UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 30, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________________________ to _______________________________
Commission File Number 001-34719
S&W SEED COMPANY
Nevada
Incorporation or Organization ) |
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27-1275784
Identification No. ) |
7108 North Fresno Street, Suite 380
( Address of Principal Executive Offices ) |
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93720
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(559) 884-2535
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class |
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Name of Each Exchange on Which Registered |
Common Stock, $0.001 Par Value |
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Nasdaq Capital Market |
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨ Yes x NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
¨ Yes x NoIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes ¨ NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x Yes ¨ NoIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer ¨ |
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Accelerated filer ¨ |
Non-accelerated filer ¨(Do not check if a smaller reporting company) |
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Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
¨ Yes x NoThe aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter was $47,396,596.
The number of shares outstanding of common stock of the Registrant as of September 22, 2015 was 13,463,455.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for the 2015 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement is to be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended June 30, 2015.
S&W SEED COMPANY
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect,
could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Report that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact are statements that could be deemed forward-looking
statements, including but not limited to any projections of revenue, margins, expenses, tax provisions, earnings, cash flows and other financial items; any statements of the plans, strategies
and objectives of management for future operations; any statements regarding our ability to raise capital in the future; any statements concerning expected development, performance or
market acceptance relating to our products or services or our ability to expand our grower or customer bases; any statements regarding future economic conditions or performance; any
statements of expectation or belief; any statements regarding our ability to retain key employees; and any statements of assumptions underlying any of the foregoing. These forward-looking
statements are often identified by the use of words such as, but not limited to, "anticipate," "believe," "can," "continue," "could,"
"estimate," "expect," "intend," "may," "will," "plan," "project," "seek," "should,"
"target," "will," "would," and similar expressions or variations intended to identify forward-looking statements. We have based these forward-looking
statements on our current expectations about future events. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results
and the timing of certain events to differ materially from future results expressed or implied by such forward- looking statements. Risks, uncertainties and assumptions include the
following:
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You are urged to carefully review the disclosures made concerning risks and uncertainties that may affect our business or operating results, which include, among others, those listed in
Part I, Item 1A. "Risk Factors" of this Report.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.
Many factors discussed in this Report, some of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from
those that might be anticipated from the forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this
Report as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements. All forward-looking statements
included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Furthermore, such forward-looking statements speak only as of
the date of this Report. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required
by law.
PART I
Overview
Founded in 1980 and headquartered in the Central Valley of California, we believe we are the leading producer and distributor of alfalfa seed in the world.
We produce or grow seed in the Western United States, Canada and Australia and sell our seed varieties in more than 30 countries across the globe. Historically, we have been recognized
as the leading producer of non-dormant alfalfa seed varieties, which varieties have been bred for warm climates and high-yields, including varieties that can thrive in poor, saline soils. Our
December 2014 acquisition of certain alfalfa research and production facility and conventional (non-GMO) alfalfa germplasm assets of DuPont Pioneer, a wholly-owned subsidiary of E.I. du
Pont de Nemours and Company, has provided us with the opportunity to become a leading producer of dormant, high yield alfalfa seed varieties, which are the varieties suitable for cold
weather conditions. We also have agreements with Monsanto Corporation to develop unique traits into specific S&W-developed varieties that exhibited high yield and salt tolerance.
We have licensing agreements with Monsanto and Forage Genetics International, LLC, a subsidiary of Land O' Lakes, Inc. to produce, breed and eventually sell Roundup Ready alfalfa
seed varieties. As a result of the above activity, our alfalfa seed business now encompasses the production, breeding and sale of non-dormant and dormant conventional varieties and the
potential for future production and sale of GMO (genetically modified organism) varieties. In addition to alfalfa seed production and sales, which is our core business, we also conduct an
ongoing stevia breeding program.
Following our initial public offering in fiscal 2010, we expanded certain pre-existing business initiatives and added new ones, including:
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We have accomplished these expansion initiatives through a combination of organic growth and strategic acquisitions, foremost among them:
We believe our 2013 combination with SGI created the world's largest non-dormant alfalfa seed company and gave us the competitive advantages of year-round production in that
market. With the completion of the acquisition of dormant alfalfa seed assets from DuPont Pioneer in December 2014, we believe we have become the largest alfalfa seed company
worldwide (by volume), with industry-leading research and development, as well as production and distribution capabilities in both hemispheres and the ability to supply proprietary dormant
and non-dormant alfalfa seed. Our operations span the world's alfalfa seed production regions, with operations in the San Joaquin and Imperial Valleys of California, five additional
Western states, Australia and three provinces in Canada. We now sell our seed products in more than 30 countries worldwide.
We also own and operate seed-cleaning and processing facilities in Five Points, California and Nampa, Idaho. Our newly-acquired Nampa Facility sits on approximately 80 acres and
includes conditioning, treating, bagging and warehouse facilities that had been used by DuPont Pioneer for its alfalfa seed processing needs.
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World Agriculture
One of the biggest challenges of the 21st century will be to expand agricultural production so that it can meet the food and nutritional demands of the world's growing population.
According to World Population Prospects: The 2012 Revision, published by the United Nations in June 2013, the world population is estimated to surpass 9.6 billion by 2050.
Improvements in farm productivity have allowed agriculture to keep pace with growing food demand. Yield-enhancing technologies such as mechanization, hybrid seed and crop
protection chemicals have enabled farmers to meet the ever-growing demand for food. Because of decreases in the amount of arable land and shrinking worldwide fresh water resources,
further increases in agricultural production must come from improvements in agricultural productivity. We address this need by breeding high-yielding alfalfa seed that is tolerant to inferior,
saline soils, thereby allowing farmers to make marginal soils with inferior water quality as productive as superior soils.
Alfalfa Seed Industry
Alfalfa seed is primarily used for growing alfalfa hay, which is grown throughout the world as "forage" for livestock, including dairy and beef cattle, horses and sheep. It is
most often harvested as hay, but can also be made into silage, grazed, or fed as greenchop to ruminant livestock. The alfalfa industry (and therefore the alfalfa seed industry) is highly
dependent on the dairy industry, which is the largest consumer of alfalfa hay. As markets around the world continue to expand to a more westernized diet with high-protein consumption, the
demands for alfalfa production around the world continue to increase.
Alfalfa is indigenous to the Middle East where it is considered a "non-dormant" plant, meaning it grows year round. "Dormant" varieties of alfalfa have adapted to
cold climates by going dormant during periods when frost or snow conditions would otherwise kill them. Dormancy is rated using a numerical system under which "dormant"
varieties are rated toward the lower end of a 1 through 11 scale, such as 2 through 4, while "non-dormant" varieties are rated toward the upper end of the scale, such as 8
through 11. The number typically identifies the number of cuttings that a farmer might be able to obtain each year. For the past 30 years, we have focused our efforts on the "non-dormant"
market, which is best suited to hot, dry climates, where the growing season lasts for most of the year, resulting in larger yields per acre.
While exact production estimates worldwide are difficult to obtain, approximately 150 million pounds of alfalfa seed are produced worldwide each year, roughly divided evenly between
non-dormant and dormant production. Alfalfa seed for the non-dormant marketplace is primarily grown in just a few key regions of the world, including the San Joaquin Valley of California,
the Imperial Valley of California, and Southern Australia. However, the growing regions for "non-dormant" alfalfa hay include the Southwestern U.S., the Middle East, North
Africa, Latin America and other hot, arid regions of the world. "Dormant" alfalfa seed, by contrast, is grown in the western United States and Canada for production of alfalfa hay
in colder climates, including the northern regions of the United States, Canada, Europe and China.
Alfalfa seed production is demanding for even the most experienced farmers. Farming practices must be tailored to the climatic conditions of each area. Irrigation must be carefully
controlled and timed to stress the plants to cause maximum flowering and seed production. Weed control is essential in order to pass inspections for purity needed for certification. Insect
pests, especially lygus bugs, must be managed throughout the season, using strategies that protect pollinators, such as honey bees, leafcutter bees and alkali bees. Fields are desiccated
using chemicals that remove moisture and then are harvested as quickly thereafter as possible to limit or avoid rain damage.
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Stevia and the Sweetener Industry
Stevia is a relative newcomer in the estimated over $50 billion global sweetener market. Although this market is still dominated by sugar, sugar substitutes continue to increase in
market share as consumer concern over sugar intake continues to increase. Stevia leaf and its refined products constitute a natural, non-caloric high intensity sweetener, estimated to be
200 to 300 times sweeter than sugar. Its taste has a slower onset and longer duration than that of sugar. It has the advantage of not breaking down with heat, making it more stable for
cooking than other sugar alternatives. In the U.S., approximately 70% of all new products formulated with stevia are beverages, with the remainder split between diverse categories,
including dairy products and baked goods.
The stevia plant is indigenous to the rain forests of Paraguay and has been used as a sweetener in its raw, unprocessed form for hundreds of years. In recent years, it has been grown
commercially in Brazil, Paraguay, Uruguay, parts of Central America, Thailand, China and the U.S. Currently, the majority of global commercial stevia production occurs in China.
The incorporation of stevia-derived extracts into foods and beverages in the U.S. has seen a rapid increase since the beginning of 2009, when stevia was first introduced as a sweetener
alternative to sugar in food and beverages. According to Mintel and Leatherhead Food Research, the value of stevia as an additive for use in food and beverage manufacture in 2013 totaled
approximately $110 million, and they estimate that this total will grow to approximately $275 million by 2017. Their report further states that, while sales of artificial sweeteners, such as
aspartame, acesulfame K and sucralose still dominate the market for sugar substitutes, consumer demand for artificial sweeteners has seen a decline since the introduction of stevia. Mintel
and Leatherhead Food Research expect to this trend to continue, with plant-derived sweeteners, such as stevia, providing the main area of growth in the sweetener market in the future.
Business Strategy
We strive to enhance our growth potential and improve gross margins by increasing our alfalfa seed business, by leveraging our expertise in plant
discovery and development and by continually assessing opportunities to expand into the production and sale of other, higher margin crops.
Our goal is to grow our alfalfa seed business by:
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These goals are being accomplished both through organic growth of our legacy business and through strategic acquisitions. We will continue to look for additional acquisition or internal
opportunities that will expand our existing business or provide us with a gateway to entering new markets that complement our existing business.
We also are continuing to exploit the emerging market for stevia through our stevia breeding program. The goal of this program is to leverage our research, development and breeding
expertise to invent stevia varieties with flavor characteristics that best complement the food and beverages into which stevia is increasingly being incorporated or that can be consumed on
its own.
Our Current Alfalfa Seed Products
We have a history of innovation in alfalfa breeding, dating back to the early 1980s when S&W's first non-dormant varieties were introduced to the
market. Starting in 2001, our Australian subsidiary, SGI, began a breeding program targeted at creating varieties that maximize seed yields, thereby reducing the cost of seed production.
Historically, we differentiated our products by optimizing our varieties for geographical regions that have hot climates and, in the case of S&W varieties, challenging soil conditions such
as high-salt content, while maximizing crop yield. Our December 2014 acquisition of DuPont Pioneer's conventional, dormant alfalfa seed varieties builds upon our initial 2013 launch into
dormant alfalfa seed markets by adding a wide selection of dormant alfalfa seed varieties that are suited for higher elevation and cooler climate conditions.
Fall Dormancy Ratings of Our Varieties
Fall dormancy is a key characteristic that can vary among alfalfa varieties. Fall Dormancy (FD) ratings are assigned to varieties based on their
performance in standardized tests for the onset of dormancy in the fall. Standard check varieties span an FD rating continuum from FD 1 to FD 11, where the onset of dormancy is
measured as fall height relative to standard check varieties. FD1 represents the earliest onset of fall dormancy, whereas FD 12 represents a completely non-dormant growth habit. Early FD
ratings are generally most suited to cold winter climates where plants must cease fall growth early allowing individual plants to survive cold winters and frozen soils conditions for lengthy
periods. FD 2 and FD 3 ratings are typically associated with early onset fall dormancy, when grown in the upper Midwest for example. FD 9 and FD 10 ratings are typically non-dormant, are
characterized as having relatively little slowdown in fall growth and are more suited for continuing forage yield production and improved yield potential in warm winter climates where soils do
not freeze.
Our current commercial product line-up includes alfalfa seed varieties that span from FD 3 (our earliest onset of fall-dormancy) to FD 10 (our most non-dormant, most winter active). The
legacy S&W product development efforts were focused on FD 8, FD 9 and FD 10, with some breeding effort devoted to FD 4, FD 6 and FD7.
S&W Varieties
S&W varieties are all bred and developed to meet the guidelines for certification by the California Crop Improvement Association ("CCIA").
In February 2012, we announced the certification of our first proprietary dormant alfalfa seed variety, which was specifically bred to thrive in high altitude and cooler climates. In August 2012, we purchased
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the rights to a portfolio of alfalfa varieties suited for higher elevations and colder climate conditions, marking our commitment to expand more aggressively into the
dormant variety market. The colder climate or higher elevation varieties that we acquired are in the range of FD 3, FD 4 and FD 5. In December 2014, we acquired from DuPont Pioneer one
of the alfalfa industry's largest portfolios of dormant alfalfa germplasm, along with their active breeding program. The Pioneer breeding program amassed a significant germplasm base that
spans from FD 3 through FD 9. The primary focus of the Pioneer breeding program was FD 4 and FD 5 for the North America market. These acquisitions of dormant germplasm significantly
expand the range of geographic and climatic growing regions where we can offer adapted varieties.
Our most non-dormant varieties (FD 8, FD 9 and FD 10) represent a large proportion of our business and are best suited to hot, arid climates. Our salt tolerant non-dormant varieties do
well in salty irrigation waters and salty soils. Our leading non-dormant varieties include SW 10, SW 9720, SW 9215, SW 9628, SW 8421S and SW 8718. Of these varieties, SW 9720, SW
9215 and SW 8421S are bred to perform very well in highly saline conditions that would stunt or kill ordinary alfalfa.
Our FD 3, FD 4 and FD 6 S&W varieties are adapted to the winter-hardy intermountain west and to irrigated areas of the Sacramento Valley and Northern San Joaquin Valley of
California. These include Rhino, Trophy and SW 6330. In addition, we have grown introductory volumes of several new varieties derived from the Pioneer germplasm base for commercial
introduction as S&W brand varieties, or potentially as varieties for licensing to third party brands. Our breeding and genetics experts continue the multi-year process of developing
improved varieties over much of the dormancy spectrum, but concentrating primarily on high salt- and heat-tolerant, non-dormant alfalfa seed, where we have established ourselves as a
leading provider. We also create blends of seed varieties.
IVS Varieties
IVS markets both common and certified alfalfa seeds, sourced from growers located in the Imperial Valley of Southeast California. A portion of the alfalfa
seed sold by IVS in fiscal 2015 was common varieties (
i.e.
, uncertified seed) while the balance consisted of certified CUF (a public variety) and proprietary varieties. The primary
proprietary varieties we acquired in the IVS acquisition are LaJolla, Catalina and Saltana.
SGI Varieties
SGI has developed well-known proprietary varieties of alfalfa, such as SuperSonic, SuperNova, SuperStar, SuperCharge, SuperAurora, SuperSequel
and SuperSiriver. Since 2002, the varieties developed by SGI have attracted an expanding grower base, and in 2012, SGI accounted for more than 60% of the total Australian certified
proprietary alfalfa seed production. SGI's alfalfa seed varieties are bred to resist disease, create persistence in the field and produce higher yields of both the alfalfa hay forage and alfalfa
seed production for our seed growers. SGI's proprietary varieties exhibit superior seed yield capability compared to traditional non-proprietary alfalfa varieties in Australia with the most
recent varieties showing the highest seed yields. Forage yields of the older SGI proprietary varieties are at least equivalent to traditional non-proprietary varieties and the forage yields of the
more recent SGI varieties are even better. All of SGI's proprietary alfalfa varieties, excluding SuperAurora, have FD ratings of 8-9 and therefore achieve optimum growth and forage
production in Mediterranean to desert climates.
SGI has a number of developments within its breeding program pertaining to semi-dormant and highly non-dormant alfalfa varieties and tropical alfalfa seed varieties.
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Additionally, SGI has a breeding and production platform of proprietary white clover varieties, including SuperHuia, SuperLadino, SuperHaifa and SuperHaifa II. Similar to SGI's alfalfa
varieties, SGI's clover varieties produce comparatively higher seed yields. In fiscal 2015, clover sales represented 5% of SGI's total seed sales. SGI's white clover varieties are used for
forage and ornamentation.
Genetically Modified Organism Alfalfa
Currently, Europe, the Middle East and certain other parts of the world prohibit the sale of genetically modified organism (GMO) alfalfa. Therefore,
historically, we have not employed genetic engineering in the breeding of our current commercial seed varieties for these markets, and consequently, we have products that can be sold
throughout the world. As a result of the January 2011 deregulation by the U.S. Department of Agriculture (the "USDA") of Roundup Ready® alfalfa, a GMO product, Roundup
Ready® alfalfa is currently being grown in the United States without any federal or state regulations governing field isolation and other protections.
Collaborative stewardship programs have been developed to facilitate the coexistence of GMO and non-GMO seed. For example, in 2010, the AOSCA launched its Alfalfa Seed
Stewardship Program (the "ASSP"). The ASSP is a voluntary, fee-based certification program for the production of alfalfa seed to be sold into markets that prohibit the sale of
GMO alfalfa. ASSP certification of seed fields includes testing for GMO material and observance of a minimum stated isolation distance of five miles from any GMO alfalfa seed production
field. Also in 2010, the California Crop Improvement Association (the "CCIA") developed a web-based alfalfa seed field isolation "pinning" map for alfalfa seed
production in the Western U.S. This map is intended to pin both GMO and non-GMO seed fields. Although beneficial to growers and customers alike these stewardship programs do not
afford legal protection to non-GMO growers. We believe that our farming practices currently meet the ASSP and CCIA requirements, including the field isolation requirements.
We continue to evaluate our options with respect to incorporating biotechnology into our alfalfa seed traits and the resulting impact on our business strategy and operations. In April
2013, we entered into a license agreement with FGI to develop and commercialize seed varieties that incorporate proprietary traits, including the Roundup Ready® trait. This agreement
further documented and formalized our previously announced collaboration with FGI and Monsanto to develop genetically modified versions of certain of our proprietary alfalfa varieties. This
development of biotech seed varieties consists of several phases including lab work and field trials to confirm agronomic performance and trait efficiency of each developed variety. Upon
completion of the field trials for any developed variety, we may elect to commercialize the variety and enter into a variety-specific license agreement with FGI pursuant to which we would
pay certain royalties and access fees. Although we will no longer be internally farming to produce our proprietary non-GMO alfalfa seed varieties following the 2015 fall harvest, depending
on the progress we make in our collaborative efforts with FGI and Monsanto, we could acquire additional farmland acreage in the future for Roundup Ready® seed stock production and
testing or for other biotechnology trait production purposes.
In December 2014, we entered into a Contract Alfalfa Production Services Agreement with DuPont Pioneer, whereby we produce for a service fee, alfalfa seed of commercial Pioneer
varieties containing the Roundup Ready® gene. These varieties are exclusive to Pioneer and accordingly, we do not produce them for or sell them to any other customer.
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In connection with the DuPont Pioneer acquisition, we only acquired conventional alfalfa varieties. However, the parties agreed to the terms of a second asset purchase agreement to be
entered into under certain circumstances relating to the purchase of DuPont Pioneer's GMO alfalfa assets: If required third party consents are received from Monsanto, FGI and others prior
to November 30, 2017 and subject to the satisfaction of certain other specified conditions, either we or DuPont Pioneer has the right to enter into (and require the other party to enter into)
the second asset purchase agreement on or before December 29, 2017 pursuant to which we would acquire DuPont Pioneer's GMO germplasm varieties and other related assets for a
purchase price of $7,000,000. There is no assurance that we will purchase the DuPont Pioneer GMO assets.
As a result of the increasing use of Roundup Ready®
alfalfa by traditional hay farmers and the lack of federal or state rules requiring adequate isolation of Roundup
Ready® alfalfa fields from conventional fields to prevent cross-pollination of GMO plants with non-GMO plants, we have experienced an increase in the number of seeds in recent
harvests that have tested positive for the adventitious presence of GMO. To date, the low percentage of seeds that have tested positive has not undermined our ability to meet international
demand, and we expect to be able to sell these seeds domestically and in other jurisdictions that permit the importation of GMO alfalfa at our customary prices for certified seed.
Nevertheless, we are taking proactive steps to protect our seed crops to ensure we have sufficient seed to meet the demand for our varieties in international markets. These steps include
seeking collaborative agreements, regulations or other measures to ensure neighboring farms that grow GMO alfalfa in the San Joaquin Valley limit the extent to which they allow the
flowering and cross-pollination of their GMO-based crops with our conventional non-GMO crops to occur; and expanding our contracted grower base in the Imperial Valley of California, as
well as other western states (including Nevada, Arizona, Oregon, Washington, Idaho, Colorado, Wyoming, Montana and Kansas), as well as the Canadian provinces of Alberta, Manitoba
and Saskatchewan, where we now have growers as a result of the DuPont Pioneer acquisition, and seed growing regions where GMO alfalfa is less prevalent. We also have begun to grow
S&W varieties in South Australia, where there is no GMO activity in alfalfa, and intend to increase that production in future growing seasons.
Alfalfa Seed Cleaning and Processing
Alfalfa seed processing is similar in all of our growing regions and begins with the harvest. Each field is harvested and identified separately with unique
information such as variety, lot number, grower name, field name, acres and certification number. During harvest, our growers load field run harvested seed separately for each field out of
the combine into bulk containers for transport to the processing facility. When the containers arrive at the facility, each container is weighed, labeled with the unique field information and a
sample is taken.
Harvested seed is then sent to seed-cleaning lines where it is cleaned and foreign matter such as weeds, inert matter and other crop seed is removed. Clean seed samples are taken
and tested for purity and germination to meet company quality standards. The clean seed is then stored in bulk until needed to fulfill a sales order. Upon receipt of a sales order, the clean
seed is pulled from inventory and processed through our packaging equipment to meet specific customer requirements such as treatment, package size and unique bag and labeling.
With the successful acquisition of the DuPont Pioneer alfalfa business, we now have a processing facility in Nampa, Idaho in addition to our existing processing facilities in Five Points.
The facility in Nampa, Idaho gives us exclusive access to the use of patented coating technology that, among other things, allows for the extension of rhizobium (seed treatment) lifespan.
We handle processing of our Imperial Valley seed under a long-term service agreement.
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S&W Processing
S&W proprietary seed is packaged into an S&W branded seed bag as well as unique customer-specific branded seed bags. Final packaging
for customers includes attaching a label with variety name and physical quality data, and attaching a State Certification tag (also known as a "blue tag") to each individual bag.
When the seed is treated with any type of seed treatment, a treatment tag must also be attached to each individual bag.
S&W proprietary seed production is produced under a state seed certification program. As part of the DuPont Pioneer acquisition, we acquired a CCIA certified lab that enables us
to collect, analyze and submit to the state all of the data needed for certification of our seed varieties so that we no longer are required to outsource that function. Certification by these
programs ensures both physical and genetic quality standards for individual lots of seed. Additional testing may be required, dependent on the market to which the shipment is destined,
such as Saudi Arabia or Mexico. Samples may be sent to the Federal Seed Laboratory (U.S. Department of Agriculture) or a State Department of Agriculture laboratory for further physical
quality testing and/or market specific phytosanitary testing.
Unlike many other plant species, the physiological characteristics of alfalfa seed allow for longer term storage without losing physical quality of the seed. When we have unsold
inventory at the end of a sales season, these seed characteristics ensure the ability to store and sell the inventory in subsequent years.
As our alfalfa seed business grows, processing facility utilization will be increased by implementing process improvements such as autonomous maintenance and quicker material
changeovers to reduce downtime. In addition, we will increase throughput by sequencing operations to remove bottlenecks and by adding work shifts. Finally, we may make capital
improvements to our facilities when business opportunities exist to create a strong return on investment.
SGI Processing
SGI's growers contract directly with independent mills in the southeast region of Southern Australia for the cleaning and preparation of SGI's varieties.
Four milling facilities are used by SGI's growers to clean and process the majority of SGI alfalfa seed, and one company, Tatiara Seeds Pty Ltd, which owns two of the four milling facilities,
processes approximately 70% of seed grown for SGI. One other milling facility cleans the majority of SGI's white clover. Although most of SGI's milling requirements are processed through
Tatiara-owned mills, we are aware of other mills that would serve our purposes were we no longer able or willing to process the SGI seed through Tatiara-owned mills.
The SGI growers are required to deliver seed that meets SGI's processing specifications, based on international and domestic certification standards. In a typical year, approximately
90-95% of product received from the growers meets SGI's specifications.
Alfalfa Seed Product Development
Our alfalfa breeding program is designed to make steady genetic improvement in our germplasm base that is used to create better performing varieties for our customer. A typical
alfalfa variety can take as little as five years or as long as 18 years to be developed, depending on methodology and the desired agronomic traits. Because of the many years required to
develop a new alfalfa variety, we believe our successful breeding program allows us to offer seed varieties incorporating a combination of characteristics desired by farmers that are not
available from any other source, thereby providing us with a competitive advantage.
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The breeding program has three distinct phases; screening, crossing, and classification. In connection with the breeding of our non-GMO varieties, in each phase of the breeding
process, we conduct tests to ensure that we have no adventitious presence (AD) of GMO contamination. Both field and greenhouse breeding locations are used in our breeding program.
For the screening phase, seed is seeded in flats in the greenhouse. Seedlings are inoculated with various pathogens to improve host plant resistance. We have locations that specialize
in nematode screening, disease screening, salt tolerance screening and insect pest screening. We screen hundreds of thousands of plants throughout the year, then these resistant plants
are transplanted to the field and are inoculated with additional pathogens and evaluated for resistance and agronomic characteristics, such as yield, tolerance to lodging, forage quality,
color, crown size, dormancy and other traits that are needed by farmers.
The second phase, or crossing phase, begins with selecting plants from field nurseries and clonally propagating them by taking stems and rooting them in the greenhouse. These rooted
clonally propagated plants are cross-pollinated to make the first generation or SYN 1 seed of the new varieties. This SYN 1 seed is used for variety characterization and also increased to
ensure ample seed is available for multiplication for the life of the variety.
The characterization phase is the most difficult part of the breeding operation. To determine performance levels and environmental adaptation, extensive testing across many
environments for yield, forage quality, yield stability across environments, dormancy, tolerance to lodging, regrowth from cutting; as well as being characterized for as many as 15-18 pests
and diseases.
We are also looking to build on our research and development expertise and expand our biotechnology initiatives. As such, we look for opportunities to collaborate with other companies
that have technologies that we believe complement our proprietary products and/or our research and development breeding expertise to develop as yet unavailable specialized alfalfa seed
products and potentially, other seed products. We currently are in the initial phase of working with Calyxt, Inc. (a wholly-owned subsidiary of Cellectis Plant Sciences) to research, develop,
produce and commercialize alfalfa seed products involving next generation gene editing technology on our elite alfalfa seed genetics. We also are forming a joint corporation in Argentina
with Bioceres, S.A. for the purpose of collaborating on developing specific GMO traited seed for the Argentina market. Both of these relationships are in their infancy, and we do not expect
that we will see a material impact on our revenue for at least two years, if ever. However, both of these biotech initiatives demonstrate our willingness and ability to expand our research and
development efforts beyond our classically-bred proprietary alfalfa seed breeding program.
Sales, Marketing and Distribution
S&W Sales and Marketing
Historically, we primarily sold high quality proprietary "non-dormant" seed varieties to those parts of the world with hot, arid climates. Our primary geographical focus for
non-dormant seed is the Middle East and North Africa, although we currently sell to customers in a broad range of areas, including the Western U.S., Mexico, South America, Middle East
and Africa, as well as other countries with Mediterranean climates. Unlike in cooler climates, the geographic areas on which we have historically concentrated are able to sustain long
growing seasons and therefore alfalfa growers can benefit from our high-yielding,
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non-dormant varieties. In recent periods, we have expanded geographically into colder climates where our
newly-acquired dormant varieties thrive. Our customers are primarily our distributors and dealers. Our distributors and dealers, in turn, sell to farmers, consisting primarily of dairy farmers,
livestock producers and merchant hay growers.
Although we have a sales team, we primarily sell our seed through our network of distributors and dealers, as well as through the services of seed brokers. We do not have formal
distribution agreements with most of our distributors, but instead operate on the basis of purchase orders and invoices. We believe that selling through dealers and distributors enables our
products to reach hay growers in areas where there are geographic or other constraints on direct sales efforts. We select dealers and distributors based on shared vision, technical
expertise, local market knowledge and financial stability. We build dealer/distributor loyalty through an emphasis on service, access to breeders, ongoing training and promotional material
support. We limit the number of dealers and distributors with whom we have relationships in any particular area in order to provide adequate support and opportunity to those with whom we
choose to do business.
Historically, all of our international sales were made to U.S. distributors who then, in turn, sold our seed into foreign markets. However, our approach to international sales shifted
beginning in fiscal 2012, and most of our international sales are now made to non-U.S. customers. Through our distributors, our primary export market historically had been Saudi Arabia
and to a lesser extent, certain other Middle Eastern and North African countries. The overall international sales mix changed beginning in fiscal 2013 with our acquisition of SGI in South
Australia. In recent years, in addition to sales to Saudi Arabia and Australia, we have been selling to customers in Sudan, Morocco, Egypt and Libya, and to customers in other regions of
the world, including Latin America, (Argentina and Mexico) and South Asia (Pakistan), both of which we view as an important regions for potential expansion. In total, we sell our alfalfa seed
varieties in approximately 25 countries throughout the world.
Domestic seed marketing is based primarily upon the dormancy attributes of our varietals as suited to climates in target markets. Prior to the DuPont Pioneer acquisition, we marketed
our alfalfa seed, which consisted primarily of non-dormant varieties, in California, Arizona, New Mexico, Texas and Nevada. We slowly began broadening our domestic geographic reach
beginning in fiscal 2013, with our first sales of dormant alfalfa seed, and significantly expanded in fiscal 2015 following the acquisition of DuPont Pioneer's dormant alfalfa seed assets. In
connection with that acquisition, we entered into a distribution agreement with DuPont Pioneer pursuant to which we became the sole
supplier, subject to certain exceptions, of certain alfalfa seed products for sale to customers by DuPont Pioneer through September 2024. In fiscal 2015, DuPont Pioneer accounted for
approximately 34% of our revenue. Given its historical market share in the sale of dormant alfalfa seed, we expect sales to DuPont Pioneer to be a significant portion of annual sales
throughout the period of the distribution agreement. A disruption in this relationship could have a material adverse impact on our results of operations.
The price, terms of sale, trade credit and payment terms are negotiated on a customer-by-customer basis. Our arrangements with our distributors do not include a right of return. Typical
terms for domestic customers require payment in full within 60 days of the date of shipment. Our credit terms with DuPont Pioneer are governed by the distribution agreement, as amended,
and provide that we receive equal installment payments in September, January and April of each year.
Sales to our international customers are paid in advance of shipment or typically within 120 days of shipment and may also be accomplished through use of letters of credit, cash
against documents and installment payment arrangements. Our credit policies are determined based upon the long-term nature of
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the relationship with our customers. Credit limits are
established for individual customers based on historical collection experience, current economic and market conditions and a review of the current status of each customer's trade accounts
receivable.
In fiscal 2015, DuPont Pioneer, a domestic customer, and Sorouh Agricultural Company, an international customer, collectively accounted for approximately 49% of our alfalfa seed
revenue. In fiscal 2015, sales to domestic customers increased as a percentage of our total sales, primarily as a result of the agreements we entered into with DuPont Pioneer, but
international customers accounted for more than a majority of the sales (59%) in the past fiscal year.
Both farmers (dairy farmers and hay growers) and dealers use pest-control advisors who recommend the varieties of alfalfa that will produce the best results in a particular location.
Therefore, a key part of our marketing strategy is to educate the consultants, as well as the farmers, as to benefits of our seed varieties.
We believe that our best marketing tool is the dissemination of information regarding the quality and characteristics of our propriety seed varieties of those persons who make the hay
growing decisions. We intend to continue to place advertisements in trade journals, participate in seed industry conferences and trade shows and engage in various other educational and
outreach programs as we deem appropriate.
Most of our international marketing efforts are accomplished through face-to-face meetings with our existing and potential customers, and their end users. In addition, we participate in
international trade shows to boost our international presence and sales efforts.
SGI Sales and Marketing
SGI sells a majority of its proprietary alfalfa seed (approximately 70-90% of its total sales per year) into Saudi Arabia, the United States and Argentina.
SGI sells the bulk of its proprietary clover seed to China, Europe and the U.S. Similar to S&W Seed, SGI has historically relied upon a network of distributors to market and sell its
products.
In marketing its products, SGI's initial impetus was to gain market penetration through the sale of improved versions of proven varieties (
e.g.
, SuperSiriver and SuperAurora) in
the market place at competitive pricing. Subsequently, SGI used its established market presence to launch additional superior varieties such as SuperSonic. SGI utilizes a variety of
distribution strategies. Through distribution arrangements SGI's proprietary varieties are marketed directly as SGI brands or under customer brand labels, and strategic allocations of full and
partial exclusivity rights are made in specific countries and geographical regions to incentivize distributors to establish markets for SGI products.
Seed Production
As of the end of our 2015 fiscal year, we have seed production capabilities in California and most of the other states in the Western United States,
including higher elevations and colder climatic regions where dormant alfalfa seed is produced, the Canadian provinces of Alberta, Manitoba and Saskatchewan and in South Australia.
S&W and IVS Production
Historically, we fulfilled all of our alfalfa seed requirements under contracts with farmers primarily located in the San Joaquin Valley of California. For a brief period, beginning in fiscal 2013, we were
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engaged in own internal farming operations and acquired, through purchase and lease, acreage on which to grow our own seed. However, in fiscal 2015, we made a
strategic decision to move away from internal farming, and we began selling some of the farmland acreage we had been using for that purpose. After completion of the fall 2015 harvest, we
will no longer be internally farming as a source of our alfalfa seed, and instead, will be sourcing all of our production from third party growers.
As of June 30, 2015, we had contracts with several hundred growers in the Western United States and Canada. Generally, we enter into contracts to produce alfalfa seed, which is
typical industry practice. Our normal contracts range from one to three years, include a price for the seed that we fix annually and that generally do not vary from grower to grower or variety
to variety. Under these contracts, we pay our growers based on the weight of cleaned and processed seed. The growers contracts that we acquired in connection with the DuPont Pioneer
acquisition were primarily for production in the Pacific Northwest and Canada. These contracts follow the same cadence and terms as the existing production with the current grower
base.
Seed is harvested annually beginning in July for the southwest region of the United States and concluding in October in the Canadian provinces.
Our network of growers has that expertise to grow alfalfa seed which is an extremely demanding crop, for which most farmers do not have the requisite skill or experience needed to
obtain consistently satisfactory results. We have worked with many of the same growers for much of the past 25 years, and we believe that we have strong relationships with them. We
allocate our seed production among our growers so that we can purchase the proper mix of seed varieties each year. The growers incur the greatest cost in the first year of production,
when they plant seed, eradicate weeds and pests and manage the pollination process; they then may be able to harvest seed from the same stands for several additional years, with the
average alfalfa seed field producing for three years. With the added resources of the acquired DuPont Pioneer alfalfa business, we believe we are in a strong position to expand our
production capabilities in the Western United States and Canada with both existing growers and by recruiting new growers in these regions.
SGI Production
As of June 30, 2015, SGI had contracts with approximately 150 individual growers in Western Victoria and South Australia to grow its alfalfa seed varieties on a total of
approximately 20,000 irrigated and 8,000 non-irrigated acres. In the Southern Hemisphere, alfalfa seed is grown counter seasonally to the Northern Hemisphere and is harvested annually,
in March through early May.
Under its current form of seed production agreement, SGI provides foundation seed to each grower and grants each grower a license to use its seed for the purposes of production of
seed for sale to SGI. Each grower is responsible for all costs of the crop production. Title in the produced seed passes to SGI upon it being certified compliant; and, if the seed is not
compliant, title will only pass to SGI upon SGI's further agreement to purchase the non-compliant seed. SGI uses a staggered payment system with the growers of its alfalfa and white clover
and the payment amounts are based upon an estimated budget price ("EBP") for compliant seed. EBP is a forecast of the final price that SGI believes will be achieved taking into
account prevailing and predicted market conditions at the time the estimate is made. Following the grower's delivery of uncleaned seed to a milling facility, SGI typically pays 40% of the
EBP to the grower based on a percentage of the pre-cleaning weight. Following this initial payment and prior to the final payment, SGI will make a series of scheduled progress payments
and, if applicable, a bonus payment for "first grade" (high quality) alfalfa seed. The final price payable to each grower (and therefore
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the total price) is dependent upon and
subject to adjustment based upon the clean weight of the seed grown, on the average price at which SGI sells the pooled seed and other costs incurred by SGI. Accordingly, the total price
paid by SGI to its grower may be more or less than the EBP. SGI's seed production agreements for alfalfa provide for an initial term of seven years and an optional renewal term of three
years. SGI's seed production agreements for white clover provide for an initial term of two years and an optional renewal term of one year. Historically, SGI has not required its growers to
harvest seed in every year under the seed production agreement. Some growers have elected to have non-harvest years, and their alfalfa is cut for hay or used for grazing instead of being
harvested for seed production.
Stevia Breeding, Research and Development
Over the past five years, our stevia activities have evolved from exploring on a small scale the potential commercial production of stevia in California to
establishing and growing a stevia breeding, research and development department. As of fiscal 2013, we are no longer pursuing the commercial production of stevia.
In our breeding program, we have identified stevia plant lines that we believe grow to heights and plant mass that compare favorably to the results for stevia plants grown in China and
Paraguay, which have historically been the primary regions for growing stevia. Our lines contain high overall steviol glycosides, including Reb A, Reb B and Reb C. We anticipate breeding
these new lines with their higher overall steviol glycosides. We have been recently conducting extensive HPLC sample testing of stevia plants under development and will be making further
selections and crosses of these plants based upon test results. The goal is to develop a stevia plant with an inherently pleasant taste profile, a large and hardy plant mass and high Reb A
content.
We are focused on developing our proprietary stevia germplasm into commercial varieties. Towards that end, we have filed two patent applications and expect to file a third patent
application in the first half of fiscal 2016. As our breeding program produces new lines, we plan to file additional patent applications in the future.
One of the filed patent applications cover lines that have been developed with a very good taste profile, thereby enabling the resulting dried leaf to be consumed directly. At the present
time, two large organic farmers in California are conducting trials with this variety. If these trials yield satisfactory results, we expect to be paid a royalty calculated as a percent of the gross
sales made by these farmers.
We also have developed lines that have been bred for processing in order to produce a stevia extract suitable for use in foods and beverages. These lines are high in sweetener
content, have large plant mass and generally offer a superior source of stevia leaf for the extraction market. Currently several of these varieties are going into trials in North America and
Europe. The results of these trials will be available during 2016.
Seasonality
We contract with growers based upon our anticipated market demand; we mill, clean and stock the seed during the harvest season and ship from
inventory throughout the year.
However, our alfalfa seed business is seasonal, with our highest concentration of sales falling in the third and fourth fiscal quarters (January through June). This differs from our
historical operations in which sales were concentrated in the first six months of our fiscal year (July through December). Since fiscal
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2013, we have had operations and customers in both
the Northern and Southern hemispheres. It was the acquisition of SGI in fiscal 2013, with its operations in South Australia, that initially had the greatest impact on the shift in seasonal sales,
as the fourth quarter is typically a significant sales quarter for SGI. Perhaps even more significantly, because the distribution agreement with DuPont Pioneer provides that one-third of the
purchased seed is paid for in the third quarter and one-third is paid for in the fourth quarter, we expect that future years will see the highest concentration of sales revenue in those two
quarters.
Tests show that seed that has been held in inventory for over one year improves in quality. Therefore, provided that we have sufficient capital to carry additional inventory, we may
increase our seed purchases and planned season end inventory if, in our judgment, we can generate increased margins and revenue with the aged seed. This will also reduce the potential
for inventory shortages in the event that we have higher than anticipated demand or other factors, such as growers electing to plant alternative, higher priced crops, reducing our available
seed supply in a particular year.
Proprietary Rights
Ownership of and access to intellectual property rights are important to us and our competitors. We sell only our proprietary alfalfa seed varieties that
have been specially selected to manifest the traits we deem best suited to particular regions in which our seed is planted for alfalfa hay. Our ability to compete effectively is dependent upon
the proprietary nature of the seeds, seedlings, processes, technologies and materials owned by or used by us or our growers. If any competitors independently develop any technologies
that substantially equal or surpass our process technology, it will adversely affect our competitive position.
In addition to patent protection for some of our alfalfa seed varieties that we acquired from DuPont Pioneer, we guard our proprietary property by exercising a high degree of control over
the supply chain. As part of this control process, we require our growers to deliver back to us all seed derived from our proprietary varieties. Historically, we have found that this control
mechanism has been an effective means to protect our proprietary seed. However, because we do not have more formal proprietary rights protections in place with our growers, it would be
possible for persons with access to our seed or plants grown from our seed to potentially reproduce proprietary seed varieties, which could significantly harm our business and our
reputation. In the future, we may deem it appropriate to implement more formal proprietary rights protections.
We are also developing proprietary stevia lines for which we have filed two patent applications with the U.S. Patent and Trademark Office. We expect to file a third patent application in
the first half of fiscal 2016, and it is our intention to build a patent portfolio of proprietary stevia lines developed through the efforts of our stevia breeding program.
SGI registers its varieties under the Australian Plant Breeder's Rights Act 1994 (Cth) (the "PBR Act"). Currently the varieties SuperSequel, SuperSiriver, SuperAurora,
SuperSonic, SuperStar, SuperSiriver II, SuperNova, SuperLadino, SuperHuia and SuperHaifa are protected under the PBR Act. Seed from varieties with plant breeder's rights
("PBR") protection can only be bought from the PBR registrant, commercial partner, licensee or an agent authorized by the registrant. Exceptions exist for use of a PBR variety,
including for private and non-commercial purposes, for experimental purposes, and for breeding other plant varieties. PBR protections last for 20 years in Australia in respect of registered
plant varieties, and generally for 20 years in other member countries of the International Union for the Protection of New
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Varieties of Plants ("UPOV"), an international convention concerning plant breeder's rights. There are currently more than 70 countries that are members of the UPOV.
SGI has licensed production and marketing rights of several of its varieties in exchange for royalties.
In addition to PBR and licensing arrangements, SGI controls dissemination of its proprietary lines by including a demand right in its form of seed production agreement for the return of
unused foundation seed if a grower fails to propagate the seed within 60 days after the grower's acquires it.
Competition
Competition in the alfalfa seed industry both domestically and internationally is intense. We face direct competition by other seed companies, including
small family-owned businesses, as well as subsidiaries or other affiliates of chemical, pharmaceutical and biotechnology companies, many of which have substantially greater resources
than we do.
Our principal competitors in our alfalfa seed business are Forage Genetics International (a subsidiary of Land O' Lakes, Inc.), Dairyland Seed Co., Inc. (owned by Dow AgroSciences
LLC, a wholly owned subsidiary of The Dow Chemical Company), Seed Services, Inc. and Pacific International Seed Company, Inc. We believe that the key competitive drivers in the
industry are proven performance, customer support in the field and value, which takes into account not simply the price of the seed but also yield in the field.
Breeding a new variety of alfalfa seed takes many years and considerable expertise and skill. We believe that our reputation for breeding and producing high-quality proprietary varieties
of alfalfa seed that manifest the traits the farmers need provide us with a competitive advantage, not only in the niche market for high salt- and heat-tolerant, non-dormant alfalfa seed, which
has been our core business for several decades, but also, with the recent acquisition of the research and development assets of DuPont Pioneer, in the full range of dormant varieties suited
for colder climates as well. We believe our research and development capabilities are unmatched in the industry and provide us with a distinct competitive advantage.
In addition to our competitors, SGI's principal regional competitors in the proprietary alfalfa seed market are PGG Wrightson Seeds Limited and Heritage Seeds Pty. Ltd. Blue Ribbon
Seeds Pty. Ltd., PGG Wrightson, Heritage Seeds, Naracoorte Seeds Pty. Ltd., Seed Distributors Pty. Ltd. and various other minor companies compete with SGI through sales of Siriver, a
common alfalfa variety. SGI also faces competition from lower value alfalfa seed produced in the European Union and, to a lesser extent, Argentina. With the exception of Blue Ribbon
Seeds, SGI faces similar competitors in its proprietary white clover business. These companies compete with SGI for acres and in sales by selling Haifa, a common white clover variety.
Competitively priced white clover is also produced and sold from the European Union and New Zealand.
Despite the advantages we perceive we, including SGI, have over many of our competitors, many of our existing and potential competitors have substantially greater research and
product development capabilities and financial, marketing and human resources than we do. As a result, these competitors may:
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We are not aware of any significant domestic or international persons or companies engaged in ongoing stevia breeding activities similar to or that could be considered competitive with
our stevia breeding program.
Environmental and Regulatory Matters
Our agricultural operations are subject to a broad range of evolving environmental laws and regulations. These laws and regulations include the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Comprehensive Environmental Response,
Compensation and Liability Act.
These environmental laws and regulations are intended to address concerns related to air quality, storm water discharge and management and disposal of agricultural chemicals
relating to seed treatment both for domestic and overseas varieties. We maintain particulate matter air emissions from our milling activities below annual tonnage limits through cyclone air
handling systems. We maintain storm water onsite, which eliminates the risk of waterway or tributary contamination. Pesticide and agricultural chemicals are managed by trained individuals,
certified and licensed through the California Department of Pesticide Regulation. County agricultural commissioners monitor all seed-treating activity for compliance.
Compliance with these laws and related regulations is an ongoing process that is not expected to have a material effect on our capital expenditures, earnings or competitive position.
Environmental concerns are, however, inherent in most major agricultural operations, including those conducted by us, and there can be no assurance that the cost of compliance with
environmental laws and regulations will not be material. Moreover, it is possible that future developments, such as increasingly strict environmental laws and enforcement policies
thereunder, and further restrictions on the use of agricultural chemicals, could result in increased compliance costs.
We also are subject to the Federal Seed Act (the "FSA"), which regulates the interstate shipment of agricultural and vegetable seed. The FSA requires that seed shipped in
interstate commerce be labeled with information that allows seed buyers to make informed choices and mandates that seed labeling information and advertisements pertaining to seed must
be truthful. The FSA also helps promote uniformity among state laws and fair competition within the seed industry.
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Because, under our existing business plan, we will only be acting as a breeder of stevia leaf and will not be extracting Reb-A or other derivatives from the leaves or adding such
derivatives to any food or beverages, we believe that we do not need to apply to the FDA for a GRAS no-objections determination or any other FDA approval. However, should our plans
with respect to stevia cultivation and processing expand in future years, we will then reexamine the advisability of seeking a GRAS determination or other FDA approval. We do not believe
that our current stevia operations are subject to any special regulatory oversight.
Internationally, we are subject to various government laws and regulations (including the U.S. Foreign Corrupt Practices Act and similar non-U.S. laws and regulations) and local
government regulations. To help ensure compliance with these laws and regulations, we have adopted specific risk management and compliance practices and policies, including a specific
policy addressing the U.S. Foreign Corrupt Practices Act.
We are also subject to numerous other laws and regulations applicable to businesses operating in California, including, without limitation, health and safety regulations.
Our Australian operations are subject to a number of laws that regulate the conduct of business in Australia, and more specifically, SGI's agricultural activities. Laws regulating the
operation of companies in Australia, including in particular the Corporations Act 2001 (Cth) are central to SGI's corporate actions and corporate governance issues in Australia. Competition
laws and laws relating to employment and occupational health and safety matters are also of fundamental importance in the Australian regulatory environment. These include the
Competition and Consumer Act 2010 (Cth), the Fair Work Act 2009 (Cth), the Work Health and Safety Act 2012 (SA) and related regulations. Notably Australian employment laws are much
more favorable to the employee than U.S. employment laws.
SGI's intellectual property rights in Australia are protected and governed by laws relating to plant breeder's rights, copyright, trademarks, the protection of confidential information, trade
secrets and know-how. These include the PBR Act, the Copyright Act 1968 (Cth), the Trade Marks Act 1995 (Cth) and related regulations.
Our Australian operations are also subject to a number of environmental laws, regulations and policies, including in particular the Environment Protection Act 1993 (SA), the Agricultural
and Veterinary Products (Control of Use) Act 2002 (SA), the Genetically Modified Crops Management Act 2004 (SA), the Dangerous Substances Act 1979 (SA), the Controlled Substances
Act 1984 (SA) and related regulations and policies. These laws regulate matters including air quality, water quality and the use and disposal of agricultural chemicals.
Employees
As of September 18, 2015, S&W had 64 full-time employees, of which 11 are employed by SGI. We also employ eight part-time employees, of
which three are SGI employees. We also retain consultants for specific purposes when the need arises. None of our employees is represented by a labor union. We consider our relations
with our employees to be good.
Corporate History
From 1980 until 2009, our business was operated as a general partnership. We bought out the former partners beginning in June 2008, incorporated in October 2009 in Delaware, and completed the buyout of
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the general partners in May 2010. We reincorporated in Nevada in December 2011. SGI, which is our wholly owned subsidiary was
incorporated as a limited proprietary corporation in South Australia in 1993, as Harkness Group, changed its name to Seed Genetics Australia Pty Ltd in 2002, and in 2011 changed its
name to Seed Genetics International Pty Ltd.
Our Contact Information
Our principal business office is located at 7108 North Fresno Street, Suite 380, Fresno, CA 93720, and our telephone number is (559) 884-2535. Our
website address is www.swseedco.com. Information contained on our website or any other website does not constitute part of this Form 10-K.
Risks Relating to Our Business and Industry
Our earnings can be negatively impacted by declining demand brought on by varying factors, many of which are out of our control.
A variety of factors, notably a severe downturn in the domestic dairy industry, could have a negative effect on sales of alfalfa hay, and as a result, the demand for our alfalfa
seed in the domestic market. At times, including fiscal 2014, the demand for our seed has also declined in the Middle East as the result of common, uncertified seed flooding the market at
lower prices than those at which we were willing to sell our certified seed. In fiscal 2015, many of these factors started to correct themselves, but these circumstances could continue or
reoccur, and our earnings could be negatively impacted. In addition, demand for our products could decline because of other supply and quality issues or for any other reason, including
products of competitors that might be considered superior by end users. A decline in demand for our products could have a material adverse effect on our business, results of operations
and financial condition.
Our earnings may also be sensitive to fluctuations in market prices.
Market prices for our alfalfa seed can be impacted by factors such as the quality of the seed and the available supply, including whether lower quality, uncertified seed is
available. Growing conditions, particularly weather conditions such as windstorms, floods, droughts and freezes, as well as diseases and pests and the adventitious presence of GMO, are
primary factors influencing the quality and quantity of the seed and, therefore, the market price at which we can sell our seed to our customers. A decrease in the prices received for our
products could have a material adverse effect on our business, results of operations and financial condition.
Our earnings are vulnerable to cost increases.
Future increase in costs such as the costs of growing seed through growers or by us internally, could cause our margins and earnings to decline unless we are
able to pass along the increased price of production to our customers. We may not be able to increase the price of our seed sufficiently to maintain our margins and earnings in the
future.
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Our inventory of seed can be adversely affected by the market price being paid for other crops.
Our seed production, both in the U.S. and Australia, substantially relies on unaffiliated growers to grow our proprietary seed and to sell it to us at negotiated prices each year.
Growers have a choice of what crops to plant. If a particular crop is paying a materially higher price than has been paid in the past, growers may decide to not grow alfalfa seed in favor of
receiving a higher return from an alternative crop planted on the same acreage. If our growers decline to a significant degree to plant the acreage on which we rely, and if we cannot find
other growers to plant the lost acreage, our inventory of seed could be insufficient to satisfy the needs of our customers, and our business, results of operations and financial condition could
materially decline. In addition, our customers could look to other suppliers for their seed if we cannot satisfy their requirements, and we may not be able to regain them as customers once
our inventory levels have returned to normal.
Adverse weather conditions, natural disasters, crop disease, pests and other natural conditions can impose significant costs and losses on our business.
Alfalfa seed, our primary product, is vulnerable to adverse weather conditions, including windstorms, floods, drought and temperature extremes, which are common but difficult
to predict. In addition, alfalfa seed is vulnerable to crop disease and to pests, which may vary in severity and effect, depending on the stage of production at the time of infection or
infestation, the type of treatment applied and climatic conditions. Unfavorable growing conditions can reduce both crop size and quality. After the 2015 crop harvest, we will no longer be
direct farming our proprietary seed. However, these factors can nevertheless directly impact us by decreasing the quality and yields of our seed and reducing our inventory and the supply of
seed we sell to our customers.
These factors can increase costs, decrease revenue and lead to additional charges to earnings, which may have a material adverse effect on our business, results of operations and
financial condition.
Because our alfalfa seed business is highly seasonal, our revenue, cash flows from operations and operating results may fluctuate on a seasonal and
quarterly basis.
We expect that the majority of our revenues will continue to be generated from our alfalfa seed business. Our alfalfa seed business is highly seasonal, with the highest
concentration of sales occurring during the third and fourth fiscal quarters. The seasonal nature of our operations results in significant fluctuations in our working capital during the growing
and selling cycles. We have experienced, and expect to continue to experience, significant variability in net sales, operating cash flows and net income on a quarterly basis.
We have had a material concentration of revenue from a small group of customers that fluctuates, and the loss of any of these customers in any quarter could
have a material adverse effect on our revenue.
On a historical basis, we have experienced a material concentration of revenue from a small group of customers. This concentration fluctuates from quarter to quarter,
depending on our customer's specific requirements, which are themselves cyclical. However, in any particular quarter, we generally have a small group of customers that accounts for a
substantial portion of that quarter's revenue. Most of these customers are not contractually obligated to purchase seed from us. The loss of one or more of these customers on a quarterly
basis, when taken year over year, could have a material adverse impact on our business, financial position, results of operations and operating cash flows. We could also suffer a material
adverse effect from any losses arising from a major customer's disputes regarding shipments,
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product quality or related matters, or from our inability to collect accounts receivable from any
major customer. There are no assurances that we will be able to maintain our current customer relationships or that they will continue to purchase our seed in the current projected
quantities. Any failure to do so may materially adversely impact our business.
Because we depend on a core group of significant customers, our sales, cash flows from operations and results of operations may be negatively affected if
our key customers reduce the amount of products they purchase from us.
We rely upon a small group of customers for a large percentage of our net revenue. Overall, two customers accounted for 49% of our fiscal 2015 revenue. We expect that a
small number of customers will continue to account for a substantial portion of our net revenue for the foreseeable future.
The loss of, or a significant adverse change in, our relationship with these customers, or any other major customer, could have a material adverse effect on our business, financial
position, results of operations and operating cash flows. The loss of, or a reduction in orders from, any significant customers, losses arising from customers' disputes regarding shipments,
product quality, or related matters, or our inability to collect accounts receivable from any major customer could have a material adverse effect on us. There is no assurance that we will be
able to maintain the relationships with our major customers or that they will continue to purchase our seed in the quantities that we expect and rely upon. If we cannot do so, our results of
operations could suffer.
Because we do not grow most of the alfalfa seed that we sell, we are substantially dependent on our network of growers, and our sales, cash flows from
operations and results of operations may be negatively affected if we are unable to maintain an adequate network of contract growers to supply our seed requirements.
After completion of the fall 2015 harvest, we no longer will be growing any of the alfalfa seed that we sell, and therefore, we are entirely dependent upon our network of
growers. While we have some supply contracts with our growers of two or three years, many of our grower contracts cover only one year, which makes us particularly vulnerable to factors
beyond our control. Events such as a shift in pricing caused by an increase in the value of commodity crops other than seed crops, increase in land prices, unexpected competition or
reduced water availability could disrupt our supply chain. Any of these disruptions could limit the supply of seed that we obtain in any given year, adversely affecting supply and thereby
lowering revenues. Such disruption could also damage our customer relationships and loyalty to us if we cannot supply the quantity of seed expected by them. In particular, we have had
some of our California growers decide to not grow alfalfa seed due to drought conditions. This situation could reoccur and could negatively impact our revenues if we do not otherwise have
sufficient seed inventory available for sale.
SGI relies on a pool of approximately 150 Australian growers to produce its proprietary seeds. Each grower arrangement is typically made for a term of seven to ten harvests. Although
SGI's grower pool is diversified, it is not without risks. Adverse agronomic or climatic factors could lead to grower exodus and negatively impact SGI's revenues if SGI does not otherwise
have sufficient seed inventory available for sale.
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A lack of availability of water in the U.S. or Australia could impact our business.
Adequate quantities and correct timing of the application of water are vital for most agriculture to thrive. Whether particular farms are experiencing water shortages depends, in
large part, on their location. However, continuing drought conditions can threaten all farmland other than those properties with their own water sources. Although alfalfa seed is not a water-intensive
crop, the availability or the cost of water is a factor in the planting of the alfalfa hay grown from our seed, and we have experienced a decline in the willingness of some California
farmers to grow alfalfa seed as a result of the ongoing severe California drought conditions. Moreover, if the dairy farmers and others who purchase our alfalfa seed to grow hay cannot get
an adequate supply of water, or if the cost of water makes it uneconomical for the farmers to grow alfalfa, we may not be able to sell our seed, which could have an adverse impact on our
results of operations. We cannot predict if water shortages will impact our business in the future, but if alfalfa hay growers are impacted by water shortages, our business could also
materially decline.
We face intense competition, and our inability to compete effectively for any reason could adversely affect our business.
The alfalfa seed market is highly competitive, and our products face competition from a number of small seed companies, as well as large agricultural and biotechnology
companies. We compete primarily on the basis of consistency of product quality and traits, product availability, customer service and price. Many of our competitors are, or are affiliated with,
large diversified companies that have substantially greater marketing and financial resources than we have. These resources give our competitors greater operating flexibility that, in certain
cases, may permit them to respond better or more quickly to changes in the industry or to introduce new products more quickly and with greater marketing support. Increased competition
could result in lower profit margins, substantial pricing pressure, reduced market share and lower operating cash flows. Price competition, together with other forms of competition, could
have a material adverse effect on our business, financial position, results of operations and operating cash flows.
If we are unable to estimate our customers' future needs accurately and to match our production to the demand of our customers, our business, financial
condition and results of operations may be adversely affected.
We sell our seed primarily to dealers and distributors who, in turn, sell primarily to hay and dairy farmers who grow hay for dairy cattle and other livestock. Due to the nature of
the alfalfa seed industry, we normally produce seed according to our production plan before we sell and deliver seed to distributors and dealers. Our dealers and distributors generally make
purchasing decisions for our products based on market prices, economic and weather conditions and other factors that we and our dealers and distributors may not be able to anticipate
accurately in advance. If we fail to accurately estimate the volume and types of products sought by the end users and otherwise adequately manage production amounts, we may produce
more seed than our dealers and distributors want, resulting in excess inventory levels. On the other hand, if we underestimate demand, which has happened in the past, we may not be able
to satisfy our dealers and distributors' demand for alfalfa seed, and thus damage our customer relations and end-user loyalty. Our failure to estimate end users' future needs and to match
our production to the demand of our customers may adversely affect our business, financial condition and results of operations.
Our third-party distributors may not effectively distribute our products.
We depend in part on third-party distributors and strategic relationships for the marketing and selling of our products. We depend on these distributors' efforts to market our
products, yet we are unable to control
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their efforts completely. In addition, we are unable to ensure that our distributors comply with all applicable laws regarding the sale of our products,
including the United States Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. 78dd-1, et seq. If our distributors fail to effectively market and sell our products, and in full
compliance with applicable laws, our operating results and business may suffer.
We extend credit to our largest international customer and to certain of our other international customers, which exposes us to the difficulties of collecting our
receivables in foreign jurisdictions if those customers fail to pay us.
Although payment terms for our seed sales generally are 90 to120 days, we regularly extend credit to our largest international customer, Sorouh Agricultural Company, and to
other international customers. Sales of our alfalfa seed varieties to Sorouh and to other international customers represented a material portion of our revenue in fiscal 2015 and that we will
continue to extend credit in connection with those sales. Because these customers are located in foreign countries, collection efforts, were they to become necessary, could be much more
difficult and expensive. Moreover, future political and/or economic factors, as well as future unanticipated trade regulations, could negatively impact our ability to timely collect outstanding
receivables from these important customers. The extension of credit to our international customers exposes us to the risk that our seed will be delivered but that we may not receive all or a
portion of the payment therefor. If these customers are unable or unwilling to fully pay for the seed they purchase on credit, our results of operations and financial condition could be
materially negatively impacted. Moreover, our internal forecasts on which we make business decisions throughout the year could be severely compromised, which could, in turn, mean that
we spend capital for operations, investment or otherwise that we would not have spent had we been aware that the customer would not honor its credit extension obligation.
Our current reliance on the seed development and production business does not permit us to spread our business risks among different business segments,
and thus a disruption in our seed production or the industry would harm us more immediately and directly than if we were diversified.
We currently operate mainly in the alfalfa seed business, and we do not expect this to change materially in the foreseeable future. Without business line diversity, we will not be
able to spread the risk of our operations. Therefore, our business opportunities, revenue and income could be more immediately and directly affected by disruptions from such things as
drought and disease or widespread problems affecting the alfalfa industry, payment disruptions and customer rejection of our varieties of alfalfa seed. If there is a disruption as described
above, our revenue and income could be reduced, and our business operations might have to be scaled back.
If we fail to introduce and commercialize new alfalfa seed varieties, we may not be able to maintain market share, and our future sales may be harmed.
The performance of our new alfalfa seed varieties may not meet our customers' expectations, or we may not be able to introduce and commercialize specific seed varieties.
Reorder rates are uncertain due to several factors, many of which are beyond our control. These include changing customer preferences, which could be further complicated by competitive
price pressures, our failure to develop new products to meet the evolving demands of the end users, the development of higher-demand products by our competitors and general economic
conditions. The process for new products to gain market recognition and acceptance is long and has uncertainties. If we fail to introduce and commercialize a new seed variety that meets
the demand of the end user, if our competitors develop products that are favored by the end users, or if we are unable to produce our existing products in sufficient quantities, our growth prospects
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may be materially and adversely affected, and our revenue may decline. In addition, sales of our new products could replace sales of some of our current similar products,
offsetting the benefit of even a successful product introduction.
The presence of GMO alfalfa in Australia or California could impact our sales.
GMO crops currently are prohibited in most of the international markets in which our proprietary seed is currently sold, and there are regions in the United States, including the
Pacific Northwest, where even small quantities of GMO material inadvertently interspersed with conventional seed make the seed undesirable, which causes customers to look elsewhere
for their alfalfa seed requirements. The greater the use of GMO seed in California and other alfalfa seed growing regions, the greater the risk that the adventitious presence of GMO material
in our seed production will occur due to pollination from hay fields or other seed fields. We regularly test for the adventitious presence of GMO in our conventional seed, and we have seen a
slight increase in the percentage of GMO material over the past several years. Our seed containing GMO material can only be sold domestically or in other jurisdictions that permit the
importation of GMO alfalfa. If we are unable to isolate our conventional (non-GMO) seed from inadvertently being contaminated by GMO seed, we may find it more difficult to sell that seed
in our key markets, which could materially adversely impact our revenue over time.
