EXHIBIT 10.15
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
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into as of November 27, 1996, by and among Xxxxx Industries, Inc., a Nevada
corporation ("FII"), Xxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxx, Xxxx X. Xxxxxxxxxx,
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Xxxxx X. Xxxxx (together with FII, the "FN Shareholders"), and Xxxxx
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Horticulture, Inc., a California corporation (the "Buyer").
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WHEREAS, the FN Shareholders own all of the issued and outstanding
shares of capital stock of Xxxxx Nurseries, Inc., a California corporation
("FN");
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WHEREAS, FN owns all of the issued and outstanding shares of capital
stock of Xxxxx Rainbow Nurseries, Inc., an Hawaii corporation ("FRN") (FN, FRN
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and all subsidiaries and divisions thereof are collectively referred to herein
as the "Company"); and
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WHEREAS, the parties desire to enter into this Agreement to provide
for the purchase by the Buyer of all of the issued and outstanding shares of
capital stock of FN from the FN Shareholders.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale of Stock. On the Closing Date (as hereinafter
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defined) the Buyer shall purchase from the FN Shareholders and the FN
Shareholders shall sell, transfer, deliver and convey to the Buyer, 483,500
issued and outstanding shares of capital stock of FN, which represents all of
the issued and outstanding shares of capital stock of FN (the "Shares"), and
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shall deliver to the Buyer, free and clear of all claims, liens, charges,
encumbrances and other restrictions of any kind, certificates representing all
of the Shares, duly endorsed in blank or accompanied by duly executed assignment
documents.
1.2 Purchase Price. The total purchase price for the Shares to be
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paid shall be Four Million Five Hundred Thousand Dollars ($4,500,000) (the
"Purchase Price").
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1.3 Payment Terms. The Purchase Price for all of the Shares shall be
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paid at the Closing (as hereinafter defined) by the Buyer as follows: (i)
$3,584,905 to the FN Shareholders by wire transfer of immediately available
funds in accordance with instructions of the FN Shareholders set forth in the
Payment Authorization Letter attached hereto as Exhibit A, (ii) $500,000 to an
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escrow account pursuant to the terms of the escrow agreement attached hereto as
Exhibit B (the "Escrow Agreement"), dated as of the date hereof, by and among
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the Buyer, the FN Shareholders and an escrow agent and (iii) the assignment
provided in Section 5.5 below.
ARTICLE II
CLOSING
2.1 Closing Date. Subject to the satisfaction of the conditions
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specified in Articles VIII and IX of this Agreement, the consummation of all the
transactions agreed to hereunder (the "Closing") shall take place on or before
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December 2, 1996 (unless, extended by mutual agreement of the parties) (the
"Closing Date") at such place as may be mutually agreed upon by the parties. At
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the Closing, the FN Shareholders and the Buyer shall each deliver to each other
all funds, documents, certificates and instruments contemplated herein to be
delivered on the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE FN SHAREHOLDERS
As a material inducement to cause the Buyer to enter into this
agreement and consummate the transactions contemplated hereby the FN
Shareholders represent and warrant to the Buyer as of the date of this Agreement
and as of the Closing Date as follows:
3.1 Organization, Etc. FII, FN and FRN are corporations duly
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organized, validly existing and in good standing under the laws of the states of
Nevada, California and Hawaii, respectively, and have full corporate power and
authority to carry on their businesses as presently conducted and to own the
properties and assets they now own. Each of FN and FRN are corporations duly
qualified to do business as a foreign corporation and in good standing in all
jurisdictions as are necessary for its ownership of properties and the operation
of its businesses as presently conducted. Each FN Shareholder has all requisite
capacity to enter into, execute and deliver this Agreement and the other
instruments and agreements contemplated hereby and to consummate the
transactions contemplated hereby and thereby. At the Closing, FII, FN and FRN
will deliver to the Buyer copies of their Articles or Certificate of
Incorporation and By-Laws, each of which copies will be true, accurate and
complete as of the Closing.
