www.glglifetech.com/Media_Center/Press_Releases/?newsID=61
GLG Announces Agreed Revisions to Strategic Alliance Supply Agreement with Cargill & US$ 20M Leaf Financing
Vancouver, B.C., July 17, 2008 - GLG Life Tech Corporation (“GLG”) (TSX: GLG) announces that it has agreed to certain revisions to its strategic alliance and long-term renewable supply agreement dated April 30, 2008 (the “Original Agreement”) with Cargill Inc. (“Cargill”) relating to the supply of stevia extract. GLG also announces the completion of financing from Cargill for the supply of Rebaudioside A (“RA”) extract as part of the Cargill supply agreement. The companies continue to work in close partnership to develop a world-class supply chain for the ingredient, including leaf supply and extract manufacturing.
Highlights of the proposed amendments to the Original Agreement include:
· GLG and Cargill have agreed to reduce the rolling three year minimum commitment to a rolling twelve month commitment. For the period from October 1, 2008 to September 30, 2009, the twelve month committed revenue to GLG is estimated at a minimum of $US 25 million. For each of years two and three, once volume and price have been agreed, Cargill will be required to either take the committed volume or pay the agreed price.
· GLG will take the lead role in arranging working capital financing for GLG's stevia leaf purchases each year beyond 2008 and Cargill may assist or participate but will not be required to do so.
· Cargill and GLG have agreed to amend the exclusivity terms to allow GLG to develop its stevia extract business with customers other than Cargill.
· Cargill will pay GLG a one-time restructuring fee of $2.5 million.
· Cargill will provide GLG with an additional US$5 million, which, pending approval, Cargill plans to do through the exercise of warrants of GLG. If Cargill’s approval for the warrant exercise is not achieved, Cargill will provide the $US 5 Million as an additional restructuring fee.
GLG agreed to the requested revisions by Cargill in the spirit of building a long term successful partnership and supply chain for rebiana with Cargill. The revisions are expected to provide GLG with a greater opportunity to develop its stevia extract business with customers other than Cargill. In addition, GLG continues to expect that it’s previously announced EBITDA margin forecasts will be achieved.
Key provisions that will remain unchanged from the Original Agreement include:
· GLG will provide a minimum of 80% of Cargill’s global requirements of RA stevia extract for the first five years of the agreement.
· GLG will be Cargill’s exclusive Chinese supplier of RA stevia extract for the term of the agreement. GLG will also be Cargill’s agent in China for any additional RA stevia extract sourcing opportunities that should arise.
· Cargill has the right of first refusal to purchase up to 93% of GLG’s production of RA extract.
· New product opportunities from GLG are to be offered to Cargill on a right of first refusal basis.
· Should Cargill wish to terminate the agreement early, it may do so on three years notice.
Cargill has provided a US$20 million loan facility to GLG to allow GLG to make leaf purchases from its suppliers during the current growing season. As security for that financing, GLG has provided Cargill with a general security agreement securing all the assets of GLG, which includes provisions for accommodation of other leaf financing lenders as well as term lenders for capital expenditure and working capital purposes. The term of this financing is for fifteen months at a floating rate based on LIBOR + 6%.
“We expect these developments to provide GLG additional customers and higher margins than we would have under the original agreement. Cargill’s long term commitment to our business continues to provide a solid foundation for future growth, capital investment and secures a leading market position for our company,” said Dr. Luke Zhang, Chairman and CEO of GLG.
“GLG is a valued partner in our supply chain strategy for Truvia™ rebiana. In a new market, time and flexibility are required for demand and supply to balance. Cargill works with select partners around the globe to meet current and future needs. GLG is positioned to capture market leadership in the cultivation of stevia. All of our collective efforts are aimed at delivering what the consumers and customers want – a natural, great tasting and zero calorie sweetener,” said Marcelo Montero, President, Cargill Health and Nutrition.
The principal terms of the amendments have been agreed and are effective today, and will reflected in definitive documentation expected to be signed on or about August 1, 2008.
In addition, GLG is pleased to report that there have been positive developments in the market for rebiana since the signing of the Original Agreement. On May 15, 2008 new science was published that definitively established the safety of rebiana as a general purpose sweetener in the United States. The peer-reviewed science was published in the journal Food & Chemical Toxicology and contained the results of more than 2 ½ years of scientific evaluation of rebiana. The FDA was notified of the findings that the product is safe for use as a general purpose sweetener. In June 2008, JECFA (Joint Expert Committee on Food Additives for the World Health Organization) convened and evaluated steviol glycosides including high purity Rebaudioside A and set a permanent ADI (acceptable daily intake) increasing the level by two fold. In July 2008, Cargill announced its US market launch of Truvia™ tabletop sweetener and Truvia™ rebiana as an ingredient for use in food and beverages.