The stevia market may not develop as we anticipate, and therefore our continued research and development activities with respect to stevia may never
become profitable to us.
There are a number of challenges to market acceptance of stevia as a natural, non-caloric sweetener. Stevia has its own unique flavor, which can affect the taste of some foods
and beverages. A common complaint about stevia is that some of its extracts and derivatives have a bitter aftertaste, and its taste does not uniformly correspond to all regional taste
preferences or combine well with some food flavors. Other factors that could impact market acceptance include the price structure compared to other sugar substitutes and availability. If the
high-intensity, non-caloric sweetener market declines or if stevia fails to achieve substantially greater market acceptance than it currently enjoys, we might not ever be able to profit from our
continued research and development activities relating to stevia or any commercial applications that we derive therefrom. Even if products conform to applicable safety and quality
standards, sales could be adversely affected if consumers in target markets lose confidence in the safety, efficacy and quality of stevia. Adverse publicity about stevia or stevia-based
products may discourage consumers from buying products that contain stevia. Any of these developments could adversely impact the future amount of dry leaf stevia, processed stevia
leaves or extract we are able to sell, which could adversely impact our results of operations.
If we are unable to acquire sufficient raw materials or produce sufficient finished product, we will not be able to meet the demands of our customers.
We must acquire sufficient alfalfa seed to meet the demands of our customers. An alfalfa seed shortage could result in loss of sales and damage to our reputation. Because we
no longer grow any of our seed ourselves, our proprietary seed is only available from our contract growers. Therefore, if our growers become unable or unwilling to produce the required
commercial quantities of alfalfa seed on a timely basis and at commercially reasonable prices, we will likely be unable to meet customer demand. The failure to satisfy our customers not
only could adversely impact our financial results but could irreparably harm our reputation.
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The loss of key employees or the failure to attract qualified personnel could have a material adverse effect on our ability to run our business.
The loss of any of our current executives, key employees or key advisors, or the failure to attract, integrate, motivate and retain additional key employees, could have a material
adverse effect on our business. Although we have employment agreements with our Chief Executive Officer, our Chief Financial Officer and our Chief Operating Officer, as well as certain
other employees, any employee could leave our employ at any time if he chose to do so. We do not carry "key person" insurance on the lives of any of our management team. As we
develop additional capabilities, we may require more skilled personnel who must be highly skilled and have a sound understanding of our industry, business or processing requirements.
Recruiting skilled personnel is highly competitive. Although to date we have been successful in recruiting and retaining qualified personnel, there can be no assurance that we will continue
to attract and retain the personnel needed for our business. The failure to attract or retain qualified personnel could have a material adverse effect on our business.
We may not be able to manage expansion of our operations effectively.
We expect our operations to grow rapidly in the near future, both as we expand our historical alfalfa seed business both domestically and internationally through internal grown
and synergistic acquisitions and increase our growers' production. We currently face these challenges in connection with the integration of the business operations we acquired from
Pioneer, which expanded our operations into five states and three Canadian provinces. These efforts will require the addition of employees, expansion of facilities and greater oversight,
perhaps in diverse locations. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute on our business strategies or
respond to competitive pressures, and we may have difficulties maintaining and updating the internal procedures and the controls necessary to meet the planned expansion of our overall
business.
Our management will also be required to maintain and expand our relationships with customers, suppliers and third parties as well as attract new customers and suppliers. We expect
that our sales and marketing costs will increase as we grow our product lines and as we increase our sales efforts in new and existing markets. Our current and planned operations,
personnel, systems and internal procedures and controls may not be adequate to support our future growth.
We may be unable to successfully integrate the businesses we have recently acquired and may acquire in the future with our current management and
structure.
As part of our growth strategy, we may acquire additional businesses, product lines or other assets. We may not be able to locate or make suitable acquisitions on acceptable
terms, and future acquisitions may not be effectively and profitably integrated into our business. Our failure to successfully complete the integration of the businesses we acquire could have
an adverse effect on our prospects, business activities, cash flow, financial condition, results of operations and stock price. Integration challenges may include the following:
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The diversion of management's attention and costs associated with acquisitions may have a negative impact on our business.
If management's attention is diverted from the management of our existing businesses as a result of its efforts in evaluating and negotiating new acquisitions and strategic
transactions, the prospects, business activities, cash flow, financial condition and results of operations of our existing businesses may suffer. We also may incur unanticipated costs in
connection with pursuing acquisitions and strategic transactions.
SGI's grower pool is dependent on a limited number of milling facilities to process its seed, with particular dependence on a dominant operator whose
commercial interests may be adverse to SGI.
Only five milling facilities are regularly used by SGI's grower pool to clean and process SGI seed. Should one or more of these facilities become unusable, there could be a
significant effect on SGI's ability to get its Australian seed to market in a timely manner or at all. SGI's growers use Tatiara Seeds Pty Ltd ("Tatiara") to process approximately 70% of seed
grown for SGI. The owner of Tatiara has begun to sell his own common seed and is now a competitor of SGI. This competing seed business creates a potential conflict of interest for Tatiara
in the care and handling of SGI's product.
SGI is thinly capitalized and may become dependent upon us for financing.
Because SGI has relatively little net working capital, it is substantially dependent upon its credit arrangement with NAB to purchase its seed inventory. SGI has breached debt
covenants relating to this credit arrangement in the past, and if future breaches of this credit arrangement or other reasons cause this credit arrangement to become unavailable to SGI, SGI
may become reliant on us to finance its operations or for financial guarantees. We currently are a guarantor on SGI's NAB credit facility. SGI's financial dependency upon us could have a
negative adverse effect upon our financial condition.
SGI is dependent on a pool of seed growers and a favorable pricing model.
SGI relies on a pool of approximately 150 Australian contract growers to produce its proprietary seeds. In this system, growers contract with SGI to grow SGI's seed for terms of
seven to ten years in the case of alfalfa and two to three years for white clover. SGI uses a staggered payment system with the growers of its alfalfa and white clover; the payment amounts
are based upon an estimated budget price, or EBP, for compliant seed. EBP is a forecast of the final price that SGI believes will be achieved taking into account prevailing and predicted
market conditions at the time the estimate is made. Following the grower's delivery of uncleaned seed to a milling facility, SGI typically pays 40% of the EBP to the grower based on pre-cleaning
weight. Following this initial payment and prior to the final payment, SGI will make a series of scheduled progress payments and, if applicable, a bonus payment for "first grade"
alfalfa seed. The final price payable to each grower (and therefore the total price) is dependent upon and subject to adjustment based upon the clean weight of the seed grown, on the
average price at which SGI sells the pooled seed and other costs incurred by SGI. Accordingly, the total price paid by SGI to its growers may be more or less than EBP. This arrangement
exposes SGI's business to unique risks, including, the
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potential for current growers to make collective demands that are unfavorable to SGI and the potential for our competitors to offer
more favorable terms for seed production, including fixed (instead of variable) payment terms.
SGI's reliance upon an estimated purchase price to growers could result in changes in estimates in our consolidated financial statements.
Our subsidiary SGI does not fix the final price for seed payable to its growers until the completion of a given year's sales cycle, pursuant to the standard contract production
agreement. We record an estimated unit price and accordingly inventory, cost of goods sold and gross profits are based upon management's best estimate of the final purchase price to our
SGI growers. To the extent the estimated purchase price varies from the final purchase price for seed, the adjustment to actual could materially impact the results in the period when the
difference between estimates and actuals are identified. If the actual purchase price is in excess of our estimated purchase price, this would negatively impact our financial results including
a reduction in gross profits and net income.
The value of SGI's rights under the Australian Plant Breeder's Rights (PBR) Act could diminish due to technological developments or challenges by
competitors, making its proprietary alfalfa seed varieties less competitive.
SGI is substantially dependent upon the PBR Act for the protection of its proprietary varieties. Currently, SGI's SuperSiriver, SuperSequel, SuperAurora, SuperHaifa,
SuperLadino, SuperHuia, SuperSonic, SuperStar, SuperSiriver II and SuperNova varieties are protected under the PBR Act. If any competitors of SGI independently develop new seeds that
customers or end users determine are better than SGI's existing varieties, such developments could adversely affect SGI's competitive position.
We may need to raise additional capital in the future.
We may find it necessary or advisable to raise additional capital in the future, whether to enhance our working capital, fund acquisitions or for other reasons. If we are required
or desire to raise additional capital in the future, such additional financing may not be available on favorable terms, or available at all, may be dilutive to our existing stockholders if in the
form of equity financing, or contain restrictions on the operation of our business if in the form of debt financing. If we fail to obtain additional capital as and when required, such failure could
have a material impact on our business, results of operations and financial condition.
Changes in government policies and laws could adversely affect international sales and therefore our financial results.
Historically, sales to our distributors who sell our proprietary alfalfa seed varieties outside the U.S. have constituted a substantial portion of our annual revenue. We anticipate
that sales into international markets will continue to represent a meaningful portion of our total sales and that continued growth and profitability will require further international expansion,
particularly in the Middle East and Africa. Our financial results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of U.S. and non-U.S.
governments, agencies and similar organizations. These conditions include but are not limited to changes in a country's or region's economic or political conditions, trade regulations
affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights in some countries, changes in the regulatory
or legal environment, burdensome taxes and tariffs and other trade barriers. International
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risks and uncertainties, including changing social and economic conditions as well as terrorism,
political hostilities and war, could lead to reduced distribution of our products into international markets and reduced profitability associated with such sales.
We are subject to risks associated with doing business globally.
Our operations, both inside and outside the United States, are subject to risks inherent in conducting business globally and under the laws, regulations and customs of various
jurisdictions and geographies. Although we sell seed to various regions of the world, a large percentage of our sales outside the United States in fiscal year 2015, including those of SGI,
were principally to customers in the Middle East, North Africa and Mexico. Accordingly, developments in those parts of the world generally have a more significant effect on our operations
than developments in other places. Our operations outside the United States are subject to special risks and restrictions, including: fluctuations in currency values and foreign-currency
exchange rates; exchange control regulations; changes in local political or economic conditions; governmental pricing directives; import and trade restrictions; import or export licensing
requirements and trade policy; restrictions on the ability to repatriate funds; and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S.
companies doing business abroad, including the Foreign Corrupt Practices Act and the trade sanctions laws and regulations administered by the U.S. Department of the Treasury's Office of
Foreign Assets Control. Acts of terror or war may impair our ability to operate in particular countries or regions, and may impede the flow of goods and services between countries.
Customers in weakened economies may be unable to purchase our products, or it could become more expensive for them to purchase imported products in their local currency, or sell their
commodity at prevailing international prices, and we may be unable to collect receivables from such customers. Further, changes in exchange rates may affect our net income, the book
value of our assets outside the United States, and our stockholders' equity. Failure to comply with the laws and regulations that affect our global operations could have an adverse effect on
our business, financial condition or results of operations.
Failure to comply with the United States Foreign Corrupt Practices Act or similar laws could subject us to penalties and other adverse consequences.
We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies, including their suppliers, distributors and other
commercial partners, from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Corruption, extortion, bribery, pay-offs, theft
and other fraudulent practices occur from time-to-time in the countries in which we distribute products. We have adopted formal policies and procedures designed to facilitate compliance
with these laws. If our employees or other agents, including our distributors or suppliers, are found to have engaged in such practices, we could suffer severe penalties and other
consequences that may have a material adverse effect on our business, financial condition and results of operations.
Environmental regulation affecting our alfalfa seed or stevia products could negatively impact our business.
As an agricultural company, we are subject to evolving environmental laws and regulations by federal and state governments. Federal laws and regulations include the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Seed Act, and
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potentially regulations of the FDA. In addition, the State of California regulates our application of agricultural chemicals in connection with seed harvest.
Our Australian operations are also subject to a number of environmental laws, regulations and policies, including in particular the Environment Protection Act 1993 (SA), the Agricultural
and Veterinary Products (Control of Use) Act 2002 (SA), the Genetically Modified Crops Management Act 2004 (SA), the Dangerous Substances Act 1979 (SA), the Controlled Substances
Act 1984 (SA) and related regulations and policies. These laws regulate matters including air quality, water quality and the use and disposal of agricultural chemicals.
Our failure to comply with these laws and related regulations could have an adverse effect on our business, financial condition or results of operations. Moreover, it is possible that future
developments, such as increasingly strict environmental laws and enforcement policies thereunder, and further restrictions on the use of agricultural chemicals, could result in increased
compliance costs which, in turn, could have a material adverse effect on our business, financial condition or results of operations.
Insurance covering defective seed claims may become unavailable or be inadequate.
Defective seed could result in insurance claims and negative publicity. Although we carry general liability insurance to cover defective seed claims, such coverage may become
unavailable or be inadequate. Even if coverage is offered, it may be at a price and on terms not acceptable to us. If claims exceed coverage limits, or if insurance is not available to us, the
occurrence of significant claims could have a material adverse effect on our business, results of operations and financial condition.
We may be exposed to product quality claims, which may cause us to incur substantial legal expenses and, if determined adversely against us, may cause us
to pay significant damage awards.
We may be subject to legal proceedings and claims from time to time relating to our seed or dried stevia leaf quality. The defense of these proceedings and claims can be both
costly and time consuming and may significantly divert efforts and resources of our management personnel. An adverse determination in any such proceeding could subject us to significant
liability and damage our market reputation and prevent us from achieving increased sales and market share. Protracted litigation could also result in our customers or potential customers
deferring or limiting their purchase of our products.
The recent global economic downturn has significantly impacted the agricultural industry which in turn has negatively affected our business.
The global economic downturn of the past several years has significantly impacted the agricultural industry, with many farmers losing their farms or laying fallow their fields, as
well as other negative impacts. The full effect of this global economic downturn on growers, customers, vendors and other business partners cannot be known with any certainty. For
example, major customers may have financial challenges unrelated to us that could result in a decrease in their business with us or, in extreme cases, cause them to file for bankruptcy
protection. Similarly, parties to contracts may be forced to breach their obligations. Although we exercise prudent oversight of the financial strength of our major business partners and seek
to diversify our risk to any single business partner, there can be no assurance that a significant grower, customer or other business partner that may be unable to meet its contractual
commitments to us. Similarly, continued stresses and pressures that could have wide-ranging negative effects on our industry's future.
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Capital and credit market issues could negatively affect our liquidity, increase our costs of borrowing and disrupt the operations of our growers and
customers.
The capital and credit markets have experienced increased volatility and disruption over the past several years, making it more difficult for companies to access those markets.
Although we believe that our operating cash flows, recent access to the capital market and our lines of credit will permit
us
to meet our financing needs for the foreseeable future,
continued or increased volatility and disruption in the capital and credit markets may impair our liquidity or increase our costs of borrowing, if we need to access the credit market. Our
business could also be negatively impacted if our growers or customers experience disruptions resulting from tighter capital and credit markets or a continued slowdown in the general
economy.
If we are unable to protect our intellectual property rights, our business and prospects may be harmed.
Our ability to compete effectively is dependent upon the proprietary nature of the seeds, seedlings, processes, technologies and materials owned by or used by us or our
growers. If any competitors independently develop new traits, seeds, seedlings, processes or technologies that customers or end users determine are better than our existing products, such
developments could adversely affect our competitive position. In addition to patent protection for some of our alfalfa seed varieties that we acquired from DuPont Pioneer, we guard our
proprietary property by exercising a high degree of control over the alfalfa seed supply chain from our S&W varieties, as well as over our stevia material. In Australia, SGI has secured
protection under the PBR Act for its most popular varieties. However, even with these measures in place, it would be possible for persons with access to our seed or plants grown from our
seed to reproduce and market our proprietary seed varieties, which could significantly harm our business and our reputation. Litigation may be necessary to protect our proprietary property
and determine the validity and scope of the proprietary rights of competitors. Intellectual property litigation could result in substantial costs and diversion of our management and other
resources. If we are unable to successfully protect our intellectual property rights, our competitors could market products that compete with our proprietary products without obtaining a
license from us.
We currently depend on Pioneer for substantially all of our sales of dormant alfalfa seed and have agreed to limitations on other sales of the seed varieties we
sell to Pioneer. Any decline in Pioneer's demand will have a material adverse effect on our results of operations.
Our distribution agreement with Pioneer limits our ability to otherwise sell the specific varieties of dormant alfalfa seed we supply to Pioneer in the sales territory covered by
Pioneer. The Pioneer sales territory includes the United States, Europe and many other of the principal dormant alfalfa seed markets. In these markets, our ability to sell the specified
varieties through distribution channels other than Pioneer is limited to certain blended, private label and variety not stated forms and cannot exceed a specified percentage of Pioneer's
demand. As result of these limitations, sales to Pioneer represent and for the foreseeable future will continue to represent the vast majority of all of our sales of dormant alfalfa seed. Any
decline in Pioneer's demand for our dormant alfalfa seed products will have a material adverse effect on our results of operations.
Pioneer may purchase alfalfa seed from other sources and reduce their purchase commitments to us.
Under our distribution agreement with Pioneer, Pioneer has made minimum purchase commitments for our dormant alfalfa seed products that extend through September 30,
2024. However, there are
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circumstances under which Pioneer's is permitted to purchase seed from other sources and reduce its purchase commitments to us, including:
Any reduction in Pioneer's purchase commitment to us will have a material adverse effect on our results of operations.
We are committed to sell dormant alfalfa seed to Pioneer at initial fixed prices with fixed subsequent maximum price increases per year. Increases in our
costs of production at rates higher than our contractual ability to increase prices would erode our profit margins and have a material adverse effect on our results of operations.
Under our distribution agreement with Pioneer, we are committed to sell dormant alfalfa seed at initial fixed prices for the 2015 and 2016 sales years. In subsequent sales
years, we can increase our prices up to a fixed percentage per year by variety. Although Pioneer has agreed to discuss in good faith an increase in the fixed maximum percentage price
increase cap for any sales year in which an increase in grower compensation costs due to changes in market conditions cause our total production costs to increase at a percentage
exceeding the amount of the cap, we cannot be certain that any such discussions will result in additional pricing flexibility for us. If our grower compensation costs or other productions costs
increase at a rate greater than the fixed maximum percentage increase per year, our profit margins would erode and we could potentially be required to sell product at a loss. Any such
change in our cost structure would have a material adverse effect on our results of operations.
If we do not complete the acquisition under the second asset purchase agreement, Pioneer may pursue alternative production arrangements for its GMO-traited
varieties and reduce purchases from us.
We are currently producing certain GMO-traited varieties for Pioneer under our production agreement with Pioneer. The production agreement expires on December 31, 2017
or upon the earlier closing of our acquisition of certain GMO germplasm and related assets from Pioneer pursuant to a second asset purchase agreement. However, we may never enter
into the second asset purchase agreement or close the acquisition of Pioneer's GMO germplasm and related assets. If Pioneer and we do not obtain certain third-party consents and
agreements on or before November 30, 2017 (or certain other conditions above are not
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satisfied), then the obligations of the parties to enter into the second asset purchase agreement will
terminate and we will have no right or obligation to acquire the GMO germplasm and related assets. In that case, our production agreement with Pioneer (relating to GMO-traited varieties)
would terminate on December 31, 2017, Pioneer would be free to pursue alternative production arrangements for the GMO-traited varieties, and Pioneer's minimum purchase commitments
to us under the distribution agreement would be materially reduced.
If we fail to perform our obligations under our distribution agreement and production agreement with Pioneer, Pioneer could terminate the agreements and
reduce or eliminate purchases of alfalfa seed from us, and we could be exposed to claims for damages.
The distribution agreement and the production agreement impose numerous obligations on us relating to, among other things, product and service quality and compliance with
laws and third party obligations. Both the distribution agreement and the production agreement permit Pioneer to terminate the agreement if we materially breach the agreement and fail to
cure the breach within a 60-day notice period, or in the case of certain bankruptcy or insolvency events. Pioneer can also immediately terminate the production agreement if we breach
certain agreements or policies with third parties related to the production of GMO-traited varieties. If Pioneer terminates either the distribution agreement or the production agreement,
Pioneer could reduce or eliminate altogether its purchase of alfalfa seed from us, and we could be left with inventory of seed that it would be difficult or impossible for us to dispose of on
commercially reasonable terms. In addition, we could be exposed to significant claims for damages to Pioneer if the termination of an agreement results from our material breach of the
agreement.
If we do not meet seed planting and production commitments to Pioneer, we could incur significant financial penalties.
Under our distribution agreement with Pioneer, if we fail to plant sufficient acreage (based on historical yields), together with any carryover inventory, to meet 110% of Pioneer's
demand and we actually fail to meet Pioneer's demand, then we are obligated to pay Pioneer a cash penalty based on the amount of the shortfall. A similar penalty provision applies only
with respect to 2017 under our Production Agreement with Pioneer, if we fail to plant or cause to be planted a specified number of planting acres.
We contract all of our production of dormant alfalfa seed with third-party growers. If, in any year, we are unable to obtain sufficient grower commitments to meet Pioneer's demand, we
could be obligated to pay significant financial penalties to Pioneer.
Risks Related to Investment in Our Securities
The value of our common stock can be volatile.
Our common stock are listed on the Nasdaq Capital Market. The overall market and the price of our common stock can fluctuate greatly. The trading price of our common stock
may be significantly affected by various factors, including but not limited to:
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Our quarter-to-quarter performance may vary substantially, and this variance, as well as general market conditions, may cause the price of our securities to
fluctuate greatly and potentially expose us to litigation.
Our alfalfa seed business, our primary source of revenue, is highly seasonal because it is tied to the growing and harvesting seasons. If sales in particular quarters are lower
than expected, our operating results for these quarters could cause our share price to decline.
Our future expense estimates are based, in large part, on estimates of future revenue, which is difficult to predict. We expect to continue to make significant expenditures in order to
expand production, sales, marketing and administrative systems and processes. We may be unable to, or may elect not to, adjust spending quickly enough to offset any unexpected
revenue shortfall. If our increased expenses are not accompanied by increased revenue in the same quarter, our quarterly operating results would be harmed.
In one or more future quarters, our results of operations may fall below the expectations of investors or analysts, and the trading price of our securities may decline as a consequence.
We believe that quarter-to-quarter comparisons of our operating results will not be a good indication of our future performance and should not be relied upon to predict the future
performance of our stock price.
In the past, companies that have experienced volatility in the market price of their stock have often been subject to securities class action litigation. We may be the target of this type of
litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our
business.
If we issue shares of preferred stock, the holdings of those owning our common stock could be diluted or subordinated to the rights of the holders of preferred
stock.
Our board of directors is authorized by our articles of incorporation to establish classes or series of preferred stock and fix the designation, powers, preferences and rights of the
shares of each such class or series without any further vote or action by our stockholders. Any shares of preferred stock so issued could have priority over our common stock with respect to
dividend or liquidation rights. Although we have no plans to issue any shares of preferred stock or to adopt any new series, preferences or other classification of preferred stock, any such
action by our board of directors or issuance of preferred stock by us could dilute your investment in our securities or subordinate your holdings to the higher priority rights of the holders of
shares of preferred stock issued in the future.
Our actual operating results may differ significantly from our guidance.
We routinely release guidance in our quarterly earnings releases, our quarterly earnings conference calls and in other forums we consider appropriate. Such guidance
regarding our future performance represents our management's estimates as of the date of release or other communication. This guidance, which includes forward-looking statements, is
based on projections prepared by our management. These
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projections are not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public
Accountants, and neither our registered public accountants nor any other independent expert or outside party compiles or examines the projections, and accordingly, no such person
expresses any opinion or any other form of assurance with respect thereto.
Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will
change. If we issue guidance, we will generally state possible outcomes as high and low ranges that are intended to provide a sensitivity analysis as variables are changed but are not
intended to represent that actual results could not fall outside of the suggested ranges. The principal reason that we would release guidance would be to provide a basis for our
management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such persons.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly
from actual results. Accordingly, our guidance, when given, is only an estimate of what management believes is realizable as of the date of release or other communication. Actual results
will vary from our guidance, and the variations may be material. In light of the foregoing, investors are urged not to rely upon, or otherwise consider, our guidance in making an investment
decision about our securities.
We do not anticipate declaring any cash dividends on our common stock.
We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and
any earnings for use in the operation and expansion of our business. If we do not pay cash dividends, our stock may be less valuable to investors because a return on their investment will
only occur if our stock price appreciates.
Anti-takeover provisions and our right to issue preferred stock could make a third-party acquisition of us difficult.
Our articles of incorporation and bylaws contain provisions that would make it more difficult for a third party to acquire control of us, including a provision that our board of
directors may issue preferred stock without stockholder approval. In addition, certain anti-takeover provisions of Nevada law, if and when applicable, could make it more difficult for a third
party to acquire control of us, even if such change in control would be beneficial to our stockholders.
Risks Relating to the Private Placement of Debentures and Warrants
On December 31, 2014, we issued an aggregate of $27,000,000 in principal amount of 8% Senior Secured Convertible Debentures and common stock purchase warrants for the
purchase of up to 2,699,999 shares of our common stock. The following are identified risks that are specifically associated with the issuance of these securities.
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If the price adjustment provision of the Debentures and Warrants and/or the weighted average dilution provision of the Warrants is triggered, there would be a
decrease in conversion and/or exercise prices.
Although the initial conversion price of the Debentures and the initial exercise price of the Warrants is $5.00, which was a premium to the price on closing of $4.00, both
securities contain provisions that could adjust downward the respective conversion and exercise prices. Both securities contain a ratchet provision under which the conversion and exercise
prices could be adjusted to as low as $4.15 (subject to adjustment for stock splits and similar events) if, on September 30, 2015, our stock price is below the then-conversion/exercise price.
The adjusted conversion and exercises prices, if applicable, will be based on a formula specified in the securities based on the lowest 10 day average VWAP of our common stock over a
20-day lookback period. If the price adjusts, we could be required to issue a greater number of shares pursuant to the Debentures and could ultimately raise less money upon exercise of the
warrants.
In addition, the Warrant also contains a weighted average price protection provision that is operable for the first three years of the term of the Warrants.
Our stockholders will have a reduced ownership and voting interest after issuance of the shares issuable upon conversion of the Debentures and exercise of
the Warrants and may exercise less influence over management.
In the event the holders of the Debentures and Warrants elect to exercise their conversion and/or exercise rights pursuant to these securities during the remainder of the term
thereof, and, without taking into account any adjustment to the conversion price of the Debentures, an aggregate of 3,655,172 shares of our common stock could be issued upon conversion
and exercise of the securities, based on a remaining $18,275,862 in principal amount of the Debentures at September 23, 2015.
Based on the current number of shares outstanding of 13,463,455 on September 22, 2015, the new issuances would represent 21.4%, of the shares outstanding after these issuances.
In addition, although we have no intention of doing so, to the extent we issue shares to service the debt, the ownership percentages of the new investors would increase incrementally. As a
result, our current stockholders as a group would own a substantially smaller interest in us and may have less influence on our management and policies than they now have.
Our repayment obligations under the Debentures are secured by a lien on our assets.
Our obligations to the holders of the Debentures are secured by a lien on all of our assets pursuant to a security agreement, which was entered into with respect to the issuance
of the Debentures. This lien is subordinate only to the lien of certain permitted senior creditors, pursuant to an inter-creditor and subordination agreement, which was entered into
simultaneously with the security agreement. If we default under the terms of the Debentures or under the terms of any permitted senior indebtedness (which is an event of default under the
Debentures), the holders of the Debentures may exercise various remedies against us, including acceleration of the entire remaining principal amount of the Debentures and all accrued and
unpaid interest thereon, and remedies against our collateral. An acceleration of the Debentures or an exercise of remedies against our assets as collateral could have a material adverse
effect on our ability to conduct our business or could force us to invoke legal measures to protect our business, including, but not limited to, for filing for protection under the U.S. Bankruptcy
Code.
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None.
The following is a description of our owned and leased properties:
Location
Size
Primary Use
Leased or Owned
Fresno (Fresno County),
2,651 sq. ft.
Corporate headquarters for S&W
Leased(1)
Sacramento (Sacramento County), CA
2,587 sq. ft.
Office Space
Leased(2)
Five Points (Fresno County), CA
40 acres (3)
Milling facilities
Owned
Calipatria (Imperial Valley),
182 acres
Alfalfa seed farmland
Owned(4)
Kern County, CA
800 acres
Farmland suitable for farming alfalfa seed and alfalfa hay
Leased(5)
Connell (Franklin County) WA
28 acres
Agricultural research facilities
Leased(6)
Nampa (Canyon County), Idaho
80 acres (approx.)
Seed production facilities
Owned (subject to mortgage)
Arlington (Columbia County), Wisconsin
25 acres
Alfalfa research and product development
Owned (subject to mortgage)
Unley, South Australia
1,937 sq. ft.
Corporate headquarters for SGI
Leased(7)
Keith, South Australia
3.7 acres
Processing facility
Owned
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__________
(1) The lease expires in February 2018. These facilities are adequate for our current needs. However, we believe there is readily available office facilities available for rent in the
Fresno area, if our needs change.
(2) The lease expires in November 2017. These facilities are adequate for our current needs. However, we believe there is readily available office facilities available for rent in the
Sacramento area, if our needs change.
(3) This facility occupies five acres of mill and processing structures, consisting of 20,336 square feet of office and production space and 46,912 square feet of warehousing
facilities. We believe that our facilities are generally well maintained and are in good operating condition. We currently have excess capacity and therefore believe that our facilities will be
adequate for our needs.
(4) One-half interest.
(5) The lease expires in September 2024.
(6) Lease expires in December 2017.
(7) Lease expires in February 2018.
From time to time, we are involved in lawsuits, claims, investigations and proceedings, including pending opposition proceedings involving patents that arise in the ordinary course
of business. There are no matters pending that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows.
Not applicable.
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PART II
Market Information Regarding Our Common Stock
Prior to May 4, 2010, there was no public market for our company's securities. From May 4, 2010 through June 11, 2010, our common stock traded on the NASDAQ Capital Market
as part of a unit under the ticker symbol "SANWU." Each unit consisted of two shares of common stock, one Class A warrant and one Class B warrant. On June 14, 2010, the
unit separated, and the components began trading as separate securities under the ticker symbols "SANW," "SANWA" and "SANWZ," for the common
stock, Class A warrants and Class B warrants, respectively. The Class A warrants were redeemed in April 2013, and the Class B warrants expired in accordance with their terms in May
2015.
The following table sets forth the range of high and low sales prices per share of Common Stock as reported on NASDAQ for the periods indicated.
High
Low
Year Ended June 30, 2014
First Quarter
$9.21
$6.78
Second Quarter
8.23
4.82
Third Quarter
7.74
5.53
Fourth Quarter
8.23
5.86
Year Ended June 30, 2015
First Quarter
$6.74
$3.91
Second Quarter
4.48
2.99
Third Quarter
5.25
3.69
Fourth Quarter
5.55
4.05
On September 22, 2015, the closing price as reported on the NASDAQ Capital Market of our common stock was $4.52 per share.
Holders
As of September 22, 2015, we had 13,463,455 shares of common stock outstanding held by 17 stockholders of record. Because many of our shares of common stock are held by
brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these record holders.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion
of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of the Board of Directors and
will be dependent upon then existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects and other
factors that the Board of Directors considers relevant. In addition, our credit facility contains restrictions on our ability to pay dividends.
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Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On April 20, 2015, we issued 200,000 shares of our common stock at a per share price of $4.64 to Bioceres, S.A., in exchange for 1,263 newly-issued shares of
Bioceres. The newly-issued shares were issued pursuant to the exemption from registration as set forth in Section 4(a)(2) of the Securities Act of 1933, as amended. The availability of the
exemption was predicated on the fact that the sale was made to a single accredited, sophisticated investor who was familiar with our business, who had access to business and financial
information about our company and with whom we have established a joint working relationship.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item with respect to our equity compensation plan is incorporated by reference to our Proxy Statement for the 2015 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended June 30, 2015.
Purchases of Equity Securities by the Issuer and Affiliate Purchasers
None.
As a smaller reporting company, we are not required to provide information typically disclosed under this item.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes
included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. In addition to our historical
consolidated
financial information, the
following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking
statements as referred to on page 2 of this Annual Report on Form 10-K. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this
Annual Report on Form 10-K, particularly in Part I, Item 1A, "Risk Factors."
Executive Overview
Founded in 1980 and headquartered in the Central Valley of California, we believe we have become the largest alfalfa seed company worldwide (by volume), with industry-leading
research and development, as well as production and distribution capabilities in both hemispheres and the ability to supply proprietary dormant and non-dormant alfalfa seed. Our operations
span the world's alfalfa seed production regions, with operations in the San Joaquin and Imperial Valleys of California, other Western states, South Australia and three provinces in Canada,
and we sell our seed varieties in more than 30 countries across the globe. Historically, we have been recognized as the leading producer of non-dormant alfalfa seed
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varieties, which varieties have been bred for warm climates and high-yields, including, in particular, varieties that thrive in high saline soils. Our December 2014 acquisition of certain alfalfa research and
production facility and conventional (non-GMO) alfalfa germplasm assets of DuPont Pioneer provided us with the opportunity to become a leading producer of dormant, high yield alfalfa
seed varieties, which are the varieties suitable for cold weather conditions. We also have agreements with Monsanto to develop unique traits into specific S&W-developed varieties that
have exhibited high yield and salt tolerance. We have licensing agreements with Monsanto and FGI to produce, breed and eventually sell Roundup Ready alfalfa see varieties. In sum, our
alfalfa seed business now encompasses the production, breeding and sale of nearly the full spectrum of non-dormant and dormant conventional varieties (from FD 2 through FD 10) and the
potential for future production and sale of transgenic ("GMO") -varieties, which are being bred to combine the most desirable characteristics of certain of our varieties with the
Roundup Ready gene. In addition to alfalfa seed breeding, production and sales, which is our core business, we also offer seed cleaning and processing for other seed manufacturers and
conduct an ongoing stevia breeding program.
Components of Our Statements of Operations Data
Revenue and Cost of Revenue
Revenue
We derive most of our revenue from the sale of our proprietary alfalfa seed varieties. We expect that over the next several years, a substantial majority of our revenue will continue
to be generated from the sale of alfalfa seed, although we are continually assessing other possible product offerings or means to increase revenue, including expanding into other, higher
margin crops. Fiscal 2016 will be the first full year in which we will have a full range of non-dormant and dormant varieties, which will enable us to significantly expand the geographic reach
of our sales efforts. The mix of our product offerings will continue to change over time with the introduction of new alfalfa seed varieties resulting from our robust research and development
efforts, including our potential expansion into genetically-modified varieties in future periods. Currently, we have a long-term distribution agreement DuPont Pioneer, which we expect will be
the source of a significant portion of our annual revenue for the next ten years.
Our revenue will fluctuate depending on the timing of orders from our customers and distributors. Because some of our large customers and distributors order in bulk only one or two
times a year, our product revenue may fluctuate significantly from period to period, however some of this fluctuation is offset by having operations in both the northern and southern
hemispheres.
Our stevia breeding program has yet to generate any meaningful revenue. However, management continues to evaluate this portion of our business and assess various means to
monetize the results of our effort to breed new, better tasting stevia varieties. Such potential opportunities including possible licensing agreements and royalty-based agreements.
Cost of Revenue
Cost of revenue relates to sale of our alfalfa seed varieties and consists of the cost of procuring seed, whether we purchase the seed from third party contract growers or grow the
seed on property we own or lease, plant conditioning and packaging costs, direct labor and raw materials, and overhead costs.
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Operating Expenses
Research and Development Expenses
Research and development expenses consist of costs incurred in the discovery, breeding and testing of our products and products in development incorporating the traits we have
specifically selected. These expenses consist primarily of employee salaries and benefits, consultant services, land leased for field trials, chemicals and supplies and other external
expenses. These costs are expensed as incurred. Because we have been in the alfalfa seed breeding business since our inception in 1980, we have expended far more dollars in
development of our proprietary varieties throughout our history than on our stevia breeding program, which we commenced in fiscal 2010.
In fiscal 2013, we determined to shift the focus of our stevia program away from commercial production and towards the breeding of improved varieties of stevia. We have continued that
effort, which has resulted in the filing of two patent applications, with the expectation of a third patent application to be filed in the first half of fiscal 2016.
We expect our research and development expenses to increase on an absolute dollar basis for the foreseeable future, although our research and development expenses may increase
significantly if we choose to accelerate certain research and development programs. Our research and development expenses may also fluctuate from period to period as a result of the
timing of various research and development projects.
Our research and development costs are charged to expense as they are incurred. Therefore, internal research and development costs are expenses as incurred, while third party
research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. The costs associated with equipment or
facilities acquired or construed for research and development activities that have alternative future uses are capitalized and depreciated on a straight-line basis over the estimated useful life
of the asset.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses consist primarily of employee costs, including salaries, employee benefits, and share-based compensation, as well as professional
service fees, insurance, marketing, travel and entertainment expense, public company expense and other overhead costs. We proactively take steps on an ongoing basis to control selling,
general and administrative expense as much as is reasonably possible.
Depreciation and Amortization
Most of the depreciation and amortization expense on our statement of operations consists of amortization expense. We amortize intangible assets, including those acquired from
DuPont Pioneer in December 2014, using the straight-line method over the estimated useful life of the asset, consisting of periods of 10-30 years for technology/IP/germplasm, 20 years for
customer relationships and trade names and 2-20 years for other intangible assets. Property, plant and equipment is depreciated using the straight-line method over the estimated useful life
of the asset, consisting of periods of 18-28 years for buildings, 3-10 years for machinery and equipment and 3-5 years for vehicles.
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Impairment Charges
We evaluate our long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable
changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. We evaluate the recoverability of long-lived
assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of long-lived assets is adjusted, based on estimates of future discounted
cash flows resulting from the use and ultimate disposition of the asset. A triggering event during the quarter ended December 31, 2014 prompted a review of certain farmland related costs.
The carrying value of these assets was deemed in excess of fair value, so we recorded an impairment charge of $500,198 in the consolidated statement of operations during the year ended
June 30, 2015.
Other Expense
Other expense consists of foreign currency gains and losses, changes in the fair value of derivative liabilities related to our warrants, changes in the fair value of our contingent
consideration obligation and interest expense in connection with amortization of debt discount. In addition interest expense consists of interest costs related to our outstanding borrowings on
our Wells Fargo revolving lines of credit and on SGI's credit facilities in South Australia, our 8% senior secured convertible promissory notes that were issued in December 2014 and mature
in June 2017, a three-year secured promissory note issued in connection with the DuPont Pioneer acquisition, a five-year subordinated promissory note that matures in October 2017 that
was issued in connection with the IVS acquisition, and a term loan for a vehicle purchase that matures in February 2018.
Income Tax Expense (Benefit)
Our effective tax rate is based on income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate. Under U.S. GAAP, if
we determine that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the benefit. Tax regulations require
certain items to be included in the tax return at different times than when those items are required to be recorded in the consolidated financial statements. As a result, our effective tax rate
reflected in our consolidated financial statements is different than that reported in our tax returns. Some of these differences are permanent, such as expenses that are not deductible on our
tax return, and some are temporary differences, such as depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent
items that can be used as a tax deduction or credit in our tax return in future years for which we have already recorded the tax benefit in our consolidated statements of operations.
Results of Operations
Fiscal Year Ended June 30, 2015 Compared to the Fiscal Year Ended June 30, 2014
Revenue and Cost of Revenue
Revenue for fiscal year ended June 30, 2015 was $81,208,903 compared to $51,533,643 for the year ended June 30 2014. The $29,675,260 increase in revenue for the year ended
June 30, 2015 was primarily attributable to sales under our distribution and production agreements with DuPont Pioneer. We are also
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experiencing an increase in sales activity for the
Middle East as we began to see recovery from the market surplus of low priced 2013 Australian crop that negatively impacted sales in prior periods.
Sales direct to international customers represented 59% and 81% of revenue during the years ended June 30, 2015 and 2014, respectively. Domestic revenue accounted for 41% and
19% of our total revenue for the years ended June 30, 2015 and 2014, respectively. The increase in domestic revenue is directly attributed to sales to DuPont Pioneer. We expect DuPont
Pioneer to represent a significant portion of our domestic sales, as well as overall sales, for the foreseeable future.
Cost of revenue of $64,607,502 in the year ended June 30, 2015 was 80% of revenue, while the cost of revenue of $41,561,736 in the year ended June 30, 2014 was 81% of revenue.
Total gross profit margins were 20.4% and 19.4% for years ended June 30, 2015 and 2014, respectively. The increase in gross profit margins is due to higher margins from the sale of
dormant alfalfa seed varieties acquired from DuPont Pioneer, improvement in seed pricing, as well as the benefits of our on-going optimization initiative.
While there will continue to be quarterly fluctuations in gross profit margin based on product sales mix, we continue to anticipate improved gross margins
in Fiscal 2016 as a result of a number of initiatives we are deploying, as well as pricing improvement in the alfalfa seed market, particularly in certain key markets.
Selling, General and Administrative Expenses
SG&A expense for the year ended June 30, 2015 totaled $9,620,807 compared to $6,815,575 for the year ended June 30, 2014. The $2,805,231 increase in SG&A
expense versus the prior year was primarily due to non-recurring transaction expenses of approximately $1,290,926 and the expenses associated with the newly acquired DuPont Pioneer
business. As a percentage of revenue, SG&A expenses were 12% in the current year compared to 13% in the year ended June 30, 2014.
Research and Development Expenses
R&D for the year ended June 30, 2015 totaled $1,890,234 compared to $840,578 in the year ended June 30, 2014. The increase of $1,049,656 from 2014 to 2015 was
primarily driven by additional research and development activities acquired from DuPont Pioneer.
Depreciation and Amortization
Depreciation and amortization expense for the year ended June 30, 2015 was $2,179,638 compared to $1,265,739 for the year ended June 30, 2014. Included in the amount was
amortization expense for intangible assets, which totaled $1,600,360 in the year ended June 30, 2015 and $951,892 in the year ended June 30, 2014. The $913,899 increase in
depreciation and amortization expense over the prior year is a result of depreciation and amortization of assets acquired from DuPont Pioneer.
Impairment Expense
We recorded an impairment charge of $500,198 during the year ended June 30, 2015, as the carrying value of certain farmland related assets was deemed in excess of net
realizable value. These farmland assets were sold in March 2015, and an additional loss on disposal of $24,646 was recorded during the year ended June 30, 2015. There was no
comparable impairment charge in the year ended June 30, 2014.
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Foreign Currency (Gain) Loss
We incurred a foreign currency loss of $159,763 for the year ended June 30, 2015 compared to a gain of $51,571 for the year ended June 30, 2014. The foreign currency gains and
losses are associated with SGI, our wholly-owned subsidiary in Australia.
Change in Derivative Warrant Liability
The derivative warrant liability is considered a level III fair value financial instrument and will be measured at each reporting period. The $1,396,000 charge to non-cash change in
derivative warrant liability expense represents the increase in fair value of the outstanding warrants issued in December 2014. The increase is driven by a $0.88 increase in the closing stock
price at June 30, 2015, from the initial measurement date of December 31, 2014.
Change in Contingent Consideration Obligation
The contingent consideration obligation is considered a level III fair value financial instrument and will be measured at each reporting period. The $74,000 charge to non-cash
change in contingent consideration obligation expense represents the decrease in the present value discount factor used to estimate the fair value of the contingent consideration obligation.
The fair value of the contingent consideration obligation is expected to increase each quarter until the end of the earn-out measurement period.
Interest Expense - Amortization of Debt Discount
Non-cash amortization of debt discount expense for the year ended June 30, 2015 was $2,934,164 compared to $52,550 for the year ended June 30, 2014. The increase represents
the amortization of the debt discount and debt issuance costs associated with the convertible debentures issued December 31, 2014. The discount is amortized using the effective interest
method and the quarterly expense will decrease as the net carrying value of the convertible debentures decrease. The year ended June 30, 2015 includes $1,146,090 of accelerated
amortization expense as a result of the $5,000,000 early principal redemption of the convertible debentures. We expect to incur $2,930,225 of amortization of debt discount during fiscal
2016.
Interest Expense - Convertible Debt and Other
Interest expense during the year ended June 30, 2015 totaled $1,831,057 compared to $600,740 for the year ended June 30, 2014. Interest expense for fiscal 2015 primarily
consisted of interest incurred on the convertible debentures issued on December 31, 2014, on the note payable issued to DuPont Pioneer as part of the purchase consideration for the
DuPont Pioneer acquisition and the working capital credit facilities with NAB and Wells Fargo. The $1,230,317 increase in interest expense in fiscal 2015 is primarily driven by $971,680 of
interest on the convertible debentures and $150,000 on the DuPont Pioneer Note, all of which were issued on December 31, 2014, and $108,637 of interest expense attributed to higher
levels of working capital resulting in additional borrowings on the working capital facilities.
45
Provision (Benefit) for Income Taxes
Income tax benefit totaled $845,979 for the year ended June 30, 2015 compared to income tax expense of $87,116 for the fiscal year ended June 30, 2014. Our effective tax rate
was 21.1% during the year ended June 30, 2015 compared to 18.9% in fiscal 2014. The decrease of the estimated annual effective tax rate from 24.4% as of December 31, 2014 was
primarily due to adjustments for the change in fair value of the derivative warrant liability. The charges associated with the fair value adjustments are not deductible for federal income tax
purposes. The Company's effective tax rate differs from the US federal statutory rate as a result of these nondeductible expenses.
Net Loss
We had a net loss of $3,163,127 for the year ended June 30, 2015 compared to net income of $373,100 for the year ended June 30, 2014. The loss in the current fiscal year was
attributable primarily to the non-recurring transaction charges, the change in derivative warrant liability and incremental interest expense associated with the convertible debentures
discussed above. The net loss per basic and diluted common share was $(0.25) for the year ended June 30, 2015 compared to net income per basic and diluted share of $0.03 for the year
ended June 30, 2014.
Liquidity and Capital Resources
Our working capital and working capital requirements fluctuate from quarter to quarter depending on the phase of the growing and sales cycle that falls during a particular quarter.
Our need for cash has historically been highest in the second and third fiscal quarters (October through March) because we historically have paid our California contracted growers
progressively, starting in the second fiscal quarter. In fiscal 2015, we paid our California growers from our legacy business approximately 50% in October 2014 and the remaining 50% was
paid in February 2015. The grower base acquired in the recent Pioneer Acquisition will be paid on a schedule similar to our historical North American grower base. SGI, our Australian-based
subsidiary, has a production cycle that is counter-cyclical to North America; however, it also puts a greater demand on our working capital and working capital requirements during the
second, third and fourth quarters based on timing of payments to growers in the second through fourth quarters. As a result of the Pioneer Acquisition, going forward we anticipate our
working capital demands to be highest in second and third quarters due to the progressive payment schedule of our North American grower base.
Historically, due to the concentration of sales to certain distributors, which typically represented a significant percentage of alfalfa seed sales, our month-to-month and quarter-to-quarter
sales and associated cash receipts were highly dependent upon the timing of deliveries to and payments from these distributors, which varied significantly from year to year. The timing of
collection of receivables from DuPont Pioneer is defined in the distribution and production agreements with DuPont Pioneer and consists of three installment payments, one in each of the
first, third and fourth quarters. Our future revenues and cash collections pertaining to the new production and distribution agreements with DuPont Pioneer will provide us with greater
predictability as sales to DuPont Pioneer will be concentrated in our third and fourth fiscal quarters and payments will be received in three installments over the September to mid-April time
period.
We continuously monitor and evaluate our credit policies with all of our customers based on historical collection experience, current economic and market conditions and a review of the current status of the
46
respective trade accounts receivable balance. Our principal working capital components include cash and cash equivalents, accounts receivable, inventory, prepaid
expense and other current assets, accounts payable and our working capital lines of credit.
In addition to funding our business with cash from operations, we have historically relied upon occasional sales of our debt and equity securities and credit facilities from financial
institutions, both in California and South Australia.
With respect to recent equity and debt financings, we raised an aggregate of $31,658,400 in gross proceeds in two separate private placements that closed on December 31, 2014.
In the first of these two financings, we sold 1,294,000 shares of our common stock at $3.60 per share for gross proceeds of $4,658,400 to one accredited investor in a private
transaction exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.
On the same day, we also sold $27,000,000 aggregate principal amount of 8% Senior Secured Convertible Debentures due November 30, 2017, together with warrants to purchase an
aggregate of 2,699,999 shares of our common stock that expire on June 30, 2020 in a private transaction exempt from registration under Section 4(a)(2) of the Securities Act and Rule
506(b) of Regulation D promulgated thereunder. The monthly interest is payable cash, in shares of our common stock, provided all of the applicable "equity conditions" defined in the
debentures are satisfied, or in any combination of cash and shares, at our option. Beginning on July 1, 2015, we are required to make monthly redemption payments, payable, at our option,
in cash, shares of common stock or a combination thereof, provided (in the event we elect to pay in shares) all of the applicable equity conditions are satisfied. The debentures contain
certain rights of acceleration and deferral at the holder's option in the event a redemption payment is to be made in stock and contains certain limited acceleration rights of the company, if
we have elected to redeem in cash and provided certain other conditions are satisfied. The debentures also provided for redemption of up to $5,000,000 in principal amount, payable in cash
without prepayment penalty, if redeemed by July 1, 2015. Such early redemption was required in the event of certain real estate sales and otherwise was optional. In March 2015, following
the sale of farmland we previously owned in California's Imperial Valley, we were required to, and did, redeem $5,000,000 in principal amount of the debentures on a
pro rata
basis.
The debentures are senior secured obligations, subject only to certain secured obligations of KeyBank (which replaced Wells Fargo as our secured lender on September 22, 2015) and
DuPont Pioneer (limited to a purchase money security interest in the assets purchased in the Pioneer Acquisition). The rights of those secured creditors are set forth in an inter-creditor and
subordination agreement that was entered into in connection with the closing of the issuance of the debentures (the "Intercreditor Agreement"). The offering expenses of the debenture and
warrant offering totaled approximately $2,355,218, yielding net proceeds of approximately $24,644,782. The net proceeds from these two December 2014 financing transactions were used
primarily to fund the cash portion of the purchase price of the Pioneer Acquisition, with the balance available for working capital and general corporate purposes.
On December 31, 2014 in connection with the Pioneer Acquisition, we issued a secured promissory note (the "Note") payable by us to DuPont Pioneer in the initial principal amount of
$10,000,000 (issued at closing), and a potential earn-out payment (payable as an increase in the principal amount of the Note) of up to $5,000,000 based on our sales under the distribution
and production agreements entered into in connection with the Pioneer Acquisition, as well as other sales of products we consummate containing the acquired germplasm in the three-year
period following the closing. The Note accrues interest at a rate of 3% per annum, and interest is payable in three annual installments, in arrears, commencing on December 31, 2015. Our
obligations under the Note are secured by certain of the assets purchased in the Pioneer Acquisition and are subject to the Intercreditor Agreement. The Note matures on December 31,
2017.
47
From 2011 until September 22, 2015, we had one or more ongoing revolving credit facility agreements with Wells Fargo.
On February 21, 2014, we entered into our most recent credit agreements with Wells Fargo and thereby became obligated under new working capital facilities (collectively, the "Wells
Facilities," which were terminated as of September 22, 2015 (see below). The New Facilities include (i) a domestic revolving facility of up to $4,000,000 to refinance our outstanding credit
accommodations from Wells Fargo and for working capital purposes, and (ii) an export-import revolving facility of up to $10,000,000 for financing export-related accounts receivable and
inventory (the "Ex-Im Revolver"). The availability of credit under the Ex-Im Revolver is limited to an aggregate of 90% of the eligible accounts receivable (as defined under the credit
agreement for the Ex-Im Revolver) plus 75% of the value of eligible inventory (also as defined under the credit agreement for the Ex-Im Revolver), with the term "value" defined as the lower
of cost or fair market value on a first-in first-out basis determined in accordance with generally accepted accounting principles. All amounts due and owing under the New Facilities were
required to be paid in full on or before the October 1, 2015 maturity date.
The Wells Facilities bore interest either (i) at a fluctuating rate per annum determined by Wells Fargo to be 2.75% above the daily one-month LIBOR Rate in effect from time to time, or
(ii) at a fixed rate per annum determined to be 2.75% above LIBOR in effect on the first day of the applicable fixed rate term. Interest is payable each month in arrears. The Wells Facilities
were satisfied in full and terminated as of September 22, 2015 as a result of our new credit facility with KeyBank, described below.
On September 22, 2015, the Company entered into an up to $20,000,000 aggregate principal amount credit and security agreement (the "Credit Facility") with KeyBank National
Association ("KeyBank").
48
In July 2012, we obtained a term loan from Wells Fargo in a principal amount of up to $2,625,000 (the "Term Loan"), which we used to fund a portion of the purchase of 640 acres of
Imperial Valley farmland. The Term Loan bore interest at a rate per annum equal to 2.35% above LIBOR as specified in the term note. As of June 30, 2015, $0 was outstanding on the Term
Loan.
In March 2015, we closed on the sale of the 759 acres of farmland in Calipatria (Imperial Valley), California for a purchase price of $7,100,000. We used the proceeds to pay-off the
existing $2.2 million Wells Fargo Term Loan, and with the remaining proceeds, redeemed $5,000,000 in principal amount (and accrued interest thereon) of the convertible debentures issued
in December 2014.
At June 30, 2015, the Company has outstanding $21,954,483 in principal amount of the debentures following the real estate sale redemption. The reduction in principal was applied on
the back end of the term, and as a result, does not reduce the dollar amount of the monthly redemption payments that commenced on July 1, 2015, but the redemption does have the effect
of reducing the term of the debentures from December 1, 2017 to June 1, 2017.
SGI finances the purchase of most of its seed inventory from growers pursuant to a seasonal credit facility with National Australia Bank Ltd ("NAB").
In April 2015, the NAB working capital credit facilities were amended and renewed and will expire on March 31, 2016 (the "2015 NAB Capital Facilities"). The 2015 NAB
Capital Facilities, as currently in effect, comprise two distinct facility lines: (i) an overdraft facility (the "Overdraft Facility"), having a credit limit of AUD $980,000 (USD $750,190 at
June 30, 2015) and a trade refinance facility (the "Trade Refinance Facility"), having a credit limit of AUD $12,000,000 (USD $9,186,000 at June 30, 2015).
49
Interest is payable each month in arrears on both the Overdraft Facility and the Trade Refinance Facility. In the event of a default, as defined in the NAB Facility Agreement, the interest
rate will increase on both facilities by 4.5% per annum. The 2015 NAB Facilities contains customary representations and warranties, affirmative and negative covenants and customary
events of default that permit NAB to accelerate SGI's outstanding obligations, all as set forth in the NAB facility agreements.
Both facilities constituting the 2015 NAB Facilities are secured by a fixed and floating lien over all the present and future rights, property and undertakings of SGI and are guaranteed by
the Company as noted above. The 2015 NAB Facilities contain customary representations and warranties, affirmative and negative covenants and customary events of default that permit
NAB to accelerate SGI's outstanding obligations, all as set forth in the NAB facility agreements. SGI was in compliance with all NAB debt covenants at June 30, 2015.
In January 2015, SGI and NAB entered into a new business markets - flexible rate loan in the amount of AUD $650,000 (USD $497,575 at June 30, 2015) (the "Keith Building
Loan") and a machinery and equipment facility in the amount of up to AUD $1,350,000 (USD $1,033,425 at June 30, 2015) (the "Keith Machinery and Equipment Facility").
The Keith Building Loan and Keith Machinery and Equipment Facility (collectively, the "Keith Credit Facilities") are being used for the construction of a new building on SGI's
Keith, South Australia property and for the machinery and equipment to be purchased for use in the operations of the new building.
The Keith Credit Facilities are both secured by a lien on all the present and future rights, property and undertakings of SGI, our corporate guarantee and a mortgage on SGI's Keith,
South Australia property. At June 30, 2015, the principal balance on the Keith Building Loan was AUD $609,382 (USD $466,482), and the principal balance on the Keith Machinery and
Equipment Facility was AUD $202,034 (USD $154,657).
50
The following table shows a summary of our cash flows for the years ended June 30, 2015 and 2014:
Operating Activities
For the year ended June 30, 2015, operating activities provided $11,112,350 in cash. Net loss adjusted for non-cash items generated $3,587,636 in cash, and changes in operating
assets and liabilities generated $7,524,714. The increase in cash from changes in operating assets and liabilities was primarily driven by decreases in inventory balances of $21,308,005,
partially offset by an increase in accounts receivable balances of $4,391,780 and reduction of payables of $11,014,912.
For the fiscal year ended June 30, 2014, operating activities used $17,867,038 in cash, as a result of a net income of $373,100 and an increase in accounts receivable of $11,301,001,
an increase in inventories of $2,135,746 and a decrease in accounts payable (including related parties) of $4,740,089.
Investing Activities
Investing activities during the year ended June 30, 2015 used $31,189,676 in cash. The Pioneer Acquisition accounted for $36,688,881 of the cash used in investing activities,
proceeds from the March 2015 sale of the Calipatria (Imperial Valley) farmland provided $7,100,000 and $1,595,813 was used in additions to property, plant and equipment, primarily for the
build out of the new packaging and distribution facility in Keith, Australia.
Investing activities during the year ended June 30, 2014 used $764,109 in cash. This amount consisted of $351,899, which was used to acquire a minority investment in shares of
Bioceres S.A., an Argentinian agrobiotechnology company, and the remaining $434,416 was used to purchase equipment.
Financing Activities
Financing activities during year ended June 30, 2015 provided $22,405,272 in cash. The convertible debt offering consummated concurrently with the Pioneer Acquisition provided
gross proceeds of $27,000,000, less $1,931,105 of debt issuance costs. The equity offering that closed concurrently with the Pioneer Acquisition provided net proceeds of $4,161,937,
consisting of $4,658,400 in gross proceeds and $496,463 of related fees. We used the proceeds from the sale of our Calipatria farmland to pay off the Term Loan with Wells Fargo and to
redeem $5,000,000 in principal amount (and accrued interest thereon) of convertible debentures.
Financing activities during the year ended June 30, 2014 provided $7,944,391 in cash, consisting primarily of net borrowings and repayments on working capital lines of credit of
$8,914,888, offset by $746,789 of principal payments on long-term loans.
51
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. However, if our costs were to become subject to
significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition
and results of operations.
Off Balance Sheet Arrangements
We did not have any off-balance sheet arrangements during the year ended June 30, 2015.
Capital Resources and Requirements
Our future liquidity and capital requirements will be influenced by numerous factors, including:
Critical Accounting Policies
The accounting policies and the use of accounting estimates are set forth in the footnotes to the consolidated financial statements.
In preparing our financial statements, we must select and apply various accounting policies. Our most significant policies are described in Note 2 - Significant Accounting Policies set
forth in the notes to the financial statements. In order to apply our accounting policies, we often need to make estimates based on judgments about future events. In making such estimates,
we rely on historical experience, market and other conditions, and on assumptions that we believe to be reasonable. However, the estimation process is by its nature uncertain given that
estimates depend on events over which we may not have control. If market and other conditions change from those that we anticipate, our results of operations, financial condition and
changes in financial condition may be materially affected. In addition, if our assumptions change, we may need to revise our estimates, or to take other corrective actions, either of which
may also have a material effect on our results of operations, financial condition or changes in financial condition. Members of our senior management have discussed the development and
selection of our critical accounting estimates, and our disclosure regarding them, with the audit committee of our board of directors, and do so on a regular basis.
52
We believe that the following estimates have a higher degree of inherent uncertainty and require our most significant judgments. In addition, had we used estimates different from any of
these, our results of operations, financial condition or changes in financial condition for the current period could have been materially different from those presented.
Intangible Assets:
All amortizable intangible assets are assessed for impairment whenever events indicate a possible loss. Such an assessment involves
estimating undiscounted cash flows over the remaining useful life of the intangible. If the review indicates that undiscounted cash flows are less than the recorded value of the intangible
asset, the carrying amount of the intangible is reduced by the estimated cash-flow shortfall on a discounted basis, and a corresponding loss is charged to the consolidated statement of
operations. Significant changes in key assumptions about the business, market conditions and prospects for which the intangible asset is currently utilized or expected to be utilized could
result in an impairment charge.
Stock-Based Compensation:
We account for stock-based compensation in accordance with FASB Accounting Standards Codification Topic 718 Stock
Compensation, which establishes accounting for equity instruments exchanged for employee services. Under such provisions, stock-based compensation cost is measured at the grant
date, based on the calculated fair value of the award, and is recognized as an expense, under the straight-line method, over the employee's requisite service period (generally the vesting
period of the equity grant).
We account for equity instruments, including stock options issued to non-employees, in accordance with authoritative guidance for equity-based payments to non-employees (FASB
ASC 505-50). Stock options issued to non-employees are accounted for at their estimated fair value. The fair value of options granted to non-employees is re-measured as they vest.
Beginning with the quarter ended December 31, 2014, we adopted the Black-Scholes-Merton option pricing model to estimate the fair value of options granted under share-based
compensation plans. The Black-Scholes-Merton model requires us to estimate a variety of factors including, but not limited to, the expected term of the award, stock price volatility, dividend
rate, risk-free interest rate. The input factors to use in the valuation model are based on subjective future expectations combined with management judgment. The expected term used
represents the weighted-average period that the stock options are expected to be outstanding. We have used the historical volatility for our stock for the expected volatility assumption
required in the model, as it is more representative of future stock price trends. We use a risk-free interest rate that is based on the implied yield available on U.S. Treasury issued with an
equivalent remaining term at the time of grant. We have not paid dividends in the past and currently do not plan to pay any dividends in the foreseeable future, and as such, dividend yield is
assumed to be zero for the purposes of valuing the stock options granted. We evaluate the assumptions used to value stock awards on a quarterly basis. If factors change and we employ
different assumptions, share-based compensation expense may differ significantly from what we have recorded in the past. When there are any modifications or cancellations of the
underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned share-based compensation expense. To the extent that we grant additional
equity securities to employees, our share-based compensation expense will be increased by the additional unearned compensation resulting from those additional grants.
Income Taxes:
We regularly assess the likelihood that deferred tax assets will be recovered from future taxable income. To the extent management believes that
it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. When a valuation allowance is established or
53
increased, an income tax charge is
included in the consolidated financial statements and net deferred tax assets are adjusted accordingly. Changes in tax laws, statutory tax rates and estimates of our future taxable income
levels could result in actual realization of the deferred tax assets being materially different from the amounts provided for in the consolidated financial statements. If the actual recovery
amount of the deferred tax asset is less than anticipated, we would be required to write-off the remaining deferred tax asset and increase the tax provision, resulting in a reduction of net
income and stockholders' equity.