3.2 Authority. The execution and delivery of this Agreement and the
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other instruments and agreements contemplated hereby and the consummation of the
transactions
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contemplated hereby and thereby have been duly authorized by FII. FII will
deliver to the Buyer at the Closing complete and correct copies, certified by
its Secretary or Assistant Secretary, of the resolutions duly and validly
adopted by its Board of Directors evidencing such authorization (which
resolutions will not have been modified, revoked or rescinded in any respect
prior to, and will be in full force and effect at, the Closing). No other act or
proceeding on the part of any FN Shareholder (or with respect to FII, its
shareholders) is necessary for the due and valid authorization or performance of
this Agreement or the transactions contemplated hereby.
3.3 Capitalization of FN and FRN.
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(a) Each FN Shareholder holds of record and owns beneficially
the number of Shares set forth next to its name on Schedule 3.3 attached hereto,
free and clear of any restrictions on transfer, taxes, security interests,
options, warrants, purchase rights, contract rights, equities, claims and
demands, other than restrictions imposed by applicable securities laws. Other
than this Agreement, no FN Shareholder is party to any option, warrant, purchase
right or any other contract or commitment that could require any FN Shareholder
to sell, transfer or otherwise dispose of any capital stock of FN or any
subsidiary thereof (other than this Agreement). No FN Shareholder is party to
any voting trust, proxy or other agreement or understanding with respect to the
voting or transfer of any capital stock of FN or any of its subsidiaries.
(b) The entire authorized capital stock of FN consists of
5,000,000 shares of common stock, par value $1.00 per share, of which 483,500
are issued and outstanding and all of which together constitute all of the
Shares. All of the Shares have been duly authorized and are validly issued,
fully paid and nonassessable, and are held of record by the respective FN
Shareholders as set forth on Schedule 3.3. The FN Shareholders have the complete
and unrestricted right and power to sell, transfer, convey and deliver all the
Shares to the Buyer, free and clear of all claims, liens and encumbrances, at
the Closing. Other than the Shares, there are no outstanding shares of capital
stock of FN or options, warrants or rights to purchase or acquire any capital
stock of FN, or any phantom stock or stock appreciation rights, or securities
convertible into or exchangeable for capital stock of FN, and there are no
contracts, commitments, understandings, arrangements or restrictions by which FN
is bound to issue any additional shares of its capital stock or any such
options, warrants, purchase rights, phantom stock, stock appreciation rights, or
convertible or exchangeable securities.
(c) As of the date of this Agreement, FN is the sole owner of
all of the issued and outstanding capital stock of FRN consisting of 1,000
shares of common stock, without par value. Other than the shares of FRN's common
stock held by FN, there are no outstanding shares of capital stock of FRN or
options, warrants or rights to purchase or acquire any capital stock of FRN, or
any phantom stock or stock appreciation rights or any securities convertible
into or exchangeable for capital stock of FRN, and there are no contracts,
commitments, understandings, arrangements or restrictions by which FRN is bound
to issue any additional shares of its capital stock
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or any such options, warrants or purchase rights, phantom stock, stock
appreciation rights, or convertible or exchangeable securities.
(d) Except for FRN, FN has no subsidiaries, and owns no interest
in and has not made any investment in any other person. Except for FRN, Inc., a
California corporation, FRN has no subsidiaries, and owns no interest in and has
not made any investment in any other person.
3.4 Binding Obligation. This Agreement constitutes the valid and
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legally binding obligation of each of the FN Shareholders, enforceable against
each of them in accordance with its terms, except as they may be affected by
bankruptcy, insolvency, moratorium or similar laws related to or limiting
creditors' rights generally or by general equitable principles.
