Internal Operating Procedures Memorandum, any recalculation or verification of any calculation with respect to data provided to the Trustee by the Servicer.
(d) The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under any Pooling and Servicing Agreement or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in any Pooling and Servicing Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any obligations of the Servicer under such Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Servicer in accordance with the terms of such Agreement.
(e) Except as expressly provided in any Pooling and Servicing Agreement, the Trustee shall have no power to vary the corpus of the Trust.
(f) The Trustee shall take such actions as are set forth in the Internal Operating Procedures Memorandum set forth in Exhibit A unless prevented from doing so through no fault of the Trustee.
SECTION 8.02. RIGHTS OF THE TRUSTEE. Except as otherwise provided in
SECTION 8.01 and in the Internal Operating Procedures Memorandum:
(a) The Trustee may conclusively rely on and shall be protected in acting on, or in refraining from acting in accord with, any resolution, Responsible Officer's certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, note or other paper or document believed by it to be genuine and to have been signed or presented to it pursuant to any Pooling and Servicing Agreement by the proper party or parties.
(b) The Trustee may consult with counsel, and any Opinion of Counsel and any advice of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel.
(c) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by any Pooling and Servicing Agreement, or to institute, conduct or defend any litigation hereunder or in relation hereto, at the request, order or direction of any of the Holders, pursuant to the provisions of any Pooling and Servicing Agreement, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; PROVIDED, HOWEVER, that nothing contained herein shall relieve the Trustee of the obligations, upon the occurrence of a Servicer Default or Early Amortization Event (which has not been cured), to exercise such of the rights and powers vested in it by any Pooling and Servicing Agreement, and to use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. The right of the Trustee to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and the Trustee shall not be answerable for other than its gross negligence or willful misconduct in the performance of any such act.
(d) The Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by any Pooling and Servicing Agreement; PROVIDED that the Trustee shall be liable for its gross negligence or willful misconduct.
(e) The Trustee shall not be bound to make any investigation into the facts of matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, direction, order, approval, bond, note or other paper or document, unless requested in writing so to do by, except as otherwise provided in a Supplement to any Series, the Holders of Investor Certificates evidencing Fractional Undivided Interests aggregating more than 50% of the Invested Amount of any Series (and, if applicable, the Majority Letter of Credit Banks and the Majority Liquidity Banks) which could be materially and adversely affected if the Trustee does not perform such acts; PROVIDED, HOWEVER, that such Holders of Investor Certificates shall indemnify and
reimburse the Trustee for any liability or expense resulting from any such investigation requested by them; PROVIDED FURTHER that the Trustee shall be entitled to make such further inquiry or investigation into such facts or matters as it may reasonably see fit, and if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books and records of the Company, personally or by agent or attorney, at the sole cost and expense of the Company.
(f) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through affiliates, agents or attorneys or a custodian or nominee, and the Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such affiliate, agent, attorney, custodian or nominee appointed with due care by it hereunder.
(g) The Trustee shall not be required to make any initial or periodic examination of any documents or records related to the Purchased Loans or the Collection Account for the purpose of establishing the presence or absence of defects, the compliance by the Company with its representations and warranties or for any other purpose.
(h) In the event that the Trustee is also acting as Paying Agent or Transfer Agent and Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article VIII shall also be afforded to such Paying Agent or Transfer Agent and Registrar.
SECTION 8.03. TRUSTEE NOT LIABLE FOR RECITALS. The Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Investor Certificates (other than the certificate of authentication on the Investor Certificates). Except as set forth in SECTION 8.15, the Trustee makes no representations as to the validity or sufficiency of any Pooling and Servicing Agreement, of the Investor Certificates (other than the certificate of authentication on the Investor Certificates), of the Exchangeable Company Interest, of any Purchased Loan or of any related document or interest. The Trustee shall not be accountable for the use or application by the Company of any of the Investor Certificates or the Exchangeable Company Interest or of the proceeds of such Investor Certificates, or the Exchangeable Company Interest or for the use or application of any funds paid to the Company in respect of the Purchased Loans or deposited in or withdrawn from the Collection Account or other accounts hereafter established to effectuate the transactions contemplated herein and in accordance with the terms of any Pooling and Servicing Agreement.
The Trustee shall not be accountable for the use or application by the Servicer of any of the Investor Certificates or of the proceeds of such Investor Certificates, or for the use or application of any funds paid to the Servicer in respect of the Purchased Loans or deposited in or withdrawn from the Collection Account by or at the direction of the Servicer. The Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Purchased Loan.
SECTION 8.04. TRUSTEE MAY OWN INVESTOR CERTIFICATES. The Trustee in its individual or any other capacity (a) may become the owner or pledgee of Investor Certificates with the same rights as it would have if it were not the Trustee and (b) may transact any banking and trust business with the Company, the Servicer or the Sellers as it would were it not the Trustee.
SECTION 8.05. TRUSTEE'S FEES AND EXPENSES. The Trustee shall be
entitled to a fee (which shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust) for all services rendered
by the Trustee in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Trustee. The
Servicer covenants and agrees to pay to the Trustee annually in advance on the
Effective Date and on or about each one year anniversary thereof, a fee agreed
upon in writing between the Trustee and the Servicer. The Trustee shall also be
entitled to reimbursement from the Servicer or the Company upon its request for
all reasonable expenses (including, without limitation, expenses incurred in
connection with notices, requests for documentation or other communications to
Holders), disbursements, losses, liabilities, damages and advances incurred or
made by the Trustee in accordance with any of the provisions of any Pooling and
Servicing Agreement or by reason of its status as Trustee under any Pooling and
Servicing Agreement (including the reasonable fees and expenses of its agents,
any co-trustee and counsel) except any such expense, disbursement, loss,
liability, damage or advance as may arise from its gross negligence or bad
faith; PROVIDED, that any obligation of the Company to make payments under this
SECTION 8.05 shall be Company Subordinated Obligations. To the extent the fees
and expenses of the Trustee are not paid on a current basis (including pursuant
to the first sentence of this SECTION 8.05), the Trustee shall be entitled to be
paid such items from amounts that would be distributable to the Company under
Article III of this Agreement or payable to the Servicer pursuant to SUBSECTION
2.05(B) of the Servicing Agreement. The Trustee shall be entitled to
reimbursement for any reasonable out-of-pocket costs or expenses incurred in
connection with the review, negotiation, preparation, execution and delivery of
any of the Transaction Documents or in connection with the issuance of any
Investor Certificates on the Effective Date. If the Trustee is appointed
Successor Servicer in accordance with the Servicing Agreement, the Trustee, in
its capacity as Successor Servicer, shall also be entitled to be paid the
Servicing Fee and any other compensation to which the Servicer is expressly
entitled under any Pooling and Servicing Agreement. The provisions of this
SECTION 8.05 shall apply to the reasonable expenses, disbursements and advances
made or incurred by the Trustee, or any other Person, in its capacity as
liquidating agent, to the extent not otherwise paid. The covenants to pay the
expenses, disbursements, losses, liabilities, damages and advances provided for
in this Section shall survive the termination of any Pooling and Servicing
Agreement or the resignation or removal of the Trustee and shall be binding on
the Company, the Servicer and any Successor Servicer.
SECTION 8.06. ELIGIBILITY RECITALS. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any State thereof authorized under such laws to exercise corporate trust powers, having (or having a holding company parent with) a combined capital and surplus of at least $100,000,000
and subject to supervision or examination by federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purpose of this SECTION 8.06, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
SECTION 8.06, the Trustee shall resign immediately in the manner and with the
effect specified in SECTION 8.07.
SECTION 8.07. RESIGNATION OR REMOVAL OF TRUSTEE.
(a) Subject to paragraph (c) below, the Trustee may at any time resign and be discharged from the trust hereby created by giving written notice thereof to the Company, the Servicer, the Letter of Credit Agent, the Administrative Agent and the Rating Agencies. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted such appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of SECTION 8.06 hereof and shall fail to resign after written request therefor by the Servicer, or if at any time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or if a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Company may remove the Trustee and promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of successor trustee pursuant to any of the provisions of this SECTION 8.07 shall not become effective until acceptance of appointment by the successor trustee as provided in SECTION 8.08.
(d) The obligations of the Company described in SECTION 8.05 hereof and the obligations of the Servicer described in SECTION 8.05 hereof and SECTION 5.02 of the Servicing Agreement shall survive the termination of this Agreement or the removal or resignation of the Trustee as provided in this Agreement.
(e) No Trustee under this Agreement shall be personally liable for any action or omission of any successor trustee.
SECTION 8.08. SUCCESSOR TRUSTEE.
(a) Any successor trustee appointed as provided in SECTION 8.07 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein. The predecessor Trustee shall deliver to the successor trustee all documents or copies thereof, at the expense of the Servicer, and statements held by it hereunder; and the Company and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor trustee all such rights, power, duties and obligations. The Servicer shall immediately give notice, but in no event less than 10 days prior to any such resignation or removal, to each Rating Agency upon the appointment of a successor trustee.
(b) No successor trustee shall accept appointment as provided in this SECTION 8.08 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of SECTION 8.06.
(c) Upon acceptance of appointment by a successor trustee as provided in this SECTION 8.08, such successor trustee shall mail notice of such succession hereunder to all Holders at their addresses as shown in the Certificate Register or the Exchange Register, as applicable.
SECTION 8.09. MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, PROVIDED such corporation shall be eligible under the provisions of SECTION 8.06, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Trustee shall promptly give notice (except to the extent prohibited under any Requirement of Law or Contractual Obligation), but in no event less than 10 days prior to any such merger or consolidation, to the Company, the Servicer, the Letter of Credit Agent, the Administrative Agent and the Rating Agencies upon any such merger or consolidation of the Trustee. Information as to such merger or consolidation that is made publicly available by the Trustee in the Authorized Newspaper shall be deemed to satisfy the notice requirement of this SECTION 8.09.
SECTION 8.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of any Pooling and Servicing Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust may at the time be located, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Holders, such title to the Trust, or any part thereof, and, subject to the other provisions of this SECTION 8.10, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under SECTION 8.06 and no notice to Holders of the appointment of any co-trustee or separate trustee shall be required under SECTION 8.08. The Trustee shall promptly notify each Rating Agency of the appointment of any co-trustee.
(b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any statute of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee;
(ii) neither the Trustee nor any separate trustee or co-trustee shall be personally liable by reason of any act or omission of any other trustee, separate trustee or co-trustee hereunder so long as such trustee, separate trustee or co-trustee is appointed with due care in accordance with the terms of this Agreement; and
(iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VIII. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of any Pooling and Servicing Agreement, specifically including every provision of any Pooling and Servicing Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Servicer and the Company.
(d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect to any Pooling and Servicing Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.
SECTION 8.11. TAX RETURNS. In the event the Trust shall be required to file U.S. Federal, state, local or foreign income tax returns, the Company (or the Servicer on behalf of the Company) shall prepare and file or shall cause to be prepared and filed any such tax returns required to be filed by the Trust and shall remit such tax returns to the Trustee for signature at least five Business Days before such tax returns are due to be filed (including extensions). The Company (or the Servicer on behalf of the Company) shall also prepare or shall cause to be prepared all U.S. Federal tax information in connection with this Agreement required by law to be distributed to Holders and shall deliver such information to the Trustee at least five Business Days prior to the date it is required by law to be distributed to the Holders. The Trustee, upon request, will furnish the Company or the Servicer with all such information known to the Trustee as may be reasonably determined by the Company or the Servicer to be required in connection with the preparation of all U.S. Federal, state, local or foreign income tax returns of the Trust, and shall, upon the Company's (or the Servicer's on behalf of the Company) written request, execute such tax returns. In no event shall the Trustee in its individual capacity be liable for any liabilities, costs or expenses of the Trust, the Holders, the Company (or the Servicer on behalf of the Company), arising under any U.S. Federal, state, local or foreign income tax law or regulation, including, without limitation, excise taxes or any other tax imposed by a Governmental Authority on or measured by income (or any interest or penalty with respect thereto or arising from any failure to comply therewith). The Trustee shall not be required to determine whether any filing of tax returns is required.
SECTION 8.12. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF INVESTOR CERTIFICATES. All rights of action and claims under any Pooling and Servicing Agreement or the Investor Certificates may be prosecuted and enforced by the Trustee without the possession of any of the Investor Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been obtained. When the Trustee incurs expenses after the occurrence of an Insolvency Event with respect to the Servicer, the Company or the Trust, such expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable bankruptcy, insolvency, receivership or similar law.
SECTION 8.13. SUITS FOR ENFORCEMENT. If a Servicer Default shall occur and be continuing, the Trustee may, as provided in SECTION 6.01 of the Servicing Agreement, proceed to protect and enforce its rights and the rights of the Holders under this Agreement or any other Transaction Document by suit, action or proceeding (including any suit, action or proceeding on behalf of the Holders against any third party) in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Agreement or any other Transaction Document or in aid of the execution of any power granted in this Agreement or any other Transaction Document or for the enforcement of any other legal, equitable or other remedy as the Trustee, being advised by counsel, shall deem most effective to protect and enforce any of the rights of the Trustee or the Holders. In furtherance of and without limiting the generality of SUBSECTION 8.01(D), the Trustee shall have the right to obtain, before initiating any such action, such reasonable indemnity from the Holders as the Trustee may require against the costs, expenses and liabilities that may be incurred therein or thereby. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Investor Certificates or the Exchangeable Company Interest or the rights of any holder thereof, or authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 8.14. RIGHTS OF INVESTOR CERTIFICATEHOLDERS TO DIRECT TRUSTEE. Except as otherwise set forth in a Supplement to any Series, Investor Certificateholders evidencing more than 50% of the Invested Amount of any Series (and, if applicable, the Majority Letter of Credit Banks and the Majority Liquidity Banks) affected by the conduct of any proceeding or the exercise of any right conferred on the Trustee shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; PROVIDED, HOWEVER, that nothing in any Pooling and Servicing Agreement shall impair the right of the Trustee to take any action deemed proper by the Trustee and which is not inconsistent with such direction of the Investor Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks); PROVIDED FURTHER that in furtherance and without limiting the generality of SUBSECTION 8.01(D), the Trustee shall have the right to obtain, before acting in accordance with any such direction of the Investor Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks), such reasonable indemnity from the Investor Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks) as the Trustee may require against the costs, expenses and liabilities that may be incurred in so acting.
SECTION 8.15. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee represents and warrants that:
(a) the Trustee is a banking corporation organized, existing and in good standing under the laws of the State of New York and is duly authorized to exercise trust powers under applicable law;
(b) the Trustee has the power and authority to enter into this Agreement and any Supplement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement and any Supplement; and
(c) each Pooling and Servicing Agreement and each of the Transaction Documents executed by it have been duly executed and delivered by the Trustee and, in the case of all such Transaction Documents, are legal, valid and binding obligations of the Trustee, enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors rights generally and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity).
SECTION 8.16. MAINTENANCE OF OFFICE OR AGENCY. The Trustee will maintain at its expense in Houston, Texas, an office or offices or agency or agencies where notices and demands to or upon the Trustee in respect of the Investor Certificates or any other Interests and the Pooling and Servicing Agreements may be served. The Trustee will give prompt written notice to the Company, the Servicer and the Holders of any change in the location of the Certificate Register, the Exchange Register, or any such office or agency.
SECTION 8.17. LIMITATION OF LIABILITY. The Investor Certificates are executed by the Trustee, not in its individual capacity but solely as Trustee of the Trust, in the exercise of the powers and authority conferred and vested in it by the Trust Agreement. Each of the undertakings and agreements made on the part of the Trustee in the Investor Certificates is made and intended not as a personal undertaking or agreement by the Trustee but is made and intended for the purpose of binding only the Trust.
SECTION 8.18. CONSEQUENTIAL DAMAGES. In no event shall The Chase Manhattan Bank, in its capacity as Trustee, be liable for special, indirect or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if it has been advised of the likelihood of such loss or damage and regardless of the form of action.
ARTICLE IX
TERMINATION
SECTION 9.01. TERMINATION OF TRUST.
(a) The Trust and the respective obligations and responsibilities of the Company, the Servicer and the Trustee created hereby (other than the obligation of the Trustee to make payments to Holders as hereafter set forth and any indemnification obligations hereunder) shall terminate, except with respect to any such obligations or responsibilities expressly stated to survive such termination, on the earliest of (i) the last
day of the August, 2020 Settlement Period, (ii) at the option of the Company, at any time when the Aggregate Invested Amount is zero, (iii) following the occurrence of any of the Early Amortization Events specified in SECTION 7.01 of this Agreement, at any time when the Aggregate Invested Amount is zero and (iv) upon completion of distribution of the amounts referred to in SUBSECTION 7.02(B) (the "TRUST TERMINATION DATE").
(b) If on the Distribution Date in the month immediately preceding the month in which the Trust Termination Date occurs (after giving effect to all transfers, withdrawals, deposits and drawings to occur on such date) the Invested Amount of any Series would be greater than zero (as certified in writing by the Servicer), the Trustee, at the written direction of the Servicer, shall make reasonable efforts to sell within 30 days of such Distribution Date all of the Purchased Loans. The proceeds of such sale shall be treated as Collections on the Purchased Loans and shall be allocated in accordance with Article III. During such 30-day period, the Servicer shall continue to collect Collections on the Purchased Loans and allocate Collections in accordance with the provisions of Article III. The reasonable costs and expenses incurred by the Trustee in such sale shall be reimbursable to the Trustee as provided in SECTION 8.05.
SECTION 9.02. OPTIONAL PURCHASE AND FINAL TERMINATION DATE OF INVESTOR CERTIFICATES OF ANY SERIES.