Inventories:
All inventories are accounted for on a lower of cost or market basis. Inventories consist of raw materials and finished goods as well as in the ground
crop inventories. Depending on market conditions, the actual amount received on sale could differ from our estimated value of inventory. In order to determine the value of inventory at the
balance sheet date, we evaluate a number of factors to determine the adequacy of provisions for inventory. The factors include the age of inventory, the amount of inventory held by type,
future demand for products and the expected future selling price we expect to realize by selling the inventory. Our estimates are judgmental in nature and are made at a point in time, using
available information, expected business plans and expected market conditions. We perform a review of our inventory by product line on a quarterly basis.
Our subsidiary, SGI, does not fix the final price for seed payable to its growers until the completion of a given year's sales cycle pursuant to its standard contract production agreement.
We record an estimated unit price, accordingly, inventory, cost of revenue and gross profits are based upon management's best estimate of the final purchase price to our SGI growers. To
the extent the estimated purchase price varies from the final purchase price for seed, the adjustment to actual could materially impact the results in the period when the difference between
estimates and actuals are identified. If the actual purchase price is in excess of our estimated purchase price, this would negatively impact our financial results including a reduction in gross
profits and net income.
Recently Adopted and Recently Enacted Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2013-02, Comprehensive Income: Reporting of Amounts
Reclassified Out of Accumulated Other Comprehensive Income, which requires companies to report, in one place, information about significant reclassifications out of accumulated other
comprehensive income, or AOCI, and disclose more information about changes in AOCI balances. We adopted this ASU in the first quarter of fiscal 2014. The adoption of this standard did
not have a material impact on our consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward
Exists, which provides guidance for the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward
exists. We will adopt the standard effective July 1, 2014. The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.
Item 7A. Qualitative and Quantitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide information typically disclosed under this item.
54
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm
56
Report of Independent Registered Public Accounting Firm
57
Consolidated Balance Sheets at June 30, 2015 and 2014
58
Consolidated Statements of Operations for the Fiscal Years Ended June 30, 2015 and
2014
59
Consolidated Statements of Comprehensive (Loss) Income
60
Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended
June 30, 2015 and 2014
61
Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2015 and 2014
62
Notes to Consolidated Financial Statements
63
55
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
We have audited the accompanying consolidated balance sheet of S&W Seed Company (the "Company") as of June 30, 2015, and the related
consolidated statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30,
2015, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
/s/ Crowe Horwath LLP
San Francisco, California
56
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Fresno, California
We have audited the accompanying consolidated balance sheet of S&W Seed Company (the "Company") as of June 30, 2014, and the related
consolidated statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30,
2014, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
/s/ M&K CPAs LLP
Houston, Texas
57
S&W SEED COMPANY
June 30,
June 30,
2015
2014
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
3,535,458
$
1,167,503
Accounts receivable, net
26,728,741
24,255,596
Inventories, net
25,521,747
28,485,584
Prepaid expenses and other current assets
797,199
230,907
Deferred tax assets
286,508
1,300,665
TOTAL CURRENT ASSETS
56,869,653
55,440,255
Property, plant and equipment, net
11,476,936
10,356,809
Intangibles, net
38,004,916
14,590,771
Goodwill
9,630,279
4,939,462
Crop production costs, net
212,231
1,952,100
Deferred tax assets
4,060,156
1,666,488
Other assets
2,088,896
354,524
TOTAL ASSETS
$
122,343,067
$
89,300,409
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
$
13,722,900
$
15,026,669
Accounts payable - related parties
1,128,630
1,053,874
Accrued expenses and other current liabilities
2,328,349
818,730
Foreign exchange contract liabilities
59,116
-
Lines of credit
13,755,800
15,888,640
Current portion of long-term debt
2,223,465
267,764
Current portion of convertible debt, net
9,265,929
-
TOTAL CURRENT LIABILITIES
42,484,189
33,055,677
Non-compete payment obligation, less current portion
100,000
150,000
Contingent consideration obligation
2,078,000
-
Long-term debt, less current portion
10,682,072
4,452,631
Convertible debt, net, less current portion
8,777,041
-
Derivative warrant liabilities
6,258,000
-
Other non-current liabilities
88,160
127,866
TOTAL LIABILITIES
70,467,462
37,786,174
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 5,000,000 shares authorized;
no shares issued and outstanding
-
-
Common stock, $0.001 par value; 50,000,000 shares authorized;
13,479,101 issued and 13,454,101 outstanding at June 30, 2015;
11,665,093 issued and 11,640,093 outstanding at June 30, 2014
13,479
11,666
Treasury stock, at cost, 25,000 shares at June 30, 2015 and at June 30, 2014
(134,196)
(134,196)
Additional paid-in capital
62,072,379
55,121,876
Accumulated deficit
(4,979,471)
(1,816,344)
Accumulated other comprehensive loss
(5,096,586)
(1,668,767)
TOTAL STOCKHOLDERS' EQUITY
51,875,605
51,514,235
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
122,343,067
$
89,300,409
See notes to consolidated financial statements.
58
S&W SEED COMPANY
Years Ended
June 30,
2015
2014
Revenue
$
81,208,903
$
51,533,643
Cost of revenue
64,607,502
41,561,736
Gross profit
16,601,401
9,971,907
Operating expenses
Selling, general and administrative expenses
9,620,807
6,815,576
Research and development expenses
1,890,234
840,578
Depreciation and amortization
2,179,638
1,265,739
Impairment charges
500,198
-
Disposal of property, plant and equipment loss (gain)
24,646
(11,921)
Total operating expenses
14,215,523
8,909,972
Income from operations
2,385,878
1,061,935
Other expense
Foreign currency loss (gain)
159,763
(51,571)
Change in derivative warrant liabilities
1,396,000
-
Change in contingent consideration obligation
74,000
-
Interest expense - amortization of debt discount
2,934,164
52,550
Interest expense - convertible debt and other
1,831,057
600,740
(Loss) income before income taxes
(4,009,106)
460,216
(Benefit) provision for income taxes
(845,979)
87,116
Net (loss) income
$
(3,163,127)
$
373,100
Net (loss) income per common share:
Basic
$
(0.25)
$
0.03
Diluted
$
(0.25)
$
0.03
Weighted average number of common shares outstanding:
Basic
12,785,450
11,572,406
Diluted
12,785,450
11,733,621
See notes to consolidated financial statements.
59
S&W SEED COMPANY
Years Ended
June 30,
2015
2014
Net (loss) income
$
(3,163,127)
$
373,100
Foreign currency translation adjustment
(3,427,819)
435,069
Comprehensive (loss) income
$
(6,590,946)
$
808,169
See notes to consolidated financial statements.
60
S&W SEED COMPANY
Accumulated
Additional
Other
Total
Common Stock
Treasury Stock
Paid-In
Accumulated
Comprehensive
Stockholders'
Shares
Amount
Shares
Amount
Capital
Deficit
Loss
Equity
Balance, June 30, 2013
11,584,101
$
11,585
-
$
-
$
54,338,758
$
(2,189,444)
$
(2,103,836)
$
50,057,063
Stock-based compensation - options, restricted stock, and RSUs
-
-
-
-
872,711
-
-
872,711
Common stock issued for exercise of underwriter warrant and A warrant
31,500
32
-
-
213,644
-
-
213,676
Net issuance to settle RSUs
57,557
57
-
-
(241,709)
-
-
(241,652)
Cancellation of restricted shares for withholding taxes
(8,065)
(8)
-
-
(61,528)
-
-
(61,536)
Treasury stock purchases
-
-
(25,000)
(134,196)
-
-
-
(134,196)
Other comprehensive income
-
-
-
-
-
-
435,069
435,069
Net income
-
-
-
-
-
373,100
-
373,100
Balance, June 30, 2014
11,665,093
$
11,666
(25,000)
$
(134,196)
$
55,121,876
$
(1,816,344)
$
(1,668,767)
$
51,514,235
Balance, June 30, 2014
11,665,093
$
11,666
(25,000)
$
(134,196)
$
55,121,876
$
(1,816,344)
$
(1,668,767)
$
51,514,235
Stock-based compensation - options, restricted stock, and RSUs
-
-
-
-
896,882
-
-
896,882
Common stock issued for exercise of options
291,559
291
-
-
1,079,708
1,079,999
Net issuance to settle RSUs
36,454
36
-
-
(79,878)
-
-
(79,842)
Cancellation of restricted shares for withholding taxes
(8,005)
(8)
-
-
(34,652)
-
-
(34,660)
Proceeds from sale of common stock, net of fees and expenses
1,294,000
1,294
-
-
4,160,643
-
-
4,161,937
Common stock issued for additional minority interest investment in Bioceres
200,000
200
-
-
927,800
-
-
928,000
Other comprehensive loss
-
-
-
-
-
-
(3,427,819)
(3,427,819)
Net loss
-
-
-
-
-
(3,163,127)
-
(3,163,127)
Balance, June 30, 2015
13,479,101
$
13,479
(25,000)
$
(134,196)
$
62,072,379
$
(4,979,471)
$
(5,096,586)
$
51,875,605
See notes to consolidated financial statements.
61
S&W SEED COMPANY
Years Ended
June 30,
2015
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income
$
(3,163,127)
$
373,100
Adjustments to reconcile net (loss) income from operating activities to net
cash provided by (used in) operating activities
Stock-based compensation
896,882
872,711
Change in allowance for doubtful accounts
83,039
49,687
Impairment charges
500,198
-
Depreciation and amortization
2,179,638
1,265,739
Loss (gain) on disposal of property, plant and equipment
24,646
(11,921)
Change in deferred tax asset
(1,402,397)
(512,971)
Change in foreign exchange contracts
64,593
(666,310)
Change in derivative warrant liabilities
1,396,000
-
Change in contingent consideration obligation
74,000
-
Amortization of debt discount
2,934,164
51,438
Changes in operating assets and liabilities, net:
Accounts receivable
(4,391,780)
(11,301,001)
Inventories
21,308,005
(2,135,746)
Prepaid expenses and other current assets
(318,479)
273,415
Crop production costs
349,435
(369,501)
Other non-current assets
(7,450)
-
Accounts payable
(11,158,693)
(4,890,482)
Accounts payable - related parties
143,781
150,393
Accrued expenses and other current liabilities
1,591,582
(912,671)
Other non-current liabilities
8,313
(102,918)
Net cash provided by (used in) operating activities
11,112,350
(17,867,038)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(1,595,813)
(434,416)
Proceeds from disposal of property, plant and equipment
7,100,000
24,832
Acquisition of business
(36,688,881)
-
Investment in Bioceres
(4,982)
(354,525)
Net cash used in investing activities
(31,189,676)
(764,109)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock
4,161,937
-
Net proceeds from warrant exercises
-
213,676
Proceeds from exercise of common stock options
1,079,999
-
Common stock repurchased
-
(134,196)
Taxes paid related to net share settlements of stock-based compensation awards
(114,502)
(303,188)
Borrowings and repayments on lines of credit, net
(766,673)
8,914,888
Proceeds from sale of convertible debt and warrants
27,000,000
-
Borrowings of long-term debt
509,702
-
Debt issuance costs
(1,931,105)
-
Repayments of convertible debt
(5,045,519)
-
Repayments of long-term debt
(2,488,567)
(746,789)
Net cash provided by financing activities
22,405,272
7,944,391
EFFECT OF EXCHANGE RATE CHANGES ON CASH
40,009
73,185
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
2,367,955
(10,613,571)
CASH AND CASH EQUIVALENTS
1,167,503
11,781,074
CASH AND CASH EQUIVALENTS
$
3,535,458
$
1,167,503
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest
$
1,491,348
$
555,970
Income taxes
210,112
777,821
See notes to consolidated financial statements.
62
S&W SEED COMPANY
NOTE 1 - BACKGROUND AND ORGANIZATION
Organization
S&W Seed Company, a Nevada corporation (the "Company") began as S&W Seed Company, a general partnership in 1980 and was originally in the business of
breeding, growing, processing and selling alfalfa seed. The corporate entity, S&W Seed Company, was incorporated in Delaware in October 2009 and is the successor entity to
Seed Holding, LLC, which had purchased a majority interest in the general partnership between June 2008 and December 2009. Following the Company's initial public offering in May 2010,
the Company purchased the remaining general partnership interests and became the sole owner of the general partnership's original business. Seed Holding, LLC remains a consolidated
subsidiary of the Company.
In December 2011, the Company reincorporated in Nevada as a result of a statutory short-form merger of the Delaware corporation into its wholly-owned subsidiary, S&W Seed
Company, a Nevada corporation.
On April 1, 2013, the Company, together with its wholly-owned subsidiary, S&W Seed Australia Pty Ltd, an Australia corporation ("S&W Australia"), closed on the acquisition
of all of the issued and outstanding shares of Seed Genetics International Pty Ltd, an Australia corporation ("SGI"), from SGI's shareholders (the "SGI Acquisition").
Business Overview
Since its establishment, the Company, including its predecessor entities, has been principally engaged in breeding, growing, processing and selling agricultural seeds, primarily
alfalfa seed. The Company owns seed cleaning and processing facilities, which are located in Five Points, California and Nampa, Idaho. The Company's products are primarily grown under
contract by farmers as well as by the Company itself under a small direct farming operation. The Company began its stevia initiative in fiscal 2010 and is currently focused on breeding
improved varieties of stevia and developing marketing and distribution programs for its stevia products.
On December 31, 2014, the Company purchased certain alfalfa research and production facilities and conventional (non-GMO) alfalfa germplasm assets and assumed certain related
liabilities ("the Pioneer Acquisition") of Pioneer Hi-Bred International, Inc. ("DuPont Pioneer").
The Company's operations span the world's alfalfa seed production regions with operations in the San Joaquin and Imperial Valleys of California, five other US states, Australia, and
three provinces in Canada, and the Company sells its seed products in more than 25 countries around the globe.
63
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company maintains its accounting records on an accrual basis in accordance with accounting principles generally accepted in the United States of America ("GAAP").
The consolidated financial statements include the accounts of Seed Holding, LLC and its other wholly-owned subsidiaries, S&W Australia, which owns 100% of SGI, and Stevia
California, LLC. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are adjusted to reflect actual experience when necessary.
Significant estimates and assumptions affect many items in the financial statements. These include allowance for doubtful trade receivables, inventory valuation, asset impairments,
provisions for income taxes, grower accruals (an estimate of amounts payable to farmers who grow seed for the Company), contingent consideration, derivative liabilities, contingencies and
litigation. Significant estimates and assumptions are also used to establish the fair value and useful lives of depreciable tangible and certain intangible assets, goodwill as well as valuing
stock-based compensation. Actual results may differ from those estimates and assumptions, and such results may affect income, financial position or cash flows.
Certain Risks and Concentrations
The Company's revenue is principally derived from the sale of alfalfa seed, the market for which is highly competitive. The Company depends on a core group of significant
customers. Two customers accounted for 49% of its revenue for the year ended June 30, 2015, and two customers accounted for 21% of its revenue for the year ended June 30, 2014.
Three customers accounted for 53% of the Company's accounts receivable at June 30, 2015. One customer accounted for 32% of the Company's accounts receivable at June 30, 2014.
Sales direct to international customers represented 59% and 81% of revenue during the years ended June 30, 2015 and 2014, respectively. The net book value of fixed assets located
outside the United States were 11% and 3% at June 30, 2015 and 2014, respectively.
Cash balances located outside of the United States may not be insured and totaled $1,039,326 and $42,074 at June 30, 2015 and 2014, respectively.
64
The following table shows revenue from external sources by destination country:
Years Ended June 30,
2015
2014
United States
$
33,130,338
41%
$
9,561,102
19%
Saudi Arabia
21,655,881
27%
11,042,450
21%
Mexico
4,906,587
6%
3,974,473
8%
Libya
3,003,085
4%
5,341,139
10%
Argentina
2,918,755
4%
800,248
2%
Australia
2,087,955
3%
2,397,636
5%
Sudan
2,068,995
3%
364,645
1%
Germany
2,035,445
3%
2,077,906
4%
France
1,729,205
2%
3,623,232
7%
Other
7,672,657
9%
12,350,812
24%
Total
$
81,208,903
100%
$
51,533,643
100%
International Operations
The Company translates its foreign operations' asset and liabilities denominated in foreign currencies into U.S. dollars at the current rates of exchange as of the balance sheet
date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in the cumulative
translation account, a component of accumulated other comprehensive income. Gains or losses from foreign currency transactions are included in the consolidated statement of
operations.
Revenue Recognition
The Company derives its revenue primarily from sale of seed and other crops and milling services. Revenue from seed and other crop sales is recognized when risk and title to
the product is transferred to the customer. No customer has a right of return.
The Company recognizes revenue from milling services according to the terms of the sales agreements and when delivery has occurred, performance is complete, and pricing is fixed or
determinable at the time of sale.
Additional conditions for recognition of revenue for all sales include the requirements that the collection of sales proceeds must be reasonably assured based on historical experience
and current market conditions, the sales price is fixed and determinable and that there must be no further performance obligations under the sale.
Cost of Revenue
The Company records purchasing and receiving costs, inspection costs and warehousing costs in cost of revenue. When the Company is required to pay for outward freight
and/or the costs incurred to deliver products to its customers, the costs are included in cost of revenue.
Cash and Cash Equivalents
For financial statement presentation purposes, the Company considers time deposits, certificates of deposit and all highly liquid investments with original maturities of three
months or less to be cash and cash equivalents. At times, cash and cash equivalents balances exceed amounts insured by the Federal Deposit Insurance Corporation.
65
Accounts Receivable
The Company provides an allowance for doubtful trade receivables equal to the estimated uncollectible amounts. That estimate is based on historical collection experience,
current economic and market conditions and a review of the current status of each customer's trade accounts receivable. The allowance for doubtful trade receivables was $155,595 and
$72,556 at June 30, 2015 and June 30, 2014, respectively.
Inventories
Inventory
Inventories consist of alfalfa seed purchased from the Company's growers under production contracts, alfalfa seed produced from its own farming operations and packaging
materials.
Inventories are stated at the lower of cost or market, and an inventory reserve permanently reduces the cost basis of inventory. Inventories are valued as follows: Actual cost is used to
value raw materials such as packaging materials, as well as goods in process. Costs for substantially all finished goods, which include the cost of carryover crops from the previous year, are
valued at actual cost. Actual cost for finished goods includes plant conditioning and packaging costs, direct labor and raw materials and manufacturing overhead costs based on normal
capacity. The Company records abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) as current period charges and allocates fixed production
overhead to the costs of finished goods based on the normal capacity of the production facilities.
The Company's subsidiary, SGI, does not fix the final price for seed payable to its growers until the completion of a given year's sales cycle pursuant to its standard contract production
agreement. SGI records an estimated unit price; accordingly, inventory, cost of revenue and gross profits are based upon management's best estimate of the final purchase price to
growers.
Inventory is periodically reviewed to determine if it is marketable, obsolete or impaired. Inventory that is determined to be obsolete or impaired is written off to expense at the time the
impairment is identified. Because the germination rate, and therefore the quality, of alfalfa seed improves over the first year of proper storage, inventory obsolescence for alfalfa seed is not
a material concern. The Company sells its inventory to distributors, dealers and directly to growers.
Growing Crops
Expenditures on growing crops are valued at the lower of cost or market and are deferred and charged to cost of products sold when the related crop is harvested and sold. The
deferred growing costs included in inventories in the consolidated balance sheets consist primarily of labor, lease payments on land, interest expense on farmland, cultivation and on-going
irrigation, harvest and fertilization costs. Costs included in growing crops relate to the current crop year. Costs that are to be realized over the life of the crop are reflected in crop production
costs.
66
Components of inventory are:
Crop Production Costs
Expenditures on crop production costs are deferred and charged to cost of products sold when the related crop is harvested and sold. The deferred crop production costs
included in the consolidated balance sheets consist primarily of the cost of plants and the transplanting, stand establishment costs, intermediate life irrigation equipment and land
amendments and preparation. Crop production costs are estimated to have useful lives of three to five years depending on the crop and nature of the expenditure and are amortized to
growing crop inventory each year over the estimated life of the crop.
Components of crop production costs are:
Property, Plant and Equipment
Property, plant and equipment is depreciated using the straight-line method over the estimated useful life of the asset - periods of 18-28 years for buildings, 3-10 years for
machinery and equipment, and 3-5 years for vehicles.
Intangible Assets
Intangible assets acquired in business acquisitions are reported at their initial fair value less accumulated amortization. Intangible assets are amortized using the straight-line
method over the estimated useful life of the asset. Periods of 10-30 years for technology/IP/germplasm, 20 years for customer relationships and trade names, and 2-20 for other intangible
assets.
The weighted average estimated useful lives are 24 years for technology/IP/germplasm, 20 years for customer relationships and trade names, and 19 years for other intangible assets.
Goodwill
Goodwill originated from acquisitions of Imperial Valley Seeds and Seed Genetics International during the fiscal year 2013 and the acquisition of the alfalfa business from
DuPont Pioneer in fiscal year 2015. Goodwill is assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could
include a significant change in the business climate, legal factors, a decline in
67
operating performance, competition, sale or disposition of a significant portion of the business, or other factors.
The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If
management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a two-step quantitative goodwill impairment
test. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The
Company uses a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires various judgmental assumptions including
assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company's budget and long-term plans.
Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the
reporting unit is considered not impaired, and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the
goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting
unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is,
the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a
business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. The Company determined it has two reporting units for goodwill
impairment testing purposes. Its reporting units are the United States operations and Australia. The Company conducted a qualitative assessment of goodwill and determined that it was
more likely than not there was no impairment.
Cost Method Investments
Investee companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method,
the Company's share of the earnings or losses of such Investee companies is not included in the consolidated balance sheet or statement of operations. However, impairment charges are
recognized in the consolidated statement of operations. If circumstances suggest that the value of the Investee company has subsequently recovered, such recovery is not recorded.
Research and Development Costs
The Company is engaged in ongoing research and development ("R&D") of proprietary seed and stevia varieties. All R&D costs must be charged to expense as
incurred. Accordingly, internal R&D costs are expensed as incurred. Third-party R&D costs are expensed when the contracted work has been performed or as milestone results
have been achieved. The costs associated with equipment or facilities acquired or constructed for R&D activities that have alternative future uses are capitalized and depreciated on a
straight-line basis over the estimated useful life of the asset.
Income Taxes
Deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities, as well as a consideration of net
operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A
valuation allowance is established,
when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.
68
Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant
unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of long-lived assets will be adjusted, based
on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. A triggering event during the quarter ended December 31, 2014 prompted a review
of certain farmland related costs. The carrying value of these assets was deemed in excess of fair value, and the Company recorded an impairment charge of $500,198 in the consolidated
statement of operations.
Derivative Financial Instruments
Foreign Exchange Contracts
The Company's subsidiary, SGI, is exposed to foreign currency exchange rate fluctuations in the normal course of its business, which the Company at times manages through the
use of foreign currency forward contracts.
The Company has entered into certain derivative financial instruments (specifically foreign currency forward contracts), and accounts for these instruments in accordance with ASC
Topic 815, "Derivatives and Hedging", which establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or
liability measured at fair value. The Company's foreign currency contracts are not designated as hedging instruments under ASC 815; accordingly, changes in the fair value are recorded in
current period earnings.
Derivative Liabilities
The Company reviews the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including
embedded conversion options and redemption options, which are required to be bifurcated and accounted for separately as derivative financial instruments.
Fair Value of Financial Instruments
The Company discloses assets and liabilities that are recognized and measured at fair value, presented in a three-tier fair value hierarchy, as follows:
69
The assets acquired and liabilities assumed in the Pioneer Acquisition were valued at fair value on a non-recurring basis as of December 31, 2014. No assets or liabilities were valued at
fair value on a non-recurring basis as of June 30, 2015 or June 30, 2014.
The carrying value of cash and cash equivalents, accounts payable, short-term and all long-term borrowings other than the convertible debentures, as reflected in the
consolidated balance sheets, approximate fair value because of the short-term maturity of these instruments or interest rates commensurate with market rates. There have been no
changes in operations and/or credit characteristics since the date of issuance could impact the relationship between interest rate and market rates. The fair value of the convertible
debentures is $21,828,653 at the balance sheet date and the carrying value is $18,042,970. The fair value was calculated using a discounted cash flow model and utilized a 10%
discount rate which is commensurate with market rates given the remaining term, principal repayment schedule and outstanding balance. The convertible debentures are categorized
as Level 3 in the fair value hierarchy. The Company used a discounted cash flows approach, to measure the fair value using Level 3 inputs.
Assets and liabilities that are recognized and measured at fair value on a recurring basis are categorized as follows:
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to classifications adopted in the current period. The reclassifications had no
effect on net loss, cash flows, or stockholders' equity.
Recent Accounting Pronouncements
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) which requires debt issuance costs related to a recognized debt liability to
be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company elected to adopt this update as of March
31, 2015 and debt issuance costs related to a recognized debt liability are presented in the consolidated balance sheet as a direct deduction from the carrying amount of that debt liability.
The update was adopted because management believes it provides a more meaningful presentation of its financial position. This change in accounting principle has been applied on a
retrospective basis and the June 30, 2014 consolidated balance sheet has been adjusted to reflect the period specific effects of applying the new guidance. The retrospective application of
this change in accounting principle did not have an impact on the June 30, 2014 consolidated balance sheet as the Company did not have debt issuance costs at that date. The adoption of
this change in accounting principle on the March 31, 2015 consolidated balance sheet reclassified debt issuance costs of $1,272,676 which were previously presented as a long-term asset, and reduced the
70
carrying value of the convertible notes by the same amount. The adoption did not have an impact on the Company's consolidated statement of operations.
NOTE 3 - BUSINESS COMBINATIONS
On December 31, 2014, the Company purchased certain alfalfa research and production facilities and conventional (non-GMO) alfalfa germplasm assets (and assumed certain
related liabilities) of DuPont Pioneer.
The acquisition expanded the Company's production capabilities, diversified its product offerings and provided access to new distribution
channels.
The Pioneer Acquisition was consummated pursuant to the terms of an asset purchase and sale agreement. The purchase price under the Agreement was up to $42,000,000,
consisting of $27,000,000 in cash (payable at closing), a three year secured promissory note (the "Note") payable by the Company to DuPont Pioneer in the initial principal amount of
$10,000,000 (issued at closing), and a potential earn-out payment (payable as an increase in the principal amount of the Note) of up to $5,000,000 based on S&W sales under
distribution and production agreements as well as other Company sales of products containing the acquired germplasm in the three-year period following the closing. The Note accrues
interest at a rate of 3% per annum and interest will be payable in three annual installments, in arrears, commencing on December 31, 2015. Principal on the Note is payable at maturity on
December 31, 2017.
The Pioneer Acquisition has been accounted for as a business combination, and the Company valued and recorded all assets acquired and liabilities assumed at their estimated fair
values on the date of the Pioneer Acquisition.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date of December 31, 2014:
December 31, 2014
Measurement
December 31, 2014
(initially reported)
Period Adjustments
(as adjusted)
Inventory
$
21,519,376
$
535,924
$
22,055,300
Property, plant and equipment
6,709,265
3,270
6,712,535
Distribution agreement
5,050,000
2,640,000
7,690,000
Production agreement
-
670,000
670,000
Grower relationships
83,000
(7,000)
76,000
Technology/IP - germplasm
12,130,000
1,210,000
13,340,000
Technology/IP - seed varieties
4,780,000
260,000
5,040,000
Goodwill
10,447,735
(5,094,418)
5,353,317
Current liabilities
(21,519,376)
9,270,870
(12,248,506)
Total acquisition cost allocated
$
39,200,000
$
9,488,646
$
48,688,646
The acquisition-date fair value of the consideration transferred consisted of the following:
December 31, 2014
Measurement
December 31, 2014
(initially reported)
Period Adjustments
(as adjusted)
Cash
$
27,000,000
$
-
$
27,000,000
Promissory note
10,000,000
-
10,000,000
Contingent earn-out
2,200,000
(196,000)
2,004,000
Amount payable to seller
-
9,684,646
9,684,646
$
39,200,000
$
9,488,646
$
48,688,646
71
The current liabilities assumed relate to inventory acquired in the acquisition. Subsequent to December 31, 2014, the Company determined that at the
acquisition date, the seller had already paid the third party growers $9,684,646 for the inventory acquired in the acquisition. As a result, the carrying amount of the current liabilities assumed
was retrospectively decreased by $9,684,646 on December 31, 2014, due to this new information, with a corresponding increase to the acquisition-date fair value of the consideration
transferred. In addition, subsequent to the issuance of the December 31, 2014 financial statements, the Company obtained final support to adjust the estimates previously made on
inventory purchases and grower payables assumed as well as acquired property, plant and equipment and intangible assets. The excess of the purchase price over the fair value of the net
assets acquired, amounting to $5,353,317, was recorded as goodwill on the consolidated balance sheet. The primary item that generated goodwill was the premium paid by the Company
for the ability to control the acquired business, technology, and the assembled workforce of Pioneer. Goodwill is not amortized for financial reporting purposes, but is amortized for tax
purposes.
Management assigned fair values to the identifiable intangible assets through a combination of the relief from royalty method and the multi-period excess earnings method. The
contingent consideration requires the Company to increase the principal amount of the Seller note by up to an additional $5,000,000 if the Company meets certain performance metrics
during the three year period following the acquisition. The fair value of the contingent consideration arrangement at the acquisition date was $2,004,000. The fair value of the contingent
consideration was estimated using a probability-weighted cash flow model. The fair value measurement is based on significant inputs not observable in the market and thus represents a
Level 3 measurement. The key assumptions in applying the income approach were as follows: 24% present value discount factor and probability adjusted revenue assumptions based on
the number of expected units produced. As of June 30, 2015, the estimated fair value of the contingent consideration is $2,078,000. The increase in the estimated fair value is recorded as
an expense in the statement of operations.
The values and useful lives of the acquired DuPont Pioneer intangibles are as follows:
Estimated
Estimated
Distribution agreement
20
$
7,690,000
Production agreement
3
670,000
Grower relationships
10
76,000
Technology/IP - germplasm
30
13,340,000
Technology/IP - seed varieties
15
5,040,000
Total identifiable intangible assets
$
26,816,000
The Company incurred $863,048 of acquisition costs associated with the Pioneer Acquisition that have been recorded in selling, general and administrative
expenses on the consolidated statement of operations.
The newly acquired business generated revenues of approximately $27.9 million during the year ended June 30, 2015.
In the transaction, DuPont Pioneer retained ownership of its GMO (genetically modified) alfalfa germplasm and related intellectual property assets, as well as the right to develop new
GMO-traited alfalfa germplasm. The retained GMO germplasm assets incorporate certain GMO traits that are licensed to DuPont Pioneer from third parties (the "Third Party GMO Traits").
The Company was interested in acquiring the GMO assets at the time it acquired the conventional (non-GMO) alfalfa seed assets, and DuPont Pioneer was interested in selling those
assets, but terms could not be agreed-upon, in part because of the need for agreements with the third parties from whom the Third Party GMO Traits are licensed.
72
The agreements related to the Pioneer Acquisition provide that both the Company and DuPont Pioneer will work towards obtaining the necessary consents from and agreements with
third parties such that the GMO assets can be transferred from DuPont Pioneer to the Company. If such consents and agreements are obtained before November 30, 2017, the Company
has committed to buy and DuPont Pioneer has committed to sell the GMO assets at a price of $7,000,000 on or before December 29, 2017.
The following unaudited pro forma financial information presents results as if the Pioneer Acquisition occurred on July 1, 2013.
Years Ended
June 30,
(Unaudited)
2015
2014
Revenue
$
91,281,208
$
90,810,192
Net loss
$
(3,133,625)
$
(385,960)
Net loss per basic and diluted share
$
(0.23)
$
(0.03)
For purposes of the pro forma disclosures above, the primary adjustments for the year ended June 30, 2015 include: (i) the reduction of DuPont Pioneer historical revenue to reflect the
shift from end customer to wholesale pricing; (ii) the reduction of cost of revenue to remove DuPont Pioneer's historical sales incentives included in cost of sales; (iii) the elimination of
acquisition and financing related charges of $1,290,927; (iv) amortization of acquired intangibles of $698,050; (v) depreciation of acquired property, plant and equipment of $221,884; (vi)
additional interest expense on the convertible notes issued concurrent to the acquisition, including non-cash amortization of debt issuance costs and accretion of debt discount of
$3,054,343; (vii) additional interest expense of $150,000 for the promissory included in total consideration for the Pioneer Acquisition; and (viii) adjustments to reflect the additional income
tax expense assuming a combined effective tax rate of 21.1%.
The primary adjustments for the year ended June 30, 2014 include: (i) the reduction of DuPont Pioneer historical revenue to reflect the shift from end customer to wholesale pricing; (ii)
the reduction of cost of revenue to remove DuPont Pioneer's historical sales incentives included in cost of sales; (iii) amortization of acquired intangibles of $1,396,100; (iv) depreciation of
acquired property, plant and equipment of $443,767; (v) additional interest expense on the convertible notes issued concurrent to the acquisition, including non-cash amortization of debt
issuance costs and accretion of debt discount of $6,053,604; (vi) additional interest expense of $225,000 for the promissory included in total consideration for the Pioneer Acquisition; and
(vii) adjustments to reflect the additional income tax expense assuming a combined effective tax rate of 18.9%.
73
NOTE 4 - GOODWILL AND INTANGIBLE ASSETS
The following table summarizes the activity of goodwill for the years ended June 30, 2015 and 2014, respectively.
Intangible assets consist of the following:
Foreign
Balance at
Currency
Balance at
July 1, 2014
Additions
Amortization
Translation
June 30, 2015
Intellectual property
$
6,246,572
$
-
$
(295,844)
$
(1,144,777)
$
4,805,951
Trade name
1,521,864
-
(83,830)
(60,194)
1,377,840
Technology/IP
1,043,067
-
(118,960)
-
924,107
Non-compete
471,768
-
(132,353)
(38,061)
301,354
GI customer list
100,295
-
(7,164)
-
93,131
Grower relationships
2,744,164
76,000
(133,770)
(502,909)
2,183,485
Supply agreement
1,380,311
-
(75,632)
-
1,304,679
Customer relationships
1,082,730
-
(58,557)
(55,554)
968,619
Distribution agreement
-
7,690,000
(192,250)
-
7,497,750
Production agreement
-
670,000
(111,666)
-
558,334
Technology/IP - germplasm
-
13,340,000
(222,334)
-
13,117,666
Technology/IP - seed varieties
-
5,040,000
(168,000)
-
4,872,000
$
14,590,771
$
26,816,000
$
(1,600,360)
$
(1,801,495)
$
38,004,916
Foreign
Balance at
Currency
Balance at
July 1, 2013
Additions
Amortization
Translation
June 30, 2014
Intellectual property
$
6,379,934
$
-
$
(324,631)
$
191,269
$
6,246,572
Trade name
1,597,150
-
(85,342)
10,056
1,521,864
Technology/IP
1,162,027
-
(118,960)
-
1,043,067
Non-compete
602,164
-
(137,595)
7,199
471,768
GI customer list
107,459
-
(7,164)
-
100,295
Grower relationships
2,802,756
-
(142,613)
84,021
2,744,164
Supply agreement
1,455,943
-
(75,632)
-
1,380,311
Customer relationships
1,133,402
-
(59,955)
9,283
1,082,730
$
15,240,835
$
-
$
(951,892)
$
301,828
$
14,590,771
Amortization expense totaled $1,600,360 and $951,892 for the years ended June 30, 2015 and 2014, respectively. Estimated aggregate remaining
amortization is as follows:
2016
2017
2018
2019
2020
Thereafter
Amortization expense
$
2,255,195
$
2,246,551
$
2,082,539
$
1,953,419
$
1,953,419
$
27,513,793
74
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Components of property, plant and equipment were as follows:
Depreciation expense totaled $579,278 and $313,847 for the years ended June 30, 2015 and 2014, respectively.
NOTE 6 - DEBT
Total debts outstanding, excluding convertible debt addressed in Note 7, are presented on the consolidated balance sheet as follows:
June 30, 2015
June 30, 2014
Working capital lines of credit
Wells Fargo
$
10,000,000
$
8,305,235
National Australia Bank Limited
3,755,800
7,583,405
Total working capital lines of credit
13,755,800
15,888,640
Current portion of long-term debt
Term loan - Wells Fargo
-
159,030
Term loan - Ally
8,994
8,734
Keith facility (machinery & equipment loan) - National Australia Bank Limited
154,657
-
Unsecured subordinate promissory note - related party
100,000
100,000
Promissory note - SGI selling shareholders
2,000,000
-
Debt discount - SGI
(40,186)
-
Total current portion
2,223,465
267,764
Long-term debt, less current portion
Term loan - Wells Fargo
-
2,220,803
Term loan - Ally
15,590
24,584
Term loan (Keith building) - National Australia Bank Limited
466,482
-
Unsecured subordinate promissory note - related party
200,000
300,000
Promissory note - SGI selling shareholders
-
2,000,000
Promissory note - Dupont Pioneer
10,000,000
-
Debt discount - SGI
-
(92,756)
Total long-term portion
10,682,072
4,452,631
Total debt
$
12,905,537
$
4,720,395
75
Since 2011, the Company has had an ongoing revolving credit facility agreement with Wells Fargo Bank, National Association ("Wells Fargo").
In July 2012, the Company and Wells Fargo agreed to add a new term loan in the amount of $2,625,000 (the "Term Loan"). The Term Loan bore interest at a rate per annum equal to
2.35% above LIBOR as specified in the Term Loan. Under the Term Loan, the first installment of monthly principal repayments commenced in August 2012 and continued at a fixed amount
per month until the first annual increase in July 2013. Thereafter the amount of monthly principal reduction was subject to annual increases, with the last monthly payment in July 2019.
There were annual principal payments in August 2013 and 2014 in the amount of $56,000, with a final installment, consisting of all remaining unpaid principal due and payable in full on July
5, 2019. In March 2015, the Company paid off the entire outstanding balance of the Term Loan concurrent with the sale of 759 acres of farmland property located in the Imperial Valley of
California.
On February 21, 2014, the Company entered into new credit agreements with Wells Fargo and thereby became obligated under new working capital facilities (collectively, the "New
Facilities"). The New Facilities include (i) a domestic revolving facility of up to $4,000,000 to refinance the Company's outstanding credit accommodations from Wells Fargo and for working
capital purposes, and (ii) an export-import revolving facility of up to $10,000,000 for financing export-related accounts receivable and inventory (the "Ex-Im Revolver"). The availability of
credit under the Ex-Im Revolver will be limited to an aggregate of 90% of the eligible accounts receivable (as defined under the credit agreement for the Ex-Im Revolver) plus 75% of the
value of eligible inventory (also as defined under the credit agreement for the Ex-Im Revolver), with the term "value" defined as the lower of cost or fair market value on a first-in first-out
basis determined in accordance with generally accepted accounting principles. All amounts due and owing under the New Facilities must be paid in full on or before October 1, 2015,
pursuant to the most recent amendments to the New Facilities as discussed below. The New Facilities are secured by a first priority lien on accounts receivable and other rights to payment,
general intangibles, inventory, and equipment. The New Facilities are further secured by a lien on, and a pledge of, 65% of the stock of the Company's wholly-owned subsidiary, Seed
Genetics International Pty Ltd. The New Facilities, as entered into in February 2014, bear interest either at (i) a fluctuating rate per annum determined by Wells Fargo to be 2.25% above the
daily one-month LIBOR Rate in effect from time to time, or (ii) a fixed rate per annum determined to be 2.25% above LIBOR in effect on the first day of the applicable fixed rate term. Interest
is payable each month in arrears.
Upon the occurrence of an event of default, as defined under the credit agreement for each of the New Facilities (collectively, the "Credit Agreements"), the principal balance due under
the Facilities will thereafter bear interest at a rate per annum that is 4% above the interest rate that is otherwise in effect under the Facilities. The Credit Agreements contain customary
representations and warranties, affirmative and negative covenants and customary events of default that permit Wells Fargo to accelerate the Company's outstanding obligations under the
New Facilities, all as set forth in the Credit Agreements and related documents.
As consideration for the Ex-Im Revolver, the Company was required to pay a one-time, non-refundable commitment fee of $100,000 to Wells Fargo. Pursuant to the terms of a Borrower
Agreement between the Company and the Export-Import Bank of the United States (the "Ex-Im Bank"), the Ex-Im Bank agrees to guarantee 90% of amounts outstanding and owing under
the Ex-Im Revolver.
On February 27, 2015, the Company executed and entered into a Third Amendment to Credit Agreement and Revolving Line of Credit Note with respect thereto, and a Third
Amendment to Ex-Im Working Capital Guarantee Credit Agreement and Revolving Line of Credit Note with respect thereto (collectively, the "Third Amendments"). Pursuant to the Third
Amendments, the respective principal amounts available under the Credit
76
Agreements and the Ex-Im Revolver remain unchanged, with the maturity date extended to July 1, 2015. Under
the Third Amendments, both the Credit Agreement Note and the Ex-Im Revolver bear interest either (i) at a fluctuating rate per annum determined by Wells Fargo to be 2.75% above the
daily one-month LIBOR Rate in effect from time to time, or (ii) at a fixed rate per annum determined to be 2.75% above LIBOR in effect on the first day of the applicable fixed rate term. The
Third Amendments include minimal changes to certain financial covenants, including the manner in which the net income financial covenant (itself unchanged) is calculated for the period
ended June 30, 2015 and, with respect to the Asset Coverage Ratio, which also remains unchanged, the addition of the requirement that such ratio be maintained at any time rather than as
of month end.
On March 27, 2015, the Company entered into a Fourth Amendment to Credit Agreement and a Fourth Amendment to Ex-Im Working Capital Guarantee Credit Agreement, the purpose
of which was to permit the Company to enter into a new guarantee with National Australia Bank Limited ("NAB") in connection with amended credit facilities to be consummated between
NAB and SGI.
On June 30, 2015, the Company entered into a Fifth Amendment to Credit Agreement and Revolving Line of Credit Note with respect thereto, and a Fifth Amendment to Ex-Im Working
Capital Guarantee Credit Agreement and Revolving Line of Credit Note related thereto (collectively, the "Fifth Amendments"). Pursuant to the Fifth Amendments, the respective
principal amounts available under the Credit Agreement and the Ex-Im Revolver remain unchanged, with the maturity date extended to October 1, 2015. Seed Holding LLC and Stevia
California LLC, both subsidiaries of the Company, executed continuing guarantees in connection therewith. On September 22, 2015, the Company paid-off and terminated the credit
facilities with Wells Fargo. See Note 15 for further discussion of the replacement credit facility with KeyBank National Association.
On October 1, 2012, the Company issued a five-year subordinated promissory note to Imperial Valley Seeds, Inc. in the principal amount of $500,000 (the "IVS Note"), with a maturity
date of October 1, 2017 (the "Maturity Date"). The IVS Note will accrue interest at a rate per annum equal to one-month LIBOR at closing plus 2%, which equals 2.2%. Interest will be
payable in five annual installments, in arrears, commencing on October 1, 2013, and on each succeeding anniversary thereof through and including the Maturity Date (each, a "Payment
Date") and on the Maturity Date. Amortizing payments of the principal of $100,000 will also be made on each Payment Date, with any remaining outstanding principal and accrued interest
payable on the Maturity Date. The outstanding balance on the IVS Note was $300,000 at June 30, 2015.
In March 2013, the Company entered into a term loan for a vehicle purchase. The loan is payable in 59 monthly installments and matures in February 2018. The loan bears interest at a
rate of 2.94% per annum.
On April 1, 2013, the Company issued a three-year subordinated promissory note to the selling shareholders of SGI in the principal amount of US $2,482,317 (the "SGI Note"), with a
maturity date of April 1, 2016 (the "SGI Maturity Date"). The SGI note is non-interest bearing. A principal payment of $482,317 was made in October 2013, and the remaining $2,000,000 will
be paid at the SGI Maturity Date. Since the note is non-interest bearing, the Company recorded a debt discount of $156,880 at the time of issuance for the estimated net present value of the
obligation and accretes the net present value of the SGI Note obligation up to the face value of the SGI Note obligation using the effective interest method as a component of interest
expense. Accretion of the debt discount totaled $52,570 and $51,438 for the years ended June 30, 2015 and 2014, respectively. Accretion of the debt discount was charged to the
consolidated statement of operations.
On December 31, 2014 the Company issued a three-year secured promissory note to DuPont Pioneer in the initial principal amount of $10,000,000 (the "Pioneer Note"), with a maturity
date of December 31, 2017 (the "Pioneer Maturity Date"). The Pioneer Note will accrue interest at 3% per annum. Interest will be payable in
77
three annual installments, in arrears, commencing on December 31, 2015, and on each succeeding anniversary thereof through and including the Pioneer Maturity Date. The principal balance remains outstanding until maturity
on December 31, 2017.
SGI finances the purchase of most of its seed inventory from growers pursuant to a seasonal credit facility with NAB. The current facility, referred to as the 2015 NAB Facilities, was
amended as of March 31, 2015 and expires on March 31, 2016. As of June 30, 2015, AUD $4,906,336 (USD $3,755,800 at June 30, 2015) was outstanding under the 2015 NAB Facilities.
The 2015 NAB Facilities, as currently in effect, comprises two distinct facility lines: (i) an overdraft facility (the "Overdraft Facility"), having a credit limit of AUD $980,000
(USD $750,190 at June 30, 2015) and a trade refinance facility (the "Trade Refinance Facility"), having a credit limit of AUD $12,000,000 (USD $9,186,000 at June 30,
2015).
The Trade Refinance Facility permits SGI to borrow funds for periods of up to 180 days, at SGI's discretion, provided that the term is consistent with its trading terms. Interest for each
drawdown is set at the time of the drawdown as follows: (i) for Australian dollar drawings, based on the Australian Trade Refinance Rate plus 1.5% per annum and (ii) for foreign currency
drawings, based on the British Bankers' Association Interest Settlement Rate for the relevant foreign currency for the relevant period, or if such rate is not available, the rate reasonably
determined by NAB to be the appropriate equivalent rate, plus 1.5% per annum. As of June 30, 2015, the Trade Refinance Facility accrued interest on Australian dollar
drawings
The Overdraft Facility permits SGI to borrow funds on a revolving line of credit up to the credit limit. Interest accrues daily and is calculated by applying the daily interest rate to the
balance owing at the end of the day and is payable monthly in arrears
For both the Overdraft Facility and the Trade Refinance Facility, interest is payable each month in arrears. In the event of a default, as defined in the NAB Facility Agreement, the
principal balance due under the facilities will thereafter bear interest at an increased rate per annum above the interest rate that would otherwise have been in effect from time to time under
the terms of each facility (
i.e.
, the interest rate increases by 4.5% per annum under the Trade Refinance Facility and the Overdraft Facility upon the occurrence of an event of
default). The 2015 NAB Facilities contains customary representations and warranties, affirmative and negative covenants and customary events of default that permit NAB to accelerate
SGI's outstanding obligations, all as set forth in the NAB facility agreements.
Both facilities constituting the 2015 NAB Facilities are secured by a fixed and floating lien over all the present and future rights, property and undertakings of SGI and are guaranteed by
the Company as noted above. The 2015 NAB Facilities contain customary representations and warranties, affirmative and negative covenants and customary events of default that permit
NAB to accelerate SGI's outstanding obligations, all as set forth in the NAB facility agreements. SGI was in compliance with all NAB debt covenants at June 30, 2015.
In January 2015, NAB and SGI entered into a new business markets - flexible rate loan (the "Keith Building Loan") in the amount of AUD $650,000 (USD $497,575 at June
30, 2015), and a machinery and equipment facility (the "Keith Machinery and Equipment Facility") of up to AUD $1,350,000 (USD $1,033,425 at June 30, 2015). The Keith
Building Loan and the Keith Machinery and Equity Facility, collectively referred to as the Keith Credit Facilities, have a combined maximum credit amount of AUD $2,000,000 (USD
$1,531,000 at June 30, 2015).
78
The Keith Credit Facilities are being used for the construction of a new building on SGI's Keith, South Australia property and for the machinery and equipment
to be purchased for use in the operations of the new building. The Keith Building Loan matures on November 30, 2024. The interest rate on the Keith Building Loan varies from pricing
period to pricing period (each such period approximately 30 days), based on the weighted average of a specified basket of interest rates (6.135% as of June 30, 2015). Interest is payable
each month in arrears. The Keith Machinery and Equipment Facility permits SGI to draw down amounts up to the maximum of AUD $1,350,000 (USD $1,033,425) for periods of up to 180
days, in SGI's discretion, provided the term is consistent with SGI's trading terms. The Keith Machinery and Equipment Facility bears interest, payable in arrears, based on the Australian
Trade Refinance Rate quoted by NAB at the time of the drawdown, plus 2.9%. The two Keith Credit Facilities contain customary representations and warranties, affirmative and negative
covenants and customary events of default that permit NAB to accelerate SGI's outstanding obligations, all as set forth in the facility agreement. They are secured by a lien on all the present
and future rights, property and undertakings of SGI, the Company's corporate guarantee and a mortgage on SGI's Keith, South Australia property. At June 30, 2015, the principal balance on
the Keith Building Loan was AUD $609,382 (USD $466,482), and the principal balance on the Keith Machinery and Equipment Facility was AUD $202,034 (USD $154,657).
The annual maturities of short-term and long-term debt (excluding debt discount), excluding convertible debt addressed in Note 7, are as follows:
NOTE 7 - SENIOR CONVERTIBLE NOTES AND WARRANTS
On December 31, 2014, the Company consummated the sale of senior secured convertible debentures (the "Debentures") and common stock purchase warrants (the "Warrants")
to various institutional investors ("Investors") pursuant to the terms of a securities purchase agreement among the Company and the Investors. At closing, the Company received
$27,000,000 in gross proceeds. Offering expenses of $1,931,105 attributed to the Debentures were recorded as deferred financing fees and recorded as a debt discount on the consolidated
balance sheet and offering expenses of $424,113 attributed derivative warrants were expensed to the statement of operations during the year ended June 30, 2015. The net proceeds were
paid directly to DuPont Pioneer in partial consideration for the purchase of certain Pioneer assets, the closing for which also took place on December 31, 2014. See Note 3 for further
discussion of the Pioneer Acquisition.
Debentures
The Debentures are due and payable on November 30, 2017, unless earlier converted or redeemed. The Debentures bear interest on the aggregate unconverted and then
outstanding principal amount at 8% per annum, payable in arrears monthly beginning February 2, 2015. Commencing on the occurrence of any Event of Default (as defined in the
Debentures) that results in the eventual acceleration of the Debentures, the interest rate will increase to 18% per annum. The monthly interest is payable in cash, or in any combination of cash or shares of
the Company's common stock at the Company's option, provided certain "equity conditions" defined in the Debentures are satisfied.
79
Beginning on July 1, 2015, the
Company is required to make monthly payments of principal as well, payable in cash or any combination of cash or shares of its common stock at the Company's option, provided all of the
applicable equity conditions are satisfied. The Debentures contain certain rights of acceleration and deferral at the holder's option in the event a principal payment is to be made in stock and
contains certain limited acceleration rights of the Company, provided certain conditions are satisfied.
The Debentures provided for redemption of up to $5,000,000 in principal amount, payable in cash without prepayment penalty, if redeemed by July 1, 2015. Such early redemption was
required in the event of certain real estate sales and otherwise was optional. In accordance with the terms of the Debentures, following the sale of 759 acres of farmland property in the
Imperial Valley of California in March 2015, which resulted in sale proceeds of $7,100,000, the Company redeemed $5,000,000 in principal amount of the Debentures on a
pro rata
basis. At June 30, 2015, the Company has outstanding $21,954,482 in principal amount of the Debentures following the real estate sale redemption. The reduction in principal was applied
on the back end of the term, and as a result, does not reduce the dollar amount of the monthly redemption payments that commence on July 1, 2015, but does have the effect of reducing
the term of the Debentures from December 1, 2017 to June 1, 2017.
Following the real estate redemption, the Company may otherwise redeem the Debentures before maturity upon payment of the optional redemption price, which is equal to 120% of the
sum of the principal amount of the Debentures, all accrued and unpaid interest, all other interest that would accrue if the Debentures were held to maturity and any unpaid liquidated
damages that may be assessed under any of the transaction documents, including the Securities Purchase Agreement, the Registration Rights Agreement and the Warrants. The
Debentures are convertible, at the holder's option, into the Company's common stock at an initial conversion price of $5.00, subject to adjustment for stock splits, reverse stock splits and
similar recapitalization events. If, on September 30, 2015, the conversion price of $5.00 exceeds the arithmetic average of the 10 lowest daily volume weighted average prices ("VWAPs") of
the common stock during the 20 consecutive trading days ending on the trading day that is immediately prior to September 30, 2015 the conversion price will adjust to that arithmetic
average but in no event will the price be reset below $4.15 (as adjusted for any stock dividends, stock split, stock combination, reclassification or similar transaction occurring after
December 30, 2014). The Company has a one-time optional forced conversion right, exercisable if specified conditions are satisfied.
The Debentures are the Company's senior secured obligations, subject only to certain secured obligations of Wells Fargo and DuPont Pioneer (limited to a purchase money security
interest in the purchased assets). The rights of Wells Fargo, DuPont Pioneer and the holders of the Debentures are set forth in an inter-creditor and subordination agreement that was
entered into in connection with the closing of the issuance of the Debentures.
Warrants
The Warrants entitle the holders to purchase, in the aggregate, 2,699,999 shares of common stock. The Warrants are exercisable beginning June 30, 2015 and expire on June 30,
2020, unless earlier redeemed. The Warrants are initially exercisable at an exercise price equal to $5.00, subject to adjustment for stock splits, combinations or similar recapitalization
events. If, on September 30, 2015, the exercise price then in effective exceeds the arithmetic average of the 10 lowest daily VWAPs of the Company's common stock during the 20
consecutive trading days ending on the trading day that is immediately prior to September 30, 2015 then the exercise price for the Warrants will be reset to that arithmetic average, but in no
event will the reset price fall below $4.15 (as adjusted for any stock dividends, stock split, stock combination, reclassification or similar transaction occurring after December 30, 2014). In
addition, if the Company issues or is deemed to have issued
80
securities at a price lower than the then applicable exercise price during the three year period ending December 31, 2017, the
exercise price of the Warrants will adjust based on a weighted average anti-dilution formula ("down-round protection"). The Warrants may be exercised for cash, provided that, if there is no
effective registration statement available registering the exercise of the Warrants, the Warrants may be exercised on a cashless basis. At any time after July 1, 2015, provided that (i) all
equity conditions set forth in the Warrant have been satisfied, and (ii) the closing sales price of the common stock equals or exceeds $12.00 for 15 consecutive trading days (subject to
adjustment for stock splits, reverse stock splits and other similar recapitalization events), the Company may redeem all or any part of the Warrants then outstanding for cash in an amount
equal to $0.25 per Warrant.
Accounting for the Conversion Option and Warrants
The aggregate gross proceeds of $27,000,000 were allocated between the Debentures and the Warrants. Due to the down-round price protection included in the terms of the
Warrants, the Warrants are treated as a derivative liability in the consolidated balance sheet, measured at fair value and marked to market each reporting period until the earlier of the
Warrants being fully exercised or December 31, 2017, when the down-round protection expires. The initial fair value of the Warrants on December 31, 2014 was $4,862,000. The Warrants
were initially valued using the Monte Carlo simulation model, under the following assumptions: (i) expected life of 5.5 years, (ii) volatility of 53.4%, (iii) risk-free interest rate of 1.65%, and (iv)
dividend rate of zero. The exercise price re-set feature was captured within the Monte-Carlo simulation by creating a series of stock price paths and examining whether or not the simulated
stock price was less than the original stated exercise price. If the simulated value was less, the exercise price was adjusted downward using the formula per the warrant purchase
agreement. If the simulated stock price was higher, the exercise price remained set at the originally stated exercise price.
The remaining $22,138,000 of proceeds was allocated to the Debentures. The required redemption contingent upon the real estate sale was determined to be an embedded derivative
not clearly and closely related to the borrowing. As such, it was bifurcated and treated as a derivative liability, recorded initially at its fair value of $150,000, leaving an allocation to the host
debt of $21,988,000. The difference between the initial amount allocated to the borrowing and the face value of the Debentures will be amortized over the term of the Debentures using the
effective interest method. In addition, debt issuance costs totaling $1,931,105 are being amortized over the term of the Debentures using the effective interest method.
While the conversion feature of the Debentures does not require separate accounting as either a derivative or an equity component, the potential reset of the conversion price on
September 30, 2015 created a contingent beneficial conversion feature. If the conversion price is adjusted at September 30, 2015 to a price less than $4.88 per share, a beneficial
conversion feature will be recognized at that time. Initially, the maximum beneficial conversion feature was approximately $3,900,000, based on a potential reset to the floor of $4.15 per
share. The redemption of $5,000,000 in principal amount of Debentures means that the maximum beneficial conversion feature that may be recognized has decreased to $3,200,000. Any
beneficial conversion feature recognized will reduce the recognized value of the debt and be treated as additional debt discount, which will be accreted to interest expense over the
remaining term of the Debentures.
Accounting for the Redemption
The redemption of $5,000,000 in principal amount of the Debentures was accounted for as a partial extinguishment of the borrowing, as well as the settlement of the derivative
recognized initially. The
81
redemption resulted in a loss of $1,183,687, which is included in the interest expense - amortization of debt discount line item on the consolidated statement of operations.
Total convertible debt outstanding, excluding debt addressed in Note 6, is presented on the consolidated balance sheet as follows:
June 30, 2015
June 30, 2014
Current portion of convertible debt, net
Senior secured convertible notes payable
$
11,274,678
$
-
Debt discount
(2,008,749)
-
Total current portion
9,265,929
-
Convertible debt, net, less current portion
Senior secured convertible notes payable
10,679,804
-
Debt discount
(1,902,763)
-
Total long-term portion
8,777,041
-
Total convertible debt, net
$
18,042,970
$
-
The annual maturities of convertible notes are as follows:
Fiscal Year
Amount
2016
$
11,274,678
2017
10,679,804
2018
-
2019
-
2020
-
Thereafter
-
Total
$
21,954,482
NOTE 8 - INCOME TAXES
Significant components of the provision (benefit) for income taxes from continuing operations are as follows:
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The difference between income tax benefits and income taxes computed using the U.S. federal income tax rate are as follows:
The Company recognizes federal and state current tax liabilities or assets based on its estimate of taxes payable to or refundable by tax authorities in the
current fiscal year. The Company also recognizes federal and state deferred tax liabilities or assets based on the Company's estimate of future tax effects attributable to temporary
differences and carry forwards. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and
judgment, are not expected to be realized.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. The Company
considers projected future taxable income and planning strategies in making this assessment. Based on the projections for the taxable income and planning strategies, the Company has
determined that it is more likely than not that the deferred tax assets will be realized. Accordingly, no valuation allowance has been recorded as of June 30, 2015 or 2014.
Significant components of the Company's deferred tax assets are shown below.
83
As of June 30, 2015, the Company had federal and state net operating loss carry forwards of approximately $10,921,582 and $6,130,593, respectively, which
will begin to expire June 30, 2030, unless previously utilized. The Company has federal research credits of $123,965 which will expire June 30, 2030, unless previously utilized. The
Company has state research credits of $25,089 that do not expire.
As of June 30, 2015, the Company has not provided for U.S. federal and state income taxes and foreign withholding taxes on approximately $3,115,000 of undistributed earnings of its
foreign subsidiary as these earnings are considered indefinitely reinvested outside of the United States. Determination of the amount of any potential unrecognized deferred income tax
liability is not practicable due to the complexities of the hypothetical calculation. If management decides to repatriate such foreign earnings in future periods, the Company may incur
incremental U.S. federal and state income taxes as well as foreign withholding taxes. However, the Company's intent is to keep these funds indefinitely reinvested outside the U.S. and its
current plans do not demonstrate a need to repatriate them to fund our U.S. operations.
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is
to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions
taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes.
The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on
an assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter. The Company is open for audit for all years since the entity
became a corporation.
The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. The Company has not accrued interest and
penalties associated with uncertain tax positions as of June 30, 2015. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.
84
The following table summarizes the warrants outstanding at June 30, 2015:
Exercise Price
Outstanding
Outstanding
Per Share /
Expiration
as of June 30,
as of June 30,
Issue Date
Unit
Date
2014
New Issuances
Expired
2015
Class B warrants
May 2010
$
11.00
May 2015
1,421,000
-
(1,421,000)
-
Underwriter warrants - units
May 2010
$
13.20
May 2015
119,000
-
(119,000)
-
Underwriter warrants
May 2012
$
6.88
Feb 2017
50,000
-
-
50,000
Warrants
Dec 2014
$
5.00
Jun 2020
-
2,699,999
-
2,699,999
1,590,000
2,699,999
(1,540,000)
2,749,999
The warrants issued in December 2014 are subject to down-round price protection. See Note 7 for further discussion.
NOTE 10 - FOREIGN CURRENCY CONTRACTS
The Company's subsidiary, SGI, is exposed to foreign currency exchange rate fluctuations in the normal course of its business, which the Company manages through the use of
foreign currency forward contracts. These foreign currency contracts are not designated as hedging instruments; accordingly, changes in the fair value are recorded in current period
earnings. These foreign currency contracts have a notional value of $7,180,179 at June 30, 2015 and maturities range from July 2015 to December 2015.
The Company records an asset or liability on the consolidated balance sheet for the fair value of the foreign currency forward contracts. The foreign currency contract liabilities totaled
$59,116 at June 30, 2015 compared to a foreign currency contract asset of $627 at June 30, 2014. The Company recorded a loss on foreign exchange contracts of $469,738 which is
reflected in cost of revenue for the year ended June 30, 2015. The Company recorded a gain on foreign exchange contracts of $111,815 during the year ended June 30, 2014, which is
reflected in cost of revenue.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Commitments
In the Pioneer Acquisition, DuPont Pioneer retained ownership of its GMO (genetically modified) alfalfa germplasm and related intellectual property assets, as well as the right to
develop new GMO-traited alfalfa germplasm. The retained GMO germplasm assets incorporate certain GMO traits that are licensed to DuPont Pioneer from third parties (the "Third Party
GMO Traits").
Pursuant to the terms of the Asset Purchase and Sale Agreement for the Pioneer Acquisition, if required third party consents are received prior to November 30, 2017 and subject to the
satisfaction of certain other conditions specified in the Asset Purchase and Sale Agreement, either the Company or DuPont Pioneer has the right to enter into (and require the other party to
enter into) on December 29, 2017 (or such earlier date as the parties agree) a proposed form of asset purchase and sale agreement, as the same may be updated in accordance with the
terms of the Asset Purchase and Sale Agreement, pursuant to which Company would acquire additional GMO germplasm varieties and other related assets from DuPont Pioneer for a
purchase price of $7,000,000.
85
Leases
The Company has entered into various non-cancelable operating lease agreements. Rent expense
under operating leases was $174,903 and $83,670 for the years ended June 30, 2015 and 2014, respectively.
The following table sets forth the Company's estimates of future lease payment obligations as of June 30, 2015:
Contingencies
The Company is not currently a party to any pending or threatened legal proceedings. Based on information currently available, management is not aware of any matters that would
have a material adverse effect on the Company's financial condition, results of operations or cash flows.