3.5 No Violation.
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(a) Neither the execution and delivery of this Agreement nor the
consummation by the FN Shareholders of the transactions contemplated hereby will
(i) violate any statute or law, or any rule, regulation, order, writ,
injunction, judgement, order, decree or other restriction of any court or
governmental authority or (ii) violate or conflict with or constitute a default
(or an event which, with notice or lapse of time, or both, would constitute a
default) under, or will result in the termination of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any property or asset owned or held by FN
or FRN under any term or provision of (x) the Articles or Certificates of
Incorporation or By-Laws of FII, FN or FRN or (y) any lease, contract,
commitment, understanding, arrangement, agreement or restriction of any kind or
character to which the Company is subject or by which any of its Properties or
any Real Property (each as hereinafter defined) is subject (other than the
Credit Agreement dated as of October 20, 1995 (as subsequently amended or
amended or restated, the "Credit Agreement") among FN, FRN, FII and Farm Credit
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Services, and related documents). Except for filings, consents, approvals or
authorizations which will have been made or obtained or actions which will have
been taken by the FN Shareholders at or prior to the Closing, with respect to
which the FN Shareholders shall make such filing or obtain such consent,
approval or authorization and shall notify the Buyer in writing, no filing with,
or consent, approval, authorization or action by, any governmental authority is
required in connection with the execution and delivery by the FN Shareholders of
this Agreement or the consummation of the transactions contemplated hereby.
(b) To the knowledge of any of the FN Shareholders (the "FN
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Shareholders' Knowledge"), the Company has complied and is in compliance with
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all applicable laws (including rules, regulations, codes, plans, injunctions,
judgements, orders, decrees, rulings and charges thereunder) of federal, state,
local and foreign governments (and all agencies thereof), and
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no action, suit, proceeding, investigation, hearing, charge, complaint, claim,
demand or notice has been filed or commenced against any of them alleging any
failure to so comply.
3.6 Title to Properties. FN and FRN have good and marketable title
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to, or a valid leasehold interest in, all personal property used by them or
shown on the Most Recent Financial Statements (as hereinafter defined) or
acquired after the date thereof (collectively, the "Properties"), free and clear
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of any mortgage, pledge, lien, encumbrance, charge or security interest, except
only non-material (either individually or in the aggregate) (i) liens imposed by
law or incurred in the ordinary course of business for obligations not yet due
to carriers, warehousemen, laborers, materialmen and the like; (ii) liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation; (iii) liens for property taxes, assessments or like governmental
charges not yet delinquent and payable without penalty; (iv) defects and
exceptions to title of any Property, none of which materially interferes (either
individually or in the aggregate) with the use by the Buyer of any of the
Properties of the Company for the purposes for which they are held; and (v) the
liens and encumbrances described in Schedule 3.06 attached hereto.
3.7 Damage or Transfer. Since the date of the Most Recent Financial
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Statements there has not been:
(a) Any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting any of the Properties or the Real
Property; or
(b) Any sale, lease or abandonment of any of the Properties or
the Real Property except for transactions in the ordinary course of business.
3.8 Annual Audited Financial Statements. Attached hereto as Schedule
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3.8 are the audited financial statements of FN and FRN for the fiscal years
ended March 31, 1994, 1995 and 1996, respectively. The audited financial
statements of FN and FRN (including any notes thereto) have been prepared in
accordance with U.S. generally accepted accounting principles applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of FN and FRN as of such dates and for the fiscal years then
ended and are consistent with the books and records of FN and FRN, which are
correct and complete.
3.9 Interim Financial Statements. Attached hereto as Schedule 3.9
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are the unaudited financial statements of FN and FRN as of September 30, 1996
and for the six-month period then ended (the "Most Recent Financial
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Statements"). The Most Recent Financial Statements have been prepared in
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accordance with U.S. generally accepted accounting principles consistently
applied on an interim basis and present fairly and completely the financial
position of FN and FRN at September 30, 1996 (subject only to normal year-end
adjustments which will not be material either individually or in the aggregate
with respect to the period ending on the Closing Date and except that such
financial statements lack footnotes), and are consistent with the books and
records
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of FN and FRN, which are correct and complete. No fact has come to the attention
of any of the FN Shareholders which would lead them to believe that such
financial statements are misleading or inaccurate in any respect.