(a) On any Business Day during the Amortization Period with respect to any Series on which the Invested Amount (or such other amount as may be set forth in the related Supplement) of such Series is reduced to an amount equal to or less than the Optional Repurchase Percentage of the Initial Invested Amount (or such other amount as may be set forth in the related Supplement) for such Series as of the day preceding the beginning of such Amortization Period, the Company shall have the option to repurchase the entire Investor Certificateholders' Interest of such Series, at a purchase price equal to (i) the outstanding Invested Amount of the Investor Certificates of such Series PLUS (ii) accrued and unpaid interest through such Business Day (after giving effect to any payment of principal and monthly interest on such date of purchase) PLUS (iii) all other amounts payable to all Investor Certificateholders of such Series under the related Supplement (such purchase price, the "CLEAN-UP CALL REPURCHASE PRICE"). The amount of the Clean-Up Call Repurchase Price will be deposited into the Collection Account for credit to the Series Collection Subaccount for such Series on such Business Day in immediately available funds and will be passed through in full to the applicable Investor Certificateholders. Following any such repurchase, such Investor Certificateholders' Interest in the Purchased Loans shall terminate and such interest therein will be allocated to the Exchangeable Company Interest and such Investor Certificateholders will have no further rights with respect thereto. In the event that the Company fails for any reason to deposit the Clean-Up Call Repurchase Price for such Purchased Loans, the Investor Certificateholders' Interest in the Purchased Loans will continue and monthly payments will continue to be made to the Investor Certificateholders.
(b) The amount deposited pursuant to SUBSECTION 9.02(A) shall be paid to the Investor Certificateholders of the related Series pursuant to Article III on the Business Day following the date of such deposit. All Investor Certificates of a Series which are purchased by the Company pursuant to SUBSECTION 9.02(A) shall be delivered by the Company upon such purchase to, and be canceled by (in accordance with the written directions of the Company), the Transfer Agent and Registrar and be disposed of in a manner satisfactory to the Trustee and the Company.
(c) All principal or interest with respect to any Series of Investor Certificates shall be due and payable no later than the Series Termination Date with respect to such Series. Unless otherwise provided in a Supplement, in the event that the Invested Amount of any Series of Investor Certificates is greater than zero on its Series Termination Date (after giving effect to all transfers, withdrawals, deposits and drawings to occur on such date and the payment of principal to be made on such Series on such date), the Trustee will sell or cause to be sold, in accordance with the directions of, except as otherwise set forth in a Supplement for any Series, the Investor Certificateholders representing more than 50% of the Invested Amount of such Series (and, if applicable, the Majority Letter of Credit Banks and the Majority Liquidity Banks) (upon which the Trustee may conclusively rely) and pay the proceeds to all Investor Certificateholders of such Series pro rata (except that unless expressly provided to the contrary in the related Supplement, no payment shall be made to Investor Certificateholders of any Class of any Series that is by its terms subordinated to any other Class until such senior Class of Investor Certificates have been paid in full) in final payment of all principal of and accrued interest on such Series of Investor Certificates, an amount of Purchased Loans or interests in Purchased Loans up to the Invested Amount of such Series at the close of business on such date; PROVIDED, HOWEVER, in furtherance and without limiting the generality of SUBSECTION 8.01(D), the Trustee shall have the right to obtain, before acting in accordance with any such direction of the Investor Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks), such reasonable indemnity from the Investor Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks) as the Trustee may require against the costs, expenses and liabilities that may be incurred in so acting. Absent such direction from, except as otherwise set forth in a Supplement for any Series, Investor Certificateholders representing more than 50% of the Invested Amount of such Series (and, if applicable, the Majority Letter of Credit Banks and the Majority Liquidity Banks) or absent such reasonable indemnity as the Trustee may require in connection with such direction, the Trustee shall continue to hold the Trust Assets in respect of such Series in accordance with the terms of the Pooling and Servicing Agreements until the Trust Termination Date (or until a majority of the Investor Certificateholders (and, if applicable, the Majority Letter of Credit Banks and the Majority Liquidity Banks) shall otherwise direct the Trustee); PROVIDED that the terms of this Agreement, the related Supplement and the Servicing Agreement shall be deemed to remain in full force and effect, except that no additional Purchased Loans shall be allocated with respect to such Series. The reasonable costs and expenses incurred by the Trustee in such sale shall be
reimbursable to the Trustee as provided in SECTION 8.05. Any proceeds of such sale in excess of such principal and interest paid shall be paid to the holder of the Exchangeable Company Interest, unless and to the extent otherwise specified in any applicable Supplement. Upon such Series Termination Date with respect to the applicable Series, final payment of all amounts allocable to any Investor Certificates of such Series shall be made in the manner provided in this SECTION 9.02.
SECTION 9.03. FINAL PAYMENT WITH RESPECT TO ANY SERIES.
(a) Written notice of any termination, specifying the Business Day upon which the Investor Certificateholders of any Series may surrender their Investor Certificates for payment of the final distribution with respect to such Series and cancellation, shall be given (subject to at least 30 days' prior written notice from the Servicer to the Trustee containing all information required for the Trustee's notice or such shorter period as is acceptable to the Trustee) by the Trustee to Investor Certificateholders of such Series mailed not later than ten days prior to such final distribution specifying (i) the Business Day upon which final payment of the Investor Certificates will be made upon presentation and surrender of Investor Certificates at the office or offices therein designated and (ii) the amount of any such final payment, payments being made only upon presentation and surrender of the Investor Certificates at the office or offices therein specified. The Servicer's notice to the Trustee in accordance with the preceding sentence shall be accompanied by a Responsible Officer's certificate setting forth the information specified in SECTION 4.03 of the Servicing Agreement covering the period during the then current calendar year through the date of such notice. The Trustee shall give such notice to the Transfer Agent and Registrar and the Paying Agent at the time such notice is given to such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to SUBSECTION 9.01(A) or the occurrence of the Series Termination Date with respect to any Series pursuant to SECTION 9.02, all funds then on deposit in the Collection Account (but only to the extent necessary to pay all outstanding and unpaid amounts to Holders) shall continue to be held in trust for the benefit of the Holders and the Paying Agent or the Trustee shall pay such funds to the Investor Certificateholders upon surrender of their Investor Certificates in accordance with the terms hereof. Any Investor Certificate not surrendered on the date specified in SUBSECTION 9.03(A)(I) shall cease to accrue any interest provided for such Investor Certificate from and after such date. In the event that all of the Investor Certificateholders shall not surrender their Investor Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Investor Certificateholders of such Series to surrender their Investor Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Investor Certificates of such Series shall not have been surrendered for cancellation, the Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Investor Certificateholders of such Series
concerning surrender of their Investor Certificates, and the cost thereof shall be paid out of the funds in the Collection Account held for the benefit of such Investor Certificateholders. The Trustee and the Paying Agent shall pay to the Company upon request any monies held by them for the payment of principal or interest that remains unclaimed for two years and neither the Trustee nor the Paying Agent shall be liable to any Investor Certificateholder for such payment to the Company upon its request. After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person.
(c) All Investor Certificates surrendered for payment of the final distribution with respect to such Investor Certificates and cancellation shall be canceled by the Transfer Agent and Registrar and be disposed of in a customary manner satisfactory to the Trustee.
SECTION 9.04. COMPANY'S TERMINATION RIGHTS. Upon the termination of the Trust pursuant to SECTION 9.01 and payment to the Trustee (in its capacity as such and/or in its capacity as Successor Servicer) of all amounts owed to it under any Pooling and Servicing Agreement, the Trustee shall assign and convey to the Company (without recourse, representation or warranty) in exchange for the Exchangeable Company Interest all right, title and interest of the Trust in the Trust Assets, whether then existing or thereafter created, and all proceeds thereof except for amounts held by the Trustee pursuant to SUBSECTION 9.03(B). The Trustee shall execute and deliver such instruments of transfer and assignment, in each case without recourse, representation or warranty (except with respect to the Trustee Liens as set forth below), as shall be reasonably requested by the Company to vest in the Company all right, title and interest which the Trust had in the Trust Assets free and clear of all Trustee Liens.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. AMENDMENT.
(a) This Agreement, the Servicing Agreement and each Supplement in respect of an outstanding Series (collectively, the "POOLING AND SERVICING AGREEMENTS") may be amended in writing from time to time by the Servicer, the Company and the Trustee, without the consent of any Holder (or the Letter of Credit Agent, the Letter of Credit Banks, the Administrative Agent or the Liquidity Banks), to cure any ambiguity, to correct or supplement any provisions herein or therein which may be inconsistent with any other provisions herein or therein or to add any other provisions hereof to change in any manner or eliminate any of the provisions with respect to matters or questions raised under any Pooling and Servicing Agreement which shall not be inconsistent with the provisions of any Pooling and Servicing Agreement, and solely with respect to this
Agreement and the Servicing Agreement, pursuant to SUBSECTION 6.02(C) and (D) of the Servicing Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by a Responsible Officer's certificate of the Company delivered to the Trustee, have a Material Adverse Effect (but, to the extent that the determination of whether such action would have a Material Adverse Effect requires a conclusion as to a question of law, an Opinion of Counsel shall be delivered to the Trustee in addition to such Responsible Officer's certificate); PROVIDED FURTHER any amendment that is entered into to provide additional Enhancement for any Outstanding Series or to conform to regulations issued by the Internal Revenue Service shall be deemed to have no Material Adverse Effect. The Trustee may, but shall not be obligated to, enter into any such amendment pursuant to this paragraph or paragraph (b) below which affects the Trustee's rights, duties or immunities under any Pooling and Servicing Agreement or otherwise.
(b) Any Pooling and Servicing Agreement and, to the extent provided in any Pooling and Servicing Agreement, any other agreement relating to the Purchased Loans may also be amended (other than in the circumstances referred to in the preceding paragraph (a)) in writing from time to time by the Servicer, the Company and the Trustee with the consent of, except as otherwise set forth in a Supplement for any Series, Investor Certificateholders evidencing more than 50% of the Invested Amount of any Series (and, if applicable, the Majority Letter of Credit Banks and the Majority Liquidity Banks) adversely affected in any material respect by the amendment (or, if any such Series shall have more than one Class of Investor Certificates adversely affected in any material respect by the amendment, more than 50% of the Invested Amount of each such Class) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of such Pooling and Servicing Agreement or such other agreement or of modifying in any manner the rights of Holders of any Series then issued and outstanding; PROVIDED, HOWEVER, that no such amendment shall (i) reduce in any manner the amount of, or delay the timing of, distributions which are required to be made on any Investor Certificate of such Series without the consent of such Investor Certificateholder of such Series (and, if applicable, each Letter of Credit Bank and each Liquidity Bank); (ii) change the definition of or the manner of calculating the interest of any Investor Certificateholder of such Series without the consent of such Investor Certificateholder (and, if applicable, each Letter of Credit Bank and each Liquidity Bank); or (iii) reduce the aforesaid percentage of the Invested Amount of any adversely affected Series or Class the Holders of which are required to consent to any such amendment without the consent of all Investor Certificateholders of each Series (and, if applicable, each Letter of Credit Bank and each Liquidity Bank) adversely affected in any material respect.
(c) Notwithstanding anything in this SECTION 10.01 to the contrary, the Supplement with respect to any Series may be amended on the terms and with the procedures provided in such Supplement.
(d) Promptly after the execution of any such amendment or consent, the Trustee shall furnish written notification of the substance of such amendment to each
Investor Certificateholder of each Outstanding Series (or with respect to an amendment of a Supplement, to each Investor Certificateholder of the applicable Series), and the Servicer shall furnish written notification of the substance of such amendment to the Letter of Credit Agent, each Letter of Credit Bank, the Administrative Agent, each Liquidity Bank and each Rating Agency. No such material amendment (including without limitation, the amendment of any Supplement notwithstanding anything to the contrary contained in any Supplement) shall be effective until the Rating Agency Condition has been satisfied.
(e) It shall not be necessary for the consent of Investor Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks) under this SECTION 10.01 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Investor Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks) shall be subject to such reasonable requirements as the Trustee may prescribe.
(f) In executing or accepting any amendment pursuant to this
SECTION 10.01, the Trustee shall, upon request, be entitled to receive
and rely upon (i) an Opinion of Counsel stating that such amendment is
authorized pursuant to a specific provision of a Pooling and Servicing
Agreement and complies with such provision, (ii) a certificate from a
Responsible Officer of the Company stating that such (A) amendment shall
not adversely affect the interests of the Holders of any outstanding
Investor Certificates (and, if applicable, the Letter of Credit Banks
and the Liquidity Banks) in any material respect except for Holders
(and, if applicable, the Letter of Credit Banks and the Liquidity Banks)
of the Series whose consent to such amendment has been obtained in
accordance with clause (b) of this SECTION 10.01 and (B) all conditions
precedent to the execution and delivery of such amendment shall have
been satisfied in full and (iii) a Tax Opinion.
SECTION 10.02. PROTECTION OF RIGHT, TITLE AND INTEREST TO TRUST. The Company (or the Servicer on behalf of the Company) shall cause each Pooling and Servicing Agreement, all amendments thereto and/or all financing statements and continuation statements and any other necessary documents covering the Holders' and the Trustee's right, title and interest to the Trust and the Trust Assets to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Trustee hereunder to all property comprising the Trust. The Company (or the Servicer on behalf of the Company) shall deliver to the Trustee copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing. In the event that the Servicer fails to file such financing or continuation statements and the Trustee has received an Opinion of Counsel, at the expense of the Company, that such filing is necessary to fully preserve and to protect the Trustee's right, title and interest in any Trust Asset then the Trustee shall have the right to file the same on behalf of the Servicer and the Company and the
Trustee shall be reimbursed and indemnified by the Company for making such filing. The Company shall cooperate fully with the Servicer in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this SECTION 10.02.
SECTION 10.03. LIMITATION ON RIGHTS OF HOLDERS.
(a) The death or incapacity of any Holder shall not operate to terminate this Agreement or the Trust, nor shall such death or incapacity entitle such Holder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them.
(b) Except with respect to the Investor Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks) as expressly provided in any Pooling and Servicing Agreement, no Holder (nor the Letter of Credit Banks nor the Liquidity Banks) shall have any right to vote or in any manner otherwise control the operation and management of the Trust, or the obligations of the parties hereto; nor shall any Holder (nor the Letter of Credit Banks nor the Liquidity Banks) be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Holder (nor the Letter of Credit Banks nor the Liquidity
Banks) shall have any right by virtue of any provisions of this
Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, unless such Holder
(and, if applicable, the Letter of Credit Banks and the Liquidity Banks)
previously shall have given to the Trustee written request to institute
such action, suit or proceeding in its own name as Trustee hereunder and
shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred
therein or thereby, and the Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or
refused to initiate any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each Holder
(and, if applicable, the Letter of Credit Banks and the Liquidity Banks)
with every other Holder (and, if applicable, the Letter of Credit Banks
and the Liquidity Banks) and the Trustee, that no one or more Holder(s)
(nor the Letter of Credit Banks nor the Liquidity Banks) shall have any
right in any manner whatever by virtue or by availing itself or
themselves of any provisions of the Pooling and Servicing Agreements to
affect, disturb or prejudice the rights of any other of the Interests,
or to obtain or seek to obtain priority over or preference to any other
such Holder (and, if applicable, the Letter of Credit Banks and the
Liquidity Banks), or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and common
benefit of all Holders (and, if applicable, the Letter of Credit Banks
and the Liquidity Banks). For the protection and enforcement of the
provisions of this SECTION 10.03, each and every Holder (and, if
applicable, the Letter of Credit Banks and the
Liquidity Banks) and the Trustee shall be entitled to such relief as can be given either at law or in equity.
(d) By their acceptance of Interests pursuant to this Agreement and the applicable Supplement, the Holders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks) agree to the provisions of this SECTION 10.03.
SECTION 10.04. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT ISSUES OF PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 10.05. NOTICES. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed to the Company, the Servicer and the Trustee at their respective Notice Addresses, or to such other address as may be hereafter notified by the respective parties hereto.
Any notice required or permitted to be mailed to a Holder shall be given by first-class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register or the Exchange Register, as the case may be. Any notice so mailed within the time prescribed in any Pooling and Servicing Agreement shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice.
SECTION 10.06. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of any Pooling and Servicing Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of such Pooling and Servicing Agreement and shall in no way affect the validity or enforceability of the other provisions of any Pooling and Servicing Agreement or of the Investor Certificates or rights of the Holders.
SECTION 10.07. ASSIGNMENT. Notwithstanding anything to the contrary contained herein, except as provided in SECTION 5.03 of the Servicing Agreement, no Pooling and Servicing Agreement, nor any rights or interests thereunder, may be assigned by the Company or the Servicer without the prior written consent of the Trustee acting on behalf of the Holders of 66-2/3% of the Invested Amount of each Outstanding Series (and, if applicable, the Letter of Credit Banks holding at least 66-2/3% of the Letter of Credit Commitment and the Liquidity Banks holding at least 66-2/3% of the Liquidity Commitment) and without the Rating Agency Condition having been satisfied with respect to such assignment.
SECTION 10.08. INVESTOR CERTIFICATES NONASSESSABLE AND FULLY PAID. It is the intention of the parties to each Pooling and Servicing Agreement that the Investor
Certificateholders (and, if applicable, the Letter of Credit Banks and the Liquidity Banks) shall not be personally liable for obligations of the Trust, that the interests in the Trust represented by the Investor Certificates shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever and that Investor Certificates upon authentication thereof by the Trustee pursuant to SECTION 5.02 are and shall be deemed fully paid.