NOTE 12 - RELATED PARTY TRANSACTIONS
Glen D. Bornt, a member of the Company's Board of Directors, is the founder and President of Imperial Valley Milling Co. ("IVM"). He is its majority shareholder and a member of its
Board of Directors. Fred Fabre, the Company's Vice President of Sales and Marketing, is a minority shareholder of IVM. IVM had a 15-year supply agreement with Imperial Valley Seeds,
Inc., and this agreement was assigned by IVS to the Company when it purchased the assets of IVS in October 2012. IVM contracts with alfalfa seed growers in California's Imperial Valley
and sells its growers' seed to the Company pursuant to a supply agreement. Under the terms of the supply agreement, IVM's entire certified and uncertified alfalfa seed production must be
offered and sold to the Company, and the Company has the exclusive option to purchase all or any portion of IVM's seed production. The Company paid $10,227,254 to IVM during the year
ended June 30, 2015. Amounts due to IVM totaled $834,158 and $651,611 at June 30, 2015 and June 30, 2014, respectively.
Simon Pengelly, SGI's Chief Financial Officer, has a non-controlling ownership interest in the partnership Bungalally Farms ("BF"). BF is one of SGI's contract alfalfa seed growers. SGI
currently has entered into seed production contracts with BF on the same commercial terms and conditions as with the other growers with whom SGI contracts for alfalfa seed production.
During year ended June 30, 2015, the Company purchased a total of $428,796 of alfalfa seed that BF grew and sold to SGI under contract seed production agreements. SGI currently has
seed production agreements with BF for 123 hectares of various seed varieties as part of its contract production for which SGI paid BF the same price it agreed to pay its other growers. Mr.
Pengelly did not personally receive any portion of these funds. Amounts due to BF totaled $293,772 and $373,341 at June 30, 2015 and 2014, respectively.
86
NOTE 13 - EQUITY-BASED COMPENSATION
2009 Equity Incentive Plan
In October 2009 and January 2010, the Company's Board of Directors and stockholders, respectively, approved the 2009 Equity Incentive Plan (the "2009 Plan"). The plan
authorized the grant and issuance of options, restricted shares and other equity compensation to the Company's directors, employees, officers and consultants, and those of the Company's
subsidiaries and parent, if any. In October 2012 and December 2012, the Company's Board of Directors and stockholders, respectively, approved the amendment and restatement of the
2009 Plan, including an increase in the number of shares available for issuance as grants and awards under the Plan to 1,250,000 shares. In September 2013 and December 2013, the
Company's Board of Directors and stockholders, respectively, approved the amendment and restatement of the 2009 Plan, including an increase in the number of shares available for
issuance as grants and awards under the Plan to 1,700,000 shares.
The term of incentive stock options granted under the 2009 Plan may not exceed ten years, or five years for incentive stock options granted to an optionee owning more than 10% of the
Company's voting stock. The exercise price of options granted under the 2009 Plan must be equal to or greater than the fair market value of the shares of the common stock on the date the
option is granted. An incentive stock option granted to an optionee owning more than 10% of voting stock must have an exercise price equal to or greater than 110% of the fair market value
of the common stock on the date the option is granted.
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Stock options issued to
non-employees are accounted for at their estimated fair value. The fair value of options granted to non-employees is re-measured as they vest. The Company amortizes stock-based
compensation expense on a straight-line basis over the requisite service period.
Beginning with the quarter ended December 31, 2014, the Company began utilizing a Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free
interest rate, dividend yield, life of the award, and the volatility of the Company's common stock to estimate the fair value of employee options grants. The fair value of grants issued prior to
the quarter ended December 31, 2014 were estimated using a lattice model. The weighted average assumptions used in the Black-Scholes-Merton model were:( i) 1.4% - 1.5% risk free rate
of interest; (ii) 0% dividend yield and (iii) 50.8% volatility of common stock. The Company applied forfeiture assumptions of 5.2%-14.9% to the estimated fair values to determine the net
expense to record in the consolidated financial statements.
On December 8, 2012, the Company granted 175,000 stock options to its directors, officers, and employees at an exercise price of $7.20, which was the closing price for the Company's
common stock on the date of grant. These options vest in equal quarterly installments over one- and three-year periods, commencing on January 1, 2013, and expire five years from
the date of grant. During the year ended June 30, 2014, the Company granted 270,000 stock options to its officers and employees at exercise prices ranging from $5.94 to $8.29, which was
the closing price for the Company's common stock on the respective dates of grant. These options vest in equal quarterly installments over periods ranging from six months to three years
and expire five years from the date of grant. During the year ended June 30, 2015, the Company granted 227,197 stock options to its directors, officers and employees at exercise prices
ranging from $3.61 to $6.25. These options vest in equal quarterly installments over periods ranging from one to three years and expiration dates range from five to ten years from the date
of grant.
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A summary of stock option activity for the years ended June 30, 2015 and 2014 is presented below:
The weighted average grant date fair value of options granted and outstanding at June 30, 2015 was $1.08. At June 30, 2015, the Company had $387,158 of
unrecognized stock compensation expense, net of estimated forfeitures, related to the options under the 2009 Plan, which will be recognized over the weighted average remaining service
period of 2.6 years. The Company settles employee stock option exercises with newly issued shares of common stock.
On May 7, 2012, the Company issued 73,000 shares of restricted common stock to certain members of the executive management team. The restricted common shares vest annually in
equal installments over a three-year period, commencing one year from the date of the grant. The Company recorded $124,287 and $146,000 of stock-based compensation expense
associated with this grant during the year ended June 30, 2015 and 2014, respectively. The value of the award was based on the closing stock price on the date of grant.
A summary of activity related to non-vested restricted shares is presented below:
On March 16, 2013, the Company issued 280,000 restricted stock units to certain members of the executive management team. The restricted stock units
have varying vesting periods whereby 34,000 restricted stock units vested on July 1, 2013 and the remaining 246,000 restricted stock units vest quarterly in equal installments over a four
and one-half year period, commencing on July 1, 2013. The Company recorded $576,951and $577,299 of stock-based compensation expense associated with this grant during the years
ended June 30, 2015 and 2014, respectively. The fair value of the award was $2,984,800 and was based on the closing stock price on the date of grant.
88
A summary of activity related to non-vested restricted share units is presented below:
At June 30, 2015, the Company had $1,302,486 of unrecognized stock compensation expense related to the restricted stock units, which will be recognized
over the weighted average remaining service period of 2.3 years.
At June 30, 2015 there were 224,581 shares available under the 2009 Plan for future grants and awards.
Stock-based compensation expense recorded for stock options, restricted stock grants and restricted stock units for the years ended June 30, 2015 and 2014 totaled $896,882 and
$872,711, respectively.
NOTE 14 - NON-CASH ACTIVITIES FOR STATEMENTS OF CASH FLOWS
The below table represents supplemental information to the Company's consolidated statements of cash flows for non-cash activities during the years ended June 30, 2015 and
2014, respectively.
NOTE 15 - SUBSEQUENT EVENTS
On July 1, 2015, the Company issued 9,354 shares of common stock in the settlement of previously granted RSU's that vested on July 1, 2015.
On July 15, 2015, the Company granted an aggregate of 120,000 options to purchase its common stock at an exercise price of $4.76 to its Chief Executive Officer and Chief Financial
Officer. The options vest over 12 quarters commencing on October 1, 2015 and are exercisable for 10 years.
89
On July 15, 2015, the Company awarded an aggregate of 88,333 restricted stock units ("RSUs") to members of its executive management team. The RSUs vest quarterly
over 12 quarters, commencing with the initial vesting on October 1, 2015, at which time 15% of the total grant will vest. The RSU grants will be fully vested on July 1, 2018, subject to
continued service with the Company on each vesting date.
On September 22, 2015, the Company entered into an up to $20,000,000 aggregate principal amount credit and security agreement (the "Credit Facility") with KeyBank National
Association ("KeyBank").
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and our Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures
as of June 30, 2015 (the "Evaluation Date"). The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or
submits under the Exchange Act is recorded,
90
processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required
disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and
management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and
procedures as of June 30, 2015, our Principal Executive Officer and Principal Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the
reasonable assurance level.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management has conducted, with the participation of our Principal Executive Officer and our Principal Accounting Officer, an assessment, including testing of the effectiveness, of our
internal control over financial reporting as of Evaluation Date. Management's assessment of internal control over financial reporting was conducted using the criteria in
Internal Control
over Financial Reporting - Guidance for Smaller Public Companies
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with our management's assessment of our internal control over financial
reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we have not identified any material weaknesses in our internal control over financial reporting as of Evaluation
Date. We have thus concluded that our internal control over financial reporting was effective as of the Evaluation Date.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject
to attestation by our registered public accounting firm pursuant to an exemption for smaller reporting companies under Section 989G of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in other factors that
occurred during the period of our evaluation or subsequent to the date we carried out our evaluation that have significantly affected, or are reasonably likely to significantly affect, our internal
control over financial reporting.
91
Item 1.02 of Form 8-K - Termination of a Material Definitive Agreement
In connection with the establishment of a new credit facility with KeyBank National Association, on September 22, 2015 we paid off
all outstanding principal and accrued interest and terminated our then-existing credit facilities with Wells Fargo Bank, National
Association. A summary of material terms of the Wells Fargo credit facilities are described in Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources on page 46 in this Report on Form 10-K.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 regarding directors, executive officers, promoters and control persons is incorporated by reference to the information appearing under
the caption "Directors and Executive Officers" in our definitive Proxy Statement relating to our 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission within 120 days after the close of our fiscal year.
Our written Code of Ethics applies to all of our directors and employees, including our executive officers, including without limitation our principal executive officer, principal financial
officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics is available on our website at http://www.swseed.com in the Investors section
under "Corporate Governance." Changes to or waivers of the Code of Ethics will be disclosed on the same website. We intend to satisfy the disclosure requirement under
Item 5.05 of Form 8-K regarding any amendment to, or waiver of, any provision of the Code of Ethics by disclosing such information on the same website.
The information required by Item 11 is incorporated by reference to the information appearing under the caption "Executive Compensation" in our definitive Proxy
Statement relating to our 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year.
The information required by Item 12 is incorporated by reference to the information appearing under the caption "Security Ownership" in our definitive Proxy
Statement relating to our 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 is incorporated by reference to the information appearing under the caption "Certain Relationships and Related Transactions"
in our definitive Proxy Statement relating to our 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of our
fiscal year.
92
The information required by Item 14 is incorporated by reference to the information appearing under the caption "Principal Accounting Fees and Services" in our
definitive Proxy Statement relating to our 2015 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal
year.
Item 15. Exhibits and Financial Statement Schedules
(1) Financial Statements:
Reference is made to the Index to Consolidated Financial Statements of S&W Seed Company under Item 8 in Part II of this Form 10-K.
(2) Financial Statement Schedules:
As a smaller reporting company, no financial statement schedules are required.
(3) Exhibits:
The following exhibits are filed herewith or incorporated by reference:
Incorporated by Reference
Exhibit
Exhibit Description
Form
SEC File Number
Exhibit
Filing
Filed
2.1
Purchase and Assignment of Membership Interests, Assumption of Obligations, Agreement to be Bound by Limited Liability Company Agreement and
Admission of Substituted Member, dated January 28, 2010
S-1
333=174599
3.3
3/10/10
2.2
Agreement and Plan of Merger between S&W Seed Company, a Delaware corporation and S&W Seed Company, a Nevada corporation, adopted December
10, 2011
8-K
001-34719
2.1
12/19/11
2.3
Asset Acquisition Agreement among the Registrant, Imperial Valley Seeds, Inc. ("IVS"), Glen D. Bornt, Fred Fabre and the Bornt Family Trust, dated
September 28, 2012
8-K
000-34719
2.1
10/2/12
2.4
Asset Purchase and Sale Agreement between the Registrant and Pioneer Hi-Bred International, Inc. ("Pioneer"), dated December 19, 2014
8-K
000-34719
2.1
12/29/14
2.5
First Amendment to Asset Purchase and Sale Agreement between the Registrant and Pioneer, dated December 31, 2014
8-K
000-34719
2.1
1/7/15
93
2.6
Second Amendment to the Asset Purchase and Sale Agreement between the Registrant and Pioneer, dated April 23, 2015
X
2.7
Third Amendment to Asset Purchase and Sale Agreement between the Registrant and Pioneer, dated July 23, 2015
X
3.1
Registrant's Articles of Incorporation
8-K
001-34719
3.1
12/19/11
3.2
Registrant's Amended and Restated Bylaws, together with Amendments One, Two and Three thereto(1)
X
4.1
Form of Common Stock Certificate
S-1
333-164588
4.1
4/23/10
4.2
Form of Underwriter Warrant issued to Rodman & Renshaw, LLC
8-K
000-34719
4.1
5/18/12
4.3
Securities Purchase Agreement between the Registrant and MFP Partners, L.P., dated December 31, 2014
8-K
000-34719
4.1
12/31/14
4.3
Form of Securities Purchase Agreement between the Registrant and each of the purchasers of 8% Senior Secured Convertible Debentures and
Common Stock Purchase Warrants, dated December 30, 2014
8-K
000-34719
10.1
12/31/14
4.4
Form of 8% Senior Secured Convertible Debentures
8-K
000-34719
10.2
1/7/15
4.5
Form of Common Stock Purchase Warrant
8-K
000-34719
10.3
12/31/14
10.1
Assignment and Assumption Agreement between the Registrant and IVS, dated October 1, 2012
8-K
000-34719
10.1
10/2/12
10.2
Supply Agreement between IVS and Imperial Valley Milling Co. ("IV Milling"), dated October 1, 2012 (assigned to the
Registrant)
10-Q
000-34719
10.1
2/13/13
10.3
Subordinated Promissory Note made by the Registrant in favor of IVS, dated October 1, 2012
8-K
000-34719
10.3
10/2/12
10.4
Service Level Agreement with IV Milling dated April 4, 2014
10-K
000-34719
10.45
9/24/14
10.5
Roundup Ready® Alfalfa Co-Breeding Agreement between the Registrant and Forage Genetics International, LLC, dated March 21,
2013(3)
10-K
000-34719
10.28
9/30/13
10.6
Contract Alfalfa Production Services Agreement between the Registrant and Pioneer, dated December 31, 2014(2)(3)
8-K
000-34719
10.2
1/7/15
10.7
First Amendment to Contract Alfalfa Production Services Agreement between the Registrant and Pioneer, dated July 23, 2015
X
10.8
Second Amendment to Contract Alfalfa Production Services Agreement between the Registrant and Pioneer, dated August 7, 2015
8-K
000-34719
10.2
8/17/15
10.9
Alfalfa Distribution Agreement between the Registrant and Pioneer, dated December 31, 2014(2)(3)
8-K
000-34719
10.1
1/7/15
94
10.10
First Amendment to Alfalfa Distribution Agreement between the Registrant and Pioneer, dated July 23, 2015
X
10.11
Second Amendment to Alfalfa Distribution Agreement between the Registrant and Pioneer, dated August 7, 2015
8-K
000-34719
10.1
8/17/15
10.12
Research Agreement between the Registrant and Pioneer, dated December 31, 2014(2)(3)
8-K
000-34719
10.3
1/7/15
10.13
Non-Exclusive Alfalfa Licensing and Assignment Agreement between the Registrant and Pioneer, dated December 31, 2014(3)
8-K
000-34719
10.4
1/7/15
10.14
Lease Agreement between the Registrant and Pioneer, dated December 31, 2014(2)(3)
8-K
000-34719
10.5
1/7/15
10.15
Information Technology Transition Services Agreement between the Registrant and Pioneer, dated December 31, 2014(2)(3)
8-K
000-34719
10.6
1/7/15
10.16
Promissory Note issued by the Registrant in favor of Pioneer, dated December 31, 2014(3)
8-K
000-34719
10.7
1/7/15
10.17
Security Agreement between the Registrant and Pioneer, dated December 31, 2014
8-K
000-34719
10.8
1/7/15
10.18
Mortgage from the Registrant to Pioneer, dated December 31, 2014
8-K
000-34719
10.9
1/7/15
10.19
Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing among the Registrant, TitleOne Corporation, as trustee, and Pioneer, as
beneficiary, dated December 31, 2014
8-K
000-34719
10.10
1/7/15
10.20
Patent License Agreement between the Registrant and Pioneer, dated December 31, 2014
8-K
000-34719
10.11
1/17/15
10.21
Patent Assignment Agreement between the Registrant and Pioneer, dated December 31, 2014(2)
8-K
000-34719
10.12
1/7/15
10.22
Know-How Transfer Agreement between the Registrant and Pioneer, dated December 31, 2014(2)
8-K
000-34719
10.13
1/7/15
10.23
Data Transfer Agreement between the Registrant and Pioneer, dated December 31, 2014(2)
8-K
000-34719
10.14
1/7/15
10.24
Assignment Agreement of Plant Variety Certificates, Plant Breeders' Rights, Maintenance Rights and Registration Rights between the Registrant and
Pioneer, dated December 31, 2014(2)
8-K
000-34719
10.15
1/7/15
95
10.25
First Amendment to the Assignment Agreement of Plant Variety Certificates, Plant Breeders' Rights, Maintenance Rights and Registration Rights
between the Registrant and Pioneer, dated April 23, 2015
X
10.26
Assignment and Assumption Agreement between the Registrant and Pioneer, dated December 31, 2014
8-K
000-34719
10.16
1/7/15
10.27
General Warranty Deed by Pioneer in favor of the Registrant, dated December 31, 2014
8-K
000-34719
10/17
1/7/15
10.28
Warrant Deed by Pioneer in favor of the Registrant, dated December 31, 2014
8-K
000-34719
10.18
1/7/15
10.29
Form of Registration Rights Agreement among the Registrant and purchasers of the 8% Senior Secured Convertible Debentures and
Warrants
8-K
000-34719
10.4
12/31/14
10.30
Form of Security Agreement among the Registrant and purchasers of the 8% Senior Secured Convertible Debentures
8-K
000-34719
10.5
12/31/14
10.31
Form of Guaranty provided by Seed Holding, LLC and Stevia California, LLC in favor of the purchasers of the 8% Senior Secured Convertible
Debentures
8-K
000-34719
10.6
12/31/14
10.32
Form of Intercreditor and Subordination Agreement among Wells Fargo Bank, N.A., Hudson
8-K
000-34719
10.7
12/31/14
10.33
Form of Indemnification Agreement with Officers, Directors and Employees of the Registrant and Subsidiaries
8-K
000-34719
10.1
7/24/14
10.34
Amended and Restated 2009 Equity Incentive Plan as amended through Amendment No. 2, forms of Stock Option Grant and Agreement, Restricted
Stock Unit Grant and Restricted Stock Award(1)
X
10.35
Employment Agreement between the Registrant and Mark S. Grewal, dated February 26, 2013*
8-K
000-34719
10.1
3/1/13
10.36
Employment Agreement between the Registrant and Matthew K. Szot, effective April 1, 2013*
8-K
000-34719
10.1
3/28/13
10.37
Amendment No. 1 to Employment Agreement between the Registrant and Matthew K. Szot, effective August 6, 2014*
8-K
000-34719
10.1
8/8/14
10.38
Contract of Employment between Seed Genetics International Pty, Ltd. and Dennis C. Jury, dated as of March 28, 2013*
8-K
000-34719
10.1
4/5/13
96
10.39
Collaboration Agreement between the Registrant and Calyxt, Inc., dated May 28, 2015 and entered into by the Registrant on June 4, 2015
CTR
X
10.40
Business Letter of Offer dated September 21, 2007 from National Australia Bank ("NAB") for Seed Genetics International Pty Ltd ("SGI") loan
facilities
10-K
000-34719
10.29
9/30/13
10.41
Business Letter of Advice dated February 26, 2013 from NAB for SGI credit facilities
10-K
000-34719
10.30
9/30/13
10.42
Business Letter of Offer dated February 27, 2013 from NAB for SGI credit facilities
10-K
000-34719
10.31
9/30/13
10.43
Business Letter of Offer dated January 19, 2015 from NAB for SGI credit facilities
X
10.44
Business Letter of Offer dated April 13, 2015 from NAB for SGI credit facilities
X
10.45
Business Letter of Advice dated April 13, 2015 from National Australia Bank modifying SGI Farm Management Overdraft Facility
X
10.46
Corporate Guarantee executed by the Registrant on April 21, 2015 in favor of National Australia Bank with respect to SGI credit facilities
X
10.47
Memorandum of Lease effective March 1, 2013 between United Investments Pty Ltd and SGI for office space in Unley, South Australia
10-K
000-34719
10.27
9/30/13
10.48
Credit Agreement between the Registrant and Wells Fargo Bank, N.A. dated as of February 1, 2014
8-K
000-34719
10.1
2/24/14
10.49
Revolving Line of Credit Note dated as of February 1, 2014 in favor of Wells Fargo Bank, N.A.
8-K
000-34719
10.2
2/24/14
10.50
Continuing Security Agreement: Right to Payment and Inventory, dated as of February 1, 2014
8-K
000-34719
10.3
2/24/14
10.51
Security Agreement: Equipment, dated as of February 1, 2014
8-K
000-34719
10.4
2/24/14
10.52
EX-IM Working Capital Guarantee Credit Agreement between the Registrant and Wells Fargo Bank, N.A., dated as of February 1, 2014
8-K
000-34719
10.5
2/24/14
10.53
EX-IM Working Capital Guarantee Borrower Agreement
8-K
000-34719
10.6
2/24/14
10.54
EX-IM Working Capital Guarantee Revolving Line of Credit Note dated as of February 1, 2014
8-K
000-34719
10.7
2/24/14
10.55
EX-IM Working Capital Guarantee: Continuing Security Agreement: Rights to Payment
8-K
000-34719
10.8
2/24/14
10.56
EX-IM Working Capital Guarantee Continuing Security Agreement: Equipment
8-K
000-34719
10.9
2/24/14
97
10.57
First Amendment to Credit Agreement between the Registrant and Wells Fargo Bank, N.A., dated as of July 2, 2014, entered into on July 28,
2014
8-K
000-34719
10.3
8/1/14
10.58
First Amendment to EX-IM Working Capital Guarantee Credit Agreement between the Registrant and Wells Fargo Bank, N.A., dated as of July 2, 2014,
entered into on July 28, 2014
8-K
000-34719
10.4
8/1/14
10.59
General Pledge Agreement dated as of July 2, 2014, entered into on July 28, 2014
8-K
000-34719
10.1
8/1/14
10.60
EX-IM Working Capital Guarantee General Pledge Agreement, dated as of July 2, 2014, entered into on July 28, 2014
8-K
000-34719
10.2
8/1/14
10.61
Amendment and Waiver Agreement between the Registrant and Wells Fargo Bank, N.A., dated December 31, 2014
8-K
000-34719
10.9
12/31/14
10.62
Third Amendment to Credit Agreement between the Registrant and Wells Fargo Bank, N.A. dated as of February 27, 2015
10-Q
000-34719
10.1
5/15/15
10.63
Revolving Line of Credit Note dated as of February 27, 2015 payable to Wells Fargo Bank, N.A.
10-Q
000-34719
10.2
5/15/15
10.64
Third Amendment to EX-IM Working Capital Guarantee Credit Agreement between the Registrant and Wells Fargo Bank, N.A., dated as of February
27, 2015
10-Q
000-34719
10.3
5/15/15
10.65
EX-IM Working Capital Guarantee Revolving Line of Credit Note dated as of February 27, 2015 payable to Wells Fargo Bank, N.A.
10-Q
000-34719
10.4
5/15//15
10.66
Fourth Amendment to Credit Agreement between the Registrant and Wells Fargo Bank, N.A., dated as of March 26, 2015
10-Q
000-34719
10.5
5/15/15
10.67
Fourth Amendment to EX-IM Working Capital Guarantee Credit Agreement between the Registrant and Wells Fargo Bank, N.A., dated as of March 26,
2015
10-Q
000-34719
10.6
5/15/15
10.68
Fifth Amendment to Credit Agreement between the Registrant and Wells Fargo Bank, N.A., dated as of June 23, 2015
X
10.69
Revolving Line of Credit Note dated as of June 23, 2015 in favor of Wells Fargo Bank, N.A.
X
10.70
Continuing Guarantee provided by Seed Holding, LLC in favor of Wells Fargo Bank, N.A., dated as of June 23, 2015
X
10.71
Continuing Guarantee provided by Stevia California, LLC in favor of Wells Fargo Bank, N.A., dated as of June 23, 2015
X
98
10.72
Fifth Amendment to EX-IM Working Capital Guarantee Credit Agreement between the Registrant and Wells Fargo Bank, N.A., dated as of June 23,
2015
X
10.73
EX-IM Working Capital Guarantee Revolving Line of Credit Note dated as of June 23, 2015 payable to Wells Fargo Bank, N.A.
X
10.74
EX-IM Working Capital Guarantee Continuing Guaranty provided by Seed Holding, LLC in favor of Wells Fargo Bank, N.A., dated as of June 23,
2015
X
10.75
EX-IM Working Capital Guarantee Continuing Guaranty provided by Stevia California, LLC in favor of Wells Fargo Bank, N.A., dated as of June 23,
2015
X
10.76
Credit and Security Agreement between the Registrant and KeyBank, National Association ("KeyBank"), dated September 22, 2015(4)
8-K
000-34719
10.1
9/23/15
10.77
Revolving Credit Note dated September 22, 2015 in favor of KeyBank(4)
8-K
000-34719
10.2
9/23/15
10.78
Intellectual Property Security Agreement of the Registrant in favor of KeyBank, dated September 22, 2015(4)
8-K
000-34719
10.4
9/23/15
10.79
Pledge Agreement by the Registrant in favor of KeyBank, dated September 22, 2015(4)
8-K
000-34719
10.3
9/23/15
10.78
Security Agreement (Subsidiary) by U.S. Subsidiaries of Registrant in favor of KeyBank, dated September 22, 2015(4)
8-K
000-34719
10.6
9/23/15
10.81
Guaranty of Payment (Subsidiary) by U.S. Subsidiaries of Registrant in favor of KeyBank, dated September 22, 2015
8-K
000-34719
10.5
9/23/15
10.82
Intercreditor and Subordination Agreement among KeyBank,
8-K
000-34719
10.7
9/23/15
21.1
Subsidiaries of the Registrant
X
23.1
Consent of Independent Registered Public Accounting Firm
X
23.2
Consent of Independent Registered Public Accounting Firm
X
24.1
Power of Attorney (see signature page)
X
31.1
Chief Executive Officer Certification pursuant to
X
31.2
Chief Financial Officer Certification pursuant to
X
99
32.1
Chief Executive Officer Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
X
32.2
Chief Financial Officer Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
X
101
The following materials from the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2015, formatted in XBRL (eXtensible Business Reporting
Language): (i) the Consolidated Balance Sheets at June 30, 2015 and June 30, 2014; (ii) the Consolidated Statements of Operations for the Fiscal Years Ended June 30, 2015 and 2014;
(iii) the Consolidated Statements of Comprehensive (Loss) Income for the Fiscal Years Ended June 30, 2015 and 2014;
(iv) the Consolidated Statement of Stockholders' Equity; (v) the Consolidated Statement of Cash Flows for the Fiscal Years Ended June 30, 2015 and 2014; and (vi) the Notes to
Consolidated Financial Statements
X
__________
CTR
Portions of this exhibit have been omitted pursuant to a request for confidential treatment.
(1) Previously filed exhibit. Filed herewith to consolidate original document and all amendments thereto.
100
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 28, 2015
S&W SEED COMPANY
By:
/s/ Mark S. Grewal
101
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark S. Grewal and
Matthew K. Szot, or any of them, his attorneys-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Signature
Title
Date
/s/ Mark S. Grewal
President, Chief Executive Officer and Director (Principal Executive Officer)
September 28, 2015
/s/ Matthew K. Szot
Executive Vice President of Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer)
September 28, 2015
/s/ Mark J. Harvey
Chairman of the Board
September 28, 2015
/s/ Glen Bornt
Director
September 28, 2015
/s/ Michael M. Fleming
Director
September 28, 2015
/s/ Alexander C. Matina
Director
September 28, 2015
/s/ Michael N. Nordstrom
Director
September 28, 2015
/s/ Charles B. Seidler
Director
September 28, 2015
/s/ William S. Smith
Director
September 28, 2015
/s/ Grover T. Wickersham
Director
September 28, 2015
/s/ Mark Wong
Director
September 28, 2015
102
FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
CA
CA
Years Ended
June 30,
2015
2014
Cash flows from operating activities
$
11,112,350
$
(17,867,038)
Cash flows from investing activities
(31,189,676)
(764,109)
Cash flows from financing activities
22,405,272
7,944,391
Effect of exchange rate changes on cash
40,009
73,185
Net increase (decrease) in cash
2,367,955
(10,613,571)
Cash and cash equivalents, beginning of period
1,167,503
11,781,074
Cash and cash equivalents, end of period
$
3,535,458
$
1,167,503
of S&W Seed Company
Fresno, California
September 28, 2015
of S&W Seed Company
September 24, 2014
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
June 30,
June 30,
2015
2014
Raw materials and supplies
$
276,339
$
173,922
Work in progress and growing crops
5,415,402
3,990,678
Finished goods
19,830,006
24,320,984
$
25,521,747
$
28,485,584
June 30,
June 30,
2015
2014
Alfalfa seed production
$
-
$
1,747,429
Alfalfa hay
92,037
16,885
Other crops
120,194
187,786
Total crop production costs, net
$
212,231
$
1,952,100
Useful Life
(Years)
Fair Value
Balance at
Foreign Currency
Balance at
July 1, 2014
Additions
Translation
June 30, 2015
Goodwill - United States
$
1,402,000
$
5,353,317
$
-
$
6,755,317
Goodwill - Australia
3,537,462
-
(662,500)
2,874,962
$
4,939,462
$
5,353,317
$
(662,500)
$
9,630,279
Balance at
Foreign Currency
Balance at
July 1, 2013
Additions
Translation
June 30, 2014
Goodwill - United States
$
1,402,000
$
-
$
-
$
1,402,000
Goodwill - Australia
3,430,050
-
107,412
3,537,462
$
4,832,050
$
-
$
107,412
$
4,939,462
June 30,
June 30,
2015
2014
Land and improvements
$
2,247,379
$
7,698,811
Buildings and improvements
5,439,712
2,095,362
Machinery and equipment
3,520,168
1,397,288
Vehicles
940,627
332,714
Construction in progress
1,113,137
44,080
Total property, plant and equipment
13,261,023
11,568,255
Less: accumulated depreciation
(1,784,087)
(1,211,446)
Property, plant and equipment, net
$
11,476,936
$
10,356,809
Fiscal Year
Amount
2016
$
2,263,651
2017
159,262
2018
10,181,328
2019
105,000
2020
105,000
Thereafter
131,482
Total
$
12,945,723
Years Ended June 30,
2015
2014
Current:
Federal
$
42,453
$
70,046
State
14,528
800
Foreign
519,910
300,727
Total current provision
576,891
371,573
Deferred:
Federal
(1,146,961)
(383,324)
State
(192,907)
(129,645)
Foreign
(83,002)
228,512
Total deferred provision (benefit)
(1,422,870)
(284,457)
(Benefit) provision for income taxes
$
(845,979)
$
87,116
Years Ended June 30,
2015
2014
Tax expense (benefit) at statutory tax rate
$
(1,363,097)
$
156,635
State taxes (benefit), net of federal tax (benefit)
(115,851)
8,018
Stock compensation
104,090
79,981
Mark to market on financial instruments
474,640
-
Warrant financing costs
145,479
-
Other permanent differences
29,161
27,649
Federal and state research credits - current year
(59,233)
(29,181)
Impact of change in federal and state effective income tax rates
(8,467)
(71,466)
Foreign Rate Differential
(58,756)
(69,541)
Other
6,055
(14,979)
$
(845,979)
$
87,116
Years Ended June 30,
2015
2014
Deferred tax assets:
Net operating loss carry forwards
$
4,124,109
$
2,844,500
Stock compensation
275,027
268,104
Tax credit carry forwards
140,524
81,290
Other, net
475,120
142,095
Total deferred tax assets
5,014,780
3,335,989
Valuation allowance for deferred tax assets
-
-
Deferred tax assets, net of valuation allowance
5,014,780
3,335,989
Deferred tax liabilities
Intangible assets
(70,911)
(147,397)
Fixed assets
(660,609)
(328,197)
Total deferred tax liabilities
(731,520)
(475,594)
Net deferred tax assets
$
4,283,260
$
2,860,395
2016
2017
2018
2019
2020
Thereafter
Operating lease obligations
$
568,062
$
529,957
$
399,271
$
237,333
$
276,548
$
1,098,096
Weighted-
Weighted -
Average
Average
Remaining
Aggregate
Number
Exercise Price
Contractual
Intrinsic
Outstanding
Per Share
Life (Years)
Value
Outstanding at June 30, 2013
827,000
$
4.74
2.8
$
2,632,060
Granted
270,000
6.44
4.5
Exercised
-
-
-
Canceled/forfeited/expired
(10,000)
4.10
1.6
Outstanding at June 30, 2014
1,087,000
5.17
2.5
1,562,712
Granted
227,197
3.89
9.5
Exercised
(400,000)
4.00
-
Canceled/forfeited/expired
(12,500)
7.75
-
Outstanding at June 30, 2015
901,697
5.33
4.1
392,850
Options vested and exercisable at June 30, 2015
585,133
5.58
2.6
195,429
Options vested and expected to vest as of June 30, 2015
890,020
$
5.34
4.1
$
381,416
Year Ended June 30, 2015
Weighted -
Weighted -
Average
Number of
Average
Remaining
Nonvested
Grant Date
Contractual
Restricted Shares
Fair Value
Life (Years)
Beginning nonvested restricted shares outstanding
24,332
$
6.00
-
Granted
-
-
-
Vested
(24,332)
6.00
-
Forfeited
-
-
-
Ending nonvested restricted shares outstanding
-
$
-
-
Year Ended June 30, 2015
Weighted -
Number of
Weighted -
Average
Nonvested
Average
Remaining
Restricted
Grant Date
Contractual
Share Units
Fair Value
Life (Years)
Beginning nonvested restricted units outstanding
191,336
$
10.66
-
Granted
-
-
-
Vested
(54,664)
10.66
-
Forfeited
-
-
-
Ending nonvested restricted units outstanding
136,672
$
10.66
2.3
Years Ended
June 30,
2015
2014
(Increase) decrease in non-cash net assets of subsidiary due to foreign currency translation gain (loss)
$
(3,427,922)
$
435,069
Fair value of assets acquired
60,937,152
-
Cash paid for the acquisition
(27,000,000)
-
Promissory note issued
(10,000,000)
-
Contingent consideration issued
(2,004,000)
-
Amount payable to seller
(9,684,646)
-
Liabilities assumed
$
12,248,506
$
-
Number
Number
Date
Herewith
* Management contract or compensatory plan or arrangement.
** This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into
any filing of Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K),
irrespective of any general incorporation language contained in such filing.
(2) Exhibits and schedules to this agreement have been omitted pursuant to Item 601(b) of Regulation S-K. The Registrant hereby undertakes to furnish supplementally a copy of
any omitted exhibit or schedule to the Securities and Exchange Commission upon request.
(3) Portions of this exhibit have been omitted pursuant to an effective order for confidential treatment.
(4) As of September 22, 2015, the KeyBank Credit Facility (Exhibits 10.76 through 10.81) replaces the Wells Fargo Credit Facilities (Exhibits 10.48 through 10.75) and the
Intercreditor and Subordination Agreement (Exhibit 10.82) replaces Exhibit 10.32.
Mark S. Grewal
President and Chief Executive Officer
Exhibit 2.6
SECOND AMENDMENT TO THE ASSET PURCHASE AND SALE AGREEMENT
This Second Amendment to the Asset Purchase and Sale Agreement (this "Second Amendment" ) is made this 23rd day of April 2015, by and between Pioneer Hi-Bred International, Inc., an Iowa corporation ( "Seller" ), and S&W Seed Company, a Nevada corporation ( "Buyer" ). Buyer and Seller are collectively referred to herein as the "Parties" and each individually as a "Party" .
WHEREAS, the Parties entered into that certain Asset Purchase and Sale Agreement dated December 19, 2014, as amended pursuant to that certain First Amendment to the Asset Purchase and Sale Agreement dated December 31, 2014 (as amended, the "APSA" );
WHEREAS , the Parties now wish to amend the APSA as provided in this Second Amendment.
NOW, THEREFORE , for and in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Parties hereby agree as follows:
(iv) any Liability arising out of or relating to the Transferred Employees to the e xtent that any such Liability is for, relates to and arises during time periods after the Closing Date, including, without limitation, (A) immigration-related Liabilities of any Transferred Employees who are foreign nationals and (B) Liabilities under Seller's Labor Condition Application and Labor Certification Application filed on January 17, 2014 and certified on January 24, 2014.
[Signature Page Follows]
IN WITNESS WHEREOF , the Parties have executed and delivered this Second Amendment as of the date first above written.
SELLER
:
PIONEER HI-BRED INTERNATIONAL, INC.
By:
/s/ Paul E. Schickler
Name:
Paul E. Schickler
Title:
President
BUYER
:
S&W SEED COMPANY
By:
/s/ Matthew K. Szot
Name:
Matthew K. Szot
Title:
CFO & EVP of Finance & Admin
[Signature Page to Second Amendment to Asset Purchase and Sale Agreement]
Exhibit 2.7
THIRD AMENDMENT TO THE ASSET PURCHASE AND SALE AGREEMENT
This Third Amendment to the Asset Purchase and Sale Agreement (this "Third Amendment" ) is made this 23rd day of July, 2015, by and between Pioneer Hi-Bred International, Inc., an Iowa corporation ( "Seller" ), and S&W Seed Company, a Nevada corporation ( "Buyer" ). Buyer and Seller are collectively referred to herein as the "Parties" and each individually as a "Party" .
WHEREAS, the Parties entered into that certain Asset Purchase and Sale Agreement dated December 19, 2014, as amended pursuant to that certain First Amendment to the Asset Purchase and Sale Agreement dated December 31, 2014 and that certain Second Amendment to the Asset Purchase and Sale Agreement dated April 23, 2015 (as amended, the "APSA" );
WHEREAS , the Parties now wish to amend the APSA as provided in this Third Amendment.
NOW, THEREFORE , for and in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Parties hereby agree as follows:
(h) No later than July 31, 2015, on not less than five (5) days' prior written notice, Buyer shall remove and transport (or cause to be removed and transported) the Inventory Seed described in clause (b) of the third berger dot on Exhibit 2.1(a)(xi) from Seller's or its Affiliate's facility in Wagga Wagga, New South Wales, Australia during normal business hours and in a manner that does not interfere with or negatively affect in any material respect any other activities of Seller or its Affiliates. In connection with the actions described in this Section 5.8(h) , Buyer shall comply, and shall cause its Affiliates and their respective representatives and agents to comply, with all access rules and requirements of Seller or its Affiliates, including all good manufacturing practices and visitor and safety rules and requirements. The cost of such removal and transport shall be borne by Buyer. Buyer shall indemnify, defend and hold harmless the Seller Indemnified Persons for, and shall pay to each Seller Indemnified Person the amount of any Damages incurred by such Seller Indemnified Person in connection with, the removal and transportation of the Inventory Seed described in clause (b) of the third berger dot on Exhibit 2.1(a)(xi) , including any claims by any representative or agent of Buyer or its affiliates assisting in the removal and transportation of such property. If Buyer shall fail to remove and transport the Inventory Seed described in clause (b) of the third berger dot on Exhibit 2.1(a)(xi) on or before July 31, 2015, Seller shall have no obligation to make
available or deliver such Inventory Seed to Buyer, such Inventory Seed shall be deemed to be an Excluded Asset for purposes of this Agreement and clause (b) of the third berger dot on Exhibit 2.1(a)(xi) shall be deemed to be stricken from such Exhibit 2.1(a)(xi) without further action of any party. Notwithstanding anything to the contrary contained herein, (i) Buyer agrees to accept, and to cause its applicable Affiliates to accept, the Inventory Seed described in clause (b) of the third berger dot on Exhibit 2.1(a)(xi) "as is" and "where is", (ii) none of Seller or any of its Affiliates make any and expressly disclaim, and Buyer, for and on behalf of itself and its Affiliates, agrees and acknowledges that none of Seller or any of its Affiliates makes any and expressly disclaims reliance upon, any representation or warranty (express or implied) of any kind (including as to accuracy or completeness) with respect to the Inventory Seed described in clause (b) of the third berger dot on Exhibit 2.1(a)(xi) , and (iii) none of Seller or any of its Affiliates shall have any Liability (including to any Buyer Indemnified Party) arising from or related to the Inventory Seed described in clause (b) of the third berger dot on Exhibit 2.1(a)(xi) . Buyer shall bear all risk of loss with respect to all Inventory Seed described in clause (b) of the third berger dot on Exhibit 2.1(a)(xi) .
(a) Subject in all events to Section 5.8(h) , all claims that any Buyer Indemnified Person may have with respect to the Inventory Seed, for any cause whatsoever (including for any Breach of the representations made in Section 3.14), shall be deemed waived by such Buyer Indemnified Person unless made in writing and received by Seller no later than sixty (60) days after the Closing Date; provided , however , that as to any such cause not reasonably discoverable by visual inspection within such sixty (60) day period, any claim based thereon shall be deemed to be waived by such Buyer Indemnified Person unless made in writing and received by Seller no later than fifteen (15) days after such Buyer Indemnified Person learns of such defect giving rise to such claim. Notwithstanding anything contained in this Agreement to the contrary, in no event shall any Buyer Indemnified Person be entitled to make any claim with respect to (i) the Inventory Seed, for any cause whatsoever (including for any Breach of the representations made in Section 3.14), after the date that is twelve (12) months after the Closing Date, or (ii) any of Inventory Seed described in clause (b) of the third berger dot on Exhibit 2.1(a)(xi) . Any Buyer Indemnified Person's failure to provide written notice of any claim within the applicable time period(s) specified above shall be deemed an absolute and unconditional waiver by such Buyer Indemnified Person of such claim.
[Signature Page Follows]
IN WITNESS WHEREOF, the Parties have executed and delivered this Third Amendment as of the date first above written.
SELLER : |
|
PIONEER HI-BRED INTERNATIONAL, INC. |
|
By: |
/s/ Paul E. Schickler |
Name: |
Paul E. Schickler |
Title: |
President |
BUYER : |
|
S&W SEED COMPANY |
|
By: |
/s/ Matthew K. Szot |
Name: |
Matthew Szot |
Title: |
CFO and EVP |
[Signature Page to Third Amendment to Asset Purchase and Sale Agreement]
Attachment I
Exhibit 2.1(a)(xi)
Inventory Seed
86CN762 |
91I05PJ1 |
93C01PJ1 |
95C06PJ1 |
97I01PI1 |
99I01PN1 |
|
91I06PJ1 |
93C02PS1 |
95C07PJ1 |
97I02PN1 |
99I02PN1 |
87C1CN1 |
91I07PJ1 |
93C03PN1 |
95C08SN1 |
97I03PN1 |
99I03PN1 |
87C2CN1 |
91I08PJ1 |
93C04CN1 |
95C09SJ1 |
97I03PN1 |
99I04PN1 |
87C4CN2 |
91I09PJ1 |
93C05CN1 |
95C10SJ1 |
97I04PS1 |
99I05PN1 |
|
91I10PJ1 |
93C06CN1 |
95C11SJ1 |
97I06PS1 |
99I06PN1 |
88C3SI1 |
91I11PJ1 |
93C07CS1 |
95C12SN1 |
97I07PS1 |
99I07PN1 |
88C3SN1 |
91I12PJ1 |
93F01SS1 |
95C13PN1 |
97I08PS1 |
99I08PN1 |
88C3SS1 |
91P05SN1 |
93F02PS1 |
95C14SS1 |
97I09PI1 |
99I09PN1 |
88C4SN1 |
91P06SN1 |
93F03PS1 |
95C17PN1 |
97I10PI1 |
99I10PN1 |
88C6SI1 |
91P07SN1 |
93F04PS1 |
95C18SN1 |
97I11PI1 |
99I12PN1 |
|
91P08SN1 |
93I08PS1 |
95C19SS1 |
97I12PI1 |
99I13PI1 |
89C1SI1 |
91P09PS1 |
93N04PL1 |
95C20PN1 |
97N01PL1 |
99I14PN1 |
89C1SS1 |
91P10PS1 |
93S01PJ1 |
95C21PS1 |
97N06PL1 |
99N01PS1 |
89C2SI1 |
91P11PS1 |
93U01SN1 |
95F51PS1 |
97N07PP1 |
99N02PS1 |
89C3SI1 |
91P12SS1 |
93U02SN1 |
95F52PI1 |
97N08PP1 |
99N03PS1 |
89C3SS1 |
91P13SJ1 |
93U03SS1 |
95F54PJ1 |
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99N04PS1 |
89C4SI1 |
91P14SN1 |
93U04SN1 |
95U01SN1 |
98I01PN1 |
99N05SS1 |
89C4SN1 |
91U01PS1 |
93U05SS1 |
95U02SN1 |
98I02PI1 |
99N06SS1 |
89C4SS1 |
91U03SI1 |
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95U03SN1 |
98I03PI1 |
99N07PL1 |
89C6SS1 |
91U04PI1 |
94C01SN1 |
95U04SS1 |
98I04PN1 |
99N08PL1 |
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91U05PI1 |
94C02PN1 |
95U05SS1 |
98I05SI1 |
99N10PL1 |
90C1CI1 |
91U06SI1 |
94C03SN1 |
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98I06PI1 |
99N11PL1 |
90C1SI1 |
91U07SI1 |
94C04SN1 |
96A06PS1 |
98I07PI1 |
99N12PL1 |
90C2PN1 |
91U08SI1 |
94C05PI1 |
96A07SN1 |
98I08PN1 |
99N15PL1 |
90C3PS1 |
91U09SI1 |
94C06PI1 |
96C08SJ1 |
98I09PS1 |
N99PS89 |
90C4SS1 |
|
94C07PI1 |
96C10SN1 |
98I10PN1 |
N99PS90 |
90C5SI1 |
92C01PS1 |
94C08PI1 |
96C13SN1 |
98I11PN1 |
N99PS91 |
90C6PN1 |
92C02PS1 |
94C09PI1 |
96C15SN1 |
98I12PN1 |
N99SP94 |
90C7PN1 |
92C03PI1 |
94C10PS1 |
96C18SN1 |
98I15PS1 |
N99SS92 |
90C8SN1 |
92C04PI1 |
94C11PS1 |
96C19SN1 |
98I17PS1 |
N99SS93 |
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92C05SI1 |
94C12PN1 |
96C20PN1 |
98N04PP1 |
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92C06PN1 |
94C13PN1 |
96N06PP1 |
98N11PS1 |
00I01PN1 |
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92C07PN1 |
94C14SJ1 |
96N07PP1 |
98N12PS1 |
00I02PN1 |
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92C08SN1 |
94C15SI1 |
96P53PS1 |
98N13PS1 |
00I03PN1 |
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92C09PN1 |
94U01SS1 |
96P60PS1 |
98N14PS1 |
00I04PN1 |
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92I05SN1 |
94U02SI1 |
96U04SN1 |
98N15PS1 |
00I05PN1 |
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92I06SS1 |
94U03SS1 |
96U05SI1 |
98N16PS1 |
00I08PN1 |
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92I07SN1 |
94U04SN1 |
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98N17PS1 |
00I09PN1 |
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92I08SI1 |
94U05SN1 |
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00I10PN1 |
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92I09SS1 |
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00I11PN1 |
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92I10SN1 |
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00I13PN1 |
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92I11SN1 |
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00I14PS1 |
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92I12SN1 |
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00I15PN1 |
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92I13SI1 |
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00I16PN1 |
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92I17PJ1 |
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00N11SS1 |
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92I18PJ1 |
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00N12SS1 |
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92I20SI1 |
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00N13PS1 |
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92I21SI1 |
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00N14PS1 |
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92I22SI1 |
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00N15PS1 |
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00N16PS1 |
Notwithstanding the foregoing, the Inventory Seed shall not include any Excluded Seed.
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
S&W SEED COMPANY
(a Nevada corporation)
As Adopted May 21, 2013
and Amended on May 17, 2014, January 6, 2015 and May 20, 2015
AMENDED AND RESTATED BYLAWS
OF
S&W SEED COMPANY
(a Nevada corporation)
TABLE OF CONTENTS
Page |
||
ARTICLE I |
OFFICES |
1 |
Section 1.1 |
Principal Offices |
1 |
Section 1.2 |
Other Offices |
1 |
ARTICLE II |
STOCKHOLDERS |
1 |
Section 2.1 |
Annual Meetings. |
1 |
Section 2.2. |
Special Meetings. |
1 |
Section 2.3 |
Advance Notice of Stockholder Business and Nominations |
1 |
Section 2.4 |
Notice of Meetings |
4 |
Section 2.5 |
Manner of Giving Notice; Electronic Notice; Affidavit of Mailing. |
4 |
Section 2.6 |
Adjournments |
5 |
Section 2.7 |
Quorum |
5 |
Section 2.8 |
Conduct of Meetings |
5 |
Section 2.9 |
Voting. |
6 |
Section 2.10 |
Proxies |
6 |
Section 2.11 |
Fixing Date for Determination of Stockholders of Record |
6 |
Section 2.12 |
List of Stockholders Entitled to Vote |
6 |
Section 2.13 |
Participation by Telephonic or Other Electronic Communication |
7 |
Section 2.14 |
Waiver of Notice or Consent by Absent Stockholders |
7 |
Section 2.15 |
Action by Written Consent of Stockholders |
7 |
Section 2.16 |
Inspectors of Elections |
7 |
ARTICLE III |
BOARD OF DIRECTORS |
8 |
Section 3.1 |
Number; Qualifications |
8 |
Section 3.2 |
Election; Resignation; Removal; Vacancies. |
8 |
Section 3.4 |
Election of Chairman of the Board |
9 |
Section 3.5 |
Regular Meetings |
9 |
Section 3.6 |
Special Meetings |
9 |
Section 3.7 |
Remote Meetings Permitted |
10 |
Section 3.8 |
Quorum; Vote Required for Action |
10 |
Section 3.9 |
Place and Conduct of Meetings |
10 |
Section 3.10 |
Adjournment |
10 |
Section 3.11 |
Notice of Adjournment |
10 |
Section 3.12 |
Written Action by Directors |
10 |
Section 3.13 |
Waiver of Notice |
11 |
Section 3.14 |
Powers |
11 |
Section 3.15 |
Fees and Compensation of Directors |
11 |
ARTICLE IV |
COMMITTEES |
11 |
Section 4.1 |
Committees |
11 |
Section 4.2 |
Committee Rules |
12 |
i
ARTICLE V |
OFFICERS |
12 |
Section 5.1 |
Designation, Election and Term of Office |
12 |
Section 5.2 |
Chief Executive Officer |
12 |
Section 5.3 |
Chairperson of the Board |
13 |
Section 5.4 |
President |
13 |
Section 5.5 |
Vice President |
13 |
Section 5.6 |
Chief Financial Officer |
13 |
Section 5.7 |
Treasurer |
13 |
Section 5.8 |
Secretary |
13 |
Section 5.9 |
Assistant Officers |
13 |
Section 5.10 |
Officers Holding Two or More Offices |
13 |
Section 5.11 |
Delegation of Authority |
13 |
Section 5.12 |
Removal |
13 |
ARTICLE VI |
STOCK |
13 |
Section 6.1 |
Certificates |
14 |
Section 6.2 |
Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates |
14 |
Section 6.3 |
Registered Stockholders |
14 |
Section 6.4 |
Other Regulations |
14 |
ARTICLE VII |
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER CORPORATE AGENTS |
14 |
Section 7.1 |
Actions Other Than By or In the Right of the Corporation |
14 |
Section 7.2 |
Actions By or in the Right of the Corporation |
15 |
Section 7.3 |
Determination of Right of Indemnification |
15 |
Section 7.4 |
Indemnification Against Expenses of Successful Party |
15 |
Section 7.5 |
Advances of Expenses |
15 |
Section 7.6 |
Right of Agent to Indemnification upon Application; Procedure Upon Application |
15 |
Section 7.7 |
Other Rights and Remedies |
16 |
Section 7.8 |
Indemnification Contracts |
16 |
Section 7.9 |
Insurance |
16 |
Section 7.10 |
Constituent Corporations |
16 |
Section 7.11 |
Other Enterprises, Fines and Service at the Corporation's Request |
16 |
Section 7.12 |
Savings Clause |
16 |
Section 7.13 |
Effect of Amendment |
17 |
Section 7.14 |
Retroactive Effect |
17 |
ARTICLE VIII |
RECORDS AND BOOKS |
17 |
Section 8.1 |
Maintenance of Share Register |
17 |
Section 8.2 |
Maintenance of Bylaws |
17 |
Section 8.3 |
Maintenance of Other Corporate Records |
17 |
Section 8.4 |
Form of Records |
17 |
Section 8.5 |
Directors' Inspection Right; Reliance Upon Books and Records |
17 |
ARTICLE IX |
INTERESTED DIRECTORS |
17 |
Section 9.1: |
Interested Directors |
18 |
ii
ARTICLE X |
GENERAL CORPORATE MATTERS |
18 |
Section 10.1 |
Notice |
18 |
Section 10.2 |
Record Date |
19 |
Section 10.3 |
Closing of Transfer Books |
19 |
Section 10.4 |
Checks, Drafts, Evidences of Indebtedness |
20 |
Section 10.5 |
Corporate Contracts and Instruments; How Executed |
20 |
Section 10.6 |
Dividends |
20 |
Section 10.7 |
Fiscal Year |
20 |
Section 10.8 |
Seal |
20 |
Section 10.9 |
Representation of Shares of Other Corporations |
20 |
Section 10.10 |
Articles of Incorporation Governs |
20 |
Section 10.11 |
Construction and Definitions |
20 |
Section 10.12 |
Severability |
20 |
ARTICLE XI |
AMENDMENT |
21 |
Section 11.1 |
Amendment by Directors. |
21 |
iii
AMENDED AND RESTATED BYLAWS
As Adopted May 21, 2013
OF
S&W SEED COMPANY
(a Nevada corporation)
Section 1.2 Other Offices . The board of directors may at any time establish a replacement principal office, branch or subordinate offices at any place or places where the corporation is qualified to do business.
Section 2.1 Annual Meetings . Unless directors are elected by written consent in lieu of an annual meeting as permitted by Section 78.320 of the Nevada Revised Statutes ("NRS"), or any successor statute, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board of Directors shall each year fix. The meeting may be held either at a place, within or without the State of Nevada, or by means of remote communication as the Board of Directors in its sole discretion may determine. Any other proper business may be transacted at the annual meeting.
Section 2.2. Special Meetings . Special meetings of stockholders for any purpose or purposes may be called at any time by the entire Board of Directors, any two directors or the President. Special meetings may not be called by any other person or persons. Each special meeting shall be held at such date and time as is requested by the person or persons calling the meeting within the limits fixed by law.
The request shall be in writing, specifying the time of such meeting, the place where it is to be held and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president or the secretary of the corporation. The officer receiving such request forthwith shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.2 shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the board of directors may be held.
Section 2.3 Advance Notice of Stockholder Business and Nominations
(a) With respect to annual meetings of stockholders:
(i) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation's notice of meeting (or any supplement thereto), (b) by or at the direction of the Board of Directors, or (c) by any stockholder of the Corporation who is a stockholder of record of the Corporation at the time the notice provided for in this Section 2.3 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting, and who complies with the notice procedures set forth in this Section 2.3.
1
(ii) For nominations or other business to be properly brought before an annual meeting of stockholders by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and any such proposed business must constitute a proper matter for stockholder action under the NRS. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year's annual meeting (provided, however, that in the event that the date of the annual meeting is more than thirty days before or more than sixty (60) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting of stockholders commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above. To be in proper written form, a stockholder's notice to the Secretary (whether pursuant to this Section 2.3(a)(ii) or Section 2.3(b)) must set forth:
(A) as to each person, if any, whom the stockholder proposes to nominate for election as a director (x) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Exchange Act and (y) such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected;
(B) if the notice relates to any business (other than the nomination of persons for election as directors) that the stockholder proposes to bring before the meeting, (w) a brief description of the business desired to be brought before the meeting, (x) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), (y) the reasons for conducting such business at the meeting, and (z) any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and
(C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (w) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, (x) the class or series and number of shares of capital stock of the Corporation that are, directly or indirectly, owned beneficially and of record by such stockholder and by such beneficial owner, (y) any derivative positions with respect to shares of capital stock of the Corporation held or beneficially held by or on behalf of such stockholder and by or on behalf of such beneficial owner, the extent to which any hedging or other transaction or series of transactions has been entered into with respect to the shares of capital stock of the Corporation by or on behalf of such stockholder and by or on behalf of such beneficial owner, and the extent to which any other agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power of such stockholder and such beneficial owner with respect to shares of capital stock of the Corporation, (z) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (aa) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group that intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve or adopt the proposal or elect the nominee or otherwise to solicit proxies from stockholders in support of such proposal or nomination.
The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine (x) the eligibility of such proposed nominee to serve as a director of the Corporation, and (y) whether such nominee qualifies as an "independent director" or "audit committee financial expert" under applicable law, securities exchange rule or regulation, or any publicly-disclosed corporate governance guideline or committee charter of the Corporation.
2
(iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 2.3 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 2.3 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.
(b) With respect to special meetings of stockholders: Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (1) by or at the direction of the Board of Directors or any duly authorized committee thereof or (2) provided that the Board of Directors or any duly authorized committee thereof has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 2.3 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election, and who complies with the notice procedures set forth in this Section 2.3. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation's notice of meeting, if the stockholder's notice in the same form as required by paragraph (a)(ii) of this Section 2.3 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above.
(c) With respect to other matters related to advance notice of stockholder business and nominations:
(i) Only persons who are nominated in accordance with the procedures set forth in this Section 2.3 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.3. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (A) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.3 and (B) if any proposed nomination or business was not made or proposed in compliance with this Section 2.3, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.3, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be considered, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.3, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
(ii) For purposes of this Section 2.3, "public announcement" shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press, or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act.
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(iii) Nothing in this Section 2.3 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals or nominations in the Corporation's proxy statement pursuant to Rule 14a-8 (or any successor thereto) promulgated under the Exchange Act (and any proposal included in the Corporation's proxy statement pursuant to such Rule shall not be subject to any of the advance notice requirements in this Section 2.3) or (b) of the holders of any series of Preferred Stock to nominate and elect directors pursuant to and to the extent provided in any applicable provisions of the certificate of incorporation.
Section 2.4 Notice of Meetings . All notices of meetings of stockholders shall be sent or otherwise given in accordance with Section 2.5 of this Article II not less than ten (10) nor more than sixty (60) days before the date of the meeting being noticed. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting the general nature of the business to be transacted, or (ii) in the case of the annual meeting those matters that the board of directors, at the time of giving the notice, intends to present for action by the stockholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees which, at the time of the notice, management intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) contracts or transactions in which a director has a direct or indirect financial interest, (ii) an amendment to the articles of incorporation, (iii) a reorganization of the corporation, (iv) dissolution of the corporation, or (v) a distribution to preferred stockholders, the notice shall also state the general nature of such proposal.
Section 2.5 Manner of Giving Notice; Electronic Notice; Affidavit of Mailing.
(a) Except as otherwise provided in this Section 2.5, notice of any meeting of stockholders shall be given either personally or by first-class mail or facsimile or other written communication, charges prepaid, addressed to the stockholder at the address of such stockholder appearing on the books of the corporation or given by the stockholder to the corporation for the purpose of notice. If no such address appears on the corporation's books or is given, notice shall be deemed to have been given if sent by mail or telegram to the corporation's principal executive office, or if published at least once in a newspaper of general circulation in the county where this office is located. Personal delivery of any such notice to any officer of a corporation or association or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. In the event of the transfer of stock after delivery or mailing of the notice of and prior to the holding of the meeting, it shall not be necessary to deliver or mail notice of the meeting to the transferee.
(b) If any notice addressed to a stockholder at the address of such stockholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the stockholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the stockholder upon written demand of the stockholder at the principal executive office of the corporation for a period of one year from the date of the giving of such notice.
(c) Any notice to stockholders given by the Corporation pursuant to any provision of the NRS, the Articles of Incorporation or these Bylaws is effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. The consent is revocable by the stockholder by written notice to the corporation. The consent is revoked if:
(i) The corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with the consent; and
(ii) The inability to deliver by electronic transmission becomes known to the secretary, assistant secretary, transfer agent or other agent of the corporation responsible for the giving of notice. However, the inadvertent failure to treat the inability to deliver a notice by electronic transmission as a revocation does not invalidate any meeting or other action.
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Electronic notice pursuant to subsection (c) of this Section 2.5 shall be deemed given if:
(A) by facsimile machine, when directed to a number at which the stockholder has consented to receive notice;
(B) by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; or
(C) by a posting on an electronic network together with separate notice to the stockholder of the specific posting,
upon the later of: (i) such posting; (ii) the giving of the separate notice; and (iii) by any other form of electronic transmission, when directed to the stockholder.
(d) An affidavit of the mailing or other means of giving any notice of any stockholders' meeting shall be executed by the secretary, assistant secretary or any transfer agent of the corporation giving such notice, and shall be filed and maintained in the minute book of the corporation.
Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 2.6 Adjournments . Any stockholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at such meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at such meeting.
When any meeting of stockholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at a meeting at which the adjournment is taken. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.
Section 2.7 Quorum . At each meeting of stockholders the holders of a majority of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, unless otherwise required by applicable law. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation's stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation's stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum.
Section 2.8 Conduct of Meetings . Meetings of stockholders shall be presided over by such person as the Board of Directors may designate, or, in the absence of such a person, the Chairperson of the Board of Directors, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairperson of the meeting and, subject to Section 2.16 hereof, shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in such person's absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
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(a) Unless a record date set for voting purposes be fixed as provided in Section 2.11 of these bylaws, only persons in whose names shares entitled to vote stand on the stock records of the corporation at the close of business on the business day next preceding the day on which notice is given (or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held) shall be entitled to vote at such meeting. Any stockholder entitled to vote on any matter other than elections of directors or officers, may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the stockholder fails to specify the number of shares such stockholder is voting affirmatively, it will be conclusively presumed that the stockholder's approving vote is with respect to all shares such stockholder is entitled to vote. Such vote may be by voice vote or by ballot; provided, however, that all elections for directors must be by ballot upon demand by a stockholder at any election and before the voting begins.
(b) When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the articles of incorporation a different vote is required in which case such express provision shall govern and control the decision of such question. Every stockholder of record of the corporation shall be entitled at each meeting of stockholders to one vote for each share of stock standing in his name on the books of the corporation. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Stockholders are not permitted to cumulate votes in the election of directors unless required by law and then only in accordance with the required procedures applicable thereto. Unless otherwise provided by applicable law, the Articles of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the shares of stock entitled to vote thereon that are present in person or represented by proxy at the meeting and are voted for or against the matter.