GLG Announces Agreed Revisions to Strategic Alliance Supply Agreement with Cargill & US$ 20M Leaf Financing
Vancouver, B.C., July 17, 2008 - GLG Life Tech Corporation (“GLG”) (TSX: GLG) announces that it has agreed to certain revisions to its strategic alliance and long-term renewable supply agreement dated April 30, 2008 (the “Original Agreement”) with Cargill Inc. (“Cargill”) relating to the supply of stevia extract. GLG also announces the completion of financing from Cargill for the supply of Rebaudioside A (“RA”) extract as part of the Cargill supply agreement. The companies continue to work in close partnership to develop a world-class supply chain for the ingredient, including leaf supply and extract manufacturing.
Highlights of the proposed amendments to the Original Agreement include:
· GLG and Cargill have agreed to reduce the rolling three year minimum commitment to a rolling twelve month commitment. For the period from October 1, 2008 to September 30, 2009, the twelve month committed revenue to GLG is estimated at a minimum of $US 25 million. For each of years two and three, once volume and price have been agreed, Cargill will be required to either take the committed volume or pay the agreed price.
· GLG will take the lead role in arranging working capital financing for GLG's stevia leaf purchases each year beyond 2008 and Cargill may assist or participate but will not be required to do so.
· Cargill and GLG have agreed to amend the exclusivity terms to allow GLG to develop its stevia extract business with customers other than Cargill.
· Cargill will pay GLG a one-time restructuring fee of $2.5 million.
· Cargill will provide GLG with an additional US$5 million, which, pending approval, Cargill plans to do through the exercise of warrants of GLG. If Cargill’s approval for the warrant exercise is not achieved, Cargill will provide the $US 5 Million as an additional restructuring fee.
GLG agreed to the requested revisions by Cargill in the spirit of building a long term successful partnership and supply chain for rebiana with Cargill. The revisions are expected to provide GLG with a greater opportunity to develop its stevia extract business with customers other than Cargill. In addition, GLG continues to expect that it’s previously announced EBITDA margin forecasts will be achieved.
Key provisions that will remain unchanged from the Original Agreement include:
· GLG will provide a minimum of 80% of Cargill’s global requirements of RA stevia extract for the first five years of the agreement.
· GLG will be Cargill’s exclusive Chinese supplier of RA stevia extract for the term of the agreement. GLG will also be Cargill’s agent in China for any additional RA stevia extract sourcing opportunities that should arise.
· Cargill has the right of first refusal to purchase up to 93% of GLG’s production of RA extract.
· New product opportunities from GLG are to be offered to Cargill on a right of first refusal basis.
· Should Cargill wish to terminate the agreement early, it may do so on three years notice.
Cargill has provided a US$20 million loan facility to GLG to allow GLG to make leaf purchases from its suppliers during the current growing season. As security for that financing, GLG has provided Cargill with a general security agreement securing all the assets of GLG, which includes provisions for accommodation of other leaf financing lenders as well as term lenders for capital expenditure and working capital purposes. The term of this financing is for fifteen months at a floating rate based on LIBOR + 6%.
“We expect these developments to provide GLG additional customers and higher margins than we would have under the original agreement. Cargill’s long term commitment to our business continues to provide a solid foundation for future growth, capital investment and secures a leading market position for our company,” said Dr. Luke Zhang, Chairman and CEO of GLG.
“GLG is a valued partner in our supply chain strategy for Truvia™ rebiana. In a new market, time and flexibility are required for demand and supply to balance. Cargill works with select partners around the globe to meet current and future needs. GLG is positioned to capture market leadership in the cultivation of stevia. All of our collective efforts are aimed at delivering what the consumers and customers want – a natural, great tasting and zero calorie sweetener,” said Marcelo Montero, President, Cargill Health and Nutrition.
The principal terms of the amendments have been agreed and are effective today, and will reflected in definitive documentation expected to be signed on or about August 1, 2008.
In addition, GLG is pleased to report that there have been positive developments in the market for rebiana since the signing of the Original Agreement. On May 15, 2008 new science was published that definitively established the safety of rebiana as a general purpose sweetener in the United States. The peer-reviewed science was published in the journal Food & Chemical Toxicology and contained the results of more than 2 ½ years of scientific evaluation of rebiana. The FDA was notified of the findings that the product is safe for use as a general purpose sweetener. In June 2008, JECFA (Joint Expert Committee on Food Additives for the World Health Organization) convened and evaluated steviol glycosides including high purity Rebaudioside A and set a permanent ADI (acceptable daily intake) increasing the level by two fold. In July 2008, Cargill announced its US market launch of Truvia™ tabletop sweetener and Truvia™ rebiana as an ingredient for use in food and beverages.