SECTION 10.09. FURTHER ASSURANCES. The Company and the Servicer agree to do and perform, from time to time, any and all acts (including but not limited to the acts required by SUBSECTION 2.01(B) and notifying related Obligors to the extent necessary to perfect the assignment of any Purchased Loan from the Company to the Trust, except to the extent that the relevant UCC and other similar laws (to the extent applicable) permit the Company (or its assignees) to provide such notification subsequent to the applicable Loan Purchase Date without materially impairing the Trust's ownership or security interest in the Trust Assets and without incurring material expenses in connection with such notification) and to execute any and all further instruments required or reasonably requested by the Trustee more fully to effect the purposes of each Pooling and Servicing Agreement, including, without limitation, the execution of any financing statements or continuation statements relating to the Purchased Loans for filing under the provisions of the UCC (or other applicable laws) of any applicable jurisdiction.
SECTION 10.10. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Trustee or the Investor Certificateholders (or, if applicable, the Letter of Credit Agent, any Letter of Credit Banks, the Administrative Agent or any Liquidity Bank), any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 10.11. COUNTERPARTS. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument.
SECTION 10.12. THIRD-PARTY BENEFICIARIES. This Agreement will inure to the benefit of and be binding upon the parties hereto and the Holders and their respective successors and permitted assigns. Except as otherwise provided in this SECTION 10.12 and in any Supplement, no other Person will have any right or obligation hereunder.
SECTION 10.13. ACTIONS BY INVESTOR CERTIFICATEHOLDERS.
(a) Wherever in any Pooling and Servicing Agreement a provision is made that an action may be taken or a notice, demand or instruction given by Investor Certificateholders, such action, notice or instruction may be taken or given by any Investor Certificateholders of any Series, unless such provision requires a specific percentage of Investor Certificateholders of a certain Series or all Series.
(b) Any request, demand, authorization, direction, notice, consent, waiver or other act by an Investor Certificateholder shall bind such Investor Certificateholder and every subsequent Holder of such Investor Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or omitted to be done by the Trustee, the Company, the Servicer in reliance thereon, whether or not notation of such action is made upon such Investor Certificate.
SECTION 10.14. MERGER AND INTEGRATION. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the Servicing Agreement. This Agreement and the Servicing Agreement may not be modified, amended, waived, or supplemented except as provided herein.
SECTION 10.15. HEADINGS. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.
SECTION 10.16. NO SETOFF. Except as expressly provided in this Agreement or any other Transaction Document, the Trustee agrees that it shall have no right of setoff or banker's lien against, and no right to otherwise deduct from, any funds held in the Collection Account for any amount owed to it by the Company, the Servicer, any Holder, the Letter of Credit Agent, any Letter of Credit Bank, the Administrative Agent or any Liquidity Bank.
SECTION 10.17. NO BANKRUPTCY PETITION. Each of the Trustee (for itself and on behalf of the Holders) and the Servicer hereby covenant and agree that it will not institute against, or join with or assist other Person in instituting against, the Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any Applicable Insolvency Laws.
SECTION 10.18. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that (a) each Pooling and Servicing Agreement is executed and delivered by the Trustee, not individually or personally but solely as Trustee of the Trust, in the exercise of the powers and authority conferred and vested in it, (b) except with respect to SECTION 8.15 hereof the representations, undertakings and agreements herein made on the part of the Trust are made and intended not as personal representations, undertakings and agreements by the Trustee, but are made and intended for the purpose of binding only the Trust, (c) nothing herein contained shall be construed as creating any liability on the Trustee, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties who are signatories to this Agreement and by any Person claiming by, through or under such parties; PROVIDED, HOWEVER, the Trustee shall be liable in its individual capacity for its own willful misconduct or gross negligence and for any tax assessed against the Trustee based on or measured by any fees, commission or compensation received by it for acting as Trustee and (d) under no circumstances shall the Trustee be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under any
Pooling and Servicing Agreement; PROVIDED FURTHER that this SECTION 10.18 shall survive the resignation or removal of the Trustee.
Except as otherwise provided hereunder, the Company hereby agrees to indemnify and hold harmless the Trustee, the Trust (for the benefit of the Holders), the Holders, the Letter of Credit Agent, the Letter of Credit Banks, the Administrative Agent and the Liquidity Banks (each, an "INDEMNIFIED PERSON") from and against any loss, liability, expense, damage or injury suffered or sustained by reason of any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of the Company pursuant to any Pooling and Servicing Agreement to which it is a party, including but not limited to any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, except to the extent such loss, liability, expense, damage or injury resulted from the gross negligence, bad faith or willful misconduct of an Indemnified Person or resulted from the performance of any Purchased Loan, market fluctuations or other market or investment risk not attributable to acts or omissions or alleged acts or omissions of the Company; PROVIDED, HOWEVER, that any payments to be made by the Company pursuant to this subsection shall be Company Subordinated Obligations. The indemnification obligations of the Company hereunder shall survive the termination of any Pooling and Servicing Agreement or the resignation or removal of the Trustee and shall be binding upon the Company, the Servicer and any Successor Servicer.
SECTION 10.19. CERTAIN INFORMATION. The Servicer and the Company shall promptly provide to the Trustee such information in computer tape, hard copy or other form regarding the Purchased Loans as the Trustee may reasonably determine to be necessary to perform its obligations hereunder.
SECTION 10.20. RESPONSIBLE OFFICER CERTIFICATES; NO RECOURSE. Any certificate executed and delivered by a Responsible Officer of the Company, the Servicer or the Trustee pursuant to the terms of the Transaction Documents shall be executed by such Responsible Officer not in an individual capacity but solely in his or her capacity as an officer of the Company, the Servicer or the Trustee, as applicable, and such Responsible Officer will not be subject to personal liability as to matters contained in the certificate. A director, officer, employee or shareholder, as such, of the Servicer or the Company shall not have liability for any obligation of the Servicer or the Company hereunder or under any Transaction Document or for any claim based on, in respect of, or by reason of, any Transaction Document, unless such claim results from the gross negligence, fraudulent acts or willful misconduct of such director, officer, employee or shareholder.
SECTION 10.21. CHASE CONFLICT WAIVER. Chase acts as Trustee, Collateral Agent, Depositary, Administrative Agent, Liquidity Bank and may provide other services or facilities from time to time (the "CHASE ROLES"). Each of the parties hereto (including the holders of the Certificates by purchase thereof) and each Liquidity Bank acknowledges and consents to any and all Chase Roles, waives any objections it may have to any actual or potential conflict of interest caused by Chase's acting as Trustee, Collateral Agent, Administrative Agent, Depositary
or as Liquidity Bank hereunder and acting as or maintaining any of the Chase Roles, and agrees that in connection with any Chase Role, Chase may take, or refrain from taking, any action which it in its discretion deems appropriate.
IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.
BUNGE FUNDING, INC.
By: Morris Kalef
Name: Morris Kalef
Title: President
BUNGE MANAGEMENT SERVICES, INC.,
as Servicer
By: Theodore P. Fox
Name: Theodore P. Fox
Title: Vice President
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as Trustee
By: Bruce C. Boyd
Name: Bruce C. Boyd
Title: Vice President
EXHIBIT A
BUNGE MASTER TRUST, INTERNAL OPERATING PROCEDURES MEMORANDUM
The purpose of this memo is to set forth the standard operating procedures to be taken by The Chase Manhattan Bank, as Trustee under the Bunge Master Trust Pooling Agreement (the "POOLING AGREEMENT"), the Servicing Agreement (the "SERVICING AGREEMENT"), and each Supplement (the "SUPPLEMENT"), (together, the "AGREEMENTS") with respect to the Monthly Settlement Statement and Daily Report which are required to be provided to the Trustee by the Servicer pursuant to the Agreements.
All defined terms used herein and not otherwise defined herein have the meanings assigned to them under the Agreements.
1. PROCEDURES TO BE FOLLOWED WITH RESPECT TO THE DAILY REPORT DELIVERED TO THE TRUSTEE BY THE SERVICER.
a) The following procedures are to be performed with respect to each Daily Report delivered to the Trustee by the Servicer:
(i) COMPARE THE DEPOSITS AS REPORTED ON THAT DAY BY THE SERVICER IN THE DAILY REPORT TO THE ACTUAL AMOUNTS DEPOSITED TO THE COLLECTION ACCOUNT ON SUCH DATE;
(ii) WITH RESPECT TO THE RECONCILEMENT OF EACH OF THE TRUST ACCOUNTS SET FORTH IN THE DAILY REPORT, COMPARE THE BEGINNING BALANCE AS REPORTED BY THE SERVICER IN THE DAILY REPORT TO THE AMOUNT ON DEPOSIT IN THE TRUST ACCOUNTS PER THE ACCOUNTING RECORDS OF THE CHASE MANHATTAN BANK;
(iii) COMPARE THE ALLOCATED LOAN AMOUNT TO THE TARGET LOAN AMOUNT, AS INDICATED IN THE DAILY REPORT,
(iv) PERFORM EACH OF THE ACCOUNT TRANSFERS SET FORTH IN THE DAILY REPORT, AS DIRECTED BY THE SERVICER.
b) Through the use of an Excel spread sheet prepared in a format which mirrors the Daily Report, the following procedure shall be performed once per each week with respect to the Daily Report delivered by the Servicer:
FOLLOWING THE INPUT OF REQUIRED VARIABLES AND SPREAD SHEET EXECUTION, COMPARE THE RESULTING FIGURES AGAINST THOSE SPECIFIED IN THE DAILY REPORT PROVIDED BY THE SERVICER.
2. PROCEDURES TO BE FOLLOWED WITH RESPECT TO EACH MONTHLY SETTLEMENT STATEMENT DELIVERED BY THE SERVICER.
a) Through the use of an Excel spread sheet prepared in a format which mirrors the Monthly Settlement Statement, the following procedure shall be performed with respect to the Monthly Settlement Statement delivered by the Servicer:
FOLLOWING THE INPUT OF REQUIRED VARIABLES AND SPREAD SHEET EXECUTION, COMPARE THE RESULTING FIGURES AGAINST THOSE SPECIFIED IN THE MONTHLY SETTLEMENT STATEMENT PROVIDED BY THE SERVICER.
(b) With respect to the reconcilement of each of the Trust Accounts set forth on the Monthly Settlement Statement, we will compare the beginning and ending balances as reported by the Servicer on the Monthly Settlement Statement to the amounts which were on deposit in the Trust Accounts per the accounting records of The Chase Manhattan Bank as of the applicable date.
3. ACTIONS TO BE TAKEN WITH RESPECT TO THE DISCOVERY OF A DISCREPANCY.
Upon discovery of any material discrepancy between the amounts reported by the Servicer and the amounts calculated as provided above, the Trustee shall notify the Servicer. The Servicer shall then have ten business days to resolve such discrepancy before the Trustee shall be obligated to give notice to the Certificateholders (and, if applicable, the Letter of Credit Agent and the Administrative Agent) and each Rating Agency.
THIS INTERNAL OPERATING PROCEDURES MEMORANDUM CONSTITUTES CONFIDENTIAL AND PROPRIETARY INFORMATION OF THE CHASE MANHATTAN BANK. THIS MEMORANDUM SHALL NOT BE DISTRIBUTED OR IN ANY WAY COMMUNICATED TO ANY PERSON NOT A PARTY TO THE AGREEMENT OR THE SUPPLEMENT OR A RATING AGENCY WITHOUT THE PRIOR WRITTEN CONSENT OF THE CHASE MANHATTAN BANK.
Schedule 2
IDENTIFICATION OF TRUST ACCOUNTS
Collection Account #23526-00
The Chase Manhattan Bank
600 Travis, 49th Floor
Houston, TX 77002
S2-1
Schedule 3
LOCATION OF CHIEF EXECUTIVE OFFICE AND JURISDICTION
OF FORMATION OF THE COMPANY
CHIEF EXECUTIVE OFFICE: 50 Main Street
White Plains, New York 10606
JURISDICTION OF FORMATION: Delaware
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S3-1
Exhibit 10.4
BUNGE MASTER TRUST
FIRST AMENDED AND RESTATED
SERIES 2000-1 SUPPLEMENT
Dated as of July 12, 2001
to
POOLING AGREEMENT
Dated as of August 25, 2000
Among
BUNGE FUNDING, INC.,
as Company
BUNGE MANAGEMENT SERVICES, INC.,
as Servicer,
THE CHASE MANHATTAN BANK
as Administrative Agent,
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL",
NEW YORK BRANCH
as Letter of Credit Agent,
THE BANK OF NEW YORK,
as Collateral Agent,
BUNGE ASSET FUNDING CORP.
as Series 2000-1 Purchaser
and
THE BANK OF NEW YORK,
as Trustee
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS..............................................................................................1
SECTION 1.01. Definitions........................................................................1
ARTICLE II
DESIGNATION OF SERIES 2000-1 VFC CERTIFICATE; PURCHASE AND SALE OF THE
SERIES 2000-1 VFC
CERTIFICATE..............................................................................................2
SECTION 2.01. Designation........................................................................2
SECTION 2.02. The Series 2000-1 VFC Certificate..................................................2
SECTION 2.03. Purchases of Interests in the Series 2000-1
VFC Certificate....................................................................3
SECTION 2.04. Delivery...........................................................................3
SECTION 2.05. Procedure for Initial Issuance and for Increasing
the Series 2000-1 Invested Amount..................................................3
SECTION 2.06. Procedure for Decreasing the Series 2000-1
Invested Amount....................................................................5
SECTION 2.07. Interest...........................................................................6
SECTION 2.08. Indemnification by the Company.....................................................6
ARTICLE III
ARTICLE III OF THE AGREEMENT.............................................................................7
SECTION 3A.02. Establishment of Series 2000-1 Collection
Subaccount.........................................................................7
SECTION 3A.03. Determination of Interest..........................................................8
SECTION 3A.04. Adjustments to Series 2000-1 Invested Amount.......................................8
SECTION 3A.05. Applications.......................................................................8
ARTICLE IV
DISTRIBUTIONS, REPORTS AND LETTER OF CREDIT
DRAWINGS................................................................................................11
SECTION 4A.01. Distributions.....................................................................11
SECTION 4A.02. Reports...........................................................................11
SECTION 4A.03. Statements and Notices............................................................11
SECTION 4A.04. Letter of Credit Drawings.........................................................12
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ARTICLE V
ADDITIONAL SERIES 2000-1 EARLY AMORTIZATION
EVENTS..................................................................................................13
SECTION 5.01. Additional Series 2000-1 Early Amortization
Events............................................................................13
ARTICLE VI
SERVICING FEE...........................................................................................15
SECTION 6.01. Servicing Compensation............................................................15
ARTICLE VII
COVENANTS; REPRESENTATIONS AND WARRANTIES..............................................................16
SECTION 7.01. Representations and Warranties of the
Company and the Servicer..........................................................16
SECTION 7.02. Covenants of the Company and the Servicer.........................................16
SECTION 7.03. Negative Covenant of the Company;
Covenants of the Servicer.........................................................17
SECTION 7.04. Obligations Unaffected............................................................18
ARTICLE VIII
CONDITIONS PRECEDENT....................................................................................18
SECTION 8.01. Conditions Precedent to Effectiveness of
Supplement........................................................................18
ARTICLE IX
MISCELLANEOUS...........................................................................................23
SECTION 9.01. Ratification of Agreement.........................................................23
SECTION 9.02. Governing Law.....................................................................23
SECTION 9.03. Further Assurances................................................................23
SECTION 9.04. Payments..........................................................................23
SECTION 9.05. Costs and Expenses................................................................23
SECTION 9.06. No Waiver; Cumulative Remedies....................................................24
SECTION 9.07. Amendments........................................................................24
SECTION 9.08. Severability......................................................................25
SECTION 9.09. Notices...........................................................................25
SECTION 9.10. Successors and Assigns............................................................25
SECTION 9.11. Counterparts......................................................................26
SECTION 9.12. Setoff............................................................................26
SECTION 9.13. No Bankruptcy Petition; No Recourse...............................................26
SECTION 9.14. Limitation on Addition of Sellers.................................................28
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SECTION 9.15. Chase Conflict Waiver.............................................................28
SECTION 9.16. Limited Recourse..................................................................29
ARTICLE X
FINAL DISTRIBUTIONS.....................................................................................29
SECTION 10.01. Certain Distributions.............................................................29
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EXHIBITS
Exhibit A Form of Series 2000-1 VFC Certificate
Exhibit B Form of Daily Report
Exhibit C Form of Monthly Settlement Statement
Exhibit D Form of Notice of Issuance/Increase
SCHEDULES
Schedule 1 Series 2000-1 Collection Subaccount
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FIRST AMENDED AND RESTATED SERIES 2000-1 SUPPLEMENT dated as of July 12, 2001 (as amended, supplemented or otherwise modified in accordance with the terms hereof and in effect from time to time, this "SUPPLEMENT"), among the Company, the Servicer, BAFC, the Collateral Agent, the Administrative Agent, the Letter of Credit Agent and the Trustee. This Supplement amends and restates that certain Series 2000-1 Supplement, dated as of August 25, 2000, among the Company, the Servicer, BAFC, The Chase Manhattan Bank (as subsequently replaced by The Bank of New York), as the Collateral Agent, the Administrative Agent, the Letter of Credit Agent and The Chase Manhattan Bank (as subsequently replaced by The Bank of New York), as the Trustee.
W I T N E S S E T H :
WHEREAS, the Company, the Servicer and the Trustee have entered into the Pooling Agreement, dated as of August 25, 2000 (as in effect on the date hereof and as the same may be amended, supplemented or otherwise modified from time to time, the "AGREEMENT");
WHEREAS, the Agreement provides, among other things, that the Company, the Servicer and the Trustee may at any time and from time to time enter into supplements to the Agreement for the purpose of authorizing the issuance on behalf of the Trust by the Company for execution and redelivery to the Trustee for authentication of one or more Series of Investor Certificates; and
WHEREAS, the Company, the Servicer, the Trustee and BAFC as the Series 2000-1 Purchaser wish to supplement the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used herein shall unless otherwise defined or referenced herein, have the meanings assigned to such terms in Annex X attached to the Agreement which Annex X is incorporated by reference herein.