3.10 Leases. Schedule 3.10 attached hereto lists (i) each lease
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included in the Properties providing for lease payments in excess of $5,000 per
year and (ii) each lease included in the Properties with a term in excess of one
year and not cancelable upon thirty (30) or fewer days' notice without any
liability, penalty or premium (the "Leases"). True and complete copies of the
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Leases, including all amendments thereof and modifications thereto have
previously been made available to the Buyer. Except as described in Schedule
3.10, neither FN nor FRN (nor to the FN Shareholders' Knowledge, any other
party) is in default with respect to any of the Leases, and all such Leases are,
and immediately after the Closing of the transactions contemplated hereby will
be, valid, binding and enforceable by and for the benefit of the Company in
accordance with their respective terms, in full force and effect without
modification. Neither FN nor FRN (nor to the FN Shareholders' Knowledge, any
other party) is in default with respect to any other leases that are included in
the Properties, and all such other leases are, and immediately after the Closing
of the transactions contemplated hereby will be, valid, binding and enforceable
by FN or FRN, as the case may be, in accordance with their respective terms, in
full force and effect without modification. Except as described on Schedule
3.10, there is no sublease with respect to any Lease or any leases.
3.11 Patents, Trademarks, Trade Names, Etc.
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(a) Schedule 3.11 sets forth a complete and correct list of all:
(i) patented or registered Intellectual Property (as hereinafter defined) and
pending patent applications or other applications for registrations of
Intellectual Property owned or filed by or on behalf of the Company; (ii) all
trade names and unregistered trademarks and service marks owned or used by the
Company; and (iii) all licenses or similar agreements or arrangements for
Intellectual Property to which the Company is a party.
(b) Except as set forth in Schedule 3.11: (i) the Company owns
and possesses all right, title and interest in and to, or has a valid and
enforceable license to use, all Intellectual Property necessary for the
operation of the business as currently conducted, free and clear of all liens,
security interests, encumbrances and other restrictions; (ii) no claim by any
third party contesting the validity, enforceability, use or ownership of any
Intellectual Property has been made, is currently outstanding or is threatened,
and there are no grounds for the same; (iii) the Company has not received any
notices of any infringement or misappropriation by, or conflict with, any third
party with respect to the Intellectual Property (including, without limitation,
any demand or request that the Company license any rights from a third party);
and (iv) the Company has not infringed, misappropriated or otherwise conflicted
with any intellectual property rights or other similar rights of any third
parties.
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(c) The term "Intellectual Property" shall mean all of the
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following owned by, issued to or licensed to the Company: patents, patent
applications and patent disclosures and any reissues, continuations,
continuations-in-part, revisions, extensions or reexaminations thereof;
trademarks, service marks, logos, trade names and corporate names, together with
all goodwill associated therewith (including, without limitation, all
translations, adaptations, derivations and combinations of the foregoing);
copyrights; and registrations, applications and renewals for any of the
foregoing, including, without limitation, the items set forth on Schedule 3.11
attached hereto.
3.12 Litigation. Except as set forth in Schedule 3.12 attached
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hereto, there are no actions, suits, investigations, hearings or proceedings
pending or, to the FN Shareholders' Knowledge, threatened against, the Company
or with respect to the Properties the Real Property or the transactions
contemplated hereby, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, agency,
instrumentality or authority.
3.13 Employee Agreements and Employee Benefits.
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(a) Except as set forth on Schedule 3.13, with respect to
current or former employees of the Company, the Company does not maintain or
contribute to or have any actual or potential liability with respect to any (i)
nonqualified deferred compensation, bonus or retirement plans or arrangements,
(ii) employee pension benefit plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (iii) employee
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welfare plans (as defined in Section 3(1) of ERISA) or (iv) material fringe
benefit plans or programs (collectively, the "Plans"). The Company does not and
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has not within the last five years contributed to nor does it have any actual or
potential liability with respect to any multiemployer pension plan (as defined
in Section 3(37) of ERISA). The Company does not maintain or contribute to or
have any liability with respect to any employee welfare benefit plan which
provides health, accident or life insurance benefits to former employees, their
spouses or dependents, other than in accordance with Section 4980B ("COBRA") of
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the Internal Revenue Code of 1986, as amended (the "Code").