(c) If a vote is to be taken by written ballot, then each such ballot shall state the name of the stockholder or proxy voting and such other information as the chairperson of the meeting deems appropriate and, if authorized by the Board of Directors, the ballot may be submitted by electronic transmission in the manner provided by law.
Section 2.10 Proxies . Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless revoked by the person executing it, prior to the vote pursuant thereto, by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by, or attendance at the meeting and voting in person by the person executing the proxy; provided, however, that no such proxy shall be valid after the expiration of six (6) months from the date of such proxy, unless coupled with an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven (7) years from the date of its execution. Subject to the above and the provisions of Section 78.355 of the NRS, or any successor statute, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the secretary of the corporation.
Section 2.11 Fixing Date for Determination of Stockholders of Record . The guidelines for fixing the record date for determination of stockholders entitled to notice of meetings and to vote at such meetings, and for other purposes incident to their role as stockholders of the Corporation are set forth in Section 10.2 of these Bylaws.
Section 2.12 List of Stockholders Entitled to Vote . A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the
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meeting, either on a reasonably accessible electronic network as permitted by law (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the principal place of business of the Corporation. If the meeting is held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting.
Section 2.13 Participation by Telephonic or Other Electronic Communication . Unless otherwise restricted by the articles of incorporation or bylaws, stockholders may participate in a meeting of stockholders by means of a telephone conference or similar methods of communication by which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this subsection constitutes presence in person at the meeting.
Section 2.14 Waiver of Notice or Consent by Absent Stockholders .
(a) The transactions at any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting, or an approval of the minutes thereof. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any regular or special meeting of stockholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 2.4 of this Article II, the waiver of notice or consent shall state the general nature of such proposal. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
(b) Attendance of a person at a meeting shall also constitute a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice if such objection is expressly made at the meeting.
Section 2.15 Action by Written Consent of Stockholders . No action shall be taken by the stockholders of the corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders of the corporation by written consent.
Section 2.16 Inspectors of Elections .
(a) Unless otherwise provided in the Corporation's Articles of Incorporation or required by the NRS, the following provisions of this Section 2.16 shall apply only if and when the Corporation has a class of voting stock that is: (i) listed on a national securities exchange; (ii) authorized for quotation on an automated interdealer quotation system of a registered national securities association; or (iii) held of record by more than two thousand (2,000) stockholders; in all other cases, observance of the provisions of this Section 2.16 shall be optional, and at the discretion of the Board of Directors of the Corporation.
(b) The Corporation shall, in advance of any meeting of stockholders, appoint one (1) or three (3) inspectors of election to act at the meeting and make a written report thereof. If there are three (3) Inspectors of Election, the decision, act or certificate of a majority shall be effective and shall represent the decision, act or certificate of all. No such Inspector need be a stockholder of the Corporation. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.
(c) Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector's ability.
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(d) Subject to any provisions of the Articles of Incorporation, the Inspectors of Election shall determine the number of shares outstanding, the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; they shall receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close and determine the result; and finally, they shall do such acts as may be proper to conduct the election or vote with fairness to all stockholders. On request, the Inspectors shall make a report in writing to the secretary of the meeting concerning any challenge, question or other matter as may have been determined by them and shall execute and deliver to such secretary a certificate of any fact found by them.
(e) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the inspectors at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless a court of competent jurisdiction, upon application by a stockholder, shall determine otherwise.
(f) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with Section 78.355 of the NRS, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 2.16 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 Number; Qualifications . The number of directors shall be fixed from time to time by resolution of the Board of Directors but shall not be less than three (3) nor more than nine (9). The initial number of directors shall be six members, and thereafter shall be fixed from time to time by resolution of the Board of Directors. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
Section 3.2 Election; Resignation; Removal; Vacancies.
(a) Each director shall serve until his successor is elected and qualified or until his death, resignation or removal. Additional directors elected in connection with rights to elect such additional directors under specified circumstances that may be granted to the holders of any series of Preferred Stock shall not be included in any class, but shall serve for such term or terms and pursuant to such other provisions as are specified in the resolution of the Board of Directors establishing such series. Any director may resign at any time upon notice to the Corporation given in writing or by electronic transmission.
(b) Directors shall be at least 21 years of age. Directors need not be stockholders. Except as otherwise provided by these Bylaws, each director shall be elected by the affirmative vote of a majority of the votes cast with respect to that director's election at any meeting for the election of directors at which a quorum is present, provided that if, as of the tenth (10th) day preceding the date the Corporation first mails its notice of meeting for such meeting to the stockholders of the Corporation, the number of nominees exceeds the number of directors to be elected (a "Contested Election"), the directors shall be elected by the vote of a plurality of the votes cast. For purposes of this Section 3.2 of these Bylaws, a majority of votes cast shall mean that the number of votes cast "for" a director's election exceeds the number of votes cast "against" that director's election (with "abstentions" and "broker nonvotes" not counted as a vote cast either "for" or "against" that director's election).
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In order for any incumbent director to become a nominee of the Board for further service on the Board, such person must submit an irrevocable resignation, contingent on (i) that person not receiving a majority of the votes cast in an election that is not a Contested Election, and (ii) acceptance of that proffered resignation by the Board in accordance with the policies and procedures adopted by the Board for such purpose. In the event an incumbent director fails to receive a majority of the votes cast in an election that is not a Contested Election, the Nominating and Corporate Governance Committee of the Board, or such other committee designated by the Board pursuant to these Bylaws, shall make a recommendation to the Board as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board shall act on the proffered resignation, taking into account the applicable committee's recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The committee in making its recommendation and the Board in making its decision each may consider any factors and other information that they consider appropriate and relevant.
If the Board accepts a director's resignation pursuant to this Section 3.2, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of may fill the resulting vacancy pursuant to Article III, Section 3.2(c) of the Bylaws.
(c) Newly created directorships resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Section 3.4 Election of Chairman of the Board . At the organizational meeting immediately following the annual meeting of stockholders, the directors may elect a Chairman of the Board from among the directors who shall hold office until the corresponding meeting of the Board of Directors in the next year and until his successor shall have been elected or until his earlier resignation or removal. Any vacancy in such office may be filled for the unexpired portion of the term in the same manner by the Board of Directors at any regular or special meeting.
Section 3.5 Regular Meetings . Regular meetings of the Board of Directors shall be held immediately following the annual meeting of the stockholders; without call at such time as shall from time to time be fixed by the Board of Directors; and as called by the Chairman of the Board in accordance with applicable law. Other regular meetings of the Board of Directors shall be held without call at such time as shall from time to time be fixed by the Board of Directors. Such regular meetings may be held without notice, provided the notice of any change in the time of any such meetings shall be given to all of the directors. Notice of a change in the determination of the time shall be given to each director in the same manner as notice for special meetings of the board of directors.
Section 3.6 Special Meetings .
(a) Special meetings of the Board of Directors shall be held upon call by or at the direction of the Chairman of the Board, the President or any two (2) directors, except that when the Board of Directors consists of one (1) director, then the one director may call a special meeting. Except as otherwise required by law, notice of each special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least three (3) days before the day on which the meeting is to be held, or shall be sent to him at such place by telex, telegram, cable, e-mail, facsimile transmission, other means of electronic transmission or telephoned or delivered to him personally, not later than twenty-four (24) hours before the date and time at which the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purpose or purposes thereof, unless otherwise required by law, the Articles or these Bylaws.
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(b) Notice of any meeting need not be given to any director who shall attend such meeting in person (except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened) or who shall waive notice thereof, before or after such meeting, in a signed writing.
Section 3.7 Remote Meetings Permitted . Members of the Board of Directors, or any committee of the Board, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.
Section 3.8 Quorum; Vote Required for Action .
(a) At all meetings of the Board of Directors a majority of the fixed number of directors shall constitute a quorum for the transaction of business. In the absence of a quorum, the directors present, by majority vote and without notice other than by announcement, may adjourn the meeting from time to time until a quorum shall be present. At any reconvened meeting following such an adjournment at which a quorum shall be present, any business may be transacted that might have been transacted at the meeting as originally notified.
(b) Except as otherwise provided herein or in the Articles of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
Section 3.9 Place and Conduct of Meetings . Each regular meeting and special meeting of the Board of Directors shall be held at a location determined as follows: The Board of Directors may designate any place, within or without the State of Nevada, for the holding of any meeting. If no such designation is made: (a) any meeting called by a majority of the directors shall be held at such location, within the county of the Corporation's principal executive office, as the directors calling the meeting shall designate; and (b) any other meeting shall be held at such location, within the county of the Corporation's principal executive office, as the Chairman of the Board may designate or, in the absence of such designation, at the Corporation's principal executive office. Subject to the requirements of applicable law, all regular and special meetings of the Board of Directors shall be conducted in accordance with such rules and procedures as the Board of Directors may approve and, as to matters not governed by such rules and procedures, as the chairman of such meeting shall determine. Meetings of the Board of Directors shall be presided over by the Chairperson of the Board of Directors, or in such person's absence by the President, or in such person's absence by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in such person's absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 3.10 Adjournment . A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
Section 3.11 Notice of Adjournment . Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of such time and place shall be given prior to the time of the adjourned meeting, in the manner specified in Section 3.6 of this Article III, to the directors who were not present at the time of the adjournment.
Section 3.12 Written Action by Directors . Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee, respectively. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
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Section 3.13 Waiver of Notice . The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. The waiver of notice of consent need not specify the purpose of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director.
Section 3.14 Powers . The Board of Directors may, except as otherwise required by law or the Articles of Incorporation, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
Section 3.15 Fees and Compensation of Directors . Directors shall be paid such compensation as may be fixed from time to time by resolution of the Board of Directors: (i) for their usual and contemplated services as directors; (ii) for their services as members of committees appointed by the Board of Directors, including attendance at committee meetings as well as services which may be required when committee members must consult with management staff; and (iii) for extraordinary services as directors or as members of committees appointed by the Board of Directors, over and above those services for which compensation is fixed pursuant to items (i) and (ii) in this Section 3.15. Compensation may be in the form of an annual retainer fee or a fee for attendance at meetings, or both, or in such other form or on such basis as the resolutions of the Board of Directors shall fix. Directors shall be reimbursed for all reasonable expenses incurred by them in attending meetings of the Board of Directors and committees appointed by the Board of Directors and in performing compensable extraordinary services. Nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity, such as an officer, agent, employee, consultant or otherwise, and receiving compensation therefor.
(a) To the full extent permitted by applicable law, the Board of Directors may from time to time establish committees, including, but not limited to, standing or special committees and an executive committee with authority and responsibility for bookkeeping, with authority to act as signatories on Corporation bank or similar accounts and with authority to choose attorneys for the Corporation and direct litigation strategy, which shall have such duties and powers as are authorized by these Bylaws or by the Board of Directors.
(b) Committee members and the chairman of each committee, shall be appointed by the Board of Directors. The Board of Directors may designate one or more directors as alternate members of a committee to replace any member who is disqualified or absent from a meeting of the committee. Unless the Board of Directors appoints alternate members pursuant to this subsection 4.1(b), the member or members of a committee present at a meeting and not disqualified from voting, whether or not the member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of an absent or disqualified member of the committee. Members of standing committees, and their chairmen, shall be elected yearly at the regular meeting of the Board of Directors that is held immediately following the annual meeting of stockholders.
(c) Any member of any committee may be removed at any time with or without cause by the Board of Directors.
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(d) Vacancies that occur on any committee shall be filled by a resolution of the Board of Directors. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, so long as a quorum is present, may continue to act until such vacancy is filled by the Board of Directors.
(e) The Board of Directors may, by resolution, at any time deemed desirable, discontinue any standing or special committee, provided, however , that so long as the Corporation's securities are listed on a national stock exchange or quoted on a national quotation service that require specified standing committees to maintain listed or quoted, as the case may be, such standing committees shall not be discontinued.
Section 4.2 Committee Rules . Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article III of these Bylaws.
Section 5.1 Designation, Election and Term of Office . The Corporation shall have a President, Treasurer (or the equivalent thereof), such senior or executive vice presidents and vice presidents as the Board of Directors deems appropriate, a Secretary and such other officers as the Board of Directors may deem appropriate. These officers shall be elected annually by the Board of Directors at a meeting immediately following the annual meeting of stockholders, and each such officer shall hold office until the corresponding meeting of the Board of Directors in the next year and until his successor shall have been elected and qualified or until his earlier resignation, death or removal. Any officer may resign at any time by giving written notice to the Board of Directors, to the President, or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein unless otherwise determined by the Board of Directors. The acceptance of a resignation by the Corporation shall not be necessary to make it effective. Any assistant officer of the Corporation may be removed, with or without cause, by the Chief Executive Officer or by the Board of Directors Any vacancy in any of the above offices may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting.
Section 5.2 Chief Executive Officer . Subject to the control of the Board of Directors and such supervisory powers, if any, as may be given by the Board of Directors, the powers and duties of the Chief Executive Officer of the Corporation are:
(a) to act as the general manager and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation;
(b) to preside at all meetings of the stockholders;
(c) to call meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and
(d) to affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board of Directors has not designated any other officer to be the Chief Executive Officer, then the Chairperson of the Board of Directors shall be the Chief Executive Officer.
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Section 5.3 Chairperson of the Board . The Chairperson of the Board of Directors shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and duties as provided in these Bylaws and as the Board of Directors may from time to time prescribe.
Section 5.4 President . The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall have designated another officer as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board of Directors to the Chairperson of the Board of Directors, and/or to any other officer, the President shall have the responsibility for the general management the control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board of Directors.
Section 5.5 Vice President . Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President, or that are delegated to him or her by the Board of Directors or the Chief Executive Officer. A Vice President may be designated by the Board of Directors to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officer's absence or disability.
Section 5.6 Chief Financial Officer . The Chief Financial Officer shall be the Treasurer of the Corporation unless the Board of Directors shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board of Directors and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer.
Section 5.7 Treasurer . The Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
Section 5.8 Secretary . The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board of Directors. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board of Directors or the Chief Executive Officer may from time to time prescribe.
Section 5.9 Assistant Officers . The Chief Executive Officer may appoint one or more assistant secretaries and such other assistant officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as may be specified from time to time by the President.
Section 5.10 Officers Holding Two or More Offices . The same person may hold any two (2) or more of the above-mentioned offices.
Section 5.11 Delegation of Authority . The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.
Section 5.12 Removal . Any officer of the Corporation shall serve at the pleasure of the Board of Directors and may be removed at any time, with or without cause, by the Board of Directors. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.
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(a) Except as otherwise provided by law, each stockholder shall be entitled to a certificate or certificates which shall represent and certify the number and class (and series, if appropriate) of shares of stock owned by him in the Corporation. Each certificate shall be signed in the name of the Corporation by the Chairman of the Board or a Vice-Chairman of the Board or the President or a Vice President, together with the Treasurer, Chief Financial Officer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Any or all of the signatures on any certificate may be a facsimile. When the corporation is authorized to issue shares of more than one class or more than one series of any class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any stockholders upon request and without charge, a full or summary statement of the designations, preferences and relatives, participating, optional or other special rights of the various classes of stock or series thereof and the qualifications, limitations or restrictions of such rights, and, if the corporation shall be authorized to issue only special stock, such certificate must set forth in full or summarize the rights of the holders of such stock. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
(b) Each share of stock shall be eligible for record of ownership, and transfer of ownership, by book-entry under a Direct Registration System that complies with NASDAQ rules; while entitled to a certificate, a stockholder shall not be required to have a certificate.
Section 6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates . No new certificate for shares shall be issued in place of any certificate theretofore issued unless the latter is surrendered and cancelled at the same time; provided, however, that a new certificate may be issued without the surrender and cancellation of the old certificate if the certificate thereto fore issued is alleged to have been lost, stolen or destroyed. In case of any such allegedly lost, stolen or destroyed certificate, the Corporation may require the owner thereof or the legal representative of such owner to give the Corporation a bond (or other adequate security) sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 6.3 Registered Stockholders . The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada.
Section 6.4 Other Regulations . The issue, transfer, conversion and registration of stock certificates shall be governed by such other regulations as the Board of Directors may establish.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER CORPORATE AGENTS
Section 7.1 Actions Other Than By or In the Right of the Corporation . The Corporation shall indemnify and hold harmless to the fullest extent permitted by the NRS any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding") (other than an action by or in the right of the Corporation) by reason of the fact that such person (or a person of whom such person is the legal representative) is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to hereinafter as an "Agent"), against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or
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proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. Such indemnification shall continue as to a person who has ceased to be an Agent and shall inure to the benefit of such person's heirs, executors and administrators. Notwithstanding the foregoing, the Corporation shall indemnify any such person seeking indemnity in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation, or if such indemnification is authorized by an agreement approved by the Board of Directors.
Section 7.2 Actions By or in the Right of the Corporation . The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was an Agent against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation by a court of competent jurisdiction, after exhaustion of all appeals therefrom, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
Section 7.3 Determination of Right of Indemnification . Any indemnification under Sections 7.1 or 7.2 of this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Agent is proper in the circumstances because the Agent has met the applicable standard of conduct set forth in Sections 7.1 and 7.2 hereof, which determination is made (a) by the Board of Directors, by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders.
Section 7.4 Indemnification Against Expenses of Successful Party . Notwithstanding the other provisions of this Article VII, to the extent that an Agent has been successful on the merits or otherwise, including the dismissal of an action without prejudice or the settlement of an action without admission of liability, in defense of any action, suit or proceeding referred to in Sections 7.1 and 7.2 hereof, or in defense of any claim, issue or matter therein, such Agent shall be indemnified against expenses, including attorneys' fees actually and reasonably incurred by such Agent in connection therewith.
Section 7.5 Advances of Expenses . Except as limited by Section 7.6 of this Article VII, expenses incurred by an Agent in defending any Proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding, if the Agent shall undertake to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified as authorized in this Article VII. Notwithstanding the foregoing, no advance shall be made by the Corporation if a determination is reasonably and promptly made by the Board of Directors by a majority vote of a quorum of disinterested directors, or (if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs) by independent legal counsel in a written opinion, that, based upon the facts known to the Board of Directors or counsel at the time such determination is made, such person acted in bad faith and in a manner that such person did not believe to be in or not opposed to the best interest of the Corporation, or, with respect to any criminal proceeding, that such person believed or had reasonable cause to believe his conduct was unlawful.
Section 7.6 Right of Agent to Indemnification upon Application; Procedure Upon Application . Any indemnification or advance under this Article VII shall be made promptly, and in any event within ninety (90) days, upon the written request of the Agent, unless a determination shall be made in the manner set forth in the second
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sentence of Section 7.5 hereof that such Agent acted in a manner set forth therein so as to justify the Corporation's not indemnifying or making an advance to the Agent. The right to indemnification or advances as granted by this Article VII shall be enforceable by the Agent in any court of competent jurisdiction, if the Board of Directors or independent legal counsel denies the claim, in whole or in part, or if no disposition of such claim is made within ninety (90) days. The Agent's expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation.
Section 7.7 Other Rights and Remedies . The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall not be deemed exclusive of any other rights to which an Agent seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be an Agent and shall inure to the benefit of the heirs, executors and administrators of such a person. All rights to indemnification under this Article VII shall be deemed to be provided by a contract between the Corporation and the Agent who serves in such capacity at any time while these Bylaws and other relevant provisions of the NRS and other applicable law, if any, are in effect. Any repeal or modification thereof shall not affect any rights or obligations then existing.
Section 7.8 Indemnification Contracts . The Board of Directors is authorized to cause the Corporation to enter into indemnification contracts with any Agent, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification rights to such person. Such rights may be greater than those provided in this Article VII.
Section 7.9 Insurance . Upon resolution passed by the Board of Directors, the Corporation may purchase and maintain insurance on behalf of any person who is or was an Agent against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VII.
Section 7.10 Constituent Corporations . For the purposes of this Article VII, references to "the Corporation" shall include, in addition to the resulting corporation, all constituent corporations (including all constituents of constituents) absorbed in a consolidation or merger as well as the resulting or surviving corporation, which, if the separate existence of such constituent corporation had continued, would have had power and authority to indemnify its Agents, so that any Agent of such constituent corporation shall stand in the same position under the provisions of the Article VII with respect to the resulting or surviving corporation as that Agent would have with respect to such constituent corporation if its separate existence had continued.
Section 7.11 Other Enterprises, Fines and Service at the Corporation's Request . For purposes of this Article VII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation that imposes duties on, or involves services by, such director, officer, employee or agent with respect to any employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VII.
Section 7.12 Savings Clause . If this Article VII or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Agent as to expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether internal or external, including a grand jury proceeding and an action or suit brought by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article VII that shall not have been invalidated, or by any other applicable law.
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Section 7.13 Effect of Amendment . Any amendment, repeal or modification of any provision of this Article VI shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VII and existing at the time of such amendment, repeal or modification.
Section 7.14 Retroactive Effect . To the extent permitted by applicable law, the rights and powers granted pursuant to this Article VII shall apply to acts and actions occurring or in progress prior to its adoption by the Board of Directors.
ARTICLE VIII
RECORDS AND BOOKS
Section 8.1 Maintenance of Share Register . The Corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the Board of Directors, a record of its stockholders, giving the names and addresses of all stockholders of record and the number and class of shares held by each stockholder.
Section 8.2 Maintenance of Bylaws . The Corporation shall keep at its principal executive office, the original or a copy of the Bylaws as amended to date, which shall be open to inspection by the stockholders at all reasonable times during office hours. If the principal executive office of the Corporation is outside this state and the Corporation has no principal business office in this state, the secretary shall, upon the written request of any stockholder, furnish to such stockholder a copy of the Bylaws as amended to date.
Section 8.3 Maintenance of Other Corporate Records . The accounting books and records and minutes of proceedings of the stockholders and the board of directors and any committee or committees of the Board of Directors shall be kept at such place or places designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the Corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.
Section 8.4 Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, diskettes or any other information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the NRS.
Section 8.5 Directors' Inspection Right; Reliance Upon Books and Records .
(a) Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of this Corporation and any subsidiary of this Corporation. Such inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts. The foregoing rights of inspection shall extend to the records of each subsidiary of the Corporation.
(b) A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall, in the performance of such person's duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
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ARTICLE IX
INTERESTED DIRECTORS
Section 9.1: Interested Directors .
(a) A contract or other transaction is not void or voidable solely because the contract or transaction is between the Corporation and one or more of its directors or officers or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or are financially interested; or solely because a common or interested director or officer is present at the meeting of the Board of Directors or a committee thereof that authorizes or approves the contract or transaction; or joins in the signing of a written consent that authorizes or approves the contract or transaction pursuant to subsection 2 of NRS 78.315; or any successor statute, or the vote or votes of a common or interested director are counted for the purpose of authorizing or approving the contract or transaction, provided that (a) the fact of the common directorship, office or financial interest is known to the Board of Directors or committee, and the Board or committee authorizes, approves or ratifies the contract or transaction in good faith by a vote sufficient for the purpose without counting the vote or votes of the common or interested director or directors; (b) the fact of the common directorship, office or financial interest is known to the stockholders, and they approve or ratify the contract or transaction in good faith by a majority vote of stockholders holding a majority of the voting power (the votes of the common or interested directors or officers must be counted in any such vote of stockholders); (c) the fact of the common directorship, office or financial interest is not known to the director or officer at the time the transaction is brought before the Board of Directors for action; or (d) the contract or transaction is fair as to the Corporation at the time it is authorized or approved. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof that authorizes, approves or ratifies a contract or transaction, and if the votes of the common or interested directors are not counted at the meeting, then a majority of the disinterested directors may authorize, approve or ratify a contract or transaction. The foregoing notwithstanding, the fact that the vote or votes of the common or interested director or directors are not counted in the circumstances contemplated above does not prohibit any authorization, approval or ratification of a contract or transaction to be given by written consent pursuant to subsection 2 of NRS 78.315, or any successor statute, regardless of whether the common or interested director signs such written consent or abstains in writing from providing consent.
(b) Unless otherwise provided in the Articles of Incorporation or these Bylaws, the Board of Directors, without regard to personal interest, may establish the compensation of directors for services in any capacity. If the Board of Directors establishes the compensation of directors pursuant to this Section 9.1, such compensation is presumed to be fair to the corporation unless proven unfair by a preponderance of the evidence.
ARTICLE X
GENERAL CORPORATE MATTERS
(a) Except as otherwise specifically provided in these Bylaws (including, without limitation, Section 10.1(b) below) or required by law, all notices required to be given pursuant to these Bylaws shall be in writing and may in every instance be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid telegram, telex, overnight express courier, mailgram or facsimile. Any such notice shall be addressed to the person to whom notice is to be given at such person's address as it appears on the records of the Corporation. The notice shall be deemed given (i) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (ii) in the case of delivery by mail, upon deposit in the mail, (iii) in the case of delivery by overnight express courier, when dispatched, and (iv) in the case of delivery via telegram, telex, mailgram or facsimile, when dispatched. Notice given pursuant to this Section 10.1(a) shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the person has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the person has consented to receive notice; (iii) if by any other form of electronic transmission, when directed to the person.
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(b) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the NRS, the Articles of Incorporation, or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 10.1(b) shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.
(c) An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
(d) Whenever notice is required to be given under any provision of these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice.
Section 10.2 Record Date . For purposes of determining the stockholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of any such meeting nor more than sixty (60) days prior to any other action, and in such case only stockholders of record on the date so fixed are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date fixed as aforesaid, except as otherwise provided in the NRS.
If the Board of Directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the board has been taken, shall be the day on which the first written consent is given.
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(c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later.
Section 10.3 Closing of Transfer Books . The Board of Directors may prescribe a period not exceeding sixty (60) days prior to any meeting of the stockholders during which no transfer of stock on the books of the Corporation may be made, or may fix a date not more than sixty (60) days prior to the holding of any such meeting as the day as of which stockholders entitled to notice of and to vote at such meeting shall be determined; and only stockholders of record on such day shall be entitled to notice or to vote at such meeting.
Section 10.4 Checks, Drafts, Evidences of Indebtedness . All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors.
Section 10.5 Corporate Contracts and Instruments; How Executed . The Board of Directors, except as in the Bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the Board of Directors or within the agency power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount.
Section 10.6 Dividends . Dividends upon the capital stock of the Corporation, subject to the provisions of the Articles of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Articles of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserves in the manner in which it was created.
Section 10.7 Fiscal Year . The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.
Section 10.8 Seal . The corporate seal shall have inscribed thereon the name of the corporation, the year of its incorporation and the words "Corporate Seal, Nevada."
Section 10.9 Representation of Shares of Other Corporations . The chairman of the board, the president, or any vice president, or any other person authorized by resolution of the Board of Directors by any of the foregoing designated officers, is authorized to vote on behalf of the Corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the Corporation. The authority herein granted to said officers to vote or represent on behalf of the Corporation any and all shares held by the Corporation in any other corporation or corporations may be exercised by any such officer in person or by any person authorized to do so by proxy duly executed by said officer.
Section 10.10 Articles of Incorporation Governs . In the event of any conflict between the provisions of the Corporation's Articles of Incorporation and Bylaws, the provisions of the Articles of Incorporation shall govern.
Section 10.11 Construction and Definitions . Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the NRS shall govern the construction of the Bylaws. Without limiting the generality of the foregoing, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person.
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Section 10.12 Severability . If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Corporation's Articles of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Articles of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Articles of Incorporation) shall remain in full force and effect.
Section 11.1 Amendment By Directors . Bylaws may be adopted, amended or repealed by the Board of Directors.
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CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am a duly elected and acting secretary of S&W Seed Company, a Nevada corporation; and
2. That the foregoing Bylaws, comprising twenty-one (21) pages, constitute the Amended and Restated Bylaws of said corporation as duly adopted and approved by the Board of Directors effective as of May 21, 2013.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said corporation this 21 st day of May, 2013.
By:
/s/ Debra K. Weiner
Debra K. Weiner
Secretary
FIRST AMENDMENT
TO
AMENDED AND RESTATED BYLAWS
OF
S&W SEED COMPANY
The undersigned, being the Secretary of S&W Seed Company, a Nevada corporation (the "Corporation"), hereby certifies that the Corporation's Amended and Restated Bylaws, as adopted May 21, 2013 (the "Bylaws"), were amended by a resolution of the Corporation's Board of Directors, adopted on May 17, 2014, as follows:
1. Paragraph (b) to Section 2.9 of the Bylaws is amended and restated in its entirety to read:
(b) When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of applicable law, the Articles of Incorporation of these Bylaws a different vote is required in which case such express provision shall govern and control the decision of such question. Every stockholder of record of the corporation shall be entitled at each meeting of stockholders to one vote for each share of stock standing in his name on the books of the corporation. Stockholders are not permitted to cumulate votes in the election of directors unless required by law and then only in accordance with the required procedures applicable thereto.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name this 17 th day of May, 2014.
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/s/ Matthew K. Szot |
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Matthew K. Szot, Secretary |
SECOND AMENDMENT
TO
AMENDED AND RESTATED BYLAWS
OF
S&W SEED COMPANY
The undersigned, being the Secretary of S&W Seed Company, a Nevada corporation (the "Corporation"), hereby certifies that the Corporation's Amended and Restated Bylaws, as adopted May 21, 2013 (the "Bylaws"), were amended by a resolution of the Corporation's Board of Directors, adopted on January 6, 2015, as follows:
A new Section 10.13 is added to the Corporation's Bylaws, as amended and restated and currently in effect, as follows:
10.13 Application of NRS 78.378-78.3793 . The provisions of NRS 78.378-78.3793 shall not apply to the shares of Common Stock issued or issuable upon conversion of convertible debentures or exercise of common stock purchase warrants to MFP Partners, L.P. in connection with investment transactions that closed on December 31, 2014.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name this 6th day of January, 2015.
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/s/ Matthew K. Szot |
|
Matthew K. Szot, Secretary |
THIRD AMENDMENT TO
AMENDED AND RESTATED BYLAWS OF
S&W SEED COMPANY,
a Nevada Corporation
The undersigned, being the Secretary of S&W Seed Company, a Nevada corporation (the "Corporation"), hereby certifies that the Corporation's Amended and Restated Bylaws, as adopted May 21, 2013 (the "Bylaws"), were amended by a resolution of the Corporation's Board of Directors, adopted on May 20, 2015, as follows:
Section 3.1 of the Bylaws Amended and Restated Bylaws of S&W Seed Company is deleted in its entirety and a new Section 3.2 substituted in its place to read in full as follows:
Section 3.1 Number; Qualifications . The number of directors shall be fixed from time to time by resolution of the Board of Directors but shall not be less than three (3) or more than ten (10). The number of directors shall be fixed at ten members upon adoption of this Section 3.1, and thereafter shall be fixed from time to time by resolution of the Board of Directors within the stated range. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
IN WITNESS WHEREOF, the undersigned here hereunto subscribed her name this 20th day of May, 2015.
/s/ Debra K. Weiner
Debra K. Weiner
Exhibit 10.7
FIRST AMENDMENT TO THE
CONTRACT ALFALFA PRODUCTION SERVICES AGREEMENT
This First Amendment to the Contract Alfalfa Production Services Agreement (this "Amendment" ) is made this 23rd day of July, 2015, by and among Pioneer Hi-Bred International, Inc., an Iowa corporation ( "Pioneer" ), and S&W Seed Company, a Nevada corporation ( "Contractor" ). Pioneer and Contractor are collectively referred to herein as the "Parties" and each individually as a "Party" .
WHEREAS, the Parties entered into that certain Contract Alfalfa Production Services Agreement dated December 31, 2014 (the "Agreement" ).
WHEREAS , the Parties now wish to amend the Agreement as provided in this Amendment.
NOW, THEREFORE , for and in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Parties hereby agree as follows:
Contractor shall provide Conditioning Services of the Contracted Amounts (other than the 2015 Contracted Amount) to meet the Specifications and shall provide the Bagging and Treating Services as may be requested by Pioneer with the final Alfalfa Varieties and any Purchased Units to be delivered in Unit sizes or such other bulk containers as specified by Pioneer. On or before September 1 in each CY-1, Pioneer shall provide a conditioning request to Contractor that provides its then-current request for the applicable Contracted Amount by variety in substantially the form set forth on Exhibit G ; provided , however , that on or before November 1 in each such CY-1, Pioneer shall have the right to amend each such conditioning request to the extent that such Alfalfa Varieties have not yet been conditioned in the manner as originally set forth in such conditioning request; provided , further , that on or before January 1 in the calendar year immediately following each such CY-1, Pioneer shall have the right to amend further such conditioning request to the extent that such Alfalfa Varieties have not yet been conditioned in the manner as originally set forth in such conditioning request, as the same may have been amended. By way of example, Pioneer may request changing a previous request for bulk untreated or treated seed to fully conditioned, treated and bagged units, but may not request a change from fully conditioned, treated or untreated, bagged units to bulk conditioned units without an agreement in writing between the parties. As another example, Pioneer may request to change bulk untreated to bulk treated. Pioneer will furnish Contractor with bags, and tags as reasonably required
by Contractor to perform such services at no charge. Fungicide and inoculants seed treatment will be applied by Contractor as specified by Pioneer in Exhibit D . Contractor shall provide a full accounting, by lot and batch, of the amount of bags and tags used by Contractor, the number of Units Conditioned, Bagged and Treated and an identification of which products and rates were used, together with the seed treatment testing results. Contractor agrees that it will utilize the tagging equipment specified by Pioneer during the term of this Agreement for all Contracted Amounts. Pioneer shall instruct Contractor as to the required text for certification tags and labeling. Prior to and after performing Conditioning Services, Contractor shall thoroughly clean all equipment and facilities in its control used in the planting, harvesting and Conditioning Services of the Alfalfa Varieties.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have executed and delivered this Amendment as of the date first above written.
PIONEER HI-BRED
By:
/s/ Paul E. Schickler
|
By:
/s/ Matthew K. Szot
|
[Signature Page to First Amendment to the Contract Alfalfa Production Services Agreement]
Exhibit 10.10
FIRST AMENDMENT TO THE
ALFALFA DISTRIBUTION AGREEMENT
This First Amendment to the Alfalfa Distribution Agreement (this "Amendment" ) is made this 23rd day of July, 2015, by and among Pioneer Hi-Bred International, Inc., an Iowa corporation ( "Pioneer" ), and S&W Seed Company, a Nevada corporation ( "Company" ). Pioneer and Company are collectively referred to herein as the "Parties" and each individually as a "Party" .
WHEREAS, the Parties entered into that certain Alfalfa Distribution Agreement dated December 31, 2014 (the "Agreement" ).
WHEREAS , the Parties now wish to amend the Agreement as provided in this Amendment.
NOW, THEREFORE , for and in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Parties hereby agree as follows:
On or before September 1 in each SY-1, Pioneer shall provide a conditioning request to Company that provides its then-current request for Pioneer Products by variety in substantially the form set forth on Schedule 2.3.5 ; provided , however , that on or before November 1 in each such SY-1, Pioneer shall have the right to amend each such conditioning request to the extent that such Pioneer Products have not yet been conditioned in the manner as originally set forth in such conditioning request; provided , further , that on or before January 1 in the Sales Year immediately following each such SY-1, Pioneer shall have the right to amend further such conditioning request to the extent that such Pioneer Products have not yet been conditioned in the manner as originally set forth in such conditioning request, as the same may have been amended. By way of example, Pioneer may request changing a previous request for bulk untreated or treated seed to fully conditioned, treated and bagged units, but may not request a change from fully conditioned, treated or untreated, bagged units to bulk conditioned units without an agreement in writing between the parties. As another example, Pioneer may request to change bulk untreated to bulk treated.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have executed and delivered this Amendment as of the date first above written.
PIONEER HI-BRED
By:
/s/ Paul E. Schickler
|
By:
/s/ Matthew K. Szot
|
[Signature Page to First Amendment to the Alfalfa Distribution Agreement]
Exhibit 10.25
FIRST AMENDMENT TO THE
ASSIGNMENT AGREEMENT OF PLANT VARIETY CERTIFICATES, PLANT BREEDERS'
RIGHTS, MAINTENANCE RIGHTS AND REGISTRATION RIGHTS
This First Amendment to the Assignment Agreement of Plant Variety Certificates, Plant Breeders' Rights, Maintenance Rights and Registration Rights (this "Amendment" ) is made this 23rd day of April 2015, by and among Pioneer Hi-Bred International, Inc., an Iowa corporation ( "Seller" ), Pioneer Overseas Corporation, an Iowa corporation ( "POC" and, together with Seller, "Pioneer" ), and S&W Seed Company, a Nevada corporation ( "Buyer" ). Buyer, Seller and POC are collectively referred to herein as the "Parties" and each individually as a "Party" .
WHEREAS, the Parties entered into that certain Assignment Agreement of Plant Variety Certificates, Plant Breeders' Rights, Maintenance Rights and Registration Rights dated December 31, 2014 (the "Agreement" ).
WHEREAS , the Parties now wish to amend the Agreement as provided in this Amendment.
NOW, THEREFORE , for and in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the Parties hereby agree as follows:
[Signature Page Follows]
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IN WITNESS WHEREOF , the Parties have executed and delivered this Amendment as of the date first above written.
PIONEER HI-BRED
By:
/s/ Paul E. Schickler
|
By:
/s/ Matthew K. Szot
|
PIONEER OVERSEAS CORPORATION
By:
/s/ Paul E. Schickler
Name:
Paul E. Schickler
Title:
President
[
Signature Page to First Amendment to Assignment Agreement of Plant Variety Certificates,
Plant Breeders' Rights, Maintenance Rights and Registration Rights]
Exhibit 10.34
S&W SEED COMPANY
AMENDED AND RESTATED
2009 EQUITY INCENTIVE PLAN
S&W Seed Company (the "Company"), a Nevada corporation, hereby adopts the following Amended and Restated 2009 Equity Incentive Plan (the "Plan"). The 2009 Equity Incentive Plan was originally adopted by the Company's Board of Directors in October 2009 and by its stockholders in February 2010. This Amendment and Restatement was adopted by the Board in October 2012, subject to stockholder approval, which was granted on December 8, 2012.
1. PURPOSE OF THE PLAN
The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as employees, directors, consultants and/or advisors who are expected to contribute to the Company's success and to achieve long-term objectives that will benefit stockholders of the Company through the additional incentives inherent in the Awards hereunder.
2. DEFINITIONS
2.1. " Affiliate " shall mean (i) any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, provided each corporation in the unbroken chain (other than the Company) owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, and (ii) any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. The Board shall have the authority to determine (i) the time or times at which the ownership tests are applied, and (ii) whether "Affiliate" includes entities other than corporations within the foregoing definition.
2.2. " Award " shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Other Share-Based Award, Performance Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan.
2.3. " Award Agreement " shall mean any agreement, contract or other instrument or document evidencing any Award hereunder, whether in writing or through an electronic medium.
2.4. " Board " shall mean the board of directors of the Company.
2.5. "Cause" shall mean with respect to a Participant, the occurrence of any of the following: (i) the Participant commits an act of dishonesty in connection with the Participant's responsibilities as an Employee or Consultant; (ii) the Participant commits a felony or any act of moral turpitude; (iii) the Participant commits any willful or grossly negligent act that constitutes gross misconduct and/or injures, or is reasonably likely to injure, the Company or any Affiliate; or (iv) the Participant willfully and materially violates (A) any written policies or procedures of the Company or any Affiliate, or (B) the Participant's obligations to the Company or any Affiliate. The determination that a termination is for Cause shall be made by the Company in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.
2.6. "Change in Control" means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
(a) Any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (i) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (ii) solely because the level of ownership held by any Exchange Act Person (the "Subject Person") exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;
(b) There is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (i) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (ii) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;
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(c) The stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur;
(d) There is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an entity, more than 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or
(e) Individuals who, on the date this Plan is adopted by the Board, are members of the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board.
For avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.
Notwithstanding the foregoing, to the extent that the Company determines that any of the payments or benefits under this Plan that are payable in connection with a Change in Control constitute deferred compensation under Section 409A that may only be paid on a transaction that meets the standard of Treasury Regulation Section 1.409A-3(a)(5), the foregoing definition of Change in Control shall apply only to the extent the transaction also meets the definition used for purposes of Treasury Regulation Section 1.409A-3(a)(5), that is, as defined under Treasury Regulation Section 1.409A-3(i)(5).
Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.
2.7. " Code " shall mean the Internal Revenue Code of 1986, as amended from time to time.
2.8. " Committee " shall mean a committee consisting of members of the Board to whom authority has been delegated by the Board in accordance with Section 4.2(c). Initially, and until further action by the Board, "Committee" shall mean the Compensation Committee of the Board or a subcommittee thereof formed by the Compensation Committee to act as the Committee hereunder. The Committee shall consist of no fewer than two Directors, each of
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whom is (i) a "Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act, (ii) an "outside director" within the meaning of Section 162(m) of the Code, and (iii) an "independent director" for purpose of the rules of the applicable stock market or exchange on which the Shares are quoted or traded, to the extent required by such rules. The Board may designate one or more Directors as alternate members of the Committee who may replace any absent or disqualified member at any meeting of the Committee.
2.9. " Consultant " shall mean any consultant or advisor who is a natural person and who provides services to the Company or any Subsidiary, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company's securities in a capital-raising transaction and (ii) does not directly or indirectly promote or maintain a market for the Company's securities.
2.10. "Continuous Service" shall mean that the Participant's service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate from a Consultant to Employee shall not terminate a Participant's Continuous Service. Furthermore, a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant's service with the Company or an Affiliate, shall not terminate a Participant's Continuous Service. However, if the corporation for which a Participant is rendering service ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant's Continuous Service shall be considered to have terminated on the date such corporation ceases to qualify as an Affiliate. A leave of absence shall be treated as Continuous Service for purposes of vesting in an Award to such extent as may be provided in the Company's leave of absence policy or in the written terms of the Participant's leave of absence.
2.11. "Corporate Transaction" shall mean the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
(a) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(b) a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;
(c) the consummation of a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(d) the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
2.12. " Covered Employee " shall mean an employee of the Company or its Subsidiaries who is a "covered employee" within the meaning of Section 162(m) of the Code.
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2.13. " Director " shall mean a non-employee member of the Board.
2.14. "Disability" shall mean with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
2.15. " Dividend Equivalents " shall have the meaning set forth in Section 12.4.
2.16. " Employee " shall mean any employee of the Company or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such person becoming an employee of the Company or any Subsidiary.
2.17. " Exchange Act " shall mean the Securities Exchange Act of 1934, as amended.
2.18. "Exchange Act Person" shall mean any natural person, entity or "group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that "Exchange Act Person" shall not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; or (v) any natural person, entity or "group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the effective date of the Plan as set forth in Section 13, is the owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities.
2.19. " Fair Market Value " shall mean, with respect to Shares as of any date, (i) the closing sale price of the Shares reported as having occurred on the principal U.S. national securities exchange on which the Shares are listed and traded on such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the Shares are not listed on any U.S. national securities exchange but are quoted in an inter-dealer quotation system on a last sale basis, the final ask price of the Shares reported on such date, or, if there is no such sale on such date, then on the last preceding date on which a sale was reported; or (iii) if the Shares are not listed on a U.S. national securities exchange nor quoted on an inter-dealer quotation system on a last sale basis, the amount determined by the Committee to be the fair market value of the Shares as determined by the Committee in its sole discretion. The Fair Market Value of any property other than Shares shall mean the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee.
2.20. "Incentive Stock Option" shall mean an Option which when granted is intended to qualify as an incentive stock option for purposes of Section 422 of the Code.
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2.21. "Non-Employee Director" shall mean a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (" Regulation S-K ")), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
2.22. " Option " shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Board shall determine.
2.23. " Other Share-Based Award " shall have the meaning set forth in Section 8.1.
2.24. "Outside Director" shall mean a Director who either (i) is not a current employee of the Company or an "affiliated corporation" (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an "affiliated corporation" who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an "affiliated corporation," and does not receive remuneration from the Company or an "affiliated corporation," either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an "outside director" for purposes of Section 162(m) of the Code.
2.25. " Participant " shall mean an Employee, Director or Consultant who is selected by the Committee to receive an Award under the Plan.
2.26. " Payee " shall have the meaning set forth in Section 13.2.
2.27. " Performance Award " shall mean any Award of Performance Cash, Performance Shares or Performance Units granted pursuant to Article 9.
2.28. "Performance Cash" shall mean any cash incentives granted pursuant to Article 9 payable to the Participant upon the achievement of such performance goals as the Committee shall establish.
2.29. "Performance Criteria" shall mean one or more of the criteria specified in Section 10.2 and selected by the Board for purposes of establishing the Performance Goals for a Performance Period.
2.30. "Performance Goals" shall mean, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be set on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to internally generated business plans, approved by the Board, the performance of one or more comparable companies or the performance of one or more relevant indices. To the extent
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consistent with Section 162(m) of the Code and the regulations thereunder, the Board is authorized to make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (i) to exclude restructuring and/or other nonrecurring charges (including but not limited to the effect of tax or legal settlements); (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; (v) to exclude stock-based compensation expense determined under generally accepted accounting principles; (vi) to exclude any other unusual, non-recurring gain or loss or extraordinary item; (vii) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (viii) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (ix) to exclude the dilutive effects of acquisitions or joint ventures; (x) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (xi) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; (xii) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); (xiii) to reflect any partial or complete corporate liquidation; (xiv) to exclude the effect of in-process research and development expenses; and (xv) to exclude the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes. The Board also retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals.
2.31. " Performance Period " shall mean the period established by the Committee during which any performance goals specified by the Committee with respect to a Performance Award are to be measured.
2.32. " Performance Share " shall mean any grant pursuant to Article 9 of a unit valued by reference to a designated number of Shares, which value will be paid to the Participant upon achievement of such performance goals as the Committee shall establish.
2.33. " Performance Unit " shall mean any grant pursuant to Article 9 of a unit valued by reference to a designated amount of cash or property other than Shares, which value will be paid to the Participant upon achievement of such performance goals during the Performance Period as the Committee shall establish.
2.34. " Permitted Assignee " shall have the meaning set forth in Section 12.2.
2.35. " Restricted Stock " shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.
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2.36. " Restricted Stock Award " shall have the meaning set forth in Section 7.1.
2.37. "Restricted Stock Unit" means an Award that is valued by reference to a Share, which value may be paid to the Participant by delivery of such property as the Board shall determine, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Board may deem appropriate.
2.38. "Restricted Stock Unit Award" shall have the meaning set forth in Section 7.1
2.39. " Shares " shall mean the shares of common stock of the Company, par value $0.001 per share.
2.40. " Stock Appreciation Right " shall mean the right granted to a Participant pursuant to Article 6.
2.41. " Subsidiary " shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the relevant time each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
2.42. Substitute Awards " shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
2.43. " Vesting Period " shall mean the period of time specified by the Committee during which vesting restrictions for an Award are applicable.
3. SHARES SUBJECT TO THE PLAN
3.1. Number of Shares .
(a) Subject to adjustment as provided in Section 11.1, the number of shares of Common Stock issued or transferred and covered by outstanding awards granted under this Plan shall not in the aggregate exceed 1,250,000 shares of Common Stock, which may be Common Stock of original issuance or Common Stock held in treasury, or a combination thereof. Subject to the provisions of Section 11.1 regarding adjustments in the event of stock splits, reverse stock splits and other recapitalization events, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 1,250,000. The Company shall at all times during the term of the Plan, and while any Stock Awards are outstanding, retain as authorized and unissued Common Stock or as treasury Common Stock, at least the number of shares of Common Stock required under the provisions of this Plan, or otherwise assure itself of its ability to perform its obligations hereunder.
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(b) If any Shares subject to an Award are forfeited, an Award expires or otherwise terminates without issuance of Shares, or an Award is settled for cash (in whole or in part) or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award (including on payment in Shares on exercise of a Stock Appreciation Right), such Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for issuance under the Plan.
(c) In the event that (i) any Option or other Award granted hereunder is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, or (ii) withholding tax liabilities arising from such Option or other Award are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then the Shares so tendered or withheld shall be available for issuance under the Plan.
(d) Substitute Awards shall not reduce the Shares authorized for grant under the Plan or the applicable limitations for grant to a Participant under Section 10.4, nor shall Shares subject to a Substitute Award again be available for Awards under the Plan to the extent of any forfeiture, expiration or cash settlement as provided in paragraph (b) or (c) above. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors prior to such acquisition or combination.
(e) The Board may grant Incentive Stock Options to any employee of the Company or any present or future Parent or Subsidiary as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board, including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.
3.2. Source of Shares . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise.
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4. ELIGIBILITY AND ADMINISTRATION
4.1. Eligibility . Any Employee, Director or Consultant shall be eligible to be selected as a Participant. The Board may grant Substitute Awards to holders of equity awards issued by a company acquired by the Company or with which the Company combines.
4.2. Administration.
(a) The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee, as provided in Section 3(c).
(b) The Board or authorized Committee shall have the power, subject to, and within the limitations of, the express provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Employees, Directors or Consultants to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.
(c) The Board may delegate all or a portion of the administration of the Plan to a Committee, as follows:
(i) The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board or the Committee (as applicable). The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, re-vest in the Board some or all of the powers previously delegated.
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(ii) In the sole discretion of the Board, the Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3 of the Exchange Act. In addition, the Board in its sole discretion, may (1) delegate to a committee of one or more members of the Board who need not be Outside Directors the authority to grant Awards to eligible persons who are either (a) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Award, or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code, and/or (2) delegate to a committee of two or more members of the Board who need not be Non-Employee Directors the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.
(iii) Until further action is taken by the Board, the full powers and administration of the Plan are hereby delegated to the Compensation Committee of the Board, which shall be constituted to comply with the membership requirements of Section 16b-3 of the Exchange Act and Section 162(m) of the Code.
(d) The Board or Committee may delegate to one or more officers of the Company the authority to do one or both of the following (i) designate Employees of the Company or any of its Subsidiaries to be recipients of Options, Stock Appreciation Rights and, to the extent permitted by applicable law, other Awards and, to the extent permitted by applicable law, the terms thereof, and (ii) determine the number of shares of Common Stock to be subject to such Awards granted to such Employees; provided, however , that the Board resolutions regarding such delegation shall specify the total number of shares of Common Stock that may be subject to the Options granted by such Officer. Any such Stock Awards granted by Officers will be granted on the form of Award Agreement most recently approved for use by the Committee or the Board, unless otherwise provided in the resolutions approving the delegation authority. Notwithstanding anything to the contrary in this Section 4.2(d), the Board may not delegate to an Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section 2.19 above.
(e) All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
(f) Neither the Board nor any Committee shall have the authority to: (i) reprice any outstanding Awards under the Plan, or (ii) cancel and re-grant any outstanding Awards under the Plan, unless the stockholders of the Company have approved such an action within 12 months prior to such an event, provided, however, that this provision shall not prevent cancellations of Awards upon expiration or termination of such Awards and the return of the underlying shares of Common Stock to the Plan for future issuance pursuant to Section 3.1(b) hereof.
(g) In connection with the Company's desire to comply as broadly as possible with Section 162(m) of the Code, and subject to adjustment in the event of stock splits, reverse stock splits and other events of recapitalization as provided in Section 11.1 hereof, no individual
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Participant shall be eligible to be granted Awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the Fair Market Value of the Common Stock on the date of grant covering more than 500,000 shares of Common Stock in any calendar year.
5. OPTIONS
5.1. Grant of Options . Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Any Option shall be subject to the terms and conditions of this Article and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Board shall deem desirable. Options may be designated as Incentive Stock Options, as determined by the Board.
5.2. Award Agreements . All Options shall be evidenced by a written Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. The terms of Options need not be the same with respect to each Participant. Granting an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article may hold more than one Option granted pursuant to the Plan at the same time.
5.3. Option Price . Other than in connection with Substitute Awards, the option price per each Share purchasable under any Option granted pursuant to this Article shall not be less than 100% of the Fair Market Value of one Share on the date of grant of such Option; provided, however , that in the case of an Incentive Stock Option granted to a Participant who, at the time of the grant, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Subsidiary, the option price per share Shall be no less than 110% of the Fair Market Value of one Share on the date of grant. Other than pursuant to Section 11.1 and other than in connection with the grant of a Substitute Award, the Committee shall not without the approval of the Company's stockholders (a) lower the option price per Share of an Option after it is granted, (b) cancel an Option when the option price per Share exceeds the Fair Market Value of the underlying Shares in exchange for cash or another Award, and (c) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Shares are traded, if any.
5.4. Option Term . The term of each Option shall be fixed by the Board in its sole discretion; provided that no Option shall be exercisable after the expiration of 10 years from the date the Option is granted, except in the event of death or disability (other than with respect to an Incentive Stock Option); provided, however, that the term of the Option shall not exceed five years from the date the Option is granted in the case of an Incentive Stock Option granted to a Participant who, at the time of the grant, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Subsidiary.
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5.5. Exercise of Options .
(a) Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee (as defined in Section 12.2) thereof (or by the Participant's executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by giving notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased. The notice of exercise shall be in such form, made in such manner, and in compliance with such other requirements consistent with the provisions of the Plan as the Committee may prescribe from time to time
(b) Full payment of the exercise price of an Option shall be made at the time of exercise and shall be made (i) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (ii) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value), (iii) by delivery of other consideration having a Fair Market Value on the exercise date equal to the total purchase price, (iv) by withholding Shares otherwise issuable in connection with the exercise of the Option, (v) through any other method specified in an Award Agreement (including same-day sales through a broker), or (vi) any combination of any of the foregoing, as may be provided in the Award Agreement. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share.
5.6. Excess Grant over Incentive Stock Option Limit. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds $100,000, the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).
5.7. Transferability of Options. The Board may, in its sole discretion, impose such limitations on the transferability of Options as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:
(a) An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.
(b) Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order; provided, however , that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
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(c) Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. In the absence of such a designation, the executor or administrator of the Optionholder's estate shall be entitled to exercise the Option. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.
5.8. Termination of Continuous Service Generally. In the event that an Optionholder's Continuous Service terminates (other than for Cause or upon the Optionholder's death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three months following the termination of the Optionholder's Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.
5.9. Extension of Exercise Period. An Optionholder's Option Agreement may provide that if the exercise of the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three months after the termination of the Optionholder's Continuous Service (or such longer or shorter period specified in the Option Agreement) during which the exercise of the Option would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.
5.10. Termination Due to Disability. In the event that an Optionholder's Continuous Service terminates as a result of the Optionholder's Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date 12 months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.
5.11. Termination Due to Death. In the event that (i) an Optionholder's Continuous Service terminates as a result of the Optionholder's death, or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder's Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder's estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder's death, but only within the period ending on the earlier of (i) the date 12 months following the date of death
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(or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the Optionholder's death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate.
5.12 . Termination for Cause. In the event that an Optionholder's Continuous Service is terminated for Cause, the Option shall terminate immediately and cease to remain outstanding and the Option shall cease to be exercisable with respect to any shares of Common Stock (whether vested or unvested) at the time of such termination.
6. STOCK APPRECIATION RIGHTS
6.1. Grant and Exercise . The Committee may provide Stock Appreciation Rights (a) in tandem with all or part of any Option granted under the Plan or at any subsequent time during the term of such Option, (b) in tandem with all or part of any Award (other than an Option) granted under the Plan or at any subsequent time during the term of such Award, or (c) without regard to any Option or other Award in each case upon such terms and conditions as the Committee may establish in its sole discretion.
6.2. Terms and Conditions . Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following:
(a) Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise (or such amount less than such Fair Market Value as the Committee shall so determine at any time during a specified period before the date of exercise) over (ii) the grant price of the Stock Appreciation Right on the date of grant, which, except in the case of Substitute Awards or in connection with an adjustment provided in Section 11.1, shall not be less than the Fair Market Value of one Share on such date of grant of the Stock Appreciation Right.
(b) The Committee shall determine in its sole discretion whether payment of a Stock Appreciation Right shall be made in cash, in whole Shares or other property, or any combination thereof.
(c) The provisions of Stock Appreciation Rights need not be the same with respect to each recipient.
(d) The Committee may impose such other conditions or restrictions on the terms of exercise and the grant price of any Stock Appreciation Right, as it shall deem appropriate. A Stock Appreciation Right shall have (i) a grant price not less than 100% of the Fair Market Value of one Share on the date of grant (subject to the requirements of Section 409A of the Code with respect to a Stock Appreciation Right granted in tandem with, but subsequent to, an Option), and (ii) a term not greater than 10 years except in the event of death or disability (other than with respect to a Stock Appreciation Right granted in tandem with an Incentive Stock Option).
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(e) An Award Agreement may provide that if on the last day of the term of a Stock Appreciation Right the Fair Market Value of one Share exceeds the grant price per Share of the Stock Appreciation Right, the Participant has not exercised the Stock Appreciation Right or the tandem Option (if applicable) and neither the Stock Appreciation Right nor the Option has expired, the Stock Appreciation Right shall be deemed to have been exercised by the Participant on such day. In such event the Company shall make payment to the Participant in accordance with this Section, reduced by the number of Shares (or cash) required for withholding taxes; any fractional Share shall be settled in cash.
(f) Without the approval of the Company's stockholders, other than pursuant to Section 11.1 and other than in connection with the grant of a Substitute Award, the Committee shall not (i) reduce the grant price of any Stock Appreciation Right after the date of grant (ii) cancel any Stock Appreciation Right when the grant price per Share exceeds the Fair Market Value of the underlying Shares in exchange for cash or another Award, and (iii) take any other action with respect to a Stock Appreciation Right that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Shares are traded.
(g) In the event that a Participant's Continuous Service terminates (other than for Cause or upon the Participant's death or Disability), the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (i) the date three months following the termination of the Participant's Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.
(h) A Participant's Stock Appreciation Right Agreement may provide that if the exercise of the Stock Appreciation Right following the termination of the Participant's Continuous Service (other than upon the Participant's death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Stock Appreciation Right shall terminate on the earlier of (i) the expiration of a period of three months after the termination of the Participant's Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement) during which the exercise of the Stock Appreciation Right would not be in violation of such registration requirements, or (ii) the expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.
(i) In the event that a Participant's Continuous Service terminates as a result of the Participant's Disability, the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date 12 months following such termination of Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the
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expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.
(j) In the event that (i) a Participant's Continuous Service terminates as a result of the Participant's death, or (ii) the Participant dies within the period (if any) specified in the Stock Appreciation Right Agreement after the termination of the Participant's Continuous Service for a reason other than death, then the Stock Appreciation Right may be exercised (to the extent the Participant was entitled to exercise such Stock Appreciation Right as of the date of death) by the Participant's estate, by a person who acquired the right to exercise the Stock Appreciation Right by bequest or inheritance or by a person designated to exercise the Stock Appreciation Right upon the Participant's death, but only within the period ending on the earlier of (i) the date 12 months following the date of death (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of such Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after the Participant's death, the Stock Appreciation Right is not exercised within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate.
(k) In the event that a Participant's Continuous Service is terminated for Cause, the Stock Appreciation Right shall terminate immediately and cease to remain outstanding and the Stock Appreciation Right shall cease to be exercisable with respect to any shares of Common Stock (whether vested or unvested) at the time of such termination.
7. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
7.1. Grants . Awards of Restricted Stock and of Restricted Stock Units may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a "Restricted Stock Award" or "Restricted Stock Unit Award" respectively), and such Restricted Stock Awards and Restricted Stock Unit Awards shall also be available as a form of payment of Performance Awards and other earned cash-based incentive compensation. The Committee has absolute discretion to determine whether any consideration (other than services) is to be received by the Company or any Subsidiary as a condition precedent to the issuance of Restricted Stock or Restricted Stock Units.
7.2. Award Agreements . The terms of any Restricted Stock Award or Restricted Stock Unit Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of Restricted Stock Awards and Restricted Stock Unit Awards need not be the same with respect to each Participant.
7.3. Rights of Holders of Restricted Stock and Restricted Stock Units. Unless otherwise provided in the Award Agreement, beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a stockholder of the Company with respect to all Shares subject to the Award Agreement and shall
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have all of the rights of a stockholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares. A Participant receiving a Restricted Stock Unit Award shall not possess voting rights with respect to such Award. Except as otherwise provided in an Award Agreement any Shares or any other property (other than cash) distributed as a dividend or otherwise with respect to any Restricted Stock Award or Restricted Stock Unit Award as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock Award or Restricted Stock Unit Award. The Committee may provide in an Award Agreement that an Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to 83(b) of the Code with respect to an Award of Restricted Stock, the Participant shall be required to file promptly a copy of such election with the Company.
7.4. Issuance of Shares. Any Restricted Stock granted under the Plan may be evidenced in such manner as the Board may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock.
7.5. Transferability. Rights to acquire shares of Common Stock under the Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the Award Agreement remains subject to the terms of the Award Agreement.
7.6. Termination of Continuous Service. Except as otherwise provided in the applicable Award Agreement, such portion of the Award that has not vested will be forfeited upon the Participant's termination of Continuous Service.
8. OTHER SHARE-BASED AWARDS
8.1. Grants . Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other property ("Other Share-Based Awards"), including deferred stock units, may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Other Share-Based Awards shall also be available as a form of payment of other Awards granted under the Plan and other earned cash-based compensation.
8.2. Award Agreements . The terms of Other Share-Based Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of such Awards need not be the same with respect to each Participant.
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8.3. Payment. Except as may be provided in an Award Agreement, Other Share-Based Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee. Other Share-Based Awards may be paid in a lump sum or in installments or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code.
9. PERFORMANCE AWARDS
9.1. Grants . Performance Awards in the form of Performance Cash, Performance Shares or Performance Units, as determined by the Committee in its sole discretion, may be granted hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 10.2.
9.2. Award Agreements. The terms of any Performance Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan, including whether such Awards shall have Dividend Equivalents. The terms of Performance Awards need not be the same with respect to each Participant.
9.3. Terms and Conditions. The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. The amount of the Award to be distributed shall be conclusively determined by the Committee.
9.4. Payment. Except as provided in Section 11.1 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code.
10. CODE SECTION 162(m) PROVISIONS
10.1. Covered Employees . Notwithstanding any other provision of the Plan, if the Committee determines at the time a Restricted Stock Award, a Restricted Stock Unit Award, a Performance Award or an Other Share-Based Award is granted to a Participant who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Committee may provide that this Article 10 is applicable to such Award.
10.2. Performance Criteria .
(a) If the Committee determines that a Restricted Stock Award, a Restricted Stock Unit, a Performance Award or an Other Share-Based Award is intended to be subject to this Article 10, the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more
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objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one or any combination of the following, or such other performance criteria as may be later determined by the Committee: (i) net sales; (ii) revenue; (iii) revenue growth or product revenue growth; (iv) operating income (before or after taxes); (v) pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per share; net income (before or after taxes); (vi) return on equity; (vii) total shareholder return; (viii) return on assets or net assets; (ix) appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; (x) market share; gross profits; (xi) earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); (xii) economic value-added models or equivalent metrics; (xiii) comparisons with various stock market indices; (xiv) reductions in costs; (xv) cash flow or cash flow per share (before or after dividends); (xvi) return on capital (including return on total capital or return on invested capital); (xvii) cash flow return on investment; (xviii) improvement in or attainment of expense levels or working capital levels; (xiv) operating margins, gross margins or cash margin; (xx) year-end cash; (xxi) debt reduction; (xxii) stockholder equity; (xxiii) financing and other capital raising transactions (including sales of the Company's equity or debt securities); (xxiv) factoring transactions; sales or licenses of the Company's assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions; and (xxv) implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel.