(a) If any term, definition or provision contained or incorporated
by reference herein conflicts with or is inconsistent with any term,
definition or provision contained in the Agreement, the terms and
provisions of this Supplement shall govern. All Article, Section,
subsection, Exhibit and Schedule references herein shall mean Article,
Section or subsection of or Exhibit or Schedule to this Supplement, except
as otherwise provided herein.
(b) Any reference herein to a Schedule or Exhibit to this Supplement shall be deemed to be a reference to such Schedule or Exhibit as it may be amended, modified or supplemented from time to time to the extent that such Schedule or Exhibit may be amended, modified or supplemented (or any term or provision of any Transaction Document may be amended that would have the effect of amending, modifying or supplementing information contained in such Schedule or Exhibit) in compliance with the terms of the Transaction Documents.
(c) Any reference in this Supplement to any representation, warranty or covenant "deemed" to have been made is intended to encompass only representations, warranties or covenants that are expressly stated to be repeated on or as of dates following the execution and delivery of this Supplement, and no such reference shall be interpreted as a reference to any implicit, inferred, tacit or otherwise unexpressed representation, warranty or covenant.
(d) The words "INCLUDE", "INCLUDES" or "INCLUDING" shall be interpreted as if followed, in each case, by the phrase "WITHOUT LIMITATION".
ARTICLE II
DESIGNATION OF SERIES 2000-1 VFC CERTIFICATE; PURCHASE AND
SALE OF THE SERIES 2000-1 VFC CERTIFICATE
SECTION 2.01. DESIGNATION. The Investor Certificate and interest created and authorized pursuant to the Agreement and this Supplement shall be designated as the "SERIES 2000-1 VFC CERTIFICATE."
SECTION 2.02. THE SERIES 2000-1 VFC CERTIFICATE.
(a) The Series 2000-1 VFC Certificate shall represent a fractional undivided interest in the Trust Assets, consisting of the right of the Series 2000-1 VFC Certificateholder to receive the distributions specified herein out of (i) the Series 2000-1 Invested Percentage (expressed as a decimal) of Collections received with respect to the Purchased Loans and all other funds on deposit in the Collection Account and (ii) to the extent such interests appear herein, all other funds on deposit in the Series 2000-1 Collection Subaccount (collectively, the "SERIES 2000-1 VFC CERTIFICATEHOLDER'S INTEREST").
(b) The Series 2000-1 VFC Certificate shall be substantially in the form of Exhibit A, and shall, upon issue, be executed by the Company and delivered by the Company to the Trustee for authentication and redelivery as provided in SECTION 2.04 hereof and SECTION 5.02 of the Agreement. The Series 2000-1 VFC Certificate shall not be issued in the form of a single global certificate as provided for in SECTION 5.01 of the
Agreement, but shall instead be issued in the form of one definitive certificate, registered in the name of the Series 2000-1 Purchaser as the holder thereof.
(c) The Exchangeable Company Interest and any other Series of Investor Certificates outstanding shall represent the ownership interests in the remainder of the Trust Assets not allocated pursuant hereto to the Series 2000-1 VFC Certificateholder's Interest.
SECTION 2.03. PURCHASES OF INTERESTS IN THE SERIES 2000-1 VFC CERTIFICATE.
Subject to the terms and conditions of this Supplement, including delivery of notice, if any, required by SECTION 2.05, (i) on the Series 2000-1 Issuance Date, the Series 2000-1 Purchaser shall purchase a Series 2000-1 VFC Certificate in an amount equal to the Series 2000-1 Initial Invested Amount, and (ii) thereafter, the Series 2000-1 Purchaser shall maintain its Series 2000-1 VFC Certificate, subject to increase or decrease during the Series 2000-1 Revolving Period, in accordance with the provisions of this Series 2000-1 Supplement. Payments by the Series 2000-1 Purchaser in respect of the Series 2000-1 VFC Certificate shall be made in immediately available funds to the Trust for deposit in the Series 2000-1 Collection Subaccount.
SECTION 2.04. DELIVERY. On the Series 2000-1 Issuance Date, the Company shall sign on behalf of the Trust and shall direct the Trustee in writing pursuant to SECTION 5.02 of the Agreement to duly authenticate, and the Trustee, upon receiving such direction, shall so authenticate the Series 2000-1 VFC Certificate in the name of the Series 2000-1 Purchaser in accordance with such written directions. In so doing, the Company acts as agent of the Trust and shall incur no personal liability in respect of the Investor Certificates. The Series 2000-1 VFC Certificate shall be issued in a minimum denomination of $100,000 and in integral multiples of $1,000 in excess thereof. The Trustee shall mark on its books the actual Series 2000-1 Invested Amount outstanding on any date of determination, which, absent manifest error, shall constitute PRIMA facie evidence of the outstanding Series 2000-1 Invested Amount from time to time.
SECTION 2.05. PROCEDURE FOR INITIAL ISSUANCE AND FOR INCREASING THE SERIES 2000-1 INVESTED AMOUNT.
(a) Subject to SUBSECTION 2.05(B), (i) on the Series 2000-1 Issuance Date, the Series 2000-1 Purchaser hereby agrees to purchase a Series 2000-1 VFC Certificate in accordance with SECTION 2.03 and (ii) on any Business Day on which the Servicer delivers a Daily Report during the Series 2000-1 Commitment Period, the Series 2000-1 Purchaser, the Administrative Agent (on behalf of the Liquidity Banks) and the Letter of Credit Agent (on behalf of the Letter of Credit Banks) hereby agree that the Series 2000-1 Invested Amount may be increased (a "SERIES 2000-1 INCREASE"), upon the request of the Servicer or the Company on behalf of the Trust (each date on which an increase in the Series 2000-1 Invested Amount occurs hereunder being herein referred to as the "SERIES 2000-1 INCREASE DATE" applicable to such Series 2000-1 Increase);
PROVIDED, HOWEVER, that the Servicer or the Company, as the case may be, shall have given the Series 2000-1 Purchaser, the Administrative Agent and the Letter of Credit Agent (with a copy to the Trustee) irrevocable written notice (effective upon receipt), substantially in the form of Exhibit D hereto, of such request no later than (i) if all or a portion of the Series 2000-1 Initial Invested Amount or Series 2000-1 Increase Amount is to be allocated to a Series 2000-1 CP Tranche, on or prior to the Series 2000-1 Issuance Date or such Series 2000-1 Increase Date, as the case may be or (ii) (x) if the Series 2000-1 Initial Invested Amount or Series 2000-1 Increase Amount is to be funded by a Prime Rate Liquidity Loan, on or prior to the Series 2000-1 Issuance Date or such Series 2000-1 Increase Date, as the case may be, or (y) if all or a portion of the Series 2000-1 Initial Invested Amount or Series 2000-1 Increase Amount is to be funded by a LIBOR Liquidity Loan, three Business Days prior to the Series 2000-1 Issuance Date or such Series 2000-1 Increase Date, as the case may be; PROVIDED, FURTHER, that the provisions of this subsection shall not restrict the allocations of Collections pursuant to Article III. Such notice shall state (x) the Series 2000-1 Issuance Date or the Series 2000-1 Increase Date, as the case may be and (y) the Series 2000-1 Initial Invested Amount, or the proposed amount of such Series 2000-1 Increase (the "SERIES 2000-1 INCREASE AMOUNT"), as the case may be.
(b) The Series 2000-1 Purchaser shall not be required to make the initial purchase of the Series 2000-1 VFC Beneficial Interest on the Series 2000-1 Issuance Date or to increase its Series 2000-1 Invested Amount on any Series 2000-1 Increase Date hereunder unless:
(i) the related aggregate Series 2000-1 Initial Invested Amount or Series 2000-1 Increase Amount is equal to $100,000 or an integral multiple of $1,000 in excess thereof;
(ii) after giving effect to the Series 2000-1 Initial Invested Amount or Series 2000-1 Increase Amount, (A) the Series 2000-1 Invested Amount (calculated without regard to clauses (d) and (e) of the definition of Series 2000-1 Invested Amount) would not exceed the Series 2000-1 Maximum Invested Amount on the Series 2000-1 Issuance Date or such Series 2000-1 Increase Date, as the case may be, and (B) the Series 2000-1 Allocated Loan Amount would not be less than the Series 2000-1 Target Loan Amount on the Series 2000-1 Issuance Date or such Series 2000-1 Increase Date, as the case may be, as set forth in the Daily Report delivered on such date;
(iii) no Series 2000-1 Early Amortization Event or Potential Series 2000-1 Early Amortization Event under the Agreement or this Supplement shall have occurred and be continuing; and
(iv) all of the representations and warranties made by each of the Company, the Servicer and each Seller in each Transaction Document to which it is a party are true and correct in all material respects on and as of the
Series 2000-1 Issuance Date or such Series 2000-1 Increase Date, as the case may be, as if made on and as of such date (except to the extent such representations and warranties are expressly made as of another date).
The Company's acceptance of funds in connection with (x) the Series 2000-1 Purchaser's initial purchase of the Series 2000-1 VFC Certificate on the Series 2000-1 Issuance Date and (y) each Series 2000-1 Increase occurring on any Series 2000-1 Increase Date shall constitute a representation and warranty by the Company to the Series 2000-1 Purchaser, the Administrative Agent, the Letter of Credit Agent, the Trustee and the Collateral Agent as of the Series 2000-1 Issuance Date or such Series 2000-1 Increase Date, as the case may be, that all of the conditions contained in this SUBSECTION 2.05(B) have been satisfied.
(c) The Servicer shall promptly notify the Company of the Series 2000-1 Increase Date. If the Series 2000-1 Purchaser funds a Series 2000-1 Increase, the Series 2000-1 Purchaser agrees to pay in immediately available funds the amount of such Series 2000-1 Increase on the related Series 2000-1 Increase Date to the Trust for deposit in the Series 2000-1 Collection Subaccount for distribution to the Company in accordance with the terms of the Transaction Documents.
SECTION 2.06. PROCEDURE FOR DECREASING THE SERIES 2000-1 INVESTED AMOUNT.
(a) On any Business Day on which the Servicer delivers a Daily Report during the Series 2000-1 Revolving Period or the Series 2000-1 Amortization Period, upon the written request of the Servicer or the Company on behalf of the Trust, the Series 2000-1 Invested Amount may be reduced (a "SERIES 2000-1 DECREASE") by the distribution by the Trustee to the Series 2000-1 Purchaser of the funds on deposit in the Series 2000-1 Collection Subaccount on such day in an amount not to exceed the amount of such funds on deposit on such day; PROVIDED that (i) any such distribution shall be applied in accordance with SUBSECTION 3A.05, (ii) the Servicer shall have given BAFC, the Administrative Agent, the Letter of Credit Agent and the Trustee irrevocable written notice (effective upon receipt) of such Series 2000-1 Decrease, on or prior to the Business Day of such Series 2000-1 Decrease and (iii) no prepayment of any Series 2000-1 Eurodollar Tranche prior to the termination of the related Interest Period may occur unless, concurrently with such prepayment, the Company shall have paid to the Series 2000-1 Purchaser any amounts due and payable by BAFC to the Liquidity Banks pursuant to SUBSECTION 4.01(C) of the Liquidity Agreement.
(b) Notwithstanding any provision to the contrary set forth in this Agreement, so long as BAFC or the Collateral Agent is the registered holder of the Series 2000-1 VFC Certificate, the Series 2000-1 Accrued Interest and the Series 2000-1 Invested Amount must be reduced in accordance with SUBSECTION 3A.05 to the extent of funds available in the Series 2000-1 Collection Subaccount on any Business Day that funds in the Cash Collateral Account are insufficient to remit the amounts required to be
remitted pursuant to SECTIONS 5.2 and 6.2 of the Security Agreement by an amount equal to such deficiency.
SECTION 2.07. INTEREST.
(a) Interest shall be payable on the Series 2000-1 VFC Certificate as specified in SUBSECTIONS 3A.05(A)(II) and 3A.05(B)(II).
(b) Calculations of per annum rates under this Supplement shall be made on the basis of a 360 day year with respect to interest rates except with respect to interest rates based on ABR, which shall be calculated on the basis of a 365 day year. Each determination of LIBOR Rate by the Administrative Agent shall be conclusive and binding upon each of the parties hereto in the absence of manifest error.
SECTION 2.08. INDEMNIFICATION BY THE COMPANY.
(a) Without limiting any other rights that BAFC, the Liquidity Banks, the Administrative Agent or the Letter of Credit Agent may have under this Supplement, the Agreement, the other Transaction Documents or under applicable law, the Company hereby agrees to indemnify BAFC, the Liquidity Banks, the Administrative Agent, the Letter of Credit Agent and the Letter of Credit Banks and any of their respective agents, officers, directors and employees (collectively, the "SERIES 2000-1 INDEMNIFIED PARTIES") from and against any and all damages, losses, claims, liabilities, costs and expenses, including reasonable attorneys' fees and reasonable disbursements (all of the foregoing being collectively referred to as "SERIES 2000-1 INDEMNIFIED AMOUNTS") awarded against or incurred by any of them in connection with the entering into and performance of this Agreement or any of the Transaction Documents by any of the Series 2000-1 Indemnified Parties, excluding, however, any amounts (i) to the extent resulting from the gross negligence or willful misconduct on the part of any Series 2000-1 Indemnified Party or (ii) constituting recourse (except as otherwise specifically provided herein or in any Transaction Document) for Defaulted Loans.
(b) In case any proceeding by any Person shall be instituted involving any Series 2000-1 Indemnified Party in respect of which indemnity may be sought pursuant to paragraph (a) of this SECTION 2.08, such Series 2000-1 Indemnified Party shall promptly notify the Company, and the Company, upon request of the Series 2000-1 Indemnified Party, shall retain counsel reasonably satisfactory to the Series 2000-1 Indemnified Party to represent the Series 2000-1 Indemnified Party and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Series 2000-1 Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Series 2000-1 Indemnified Party unless the Company and the Series 2000-1 Indemnified Party shall have mutually agreed to the retention of such counsel. It is understood that the Company shall not, in respect of the legal expenses of any Series 2000-1 Indemnified Party in connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such Series 2000-1 Indemnified Parties and all other parties indemnified by the Company under the Series Supplement, or any other Transaction Document. Such firm shall be designated in writing by Chase.
(c) Any payments to be made by the Company pursuant to this Section shall (i) be Company Subordinated Obligations, (ii) be made solely from funds available to the Company that are not required to be applied to Company Unsubordinated Obligations then due and (iii) not constitute a general recourse claim against the Company after satisfying all Company Unsubordinated Obligations then due, except to the extent that funds are available (including, but not limited to, funds available to the Company pursuant to the exercise of its right to indemnity and other payments pursuant to SECTIONS 2.05 and 8.02 of the Sale Agreement) to the Company to make such payments.
ARTICLE III
ARTICLE III OF THE AGREEMENT
SECTION 3.01 of the Agreement and each other section of Article III of the Agreement relating to another Series shall be read in its entirety as provided in the Agreement. Article III of the Agreement (except for SECTION 3.01 thereof and any portion thereof relating to another Series) shall read in its entirety as follows and shall be exclusively applicable to Series 2000-1:
SECTION 3A.02. ESTABLISHMENT OF SERIES 2000-1 COLLECTION SUBACCOUNT.
(a) The Trustee shall cause to be established and maintained in the name of the Trustee, on behalf of the Trust, for the benefit of the Series 2000-1 Purchaser a subaccount of the Collection Account (the "SERIES 2000-1 COLLECTION SUBACCOUNT"), which subaccount is the Series Collection Subaccount with respect to Series 2000-1 to bear a designation indicating that the funds deposited therein are held for the benefit of the Series 2000-1 Purchaser and its assignees. The Trustee, on behalf of the Holders, shall possess all right, title and interest in all funds from time to time on deposit in, and all Eligible Investments credited to, the Series 2000-1 Collection Subaccount and in all proceeds thereof. The Series 2000-1 Collection Subaccount shall be under the sole dominion and control of the Trustee for the exclusive benefit of the Series 2000-1 Purchaser and its assignees.
(b) All Eligible Investments in the Series 2000-1 Collection Subaccount shall be held by the Trustee, on behalf of the Holders; PROVIDED, HOWEVER, that funds on deposit in the Series 2000-1 Collection Subaccount shall in accordance with SUBSECTION 3.01(B) of the Pooling Agreement, at the direction of the Company (or the
Servicer on behalf of the Company), be invested together with funds held in other subaccounts or sub-subaccounts of the Collection Account.
SECTION 3A.03. DETERMINATION OF INTEREST. The amount of interest distributable with respect to the Series 2000-1 VFC Certificate ("SERIES 2000-1 ACCRUED INTEREST") on any date of determination shall be the aggregate amount of Series 2000-1 Daily Interest Expense accrued from and including the Series 2000-1 Issuance Date to but excluding such date of determination minus the aggregate amount of interest that has been distributed in accordance with SUBSECTION 3A.05(A)(II) or SUBSECTION 3A.05(B)(II).
SECTION 3A.04. ADJUSTMENTS TO SERIES 2000-1 INVESTED AMOUNT.
(a) REDUCTIONS TO SERIES 2000-1 INVESTED AMOUNT. If, on any Special
Allocation Settlement Report Date, the Series 2000-1 Allocable Charged-Off
Amount is greater than zero for the related Settlement Period, the Trustee
shall (in accordance with the written directions of the Servicer upon
which the Trustee may conclusively rely) reduce the Series 2000-1 Invested
Amount (but not below zero) by such Series 2000-1 Allocable Charged-Off
Amount (which shall also be reduced by the amount so applied) and shall
allocate such amount to the Series 2000-1 Invested Amount.
(b) INCREASES TO SERIES 2000-1 INVESTED AMOUNT. If, on any Special
Allocation Settlement Report Date, the Series 2000-1 Allocable Recoveries
Amount is greater than zero for the related Settlement Period, the Trustee
shall (in accordance with written directions from the Servicer upon which
the Trustee may conclusively rely, subject to its obligation to perform
the procedures set forth in the Internal Operating Procedures Memorandum)
increase the Series 2000-1 Invested Amount (but only to the extent of any
previous reductions of the Series 2000-1 Invested Amount pursuant to
SUBSECTION 3A.04(a)) by the amount of the Series 2000-1 Allocable
Recoveries Amount (which shall also be reduced by the amount so applied)
and shall allocate such amount to the Series 2000-1 Invested Amount;
SECTION 3A.05. APPLICATIONS.
(a) During the Series 2000-1 Revolving Period, the funds deposited in the Series 2000-1 Collection Subaccount, after giving effect to any deposit resulting from a Series 2000-1 Increase, if any pursuant to SUBSECTION 2.05 on any Business Day shall be distributed by the Trustee not later than 4:30 p.m., New York City time (but only to the extent that the Trustee has received a Monthly Settlement Statement or Daily Report, as applicable, which reflects the receipt of the Collections on deposit therein not later than 12:00 (Noon), New York City time, upon which Monthly Settlement Statement or Daily Report, as applicable, the Trustee may conclusively rely, subject to its obligation to perform the procedures set forth in the Internal Operating Procedures Memorandum) in accordance with the following priorities (or, if neither BAFC nor the Collateral Agent is the registered holder of the Series 2000-1 VFC Certificate, the Trustee shall distribute the
amounts required by clauses (ii), (iii) and (iv) below in accordance with the payment instructions of any subsequent holder of the Series 2000-1 VFC Certificate):
(i) distribute to the Servicer an amount equal to the Series 2000-1 Servicing Fee due and payable as required in SUBSECTION 2.05(A) of the Servicing Agreement (less any amounts payable to the Trustee pursuant to SECTION 8.05 of the Agreement, which shall be paid to the Trustee);
(ii) if requested pursuant to SUBSECTION 2.06(A) or if required pursuant to SUBSECTION 2.06(B), transfer to the Cash Collateral Account an amount to be applied (A) first, to pay Series 2000-1 Accrued Interest and (B) second, to reduce the Series 2000-1 Invested Amount (any such reduction, the "SERIES 2000-1 PRINCIPAL PAYMENT");
(iii) on each Distribution Date, transfer to the Cash Collateral Account an amount equal to any Series 2000-1 Program Costs due and payable;
(iv) on each Distribution Date, transfer to Bunge Finance and Bunge Finance North America an amount equal to the applicable Solicitation Fee for the immediately preceding Settlement Period; and
(v) on any Business Day, distribute to the Company in accordance with directions contained in the Monthly Settlement Statement or Daily Report, as applicable, or to such accounts or such Persons and in such amounts as the Company (or the Servicer on behalf of the Company) may direct in writing (which directions may consist of standing instructions provided by the Company that shall remain in effect until changed by the Company in writing);
PROVIDED that the Trustee shall only make the distributions set forth in this SUBSECTION 3A.05(A) if no Series 2000-1 Early Amortization Event or Potential Series 2000-1 Early Amortization Event has occurred and is continuing to the actual knowledge of the Trustee and only to the extent that if, after giving effect to such distribution, the Series 2000-1 Target Loan Amount would not exceed the Series 2000-1 Allocated Loan Amount as shown on the applicable Daily Report and Monthly Settlement Statement.
(b) During the Series 2000-1 Amortization Period, the Trustee shall, based solely on the information provided to the Trustee by the Servicer in the Monthly Settlement Statement and Daily Report, as applicable (upon which the Trustee may conclusively rely, subject to its obligation to perform the procedures set forth in the Internal Operating Procedures Memorandum), apply, on any Business Day, amounts on deposit in the Series 2000-1 Collection Subaccount in the following order of priority (or, if neither BAFC nor the Collateral Agent is the registered holder of the Series 2000-1 VFC Certificate, the Trustee shall distribute the amounts required by clauses (ii) and (iv) below in accordance with the payment instructions of any subsequent holder of the Series 2000-1 VFC Certificate):
(i) if any amounts are owed to the Trustee or any other
Person, on account of Servicing Fees incurred in respect of the
performance of its responsibilities as Successor Servicer,
distribute to the Trustee or such other Person an amount equal to
the product of (a) the amount so owed to such Successor Servicer and
(b) a fraction, the numerator of which shall be equal to the Series
2000-1 Invested Amount as of the end of the immediately preceding
Settlement Period and the denominator of which shall be equal to the
Aggregate Invested Amount as of the end of the immediately preceding
Settlement Period;
(ii) if requested pursuant to SUBSECTION 2.06(A) or if required pursuant to SUBSECTION 2.06(B), transfer to the Cash Collateral Account an amount to be applied (A) first, to pay Series 2000-1 Accrued Interest and (B) second, to make Series 2000-1 Principal Payments;
(iii) if, following the repayment in full of all amounts set forth in clauses (i)-(ii) above, any amounts are owed to the Trustee, the Series 2000-1 Purchaser or any other Person, on account of its fees, expenses and disbursements incurred in respect of the performance of its responsibilities hereunder or as Successor Servicer (except as otherwise set forth in clause (v) below), transfer such amounts to the Trustee, the Series 2000-1 Purchaser or such other Person;
(iv) transfer to the Cash Collateral Account an amount equal to any other Series 2000-1 Program Costs due and payable;
(v) distribute to the Servicer an amount equal to the Series 2000-1 Servicing Fee due and payable as required in SUBSECTION 2.05(A) of the Servicing Agreement (less any amounts payable to the Trustee pursuant to SECTION 8.05 of the Agreement, which shall be paid to the Trustee);
(vi) on each Distribution Date, transfer to Bunge Finance and Bunge Finance North America an amount equal to the applicable Solicitation Fee for the immediately preceding Settlement Period; and
(vii) following the repayment in full of all amounts set forth in clauses (i) through (vi) above, the remaining amount on deposit in the Series 2000-1 Collection Subaccount, if any, shall be distributed to the holder of the Exchangeable Company Interest.
(c) The allocations to be made pursuant to this SECTION 3A.05 are subject to the provisions of SECTIONS 2.05, 2.07, 7.02, 9.01 and 9.04 of the Agreement.
ARTICLE IV
DISTRIBUTIONS, REPORTS AND LETTER OF CREDIT DRAWINGS
Article IV of the Agreement (except for any portion thereof relating to another Series) shall read in its entirety as follows and the following shall be exclusively applicable to the Series 2000-1 VFC Certificate issued pursuant to this Supplement:
SECTION 4A.01. DISTRIBUTIONS.
(a) The Trustee shall distribute to the Series 2000-1 Purchaser from the Series 2000-1 Collection Subaccount indicated in Article III the aggregate amount to be distributed to the Series 2000-1 Purchaser pursuant to Article III.
(b) All allocations and distributions hereunder shall be in accordance with the Monthly Settlement Statement and the Daily Report, as applicable, and shall be made in accordance with the provisions of SECTION 9.04 hereof and subject to SUBSECTION 3.01(G) of the Agreement.
SECTION 4A.02. REPORTS. The Servicer shall provide BAFC and the Trustee with a Daily Report in accordance with SECTION 4.01 of the Servicing Agreement.
SECTION 4A.03. STATEMENTS AND NOTICES.
(a) MONTHLY SETTLEMENT. On each Settlement Report Date, the Servicer shall deliver to BAFC, the Administrative Agent, the Letter of Credit Agent and the Trustee a Monthly Settlement Statement in the Form of Exhibit C setting forth, among other things, the Series 2000-1 Accrued Interest, the Series 2000-1 Monthly Servicing Fee and the Series 2000-1 Invested Amount.
(b) ANNUAL CERTIFICATEHOLDERS' TAX STATEMENT. On or before January 31 of each calendar year (or such earlier date as required by applicable law), beginning with calendar year 2001, the Company (or the Servicer on its behalf) on behalf of the Trustee shall furnish, or cause to be furnished, to the Series 2000-1 Purchaser, a statement prepared by the Company (or the Servicer on its behalf) containing the aggregate amount distributed to such Series 2000-1 Purchaser for such preceding calendar year, together with such other information as is required to be provided by an issuer of indebtedness under the Code and such other customary information as the Company (or the Servicer on its behalf) deems necessary to enable the Series 2000-1 Purchaser to prepare their tax return. Such obligation of the Company shall be deemed to have been satisfied to the extent that substantially comparable information shall have been provided by the Trustee or the Servicer pursuant to any requirements of the Internal Revenue Code as from time to time in effect. The Trustee shall be under no obligation to prepare tax returns for the Trust.
(c) SERIES 2000-1 EARLY AMORTIZATION EVENT/DISTRIBUTION OF PRINCIPAL NOTICES. Upon the occurrence of a Series 2000-1 Early Amortization Event or Potential Series 2000-1 Early Amortization Event, the Company or the Servicer, as the case may be, shall give prompt written notice thereof to BAFC, the Administrative Agent, the Letter of Credit Agent and the Trustee. As promptly as reasonably practicable after its receipt of notice of the occurrence of a Series 2000-1 Early Amortization Event, the Trustee shall give notice to each Series 2000-1 Rating Agency (which notice shall be given, by telephone or otherwise, not later than the second Business Day after such receipt).
SECTION 4A.04. LETTER OF CREDIT DRAWINGS.
(a) DRAWS FOR DEFAULTED LOANS. If on any Business Day any Loan has
become a Defaulted Loan, the Servicer shall (i) notify the Administrative
Agent on the next succeeding Business Day of such fact and the aggregate
principal amount of such Defaulted Loan and interest thereon accrued to
and including the day prior to the day such Loan became a Defaulted Loan;
PROVIDED, that if more than one Loan shall become a Defaulted Loan on that
date, such notice shall include the aggregate principal amount of each
such Defaulted Loan and interest thereon accrued to and including the day
prior to the day each such Loan became a Defaulted Loan, and (ii) prepare
a Servicer's Certificate (with copies to the Letter of Credit Agent) which
shall serve to instruct the Administrative Agent to (A) draw on the Letter
of Credit on such Business Day in an amount equal to the lesser of (x) the
aggregate unpaid principal amount of such Defaulted Loan and accrued and
unpaid interest (or discount) thereon to and including the day prior to
the day the Loan has become a Defaulted Loan, or (y) the Letter of Credit
Amount then in effect, (B) deposit the proceeds of such drawing into the
Cash Collateral Account for application in accordance with SECTION 5.2 and
SECTION 6.2 of the Security Agreement), and (C) instruct the Collateral
Agent to reimburse the Letter of Credit Banks for such draw in accordance
with the terms of the Letter of Credit Reimbursement Agreement and the
Security Agreement. Each Servicer's Certificate shall also contain
notification to the Administrative Agent of Loans which have become
Defaulted Loans since the most recent Daily Report, including the
aggregate outstanding principal amount of such Defaulted Loans plus
accrued interest (or discount) thereon to and including the day prior to
the day such Loans become Defaulted Loans. The Servicer shall, on the
Business Day on which such Loan has become a Defaulted Loan, or if such
day is not a Business Day, on the next succeeding Business Day, transmit
the Servicer's Certificate to the Letter of Credit Agent for verification
of the Letter of Credit Amount as of the date such Servicer's Certificate
is prepared. Notwithstanding the foregoing, if at any time the Letter of
Credit Amount in effect shall be less than the aggregate principal plus
accrued and unpaid interest (or discount) in respect of Defaulted Loans,
the Servicer shall include in the Servicer's Certificate instructions to
the Administrative Agent that, upon receipt of notice from the Collateral
Agent of payment of the Repayment Amount to the Letter of Credit Agent
pursuant to either SECTION 5.2 or 6.2 of the Security Agreement, or other
receipt of notice that the Repayment Amount has been paid, the
Administrative Agent
shall immediately submit a second draw on the Letter of Credit for the lesser of (x) the amount of such excess principal plus accrued and unpaid interest (or discount) on such Defaulted Loans over the Letter of Credit Amount prior to giving effect to the first draw or (y) the Letter of Credit Amount after giving effect to the payment of such Repayment Amount.
(b) DRAWS UPON L/C EXPIRATION DATE. On the fourth Business Day
preceding the L/C Expiration Date, the Servicer shall (i) prepare a
Servicer's Certificate (with copies to the Letter of Credit Agent and each
Guarantor) to instruct the Administrative Agent to (1) draw on the Letter
of Credit on the third Business Day preceding the L/C Expiration Date in
an amount equal to the Letter of Credit Amount then in effect and (2) wire
transfer the proceeds of such drawing to the Collateral Agent for deposit
into the Reserve Account maintained by the Collateral Agent pursuant to
SECTION 5.7 of the Security Agreement and (ii) on such day, transmit the
Servicer's Certificate to the Letter of Credit Agent for verification of
the Letter of Credit Amount. The Letter of Credit Agent shall make the
verification to the Servicer with a copy to the Collateral Agent.
ARTICLE V
ADDITIONAL SERIES 2000-1 EARLY AMORTIZATION EVENTS
SECTION 5.01. ADDITIONAL SERIES 2000-1 EARLY AMORTIZATION EVENTS. If any one of the events specified in SECTION 7.01 of the Agreement (after any grace periods or consents applicable thereto) or any one of the following events (each, a "SERIES 2000-1 EARLY AMORTIZATION EVENT"), after grace periods or consents applicable thereto, shall occur during the Series 2000-1 Revolving Period:
(a) (i) failure on the part of the Servicer or a Guarantor to direct any payment or deposit to be made, or failure of any payment or deposit to be made, in respect of interest owing on any Series 2000-1 VFC Certificate within three (3) Business Days of the date such interest is due, (ii) failure on the part of the Servicer or a Guarantor to direct any payment or deposit to be made, or failure of any payment or deposit to be made, in respect of principal owing on the Series 2000-1 VFC Certificate on the date such principal is due or (iii) failure on the part of the Servicer or a Guarantor to direct any payment or deposit to be made, or of the Company or a Guarantor to make any payment or deposit in respect of any other amounts owing by the Company, under any Pooling and Servicing Agreement to or for the benefit of the Series 2000-1 Purchaser within three (3) Business Days of the date such amount is due or such deposit is required to be made;
(b) (i) failure on the part of the Company duly to observe or perform in any material respect any covenant or agreement set forth in SUBSECTION 2.06(G) or 2.06(J)(I) or (II) of the Pooling Agreement; or (ii) failure on the part of the Company duly to observe or perform in any material respect any other covenant or agreement of the
Company set forth in any Pooling and Servicing Agreement (including each covenant contained in SECTIONS 2.07 and 2.08 of the Agreement) that continues unremedied thirty (30) days after the earlier of (A) the date on which a Responsible Officer of the Company or a Responsible Officer of the Servicer has knowledge of such failure and (B) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Company by the Trustee, or to the Company and the Trustee by the Letter of Credit Agent or Administrative Agent;
(c) any representation or warranty made or deemed made by the Company in any Pooling and Servicing Agreement to or for the benefit of the Series 2000-1 Purchaser shall prove to have been incorrect in any material respect when made or when deemed made and as a result of such incorrectness, the interests, rights or remedies of the Series 2000-1 Purchaser have been materially and adversely affected; PROVIDED, HOWEVER, that a Series 2000-1 Early Amortization Event shall not be deemed to have occurred under this paragraph if the incorrectness of such representation or warranty gives rise to an obligation to repurchase or make an adjustment payment in respect of the related Purchased Loans and the Company has repurchased or made an adjustment payment in respect of the related Purchased Loan or all such Purchased Loans, if applicable, in accordance with the provisions of any Pooling and Servicing Agreement.
(d) a Servicer Default other than any Servicer Default that is within SUBSECTION 5.01(A) above shall have occurred and be continuing;
(e) a Purchase Termination Event shall have occurred and be continuing;
(f) any of the Agreement, the Servicing Agreement, this Supplement or the Sale Agreement shall cease, for any reason, to be in full force and effect, or the Company, the Servicer, the Sellers, or any Affiliate of any of the foregoing, shall so assert in writing;
(g) the Trust shall for any reason cease to have a valid and perfected first priority undivided ownership or first priority security interest in any or all of the Trust Assets (subject to no other Liens other than any Permitted Liens) or any of the Servicer, the Sellers, the Company or any Affiliate of any of the foregoing, shall so assert;
(h) a Federal tax notice of a Lien, in an amount equal to or greater than $100,000, shall have been filed against the Company or the Trust unless there shall have been delivered to the Trustee, the Letter of Credit Agent, the Administrative Agent and the Series 2000-1 Rating Agencies proof of release of such Lien;
(i) a notice of a Lien shall have been filed by the PBGC against the Company or the Trust under Section 412(n) of the Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which Section 412(n)
of the Code or Section 302(f) of ERISA applies unless there shall have been delivered to the Trustee, the Letter of Credit Agent, the Administrative Agent and the Series 2000-1 Rating Agencies proof of the release of such Lien;
(j) one or more judgments for the payment of money (to the extent not bonded or covered by insurance to the reasonable satisfaction of the Administrative Agent) shall be rendered against the Company (i) in an aggregate amount greater than $100,000 or (ii) that, individually or in the aggregate, have resulted or could reasonably be expected to result in a Material Adverse Effect;
(k) (i) the Credits Outstanding shall exceed the Available Liquidity Commitment or (ii) the Series 2000-1 Invested Amount shall exceed the Series 2000-1 Maximum Invested Amount;
(l) a Default or Event of Default shall have occurred and be continuing;
(m) the Liquidity Commitment shall have been terminated pursuant to
SECTION 4.02 of the Liquidity Agreement;
(n) the amount available to be drawn under the Guaranty shall be less than the Aggregate Invested Amount;
then, in the case of (x) any event described in SECTION 7.01 of the Agreement, automatically without any notice or action on the part of the Trustee, Series 2000-1 Purchaser, the Administrative Agent, the Letter of Credit Agent or the Collateral Agent, an early amortization period shall immediately commence or (y) any event described above, after the applicable grace period (if any) set forth in the applicable subsection, the Trustee may, and at the written direction of the Majority Letter of Credit Banks and the Majority Liquidity Banks, shall, by written notice then given to each Guarantor, the Company, BAFC and the Servicer, declare that an early amortization period has commenced as of the date of such notice with respect to Series 2000-1 (any such period under clause (x) or (y) above, a "SERIES 2000-1 EARLY AMORTIZATION PERIOD"). Upon the occurrence of a Series 2000-1 Early Amortization Event or a Potential Series 2000-1 Early Amortization Event, the Trustee may, or shall at the written direction of the Letter of Credit Agent or the Administrative Agent, direct each Obligor to make all payments with respect to Purchased Loans directly to the Collection Account.