(b) Such performance goals also may be based solely by reference to the Company's performance or the performance of a Subsidiary, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies.
(c) The Committee may also exclude charges related to an event or occurrence which the Committee determines should appropriately be excluded, including (i) restructuring and/or other nonrecurring charges (including but not limited to the effect of tax or legal settlements); (ii) exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; (v) stock-based compensation expense determined under generally accepted accounting principles; (vi) any other unusual, non-recurring gain or loss or extraordinary item; (vii) a response to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (viii) a response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (ix) the dilutive effects of acquisitions or joint ventures; (x) the assumption that any business divested by S&W achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (xi) the effect of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; (xii) the reflection of a corporate transaction,
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such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); (xiii) the reflection of any partial or complete corporate liquidation; (xiv) the effect of in-process research and development expenses; and (xv) the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes.
(d) Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, and the regulations thereunder.
10.3. Adjustments . Notwithstanding any provision of the Plan, with respect to any Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Other Share-Based Award that is subject to this Article 10, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals, except in the case of the death or disability of the Participant or as otherwise determined by the Committee in special circumstances.
10.4. Restrictions . The Committee shall have the power to impose such other restrictions on Awards subject to this Article 10 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for "performance-based compensation" within the meaning of Section 162(m) of the Code. In no event shall the number of Shares that are subject to performance-based vesting conditions and which are granted to any Participant in a single calendar year exceed 500,000 Shares, subject to adjustment in accordance with Section 11.1.
11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS
11.1 . Capitalization Adjustments . If any change is made in, or other events occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the effective date of the Plan set forth in Section 13 without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company (each a "Capitalization Adjustment")), the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3.1(a), (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3.1(a), (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Sections 4.2(g) and 10.4, and (iv) the class(es) and number of securities and price per share of stock subject to outstanding Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction "without receipt of consideration" by the Company.
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11.2. Dissolution or Liquidation . In the event of a dissolution or liquidation of the Company, all outstanding Awards (other than Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company's right of repurchase) shall terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company's repurchase option or subject to the forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Award is providing Continuous Service, provided, however , that the Board may, in its sole discretion, cause some or all Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.
11.3. Corporate Transaction . The following provisions shall apply to Awards in the event of a Corporate Transaction unless otherwise provided in a written agreement between the Company or any Affiliate and the holder of the Award or unless otherwise expressly provided by the Board at the time of grant of a Award:
(a) In the event of a Corporate Transaction, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation's parent company) may assume or continue any or all Awards outstanding under the Plan or may substitute similar stock awards for Awards outstanding under the Plan (including, but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Awards may be assigned by the Company to the successor of the Company (or the successor's parent company, if any), in connection with such Corporate Transaction. A surviving corporation or acquiring corporation may choose to assume or continue only a portion of a Stock Award or substitute a similar stock award for only a portion of a Stock Award. The terms of any assumption, continuation or substitution shall be set by the Board in accordance with the provisions of Section 4.2(b).
(b) In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue any or all outstanding Awards or substitute similar stock awards for such outstanding Awards, then with respect to Awards that have not been assumed, continued or substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction (referred to as the "Current Participants"), the vesting of such Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five days prior to the effective time of the Corporate Transaction), and such Awards shall terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Awards shall lapse (contingent upon the effectiveness of the
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Corporate Transaction). No vested Restricted Stock Unit Award shall terminate pursuant to this Section 11.3(b) without being settled by delivery of shares of Common Stock, their cash equivalent, any combination thereof, or in any other form of consideration, as determined by the Board, prior to the effective time of the Corporate Transaction.
(c) In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue any or all outstanding Awards or substitute similar stock awards for such outstanding Awards, then with respect to Awards that have not been assumed, continued or substituted and that are held by persons other than Current Participants, the vesting of such Awards (and, if applicable, the time at which such Award may be exercised) shall not be accelerated and such Awards (other than a Award consisting of vested and outstanding shares of Common Stock not subject to the Company's right of repurchase) shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction; provided, however , that any reacquisition or repurchase rights held by the Company with respect to such Awards shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction. No vested Restricted Stock Unit Award shall terminate pursuant to this Section 11.3(c) without being settled by delivery of shares of Common Stock, their cash equivalent, any combination thereof, or in any other form of consideration, as determined by the Board, prior to the effective time of the Corporate Transaction.
(d) Notwithstanding the foregoing, in the event a Award will terminate if not exercised prior to the effective time of a Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such Award may not exercise such Award but will receive a payment, in such form as may be determined by the Board, equal in value to the excess, if any, of (i) the value of the property the holder of the Award would have received upon the exercise of the Award immediately prior to the effective time of the Corporate Transaction, over (ii) any exercise price payable by such holder in connection with such exercise.
11.4. Change in Control. An Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the agreement for such Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant. An Award may vest as to all or any portion of the shares subject to the Award (i) immediately upon the occurrence of a Change in Control, whether or not such Award is assumed, continued, or substituted by a surviving or acquiring entity in the Change in Control, or (ii) in the event a Participant's Continuous Service is terminated, actually or constructively, within a designated period following the occurrence of a Change in Control. In the absence of such provisions, no such acceleration shall occur.
12. GENERALLY APPLICABLE PROVISIONS
12.1. Amendment and Termination of the Plan . The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the principal securities market on which the Shares are traded; provided that the Board may not, without the approval of the Company's stockholders, amend the Plan to (a) increase the number
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of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 11.1), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.3 or Section 6.2(e), (e) increase the maximum permissible term of any Option specified by Section 5.4 or the maximum permissible term of a Stock Appreciation Right specified by Section 6.2(d), or (f) increase the limitations set forth in Sections 3.1(a), 4.2(g) or 10.4. No amendments to, or termination of, the Plan shall impair the rights of a Participant under any Award previously granted without such Participant's consent.
12.2. Transferability of Awards . Except as provided elsewhere herein, no Award and no Shares that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution, and such Award may be exercised during the life of the Participant only by the Participant or the Participant's guardian or legal representative. To the extent and under such terms and conditions as determined by the Board, a Participant may assign or transfer an Award (each transferee thereof, a "Permitted Assignee") to (i) the Participant's spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings, (ii) to a trust for the benefit of one or more of the Participant or the persons referred to in clause (i), or (iii) to a partnership, limited liability company or corporation in which the Participant or the persons referred to in clause (i) are the only partners, members or stockholders; provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company's transfer agent in effectuating any transfer permitted under this Section.
12.3. Termination of Employment . The Board shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, continue to vest or be earned and the terms of such exercise, vesting or earning, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Subsidiary (including as a Director), whether by reason of death, disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant's employment or services will be determined by the Board, which determination will be final.
12.4. Deferral ; Dividend Equivalents . The Board shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award may, if so determined by the Board, be entitled to receive, currently or on a deferred basis, cash, stock or other property dividends in amounts equivalent to cash, stock or other property dividends on Shares ("Dividend Equivalents") with respect to the number of Shares covered by the Award, as determined by the Board, in its sole discretion. The Board may provide that such amounts and Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested and may provide that such amounts and Dividend Equivalents are subject to the same vesting or performance conditions as the underlying Award.
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13. MISCELLANEOUS
13.1. Award Agreements . Each Award Agreement shall either be (a) in writing in a form approved by the Board and executed by the Company by an officer duly authorized to act on its behalf, or (b) an electronic notice in a form approved by the Board and recorded by the Company (or its designee) in an electronic recordkeeping system used for the purpose of tracking one or more types of Awards as the Board may provide; in each case and if required by the Board, the Award Agreement shall be executed or otherwise electronically accepted by the recipient of the Award in such form and manner as the Board may require. The Board may authorize any officer of the Company to execute any or all Award Agreements on behalf of the Company. The Award Agreement shall set forth the material terms and conditions of the Award as established by the Board consistent with the provisions of the Plan.
13.2. Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a "Payee") net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Subsidiary shall have the right to withhold from wages or other amounts otherwise payable to such Payee such withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value), or by directing the Company to retain Shares (up to the Participant's minimum required tax withholding rate or such other rate that will not cause an adverse accounting consequence or cost) otherwise deliverable in connection with the Award.
13.3. Right of Discharge Reserved; Claims to Awards . Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee, Director or Consultant the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee, Director or Consultant at any time for any reason. Except as specifically provided by the Board, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee, Director or Consultant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees, Directors Consultants or Participants under the Plan.
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13.4. Substitute Awards . Notwithstanding any other provision of the Plan, the terms of Substitute Awards may vary from the terms set forth in the Plan to the extent the Board deems appropriate to conform, in whole or in part, to the provisions of the awards in substitution for which they are granted.
13.5. Cancellation of Award; Forfeiture of Gain . Notwithstanding anything to the contrary contained herein, an Award Agreement may provide that the Award shall be canceled if the Participant, without the consent of the Company, while employed by the Company or any Subsidiary or after termination of such employment or service, violates a non- competition, non-solicitation or non-disclosure covenant or agreement or otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary (including conduct contributing to any financial restatements or financial irregularities), as determined by the Board in its sole discretion. The Board may provide in an Award Agreement that if within the time period specified in the Agreement the Participant establishes a relationship with a competitor or engages in an activity referred to in the preceding sentence, the Participant will forfeit any gain realized on the vesting or exercise of the Award and must repay such gain to the Company.
13.6. Stop Transfer Orders . All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Board may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
13.7. Nature of Payments . All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Subsidiary, division or business unit of the Company. Any income or gain realized pursuant to Awards under the Plan constitutes a special incentive payment to the Participant and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any Subsidiary except as may be determined by the Board.
13.8. Other Plans . Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
13.9. Unfunded Status of the Plan. The Plan is intended to constitute an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Board may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
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13.10. Foreign Employees . Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees, Directors or Consultants providing services in the United States as may, in the judgment of the Board, be necessary or desirable in order to recognize differences in local law or tax policy. The Board also may impose conditions on the exercise or vesting of Awards in order to minimize the Company's obligation with respect to tax equalization for Employees or Consultants on assignments outside their home country.
13.11. Compliance with Section 409A of the Code. This Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. To the extent that an Award or the payment, settlement or deferral thereof is subject to Section 409A of the Code, the Award shall be granted, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including regulations or other guidance issued with respect thereto, except as otherwise determined by the Committee. Any provision of this Plan that would cause the grant of an Award or the payment, settlement or deferral thereof to fail to satisfy Section 409A of the Code shall be amended to comply with Section 409A of the Code on a timely basis, which may be made on a retroactive basis, in accordance with regulations and other guidance issued under Section 409A of the Code.
13.12 . Limitations on Liability . Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee, or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer, other employee, or agent of the Company. The Company will indemnify and hold harmless each director, officer, other employee, or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including attorneys' fees) or liability (including any sum paid in settlement of a claim with the Board's approval) arising out of any act or omission to act concerning this Plan unless arising out of such person's own fraud or bad faith.
13.13. Retroactive Effect. To the extent permitted by law, all of the provisions of this Amended and Restated Plan shall be made retroactive to all Awards granted prior to the date of the amendment and restatement.
13.14. Use of Proceeds . Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.
13.15. Investment Assurances . The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Award, (i) to give written assurances satisfactory to the Company as to the Participant's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and
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risks of exercising the Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Award for the Participant's own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise or acquisition of Common Stock under the Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
13.16. Securities Law Compliance . The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however , that this undertaking shall not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained. A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities laws.
13.17. Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement or the written terms of a Performance Cash Award, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Award by any of the following means (in addition to the Company's right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with a Stock Award; provided, however , that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Award agreement.
13.18. Electronic Delivery. Any reference herein to a "written" agreement or document shall include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company's intranet.
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13.19. Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant's termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.
13.20. Non-Exempt Employees. No Award granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant's death or Disability, (ii) upon a Corporate Transaction in which such Award is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant's retirement (as such term may be defined in the Participant's Stock Award agreement or another applicable agreement or in accordance with the Company's then current employment policies and guidelines), any vested Awards may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of a Award will be exempt from his or her regular rate of pay.
13.21. No Obligation to Notify or Minimize Taxes; Company may Pay Individual Tax Liability. The Company shall have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Award to the holder of such Stock Award. The foregoing notwithstanding, in the sole discretion of the Plan Administrator, the Company may, but is under no obligation to, agree to pay all or a portion of the individual tax liability of one or more Plan Participants whose awards do not satisfy the conditions for exemption under Code section 409A.
13.22. Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of an Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records ( e.g. , Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms ( e.g. , exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement or the written terms of a Performance Cash Award as a result of a clerical error in the papering of the Award agreement, the corporate records will control.
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13.23. Governing Law . The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Nevada, without reference to principles of conflict of laws, and construed accordingly.
13.24. Effective Date of Plan; Termination of Plan . The Plan originally became effective on the date of the adoption of the Plan by the Board, which was October 30, 2009. The amendment and restatement of the Plan became effective on October 22, 2012, subject to receipt of stockholder approval within 12 months thereafter. Awards may be granted under the Plan at any time and from time to time on or prior to the tenth anniversary of the effective date of the Plan (October 30, 2019), on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired.
13.25. Construction . As used in the Plan, the words " include " and " including ," and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words " without limitation ."
13.26. Captions . The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.
13.27. Severability . If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan.
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AMENDMENT NO. 1 TO
S&W SEED COMPANY
AMENDED AND RESTATED
2009 EQUITY INCENTIVE PLAN
(Effective September 20, 2013)
S&W Seed Company (the "Company"), a Nevada corporation, hereby adopts the following Amendment No. 1 to the Amended and Restated 2009 Equity Incentive Plan (the "Plan"). The Plan was originally adopted by the Company's Board of Directors in October 2009 and by its stockholders in February 2010. This Amendment No. 1 was adopted by the Board on September 20, 2013.
The Plan is hereby amended to add the following language to the end of Section 12.3 thereof:
Notwithstanding the above, the terms of a written agreement between the Company and the Participant, including but not limited to an employment agreement, will control over the terms of the Plan with the respect to the definitions of events of termination, except to the extent such conflicting terms could result in an unintended tax result of the Award under the Code.
AMENDMENT NO. 2 TO
S&W SEED COMPANY
AMENDED AND RESTATED
2009 EQUITY INCENTIVE PLAN
(Effective December 10, 2013)
S&W Seed Company (the "Company"), a Nevada corporation, hereby adopts the following Amendment No. 2 to the Amended and Restated 2009 Equity Incentive Plan (the "Plan"). The Plan, as amended and restated, was adopted by the Company's Board of Directors in October 22, 2012 and by its stockholders on December 8, 2012. This Amendment was approved by the Company's Board of Directors on September 20, 2013 and by its stockholders on December 10, 2013..
A. Section 3.1(a) of the Plan is amended and replaced in its entirety with the following:
3.1. Number of Shares .
(a) Subject to adjustment as provided in Section 11.1, the number of shares of Common Stock issued or transferred and covered by outstanding awards granted under this Plan shall not in the aggregate exceed 1,700,000 shares of Common Stock, which may be Common Stock of original issuance or Common Stock held in treasury, or a combination thereof. Subject to the provisions of Section 11.1 regarding adjustments in the event of stock splits, reverse stock splits and other recapitalization events, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be 1,700,000. The Company shall at all times during the term of the Plan, and while any Stock Awards are outstanding, retain as authorized and unissued Common Stock or as treasury Common Stock, at least the number of shares of Common Stock required under the provisions of this Plan, or otherwise assure itself of its ability to perform its obligations hereunder.
B. Except as specifically amended by this Amendment, the Plan shall remain in full force and effect in accordance with its terms.
FORM OF STOCK OPTION GRANT
S&W SEED COMPANY
GRANT NOTICE FOR 2009 AMENDED AND RESTATED EQUITY INCENTIVE PLAN
NON-QUALIFIED STOCK OPTIONS
FOR GOOD AND VALUABLE CONSIDERATION, S&W Seed Company, a Nevada corporation (the "Company"), hereby grants to Participant named below the nonqualified stock option (the "Option") to purchase any part or all of the number of shares of its common stock, par value $0.001 (the "Common Stock"), that are covered by this Option, as specified below, at the Exercise Price per share specified below and upon the terms and subject to the conditions set forth in this Grant Notice, the S&W Seed Company Amended and Restated 2009 Equity Incentive Plan (the "Plan") and the Standard Terms and Conditions (the "Standard Terms and Conditions") promulgated under such Plan, each as amended from time to time. This Option is granted pursuant to the Plan and is subject to and qualified in its entirety by the Standard Terms and Conditions.
Name of Participant:
Date of Grant:
Number of Shares of
Common Stock covered by Option:
Exercise Price Per Share: $
Expiration Date:
Vesting Schedule:
This Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. By accepting this Grant Notice, Participant acknowledges that he or she has received and read, and agrees that this Option shall be subject to, the terms of this Grant Notice, the Plan and the Standard Terms and Conditions.
S&W SEED COMPANY |
PARTICIPANT SIGNATURE |
By: _____________________________________________
|
___________________________________________
|
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S&W SEED COMPANY
STANDARD TERMS AND CONDITIONS FOR
NON-QUALIFIED STOCK OPTIONS
These Standard Terms and Conditions apply to the Options granted pursuant to the S&W Seed Company 2009 Amended and Restated Equity Incentive Plan, as amended from time to time (the "Plan"), which are identified as nonqualified stock options and are evidenced by a Grant Notice or an action of the Administrator that specifically refers to these Standard Terms and Conditions. In addition to these Terms and Conditions, the Option shall be subject to the terms of the Plan, which are incorporated into these Standard Terms and Conditions by this reference. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.
1. TERMS OF OPTION
S&W Seed Company, a Nevada corporation (the "Company"), has granted to the Participant named in the Grant Notice provided to said Participant herewith (the "Grant Notice") a nonqualified stock option (the "Option") to purchase up to the number of shares of the Company's common stock (the "Common Stock"), set forth in the Grant Notice. The exercise price per share and the other terms and subject to the conditions of the Option are set forth in the Grant Notice, these Standard Terms and Conditions (as amended from time to time), and the Plan. For purposes of these Standard Terms and Conditions and the Grant Notice, any reference to the Company shall include a reference to any Subsidiary.
2. NON-QUALIFIED STOCK OPTION
The Option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and will be interpreted accordingly.
3. EXERCISE OF OPTION
The Option shall not be exercisable as of the Grant Date set forth in the Grant Notice. After the Grant Date, to the extent not previously exercised, and subject to termination or acceleration as provided in these Standard Terms and Conditions and the Plan, the Option shall be exercisable only to the extent it becomes vested, as described in the Grant Notice or the terms of the Plan, to purchase up to that number of shares of Common Stock as set forth in the Grant Notice, provided that (except as set forth in Section 4.A below) the Participant remains employed with the Company and does not experience a Termination of Employment. The vesting period and/or exercisability of an Option may be adjusted by the Administrator to reflect the decreased level of employment during any period in which the Participant is on an approved leave of absence or is employed on a less than full time basis.
To exercise the Option (or any part thereof), the Participant shall deliver to the Company a "Notice of Exercise" in a form specified by the Administrator, specifying the number of whole shares of Common Stock the Participant wishes to purchase and how the Participant's shares of Common Stock should be registered (in the Participant's name only or in the Participant's and the Participant's spouse's names as community property or as joint tenants with right of survivorship).
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The exercise price (the "Exercise Price") of the Option is set forth in the Grant Notice. The Company shall not be obligated to issue any shares of Common Stock until the Participant shall have paid the total Exercise Price for that number of shares of Common Stock. The Exercise Price may be paid in Common Stock, cash or a combination thereof, including an irrevocable commitment by a broker to pay over such amount from a sale of the Common Stock issuable under the Option, the delivery of previously owned Common Stock, withholding of shares of Common Stock deliverable upon exercise of the Option, or in such other manners as may be permitted by the Administrator.
Fractional shares may not be exercised. Shares of Common Stock will be issued as soon as practical after exercise. Notwithstanding the above, the Company shall not be obligated to deliver any shares of Common Stock during any period when the Company determines that the exercisability of the Option or the delivery of shares of Common Stock hereunder would violate any federal, state or other applicable laws.
4. EXPIRATION OF OPTION
The Option shall expire and cease to be exercisable as of the earlier of (a) the Expiration Date set forth in the Grant Notice or (b) the date specified below in connection with the Participant's Termination of Employment:
A. Subject to the terms of any then-in effect employment agreement between the Company and the Participant, if the Participant's Termination of Employment is by reason of death, Disability or Retirement, the Participant (or the Participant's estate, beneficiary or legal representative) may exercise the Option (regardless of whether then vested or exercisable) until the date that is twelve months following the date of such Termination of Employment. To the extent an employment agreement varies this provision, the provision in the employment agreement shall prevail.
B. Subject to the terms of any then-in effect employment agreement, if the Participant's Termination of Employment is for any reason other than death, Disability, Retirement or Cause, the Participant may exercise any portion of the Option that is vested and exercisable at the time of such Termination of Employment until the date that is three months following the date of such Termination of Employment. Any portion of the Option that is not vested and exercisable at the time of such Termination of Employment (after taking into account any accelerated vesting under Section 12 of the Plan, if applicable) shall be forfeited and canceled as of the date of such Termination of Employment. To the extent an employment agreement varies this provision, the provision in the employment agreement shall prevail.
C. Subject to the terms of any then-in effect employment agreement, if the Participant's Termination of Employment is by the Company for Cause, the entire Option, whether or not then vested and exercisable, shall be immediately forfeited and canceled as of the date of such Termination of Employment. To the extent an employment agreement varies this provision, the provision in the employment agreement shall prevail.
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5. RESTRICTIONS ON RESALES OF SHARES ACQUIRED PURSUANT TO OPTION EXERCISE
The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares of Common Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and other optionholders and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers.
6. INCOME TAXES
The Company shall not deliver shares of Common Stock in respect of the exercise of any Option unless and until the Participant has made arrangements satisfactory to the Administrator to satisfy applicable withholding tax obligations. Unless the Participant pays the withholding tax obligations to the Company by cash or check in connection with the exercise of the Option, withholding may be effected, at the Company's option, by withholding Common Stock issuable in connection with the exercise of the Option (provided that shares of Common Stock may be withheld only to the extent that such withholding will not result in adverse accounting treatment for the Company). The Participant acknowledges that the Company shall have the right to deduct any taxes required to be withheld by law in connection with the exercise of the Option from any amounts payable by it to the Participant (including, without limitation, future cash wages).
7. NON-TRANSFERABILITY OF OPTION
Except as permitted by the Administrator or as permitted under the Plan, the Participant may not assign or transfer the Option to anyone other than by will or the laws of descent and distribution and the Option shall be exercisable only by the Participant during his or her lifetime. The Company may cancel the Participant's Option if the Participant attempts to assign or transfer it in a manner inconsistent with this Section 7.
8. OTHER AGREEMENTS SUPERSEDED
Subject to the terms of any then-effective employment agreement between the Company and the Participant, the Grant Notice, these Standard Terms and Conditions and the Plan constitute the entire understanding between the Participant and the Company regarding the Option. Any prior agreements, commitments or negotiations concerning the Option are superseded. The foregoing notwithstanding, if any provision of an employment agreement between the Company and the Participant varies from the terms set forth herein, the terms of the employment agreement shall prevail.
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NOTICE OF EXERCISE
S&W Seed Company
7108 North Fresno Street, Suite 380
Fresno, CA 93720
Ladies and Gentlemen:
1. Option . The person named below (the " Purchaser ") was granted options (the " Options ") to purchase shares of Common Stock (the " Shares ") of S&W Seed Company, a Nevada corporation (the " Company ") pursuant to the Company's 2009 Amended and Restated Equity Incentive Plan, as amended (the " Plan "), by Notice of Stock Option Grant (the " Grant Notice ") and its appended Standard Terms and Conditions (collectively, the " Stock Option Agreement ") attached thereto, as described below.
Purchaser's Name:
Date of Grant:
Number of Options Granted:
Exercise Price Per Share: $
Type of Option: Non-qualified stock options
2. Exercise of Option . I hereby elect to exercise my Options to purchase the following number of Shares, as authorized by the Grant Notice and the Stock Option Agreement dated as of _________, 201__.
Total Shares Purchased: _____________________________
Aggregate Exercise Price (number of options to be exercised times the exercise price of $4.76):
$ ______________________
3. Method of Payment . I have elected to exercise my Options in the following manner:
¨ Net exercise , pursuant to which the Company is irrevocably authorized to withhold that number of shares sufficient to pay the full exercise price for the shares purchased and any required withholding, delivering only the "net number of shares" based on the closing price of the Company's common stock on the last trading day prior to the date of this Notice
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Please attach irrevocable instructions to broker if utilizing same day exercise and sale.
¨ Cancellation of Indebtedness owed by the Company to me
¨ __________ shares of the Company's common stock, fair market value $____ per share held by me for a period of at least six months
Wire instructions for delivery of payment may be secured by contacting _______________________ or by telephone (___) _______.
4. Tax Withholding .
If you are an S&W employee, the Company is required to withhold an amount sufficient to pay the taxes on your exercise of your Options, unless you are exercising incentive stock options and are holding the Shares for at least six months. If either you or your broker is making a cash payment to the Company, you will be required to include with your purchase price the applicable tax payment or otherwise arrange for delivery of the payment. Please contact Matt Szot if you need assistance regarding tax withholding. Note also that some brokerage firms have a policy requiring the firm to withhold the maximum percentage of withholding regardless of the percentage that would be applicable to a particular option holder. If you are not an S&W employee, you are responsible for the payment of any taxes that accrue as a result of your exercise of your Options.
5. I desire to take title to the Shares as follows:
¨ Husband and wife, as community property
¨ Joint Tenants
¨ Other, please specify: ___________________________
6. Share Delivery Instructions .
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¨ Please arrange for a physical stock certificate to be delivered to me at the following address:
7. If I am married, my spouse has executed a Consent of Spouse in the form attached as Attachment 1.
I acknowledge and agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Plan and the Stock Option Exercise Agreement attached hereto as Exhibit A . The Plan and the Stock Option Exercise Agreement are incorporated herein by reference. Capitalized terms not defined herein shall have the meanings ascribed to them in the Plan or in the Stock Option Exercise Agreement, as applicable. I acknowledge receipt of a copy of the Plan, and the Stock Option Exercise Agreement, represent that I have carefully read and am familiar with their provisions, and hereby accept the Shares subject to all of their terms and conditions. I acknowledge that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares and that I should consult a tax adviser prior to such exercise or disposition.
[Remainder of Page Intentionally Left Blank]
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This Notice of Exercise and the Stock Option Exercise Agreement shall be effective as of the later date on which this Notice is executed by the Company and the Purchaser.
Very truly yours,
_______________________________________________________
(Signature)
Print Name: ______________________________________
Dated this ___ day of __________, 20__
Social Security Number: _________________________
(if applicable)
Address:
__________________________________________________
__________________________________________________
Receipt of the above is hereby acknowledged this __ day of __________, 20__.
S&W SEED COMPANY
By: ________________________________________________
Name: ___________________________________________
Title: _________________________________________
Attachments:
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ATTACHMENT 1
SPOUSAL CONSENT
The undersigned spouse of _________ (the "Purchaser") has read, understands, and hereby approves the Notice of Exercise (the "Exercise Notice") and the Stock Option Exercise Agreement between Purchaser and the Company (the "Exercise Agreement"). In consideration of the Company's granting my spouse the right to purchase the Shares as set forth in the Exercise Notice and the Agreement, the undersigned hereby agrees to be irrevocably bound by the Exercise Notice and the Exercise Agreement and further agrees that any community property interest I may have in the Shares shall similarly be bound by the Exercise Notice and the Exercise Agreement. The undersigned hereby appoints Purchaser as my attorney-in-fact with respect to any amendment or exercise of any rights under the Exercise Notice and the Agreement.
Dated: ________________________________________
______________________________________________________
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EXHIBIT A
S&W SEED COMPANY
2009 AMENDED AND RESTATED EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
1. EXERCISE OF OPTION .
1.1 Exercise . Pursuant to exercise of that certain option (the " Option ") granted to the Purchaser (the " Purchaser ") named on the Notice of Exercise (the " Exercise Notice ") to which this Stock Option Exercise Agreement is attached, under the 2009 Amended and Restated Equity Incentive Plan as may be amended from time to time (the " Plan "), of S&W Seed Company, a Nevada corporation (the " Company "), and subject to the terms and conditions of the Exercise Notice and this Stock Option Exercise Agreement (the " Exercise Agreement "), the Purchaser hereby purchases from the Company, and the Company hereby sells to the Purchaser, the Total Shares Purchased set forth in the Exercise Notice (the " Shares ") of the Company's Common Stock at the Exercise Price per Share set forth in the Exercise Notice (the " Exercise Price "). As used in this Exercise Agreement, the term " Shares " refers to the Shares purchased under the Exercise Notice and this Exercise Agreement and includes all securities received (i) in replacement of the Shares, (ii) as a result of stock dividends or stock splits with respect to the Shares, and (iii) all securities received in replacement of the Shares in a merger, recapitalization, reorganization or similar corporate transaction. Capitalized terms not defined herein shall have the meanings ascribed to them in the Plan or the Exercise Notice.
1.2 Payment . The Purchaser hereby delivers payment of the Exercise Price as set forth in the Exercise Notice.
2. DELIVERY .
2.1 Deliveries by Purchaser . The Purchaser hereby delivers to the Company (i) the Exercise Notice and (ii) the Exercise Price and payment or other provision for any applicable tax obligations as specified in the Exercise Notice.
2.2 Deliveries by the Company . Upon its receipt of the Exercise Price, payment or other provision for any applicable tax obligations and all the documents to be executed and delivered by the Purchaser to the Company under Section 2.1 above, the Company will issue a duly executed stock certificate evidencing the Shares in the name of the Purchaser to be delivered to the Purchaser in accordance with the delivery instructions provided by him.
3. RIGHTS AS A STOCKHOLDER . Subject to the terms and conditions of this Exercise Agreement, the Purchaser will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to the Purchaser until such time as the Purchaser disposes of the Shares .
4. TAX CONSEQUENCES . THE PURCHASER UNDERSTANDS THAT THE PURCHASER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF THE PURCHASER'S PURCHASE OR DISPOSITION OF THE SHARES. THE PURCHASER REPRESENTS: (i) THAT THE PURCHASER HAS CONSULTED WITH ANY TAX ADVISER
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THAT THE PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (ii) THAT THE PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE . THE PURCHASER SHOULD CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES .
4.1 Exercise of Incentive Stock Option . If the Option qualifies as an ISO, there will be no regular U.S. Federal income tax liability or applicable state income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as a tax preference item for U.S. Federal alternative minimum tax purposes and may subject the Purchaser to the alternative minimum tax in the year of exercise.
4.2 Exercise of Nonqualified Stock Option . If the Option does not qualify as an ISO, there may be a regular U.S. Federal income tax liability and an applicable state income tax liability upon the exercise of the Option. The Purchaser will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If the Purchaser is or was an employee of the Company, the Company may be required to withhold from the Purchaser's compensation or collect from the Purchaser and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.
4.3 Disposition of Shares . The following tax consequences may apply upon disposition of the Shares.
(a) Incentive Stock Options . If the Shares are held for more than twelve (12) months after the date of purchase of the Shares pursuant to the exercise of an ISO and are disposed of more than two (2) years after the Date of Grant as set forth in the Grant Notice, any gain realized on disposition of the Shares will be treated as long term capital gain for U.S. federal and applicable state income tax purposes. If Vested Shares purchased under an ISO are disposed of within either of the applicable one (1) or two (2) year holding periods, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates in the year of the disposition) to the extent of the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price.
(b) Nonqualified Stock Options . If the Shares are held for more than twelve (12) months after the date of purchase of the Shares pursuant to the exercise of an NQSO, any gain realized on disposition of the Shares will be treated as long-term capital gain.
(c) Withholding . The Company may be required to withhold from the Purchaser's compensation or collect from the Purchaser and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income.
5. COMPLIANCE WITH LAWS AND REGULATIONS . The issuance and transfer of the Shares will be subject to and conditioned upon compliance by the Company and the Purchaser with all applicable state and U.S. Federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company's Common Stock may be listed or quoted at the time of such issuance or transfer.
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Without limiting the generality of the foregoing, if the Purchaser is an affiliate of the Company, such Purchaser agrees that all Shares purchased upon exercise of the Option shall be considered "control stock" as that term is defined in Rule 144 promulgated under the Securities Act of 1933, as amended and as such, must either be sold in accordance with Rule 144 as it applies to control securities or sold pursuant to a reoffer prospectus filed with the Securities and Exchange Commission as part of an effective registration statement on Form S-8.
6. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this Exercise Agreement. This Exercise Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. This Exercise Agreement will be binding upon the Purchaser and the Purchaser's heirs, executors, administrators, legal representatives, successors and assigns.
7. GOVERNING LAW; SEVERABILITY . This Exercise Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California. If any provision of this Exercise Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
8. NOTICES . Any notice required to be given or delivered to the Company shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to the Purchaser shall be in writing and addressed to the Purchaser at the address indicated in the Exercise Notice or to such other address as the Purchaser may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: (i) personal delivery or delivery by electronic mail to an address the sending knows is a valid and active address of the recipient; (ii) three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); or (iii) one (1) business day after deposit with any return receipt express courier (prepaid).
9. FURTHER INSTRUMENTS . The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of the Exercise Notice and/or this Exercise Agreement.
10. HEADINGS . The captions and headings of this Exercise Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Exercise Agreement. All references herein to Sections will refer to Sections of this Exercise Agreement.
11. ENTIRE AGREEMENT . The Plan, the Grant Notice and its appended Stock Option Standard Terms and Conditions, the Exercise Notice and this Exercise Agreement, together with all Exhibits thereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of the Exercise Notice and this Exercise Agreement, and supersede all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter hereof.
Dated this __________________, 20__.
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FORM OF RESTRICTED STOCK UNIT GRANT
S&W SEED COMPANY
AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
Restricted Stock Unit Grant
S&W Seed Company, a Nevada corporation (the "Company"), hereby grants you a restricted stock unit ("RSU") award ("Award") pursuant to the Company's Amended and Restated 2009 Equity Incentive Plan (the "Plan"), for the number of shares of the Company's Common Stock, $0.001 par value per share ("Common Stock") set forth below. All capitalized terms in the attached Restricted Stock Unit Agreement ("Agreement") that are not defined in this Agreement have the meanings given to them in the Plan. This Award is subject to all of the terms and conditions of the Plan, which is incorporated into this Agreement by reference. This Agreement is not meant to interpret, extend, or change the Plan in any way, or to represent the full terms of the Plan. If there is any discrepancy, conflict or omission between this Agreement and the provisions of the Plan, the provisions of the Plan shall apply.
Name of Participant:
Number of Shares:
Date of Grant:
First Vesting Date:
Subject to the forfeiture provisions set forth in this Agreement, this Award will vest as follows:
By accepting this Award, you agree to all of the terms and conditions described in the attached Agreement. You and the Company agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the intent of the attached Agreement. You are also acknowledging receipt of this Grant the attached Agreement and a copy of the prospectus describing the Plan and the Restricted Stock Units.
If for any reason, you wish to not accept this Award, please notify the Company in writing within 30 calendar days of the date of this Award, attention Corporate Secretary.
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S&W SEED COMPANY
AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
1 Effect of Termination of Employment . In the event of your Termination prior to the last Vesting Date, the following provisions will govern the vesting of this Award:
(a) In the event of your Termination prior to the Vesting Date for any reason other than as expressly set forth in the other subsections of this Section 1 of the Agreement, this Award will terminate without having vested as to any of the unvested Restricted Stock Units subject to this Award.
(b) In the event of your Termination by the Company prior to the Vesting Date (i) without cause, (ii) due to a Change of Control; or (iii) due to your death or Disability, this Award will vest in full and be non-forfeitable immediately as of the Termination Date. For purposes of this Award, Change of Control and Disability are defined in the Plan.
(c) In the event of your voluntary Termination prior to the Vesting Date, all unvested Restricted Stock Units will be cancelled in on the date of Termination.
(d) In the event of your Termination for Cause by the Company or its successor, prior to the Vesting Date, all unvested Restricted Stock Units will be cancelled on the date of Termination. For purposes of this Award, Termination for Cause is defined in the Plan.
In the event any of the foregoing terms are inconsistent with the terms of an employment agreement between you and the Company in effect at the time of your Termination, the terms of the employment agreement shall supersede the Termination provisions of this Agreement.
2. Issuance of Shares under this Award : The Company will issue you the Shares subject to this Award on the Vesting Date. Until the date the Shares are issued to you, you will have no rights as a stockholder of the Company.
3.
Rights as a Stockholder; Dividend Equivalent Rights
. You shall have no voting or other rights as
a stockholder with respect to the Shares of Common Stock underlying the Award until such Shares of Common Stock have been issued to you. Notwithstanding the preceding sentence, you
shall be entitled to receive payment of the equivalent of any and all dividends declared by the Company on its Common Stock on each date on which dividends are paid on and after the date of
grant of the Award in an amount equal to the amount of such dividends multiplied by the number of Shares of Common Stock underlying the then outstanding portion of the Award. These
dividend equivalents shall be paid upon the later of (a) the date dividends are paid to the common stockholders of the Company, or (b) the date the Restricted Stock Units with respect to which
such dividend equivalents are payable become vested (it being understood that
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no dividend equivalents will be paid with respect to Shares underlying any Restricted Stock Units that do not vest, but that dividend equivalent rights equal to the dividends declared on the Company's Common Stock from and after the date of grant of the unvested Restricted Stock Units shall be paid as and when such Restricted Stock Units vest).
4. Withholding Taxes . This Award is generally taxable for purposes of United States federal income and employment taxes upon vesting based on the Fair Market Value on Vesting Date, which taxation may not be applicable to you as a non-U.S. resident. To the extent required by applicable federal, state or other law, you shall make arrangements satisfactory to the Company for the payment and satisfaction of any income tax, social security tax, payroll tax, payment on account or other tax related to withholding obligations that arise under this Award and, if applicable, any sale of Shares of the Common Stock. The Company shall not be required to issue Shares of the Common Stock pursuant to this Award or to recognize any purported transfer of Shares of the Common Stock until such obligations are satisfied. Unless otherwise agreed to by the Company and you, these obligations will be satisfied by the Company withholding a number of Shares of Common Stock that would otherwise be issued under this Award that the Company determines has a Fair Market Value sufficient to meet the tax withholding obligations. For purposes of this Award, Fair Market Value is defined in the Plan.
You are ultimately liable and responsible for all taxes owed by you in connection with this Award, regardless of any action the Company takes or any transaction pursuant to this section with respect to any tax withholding obligations that arise in connection with this Award. The Company makes no representation or undertaking regarding the treatment of any tax withholding in connection with the grant, issuance, vesting or settlement of this Award or the subsequent sale of any of the Shares of Common Stock underlying the Shares that vest. The Company does not commit and is under no obligation to structure this Award to reduce or eliminate your tax liability.
5. Disputes : Any question concerning the interpretation of this Agreement, any adjustments to made thereunder, and any controversy that may arise under this Agreement, shall be determined by the Committee in accordance with its authority under Section __ of the Plan. Such decision by the Committee shall be final and binding.
6. Other Matters :
(a) The Award granted to an employee in any one year, or at any time, does not obligate the Company or any Subsidiary or other affiliate of the Company to grant an award in any future year or in any given amount and should not create an expectation that the Company (or any Subsidiary or other affiliate) might grant an award in any future year or in any given amount.
(b) Nothing contained in this Agreement creates or implies an employment contract or term of employment or any promise of specific treatment upon which you may rely.
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(c) Notwithstanding anything to the contrary in this Agreement, the Company may reduce your Award if you change classification from a full-time employee to a part- time employee.
(d) Except as otherwise set forth below, this Award is not part of your employment contract (if any) with the Company, your salary, your normal or expected compensation, or other remuneration for any purposes, including for purposes of computing benefits, severance pay or other termination compensation or indemnity. The foregoing notwithstanding, this Award shall vest in accordance with the terms of your employment agreement in the event of your termination without cause or upon a change of control.
(e) This Agreement shall be governed by the laws of the State of Nevada without regard to choice of law principles of Nevada or other jurisdictions. Any action, suit, or proceeding relating to this Agreement or the Award granted hereunder shall be brought in the state or federal courts of competent jurisdiction in Fresno County in the State of California.
(f) It is intended that the terms of this Award will not result in the imposition of any tax liability pursuant to Section 409A of the Internal Revenue Code (the "Code"). This Agreement shall be construed and interpreted consistent with that intent. The foregoing notwithstanding, if this Award is deemed to be governed by Section 409A(a)(2)(B)(i) of the Code relating to payments made to certain "key employees" of certain publicly-traded companies), in such event, any Shares to which you would otherwise be entitled during the six month period following the date of your "separation from service" under Section 409A (or shorter period ending on the date of your death following such separation) will instead be issued on the first business day following the expiration of the applicable delay period.
(g) The Company may, in its sole discretion, deliver any documents related to the Award by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive all applicable documentation by electronic delivery and to participate in the Plan through an online system established or maintained by the Company or a third party vendor designated by the Company.
This Agreement (including the Plan, which is incorporated by reference) constitutes the entire agreement between you and the Company with respect to this Award, and supersedes all prior agreements or promises with respect to the Award. Except as provided in the Plan, this Agreement may be amended only by a written document signed by the Company and you. Subject to the terms of the Plan, the Company may assign any of its rights and obligations under this Agreement, and this Agreement shall be binding on, and inure to the benefit of, the successors and assigns of the Company. Subject to the restrictions on transfer of an Award described in Section 12.2 of the Plan, this Agreement shall be binding on your permitted successors and assigns (including heirs, executors, administrators and legal representatives). All notices required under this Agreement or the Plan must be mailed or hand-delivered, (1) in the case of the Company, to the Company at its address set forth in this Agreement, or at such other address designated in writing by the Company to you, and (2) in the case of you, at the address recorded in the books and records of the Company as your then current home address.
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The Company has signed this Award Agreement effective as the Date of Grant.
S&W SEED COMPANY
7108 North Fresno Street, Suite 380
Fresno, CA 93720
By: _____________________________________
Name
Title
Agreed and accepted this ___ day of __________, 201__:
___________________________________________
Name
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FORM OF RESTRICTED STOCK GRANT
S&W SEED COMPANY
2009 EQUITY INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement"), dated as of _____________ (the "Date of Grant"), is made by and between S&W Seed Company, a Nevada corporation (the "Company"), and Mark S. Grewal (the "Grantee").
WHEREAS, the Company has adopted the S&W Seed Company 2009 Equity Incentive Plan (the "Plan"), pursuant to which the Company may grant Restricted Stock;
WHEREAS, the Company desires to grant to the Grantee the number of shares of Restricted Stock provided for herein;
NOW, THEREFORE, in consideration of the recitals and the mutual agreements herein contained, the parties hereto agree as follows:
Section 1. Grant of Restricted Stock Award
(a) Grant of Restricted Stock. The Company hereby grants to the Grantee thirty-three thousand (33,000) shares (the "Shares") of Restricted Stock (the "Award") on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan.
(b) Incorporation of Plan; Capitalized Terms; Definitions.
(i) The provisions of the Plan are hereby incorporated herein by reference. Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan. Consistent with the terms of the Plan, the Administrator shall have final authority to interpret and construe the Plan and this Agreement and to make any and all determinations thereunder, and its decision shall be binding and conclusive upon the Grantee and his legal representative in respect of any questions arising under the Plan or this Agreement.
(ii) Any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan.
Section 2. Terms and Conditions of Award
The grant of Restricted Stock provided in Section 1(a) shall be subject to the following terms, conditions and restrictions:
(a) Ownership of Shares. Subject to the restrictions set forth in the Plan and this Agreement (including, without limitation, the restriction in Section 2(b) below), the Grantee shall possess all incidents of ownership of the Restricted Stock granted hereunder, including the right to vote the Shares.
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(b) Dividends. The Restricted Stock shall not be entitled to receipt of any dividends, whether cash, stock or other property, until the shares have vested.
(c) Restrictions. The Restricted Stock and any interest therein, may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, during the Restricted Period. Any attempt to dispose of any Restricted Stock in contravention of the above restriction shall be null and void and without effect.
(d) Certificate; Book Entry Form; Legend. The Company shall issue the Shares of Restricted Stock either (i) in certificate form or (ii) in book entry form, registered in the name of the Grantee, with legends, or notations, as applicable, referring to the terms, conditions and restrictions applicable to the Award. The Grantee agrees that any certificate issued for Restricted Stock prior to the lapse of any outstanding restrictions relating thereto shall be inscribed with the following legend:
This certificate and the shares of stock represented hereby are subject to the terms and conditions, including forfeiture provisions and restrictions against transfer (the "Restrictions"), contained in the S&W Seed Company 2009 Equity Incentive Plan and an agreement entered into between the registered owner and the Company. Any attempt to dispose of these shares in contravention of the Restrictions, including by way of sale, assignment, transfer, pledge, hypothecation or otherwise, shall be null and void and without effect.
(e) Lapse of Restrictions. Subject to the provisions of this Agreement and the Plan, [describe vesting]. Upon the lapse of restrictions relating to any Shares of Restricted Stock, the Company shall, as applicable, either remove the notations on any such Shares of Restricted Stock issued in book-entry form or deliver to the Grantee or the Grantee's personal representative a stock certificate representing a number of Shares of Common Stock, free of the restrictive legend described in Section 2(d), equal to the number of Shares of Restricted Stock with respect to which such restrictions have lapsed. If certificates representing such Restricted Stock shall have theretofore been delivered to the Grantee, such certificates shall be returned to the Company, complete with any necessary signatures or instruments of transfer prior to the issuance by the Company of such unlegended Shares of Common Stock.
(f) Termination of Employment. In the event of the termination of Grantee's employment or service with the Company, Parent of any Subsidiary:
(i) for any reason other than for "cause" prior to the lapsing of the restrictions in accordance with Section 2(e) hereof with respect to any Shares of the Restricted Stock granted hereunder, all Shares of Restricted Stock shall vest in full and be non-forfeitable on the date of such termination.
(ii) for "cause" prior to the lapsing of the restrictions in accordance with Section 2(e) hereof with respect to any Shares of the Restricted Stock granted hereunder, such portions of the Award that have not yet vested shall be forfeited by the Grantee as of the date of termination. Shares of Restricted Stock forfeited pursuant to this Section 2(f) shall be transferred to, and reacquired by, the Company without payment of any consideration by the Company, and neither the Grantee nor any of the Grantee's successors, heirs, assigns or personal representatives shall thereafter have any further rights or interests in such shares. If certificates for any such shares containing restrictive legends shall have theretofore been delivered to the Grantee (or his/her legatees or personal representative), such certificates shall be returned to the Company, complete with any necessary signatures or instruments of transfer.
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For purposes of this Section 2(f), termination for "cause" generally means termination as a result of Grantee's willful gross misconduct that is materially adverse to the Company, Grantee's willful violation of a federal or state law, rule or regulation applicable to the business of the Company that is materially adverse to the Company, Grantee's conviction for, or entry of a guilty or no contest plea to, a felony. Grantee's termination of employment or service will not be considered to be for Cause unless it is approved by a majority vote of the members of the Board of Directors or an independent committee thereof. It is understood that good faith decisions of the Grantee relating to the conduct of the Company's business or the Company's business strategy will not constitute "cause."
(g) Corporate Transactions . In the event of (i) a "change of control," all Shares of Restricted Stock shall vest in full and be non-forfeitable immediately before such event or the date of termination in connection therewith, whichever is applicable; or (ii) a proposed dissolution or liquidation of the Company, the Award will terminate and be forfeited immediately prior to the consummation of such proposed transaction, unless otherwise provided by the Administrator. For purposes of this Section 2(g), "change of control" shall the sale or substantially all of the assets of the Company or the acquisition of the Company by another entity by means of consolidation or merger after which the then current stockholders of the Company hold less than 50% of the voting power of the surviving corporation provided that a reincorporation of the Company shall not be a change of control.
(h) Income Taxes. Except as provided in the next sentence, the Company shall withhold and/or reacquire a number of Shares having a Fair Market Value equal to the taxes that the Company determines it is required to withhold under applicable tax laws with respect to the Restricted Stock (with such withholding obligation determined based on any applicable minimum statutory withholding rates), in connection with the vesting of the Restricted Stock. In the event the Company cannot (under applicable legal, regulatory, listing or other requirements) satisfy such tax withholding obligation in such method, the Grantee makes a Section 83(b) election pursuant to Section 2(j) below, or the parties otherwise agree in writing, then , the Company may satisfy such withholding by any one or combination of the following methods: (i) by requiring the Grantee to pay such amount in cash or check; (ii) by deducting such amount out of any other compensation otherwise payable to the Grantee; and/or (iii) by allowing the Grantee to surrender shares of Common Stock of the Company which (a) in the case of shares initially acquired from the Company (upon exercise of a stock option or otherwise), have been owned by the Grantee for such period (if any) as may be required to avoid a charge to the Company's earnings, and (b) have a Fair Market Value on the date of surrender equal to the amount required to be withheld. For these purposes, the Fair Market Value of the Shares to be withheld or repurchased, as applicable, shall be determined on the date that the amount of tax to be withheld is to be determined.
(j) Section 83(b) Election . The Grantee hereby acknowledges that he may file an election pursuant to Section 83(b) of the Code to be taxed currently on the Fair Market Value of the Shares of Restricted Stock (less any purchase price paid for the Shares), provided that such election must be filed with the Internal Revenue Service no later than thirty (30) days after the grant of such Restricted Stock. The Grantee will seek the advice of her own tax advisors as to the advisability of making such a Section 83(b) election, the potential consequences of making such an election, the requirements for making such an election, and the other tax consequences of the Restricted Stock award under federal, state, and any other laws that may be applicable. The Company and its affiliates and agents have not and are not providing any tax advice to the Grantee.
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Section 3. Miscellaneous
(a) Notices. Any notices, requests, demands, and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one (1) day after being sent overnight by a well-established commercial overnight service, or (c) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:
to the Company :
Attn: Chairman of the Compensation Committee
c/o Corporate Secretary
S&W Seed Company
7108 North Fresno Street, Suite 380
Fresno, CA 93720
If to Grantee :
at the last residential address known by the Company.
(b) No Right to Continued Employment. Nothing in the Plan or in this Agreement shall confer upon the Grantee any right to continue in the employ of the Company, a Parent or any Subsidiary or shall interfere with or restrict in any way the right of the Company, Parent or any Subsidiary, which is hereby expressly reserved, to remove, terminate or discharge the Grantee at any time for any reason whatsoever, with or without Cause and with or without advance notice.
(c) Bound by Plan. By signing this Agreement, the Grantee acknowledges that he has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all the terms and provisions of the Plan.
(d) Adjustments. The Award shall be adjusted by the Committee at the same time as adjustments are made in accordance with Section 3.1(e) of the Plan with regard to "Adjustments Upon Change in Capitalization, Corporate Transactions" in a manner similar to, and subject to, the same requirements under Section 3.1(e) of the Plan. For purposes of this Award, the term "stock dividend" under Section 3.1(e) of the Plan shall include dividends or other distributions of the stock of the Subsidiaries of the Company.
(e) Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and of the Grantee and the beneficiaries, executors, administrators, heirs and successors of the Grantee.
(f) Invalid Provision. The invalidity or unenforceability of any particular provision thereof shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision had been omitted.
(g) Modifications. No change, modification or waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the parties hereto.
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(h) Entire Agreement. This Agreement, the Plan and the Offer Letter contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and therein and supersede all prior communications, representations and negotiations in respect thereto.
(i) Governing Law. This Agreement and the rights of the Grantee hereunder shall be construed and determined in accordance with the laws of the State of California.
(j) Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.
(k) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the ___ day of _________, 201__.
S&W SEED COMPANY
By: _____________________________________
Name
Title
GRANTEE
________________________________________
[SIGNATURE PAGE - RESTRICTED STOCK AWARD AGREEMENT]
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Exhibit 10.39
CONFIDENTIAL MATERIAL OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
"***" ASTERISKS DENOTE SUCH OMISSIONS.
Confidential
COLLABORATION AGREEMENT
This COLLABORATION AGREEMENT (the "Agreement") is entered into as from May 28th , 2015 (the "Effective Date") by and between S&W Seed Company , 7018 N. Fresno, Suite 380, Fresno, CA 93720 (hereinafter "S&W") and CALYXT Inc. , a company having its head office at 600 County Road D West, Suite 8, New Brighton, MN 55112, USA (hereinafter "Calyxt");
Each of S&W and Calyxt shall individually be referred to as a "Party" and collectively as the "Parties".
PREAMBLE
Whereas,
Calyxt is a biotechnological company with expertise in plant genome engineering utilizing its innovative breeding and targeted genome editing technology to create traits of value and products for the agricultural and food industry;Whereas,
S&W is a breeding, production and processing company for the alfalfa and stevia industries;Whereas
, S&W and Calyxt (previously known as Cellectis Plant Sciences Inc.) entered into discussions on June 4 th 2014 through the execution of a Mutual Confidential Disclosure Agreement (the "MCDA") regarding a collaboration between them for the development and commercialization of products involving genome-modified Alfalfa for use as human food and animal feed sources (the "Collaboration");Whereas , confirming their interest for the Collaboration, the Parties entered into a Material Transfer Agreement on September 19 th 2014 (the "MTA") for the transfer of the Material (as further defined hereinafter) together with associated know-how proprietary to S&W to Calyxt for certain research, testing, and experimental purposes within the frame of their intended Collaboration, and the Parties executed a Letter Of Intent on October 22 nd , 2014 (the "LOI") setting forth certain principles and obligations regarding the negotiation of this Agreement;
Whereas, the present Agreement is the Definitive Agreement referred to in the LOI which is to set forth the definitive terms and conditions of the Parties' Collaboration, terminate and replace any and all previous agreement entered into between the Parties in relation to the Collaboration;
NOW THEREFORE, and in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and between the Parties as follows:
1. DEFINITIONS
For the purpose of this Agreement, the following terms shall have the meanings defined herein, whether used in the singular or the plural:
CONFIDENTIAL MATERIAL OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
"***" ASTERISKS DENOTE SUCH OMISSIONS.
Confidential
1.1. "Affiliate" means any corporation, organization, association or other entity that, at the Effective Date or subsequently, Controls, is Controlled by, or is under common Control with the Party in question.
1.2. "
Background Intellectual Property" and " Background IP" shall be interchangeable and mean any and all of the intellectual property rights, technical information, know-how or trade secret of a Party and its Affiliates which pre-exist this Agreement (including without limitation their respective Licensed Patents and Protections), along with any and all of the intellectual property generated, conceived, created or developed outside the scope of the Research Program by a Party and/or its Affiliates; the use or practice of which would be useful in achieving the objectives of the Collaboration and the subsequent commercialization activities. The Background IP of each Party made available for the Collaboration is listed as Annex 1 to this Agreement and also include the Material provided by one Party to the other and developed without use or practice of the other Party's Background IP / Material. Calyxt's Background IP used or practiced during its performance of the Research Program for the development of a Material/Product and/or covering such Material/Product will be listed in the Material Transfer Form prior to delivery to S&W.1.3. "
Commercialize " or " Commercialization " means any activities directed to marketing, promoting, distributing, importing for sale, offering to sell and/or selling Products.1.4. "
Commercially Reasonable Efforts" means all reasonable good faith efforts to accomplish an objective, but in any event not less than the concerned Party would normally use in the ordinary course of its business to accomplish a similar objective under a similar circumstance.1.5. "
Confidential Information" means the proprietary and confidential information of one Party and/or its Affiliates (the "Disclosing Party") that is disclosed and/or made available to the other Party (the "Receiving Party") as from June 4 th 2014 (effective date of the MCDA) until expiration or termination of this Agreement. "Confidential Information" shall include without limitation (a) the discussions and negotiations regarding the Collaboration, (b) the terms and conditions of the LOI, the MTA and this Agreement, (b) any proprietary or confidential information or material, including without limitations all trade secrets and all scientific data, in tangible form disclosed hereunder that is marked as "Confidential" at the time it is delivered to the Receiving Party, (c) any Product, any information related to either Party's Background IP and Foreground IP, and/or (d) proprietary or confidential information or material, including without limitations all trade secrets and all scientific data, disclosed orally hereunder which is identified as confidential or proprietary when disclosed and such disclosure of confidential information is confirmed in writing (or by facsimile or email) within thirty (30) days by the Disclosing Party; provided however, that the above information shall not be deemed Confidential Information, to the extent the Receiving Party can establish by competent written proof that such information:
Page 2 of 30
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TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
"***" ASTERISKS DENOTE SUCH OMISSIONS.
Confidential
1.6. "
Control" (and the derivative terms " controlling " and " controlled " ) means:(c) as to intellectual property, the possession (whether by ownership, license, or other agreement or arrangement existing now or after the Effective Date, other than pursuant to this Agreement) by a Party or its Affiliate of the right to grant to the other Party a license as provided herein under such intellectual property.
1.7. "
Field" means use as human food and animal feed sources or as fuel sources.1.8. "
Foreground Intellectual Property" and " Foreground IP" shall be interchangeable and mean any and all intellectual property, including without any limitation any data, discovery, invention and results, either patentable or not, generated, conceived, created or developed in the performance of, or as a result of the performance of the Research Program by at least one of the Party and/or its Affiliates. The Foreground IP expressly excludes the Background IP of each Party.1.9. "
JSC " shall mean the Joint Steering Committee appointed by the Parties in accordance with and pursuant to Section 2.3.1.10. "
Licensed Patents" means the Patents Controlled by each of the Parties and listed in Annex 1 and/or in a Material Transfer Form and/or the relevant Product Commercialization Agreement from which a license is necessary in order to exploit a Material or Commercialize a Product or otherwise perform the Research Program in accordance with and pursuant to the terms of this Agreement.1.11. "
Material" means any and all (i) material, proprietary to or Controlled by a Party as part of its Background IP, supplied by such Party (or its designee) to the other for the purpose of performing the Research Program ("Calyxt's Material" or "S&W's Material") and/or (ii) material created through the performance of the Research Program (including Product(s)). Annex 1 sets forth the Calyxt Material and the S&W Material initially included in the Research Program. Any Material not otherwisePage 3 of 30
CONFIDENTIAL MATERIAL OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
"***" ASTERISKS DENOTE SUCH OMISSIONS.
Confidential
mentioned in Annex 1 that a Party wishes to include in the Research Program after the date hereof will be transferred using a Material Transfer Form. Notwithstanding any other provision of this Agreement, any Alfalfa elite lines not listed on Annex 1 (as the same may from time to time be amended by S&W and Calyxt), even if previously made available by S&W to Calyxt under the MTA, or not provided by S&W after the date hereof using a Material Transfer Form as mentioned herein shall not be deemed "Material" as per the terms herein and shall be expressly excluded from the Research Program.
1.12. "
Material Transfer Form " or " MTF " means the document on the format attached as Annex 4 hereto that is executed between the Parties prior to any provision of Material and/or Product, each of which will be deemed to form an integral part of this Agreement upon execution. Each MTF will indicate the specificities of the Material/ Product, the Background IP of the supplying Party covering the Material / Product as well as any restrictions associated with the use of such Material / Product that may result from obligations contracted towards licensors in relation to the use and/or practice of such licensor's intellectual property.1.13. "
Net Sales " means the cash consideration paid to a Party (or Third Party acting on behalf of such Party, including without limitation a distributor of such Party) for the sale (i.e. transfer of ownership) of Products, less the following documented deductions (collectively the "Deductions") (i) cost of trade or cash discounts actually granted, other than early pay discounts; (ii) credits or allowance given for rejected or returned products, (iii) billing errors and retroactive price reductions; (iv) freight; (v) insurance; (vi) value added, use or sales taxes stated on the invoice; (vii) customs duties, tariffs and governmental charges actually imposed on the transfer or transport of Products across borders. In the case of any sale for value, such as barter or counter-trade other than in an arm's length transaction exclusively for cash, Net Sales shall be deemed to be the relevant open market price for the Product in the country or territory in which the sale, use or disposal takes place or if the relevant open market price is not ascertainable, a reasonable price, assessed on an arm's length basis therefore, after deduction of all documented Deductions. If the Product is sold to any Third Party together with other products or services, the price of such Product, solely for purposes of the calculation of Net Sales, shall be deemed to be no less than the relevant open market price for the Product in the country or territory in which the sale, use or disposal takes place or if the relevant open market price is not ascertainable, a reasonable price, assessed on an arm's length basis therefore, after deduction of all documented Deductions.1.14. "
Patents" shall mean (a) all patents and patent applications, including provisional patent applications, and (b) any divisions, continuations, continuations-in-part, or reissues of the patent applications described in clause (a) above; and (c) any patents issuing on any patent applications in clauses (a) and (b) above including any reissues or re-examinations, extensions, confirmations, registrations or revalidations of any of the foregoing.1.15. "
Product" means any genome-modified Material developed under this Agreement that comprises one or several Trait(s).1.16. "
Protection" shall mean any grant (or any application for a grant) made by a government or other competent authority that confers upon the creator or owner of an invention the sole right to make, use, and/or sell that invention for a set period of time. As an illustration, a Protection may include trademarks, copyright, Patents or Plant Variety Protection.Page 4 of 30
CONFIDENTIAL MATERIAL OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
"***" ASTERISKS DENOTE SUCH OMISSIONS.
Confidential
1.17. "
Research" means the generation of knowledge regarding natural mechanisms, as well as functions of genes, tissues and/or cells, mechanisms of action studies and target validation. For the avoidance of doubt, Research excludes any Commercialization activities.1.18. "
Research Program" means the research program aiming at developing and generating Product(s) in accordance with Annex 2.1.19. "
Territory" means any country or geographical region worldwide.1.20. "
Third Party" means any individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, other than Calyxt and S&W and their respective Affiliates.1.21.
" Trait" means one or more of the following traits to be developed in the Material:***
Rules Of Interpretation
The following rules apply unless the context expressly requires otherwise:
(a) the singular includes the plural and conversely;
(b) headings are for convenience only and do not affect interpretation;
(c) a gender includes all genders;
(d) references to "including" and "include(s)" shall be deemed to mean respectively "including without limitation" and "include(s) without limitation";
(e) if a word or phrase is defined, its other grammatical forms have a corresponding meaning;
(f) a reference to a Section, Clause or Schedule is a reference to a section, clause or a schedule to this Agreement;
(g) a reference to an agreement or document is to the agreement or document as amended, varied, supplemented, novated or replaced from time to time, except to the extent prohibited / specified by this Agreement;
(h) a reference to a Party to this Agreement or person to another agreement or document includes the Party's or person's successors, permitted substitutes and assigns;
(i) a reference to legislation or to a provision of legislation includes modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it;
(j) a reference to conduct includes, without limitation, an omission, statement and undertaking, whether or not in writing;
(k) a reference to an agreement includes any undertaking, deed, agreement and legally enforceable arrangement whether or not in writing and a reference to a document includes an agreement (as so defined) in writing, and any certificate, notice, instrument or document of any kind.