ARTICLE VI
SERVICING FEE
SECTION 6.01. SERVICING COMPENSATION. A servicing fee (the "SERIES 2000-1 MONTHLY SERVICING FEE") shall be payable to the Servicer as specified in SUBSECTION 2.05(A) of the Servicing Agreement.
ARTICLE VII
COVENANTS;
REPRESENTATIONS
AND WARRANTIES
SECTION 7.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SERVICER.
(a) The Company and the Servicer each hereby represents and warrants to the Trustee and the Series 2000-1 Purchaser that each and every of their respective representations and warranties contained in the Agreement and the Servicing Agreement is true and correct as of the Series 2000-1 Issuance Date and as of the date of each Series 2000-1 Increase.
(b) The Company hereby represents and warrants to the Trustee and the Trust, for the benefit of the Holders, on each Loan Purchase Date that since the Effective Date, no material adverse change has occurred in the overall rate of collection of the Purchased Loans.
SECTION 7.02. COVENANTS OF THE COMPANY AND THE SERVICER. The Company (solely with respect to clauses (a), (b), (c), (d) and (e) below) and the Servicer hereby agree, in addition to their obligations under the Agreement and the Servicing Agreement, that:
(a) they shall not terminate the Agreement unless in compliance with the terms of the Agreement and the Supplements relating to each Outstanding Series;
(b) they shall observe in all material respects each and every of their respective covenants (both affirmative and negative) contained in the Agreement, the Servicing Agreement, this Supplement and all other Transaction Documents to which each is a party;
(c) they shall afford BAFC, the Administrative Agent, the Letter of Credit Agent, the Collateral Agent, the Trustee or any of their representatives access to all records relating to the Purchased Loans at any reasonable time during regular business hours, upon reasonable prior notice (and without prior notice if a Series 2000-1 Early Amortization Event has occurred), for purposes of inspection and shall permit BAFC, the Administrative Agent, the Letter of Credit Agent, the Collateral Agent or the Trustee or any of their representatives to visit any of the Company's or the Servicer's, as the case may be, offices or properties during regular business hours and as often as may reasonably be requested, subject to the Company's or the Servicer's, as the case may be, normal security and confidentiality requirements and to discuss the business, operations, properties, financial and other conditions of the Company or the Servicer with their respective officers and employees and with their Independent Public Accountants;
(d) they shall not waive the provisions of SUBSECTIONS 7.01(D), (E)(I), (F), (G) or (H) or SECTIONS 2.05 or 8.02 of the Sale Agreement without the consent of the Majority Letter of Credit Banks and the Majority Liquidity Banks;
(e) neither the Company nor the Servicer shall take any action, nor shall the Servicer permit any Seller to take any action, requiring the satisfaction of the Rating Agency Condition pursuant to any Transaction Document without the prior written consent of the Majority Letter of Credit Banks and the Majority Liquidity Banks; and
(f) the Servicer shall cooperate in good faith to allow the Trustee to use the Servicer's available facilities and expertise upon the Servicer's termination or default.
SECTION 7.03. NEGATIVE COVENANT OF THE COMPANY; COVENANTS OF THE SERVICER.
(a) The Company shall not declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of capital stock of the Company, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Company (such declarations, payments, setting apart, purchases, redemptions, defeasance, retirements, acquisitions and distributions being herein called "RESTRICTED PAYMENTS") while Series 2000-1 is an Outstanding Series, except (i) from amounts distributed to the Company (x) in respect of the Exchangeable Company Interest, PROVIDED that on the date any such Restricted Payment is made, the Company is in compliance with its payment obligations under SECTION 2.05 of the Agreement or (y) pursuant to SUBSECTION 3A.05; (ii) in compliance with all terms of the Transaction Documents and (iii) such Restricted Payment is made in accordance with all corporate and legal formalities applicable to the Company; PROVIDED that no Restricted Payment shall be made if a Series 2000-1 Early Amortization Event has occurred and is continuing (or would occur as a result of making such Restricted Payment).
(b) The Servicer hereby agrees that it shall observe each and all of its covenants (both affirmative and negative) contained in each Pooling and Servicing Agreement in all material respects and that it shall:
(i) provide to the Letter of Credit Agent, the Administrative Agent and the Collateral Agent, simultaneously with delivery to the Trustee or the Series 2000-1 Rating Agencies, all reports, notices, certificates, statements and other documents required to be delivered to the Trustee or the Series 2000-1 Rating Agencies pursuant to the Agreement, the Servicing Agreement and the other Transaction Documents and furnish to the Letter of Credit Agent, the Administrative Agent and the Collateral Agent promptly after receipt thereof a
copy of each material notice, material demand or other material communication (excluding routine communications) received by or on behalf of the Company or the Servicer with respect to the Transaction Documents; and
(ii) provide notice to the Letter of Credit Agent, the Administrative Agent and the Collateral Agent of the appointment of a Successor Servicer pursuant to SECTION 6.02 of the Servicing Agreement.
SECTION 7.04. OBLIGATIONS UNAFFECTED. The obligations of the Company and the Servicer to the Letter of Credit Agent, the Administrative Agent, the Collateral and the Series 2000-1 Purchaser under this Supplement shall not be affected by reason of any invalidity, illegality or irregularity of any of the Purchased Loans or any sale of any of the Purchased Loans.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.01. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SUPPLEMENT. This Supplement will become effective on the date on which the following conditions precedent have been satisfied:
(a) TRANSACTION DOCUMENTS. BAFC, the Trustee, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent shall have received an original copy for itself, each executed and delivered in form and substance satisfactory to BAFC, the Letter of Credit Agent and the Administrative Agent, of (i) the Agreement executed by a duly authorized officer of each of the Company, the Servicer and the Trustee, (ii) this Supplement executed by a duly authorized officer or authorized representative of each of the Company, the Servicer, the Trustee, the Administrative Agent, the Letter of Credit Agent, the Collateral Agent and the Series 2000-1 Purchaser and (iii) the other Transaction Documents duly executed by the parties thereto.
(b) CORPORATE DOCUMENTS; CORPORATE PROCEEDINGS OF THE COMPANY, THE
SELLERS AND THE SERVICER. BAFC, the Trustee, the Collateral Agent, the
Letter of Credit Agent and the Administrative Agent shall have received
from the Company and each Seller, complete copies of:
(i) a copy of the certificate of incorporation including all amendments thereto, of such Person, certified as of a recent date by the Secretary of State or other appropriate authority of the jurisdiction of incorporation, as the case may be, and a certificate of compliance, of status or of good standing (or other similar certificate, if any), as and to the extent applicable, of each such Person as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction;
(ii) a certificate of a Responsible Officer of such Person dated the Series 2000-1 Issuance Date and certifying (A) that attached thereto is a true and complete copy of the By-laws of such Person in effect as of the Series 2000-1 Issuance Date, (B) that attached thereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to BAFC, the Letter of Credit Agent and the Administrative Agent, of the Board of Directors of such Person or committees thereof authorizing the execution, delivery and performance of the transactions contemplated by the Transaction Documents, and that such resolutions have not been amended, modified, revoked or rescinded and are in full force and effect on the Series 2000-1 Issuance Date, (C) that the certificate of incorporation of such Person has not been amended since the last amendment thereto shown on the certificate of the Secretary of State or other appropriate authority of the jurisdiction of incorporation of such Person furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer executing any Transaction Documents or any other document delivered in connection herewith or therewith on behalf of such Person; and
(iii) a certificate of another Responsible Officer as to the incumbency and specimen signature of the Responsible Officer executing the certificate pursuant to clause (ii) above.
(c) GOOD STANDING CERTIFICATES. BAFC, the Trustee, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent shall have received copies of certificates of compliance, of status or of good standing (or similar certificate, if any), dated as of a recent date from the Secretary of State or other appropriate authority of such jurisdiction, with respect to such Person in each jurisdiction where the ownership, lease or operation of property or the conduct of business requires it to qualify as a foreign corporation, except where the failure to so qualify would not reasonably be expected to have a material adverse effect on the business, operations, properties or condition (financial or otherwise) of such Person.
(d) CONSENTS, LICENSES, APPROVALS, ETC. BAFC, the Trustee, the
Collateral Agent, the Letter of Credit Agent and the Administrative Agent
shall have received certificates dated the Series 2000-1 Issuance Date of
a Responsible Officer of such Person either (i) attaching copies of all
material consents, licenses, approvals, registrations or filings required
in connection with the execution, delivery and performance by such Person
of the Agreement, this Supplement, the Sale Agreement and/or the Servicing
Agreement, as the case may be, and the validity and enforceability of the
Agreement, this Supplement, the Sale Agreement, and/or the Servicing
Agreement against such Person and such consents, licenses and approvals
shall be in full force and effect or (ii) stating that no such consents,
licenses, approvals registrations or filings are so required, except for
(a) the filing of UCC financing statements (or similar filings) in any
applicable jurisdictions necessary to perfect the Trusts' ownership or
security interesting the Purchased Loans; and (b) those that may be
required under state securities
or "blue sky" laws; PROVIDED, that the Company makes no representation or warranty as to whether any action , consent, or approval of, registration or filing with any other action by any Governmental Authority is or will be required in connection with the distribution of the Certificates and Interests.
(e) LIEN SEARCHES. BAFC, the Collateral Agent, the Letter of Credit Agent, the Administrative Agent and the Trustee shall have received the results of a recent search satisfactory to BAFC, the Letter of Credit Agent and the Administrative Agent of any UCC filings (or equivalent filings) made with respect to the Company and the Sellers (and with respect to such other Persons as BAFC, the Letter of Credit Agent or the Administrative Agent deems necessary) in the jurisdictions in which the Sellers and the Company are required to file financing statements pursuant to SUBSECTION 8.01(S), together with copies of the financing statements (or similar documents) disclosed by such search, and accompanied by evidence satisfactory to BAFC, the Letter of Credit Agent and the Administrative Agent that any Liens disclosed by such search would be Permitted Liens or have been released.
(f) LEGAL OPINIONS. BAFC, the Collateral Agent, the Letter of Credit Agent, the Administrative Agent and the Trustee shall have received opinions of counsel to the Company and the Sellers, dated the Series 2000-1 Issuance Date, as to corporate, bankruptcy, perfection and other matters, in form and substance reasonably acceptable to BAFC, the Letter of Credit Agent and the Administrative Agent and their counsel.
(g) FEES. BAFC, the Collateral Agent, the Letter of Credit Agent, the Administrative Agent and the Trustee shall have received payment of all fees and other amounts due and payable to any of them on or before the Series 2000-1 Issuance Date.
(h) CONDITIONS UNDER THE SALE AGREEMENT. A Responsible Officer of the Sellers and of the Company, respectively, shall have certified that all conditions to the obligations of the Sellers and of the Company under the Sale Agreement shall have been satisfied in all material respects.
(i) COMPANY'S BOARD OF DIRECTORS. The composition of the Company's Board of Directors (including two independent directors) shall be reasonably acceptable to BAFC, the Letter of Credit Agent and the Administrative Agent.
(j) FINANCIAL STATEMENTS. BAFC, the Trustee, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent shall have received the consolidated balance sheets and statements of income, stockholders' equity and cash flows of Bunge and its Subsidiaries on a consolidated basis as of and for the fiscal year ended December 31, 1999, audited by and accompanied by a copy of the opinion of Deloitte & Touche, Independent Public Accountants.
(k) SOLVENCY CERTIFICATE. BAFC, the Collateral Agent, the Letter of Credit Agent, the Administrative Agent and the Trustee shall have received a certificate
dated the Series 2000-1 Issuance Date and signed by a Responsible Officer of the Company, in form satisfactory to BAFC, the Letter of Credit Agent and the Administrative Agent, to the effect that the Company will be Solvent after giving effect to the transactions occurring on the Series 2000-1 Issuance Date.
(l) REPRESENTATIONS AND WARRANTIES. On the Series 2000-1 Issuance Date, the representations and warranties of the Company and the Servicer in the Agreement, the Servicing Agreement and this Supplement shall be true and correct in all material respects.
(m) ESTABLISHMENT OF ACCOUNTS. BAFC, the Collateral Agent, the Letter of Credit Agent, the Administrative Agent and the Trustee (x) shall have received evidence of the establishment of the Collection Account and the Collateral Accounts (other than the Reserve Account) and (y) shall otherwise be satisfied with the arrangements for collection of the Purchased Loans pursuant to the Transaction Documents.
(n) BAFC RATING. BAFC, the Collateral Agent, the Administrative Agent and the Trustee shall have received a letter from S&P confirming its "A-1" rating of BAFC's commercial paper, a letter from Moody's confirming its "P-1" rating of BAFC's commercial paper and a letter from Fitch confirming its "F-1" rating of BAFC's commercial paper.
(o) DAILY REPORT. BAFC, the Collateral Agent, the Administrative Agent and the Trustee shall have received a Daily Report on the Series 2000-1 Issuance Date.
(p) NO LITIGATION. BAFC, the Trustee, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent shall have received confirmation that there is no pending or, to their knowledge after due inquiry, threatened action or proceeding affecting a Seller, the Servicer, the Company or any of their Subsidiaries before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect.
(q) BACK-UP SERVICING ARRANGEMENTS. BAFC, the Trustee, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent shall have received evidence that each Seller and the Servicer maintains disaster recovery systems and back-up computer and other information management systems that, in BAFC's, the Letter of Credit Agent's and the Administrative Agent's reasonable judgement, are sufficient to protect such Seller's and such Servicer's business against material interruption or loss or destruction of its primary computer and information management systems.
(r) FILINGS, REGISTRATIONS AND RECORDINGS.
(i) Each Seller shall have filed and recorded before such Series 2000-1 Issuance Date, at its own expense, UCC-1 financing statements (or other similar filings) with respect to the Purchased Loans and other Loan Assets (as defined with respect to the Sale Agreement) in such manner and in such jurisdictions as are necessary to perfect the Company's ownership interest thereof under the relevant UCC (or similar laws) and delivered evidence of such filings to BAFC, the Trustee, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent on or prior to such Series 2000-1 Issuance Date, and all other action (including but not limited to notifying related Obligors of the assignment of a Purchased Loan, except to the extent that the relevant UCC and other similar laws (to the extent applicable) permit the Seller (or the Company or its assignees) to provide such notification subsequent to the 2000-1 Issuance Date without materially impairing the Company's ownership of or security interest in the Purchased Loans and without incurring material expenses in connection with such notification) necessary to perfect under the relevant UCC and other similar laws (to the extent applicable) in jurisdictions outside the United States (to the extent applicable) the Company's ownership of or security interest in the Purchased Loans and other Loan Assets (as defined with respect to the Sale Agreement) shall have been duly taken; and
(ii) The Company (or the Servicer on its behalf) shall have filed and recorded before such Series 2000-1 Issuance Date, at its own expense, UCC-1 financing statements (or other similar filings) with respect to the Trust Assets in such manner and in such jurisdictions as are necessary to perfect and maintain perfection of the assignment of the Trust Assets to the Trust and delivered evidence of such filings to the BAFC, the Trustee, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent on or prior to such Series 2000-1 Issuance Date, and all other action (including but not limited to notifying related Obligors of the assignment of a Purchased Loan, except to the extent that the relevant UCC and other similar laws (to the extent applicable) permit the Company (or its assignees) to provide such notification subsequent to the Series 2000-1 Issuance Date without materially impairing the Trust's ownership or security interest of the Trust Assets and without incurring material expenses in connection with such notification) necessary to perfect under the relevant UCC and other similar laws (to the extent applicable) in jurisdictions outside the United States (to the extent applicable) the Trust's security interest or ownership of the Trust Assets shall have been duly taken by the Company (or by the Servicer on behalf of the Company).
(s) OTHER REQUESTS. The Collateral Agent, the Letter of Credit Agent and the Administrative Agent shall have received such other approvals, opinions or documents as it may reasonably request.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. RATIFICATION OF AGREEMENT. As supplemented by this Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Supplement shall be read, taken and construed as one and the same instrument.
SECTION 9.02. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT ISSUES OF PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 9.03. FURTHER ASSURANCES. Each of the Company, the Servicer and the Trustee agrees, from time to time, to do and perform any and all acts and to execute any and all further instruments required or reasonably requested by BAFC, the Letter of Credit Agent or the Administrative Agent more fully to effect the purposes of this Supplement and the sale of the Series 2000-1 VFC Certificate and the Series 2000-1 VFC Beneficial Interests hereunder, including, without limitation, in the case of the Company and the Servicer, the execution of any financing or registration statements or similar documents or notices or continuation statements relating to the Purchased Loans and the other Trust Assets for filing or registration under the provisions of the relevant UCC or similar legislation of any applicable jurisdiction, provided that, in the case of the Trustee, in furtherance and without limiting the generality of SUBSECTION 8.01(D) of the Agreement, the Trustee shall have received reasonable assurance in writing of adequate reimbursement and indemnity in connection with taking such action before the Trustee shall be required to take any such action.
SECTION 9.04. PAYMENTS. Each payment to be made hereunder shall be made on the required payment date in Dollars and in immediately available funds, and if such payment is to be made to the Series 2000-1 Purchaser or any Secured Party, such payment shall be deposited in the Cash Collateral Account for distribution in accordance with the Security Agreement. If neither BAFC nor the Collateral Agent is the registered holder of the Series 2000-1 VFC Certificate, such payments shall be made in accordance with the payment instructions from any subsequent registered holder of the Series 2000-1 VFC Certificate.
SECTION 9.05. COSTS AND EXPENSES. The Company agrees to pay all reasonable fees and out-of-pocket costs and expenses of BAFC (including, without limitation, reasonable fees and disbursements of counsel to BAFC) in connection with (i) the preparation, execution and delivery of this Supplement, the Agreement, and the other Transaction Documents and amendments or waivers of any such documents, (ii) the reasonable enforcement by BAFC of the obligations and liabilities of the Company and the Servicer under the Agreement, this Supplement or any related document, (iii) any restructuring or workout of the Agreement, this Supplement or any related document and (iv) any inspection of the Company's and/or the Servicer's offices, properties, books and records and any discussions with the officers,
employees and the Independent Public Accountants of the Company or the Servicer;
PROVIDED, HOWEVER, that any payments made by the Company pursuant to this
Section shall be Company Subordinated Obligations.
SECTION 9.06. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Trustee, the Letter of Credit Agent, the Administrative Agent, the Series 2000-1 Purchaser or the Collateral Agent, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 9.07. AMENDMENTS.
(a) Subject to SUBSECTION (C) of this SECTION 9.07, this Supplement may be amended in writing from time to time by the Servicer, the Company and the Trustee, with the prior written notice to BAFC, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent, but without the consent of BAFC, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent, to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provisions herein or to add any other provisions to or change in any manner or eliminate any of the provisions with respect to matters or questions raised under this Supplement which shall not be inconsistent with the provisions of any Pooling and Servicing Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by a Responsible Officer's Certificate of the Servicer delivered to the Trustee upon which the Trustee may conclusively rely, have a Material Adverse Effect (but, to the extent that the determination of whether such action would have a Material Adverse Effect requires a conclusion as to a question of law, an Opinion of Counsel shall be delivered by the Servicer to the Trustee in addition to such Responsible Officer's Certificate). The Trustee may, but shall not be obligated to, enter into any such amendment pursuant to this paragraph or paragraph (b) below that affects the Trustee's rights, duties or immunities under any Pooling and Servicing Agreement or otherwise.
(b) Subject to SUBSECTION (C) of this SECTION 9.07, this Supplement may also be amended (other than in the circumstances referred to in SUBSECTION (A)) in writing from time to time by the Servicer, the Company and the Trustee with the written consent of BAFC, the Collateral Agent, the Letter of Credit Agent, the Majority Letter of Credit Banks, the Administrative Agent and the Majority Liquidity Banks for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Supplement or of modifying in any manner the rights of BAFC, the Collateral Agent, the Letter of Credit Agent, the Letter of Credit Banks, the Administrative Agent or the Liquidity Banks; PROVIDED, HOWEVER, that no such amendment shall, unless signed or consented to in writing by the Letter of Credit Banks and all Liquidity Banks, (i)
extend the time for payment, or reduce the amount, of any amount of money
payable to or for the account of the Series 2000-1 Purchaser under any
provision of this Supplement or extend the Series 2000-1 Termination Date,
(ii) subject the Series 2000-1 Purchaser to any additional obligation
(including, without limitation, any change in the determination of any
amount payable by the Series 2000-1 Purchaser) or (iii) change the Series
2000-1 Maximum Invested Amount or the number of Letter of Credit Banks or
Liquidity Banks which shall be required for any action under this
subsection or any other provision of this Supplement.
(c) No amendment to this Supplement shall be effective until (i) if
such amendment is material, the Rating Agency Condition is satisfied and
(ii) with respect to all such amendments, prior written notice is given to
the Series 2000-1 Rating Agencies.
(d) The Company and the Trustee hereby agree that the Company and the Trustee may not perform a Company Exchange in accordance with SECTION 5.10 of the Agreement without obtaining (i) the prior written consent of BAFC, the Letter of Credit Banks having, in the aggregate, more than 66-2/3% of the Letter of Credit Commitment and the Liquidity Banks having, in the aggregate, more than 66 2/3% of the Liquidity Commitment, and (ii) satisfaction of the Rating Agency Condition.
SECTION 9.08. SEVERABILITY. If any provision hereof is void or unenforceable in any jurisdiction, such status shall not affect the validity or enforceability of (i) such provision in any other jurisdiction or (ii) any other provision hereof in such or any other jurisdiction.
SECTION 9.09. NOTICES. All notices, requests and demands to or upon any party hereto to be effective shall be given (i) in the case of the Company, the Servicer and the Trustee, in the manner set forth in SECTION 10.05 of the Agreement and (ii) in the case of the Series 2000-1 Purchaser, the Letter of Credit Agent, each Letter of Credit Bank, each Liquidity Bank, the Administrative Agent, the Collateral Agent and the Series 2000-1 Rating Agencies, in writing (including a confirmed transmission by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, at their respective Notice Addresses or to such other address as may be hereafter notified by the respective parties hereto.
SECTION 9.10. SUCCESSORS AND ASSIGNS.
(a) This Supplement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
(b) Neither the Company nor the Servicer shall assign or delegate any of its rights or duties hereunder other than to an Affiliate thereof without the prior written consent of the Trustee, the Series 2000-1 Purchaser, the Letter of Credit Agent, the
Administrative Agent and the Collateral Agent, and any attempted assignment without such consent shall be null and void.
(c) Notwithstanding any other provisions herein, no transfer or assignment of any interests or obligations of the Series 2000-1 Purchaser hereunder or any grant of participation therein shall be permitted (i) if such transfer, assignment or grant would result in a prohibited transaction under Section 4975 of the Internal Revenue Code or Section 406 of ERISA or cause the Trust Assets to be regarded as "plan assets" pursuant to 29 C.F.R. ss. 2510.3-101, and (ii) unless the transferee shall deliver to the Trustee, the Company and the Collateral Agent an officer's certificate and an opinion of counsel that such transfer, assignment or grant would not require the Company or the Sellers to file a registration statement with the Securities and Exchange Commission.
SECTION 9.11. COUNTERPARTS. This Supplement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement.
SECTION 9.12. SETOFF. In addition to any rights and remedies of the Series 2000-1 Purchaser provided by law, the Series 2000-1 Purchaser shall have the right, without prior notice to the Company, any such notice being expressly waived by the Company to the extent permitted by applicable law, upon any amount becoming due and payable by the Company hereunder or under the Series 2000-1 VFC Certificate to setoff and appropriate and apply against any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Series 2000-1 Purchaser to or for the credit or the account of the Company. The Series 2000-1 Purchaser agrees promptly to notify the Company, the Trustee, the Letter of Credit Agent, the Collateral Agent and the Administrative Agent after any the setoff and application made by the Series 2000-1 Purchaser; PROVIDED that the failure to give such notice shall not affect the validity of such setoff and application.
SECTION 9.13. NO BANKRUPTCY PETITION; NO RECOURSE.
(a) (i) The Series 2000-1 Purchaser, the Collateral Agent, the Administrative Agent, the Liquidity Banks, the Letter of Credit Agent, the Letter of Credit Banks, the Servicer and the Trustee each hereby covenants and agrees that prior to the date which is one year and one day after all Investor Certificates of each Outstanding Series are repaid in full it will not institute against, or join with or assist any other Person in instituting against, the Company any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other similar proceedings under any Applicable Insolvency Laws. (ii) Notwithstanding anything elsewhere herein contained, the sole remedy of the Collateral Agent, the Administrative Agent, the Liquidity Banks, the Letter of Credit Agent, the Letter of Credit Banks, the Servicer, the Trustee, the Series 2000-1 Purchaser, or any other Person in respect of any obligation, covenant, representation,
warranty or agreement of the Company under or related to this Supplement shall be against the assets of the Company. Neither the Collateral Agent, nor the Administrative Agent, nor the Liquidity Banks, nor the Letter of Credit Agent, nor the Letter of Credit Banks, nor the Series 2000-1 Purchaser, nor the Trustee, nor the Servicer, nor any other Person shall have any claim against the Company to the extent that such assets are insufficient to meet any such obligation, covenant, representation, warranty or agreement (the difference being referred to herein as "shortfall") and all claims in respect of the shortfall shall be extinguished. A director, officer, employee or shareholder, as such, of the Servicer or the Company shall not have liability for any obligation of the Servicer or the Company hereunder or under any Transaction Document or for any claim based on, in respect of, or by reason of, any Transaction Document, unless such claim results from the gross negligence, fraudulent acts or willful misconduct of such director, officer, employee or shareholder.
(b)
(i) The Trustee, the Company, the Servicer, the Collateral Agent, the Administrative Agent, the Liquidity Banks, the Letter of Credit Agent and the Letter of Credit Banks, each hereby covenant and agree that prior to the date which is one year and one day after the latest of (A) the last day of the Series 2000-1 Amortization Period, (B) the date on which all Series 2000-1 Aggregate Unpaids are repaid in full, and (C) the date on which all outstanding Commercial Paper of BAFC is paid in full, it will not institute against, or join with or assist any other Person in instituting against, BAFC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other similar proceedings under any Applicable Insolvency Laws.
(ii) Notwithstanding any other provision hereof or of any other Transaction Documents, the sole remedy of the Collateral Agent, the Administrative Agent, the Liquidity Banks, the Letter of Credit Agent, the Letter of Credit Banks, the Servicer, the Trustee or any other Person in respect of any obligation, covenant, representation, warranty or agreement of BAFC under or related to this Supplement or any other Transaction Document shall be against the assets of BAFC. Neither the Collateral Agent, nor the Administrative Agent, nor any Liquidity Bank, nor the Letter of Credit Agent, nor any Letter of Credit Bank, nor the Servicer, nor the Trustee nor any other Person shall have any claim against BAFC to the extent that such assets are insufficient to meet such obligations, covenant, representation, warranty or agreement (the difference being referred to herein as a "SHORTFALL") and all claims in respect of the shortfall shall be extinguished; PROVIDED, HOWEVER, that the provisions of this SECTION 9.13 apply solely to the obligations of BAFC and shall not extinguish such shortfall for purposes of the obligations of a Guarantor to any Person under the Guaranty.
The provisions of this SECTION 9.13 shall survive termination of this Agreement.
SECTION 9.14. LIMITATION ON ADDITION OF SELLERS. Notwithstanding anything to the contrary contained in the Sale Agreement or the Agreement, the Company shall not consent to the addition of a Seller thereunder unless each of the following conditions shall have been satisfied.
(i) Each of the conditions set forth in SECTION 3.05 of the Sale Agreement shall have been satisfied and the Trustee shall have received evidence in the form of a Responsible Officer's Certificate as to that fact.
(ii) The Company, the Trustee, the Collateral Agent, the Administrative Agent and the Letter of Credit Agent, shall have received confirmation that there is no pending or, to its knowledge after due inquiry, threatened action or proceeding affecting such additional Seller before any Governmental Authority (A) that could reasonably be expected to have a Material Adverse Effect, or (B) that purports to affect the legality, validity or enforceability or this Supplement, the Agreement or any other Transaction Document or any of the transactions contemplated hereby or thereby.
(iii) The Company, the Trustee, the Collateral Agent, the Administrative Agent and the Letter of Credit Agent shall have received evidence that the Rating Agency Condition shall have been satisfied with respect to the addition of such Seller.
(iv) The Administrative Agent and the Letter of Credit Agent shall have provided prior written consent to the addition of such Seller to Bunge.
(v) The Company, the Administrative Agent, the Letter of Credit Agent, the Collateral Agent and the Trustee shall have received Opinions of Counsel of outside counsel addressed to the Company, the Administrative Agent, the Letter of Credit Agent, the Collateral Agent and the Trustee covering matters with respect to such Seller as were covered in the Opinions of Counsel delivered on the Series 2000-1 Issuance Date with respect to the original Sellers.
(vi) The Company, the Trustee, the Collateral Agent, the Administrative Agent and the Letter of Credit Agent shall have received a certificate prepared by a Responsible Officer of the Servicer certifying that after giving effect to the addition of such Seller, the Credits Outstanding shall be equal to or less than the Available Liquidity Commitment on the related Seller Addition Date.
SECTION 9.15. CHASE CONFLICT WAIVER. Chase acts as Depositary, Administrative Agent and Liquidity Bank and may provide other services or facilities from time to time (the "CHASE ROLES"). Each Liquidity Bank and each other party hereto hereby acknowledges and consents to any and all Chase Roles, waives any objections it may have to any actual or potential conflict of interest caused by Chase's acting as Administrative Agent,
Depositary or as Liquidity Bank hereunder and acting as or maintaining any of the Chase Roles, and agrees that in connection with any Chase Role, Chase may take, or refrain from taking, any action which it in its discretion deems appropriate.
SECTION 9.16. LIMITED RECOURSE.
No recourse under any obligation, covenant or agreement of BAFC contained in the Pooling Agreement shall be had against any incorporator, stockholder, officer, director, employee or agent of BAFC or any of their Affiliates (solely by virtue of such capacity) by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that the Pooling Agreement is solely a corporate obligation of BAFC individually, and that no personal liability whatever shall attach to or be incurred by any incorporator, stockholder, officer, director, employee or agent of BAFC or any of their Affiliates (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of BAFC contained in the Pooling Agreement, or implied therefrom, and that any and all personal liability for breaches by BAFC of any of such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of the Pooling Agreement; PROVIDED that the foregoing shall not relieve any such Person from any liability it might otherwise have as a result of fraudulent actions taken or omissions made by them. The provisions of this SECTION 9.16 shall survive termination of the Pooling Agreement.
ARTICLE X
FINAL DISTRIBUTIONS
SECTION 10.01. CERTAIN DISTRIBUTIONS.
(a) Not later than 2:00 p.m., New York City time, on the Distribution Date following the date on which the proceeds from the disposition of the Purchased Loans pursuant to SUBSECTION 7.02(B) of the Agreement are deposited into the Series 2000-1 Collection Subaccount, the Trustee shall distribute such amounts pursuant to Article III of this Supplement.
(b) Notwithstanding anything to the contrary in this Supplement or the Agreement, any distribution made pursuant to this Section shall be deemed to be a final distribution pursuant to SECTION 9.03 of the Agreement with respect to the Series 2000-1 VFC Certificate.
IN WITNESS WHEREOF, the Company, the Servicer, the Trustee, the Series 2000-1 Purchaser, the Collateral Agent, the Letter of Credit Agent and the Administrative Agent have caused this First Amended and Restated Series 2000-1 Supplement to be duly executed by their respective officers as of the day and year first above written.
BUNGE FUNDING, INC.
BUNGE MANAGEMENT SERVICES, INC.,
as Servicer
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee
BUNGE ASSET FUNDING CORP.,
as the Series 2000-1 Purchaser
THE BANK OF NEW YORK,
as the Collateral Agent
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK INTERNATIONAL", NEW
YORK BRANCH,
as the Letter of Credit Agent
THE CHASE MANHATTAN BANK,
as the Administrative Agent
SCHEDULE I
SERIES 2000-1 COLLECTION SUBACCOUNT
Series 2000-1 Collection Subaccount #200805
The Bank of New York
101 Barclay Street
New York, NY 10286
SI-1
EXHIBIT A
TO
SERIES 2000-1 SUPPLEMENT
BUNGE MASTER TRUST
FORM OF SERIES 2000-1 VFC CERTIFICATE
REGISTERED UP TO $750,000,000.00 SERIES
NO. VFC-[ ] 2000-1 INVESTED AMOUNT*
*THE SERIES 2000-1 INVESTED AMOUNT OF THIS SERIES 2000-1 VFC CERTIFICATE
IS SUBJECT TO CHANGE AS DESCRIBED HEREIN.
THIS SERIES 2000-1 VFC CERTIFICATE AMENDS AND RESTATES THE AMENDED AND
RESTATED SERIES 2000-1 VFC CERTIFICATE THAT WAS ISSUED ON DECEMBER 20, 2000.
THIS SERIES 2000-1 VFC CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). NEITHER THIS SERIES 2000-1 VFC CERTIFICATE NOR ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS.
THIS SERIES 2000-1 VFC CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE POOLING AGREEMENT AND SUPPLEMENT REFERRED TO HEREIN.
This Series 2000-1 VFC Certificate evidences a fractional undivided interest in the assets of the
BUNGE MASTER TRUST
the corpus of which consists of loans made by Bunge Finance Limited and Bunge Finance North America, Inc. to Affiliates, which loans have been purchased by Bunge Funding, Inc., a Delaware corporation, which in turn transferred and assigned such receivables to the Bunge Master Trust.
(Not an interest in or recourse obligation of Bunge International Limited (except in its capacity as Guarantor), Bunge Limited (except in its capacity as Guarantor), Bunge Funding, Inc. or any of their respective Affiliates)
This certifies that
BUNGE ASSET FUNDING CORP.