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2. PURPOSE OF THE COLLABORATION
2.1. Purpose of the collaboration. The Parties have entered into this Agreement to record the principles of cooperation and liability that govern their Collaboration. The Parties intend to use Commercially Reasonable Efforts to develop Product(s) within the frame of the Research Program using their Background IP, for subsequent Commercialization in the Field.
2.2. Exclusivity. For a period of three (3) years following the Effective Date, on a world-wide basis, each of the Parties agrees that neither it nor any of its Affiliates will enter into, directly or indirectly, any collaboration with a Third Party aiming at developing non-transgenic Alfalfa elite lines using targeted gene editing technologies to introduce genetic modifications of endogenous genes and comprising Traits for use in the Field. For clarity, nothing in this Agreement will restrict in any way, any activities of S&W or Calyxt (or any of their respective Affiliates) with respect to the development of transgenic alfalfa.
2.3. Joint Steering Committee
2.3.1. Formation of JSC. The Parties shall establish a joint steering committee (the " JSC
2.3.2. Responsibilities. The JSC shall, in addition to its other responsibilities as explicitly set forth in this Agreement, be responsible for:
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2.3.3. Dissolution of the JSC. The JSC shall be disbanded upon termination or expiration of the Agreement.
2.3.4. Procedural Rules for the JSC. Subject to the terms and conditions set forth in this Agreement, the JSC shall establish its own procedural rules for its operation. The JSC shall make decisions by unanimous consent of the JSC members. One (1) JSC member of each Party shall be required to constitute a quorum at all JSC meetings.
2.3.5. Meetings. The JSC will meet at least one (1) time during each year, and more frequently as the JSC members and/or each of the Parties deem reasonably appropriate, on such dates, and at such places and times, as provided herein or as the JSC members and/or Parties will agree. Meetings of the JSC may be held telephonically or in person, and those that are held in person will alternate between the offices of the Parties, or such other place as the Parties may agree. The members of the JSC also may convene or be polled or consulted from time to time by means of telecommunications, video conferences, electronic mail or correspondence, as deemed necessary or appropriate. Each Party shall bear the expenses related to the participation of its respective JSC designated members for each such JSC meeting (including travel and accommodation expenses).
3. PRODUCT(S) DEVELOPMENT
3.1. Delivery of Material and related Information
S&W has supplied the Material listed on Annex 1 hereto to Calyxt under the MTA, in sufficient quantity together with any S&W's technical information necessary to allow Calyxt to efficiently perform the Research Program in accordance with and pursuant to the present Agreement.
Any further Material required to be supplied by a Party to the other and necessary for the performance of the Research Program will be provided using the Material Transfer Form. For clarity, S&W will have no obligation to supply any Alfalfa elite line in connection with the Research Program other than those listed on Annex 1 hereto.
The Party supplying the Material as part of its Background IP shall endeavor to provide all reasonable technical information at its disposal in relation to the Material that is necessary for the other Party to comply with the terms of this Agreement and ensure stability of the Material.
3.2. Performance of Research Program
The Parties will use Commercially Reasonable Efforts to perform the Research Program as described in Annex 2 hereto.
Each Party will perform its activities under the Research Program in accordance with all relevant applicable guidelines, laws and regulations.
Unless otherwise agreed to in writing between the Parties, each Party shall assume all the costs related to its performance of its activities under the Research Program.
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Each Party will keep the other Party informed on the progress of its performance of the Research Program by conference calls and by written reports at a frequency that will be determined between the Parties or upon reasonable request from the other Party.
3.3. Ownership of the Product(s) developed during the Research Program
The Product(s) shall be jointly owned by the Parties.
3.4. Use of the Product(s) developed during the Research Program
Subject to Article 4 herein, any Product(s) developed during the Research Program shall be used for Research purposes in the Field only, in accordance with and subject to the provisions of this Agreement and for the strict interest of the Collaboration. The Parties shall not be entitled to supply or provide any Material or information developed under the Research Program, or the other Party's Material, to any Third Party without the express written approval of the other Party or as otherwise approved in writing by the JSC.
3.5. Regulatory Approvals
Calyxt shall submit, obtain and maintain any and all approvals & filings required from regulatory or government authority having jurisdiction for the approval of the exploitation of the Product(s) (the "Regulatory Approvals") in the United States. S&W undertakes to provide all support and assistance reasonably required by Calyxt for any such submission, obtention and maintenance of the Regulatory Approvals. All costs incurred by the Parties with regard to such submission, obtention and maintenance of the Regulatory Approvals in the United States will be shared equally between Calyxt and S&W. For Territories outside of the United States, the JSC will determine which Party will be responsible for obtaining the necessary Regulatory Approvals in each territory where the Product(s) will be sold, where applicable. All costs incurred by each Party to submit, obtain or maintain such Regulatory Approvals will be shared equally between Calyxt and S&W. Either Party shall promptly reimburse its portion of the costs associated with the submission, obtention and maintenance of the Regulatory Approvals within thirty (30) days following receipt of the relevant invoice from the other Party.
4. COMMERCIAL EXPLOITATION OF THE PRODUCT(S)
4.1. It will be the responsibility of the JSC to determine in writing which candidate Product(s) developed under the Research Program will be Commercialized.
4.2. Subject to Article 5 herein and to the provisions of the present Article 4, the Product(s) shall be used for Commercialization purposes in the Field only. Any further research and/or collaboration with any Third Party involving the Product(s), material or information developed during the Research Program must be reviewed by the JSC and previously approved in writing by the Parties' representatives.
4.3. Prior to any Commercialization of any Product, the JSC shall meet and organize in detail the Commercial activities for the Product for approval by the Parties' representatives. For any avoidance of doubt, no Product(s) shall be Commercialized prior to the Parties agreeing to a Product Commercialization Agreement.
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The JSC shall work with the respective marketing teams of both Parties to develop a plan to promote and market the Product(s) that are approved for Commercialization by the JSC (the " Promotion and Marketing Plan
" ). This may include but not be exclusive to activities such as branding, direct marketing efforts and sales training presentations. The Promotion and Marketing Plan shall be submitted to the Parties' approval prior to any implementation.Both Parties shall follow respective branding guidelines established and agreed upon by the JSC, this shall include but is not exclusive to rules regarding the use of logo and trademarks. The JSC shall co-ordinate the Parties' messages regarding the Product(s) to ensure that the Parties' communication on the Product(s) is always consistent and more generally does not interfere with the interests of any Party and its relevant Affiliates. The Parties shall not make any claims, representations or warranties concerning the Product(s) to Third Parties that are not specifically approved by the JSC in writing.
Each Party will comply with any legitimate directions, comments and suggestions it may receive from the JSC concerning the contents and the quality of any promotional material for the Products as well as any reference made by a Party to the Products or the other Party.
Any and all costs associated with the implementation of the Promotion and Marketing Plan shall be borne by the Party that incurs them.
4.4. Prior to any Commercialization of any Product, the Parties will negotiate in good faith the terms of a separate Product Commercialization Agreement. The terms of the Product Commercialization Agreement will be based on the following principles:
4.4.1. S&W shall be responsible for all costs related to the breeding and variety development
4.4.2. S&W will be responsible for manufacturing and shipping of all Product(s):
(a) With respect to the S&W exclusive territory (set forth in Clause 4.4.4 herein), S&W shall not be compensated by Calyxt for these manufacturing and shipping activities;
(b) With respect to the Calyxt exclusive territory (set forth in Clause 4.4.3 herein), S&W shall be compensated by Calyxt for these activities at fair market-based rates (based on the country of production) except if Calyxt elects to manufacture and ship the Product(s) by itself or entrusts a Third Party for such activities in the Calyxt exclusive territory;
4.4.3. Calyxt shall be responsible and shall have exclusive rights for the Commercialization of the Product(s) in all countries that are part of the European Union at the Effective Date and any new country at the time of Commercialization of the applicable Product, Ukraine, Russia and India.
4.4.5. S&W shall be responsible and shall have exclusive rights for the Commercialization of the Product(s) in any country or region of the Territory that is not part of the Calyxt exclusive territory as per Section 4.4.3 above.
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For any avoidance of doubt, "exclusive rights" granted to a Party with respect to a specific territory imposes on the other Party an obligation (i) not to Commercialize the Product(s) in the other Party's exclusive territory, (ii) refrain from granting any right to any Third Party for the Commercialization of the Product(s) in the other Party's exclusive territory, and (iii) use all best efforts, as far as possible under applicable laws, to avoid parallel importations from its territory to the other Party's exclusive territory.
In the event a Party decides not to Commercialize or to discontinue Commercialization of any Product(s) in its exclusive territory (or any portions thereof), the other Party will have a right of first refusal for the Commercialization rights of the Product(s) in said territory as part of its exclusive territory as per 4.4.3 or 4.4.4.
5. INTELLECTUAL PROPERTY, PROTECTION, PROSECUTION, MAINTENANCE AND LITIGATION, OWNERSHIP & LICENSE
5.1. Ownership
5.1.1. Background IP
Each of the Parties and their Affiliates shall retain ownership and/or Control of its Background IP. For greater certainty and subject to Section 2.2, nothing in this Agreement shall restrict the owner or controller of any Background IP from practicing or commercializing any Background IP.
For the avoidance of doubt, a Party shall have no right, express or implied, with respect to the other Party's Background IP, in each case except as expressly provided in the present Section 5.1.
Each Party shall have the sole right, but not the obligation to obtain, prosecute and maintain, at its cost and expense, throughout the world, any and all Licensed Patents and patents relating to its Background IP.
5.1.2. Foreground IP
(a) Inventorship of inventions related to Foreground IP shall be determined in accordance with United States patent laws, regardless of where an invention is discovered, developed or otherwise generated, and regardless of where rights to such inventions are enforced.
(b) All Foreground IP related to the Traits and/or nucleases and uses thereof, with or without the use of recombination matrix, and the cell and molecular biology methods used to generate, screen and isolate the resulting cells shall be exclusively owned by Calyxt (or its designated Affiliates).
(c) Subject to clause 5.1.2 b) herein, all Foreground IP related to the alfalfa germplasm un-modified by Calyxt, shall be exclusively owned by S&W (or its Affiliates).
(d) Subject to clauses 5.1.2. b) and c) herein, any and all inventions made under this Agreement by inventors of both Parties resulting from the execution of the Research Program and performance of this Agreement shall be jointly owned by the Parties ("Joint Intellectual Property" or "Joint IP"). For clarity, pursuant to Section 3.3, the Product(s) are jointly owned by the Parties.
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(e) Each Party shall, and does hereby, assign, and shall cause any individuals involved on its side to so assign, to the other Party, without additional compensation, such right, title and interest in and to any Foreground Intellectual Property as well as any intellectual property rights with respect thereto, as is necessary to fully effect the ownership provided for in this Section 5.1.2.
(f) Each Party shall cooperate with any and all reasonable requests for assistance from the other Party, including by making its employees, consultants and other scientific staff available upon reasonable notice during normal business hours at their respective places of business to effect any intellectual property application under the Foreground IP.
5.2. Foreground Intellectual Property Protection
5.2.1. S&W and Calyxt shall jointly determine the strategy for any Protection arising from the Foreground Intellectual Property; provided, however, that (i) the Party owning exclusively such Foreground IP (pursuant to Clause 5.1.2 b) or c) above) will be responsible for and have the control for the submission and management of the Protection related to said Foreground IP, or (ii) with respect to Joint IP, the JSC will select one Party as being responsible for the submission and management of such Protection. For purposes hereof, "Managing Party" shall designate the Party in charge of submitting and managing the Protection pursuant to the preceding sentence. While the Managing Party will be managing the Protection resulting from the Foreground IP, the Managing Party shall consult with the non-managing Party for all questions related to the filing/validation of Protection, maintenance/abandonment and dispute resolution. The non-managing Party could also be invited or requested to provide consulting as requested during prosecution, and shall execute any documents related to the filing, validation, prosecuting, abandonment and maintenance as may be reasonably necessary in a timely manner to enable the Managing Party to file and prosecute such Protection. It is expressly agreed that the Parties shall mutually agree any strategy for the filing/validation of Protection, maintenance/abandonment and dispute resolution related to any Joint IP, whereas each Party shall have the responsibility and sole control of the filing/validation of Protection, maintenance/abandonment and dispute resolution related to Foreground IP exclusively owned by it (pursuant to Clause 5.1.2 b) or c) above) after having duly informed and consulted the other Party as provided in the present clause.
5.2.2. All fees and costs related to the Protection of Foreground IP shall be the responsibility of the Party owning such Foreground IP or, with respect to Joint IP, divided evenly between both Parties (50%-50%). Each Party undertakes to reimburse the other Party of any fees and costs reasonably incurred in accordance with directions of the JSC by the other Party in relation to any Protection of Joint IP within thirty (30) days following the receipt of the other Party's invoice.
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5.2.3. If a Party (the "Abandoning Party") decides not to file an application for any Protection in any particular country or countries, or if such Party decides to discontinue prosecution or maintenance of any Protection in any particular country or countries (each, an "Abandoned Protection
5.2.4. Infringement. The Parties hereto shall inform each other promptly of any infringement or colorable cause of action for infringement of a Protection of Joint IP as they become aware of. In such case, the Parties shall promptly meet and agree on a mutual position whether or not to enforce the Parties' rights under the Protection. The costs of pursuing any enforcement actions (including any expenses associates with defending any validity, non-enforceability, patents misuse or any other kind of claims brought in response to such enforcement) shall be payable by both Parties, on a 50%-50% basis. If a Party fails or decides not to join the other Party in its defense of the Protection, then the corresponding Protection rights shall be immediately assigned to the defending Party by the non-defending Party. Any damages or other compensation received by a Party or the Parties as a result of the outcome of an infringement case shall be shared between the Parties in a proportion equivalent to their respective financial contribution to the defense of such case.
5.3. Grant of Licenses and Use of the Foreground IP
5.3.1. Grant of Licenses under the Background IP
(a) Grant of Licenses to perform the Research Program. Subject to the provisions of this Agreement and any MTF, each Party hereby grants to the other Party a non-exclusive, non-transferable license under its Material and Background IP for the other Party (or its subcontractor under its responsibility) to perform the Research Program as set forth in this Agreement. Subject to Article 10.2.7, such license shall automatically terminate upon termination of this Agreement.
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(b) Grant of Licenses to Commercialize Product(s). Subject to the Parties' execution of a Product Commercialization Agreement as provided under Article 4 herein, each Party undertakes to grant the other Party a non-exclusive, non-transferable license under its Material and Background IP (that will be listed in such Product Commercialization Agreement) as necessary for the other Party (or its subcontractor under its responsibility) to Commercialize the Product(s) developed under this Agreement. Subject to Article 10.2.7, such license shall automatically terminate upon termination of this Agreement.
5.3.2. Use of the Foreground IP
(a) Use of the Foreground IP in the Field. Subject to Section 5.2, each Party hereby grants to the other Party a non-exclusive, non-transferable license under its proprietary Foreground IP as necessary for the other Party (or its subcontractor under its responsibility) to perform its obligations under this Agreement. Subject to Article 10.2.7, such license shall automatically terminate upon termination of this Agreement.
(b) Use of the Foreground IP outside the Field. Each Party shall have the exclusive right to use its proprietary Foreground IP (pursuant to Clause 5.1.2 b) or c) above) freely and grant licenses to Third Parties outside of the Field without any specific compensation of any kind to the other. For purposes of the present Section 5.3.2.b and for clarity, the term "exclusive" shall mean that the other Party shall refrain itself from using, and shall not sublicense to any Third Party, any right under the other Party's proprietary Foreground IP (pursuant to Clause 5.1.2 b) or c) above) for any activity occurring outside the Field. As for Joint IP, each Party shall have the non-exclusive right to use its proprietary Joint IP freely and grant non-exclusive licenses to Third Parties for purposes unrelated to the Field without any specific compensation of any kind to the other.
5.3.3. Sublicensees
Each Party shall only be entitled to sublicense rights granted to it by the other Party in accordance with the present Section 5.3.3 to subcontractors and shall secure that any such sublicensee(s) pursuant to the present Section 5.3.3 will comply with terms at least as stringent as the ones set forth in this Agreement (including without limitation the royalty obligations set forth in Section 6.1, any reporting, compliance with laws and confidentiality obligations). Each Party that is a sublicensor will be responsible to the other Party for any breach by its sublicensee(s) of the terms of this Agreement. Termination of a license granted to a Party pursuant to the present Section 5.3 shall immediately and automatically terminate any sublicense granted by such Party.
6. FINANCIAL CONSIDERATIONS
6.1. Prior to any Commercialization of any Product, the Parties will negotiate in good faith the Financial Considerations in a separate Product Commercialization Agreement. The terms of the Product Commercialization Agreement will be based on the following principles set forth in Sections 6.2 and 6.3.
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6.2. No later than forty-five (45) days after each calendar year in which there are sales of any Product(s) by or on behalf of S&W and/or its Affiliates pursuant to Section 4.4.4, S&W shall pay to Calyxt a royalty equal to:
- If the Product Net Sale Price is less than or equal to USD8.00 per pound, S&W shall pay to Calyxt a royalty equal to *** percent ( *** %) of its Net Sales of the Product invoiced during such calendar year;
- If the Product Net Sale Price is greater than USD8.00 per pound but less than USD12.50, S&W shall pay to Calyxt a royalty equal to *** percent ( *** %) of the Net Sales of the Product invoiced during such calendar year; and
- If the Product Net Sale Price of the Product is greater than USD12.51 per pound, S&W shall pay to Calyxt a royalty equal to *** percent ( *** %) of the Net Sales of Product invoiced during such calendar year.
As used in this Section 6.2, "Product Net Sale Price" means, as to any Product for any calendar year, the result of (a) the Net Sales of the Product invoiced during such calendar year, divided by (b) the total pounds of the Product invoiced during such calendar year.
6.3. No later than forty-five (45) days after each calendar year in which there are sales of any Product(s) by or on behalf of Calyxt and/or its Affiliates pursuant to Section 4.4.3, Calyxt shall pay to S&W a royalty equal to *** percent ( *** %) of the Net Sales of Product(s) invoiced during such calendar year.
6.4. Each Party shall make annual royalty reports to the other Party within thirty (30) days of each calendar year during the term of this Agreement. Each such royalty report will show the invoice amounts and sales made during the most recently completed reporting period; the amount of each Product sold, and the country(ies) where they were sold; the royalties, in United States Dollars, payable hereunder. If no sales have been made during any reporting period, a statement to this effect shall be required.
7. REPORTS, PAYMENTS & ACCOUNTING
7.1. Reports & Payments
7.1.1. All payments or reimbursements due under this Agreement (other than royalty payments) shall be due and payable by S&W or Calyxt, as applicable, within thirty (30) days upon the occurrence of the event that triggers such payment. Any royalty payment under this Agreement will be due and payable as provided in Section 6.
7.1.2. Interest shall accrue on any late payment of fees as of the date such payment is due, at an annual interest rate equal to the lesser of the legal rate fixed by the European Central Bank plus two percent (2%) or the highest rate permissible by law, with such interest accruing from the date the payment was originally, and any late payment pursuant to this Section shall be credited first to interest and then to any outstanding fees. This Section shall in no way limit any other rights and remedies available to the Party to whom payment is owed, whether arising under this Agreement or at law or in equity.
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7.2. In case of dispute between the Parties for whatever reason, neither Party has the right to withhold or suspend any payments due to the other Party under the Agreement or to operate any off-setting against any other sums claimed, provided that the other Party shall refrain from incurring any reimbursable expenses until the dispute is considered to be resolved by both Parties.
7.3. All payments pursuant to this Agreement by the paying Party to the collecting Party are expressed exclusive of any Value Added Tax ("VAT"), or similar taxes which may be applicable and which shall be paid by the paying Party directly to its competent tax authority. Withholding taxes (if any) levied by the tax authorities or a governmental of any country on payments made to the collecting Party by the paying Party hereunder, shall be deducted from any payments due by the paying Party. The paying Party shall cooperate with the collecting Party to avoid any double taxing and provide it upon simple request with any document necessary for this purpose. The paying Party shall help the collecting Party claim exemption therefrom under any double taxation or similar agreement in force and shall produce to the collecting Party proper evidence of payment of all withholding tax.
7.4. Accounting
Each Party shall keep true and accurate books of account and records for the purpose of determining the payments payable under this Agreement. Such books and records shall be kept for at least five (5) years following the end of the calendar year to which they pertain. The books and records of each Party shall be open for inspection during such five (5) years period by a public accounting firm for whom such Party has no reasonable objection, solely for the purpose of verifying payments due. Such inspections may be made no more than once each calendar year, at reasonable times and on reasonable notice. Inspections shall be at the expense of the other Party; provided, however, in the event a variation or error producing an increase exceeding five percent (5%) of the amount stated for any period covered by the inspection is established in the course of any such inspection, then all reasonable costs relating to the inspection for such period and any unpaid amounts that are discovered shall be paid promptly by the inspected Party together with interest thereon from the date such payments were due at the lesser of the legal rate fixed by the European Central Bank plus two percent (2%) or the highest rate permissible by law, and any payment pursuant to this Section shall be credited first to interest and then to any outstanding royalties.
7.5. Currency
All payments due under this Agreement shall be made by bank wire transfer in immediately available funds to a bank account designated by the receiving Party. All payments hereunder shall be made in US Dollar. In the event that the due date of any payment is a Saturday, Sunday or national holiday, such payment may be paid on the following business day. If any currency conversion shall be required in connection with the calculation of payments hereunder, such conversion shall be made using the rate used by a Party for its financial reporting purposes in accordance with Generally Accepted Accounting Principles (or foreign equivalent).
8. WARRANTIES, NO OTHER WARRANTIES, INDEMNIFICATION & PATENTS
8.1. Warranty on Entering in to Agreement. Each Party represents and warrants to the other Party that:
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8.1.1. It is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate action.
8.1.2. The execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound. It is aware of no action, suit or inquiry or investigation instituted by any governmental agency which questions or threatens the validity of this Agreement.
8.2. Additional Intellectual Property Warranties. Each Party represents and warrants to the other Party that:
8.2.1. It possesses sufficient rights to enable it to grant all rights and licenses it grants to the other Party (including with respect to its Licensed Patents) under Section 5.3.
8.2.2. To the best of its knowledge, its Licensed Patents and Background IP existing as of the Effective Date constitute all of the Patents and other intellectual property Controlled by it as of such date that are necessary for the development, production and Commercialization of Products.
8.2.3. It has not granted, and during the term of this Agreement, it will not grant, any right or license, to any Third Party under its Background IP or Foreground IP that conflicts with the rights or licenses granted or to be granted to the other Party hereunder or the terms hereof.
8.2.4 It has not received any written notice of any claims or litigation at the Effective Date, seeking to invalidate or otherwise challenge its Licensed Patents or its rights therein.
8.2.5. It has entered into agreements with each of its current and former officers, employees and consultants involved in research and development work, including development of its Background IP and Foreground IP, providing it, to the extent permitted by law, with title and ownership to patents, patent applications, trade secrets and inventions conceived, developed, reduced to practice by such person, solely or jointly with other of such persons, during the period of employment or contract by it (except where the failure to have entered into such an agreement would not have a material adverse effect on the rights granted to the other Party herein), and it is not aware that any of its employees or consultants is in material violation thereof.
8.2.6. At the Effective Date, to the best of its knowledge, there is no infringement, misappropriation or violation by Third Parties of any of its Background IP in the Field.
8.2.7. At the Effective Date, there is no pending or, to the best of its knowledge, threatened action, suit, proceeding or claim by others against it that it infringes, misappropriates or otherwise violates any intellectual property or other proprietary rights of others in connection with the use of its Licensed Patents or Background IP, and it has not received any written notice of such claim.
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8.2.8. At the Effective Date, none of its Licensed Patents have been adjudged invalid or unenforceable by a court of competent jurisdiction or applicable government agency, in whole or in part, and there is no pending or, to its knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Licensed Patents.
8.3. No Other Warranties
8.3.1. Except as set forth in Sections 8.1 and 8.2, neither Party makes any representations or warranties of any kind either express or implied relating to the Product(s), its Background IP, the Licensed Patents and the technology covered by the Licensed Patents, including without limitation any warranties regarding their feasibility, use, safety, efficacy or performance, any warranty of merchantability or any warranty for fitness for any particular purpose or a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement is or will be free from infringement of patents, copyrights, and other rights of Third Parties or any other express or implied legal or contractual warranty.
8.3.2. Each Party acknowledges that the technology licensed under the Licensed Patents is experimental in nature and agrees to take all reasonable precautions to prevent death, personal injury, illness and property damage from the use of the Licensed Patents and the license including but not limited to its defects or eviction.
8.3.3. In no event shall a Party be liable for incidental or consequential damages of any kind, including economic damage or injury to property and lost profits, regardless of whether the other Party shall be advised, shall have other reason to know, or in fact shall know of the possibility of the foregoing.
8.4. Indemnification
S&W shall indemnify and hold Calyxt and Calyxt's Affiliates, and their respective directors, officers, employees, agents, consultants and counsel, and the successors and assigns of the foregoing (the "Calyxt's Indemnitees") harmless from and against any and all liabilities, damages, losses, costs or expenses, including (without limitation) reasonable attorneys' and professional fees and other expenses of litigation (collectively "Losses") arising from or occurring as a result of (a) the negligence, gross negligence or willful misconduct of S&W or any of its Affiliates, or their respective employees or agents, or (b) any breach by S&W of a representation, warranty or covenant of this Agreement, and (c) any violation of applicable law, except to the extent such Losses are caused by (i) a breach by Calyxt of a representation, warranty, or covenant of this Agreement or (ii) willful misconduct or gross negligence by Calyxt.
Calyxt shall indemnify and hold S&W and S&W' Affiliates, and their respective directors, officers, employees, agents, consultants and counsel, and the
successors and assigns of the foregoing (the "S&W' Indemnitees") harmless from and against any and all Losses arising from or occurring as a result of (a) the negligence,
gross negligence or willful misconduct of Calyxt or any of its Affiliates, or their respective employees or agents, or (b) any breach by Calyxt of a representation, warranty or covenant of this Agreement,
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and (c) any violation of applicable law, except to the extent that such Losses are caused by
(i) a breach by S&W of a representation, warranty, or covenant of this Agreement or (ii) willful misconduct or gross negligence by S&W.
8.5. Product Liability
Except and to the extent that either Party is required to indemnify the other pursuant to Section 8.4, all losses arising from or
occurring as a result of any Third Party claim for product liability shall be borne equally (50%/50%) by the Parties if and to the extent such Third Party claim relates to Product(s).
9. CONFIDENTIALITY & PUBLICATIONS
9.1. Confidential Information.
Except as expressly provided in this Agreement, each Party agrees that it shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose except for the purposes contemplated by this Agreement any Confidential Information furnished to it by the other Party hereto
pursuant to this Agreement. Without limitation upon any provision of this Agreement, each of the Parties hereto shall be responsible for the observance by its Affiliates, employees,
licensees, sublicensees, agents and consultants of the confidentiality obligations set forth in this Section and this Agreement, generally. The foregoing non-use and non-disclosure
obligations shall continue (a) indefinitely, for all Confidential Information that qualifies as a trade secret under applicable law; or (b) for the term of this Agreement and for five (5) years
thereafter, in all other cases.
9.2. Permitted Disclosures.
Except as otherwise limited by this Agreement, each Party hereto may disclose the other Party's Confidential Information
and scientific data only to (a) its Affiliates, employees, licensees, sublicensees, agents and consultants on a need to know basis as necessary for the performance of the Agreement;
provided that such Affiliates, employees and consultants agree to be bound by the terms of this Section
, (b) to the extent
such disclosure is necessary in connection with prosecuting or defending litigation, complying with applicable governmental regulations or securities laws or otherwise submitting information
to tax or other governmental authorities, or as required by applicable securities laws or the rules and policies of any stock exchange on which securities of such Party are traded or any other
applicable regulatory rule or regulation or governmental agency directive, provided that the receiving Party shall give reasonable advance notice to the other Party of such disclosure and
shall cooperate with the original disclosing Party in any effort by the original disclosing Party to secure a protective order blocking the disclosure of, or otherwise affording confidential
treatment to, such confidential information; (c) to potential investors and/or acquirers of the receiving Party, on a need to know basis, provided that such potential investors and/or acquirers
are bound by confidentiality obligations at least as strong as the confidentiality obligations between the Parties under this Agreement, (d) in confidence, to its auditors, financial advisors and
financial institutions and their respective professional advisors; or (e) as mutually agreed upon by the Parties. The Parties may also disclose the terms of this Agreement to their respective
licensors as they may be contractually required, provided that they shall undertake to (i) give reasonable advance notice to the other Party of such disclosure, (ii) redact any portion not
required to be disclosed by contract and (iii) ensure to bind their licensors by confidentiality obligations at least as protective of the disclosed information as set forth herein.
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9.3.
TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
"***" ASTERISKS DENOTE SUCH OMISSIONS.
TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
"***" ASTERISKS DENOTE SUCH OMISSIONS.
If a Party desires to publish on any of the results obtained under this Agreement it will consult with the other Party before submitting to any publication to make sure that no Confidential Information of the other Party is disclosed, agreement is obtained concerning authorship and appropriate reference is made to any contribution of the other Party. The Parties will make best efforts to finalize the above consulting process within four (4) weeks. Consent to publication may not be unreasonably withheld.
10. TERM AND TERMINATION
10.1. Term
This Agreement is effective as of the Effective Date and shall continue in full force and effect, unless earlier terminated in accordance with this Article 10 or by mutual agreement of the Parties, for twenty (20) years from the Effective Date or upon expiration of the last to expire Product Commercialization Agreement (entered into pursuant to Section 4.4), whichever is the later.
10.2. Termination
10.2.1. Either Party may terminate this Agreement at its convenience during the performance of the Research Program, provided no Product(s) are yet commercialized, upon giving a three (3) month's prior written notice to the other Party.
10.2.2. Failure by either Party (the "Failing Party") to comply with its respective obligations and conditions contained in this Agreement shall entitle the other Party (the "Terminating Party") to give to the Failing Party in default notice requiring it to make good such default. If such default is not made good within sixty (60) days after receipt of such notice by the Failing Party, the Terminating Party shall be entitled (without prejudice of any of its other rights conferred on it by this Agreement) to terminate this Agreement by giving termination notice to take effect immediately.
10.2.3. Subject to the applicable laws and regulations, either Party may terminate this Agreement if:
(a) the other Party enters in any arrangement or composition with creditors, or makes an assignment for the benefit of creditors; or
(b) there is a dissolution, liquidation or winding-up of the other Party's business; or
(c) a trustee in bankruptcy of the assets of the other Party is appointed and such trustee does not, within thirty (30) days after receipt of written notice from the other Party confirm this Agreement and provide adequate assurance that the terms and conditions hereof shall faithfully be fulfilled.
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10.2.4. Each Party acknowledges to the other Party the right to terminate this Agreement with immediate effect by the simple sending of a notice, in case of dispute by such Party of the validity of all or part of the other Party's Licensed Patents.
10.2.5. The right of either Party to terminate this Agreement as provided above shall not be affected in any way by its waiver of, or failure to take action with respect to, any previous failure to perform hereunder.
10.2.6. Upon termination of this Agreement by Calyxt (pursuant to Section 10.2.1, 10.2.2, 10.2.3 or 10.2.4) or by S&W (pursuant to Section 10.2.2, 10.2.3 or 10.2.4), each Party shall incur no further obligation and any and all rights and, the licenses granted hereunder shall terminate. The Parties shall cease (and pursuant to Section 5.3.3 have any sublicensee(s) cease) use of the Background IP and Material of the other Party, and any activities in relation to the Products. Upon termination by either Party pursuant to the present clause 10.2.6, any Party may request
and the other Party shall proceed with such request and provide a certificate of destruction duly signed by its representative(s) to the requesting Party (where applicable) within thirty (30) days following receipt of such request.
10.2.7. Upon termination of this Agreement by S&W pursuant to Section 10.2.1, (a) Calyxt shall retain rights to commercialize any Products developed under this Agreement and (b) Calyxt will be allowed to breed with any Products developed under this Agreement for the sole purpose of developing new and competitive varieties containing the Trait(s) for commercialization at Calyxt's sole discretion and without any restriction (any Product referred to in clause (a) or variety developed pursuant to clause (b) is referred to herein as a "Restricted Product"); provided however, that Calyxt will not be allowed to utilize the Products in a breeding program for the creation of new alfalfa varieties that do not contain the Trait(s).
In such a termination scenario, Calyxt will make royalty payments to S&W for all sales of Restricted Products by or on behalf of Calyxt and/or its Affiliates solely based on the germplasm contribution made by S&W at industry-standard rates (the Parties agree that the royalty amount will equal USD *** per pound of Restricted Product seed). Any such royalty payments will be creditable towards the USD *** ( *** US Dollars) of R&D expenses incurred by Calyxt during the course of the project. Report and payment of such royalties will be made within the conditions of Article 6 and 7.
10.2.8. Any rights and obligations accrued prior to termination or expiration of this Agreement shall not be affected by such termination or expiration.
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10.2.9. The provisions of Articles 3.3, 3.4, 5, 6 (only with regard to the payment of any sum(s) accrued during the term of this Agreement), 7, 8, 9, 10, 11.3 and 11.4 shall survive the expiration or termination of this Agreement.
11. MISCELLANEOUS
11.1. Force Majeure
Neither Party shall be liable to the other for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by earthquake, riot, civil commotion, war, hostilities between nations, governmental law, order or regulation, embargo, action by the government or any agency thereof, act of God, storm, fire, accident, terrorism, labor dispute or strike, sabotage, explosion or other similar or different contingencies, in each case, beyond the reasonable control of the respective Party. The Party affected by Force Majeure shall provide the other Party with full particulars thereof as soon as it becomes aware of the same (including its best estimate of the likely extent and duration of the interference with its activities), and shall use its best endeavors to overcome the difficulties created thereby and to resume performance of its obligations as soon as practicable. If the performance of any obligation under this Agreement is delayed owing to a force majeure for any continuous period of more than six (6) months, the Parties hereto shall consult with respect to an equitable solution, including the possible termination of this Agreement.
11.2. Independent Contractors
Nothing contained in this Agreement is intended implicitly, or is to be construed, to constitute a partnership, joint venture or employer/employee relationship between the Parties. No Party hereto shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of any other Party or to bind any other Party to any contract, agreement or undertaking with any Third Party.
11.3. Notices
All notices, requests and other communications hereunder shall be in writing and shall be personally delivered or sent by international express delivery service or personal courier, in each case to the respective address specified below, or such other address as may be specified in writing to the other Parties hereto or to such other person or address as any Party shall specify by notice in writing to each of the other Parties hereto:
S&W: |
S&W Seed Company
|
Calyxt: |
Calyxt Plant Sciences
|
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Except for a notice of a change of address, which shall be effective only upon receipt thereof, all such notices, requests, demands, waivers and communications properly addressed shall be effective: (a) if sent by Federal Express or other overnight delivery service, three (3) business day after delivery to such service; and (b) if sent by personal courier, upon receipt.
11.4. Governing Law & Dispute Resolution
11.4.1. Governing Law
This Agreement and any dispute arising from the performance or breach hereof shall be governed by and construed in accordance with the laws of Delaware, without reference to conflict of laws principles.
All disputes related to this Agreement between the Parties that, despite good faith negotiations between the Parties, cannot be solved amicably may be referred exclusively to the competent courts of Delaware, USA.
11.5. Amendments
No amendment to this Agreement shall be valid unless embodied in a writing executed by each of the Parties hereto. No waiver of any of the provisions of this Agreement shall be valid unless embodied in a writing executed by the Party against whom the waiver is sought to be enforced.
11.6. Entire Agreement
This Agreement together with the Annexes hereto constitutes the entire agreement, both written or oral, with respect to the subject matter hereof, and supersedes all prior or contemporaneous understandings or agreements, whether written or oral, between S&W and Calyxt with respect to such subject matter.
11.7. Severability
In the event that any provisions of this Agreement are determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall remain in full force and effect without said provision. The Parties shall in good faith negotiate a substitute clause for any provision declared invalid or unenforceable; provided, if the Parties are unable to agree on such a substitute clause and the deletion of the provision held invalid or unenforceable would produce material adverse financial consequences for one Party, such Party shall have the right to terminate this Agreement immediately.11.8. Headings
The headings to the Sections hereof are not a part of this Agreement, but are included merely for convenience of reference only and shall not affect its meaning or interpretation.Page 22 of 30
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11.9. Assignment
Neither this Agreement nor any rights and obligations of a Party under this Agreement may be assigned or otherwise transferred to a Third Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld; provided, however, that either Party may assign its rights or delegate its obligations under this Agreement without such consent (a) to an Affiliate of such Party or (b) to its successor in interest in connection with any merger, acquisition, consolidation, corporate reorganization, or similar transaction, or sale of all or substantially all of its assets, provided that such assignee agrees in writing to assume and be bound by the assignor's obligations under this Agreement.
11.10. Applicable laws
In performing this Agreement, the Parties shall comply with all laws applicable to the performance of the obligations hereunder. Wherever there is a conflict between any provision of this Agreement and any law, the law shall prevail, but in such event the affected provision of this Agreement shall be limited or eliminated only to the extent necessary, and the remainder of this Agreement shall remain in full force and effect.
11.11. US Export laws and regulations
Each Party understands that the Arms Export Control Act (AECA), including its implementing International Traffic In Arms Regulations (ITAR) and the Export Administration Act 5EAA), including its Export Administration Regulations (EAR), are some (but not all) of the laws and regulations that comprises the U.S. export laws and regulations. Each party further understands that the U.S. export laws and regulations include (but are not limited to): ITAR and EAR product/service/data-specific requirements; (ii) ITAR and EAR ultimate destination-specific requirements; (iii) ITAR and EAR end user-specific requirements; (iv) Foreign Corrupt Practices Act; and (v) antiboycott laws and regulations. Each party shall comply with all then-current applicable export laws and regulations of the U.S. Government (and other applicable U.S. laws and regulations) pertaining to Products (including any associated products, items, articles, computer software, media, services, technical data, and other information). Each Party certifies that it shall not, directly or indirectly, export (including any deemed export), nor re-export (including any deemed re-export) the Products (including any associated products, items, articles, computer software, media, services, technical data, and other information) in violation of U.S. export laws and regulations or other applicable U.S. laws and regulations.
11.12. Counterparts
This Agreement may be executed in two counterparts, each of which shall be deemed an original and which together shall constitute one instrument.
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IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement in duplicate originals by their duly authorized officers or representatives.
S&W Seed Company |
CALYXT INC. |
By: /s/ Mark S. GrewalMark S. Grewal Its: Pres & CEO Date of Execution: June 3, 2015 |
By: /s/ Luc MathisLuc MATHIS, Its: Chief Executive Officer Date of Execution: May 26 th 2015 |
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Annex 1
Background IP and Material
1. Background IP
a- Calyxt's Licensed Patents
Calyxt's Licensed Patents that have been practiced during Calyxt's performance of the Research Program and/or covering any Material / Products created or generated by Calyxt during the Research Program will be set forth in a MTF upon transfer of any such Material to S&W.
b- S&W Licensed Patents
None
2. Material
S&W has provided the following Material to Calyxt under the MTA for use in the Research Program:
***
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Annex 2
Research Program
The following describes details of the Research Program for the Collaboration Agreement between Calyxt and S&W for the development of new Alfalfa varieties (the Products) containing Trait(s) created by targeted genome editing. The tasks defined below as part of the Research Program are given as an example and are subject to change by determination of the JSC. The details, as well as the duration, of each task will vary based on the complexity of the Trait(s) selected for inclusion into the Research Program as well as unforeseen difficulty working with any unknown germplasm, such as that provided by S&W.
OBJECTIVE
The program will use the TALEN TM -mediated gene-editing platform at Calyxt to modify certain target genes to achieve a desired Trait in the Material (alfalfa germplasm) provided by S&W. The following traits will be candidates for the creation of Products in this Research Program:
***
Calyxt will create the gene-edited alfalfa lines, validate the genotype/phenotype in greenhouse-grown plants and transfer plants material from each edited line to S&W. S&W will incorporate the gene-edited lines developed by Calyxt into their breeding program to develop new varieties that contain the Trait (or stacks of Traits) of interest. S&W will also conduct the necessary field validations to determine the optimal combination of gene-edits as needed to reach the desired phenotype. Calyxt will provide assistance to S&W for the breeding activities and later plant variety trials. The JSC will determine the priority list for each potential trait-by-variety combination to be launched in the Calyxt gene-editing platform.
Calyxt and S&W agree that, unless otherwise mutually agreed in writing, S&W will not be obligated to incorporate more than *** gene-edited lines developed by Calyxt into S&W's breeding program.
PROGRAM DESCRIPTION
1) Overview
The program will be organized into three phases:
Phase 1 - Generation of Plants with Gene Knockouts
S&W and Calyxt will work together to determine the gene target(s) necessary to create the intended Trait(s) listed above. S&W will supply a sufficient quantity of seed and/or plant material from each of the alfalfa varieties to be gene-edited. Calyxt will sequence-verify the target genes in the S&W varieties, design and test TALEN TM for each gene target, transform each variety, regenerate plants, genotype individual plants for targeted gene edits and (if applicable) evaluate the intended phenotype of the gene-edit lines from greenhouse-grown plants.
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Phase 2 - Pre-Commercial Breeding and Field Validation
S&W will incorporate up to *** gene-edited line provided by Calyxt into their alfalfa breeding program to create combinations of gene knockouts within breeding populations as needed to create the desired phenotype in a new variety. Calyxt will assist S&W in the breeding activities, including trait genotyping of breeding lines and phenotypic analyses. S&W will bring together through breeding the necessary gene edits to create new trait-containing, elite varieties of alfalfa. S&W will conduct the necessary field validations and quality assessments of the new alfalfa varieties.
Phase 3 - Field Trials, Seed Production and Commercialization
S&W will conduct variety performance trials on all candidate lines as part of their new variety development platform.
2) Description of Phases at Calyxt
Phase 1 - Generation of Plants with Gene Edits
Tasks
Task 1.1 - Sequence the target genes from the elected S&W varieties, TALEN TM engineering and validation
Duration: ***
Task 1.2 - Tissue culture optimization, plant transformation and genotyping
Duration: ***
Task 1.3 - Plant regeneration, maturation and phenotypic screening (if applicable)
Duration: ***
Deliverables
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***
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Annex 3
JSC Members
For Calyxt: Luc Mathis (CEO) and William Haun (Director of Product Development)
For S&W: Mark Grewal (President and CEO) and Danielson Gardner (Vice President of Breeding and Genetics)
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Annex 4
>Material Transfer Form
The Present Material Transfer Form is entered into by and between [ = ] and
[ = ] pursuant to and in accordance with the Collaboration Agreement made effective as from November 25 th , 2014 (the "Agreement") executed between S&W Seed Company and CELLECTIS PLANT SCIENCES ;The provisions of the Agreement shall be applicable to the present transfer of Material. The present form is hereby attached to the Agreement and constitutes an integral part of it.
Owner of the Material
|
|
Description of the Material
|
|
Description of the use of the Material within the frame of the Research Program
|
|
Recipient
|
|
Date of transfer |
Date of receipt by the owner of the Material of the fully signed Material Transfer Form
|
Background IP practiced for the development of the Material and/or covering the Material
|
|
Specific use restrictions in relation to the Background IP
|
Made in two (2) copies.
[ = ]
By: _____________________________
|
[ = ]
By: _____________________________
|
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Exhibit 10.43
Exhibit 10.44
Exhibit 10.45
Exhibit 10.46
CORPORATE GUARANTEE
CORPORATE GUARANTEE (this " Guarantee "), dated as of April 21, 2015, is made by S&W SEED COMPANY, a Nevada corporation (" S&W Seed " or the " Guarantor ") in favor of NATIONAL AUSTRALIA BANK LIMITED (the "Lender").
RECITALS
A. Lender and Seed Genetics International Pty Ltd (" SGI " or the " Borrower ") have entered into an ongoing credit agreements dated February 27, 2013 and 13 April 2015 (as renewed, amended, supplemented or otherwise modified from time to time, the " Credit Agreement ," and together with several facility lines that comprise this agreement and such other documents and instruments executed and delivered in connection with the credit agreement, collectively, the " Credit Facility ") under the terms of which SGI may borrow up to AUD $15.0 million from the Lender from time to time throughout the term of the Credit Facility;
Borrower's repayment and other obligations under the Credit Facility, including all fees, interest, costs and expenses, are secured by S&W Seed's corporate guarantee dated April 21, 2014, which guarantees Borrower's obligations under the Credit Facility up to AUD $10.0 million.
In connection with Lender's agreement with Borrower to increase the credit amount available to Borrower under the Credit Facility up to AUD $15.0 million, the Guarantor has agreed to increase the maximum amount of its guarantee.
The Guarantor will derive substantial direct and indirect benefit from the making of the loans by the Lender to the Borrower for the duration of the term of the Credit Facility. The Guarantor acknowledges that the Lender is acting in reliance on the Guarantor, including obligations and giving rights under this Guarantee, as an inducement for Lender continuing to make loans to Borrower.
NOW, THEREFORE, in consideration of the premises and to induce the Lender to increase the available Credit Facility with Borrower up to a maximum of AUD $15.0 million, to make further advances under the Credit Facility as so increased and to induce the Lender to make loans to, and otherwise extend credit for the account of the Borrower, the Guarantor hereby agrees with the Lender as follows:
1. Defined Terms .
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
2. Guarantee .
3. Right of Set-off . Upon the occurrence and during the continuance of any Event of Default, the Guarantor hereby irrevocably authorizes the Lender at any tin1e and from time to time without notice to the Guarantor, any such notice being expressly waived by the Guarantor, to set-off and appropriate and apply 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 Lender to or for the credit or the account of the Guarantor, or any part thereof in such amounts as
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the Lender may elect, against and on account of the obligations and liabilities of the Guarantor to the Lender hereunder and claims of every nature and description of the Lender against the Guarantor, in any currency, whether arising hereunder, under the Credit Agreement or other document or instrument constituting the Credit Facility, as the Lender may elect, whether or not the Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Lender shall notify the Guarantor promptly of any such set-off and the application made by the Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Lender may have.
4. No Subrogation . Notwithstanding any payment or payments made by the Guarantor hereunder or any set-off or application of funds of the Guarantor by the Lender, the Guarantor shall not be entitled to be subrogated to any of the rights of the Lender against the Borrower or any collateral security or guarantee or right of offset held by the Lender for the payment of the Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower in respect of payments made by the Guarantor hereunder, nor claim an amount under any law relating to bankruptcy, winding up or the protection of creditors in relation to the Borrower until all amounts owing to the Lender by the Borrower on account of the Obligations are paid in full and the Commitments are terminated. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Lender, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Lender in the exact form received by such Guarantor (duly endorsed by such Guarantor to the Lender, if required), to be applied against the Obligations.
5. Amendment s, etc. with respect to the Obligations; Waiver of Rights . The Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against such Guarantor and without notice to or further assent by such Guarantor, any demand for payment of any of the Obligations made by the Lender may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other patty upon or for any part thereof, or any collateral security or guarai1tee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, increased, extended, amended, modified, accelerated , com promised, waived, surrendered or released by the Lender and the Credit Facility may be amended, modified, supplemented or terminated, in whole or in part, as the Lender may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. When making any demand hereunder against the Guarantor, the Lender may, but shall be under no obligation to, make a similar demand on the Borrower or other guarantors, if any, and any failure by the Lender to make any such demand or to collect any payments from the Borrower or any such other guarantor or any release of the Borrower or such other guarantor shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights ai1d remedies, express or implied, or as a matter of law, of the Lender against such Guarantor.
6. Guarantee Absolute and Unconditional . This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and the successors and assigns thereof, and shall inure to be benefit of the Lender and its successors, endorsees, transferees and assigns, until all the Obligations and the obligations of the Guarantor under this Guarantee shall have been satisfied by payment in full and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Facility the Borrower may be free from any Obligations.
7. Reinstatement . This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or the Guarantor, or upon or as a result of the
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appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or the Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.
8. Payments . The Guarantor hereby guarantees that payments hereunder will be paid to the Lender without set-off, deduction or counterclaim in Australian Dollars (AUD) at the office of the Lender specified in the Credit Facility.
9. Authority of Lender . The Guarantor acknowledges that the rights and responsibilities of the Lender under this Guarantee with respect to any action taken by the Lender or the exercise or non-exercise by the Lender of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this guarai1tee shall be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them.
10. Information Relating to Borrower . The Guarantor acknowledges and agrees that it has made such independent examination, review and investigation of the Credit Facility documents and instruments as Guarantor deems necessary and appropriate and shall have sole responsibility to obtain from the Borrower any information required by the Guarantor about any modifications thereto. The Guarantor further acknowledges and agrees that it shall have the sole responsibility for, and has adequate means of, obtaining from the Borrower such information concerning the Borrower's financial condition or business operations as Guarantor may require, and that the Lender has not duty, and the Guarantor is not relying on the Lender at any time to disclose to the Guarantor any information relating to the business operations or financial condition of the Lender.
11. Representations . The Guarantor makes the following representations and warranties:
12. Further Assurances . The Guarantor will perform all acts and execute all agreements, assurances and other documents and instruments as the Lender, acting reasonably, requires to perfect or improve the powers afforded or created, or intended to be afforded or created, by this Deed.
13. Notices . All notices, requests and demands to or upon the Lender or the Guarantor to be effective shall be in writing (or by electronic mail, fax or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (i) when delivered by hand or overnight mail or (ii) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (iii) if by electronic mail, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows:
The Lender and the Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section.
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14. Severability . Any provision of this Guarantee that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or lll1enforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
15. Integration . This Guarantee represents the agreement of the Guarantor with respect to the subject matter hereof and there are no promises or representations by the Lender relative to the subject matter hereof not reflected herein.
16. Amendments in Writing; No Waiver; Cumulative Remedies .
17. Section Headings . The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
18. Successors and Assigns . This Guarantee shall be bind ing upon the successors and assigns of the Guarantor and shall inure to the benefit of Lender and their respective successors and assigns.
19. Costs and Expenses . The Guarantor agrees to pay all costs, expenses and liabilities incurred by the Lender in connection with taking any action with respect to this Guarantee including on a full indemnity basis up to the maximum liability of the Guarantor hereunder, all administration costs, including enforcement charges, any advisors or agents costs and all reasonable attorneys' fees and all other costs and expenses that may be incurred by the Lender (i) in the enforcement of this Guarantee; or (ii) in the preservation, protection or enforcement of any rights of the Lender in any case commenced by or against the Guarantor under the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute.
20. GOVERNING LAW . THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
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21. Submission To Jurisdiction; Waivers . The Guarantor hereby irrevocably and unconditionally:
22. Acknowledgments . The Guarantor hereby acknowledges that:
23. Counterparts . This Guarantee may be executed by one or more of the parties to this Guarantee on any number of separate counterparts (signature pages exchanged by facsimile or e-mail (.pdf) shall be fully binding), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the undersigned parties has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written.
S&W SEED COMPANY
By:
/s/ Matthew K. Szot
Matthew K. Szot
Executive Vice President of Finance
and Administration and Chief
Financial Officer
ACKNOWLEDGED AND AGREED TO BY:
NATIONAL AUSTRALIA BANK LIMITED
By: ____________________________________
Name: __________________________________
Title: _________________________________
[SIGNATURE PAGE OF CORPORATE GUARANTEE]
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Exhibit 10.68
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as of June 23, 2015, by and between S&W SEED COMPANY ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
A. Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of February 1, 2014 as amended from time to time ("Credit Agreement").
B. Pursuant to the Credit Agreement, Borrower remains indebted to Bank under a line of credit in the maximum principal amount of Four Million Dollars ($4,000,000.00) (the "Line of Credit"), which is evidenced by that certain Revolving Line of Credit Note dated February 27, 2015, as amended or modified from time to time (the "Prior Line of Credit Note"). The Prior Line of Credit Note matures and becomes due and payable in full on July 1, 2015 and as of the date hereof, the outstanding principal balance under the Prior Line of Credit is $0.00, plus accrued but unpaid interest.
C. Subject to the terms and conditions contained herein, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, subject to the terms and conditions described herein, the parties hereto agree that the Credit Agreement shall be amended as follows; provided , however , that nothing shall terminate any security interests, guaranties, subordinations or other documents in favor of Bank, all of which shall remain in full force and effect unless expressly amended hereby:
1. Amendment to Section 1.1. Section 1.1 is hereby amended by deleting "July 1, 2015" as the last day on which Bank will make advances under the Line of Credit, and by substituting for said date "October 1, 2015", with such change to be effective upon the execution and delivery to Bank of a promissory note substantially in the form of Exhibit A attached hereto (the "Line of Credit Note") (which Note shall replace and be deemed the Line of Credit Note defined in and made pursuant to the Credit Agreement) and all other contracts, instruments and documents required by Bank to evidence such change; provided , however , that advances made under the Prior Line of Credit Note shall be deemed made under the Line of Credit Note.
2. Amendment to Section 1.2(e). The following is hereby added to the Credit Agreement as a new Section 1.2(e):
"(e) Fee Letter . Borrower shall pay to Bank as and when due all fees specified in and pursuant to the terms and provisions of the Fee Letter dated as of June 23, 2015 and executed by Borrower and Bank ("Fee Letter")."
3. Amendment to Section 1.4. Section 1.4 is hereby deleted in its entirety, and the following substituted therefor:
"As security for (i) all indebtedness and other obligations of Borrower to Bank subject hereto, (ii) all indebtedness and other obligations of Borrower to Bank arising under or in connection with all Purchase Card Documents (as defined below) and all purchase cards issued by Bank at Borrower's request, and (iii) all indebtedness and other obligations of Borrower to Bank arising under or in connection with all Foreign Exchange Agreements (as defined below), Borrower hereby confirms and grants to Bank security interests of first priority in all Borrower's accounts receivable and other rights to payment, general intangibles, inventory, equipment and sixty-five percent (65%) of Borrower's stock held in S&W SEED AUSTRALIA PTY. LTD. For the purposes of the foregoing, "Purchase Card Documents" means that certain WellsOne Commercial Card Express Agreement, effective as of April 15, 2013, between Bank and Borrower, as amended, modified and/or supplemented from time to time, together with all other documents executed by Borrower or issued by Bank and related to purchase cards issued by Bank at Borrower's request, as all of the same may be amended, modified and/or supplemented from time to time and "Foreign Exchange Documents" means that certain Foreign Exchange Master Agreement dated as of October 16, 2013 by and between Borrower and Bank, as amended, modified and/or supplemented from time to time, together with all other documents executed by Borrower or issued by Bank and related to foreign exchange transactions entered into between Borrower and Bank, as all of the same may be amended, modified and/or supplemented from time to time. Borrower hereby confirms that its grant of security interests to Bank as set forth in the security agreements previously executed by Borrower in favor of Bank shall secure all indebtedness and other obligations to Bank under the Loan Documents, the Purchase Card Documents, all purchase cards issued by Bank at Borrower's request and the Foreign Exchange Documents.
Promptly following Bank's request, Borrower shall provide to Bank each of the following to secure the indebtedness described in the preceding paragraph: (i) security agreements duly executed by each Guarantor (as defined below), pursuant to which each Guarantor grants to Bank security interests in substantially all of such Guarantor's assets; (ii) a pledge agreement duly executed by Borrower pursuant to which Borrower pledges to Bank all of Borrower's equity interests in the Guarantors; and (iii) to the extent certificated, original equity certificates issued by the Guarantors to Borrower, together with blank instruments of transfer.
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All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, deeds or mortgages, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Bank personnel), expended or incurred by Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance."
4. Amendment to Section 1.5. The following is hereby added to the Credit Agreement as a new Section 1.5:
"SECTION 1.5. GUARANTIES . The payment and performance of all indebtedness and other obligations of Borrower to Bank shall be guaranteed jointly and severally by Seed Holding, LLC, a Nevada limited liability company and Stevia California, LLC, a California limited liability company (each individually a "Guarantor" and collectively, the "Guarantors"), as evidenced by and subject to the terms of guaranties in form and substance satisfactory to Bank."
5. Amendment to Section 4.9(d). Section 4.9(d) of the Credit Agreement is hereby deleted in its entirety, and the following substituted therefor:
"(d) Net income after taxes not less than $1.00, measured on a consolidated rolling 4-quarter basis as of each fiscal quarter end; provided, however, Borrower is permitted to exclude one-time crop losses incurred during fiscal year 2013 up to a maximum of $2,333,123.00 for the reporting period ending March 31, 2014 only; provided further, Borrower is permitted to have net income after taxes of (i) not less than negative $1,600,000.00 for the four fiscal quarter period ending as of March 31, 2015 and (ii) not less than negative $2,700,000.00 for the four fiscal quarter periods ending as of June 30, 2015 and September 30, 2015."
6. Amendment to Section 6.1(m). Section 6.1(m) of the Credit Agreement is hereby deleted in its entirety, and the following substituted therefor:
"(m) Borrower fails to deliver by September 1, 2015 each of the following, in each case in form and substance satisfactory to Bank: (i) a deed of trust or mortgage in respect to the Nampa Property and the Columbia County Property (as such terms are defined in the Amendment and Waiver Agreement dated as of December 31, 2014 between Borrower and Bank) and all other real property of Borrower and any Third Party Obligor required by Bank; and (ii) such title insurance policies, evidence of insurance, insurance certificates and endorsements, surveys, appraisals, consents, estoppels, subordination agreements, recordations, collateral filings, opinions, resolutions, documents and other instruments as Bank shall require in connection with the foregoing."
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7. Conditions Precedent. The obligation of Bank to amend the terms and conditions of the Credit Agreement as provided herein, is subject to the fulfillment to Bank's satisfaction of all of the following conditions by no later than June 29, 2015:
(a) Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed:
(i) This Amendment.
(ii) The Line of Credit Note.
(iii) Continuing Guaranty from Seed Holding, LLC.
(iv) Continuing Guaranty from Stevia California, LLC.
(v) Limited Liability Company Certificate: Continuing Guaranty from Seed Holding, LLC.
(vi) Limited Liability Company Certificate: Continuing Guaranty from Stevia California, LLC.
(vii) Fee Letter.
(viii) Written consent from all Lenders under the Intercreditor Agreement (as defined in the Amendment and Waiver dated December 31, 2014 between Borrower and Bank) to all amendments
under the Loan Documents.
(ix) Such other documents as Bank may require under any other section of this Amendment.
(b) Bank shall have received all fees as and when due under the Fee Letter.
(c) Other Fees and Costs . In addition to Borrower's obligations under the Credit Agreement and the other Loan Documents, Borrower shall have paid to Bank the full amount of all costs and expenses, including reasonable attorneys' fees (including the allocated costs of Bank's in-house counsel) expended or incurred by Bank in connection with the negotiation and preparation of this Amendment, for which Bank has made demand.
8. General Release . In consideration of the benefits provided to Borrower under the terms and provisions hereof, Borrower hereby agrees as follows ("General Release"):
(a) Borrower, for itself and on behalf of its successors and assigns, does hereby release, acquit and forever discharge Bank, all of Bank's predecessors in interest, and all of Bank's past and present officers, directors, attorneys, affiliates, employees and agents, of and from any and all claims, demands, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or of any relationship, acts, omissions, misfeasance, malfeasance, causes of action, defenses, offsets, debts, sums of money, accounts, compensation, contracts, controversies, promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, each as though fully set forth herein at length (each, a "Released Claim" and collectively, the "Released Claims"), that Borrower now has or may acquire as of the later of: (i) the date this Amendment becomes effective through the satisfaction (or waiver by Bank) of all conditions hereto; or (ii) the date that Borrower has executed and delivered this Amendment to Bank (hereafter, the "Release Date"), including without limitation, those Released Claims in any way arising out of, connected with or related to any and all prior credit accommodations, if any, provided by Bank, or any of Bank's predecessors in interest, to Borrower, and any agreements, notes or documents of any kind related thereto or the transactions contemplated thereby or hereby, or any other agreement or document referred to herein or therein.
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(b) Borrower hereby acknowledges, represents and warrants to Bank as follows:
(i) Borrower understands the meaning and effect of Section 1542 of the California Civil Code which provides:
"Section 1542. GENERAL RELEASE; EXTENT . A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR."
(ii) With regard to Section 1542 of the California Civil Code, Borrower agrees to assume the risk of any and all unknown, unanticipated or misunderstood defenses and Released Claims which are released by the provisions of this General Release in favor of Bank, and Borrower hereby waives and releases all rights and benefits which it might otherwise have under Section 1542 of the California Civil Code with regard to the release of such unknown, unanticipated or misunderstood defenses and Released Claims.
(c) Each person signing below on behalf of Borrower acknowledges that he or she has read each of the provisions of this General Release. Each such person fully understands that this General Release has important legal consequences and each such person realizes that they are releasing any and all Released Claims that Borrower may have as of the Release Date. Borrower hereby acknowledges that it has had an opportunity to obtain a lawyer's advice concerning the legal consequences of each of the provisions of this General Release.
(d) Borrower hereby specifically acknowledges and agrees that: (i) none of the provisions of this General Release shall be construed as or constitute an admission of any liability on the part of Bank; (ii) the provisions of this General Release shall constitute an absolute bar to any Released Claim of any kind, whether any such Released Claim is based on contract, tort, warranty, mistake or any other theory, whether legal, statutory or equitable; and (iii) any attempt to assert a Released Claim barred by the provisions of this General Release shall subject Borrower to the provisions of applicable law setting forth the remedies for the bringing of groundless, frivolous or baseless claims or causes of action.
9. Fees and Costs . In addition to Borrower's obligations to Bank under the Credit Agreement and the other Loan Documents, Borrower hereby agrees to pay to Bank immediately upon demand the full amount of all costs and expenses, including reasonable attorneys' fees (including the allocated costs of Bank's in-house counsel) expended or incurred by Bank in connection with the negotiation and preparation of this Amendment and all other documents required pursuant to this Amendment.
10. Miscellaneous . Except as specifically provided herein, all terms and conditions of the Credit Agreement shall remain in full force and effect, without waiver or modification. All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document. This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Amendment.
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11. Reaffirmation; Certification . Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default.
[Continues With Signatures On Following Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.
By:
/s/ Matthew K. Szot
|
WELLS FARGO BANK,
By:
/s/
_________________________
|
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EXHIBIT A
FORM OF LINE OF CREDIT NOTE
REVOLVING LINE OF CREDIT NOTE
$4,000,000.00 |
San Francisco, California
|
FOR VALUE RECEIVED, the undersigned S&W SEED COMPANY ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at 333 Market Street, 3rd Floor, San Francisco, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Four Million Dollars ($4,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.
This Note amends, restates and supersedes in its entirety that certain Revolving Line of Credit Note in the maximum principal amount of Four Million Dollars ($4,000,000.00), executed by Borrower in favor of Bank and dated February 27, 2015, as such may have been amended or modified from time to time prior to the date hereof.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:
(a) "Daily One Month LIBOR" means, for any day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period.