(the "SERIES 2000-1 VFC CERTIFICATEHOLDER") is the registered owner of a fractional undivided interest in the assets of Bunge Master Trust (the "TRUST") originally created pursuant to the Pooling Agreement, dated as of August 25, 2000 (as the same may from time to time be amended, restated, supplemented or otherwise modified thereafter, the "POOLING AGREEMENT"), by and among Bunge Funding, Inc., a Delaware corporation (the "COMPANY"), Bunge Management Services, Inc., a Delaware corporation, as Servicer (the "SERVICER"), and The Chase Manhattan Bank, (as subsequently replaced by The Bank of New York) as trustee (in such capacity, the "TRUSTEE") for the Trust, as supplemented by the Series 2000-1 Supplement, dated as of August 25, 2000 (as amended, supplemented or otherwise modified from time to time, the "SUPPLEMENT", collectively, with the Pooling Agreement, the "AGREEMENT"), by and among the Company, the Servicer, the Trustee, Bunge Asset Funding Corp. ("BAFC"), The Chase Manhattan Bank (as subsequently replaced by The Bank of New York), as collateral agent (in such capacity the "COLLATERAL AGENT"), Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank International", New York Branch, as letter of credit agent (in such capacity, the "LETTER OF CREDIT AGENT") and The Chase Manhattan Bank, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT"). The corpus of the Trust consists of Purchased Loans and all other Trust Assets referred to in the Agreement. Although a summary of certain provisions of the Agreement is set forth below, this Series 2000-1 VFC Certificate does not purport to summarize the Agreement, is qualified in its entirety by the terms and provisions of the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds and duties evidenced hereby and the rights, duties and obligations of the Trustee. A copy of the Agreement may be requested by a holder hereof by writing to the Trustee at The Bank of New York, 101 Barclay Street, Fl. 21 West, New York, New York 10286, Attention: Martin Reed. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to them in Annex X attached to the Agreement.
THIS SERIES 2000-1 VFC CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND CONDITIONS OF THE AGREEMENT, TO WHICH AGREEMENT THE SERIES 2000-1 VFC CERTIFICATEHOLDER, BY VIRTUE OF THE ACCEPTANCE HEREOF, ASSENTS AND IS BOUND.
The Servicer, the Company, the Series 2000-1 VFC Certificateholder and the Trustee intend, for federal, state and local income and franchise tax purposes only (but for no other purpose), that the Series 2000-1 VFC Certificate be evidence of indebtedness of the Company secured by the Trust Assets and that the Trust not be characterized as an association or publicly traded partnership taxable as a corporation. The Series 2000-1 VFC Certificateholder, by the acceptance hereof, agrees to treat the Series 2000-1 VFC Certificate for federal, state and local income and franchise tax purposes (but for no other purpose) as indebtedness of the Company; PROVIDED, HOWEVER, that nothing in this Series 2000-1 VFC Certificate or in the Transaction Documents shall impose on the Company any personal liability in respect of this Series 2000-1 VFC Certificate.
This Series 2000-1 VFC Certificate is the Investor Certificate entitled "Bunge Master Trust, Series 2000-1 VFC Certificate" (the "SERIES 2000-1 VFC CERTIFICATE") representing a fractional undivided interest in the Trust Assets, consisting of the right to receive the distributions specified in the Supplement out of (i) the Series 2000-1 Invested Percentage (expressed as a decimal) of Collections received with respect to the Purchased Loans and all other funds on deposit in the Collection Account and (ii) to the extent such interests appear in the Supplement, all other funds on deposit in the Series 2000-1 Collection Subaccount (collectively, the "SERIES 2000-1 VFC CERTIFICATEHOLDER'S INTEREST"). The Trust Assets are allocated in part to the Series 2000-1 VFC Certificateholder with the remainder allocated to the Investor Certificateholders of other Series, if any, and to the Company. An Exchangeable Company Interest representing the Company's interest in the Trust was issued to the Company pursuant to the Pooling Agreement on August 25, 2000. The Exchangeable Company Interest represents the interest in the Trust Assets not represented by the Investor Certificates of each Outstanding Series. The Exchangeable Company Interest may be decreased by the Company pursuant to the Pooling Agreement in exchange for an increase in the Invested Amount of a Class of Investor Certificates of an Outstanding Series, or one or more newly issued Series of Investor Certificates, upon the conditions set forth in the Agreement.
Distributions with respect to this Series 2000-1 VFC Certificate shall be paid by the Trustee in immediately available funds to the Series 2000-1 VFC Certificateholder by depositing such funds in the Cash Collateral Account or, if neither BAFC nor the Collateral Agent is the registered holder of the Series 2000-1 VFC Certificate, in accordance with the payment instructions from any subsequent registered holder of the Series 2000-1 VFC Certificate. Final payment of this Series 2000-1 VFC Certificate shall be made only upon presentation and surrender of this Series 2000-1 VFC Certificate at the office or agency specified in the notice of final distribution delivered by the Trustee to the Series 2000-1 VFC Certificateholder in accordance with the Agreement.
THIS SERIES 2000-1 VFC CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN INTEREST IN, BUNGE (EXCEPT IN ITS CAPACITY AS GUARANTOR), THE COMPANY, THE SERVICER OR ANY AFFILIATE OF EITHER OF THEM.
The transfer of this Series 2000-1 VFC Certificate shall be registered in the Certificate Register upon surrender of this Series 2000-1 VFC Certificate for registration of transfer at any office or agency maintained by the Transfer Agent and Registrar accompanied by evidence of satisfaction of the transfer restrictions set forth in SUBSECTION 9.10(C) of the Series 2000-1 Supplement and a written instrument of transfer, in a form satisfactory to the Trustee, the Transfer Agent and Registrar, the Company and the Servicer, duly executed by the Series 2000-1 VFC Certificateholder or the Series 2000-1 VFC Certificateholder's attorney, and duly authorized in writing with such signature guaranteed, and thereupon one or more new Series 2000-1 VFC Certificates of authorized denominations and of like aggregate Fractional Undivided Interests will be issued to the designated transferee or transferees.
The Company, the Trustee, the Servicer, the Transfer Agent and Registrar, and any agent of any of them, may treat the person whose name is recorded in the Series 2000-1 Register as the Series 2000-1 Purchaser for all purposes of the Supplement, notwithstanding notice to the contrary.
It is expressly understood and agreed by the Company and the Series 2000-1 VFC Certificateholder that (i) the Agreement is executed and delivered by the Trustee, not individually or personally but solely as Trustee of the Trust, in the exercise of the powers and authority conferred and vested in it, (ii) the representations, undertakings and agreements made on the part of the Trust in the Agreement are made and intended not as personal representations, undertakings and agreements by the Trustee, but are made and intended for the purpose of binding only the Trust, (iii) nothing herein contained shall be construed as creating any liability of the Trustee, individually or personally, to perform any covenant either expressed or implied made on the part of the Trust in the Agreement, all such liability, if any, being expressly waived by the parties who are signatories to the Agreement and by any Person claiming by, through or under such parties; PROVIDED, HOWEVER, the Trustee shall be liable in its individual capacity for its own willful misconduct or gross negligence and for any tax assessed against the Trustee based on or measured by any fees, commission or compensation received by it for acting as Trustee and (iv) under no circumstances shall the Trustee be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under the Agreement.
The holder of this Series 2000-1 VFC Certificate is authorized to record the date and amount of each increase and decrease in the Series 2000-1 Invested Amount with respect to such holder on the schedules annexed hereto and made a part hereof and any such recordation shall constitute PRIMA FACIE evidence of the accuracy of the information so recorded, absent manifest error, PROVIDED that the failure of the holder of this Series 2000-1 VFC Certificate to make such recordation (or any error in such recordation) shall not affect the obligations of the Company, the Servicer or the Trustee under the Agreement.
This Series 2000-1 VFC Certificate shall be treated as a "certificated security" for the purposes of Section 8-102(a)(4) of the New York UCC.
THIS SERIES 2000-1 VFC CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ANY CONFLICT OF LAW PRINCIPLES.
By acceptance of this Series 2000-1 VFC Certificate, the Series 2000-1 VFC Certificateholder hereby agrees that it will not institute against, or join with or assist any other Person in instituting against, the Company prior to the date which is one year and one day after all Investor Certificates of each Outstanding Series are repaid in full any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any Applicable Insolvency Laws.
Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Series 2000-1 VFC Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Company, as agent of the Trust, has caused this Series 2000-1 VFC Certificate to be duly executed.
Dated: July __, 2001
BUNGE FUNDING, INC.,
as agent of the Trust as authorized
pursuant to SECTION 5.01 of the
Pooling Agreement,
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Series 2000-1 VFC Certificate referred to in the within-mentioned Agreement.
THE BANK OF NEW YORK, not in its individual capacity but solely as Trustee,
Pay to the order of The Bank of New York, as Collateral Agent.
BUNGE ASSET FUNDING CORP.,
SCHEDULE 1
TO
SERIES 2000-1 VFC CERTIFICATE
Series 2000-1 Series 2000-1
Increase in Decrease in Series 2000-1
Date Series 2000-1 Series 2000-1 Purchaser Notation
Purchaser Purchaser Invested Made By
Invested Invested Amount
Amount Amount
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EXHIBIT D
TO
SERIES 2000-1 SUPPLEMENT
FORM OF ISSUANCE/INCREASE NOTICE
___, 20__
BUNGE ASSET FUNDING CORP.
THE CHASE MANHATTAN BANK,
as Administrative Agent
THE BANK OF NEW YORK,
as Trustee
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH,
as Letter of Credit Agent
Ladies and Gentlemen;
Reference is hereby made to the First Amended and Restated Series 2000-1 Supplement, dated as of July 12, 2001 (as amended or supplemented, the "SUPPLEMENT"), among Bunge Funding, Inc. (the "COMPANY"), Bunge Management Services, Inc. as Servicer (in such capacity, the "SERVICER"), Bunge Asset Funding Corp. as Series 2000-1 Purchaser, The Bank of New York, as Collateral Agent and as Trustee, The Chase Manhattan Bank, as Administrative Agent, and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank International", New York Branch, as Letter of Credit Agent. Capitalized terms used in this Notice and not otherwise defined herein shall have the meanings assigned thereto or incorporated by reference in the Supplement.
This Notice constitutes the notice recruited in connection with [the initial issuance] [a Series 2000-1 Increase] pursuant to SUBSECTION 2.05(A) of the Supplement.
The [Servicer] [Company] hereby requests [a purchase in respect of the initial issuance of the Series 2000-1 VFC Certificate] [a Series 2000-1 Increase] be made by the Series 2000-1 Purchaser on _________, ________ in the aggregate amount of $________.
The [Servicer] [Company] hereby represents and warrants, as of the date of such [purchase] [Series 2000-1 Increase] after giving effect thereto, that the conditions set forth in
SECTION 2.05 of the Supplement with respect to such [purchase] [Series 2000-1 Increase] have been satisfied.
IN WITNESS WHEREOF, the undersigned has caused this Notice to be executed by its duly authorized officer as of the date first above written.
[BUNGE MANAGEMENT SERVICES, INC.,
as Servicer] [BUNGE FUNDING, INC.]
Exhibit 21.1
SUBSIDIARIES OF BUNGE LIMITED
COUNTRY OF INCORPORATION/ OWNERSHIP
COMPANY NAME PERCENTAGE
------------ ----------
BERMUDA
Greenleaf, Ltd. 100.00
Bunge Finance Ltd. 100.00
Ceval Holdings Ltd. 100.00
Serrana Holdings Ltd. 100.00
Bunge Global Markets, Ltd. 100.00
BARBADOS
Bunge Export Sales (Barbados) Corporation 100.00
CAYMAN ISLANDS
Santista International Ltd. 71.10
Serrana International Ltd. 72.00
Santista Export Ltd. 71.10
Ceval Export Securitization Ltd. 71.10
Ceval International Ltd. 71.10
Bunge Trade Limited 100.00
USA
Bunge Corporation 100.00
Bunge Lauhoff Grain Company 100.00
Nutrition Unlimited, Inc. 100.00
The Crete Mills, Inc. 100.00
Lauhoff Finance Corporation 100.00
Bunge Foods Corporation 100.00
Richardson & Holland Corporation 100.00
Basic Foods, Inc. 100.00
Bunge Corporation (Emporia) 100.00
Produce Grain, Inc. 100.00
Bunge North America Corporation 100.00
International Produce, Inc. 100.00
Bunge Foods Corporation (California) 100.00
1
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SUBSIDIARIES OF BUNGE LIMITED
COUNTRY OF INCORPORATION/ OWNERSHIP
COMPANY NAME PERCENTAGE
------------ ----------
USA
Bunge North America, Inc. 100.00
Bunge Finance North America, Inc. 100.00
Bunge Global Markets, Inc. 100.00
Bunge Management Services Inc. 100.00
Bunge Funding, Inc. 100.00
Bunge Asset Funding Corporation 100.00
CANADA
Bunge of Canada Ltd. 100.00
MEXICO
Controladora Bunge, S.A. de C.V. 100.00
Agroproductos y Servicios Bunge, S.A. de C.V. 100.00
Alimentos Bunge, S.A. de C.V. 75.00
Harinera La Espiga, S.A. de C.V. 25.00
Inmobiliaria A. Gil S.A. 25.00
Inmobiliaria Gilsa S.A. 25.00
Servicios Administrativos Bunge, S.A. de C.V. 100.00
Molinos Lauhoff-Bunge S.A. de C.V. 100.00
ARGENTINA
Terminal Bahia Blanca S.A. 59.56
Bunge Ceval S.A. 100.00
Bunge Argentina S.A. 100.00
Terminal 6 S.A. 40.00
Terminal 6 Industrial S.A. 50.00
Guide S.A. 50.00
Distribuidora de Productos del Hogar S.A. 100.00
2
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SUBSIDIARIES OF BUNGE LIMITED
COUNTRY OF INCORPORATION/ OWNERSHIP
COMPANY NAME PERCENTAGE
------------ ----------
BRAZIL
Bunge Alimentos S.A. 71.10
Fertimport S.A. 100.00
Serrana S.A. 83.60
Fosbrasil S.A. 31.86
Bunge Investimentos & Consultoria Ltda. 100.00
Serrana Participacoes S.A. 83.60
Bunge Fertilizantes S.A. 72.00
Amoniasul Servicos de Refrigeracao Industrial Ltda. 36.00
Fertilizantes Anhanguera Ltda. 83.60
Santista Industrial Comercial Ltda. 71.10
Ceval Armazens Gerais Ltda. 71.10
Ceval Centro Oeste S.A. 65.43
Fertilizantes Ouro Verde S.A. 75.86
Fertifos Administracao e Participacao S.A. 37.89
Fosfertil S.A. 21.29
Ultrafertil S.A. 21.29
Manah Agropastoril Ltda. 72.00
Sucuapara Agropastoril Ltda. 72.00
Macra Administracao e Servicos S/C Ltda. 40.88
Agrisat Solucoes Integradas Ltda. 36.00
Industria de Fertilizantes de Cubatao Ltda. 72.00
SINGAPORE / INDONESIA
Bunge Agribusiness Singapore Pte Ltd. 100.00
PT Bunge Agribusiness Indonesia 97.00
Bunge Agribusiness Malaysia Sdn. Bhd. 100.00
CHINA
Bunge International Trading (Shanghai) Co. Ltd. 100.00
3
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SUBSIDIARIES OF BUNGE LIMITED
COUNTRY OF INCORPORATION/ OWNERSHIP
COMPANY NAME PERCENTAGE
------------ ----------
UNITED KINGDOM
Bunge Corporation Ltd. 100.00
Bunge UK Limited 100.00
SPAIN
Bunge Iberica S.A. 99.90
HOLLAND
Koninklijke Bunge B.V. 100.00
Bunge Trade Services B.V. 100.00
Europroteol B.V. 100.00
SWITZERLAND
Bunge AG 100.00
Bunge Agribusiness S.A. 100.00
ITALY
Bunge Global Markets SPA 100.00
FRANCE
Bunge France SAS 99.99
GERMANY
Bunge Handelsgesellshaft MBH 100.00
PORTUGAL
Vip Madeira Representacoes e Comercio Ltda 71.10
Bunge Iberica Portugal, S.A. 100.00
TURKEY
Bunge Gida Ticaret S.A. 99.99
DOMINICAN REPUBLIC
Bunge Caribe, S.A. 94.40
4
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SUBSIDIARIES OF BUNGE LIMITED
COUNTRY OF INCORPORATION/ OWNERSHIP
COMPANY NAME PERCENTAGE
------------ ----------
MAURITIUS
Siam Stock Holdings Ltd. 28.44
INDIA
Geepee Ceval Proteins & Inv. Ltd. 28.44
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EXHIBIT 23.1
[DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
To the Board of Directors and Stockholder of
Bunge Limited
Bermuda
We consent to the use in this Registration Statement of Bunge Limited on Form F-1 of our report dated April 2, 2001 (July 12, 2001 as to the effects of the share exchange and share dividend described in Note 18 and 20) appearing in the Prospectus, which is part of this Registration Statement, and to reference to us under the headings "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report also included Schedule II - Valuation and Qualifying Accounts of Bunge Limited, contained in Item 8. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statements taken as a whole, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche Hamilton, Bermuda July 12, 2001 |
EXHIBIT 23.2
[DELOITTE TOUCHE TOHMATSU LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Bunge Limited on Form F-1 of our report related to Manah S.A. and Subsidiaries dated January 12, 2001, and our report related to Fertifos Administracao e Participacao S.A. and Subsidiaries dated January 12, 2001, appearing in the Prospectus, which is a part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such Prospectus.
/S/ DELOITTE & TOUCHE TOHMATSU DELOITTE & TOUCHE TOHMATSU Auditores, Independentes Sao Paulo, Brazil July 12, 2001 |