(b) "LIBOR" means (i) for the purpose of calculating effective rates of interest for loans making reference to LIBOR Periods, the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery on the first day of each LIBOR Period for a period approximately equal to such LIBOR Period as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, two London Business Days prior to the first day of such LIBOR Period (or if not so reported, then as determined by Bank from another recognized source or interbank quotation), or (ii) for the purpose of calculating effective rates of interest for loans making reference to the Daily One Month LIBOR Rate, the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery of funds for one (1) month as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, or, for any day not a London Business Day, the immediately preceding London Business Day (or if not so reported, then as determined by Bank from another recognized source or interbank quotation).
(c) "LIBOR Period" means a period commencing on a New York Business Day and continuing for one (1) month, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that (i) no LIBOR Period may be selected for a principal amount less than One Hundred Thousand Dollars ($100,000.00), (ii) if the day after the end of any LIBOR Period
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is not a New York Business Day (so that a new LIBOR Period could not be selected by Borrower to start on such day), then such LIBOR Period shall continue up to, but shall not include, the next New York Business Day after the end of such LIBOR Period, unless the result of such extension would be to cause any immediately following LIBOR Period to begin in the next calendar month in which event the LIBOR Period shall continue up to, but shall not include, the New York Business Day immediately preceding the last day of such LIBOR Period, and (iii) no LIBOR Period shall extend beyond the scheduled maturity date hereof.
(d) "London Business Day" means any day that is a day for trading by and between banks in Dollar deposits in the London interbank market.
(e) "New York Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in New York are authorized or required by law to close.
(f) "State Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in the jurisdiction described in "Governing Law" herein are authorized or required by law to close.
INTEREST:
(a) Interest . The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum determined by Bank to be two and three-quarters percent (2.75%) above the Daily One Month LIBOR Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be two and three-quarters percent (2.75%) above LIBOR in effect on the first day of the applicable LIBOR Period. Bank is hereby authorized to note the date, principal amount and interest rate applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options . Subject to the provisions herein regarding LIBOR Periods and the prior notice required for the selection of a LIBOR interest rate, (i) at any time any portion of this Note bears interest determined in relation to LIBOR for a LIBOR Period, it may be continued by Borrower at the end of the LIBOR Period applicable thereto so that all or a portion thereof bears interest determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a new LIBOR Period designated by Borrower, (ii) at any time any portion of this Note bears interest determined in relation to the Daily One Month LIBOR Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a LIBOR Period designated by Borrower, and (iii) at the time an advance is made hereunder, Borrower may choose to have all or a portion thereof bear interest determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a LIBOR Period designated by Borrower.
To select an interest rate option hereunder determined in relation to LIBOR for a LIBOR Period, Borrower shall give Bank notice thereof that is received by Bank prior to 11:00 a.m California time on a State Business Day at least two State Business Days prior to the first day of the LIBOR Period, or at a later time during such State Business Day if Bank, at its sole discretion, accepts Borrower's notice and quotes a fixed rate to Borrower. Such notice shall specify: (A) the interest rate option selected by Borrower, (B) the principal amount subject thereto, and (C) for each LIBOR selection, the length of the applicable LIBOR Period. If Bank has not received such notice in accordance with the foregoing before an advance is made hereunder or before the end of any LIBOR Period, Borrower shall be deemed to have made a
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Daily One Month LIBOR Rate interest selection for such advance or the principal amount to which such LIBOR Period applied. Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as it is given in accordance with the foregoing and, with respect to each LIBOR selection, if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three State Business Days after such notice is given. Borrower shall reimburse Bank immediately upon demand for any loss or expense (including any loss or expense incurred by reason of the liquidation or redeployment of funds obtained to fund or maintain a LIBOR borrowing) incurred by Bank as a result of the failure of Borrower to accept or complete a LIBOR borrowing hereunder after making a request therefor. Any reasonable determination of such amounts by Bank shall be conclusive and binding upon Borrower.
(c) Taxes and Regulatory Costs . Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) costs, expenses and liabilities arising from or in connection with reserve percentages prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.
(d) Payment of Interest . Interest accrued on this Note shall be payable on the first day of each month, commencing July 1, 2015.
(e) Default Interest . From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank's option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment . Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on October 1, 2015.
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(b) Advances . Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) Mark S. Grewal or Matthew K. Szot, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by Borrower.
(c) Application of Payments . Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Daily One Month LIBOR Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest LIBOR Period first.
PREPAYMENT:
(a) Daily One Month LIBOR Rate . Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Daily One Month LIBOR Rate at any time, in any amount and without penalty.
(b) LIBOR . Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the LIBOR Period applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such LIBOR Period matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the LIBOR Period applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such LIBOR Period at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum four percent (4.00%) above the Daily One Month LIBOR Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).
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EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of February 1, 2014, as amended from time to time (the "Credit Agreement"). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies . Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.
(b) Obligations Joint and Several . Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.
(c) Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.
S&W SEED COMPANY
By: ___________________________
Matthew K. Szot, Executive Vice President
Chief Financial Officer
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Exhibit 10.69
REVOLVING LINE OF CREDIT NOTE
$4,000,000.00 |
San Francisco, California
|
FOR VALUE RECEIVED, the undersigned S&W SEED COMPANY ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at 333 Market Street, 3rd Floor, San Francisco, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Four Million Dollars ($4,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.
This Note amends, restates and supersedes in its entirety that certain Revolving Line of Credit Note in the maximum principal amount of Four Million Dollars ($4,000,000.00), executed by Borrower in favor of Bank and dated February 27, 2015, as such may have been amended or modified from time to time prior to the date hereof.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:
(a) "Daily One Month LIBOR" means, for any day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period.
(b) "LIBOR" means (i) for the purpose of calculating effective rates of interest for loans making reference to LIBOR Periods, the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery on the first day of each LIBOR Period for a period approximately equal to such LIBOR Period as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, two London Business Days prior to the first day of such LIBOR Period (or if not so reported, then as determined by Bank from another recognized source or interbank quotation), or (ii) for the purpose of calculating effective rates of interest for loans making reference to the Daily One Month LIBOR Rate, the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery of funds for one (1) month as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, or, for any day not a London Business Day, the immediately preceding London Business Day (or if not so reported, then as determined by Bank from another recognized source or interbank quotation).
(c) "LIBOR Period" means a period commencing on a New York Business Day and continuing for one (1) month, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that (i) no LIBOR Period may be selected for a principal amount less than One Hundred Thousand Dollars ($100,000.00), (ii) if the day after the end of any LIBOR Period is not a New York Business Day (so that a new LIBOR Period could not be selected by Borrower to start on such day), then such LIBOR Period shall continue up to, but shall not
include, the next New York Business Day after the end of such LIBOR Period, unless the result of such extension would be to cause any immediately following LIBOR Period to begin in the next calendar month in which event the LIBOR Period shall continue up to, but shall not include, the New York Business Day immediately preceding the last day of such LIBOR Period, and (iii) no LIBOR Period shall extend beyond the scheduled maturity date hereof.
(d) "London Business Day" means any day that is a day for trading by and between banks in Dollar deposits in the London interbank market.
(e) "New York Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in New York are authorized or required by law to close.
(f) "State Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in the jurisdiction described in "Governing Law" herein are authorized or required by law to close.
INTEREST:
(a) Interest . The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum determined by Bank to be two and three-quarters percent (2.75%) above the Daily One Month LIBOR Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be two and three-quarters percent (2.75%) above LIBOR in effect on the first day of the applicable LIBOR Period. Bank is hereby authorized to note the date, principal amount and interest rate applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options . Subject to the provisions herein regarding LIBOR Periods and the prior notice required for the selection of a LIBOR interest rate, (i) at any time any portion of this Note bears interest determined in relation to LIBOR for a LIBOR Period, it may be continued by Borrower at the end of the LIBOR Period applicable thereto so that all or a portion thereof bears interest determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a new LIBOR Period designated by Borrower, (ii) at any time any portion of this Note bears interest determined in relation to the Daily One Month LIBOR Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a LIBOR Period designated by Borrower, and (iii) at the time an advance is made hereunder, Borrower may choose to have all or a portion thereof bear interest determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a LIBOR Period designated by Borrower.
To select an interest rate option hereunder determined in relation to LIBOR for a LIBOR Period, Borrower shall give Bank notice thereof that is received by Bank prior to 11:00 a.m California time on a State Business Day at least two State Business Days prior to the first day of the LIBOR Period, or at a later time during such State Business Day if Bank, at its sole discretion, accepts Borrower's notice and quotes a fixed rate to Borrower. Such notice shall specify: (A) the interest rate option selected by Borrower, (B) the principal amount subject thereto, and (C) for each LIBOR selection, the length of the applicable LIBOR Period. If Bank has not received such notice in accordance with the foregoing before an advance is made hereunder or before the end of any LIBOR Period, Borrower shall be deemed to have made a Daily One Month LIBOR Rate interest selection for such advance or the principal amount to which such LIBOR Period applied. Any such notice may be given by telephone (or such other
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electronic method as Bank may permit) so long as it is given in accordance with the foregoing and, with respect to each LIBOR selection, if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three State Business Days after such notice is given. Borrower shall reimburse Bank immediately upon demand for any loss or expense (including any loss or expense incurred by reason of the liquidation or redeployment of funds obtained to fund or maintain a LIBOR borrowing) incurred by Bank as a result of the failure of Borrower to accept or complete a LIBOR borrowing hereunder after making a request therefor. Any reasonable determination of such amounts by Bank shall be conclusive and binding upon Borrower.
(c) Taxes and Regulatory Costs . Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) costs, expenses and liabilities arising from or in connection with reserve percentages prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.
(d) Payment of Interest . Interest accrued on this Note shall be payable on the first day of each month, commencing July 1, 2015.
(e) Default Interest . From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank's option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment . Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on October 1, 2015.
(b) Advances . Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) Mark S. Grewal or Matthew K. Szot, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by
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the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by Borrower.
(c) Application of Payments . Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Daily One Month LIBOR Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest LIBOR Period first.
PREPAYMENT:
(a) Daily One Month LIBOR Rate . Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Daily One Month LIBOR Rate at any time, in any amount and without penalty.
(b) LIBOR . Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the LIBOR Period applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such LIBOR Period matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the LIBOR Period applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such LIBOR Period at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum four percent (4.00%) above the Daily One Month LIBOR Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).
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EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of February 1, 2014, as amended from time to time (the "Credit Agreement"). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies . Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.
(b) Obligations Joint and Several . Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.
(c) Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of California.
[Continues With Signature(s) On Following Page]
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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.
S&W SEED COMPANY
By:
/s/ Matthew K. Szot
Matthew K. Szot, Executive Vice President
Chief Financial Officer
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Exhibit 10.70
CONTINUING GUARANTY
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
1. GUARANTY; DEFINITIONS. In consideration of any credit or other financial accommodation heretofore, now or hereafter extended or made to S&W SEED COMPANY ("Borrowers"), or any of them, by WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned SEED HOLDING, LLC ("Guarantor"), jointly and severally unconditionally guarantees and promises to pay to Bank, or order, on demand in lawful money of the United States of America and in immediately available funds, any and all Indebtedness of any of the Borrowers to Bank. The term "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether any of the Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable. This Guaranty is a guaranty of payment and not collection.
2. MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION UNDER OTHER GUARANTIES. This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of each of the Borrowers to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of any of the Borrowers or Guarantor or any other event or proceeding affecting any of the Borrowers or Guarantor. This Guaranty shall not apply to any new Indebtedness created after actual receipt by Bank of written notice of its revocation as to such new Indebtedness; provided however, that loans or advances made by Bank to any of the Borrowers after revocation under commitments existing prior to receipt by Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Borrowers or committed by Bank prior to receipt by Bank of such revocation, shall not be considered new Indebtedness. Any such notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its office at 333 Market Street, 3rd Floor, San Francisco, California, or at such other address as Bank shall from time to time designate. Any payment by Guarantor shall not reduce Guarantor's maximum obligation hereunder unless written notice to that effect is actually received by Bank at or prior to the time of such payment. The obligations of Guarantor hereunder shall be in addition to any obligations of Guarantor under any other guaranties of any liabilities or obligations of any of the Borrowers or any other persons heretofore or hereafter given to Bank unless said other guaranties are expressly modified or revoked in writing; and this Guaranty shall not, unless expressly herein provided, affect or invalidate any such other guaranties.
3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and several and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against any of the Borrowers or any other person, or whether any of the Borrowers or any other person is joined in any such action or actions. Guarantor acknowledges that this Guaranty is absolute and unconditional, there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Guarantor. Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, and Guarantor agrees that any payment of any Indebtedness or other act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to
Guarantor's liability hereunder. The liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys' fees, expended or incurred by Bank in connection therewith, including without limitation, in any litigation with respect thereto.
4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or after revocation hereof, without notice to or demand on Guarantor, and without affecting Guarantor's liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release any such security; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or any other guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from any of the Borrowers to any Indebtedness of any of the Borrowers to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Guaranty in whole or in part. Upon Bank's request, Guarantor agrees to provide to Bank copies of Guarantor's financial statements.
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Bank that: (a) this Guaranty is executed at Borrowers' request; (b) Guarantor shall not, without Bank's prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor's assets other than in the ordinary course of Guarantor's business; (c) Bank has made no representation to Guarantor as to the creditworthiness of any of the Borrowers; and (d) Guarantor has established adequate means of obtaining from each of the Borrowers on a continuing basis financial and other information pertaining to Borrowers' financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor's risks hereunder, and Guarantor further agrees that Bank shall have no obligation to disclose to Guarantor any information or material about any of the Borrowers which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i) proceed against any of the Borrowers or any other person; (ii) marshal assets or proceed against or exhaust any security held from any of the Borrowers or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from any of the Borrowers or any other person; (iv) take any other action or pursue any other remedy in Bank's power; or (v) make any presentment or demand for performance, or give any notice of nonperformance, protest, notice of protest or notice of dishonor hereunder or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed hereunder, or in connection with the creation of new or additional Indebtedness.
(b) Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of any of the Borrowers or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of any of the Borrowers or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of any of the Borrowers which is a corporation, partnership or other type of entity, or any defect in the formation of any such Borrower; (iv) the application
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by any of the Borrowers of the proceeds of any Indebtedness for purposes other than the purposes represented by Borrowers to, or intended or understood by, Bank or Guarantor; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Borrowers or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any of the Borrowers; (vi) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (viii) any requirement that Bank give any notice of acceptance of this Guaranty. Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Borrowers or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Guarantor further waives all rights and defenses Guarantor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Guarantor's rights of subrogation or Guarantor's rights to proceed against any of the Borrowers for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of any of the Borrowers in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Borrowers' Indebtedness, whether by operation of Sections 726, 580a or 580d of the Code of Civil Procedure as from time to time amended, or otherwise, including any rights Guarantor may have to a Section 580a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.
7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S POSSESSION. In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Bank by law, Bank shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Bank in writing.
8. SUBORDINATION. Any Indebtedness of any of the Borrowers now or hereafter held by Guarantor is hereby subordinated to the Indebtedness of Borrowers to Bank. Such Indebtedness of Borrowers to Guarantor is assigned to Bank as security for this Guaranty and the Indebtedness and, if Bank requests, shall be collected and received by Guarantor as trustee for Bank and paid over to Bank on account of the Indebtedness of Borrowers to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. Any notes or other instruments now or hereafter evidencing such Indebtedness of any of the Borrowers to Guarantor shall be marked with a legend that the same are subject to this Guaranty and, if Bank so requests, shall be delivered to Bank. Bank is hereby authorized in the name of Guarantor from time to time to file financing statements and continuation statements and execute such other documents and take such other action as Bank deems necessary or appropriate to perfect, preserve and enforce its rights hereunder.
9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder are cumulative. No delay, failure or discontinuance of Bank in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent
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or approval of any kind by Bank of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with the enforcement of any of Bank's rights, powers or remedies and/or the collection of any amounts which become due to Bank under this Guaranty, and the prosecution or defense of any action in any way related to this Guaranty, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Guarantor or any other person or entity. All of the foregoing shall be paid by Guarantor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or Bank's Prime Rate in effect from time to time.
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Guarantor may not assign or transfer any of its interests or rights hereunder without Bank's prior written consent. Guarantor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Borrowers to Bank and any obligations with respect thereto, including this Guaranty. In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Guarantor and/or this Guaranty, whether furnished by Borrowers, Guarantor or otherwise. Guarantor further agrees that Bank may disclose such documents and information to Borrowers.
12. AMENDMENT. This Guaranty may be amended or modified only in writing signed by Bank and Guarantor.
13. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this Guaranty as a Guarantor hereby expressly agrees that recourse may be had against his or her separate property for all his or her obligations under this Guaranty.
14. APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but a single Borrower, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the word "Borrowers" and the word "Guarantor" respectively shall mean all or any one or more of them as the context requires.
15. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS. Guarantor warrants and agrees that each of the waivers set forth herein is made with Guarantor's full knowledge of its significance and consequences, and that under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any waiver or other provision of this Guaranty shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Guaranty.
16. GOVERNING LAW. This Guaranty shall be governed by and construed in accordance with the laws of the State of California.
17. ARBITRATION.
(a) Arbitration . The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization,
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administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party's right to demand arbitration being automatically terminated.
(b) Governing Rules . Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. 91 or any similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure . The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers . Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.
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(e) Discovery . In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations . No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.
(g) Payment Of Arbitration Costs And Fees . The arbitrator shall award all costs and expenses of the arbitration proceeding.
(h) Real Property Collateral; Judicial Reference . Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.
(i) Miscellaneous . To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.
(j) Small Claims Court . Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court's jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys' fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.
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IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of June 23, 2015.
SEED HOLDING, LLC
By:
/s/ Mark S. Grewal
Mark S. Grewal, its Manager
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Exhibit 10.71
CONTINUING GUARANTY
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
1. GUARANTY; DEFINITIONS. In consideration of any credit or other financial accommodation heretofore, now or hereafter extended or made to S&W SEED COMPANY ("Borrowers"), or any of them, by WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned STEVIA CALIFORNIA, LLC ("Guarantor"), jointly and severally unconditionally guarantees and promises to pay to Bank, or order, on demand in lawful money of the United States of America and in immediately available funds, any and all Indebtedness of any of the Borrowers to Bank. The term "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether any of the Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable. This Guaranty is a guaranty of payment and not collection.
2. MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION UNDER OTHER GUARANTIES. This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of each of the Borrowers to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of any of the Borrowers or Guarantor or any other event or proceeding affecting any of the Borrowers or Guarantor. This Guaranty shall not apply to any new Indebtedness created after actual receipt by Bank of written notice of its revocation as to such new Indebtedness; provided however, that loans or advances made by Bank to any of the Borrowers after revocation under commitments existing prior to receipt by Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Borrowers or committed by Bank prior to receipt by Bank of such revocation, shall not be considered new Indebtedness. Any such notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its office at 333 Market Street, 3rd Floor, San Francisco, California, or at such other address as Bank shall from time to time designate. Any payment by Guarantor shall not reduce Guarantor's maximum obligation hereunder unless written notice to that effect is actually received by Bank at or prior to the time of such payment. The obligations of Guarantor hereunder shall be in addition to any obligations of Guarantor under any other guaranties of any liabilities or obligations of any of the Borrowers or any other persons heretofore or hereafter given to Bank unless said other guaranties are expressly modified or revoked in writing; and this Guaranty shall not, unless expressly herein provided, affect or invalidate any such other guaranties.
3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and several and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against any of the Borrowers or any other person, or whether any of the Borrowers or any other person is joined in any such action or actions. Guarantor acknowledges that this Guaranty is absolute and unconditional, there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Guarantor. Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, and Guarantor agrees that any payment of any Indebtedness or other act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to
Guarantor's liability hereunder. The liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys' fees, expended or incurred by Bank in connection therewith, including without limitation, in any litigation with respect thereto.
4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or after revocation hereof, without notice to or demand on Guarantor, and without affecting Guarantor's liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release any such security; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or any other guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from any of the Borrowers to any Indebtedness of any of the Borrowers to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Guaranty in whole or in part. Upon Bank's request, Guarantor agrees to provide to Bank copies of Guarantor's financial statements.
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Bank that: (a) this Guaranty is executed at Borrowers' request; (b) Guarantor shall not, without Bank's prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor's assets other than in the ordinary course of Guarantor's business; (c) Bank has made no representation to Guarantor as to the creditworthiness of any of the Borrowers; and (d) Guarantor has established adequate means of obtaining from each of the Borrowers on a continuing basis financial and other information pertaining to Borrowers' financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor's risks hereunder, and Guarantor further agrees that Bank shall have no obligation to disclose to Guarantor any information or material about any of the Borrowers which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i) proceed against any of the Borrowers or any other person; (ii) marshal assets or proceed against or exhaust any security held from any of the Borrowers or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from any of the Borrowers or any other person; (iv) take any other action or pursue any other remedy in Bank's power; or (v) make any presentment or demand for performance, or give any notice of nonperformance, protest, notice of protest or notice of dishonor hereunder or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed hereunder, or in connection with the creation of new or additional Indebtedness.
(b) Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of any of the Borrowers or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of any of the Borrowers or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of any of the Borrowers which is a corporation, partnership or other type of entity, or any defect in the formation of any such Borrower; (iv) the application
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by any of the Borrowers of the proceeds of any Indebtedness for purposes other than the purposes represented by Borrowers to, or intended or understood by, Bank or Guarantor; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Borrowers or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any of the Borrowers; (vi) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (viii) any requirement that Bank give any notice of acceptance of this Guaranty. Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Borrowers or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Guarantor further waives all rights and defenses Guarantor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Guarantor's rights of subrogation or Guarantor's rights to proceed against any of the Borrowers for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of any of the Borrowers in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Borrowers' Indebtedness, whether by operation of Sections 726, 580a or 580d of the Code of Civil Procedure as from time to time amended, or otherwise, including any rights Guarantor may have to a Section 580a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.
7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S POSSESSION. In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Bank by law, Bank shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Bank in writing.
8. SUBORDINATION. Any Indebtedness of any of the Borrowers now or hereafter held by Guarantor is hereby subordinated to the Indebtedness of Borrowers to Bank. Such Indebtedness of Borrowers to Guarantor is assigned to Bank as security for this Guaranty and the Indebtedness and, if Bank requests, shall be collected and received by Guarantor as trustee for Bank and paid over to Bank on account of the Indebtedness of Borrowers to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. Any notes or other instruments now or hereafter evidencing such Indebtedness of any of the Borrowers to Guarantor shall be marked with a legend that the same are subject to this Guaranty and, if Bank so requests, shall be delivered to Bank. Bank is hereby authorized in the name of Guarantor from time to time to file financing statements and continuation statements and execute such other documents and take such other action as Bank deems necessary or appropriate to perfect, preserve and enforce its rights hereunder.
9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder are cumulative. No delay, failure or discontinuance of Bank in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.
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10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with the enforcement of any of Bank's rights, powers or remedies and/or the collection of any amounts which become due to Bank under this Guaranty, and the prosecution or defense of any action in any way related to this Guaranty, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Guarantor or any other person or entity. All of the foregoing shall be paid by Guarantor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or Bank's Prime Rate in effect from time to time.
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Guarantor may not assign or transfer any of its interests or rights hereunder without Bank's prior written consent. Guarantor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Borrowers to Bank and any obligations with respect thereto, including this Guaranty. In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Guarantor and/or this Guaranty, whether furnished by Borrowers, Guarantor or otherwise. Guarantor further agrees that Bank may disclose such documents and information to Borrowers.
12. AMENDMENT. This Guaranty may be amended or modified only in writing signed by Bank and Guarantor.
13. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this Guaranty as a Guarantor hereby expressly agrees that recourse may be had against his or her separate property for all his or her obligations under this Guaranty.
14. APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but a single Borrower, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the word "Borrowers" and the word "Guarantor" respectively shall mean all or any one or more of them as the context requires.
15. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS. Guarantor warrants and agrees that each of the waivers set forth herein is made with Guarantor's full knowledge of its significance and consequences, and that under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any waiver or other provision of this Guaranty shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Guaranty.
16. GOVERNING LAW. This Guaranty shall be governed by and construed in accordance with the laws of the State of California.
17. ARBITRATION.
(a) Arbitration . The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization,
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administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party's right to demand arbitration being automatically terminated.
(b) Governing Rules . Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. 91 or any similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure . The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers . Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.
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(e) Discovery . In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations . No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.
(g) Payment Of Arbitration Costs And Fees . The arbitrator shall award all costs and expenses of the arbitration proceeding.
(h) Real Property Collateral; Judicial Reference . Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.
(i) Miscellaneous . To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.
(j) Small Claims Court . Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court's jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys' fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.
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IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of June 23, 2015.
STEVIA CALIFORNIA, LLC
By:
/s/ Mark S. Grewal
Mark S. Grewal, its Manager
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Exhibit 10.72
FIFTH AMENDMENT TO EX-IM WORKING CAPITAL GUARANTEE CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO EX-IM WORKING CAPITAL GUARANTEE CREDIT AGREEMENT (this "Amendment") is entered into as of June 23, 2015, by and between S&W SEED COMPANY ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
A. Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain EX-IM Working Capital Guarantee Credit Agreement between Borrower and Bank dated as of February 1, 2014 as amended from time to time ("Credit Agreement").
B. Pursuant to the Credit Agreement, Borrower remains indebted to Bank under a line of credit in the maximum principal amount of Ten Million Dollars ($10,000,000.00) (the "Line of Credit"), which is evidenced by that certain EX-IM Working Capital Guarantee Revolving Line of Credit Note dated February 27, 2015, as amended or modified from time to time (the "Prior Line of Credit Note"). The Prior Line of Credit Note matures and becomes due and payable in full on July 1, 2015 and as of the date hereof, the outstanding principal balance under the Prior Line of Credit is $10,000,000.00, plus accrued but unpaid interest.
C. Subject to the terms and conditions contained herein, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, subject to the terms and conditions described herein, the parties hereto agree that the Credit Agreement shall be amended as follows; provided , however , that nothing shall terminate any security interests, guaranties, subordinations or other documents in favor of Bank, all of which shall remain in full force and effect unless expressly amended hereby:
1. Amendment to Section 1.1. Section 1.1 is hereby amended by deleting "July 1, 2015" as the last day on which Bank will make advances under the Line of Credit, and by substituting for said date "October 1, 2015", with such change to be effective upon the execution and delivery to Bank of a promissory note substantially in the form of Exhibit A attached hereto (the "Line of Credit Note") (which Note shall replace and be deemed the Line of Credit Note defined in and made pursuant to the Credit Agreement) and all other contracts, instruments and documents required by Bank to evidence such change; provided , however , that advances made under the Prior Line of Credit Note shall be deemed made under the Line of Credit Note.
2. Amendment to Section 1.2(e). The following is hereby added to the Credit Agreement as a new Section 1.2(e):
"(e) Ex-Im Working Capital Guarantee Fee Letter . Borrower shall pay to Bank as and when due all fees specified in and pursuant to the terms and provisions of the Ex-Im Working Capital Guarantee Fee Letter dated as of June 23, 2015 and executed by Borrower and Bank ("Ex-Im Working Capital Guarantee Fee Letter")."
3. Amendment to Section 1.4. Section 1.4 is hereby deleted in its entirety, and the following substituted therefor:
"As security for all indebtedness and other obligations of Borrower to Bank subject hereto, Borrower hereby confirms and grants to Bank security interests of first priority in all Borrower's accounts receivable and other rights to payment, general intangibles, inventory, equipment and sixty-five percent (65%) of Borrower's stock held in S&W SEED AUSTRALIA PTY. LTD.
Promptly following Bank's request, Borrower shall provide to Bank each of the following to secure the indebtedness described in the preceding paragraph: (i) security agreements duly executed by each Guarantor (as defined below), pursuant to which each Guarantor grants to Bank security interests in substantially all of such Guarantor's assets; (ii) a pledge agreement duly executed by Borrower pursuant to which Borrower pledges to Bank all of Borrower's equity interests in the Guarantors; and (iii) to the extent certificated, original equity certificates issued by the Guarantors to Borrower, together with blank instruments of transfer.
All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, deeds or mortgages, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Bank personnel), expended or incurred by Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance."
4. Amendment to Section 1.5. The following is hereby added to the Credit Agreement as a new Section 1.5:
"SECTION 1.5. GUARANTIES . The payment and performance of all indebtedness and other obligations of Borrower to Bank shall be guaranteed jointly and severally by Seed Holding, LLC, a Nevada limited liability company and Stevia California, LLC, a California limited liability company (each individually a "Guarantor" and collectively, the "Guarantors"), as evidenced by and subject to the terms of guaranties in form and substance satisfactory to Bank."
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5. Amendment to Section 4.9(d). Section 4.9(d) of the Credit Agreement is hereby deleted in its entirety, and the following substituted therefor:
"(d) Net income after taxes not less than $1.00, measured on a consolidated rolling 4-quarter basis as of each fiscal quarter end; provided, however, Borrower is permitted to exclude one-time crop losses incurred during fiscal year 2013 up to a maximum of $2,333,123.00 for the reporting period ending March 31, 2014 only; provided further, Borrower is permitted to have net income after taxes of (i) not less than negative $1,600,000.00 for the four fiscal quarter period ending as of March 31, 2015 and (ii) not less than negative $2,700,000.00 for the four fiscal quarter periods ending as of June 30, 2015 and September 30, 2015."
6. Amendment to Section 6.1(m). Section 6.1(m) of the Credit Agreement is hereby deleted in its entirety, and the following substituted therefor:
"(m) Borrower fails to deliver by September 1, 2015 each of the following, in each case in form and substance satisfactory to Bank: (i) a deed of trust or mortgage in respect to the Nampa Property and the Columbia County Property (as such terms are defined in the Amendment and Waiver Agreement dated as of December 31, 2014 between Borrower and Bank) and all other real property of Borrower and any Third Party Obligor required by Bank; and (ii) such title insurance policies, evidence of insurance, insurance certificates and endorsements, surveys, appraisals, consents, estoppels, subordination agreements, recordations, collateral filings, opinions, resolutions, documents and other instruments as Bank shall require in connection with the foregoing."
7. Conditions Precedent. The obligation of Bank to amend the terms and conditions of the Credit Agreement as provided herein, is subject to the fulfillment to Bank's satisfaction of all of the following conditions by no later than June 29, 2015:
(a) Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed:
(i) This Amendment.
(ii) The Line of Credit Note.
(iii) Continuing Guaranty from Seed Holding, LLC.
(iv) Continuing Guaranty from Stevia California, LLC.
(v) Limited Liability Company Certificate: Continuing Guaranty from Seed Holding, LLC.
(vi) Limited Liability Company Certificate: Continuing Guaranty from Stevia California, LLC.
(vii) Fee Letter.
(viii) Written consent from all Lenders under the Intercreditor Agreement (as defined in the Amendment and Waiver dated December 31, 2014 between Borrower and Bank) to all amendments
under the Loan Documents.
(ix) Such other documents as Bank may require under any other section of this Amendment.
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(b) Bank shall have received all fees as and when due under the Fee Letter.
(c) Other Fees and Costs . In addition to Borrower's obligations under the Credit Agreement and the other Loan Documents, Borrower shall have paid to Bank the full amount of all costs and expenses, including reasonable attorneys' fees (including the allocated costs of Bank's in-house counsel) expended or incurred by Bank in connection with the negotiation and preparation of this Amendment, for which Bank has made demand.
8. General Release . In consideration of the benefits provided to Borrower under the terms and provisions hereof, Borrower hereby agrees as follows ("General Release"):
(a) Borrower, for itself and on behalf of its successors and assigns, does hereby release, acquit and forever discharge Bank, all of Bank's predecessors in interest, and all of Bank's past and present officers, directors, attorneys, affiliates, employees and agents, of and from any and all claims, demands, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or of any relationship, acts, omissions, misfeasance, malfeasance, causes of action, defenses, offsets, debts, sums of money, accounts, compensation, contracts, controversies, promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, each as though fully set forth herein at length (each, a "Released Claim" and collectively, the "Released Claims"), that Borrower now has or may acquire as of the later of: (i) the date this Amendment becomes effective through the satisfaction (or waiver by Bank) of all conditions hereto; or (ii) the date that Borrower has executed and delivered this Amendment to Bank (hereafter, the "Release Date"), including without limitation, those Released Claims in any way arising out of, connected with or related to any and all prior credit accommodations, if any, provided by Bank, or any of Bank's predecessors in interest, to Borrower, and any agreements, notes or documents of any kind related thereto or the transactions contemplated thereby or hereby, or any other agreement or document referred to herein or therein.
(b) Borrower hereby acknowledges, represents and warrants to Bank as follows:
(i) Borrower understands the meaning and effect of Section 1542 of the California Civil Code which provides:
"Section 1542. GENERAL RELEASE; EXTENT . A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR."
(ii) With regard to Section 1542 of the California Civil Code, Borrower agrees to assume the risk of any and all unknown, unanticipated or misunderstood defenses and Released Claims which are released by the provisions of this General Release in favor of Bank, and Borrower hereby waives and releases all rights and benefits which it might otherwise have under Section 1542 of the California Civil Code with regard to the release of such unknown, unanticipated or misunderstood defenses and Released Claims.
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(c) Each person signing below on behalf of Borrower acknowledges that he or she has read each of the provisions of this General Release. Each such person fully understands that this General Release has important legal consequences and each such person realizes that they are releasing any and all Released Claims that Borrower may have as of the Release Date. Borrower hereby acknowledges that it has had an opportunity to obtain a lawyer's advice concerning the legal consequences of each of the provisions of this General Release.
(d) Borrower hereby specifically acknowledges and agrees that: (i) none of the provisions of this General Release shall be construed as or constitute an admission of any liability on the part of Bank; (ii) the provisions of this General Release shall constitute an absolute bar to any Released Claim of any kind, whether any such Released Claim is based on contract, tort, warranty, mistake or any other theory, whether legal, statutory or equitable; and (iii) any attempt to assert a Released Claim barred by the provisions of this General Release shall subject Borrower to the provisions of applicable law setting forth the remedies for the bringing of groundless, frivolous or baseless claims or causes of action.
9. Fees and Costs . In addition to Borrower's obligations to Bank under the Credit Agreement and the other Loan Documents, Borrower hereby agrees to pay to Bank immediately upon demand the full amount of all costs and expenses, including reasonable attorneys' fees (including the allocated costs of Bank's in-house counsel) expended or incurred by Bank in connection with the negotiation and preparation of this Amendment and all other documents required pursuant to this Amendment.
10. Miscellaneous . Except as specifically provided herein, all terms and conditions of the Credit Agreement shall remain in full force and effect, without waiver or modification. All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document. This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Amendment.
11. Reaffirmation; Certification . Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default.
[Continues With Signatures On Following Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.
By:
/s/ Matthew K. Szot
|
WELLS FARGO BANK,
By:
/s/
_________________________
|
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EXHIBIT A
FORM OF LINE OF CREDIT NOTE
EX-IM WORKING CAPITAL GUARANTEE
REVOLVING LINE OF CREDIT NOTE
$10,000,000.00 |
San Francisco, California
|
FOR VALUE RECEIVED, the undersigned S&W SEED COMPANY ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at 333 Market Street, 3rd Floor, San Francisco, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Ten Million Dollars ($10,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.
This Note amends, restates and supersedes in its entirety that certain EX-IM Working Capital Guarantee Revolving Line of Credit Note in the maximum principal amount of Ten Million Dollars ($10,000,000.00), executed by Borrower in favor of Bank and dated February 27, 2015, as such may have been amended or modified from time to time prior to the date hereof.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:
(a) "Daily One Month LIBOR" means, for any day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period.
(b) "LIBOR" means (i) for the purpose of calculating effective rates of interest for loans making reference to LIBOR Periods, the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery on the first day of each LIBOR Period for a period approximately equal to such LIBOR Period as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, two London Business Days prior to the first day of such LIBOR Period (or if not so reported, then as determined by Bank from another recognized source or interbank quotation), or (ii) for the purpose of calculating effective rates of interest for loans making reference to the Daily One Month LIBOR Rate, the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery of funds for one (1) month as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, or, for any day not a London Business Day, the immediately preceding London Business Day (or if not so reported, then as determined by Bank from another recognized source or interbank quotation).
(c) "LIBOR Period" means a period commencing on a New York Business Day and continuing for one (1) month, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that (i) no LIBOR Period may be selected for a principal amount less than
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One Hundred Thousand Dollars ($100,000.00), (ii) if the day after the end of any LIBOR Period is not a New York Business Day (so that a new LIBOR Period could not be selected by Borrower to start on such day), then such LIBOR Period shall continue up to, but shall not include, the next New York Business Day after the end of such LIBOR Period, unless the result of such extension would be to cause any immediately following LIBOR Period to begin in the next calendar month in which event the LIBOR Period shall continue up to, but shall not include, the New York Business Day immediately preceding the last day of such LIBOR Period, and (iii) no LIBOR Period shall extend beyond the scheduled maturity date hereof.
(d) "London Business Day" means any day that is a day for trading by and between banks in Dollar deposits in the London interbank market.
(e) "New York Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in New York are authorized or required by law to close.
(f) "State Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in the jurisdiction described in "Governing Law" herein are authorized or required by law to close.
INTEREST:
(a) Interest . The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum determined by Bank to be two and three-quarters percent (2.75%) above the Daily One Month LIBOR Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be two and three-quarters percent (2.75%) above LIBOR in effect on the first day of the applicable LIBOR Period. Bank is hereby authorized to note the date, principal amount and interest rate applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options . Subject to the provisions herein regarding LIBOR Periods and the prior notice required for the selection of a LIBOR interest rate, (i) at any time any portion of this Note bears interest determined in relation to LIBOR for a LIBOR Period, it may be continued by Borrower at the end of the LIBOR Period applicable thereto so that all or a portion thereof bears interest determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a new LIBOR Period designated by Borrower, (ii) at any time any portion of this Note bears interest determined in relation to the Daily One Month LIBOR Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a LIBOR Period designated by Borrower, and (iii) at the time an advance is made hereunder, Borrower may choose to have all or a portion thereof bear interest determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a LIBOR Period designated by Borrower.
To select an interest rate option hereunder determined in relation to LIBOR for a LIBOR Period, Borrower shall give Bank notice thereof that is received by Bank prior to 11:00 a.m California time on a State Business Day at least two State Business Days prior to the first day of the LIBOR Period, or at a later time during such State Business Day if Bank, at its sole discretion, accepts Borrower's notice and quotes a fixed rate to Borrower. Such notice shall specify: (A) the interest rate option selected by Borrower, (B) the principal amount subject thereto, and (C) for each LIBOR selection, the length of the applicable LIBOR Period. If Bank has not received such notice in accordance with the foregoing before an advance is made
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hereunder or before the end of any LIBOR Period, Borrower shall be deemed to have made a Daily One Month LIBOR Rate interest selection for such advance or the principal amount to which such LIBOR Period applied. Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as it is given in accordance with the foregoing and, with respect to each LIBOR selection, if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three State Business Days after such notice is given. Borrower shall reimburse Bank immediately upon demand for any loss or expense (including any loss or expense incurred by reason of the liquidation or redeployment of funds obtained to fund or maintain a LIBOR borrowing) incurred by Bank as a result of the failure of Borrower to accept or complete a LIBOR borrowing hereunder after making a request therefor. Any reasonable determination of such amounts by Bank shall be conclusive and binding upon Borrower.
(c) Taxes and Regulatory Costs . Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) costs, expenses and liabilities arising from or in connection with reserve percentages prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.
(d) Payment of Interest . Interest accrued on this Note shall be payable on the first day of each month, commencing July 1, 2015.
(e) Default Interest . From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank's option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment . Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on October 1, 2015.
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(b) Advances . Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) Mark S. Grewal or Matthew K. Szot, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by Borrower.
(c) Application of Payments . Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Daily One Month LIBOR Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest LIBOR Period first.
PREPAYMENT:
(a) Daily One Month LIBOR Rate . Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Daily One Month LIBOR Rate at any time, in any amount and without penalty.
(b) LIBOR . Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the LIBOR Period applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such LIBOR Period matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the LIBOR Period applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such LIBOR Period at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs,
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expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum four percent (4.00%) above the Daily One Month LIBOR Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of that certain EX-IM Working Capital Guarantee Credit Agreement between Borrower and Bank dated as of February 1, 2014, as amended from time to time (the "Credit Agreement"). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies . Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.
(b) Obligations Joint and Several . Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.
(c) Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.
S&W SEED COMPANY
By: ___________________________
Matthew K. Szot, Executive Vice President
Chief Financial Officer
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Exhibit 10.73
EX-IM WORKING CAPITAL GUARANTEE
REVOLVING LINE OF CREDIT NOTE
$10,000,000.00 |
San Francisco, California
|
FOR VALUE RECEIVED, the undersigned S&W SEED COMPANY ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at 333 Market Street, 3rd Floor, San Francisco, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Ten Million Dollars ($10,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.
This Note amends, restates and supersedes in its entirety that certain EX-IM Working Capital Guarantee Revolving Line of Credit Note in the maximum principal amount of Ten Million Dollars ($10,000,000.00), executed by Borrower in favor of Bank and dated February 27, 2015, as such may have been amended or modified from time to time prior to the date hereof.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:
(a) "Daily One Month LIBOR" means, for any day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period.
(b) "LIBOR" means (i) for the purpose of calculating effective rates of interest for loans making reference to LIBOR Periods, the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery on the first day of each LIBOR Period for a period approximately equal to such LIBOR Period as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, two London Business Days prior to the first day of such LIBOR Period (or if not so reported, then as determined by Bank from another recognized source or interbank quotation), or (ii) for the purpose of calculating effective rates of interest for loans making reference to the Daily One Month LIBOR Rate, the rate of interest per annum determined by Bank based on the rate for United States dollar deposits for delivery of funds for one (1) month as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, or, for any day not a London Business Day, the immediately preceding London Business Day (or if not so reported, then as determined by Bank from another recognized source or interbank quotation).
(c) "LIBOR Period" means a period commencing on a New York Business Day and continuing for one (1) month, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that (i) no LIBOR Period may be selected for a principal amount less than One Hundred Thousand Dollars ($100,000.00), (ii) if the day after the end of any LIBOR Period is not a New York Business Day (so that a new LIBOR Period could not be selected by
Borrower to start on such day), then such LIBOR Period shall continue up to, but shall not include, the next New York Business Day after the end of such LIBOR Period, unless the result of such extension would be to cause any immediately following LIBOR Period to begin in the next calendar month in which event the LIBOR Period shall continue up to, but shall not include, the New York Business Day immediately preceding the last day of such LIBOR Period, and (iii) no LIBOR Period shall extend beyond the scheduled maturity date hereof.
(d) "London Business Day" means any day that is a day for trading by and between banks in Dollar deposits in the London interbank market.
(e) "New York Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in New York are authorized or required by law to close.
(f) "State Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in the jurisdiction described in "Governing Law" herein are authorized or required by law to close.
INTEREST:
(a) Interest . The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum determined by Bank to be two and three-quarters percent (2.75%) above the Daily One Month LIBOR Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be two and three-quarters percent (2.75%) above LIBOR in effect on the first day of the applicable LIBOR Period. Bank is hereby authorized to note the date, principal amount and interest rate applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options . Subject to the provisions herein regarding LIBOR Periods and the prior notice required for the selection of a LIBOR interest rate, (i) at any time any portion of this Note bears interest determined in relation to LIBOR for a LIBOR Period, it may be continued by Borrower at the end of the LIBOR Period applicable thereto so that all or a portion thereof bears interest determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a new LIBOR Period designated by Borrower, (ii) at any time any portion of this Note bears interest determined in relation to the Daily One Month LIBOR Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a LIBOR Period designated by Borrower, and (iii) at the time an advance is made hereunder, Borrower may choose to have all or a portion thereof bear interest determined in relation to the Daily One Month LIBOR Rate or to LIBOR for a LIBOR Period designated by Borrower.
To select an interest rate option hereunder determined in relation to LIBOR for a LIBOR Period, Borrower shall give Bank notice thereof that is received by Bank prior to 11:00 a.m California time on a State Business Day at least two State Business Days prior to the first day of the LIBOR Period, or at a later time during such State Business Day if Bank, at its sole discretion, accepts Borrower's notice and quotes a fixed rate to Borrower. Such notice shall specify: (A) the interest rate option selected by Borrower, (B) the principal amount subject thereto, and (C) for each LIBOR selection, the length of the applicable LIBOR Period. If Bank has not received such notice in accordance with the foregoing before an advance is made hereunder or before the end of any LIBOR Period, Borrower shall be deemed to have made a Daily One Month LIBOR Rate interest selection for such advance or the principal amount to
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which such LIBOR Period applied. Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as it is given in accordance with the foregoing and, with respect to each LIBOR selection, if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three State Business Days after such notice is given. Borrower shall reimburse Bank immediately upon demand for any loss or expense (including any loss or expense incurred by reason of the liquidation or redeployment of funds obtained to fund or maintain a LIBOR borrowing) incurred by Bank as a result of the failure of Borrower to accept or complete a LIBOR borrowing hereunder after making a request therefor. Any reasonable determination of such amounts by Bank shall be conclusive and binding upon Borrower.
(c) Taxes and Regulatory Costs . Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) costs, expenses and liabilities arising from or in connection with reserve percentages prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.
(d) Payment of Interest . Interest accrued on this Note shall be payable on the first day of each month, commencing July 1, 2015.
(e) Default Interest . From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank's option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment . Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on October 1, 2015.
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(b) Advances . Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) Mark S. Grewal or Matthew K. Szot, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by Borrower.
(c) Application of Payments . Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Daily One Month LIBOR Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest LIBOR Period first.
PREPAYMENT:
(a) Daily One Month LIBOR Rate . Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Daily One Month LIBOR Rate at any time, in any amount and without penalty.
(b) LIBOR . Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the LIBOR Period applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such LIBOR Period matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the LIBOR Period applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such LIBOR Period at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum four percent (4.00%) above the Daily One Month LIBOR Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).
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EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of that certain EX-IM Working Capital Guarantee Credit Agreement between Borrower and Bank dated as of February 1, 2014, as amended from time to time (the "Credit Agreement"). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies . Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.
(b) Obligations Joint and Several . Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.
(c) Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of California.
[Continues With Signature(s) on Following Page]
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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.
S&W SEED COMPANY
By:
/s/ Matthew K. Szot
Matthew K. Szot, Executive Vice President
Chief Financial Officer
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Exhibit 10.74
EX-IM WORKING CAPITAL GUARANTEE
CONTINUING GUARANTY
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
1. GUARANTY; DEFINITIONS. In consideration of any credit or other financial accommodation heretofore, now or hereafter extended or made to S&W SEED COMPANY ("Borrowers"), or any of them, by WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned SEED HOLDING, LLC ("Guarantor"), jointly and severally unconditionally guarantees and promises to pay to Bank, or order, on demand in lawful money of the United States of America and in immediately available funds, any and all Indebtedness of any of the Borrowers to Bank. The term "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether any of the Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable. This Guaranty is a guaranty of payment and not collection.
2. MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION UNDER OTHER GUARANTIES. This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of each of the Borrowers to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of any of the Borrowers or Guarantor or any other event or proceeding affecting any of the Borrowers or Guarantor. This Guaranty shall not apply to any new Indebtedness created after actual receipt by Bank of written notice of its revocation as to such new Indebtedness; provided however, that loans or advances made by Bank to any of the Borrowers after revocation under commitments existing prior to receipt by Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Borrowers or committed by Bank prior to receipt by Bank of such revocation, shall not be considered new Indebtedness. Any such notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its office at 333 Market Street, 3rd Floor, San Francisco, California, or at such other address as Bank shall from time to time designate. Any payment by Guarantor shall not reduce Guarantor's maximum obligation hereunder unless written notice to that effect is actually received by Bank at or prior to the time of such payment. The obligations of Guarantor hereunder shall be in addition to any obligations of Guarantor under any other guaranties of any liabilities or obligations of any of the Borrowers or any other persons heretofore or hereafter given to Bank unless said other guaranties are expressly modified or revoked in writing; and this Guaranty shall not, unless expressly herein provided, affect or invalidate any such other guaranties.
3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and several and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against any of the Borrowers or any other person, or whether any of the Borrowers or any other person is joined in any such action or actions. Guarantor acknowledges that this Guaranty is absolute and unconditional, there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Guarantor. Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, and Guarantor agrees that any payment of any Indebtedness or other act which shall toll any statute of
limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to Guarantor's liability hereunder. The liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys' fees, expended or incurred by Bank in connection therewith, including without limitation, in any litigation with respect thereto.
4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or after revocation hereof, without notice to or demand on Guarantor, and without affecting Guarantor's liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release any such security; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or any other guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from any of the Borrowers to any Indebtedness of any of the Borrowers to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Guaranty in whole or in part. Upon Bank's request, Guarantor agrees to provide to Bank copies of Guarantor's financial statements.
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Bank that: (a) this Guaranty is executed at Borrowers' request; (b) Guarantor shall not, without Bank's prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor's assets other than in the ordinary course of Guarantor's business; (c) Bank has made no representation to Guarantor as to the creditworthiness of any of the Borrowers; and (d) Guarantor has established adequate means of obtaining from each of the Borrowers on a continuing basis financial and other information pertaining to Borrowers' financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor's risks hereunder, and Guarantor further agrees that Bank shall have no obligation to disclose to Guarantor any information or material about any of the Borrowers which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i) proceed against any of the Borrowers or any other person; (ii) marshal assets or proceed against or exhaust any security held from any of the Borrowers or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from any of the Borrowers or any other person; (iv) take any other action or pursue any other remedy in Bank's power; or (v) make any presentment or demand for performance, or give any notice of nonperformance, protest, notice of protest or notice of dishonor hereunder or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed hereunder, or in connection with the creation of new or additional Indebtedness.
(b) Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of any of the Borrowers or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of any of the Borrowers or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of any of the Borrowers which is a corporation,
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partnership or other type of entity, or any defect in the formation of any such Borrower; (iv) the application by any of the Borrowers of the proceeds of any Indebtedness for purposes other than the purposes represented by Borrowers to, or intended or understood by, Bank or Guarantor; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Borrowers or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any of the Borrowers; (vi) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (viii) any requirement that Bank give any notice of acceptance of this Guaranty. Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Borrowers or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Guarantor further waives all rights and defenses Guarantor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Guarantor's rights of subrogation or Guarantor's rights to proceed against any of the Borrowers for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of any of the Borrowers in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Borrowers' Indebtedness, whether by operation of Sections 726, 580a or 580d of the Code of Civil Procedure as from time to time amended, or otherwise, including any rights Guarantor may have to a Section 580a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.
7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S POSSESSION. In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Bank by law, Bank shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Bank in writing.
8. SUBORDINATION. Any Indebtedness of any of the Borrowers now or hereafter held by Guarantor is hereby subordinated to the Indebtedness of Borrowers to Bank. Such Indebtedness of Borrowers to Guarantor is assigned to Bank as security for this Guaranty and the Indebtedness and, if Bank requests, shall be collected and received by Guarantor as trustee for Bank and paid over to Bank on account of the Indebtedness of Borrowers to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. Any notes or other instruments now or hereafter evidencing such Indebtedness of any of the Borrowers to Guarantor shall be marked with a legend that the same are subject to this Guaranty and, if Bank so requests, shall be delivered to Bank. Bank is hereby authorized in the name of Guarantor from time to time to file financing statements and continuation statements and execute such other documents and take such other action as Bank deems necessary or appropriate to perfect, preserve and enforce its rights hereunder.
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9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder are cumulative. No delay, failure or discontinuance of Bank in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with the enforcement of any of Bank's rights, powers or remedies and/or the collection of any amounts which become due to Bank under this Guaranty, and the prosecution or defense of any action in any way related to this Guaranty, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Guarantor or any other person or entity. All of the foregoing shall be paid by Guarantor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or Bank's Prime Rate in effect from time to time.
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Guarantor may not assign or transfer any of its interests or rights hereunder without Bank's prior written consent. Guarantor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Borrowers to Bank and any obligations with respect thereto, including this Guaranty. In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Guarantor and/or this Guaranty, whether furnished by Borrowers, Guarantor or otherwise. Guarantor further agrees that Bank may disclose such documents and information to Borrowers.
12. AMENDMENT. This Guaranty may be amended or modified only in writing signed by Bank and Guarantor.
13. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this Guaranty as a Guarantor hereby expressly agrees that recourse may be had against his or her separate property for all his or her obligations under this Guaranty.
14. APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but a single Borrower, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the word "Borrowers" and the word "Guarantor" respectively shall mean all or any one or more of them as the context requires.
15. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS. Guarantor warrants and agrees that each of the waivers set forth herein is made with Guarantor's full knowledge of its significance and consequences, and that under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any waiver or other provision of this Guaranty shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Guaranty.
16. GOVERNING LAW. This Guaranty shall be governed by and construed in accordance with the laws of the State of California.
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17. ARBITRATION.
(a) Arbitration . The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party's right to demand arbitration being automatically terminated.
(b) Governing Rules . Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. 91 or any similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure . The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers . Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.
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(e) Discovery . In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations . No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.
(g) Payment Of Arbitration Costs And Fees . The arbitrator shall award all costs and expenses of the arbitration proceeding.
(h) Real Property Collateral; Judicial Reference . Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.
(i) Miscellaneous . To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.
(j) Small Claims Court . Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court's jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys' fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.
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IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of June 23, 2015.
SEED HOLDING, LLC
By:
/s/ Mark S. Grewal
Mark S. Grewal, its Manager
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Exhibit 10.75
EX-IM WORKING CAPITAL GUARANTEE
CONTINUING GUARANTY
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
1. GUARANTY; DEFINITIONS. In consideration of any credit or other financial accommodation heretofore, now or hereafter extended or made to S&W SEED COMPANY ("Borrowers"), or any of them, by WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned STEVIA CALIFORNIA, LLC ("Guarantor"), jointly and severally unconditionally guarantees and promises to pay to Bank, or order, on demand in lawful money of the United States of America and in immediately available funds, any and all Indebtedness of any of the Borrowers to Bank. The term "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether any of the Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable. This Guaranty is a guaranty of payment and not collection.
2. MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION UNDER OTHER GUARANTIES. This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of each of the Borrowers to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of any of the Borrowers or Guarantor or any other event or proceeding affecting any of the Borrowers or Guarantor. This Guaranty shall not apply to any new Indebtedness created after actual receipt by Bank of written notice of its revocation as to such new Indebtedness; provided however, that loans or advances made by Bank to any of the Borrowers after revocation under commitments existing prior to receipt by Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Borrowers or committed by Bank prior to receipt by Bank of such revocation, shall not be considered new Indebtedness. Any such notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its office at 333 Market Street, 3rd Floor, San Francisco, California, or at such other address as Bank shall from time to time designate. Any payment by Guarantor shall not reduce Guarantor's maximum obligation hereunder unless written notice to that effect is actually received by Bank at or prior to the time of such payment. The obligations of Guarantor hereunder shall be in addition to any obligations of Guarantor under any other guaranties of any liabilities or obligations of any of the Borrowers or any other persons heretofore or hereafter given to Bank unless said other guaranties are expressly modified or revoked in writing; and this Guaranty shall not, unless expressly herein provided, affect or invalidate any such other guaranties.
3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and several and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against any of the Borrowers or any other person, or whether any of the Borrowers or any other person is joined in any such action or actions. Guarantor acknowledges that this Guaranty is absolute and unconditional, there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Guarantor. Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, and Guarantor agrees that any payment of any Indebtedness or other act which shall toll any statute of
limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to Guarantor's liability hereunder. The liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys' fees, expended or incurred by Bank in connection therewith, including without limitation, in any litigation with respect thereto.
4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or after revocation hereof, without notice to or demand on Guarantor, and without affecting Guarantor's liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release any such security; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or any other guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from any of the Borrowers to any Indebtedness of any of the Borrowers to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Guaranty in whole or in part. Upon Bank's request, Guarantor agrees to provide to Bank copies of Guarantor's financial statements.
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Bank that: (a) this Guaranty is executed at Borrowers' request; (b) Guarantor shall not, without Bank's prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor's assets other than in the ordinary course of Guarantor's business; (c) Bank has made no representation to Guarantor as to the creditworthiness of any of the Borrowers; and (d) Guarantor has established adequate means of obtaining from each of the Borrowers on a continuing basis financial and other information pertaining to Borrowers' financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor's risks hereunder, and Guarantor further agrees that Bank shall have no obligation to disclose to Guarantor any information or material about any of the Borrowers which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i) proceed against any of the Borrowers or any other person; (ii) marshal assets or proceed against or exhaust any security held from any of the Borrowers or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from any of the Borrowers or any other person; (iv) take any other action or pursue any other remedy in Bank's power; or (v) make any presentment or demand for performance, or give any notice of nonperformance, protest, notice of protest or notice of dishonor hereunder or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed hereunder, or in connection with the creation of new or additional Indebtedness.
(b) Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of any of the Borrowers or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of any of the Borrowers or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of any of the Borrowers which is a corporation,
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partnership or other type of entity, or any defect in the formation of any such Borrower; (iv) the application by any of the Borrowers of the proceeds of any Indebtedness for purposes other than the purposes represented by Borrowers to, or intended or understood by, Bank or Guarantor; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Borrowers or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any of the Borrowers; (vi) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (viii) any requirement that Bank give any notice of acceptance of this Guaranty. Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Borrowers or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Guarantor further waives all rights and defenses Guarantor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Guarantor's rights of subrogation or Guarantor's rights to proceed against any of the Borrowers for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of any of the Borrowers in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Borrowers' Indebtedness, whether by operation of Sections 726, 580a or 580d of the Code of Civil Procedure as from time to time amended, or otherwise, including any rights Guarantor may have to a Section 580a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.
7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S POSSESSION. In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Bank by law, Bank shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Bank in writing.
8. SUBORDINATION. Any Indebtedness of any of the Borrowers now or hereafter held by Guarantor is hereby subordinated to the Indebtedness of Borrowers to Bank. Such Indebtedness of Borrowers to Guarantor is assigned to Bank as security for this Guaranty and the Indebtedness and, if Bank requests, shall be collected and received by Guarantor as trustee for Bank and paid over to Bank on account of the Indebtedness of Borrowers to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. Any notes or other instruments now or hereafter evidencing such Indebtedness of any of the Borrowers to Guarantor shall be marked with a legend that the same are subject to this Guaranty and, if Bank so requests, shall be delivered to Bank. Bank is hereby authorized in the name of Guarantor from time to time to file financing statements and continuation statements and execute such other documents and take such other action as Bank deems necessary or appropriate to perfect, preserve and enforce its rights hereunder.
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9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder are cumulative. No delay, failure or discontinuance of Bank in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with the enforcement of any of Bank's rights, powers or remedies and/or the collection of any amounts which become due to Bank under this Guaranty, and the prosecution or defense of any action in any way related to this Guaranty, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Guarantor or any other person or entity. All of the foregoing shall be paid by Guarantor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or Bank's Prime Rate in effect from time to time.
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Guarantor may not assign or transfer any of its interests or rights hereunder without Bank's prior written consent. Guarantor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Borrowers to Bank and any obligations with respect thereto, including this Guaranty. In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Guarantor and/or this Guaranty, whether furnished by Borrowers, Guarantor or otherwise. Guarantor further agrees that Bank may disclose such documents and information to Borrowers.
12. AMENDMENT. This Guaranty may be amended or modified only in writing signed by Bank and Guarantor.
13. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this Guaranty as a Guarantor hereby expressly agrees that recourse may be had against his or her separate property for all his or her obligations under this Guaranty.
14. APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but a single Borrower, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the word "Borrowers" and the word "Guarantor" respectively shall mean all or any one or more of them as the context requires.
15. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS. Guarantor warrants and agrees that each of the waivers set forth herein is made with Guarantor's full knowledge of its significance and consequences, and that under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any waiver or other provision of this Guaranty shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Guaranty.
16. GOVERNING LAW. This Guaranty shall be governed by and construed in accordance with the laws of the State of California.
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17. ARBITRATION.
(a) Arbitration . The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination. In the event of a court ordered arbitration, the party requesting arbitration shall be responsible for timely filing the demand for arbitration and paying the appropriate filing fee within 30 days of the abatement order or the time specified by the court. Failure to timely file the demand for arbitration as ordered by the court will result in that party's right to demand arbitration being automatically terminated.
(b) Governing Rules . Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. 91 or any similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure . The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers . Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.
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(e) Discovery . In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations . No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.
(g) Payment Of Arbitration Costs And Fees . The arbitrator shall award all costs and expenses of the arbitration proceeding.
(h) Real Property Collateral; Judicial Reference . Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.
(i) Miscellaneous . To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.
(j) Small Claims Court . Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court's jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys' fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.
[Continues With Signature(s) On Following Page]
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IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of June 23, 2015.
STEVIA CALIFORNIA, LLC
By:
/s/ Mark S. Grewal
Mark S. Grewal, its Manager
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Exhibit 21.1
SUBSIDIARIES OF
S&W SEED COMPANY,
Nevada corporation
Seed Holding, LLC, a Nevada limited liability company
Stevia California, LLC, a California limited liability company
S&W Seed Australia Pty Ltd (CAN 162 715 326), an Australia corporation
Seed Genetics International Pty Ltd (ACN 061 114 814), an Australia corporation (wholly-owned by S&W Seed Australia Pty Ltd)
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the registration statements on Form S-3 (File Nos. 333-201797, 333-178481 and 333-191819) and Form S-8 (File Nos. 333-169742 and 333-196067) of S&W Seed Company of our report dated September 28, 2015 on the consolidated balance sheet of S&W Seed Company, as of June 30, 2015 and the consolidated statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows for the year then ended, appearing in this Annual Report on Form 10-K.
/s/ Crowe Horwath LLP
San Francisco, California
September 28, 2015
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference of our report dated September 24, 2014 relating to our audits of the consolidated financial statements of S&W Seed Company that appear in this Annual Report on Form 10-K for the fiscal year ended June 30, 2015 in (i) the Registration Statement of S&W Seed Company on Form S-1 as amended under cover of Form S-3 (File No. 333-164588) declared effective on February 8, 2012, (ii) its Registration Statement on Form S-3 (No. 333-178481 declared effective on February 8, 2012); (iii) its Registration Statement on Form S-8 pertaining to the 2009 Equity Incentive Plan of S&W Seed Company (No. 333-169742); (iv) its Registration Statement on Form S-3 (No. 333-191819 declared effective on December 9, 2013); and (v) its Registration Statement on Form S-8 pertaining to the 2009 Amended and Restated Equity Incentive Plan of S&W Seed Company (No. 333-196067).
/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
September 28, 2015
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Mark S. Grewal, certify that:
1. I have reviewed this report on Form 10-K of S&W Seed Company (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: September 28, 2015 |
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/s/ Mark S. Grewal
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Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Matthew K. Szot, certify that:
1. I have reviewed this report on Form 10-K of S&W Seed Company (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: September 28, 2015 |
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/s/ Matthew K. Szot
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Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of S&W Seed Company (the "Company") for the fiscal year ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Mark S. Grewal, President and Chief Executive Officer of the Company, certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: September 28, 2015 |
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/s/ Mark S. Grewal
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Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of S&W Seed Company (the "Company") for the fiscal year ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Matthew K. Szot, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: September 28, 2015 |
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/s/ Matthew K. Szot
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