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(b) The Plans (and related trusts and insurance contracts)
comply in form and in operation in all material respects with the requirements
of applicable law including ERISA and the Code; and no such Plan is intended to
be a "qualified plan" under Section 401(a) of the Code.
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(c) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports and Summary Plan Descriptions) with
respect to each Plan have been properly and timely filed with the appropriate
government agency or distributed to participants, and the Company has complied
with the requirements of COBRA.
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(d) With respect to each Plan, all contributions and premium
payments which are due have been paid, all contributions or other payments for
prior plan years which are not yet due and with respect to the current plan year
for the period ending on the Closing Date have been made or accrued, and all
liabilities for welfare plan benefits have been adequately funded. With respect
to the Profit Sharing Plan, all amounts payable have been paid and all amounts
which may be payable with respect to the current plan year have been adequately
accrued on the financial statements of FN and FRN.
(e) Neither FN nor FRN has any actual or potential liability to
the Pension Benefit Guaranty Corporation, the Internal Revenue Service, the
Department of Labor, any multiemployer plan or otherwise with respect to any
Plan or with respect to any employee pension benefit plan currently or
previously maintained by members of the controlled group of companies (as
defined in Section 414 of the Code) that includes FN or FRN (the "Controlled
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Group") that has not been satisfied in full, and no condition exists that
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presents a material risk to FN or FRN or any member of the Controlled Group of
incurring such a liability. Each Plan is terminable by FN or FRN at will with no
penalty or premium.
(f) With respect to each Plan, (i) there have been no prohibited
transactions as defined in Section 406 of ERISA or Section 4975 of the Code,
(ii) no fiduciary (as defined in Section 3(21) of ERISA) has any liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of such Assumed Plan, and
(iii) no actions, investigations, suits or claims with respect to the assets
thereof (other than routine claims for benefits) are pending or threatened, and
to the FN Shareholders' Knowledge there exist no facts which would give rise to
or could reasonably be expected to give rise to any such actions,
investigations, suits or claims.
(g) With respect to each of the Plans, the Company has furnished
to the Buyer true and complete copies of (i) the plan documents and summary plan
descriptions, (ii) the most recent determination letter received from the
Internal Revenue Service, (iii) the last actuarial valuation and Form 5500
Annual Report, and (iv) all related trust agreements, insurance contracts or
other funding agreements which implement such Plans.
(h) Schedule 3.13 contains a list of the active employees of FN
and FRN on the date of this Agreement together with their wage rates and/or
salary, which list identifies the Plans in which they participate. The Company
has not established any severance or similar policy or plan that would entitle
employees to severance or termination pay or similar payments.
3.14 Contracts and Commitments. Schedule 3.14 attached hereto
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contains a complete and accurate list of each contract, agreement and commitment
(herein collectively referred to as the "Contracts") of FN and FRN that (i)
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provides for payments in excess of $10,000 per year or (ii) the term of which is
in excess of one year and is not cancelable upon thirty (30) or fewer days'
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notice without any liability, penalty or premium (other than a nominal
cancellation fee or charge).
Except as otherwise set forth in Schedule 3.14:
(a) The enforceability of the Contracts will not be affected in
any manner by the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby;
(b) Neither FN nor FRN have any collective bargaining agreement
in effect or being negotiated;
(c) Neither FN, FRN nor, to the FN Shareholders' Knowledge, any
other party to a Contract is in default, nor is there any basis for any valid
claim of default, under any Contract;
(d) Neither FN nor FRN is under any liability or obligation with
respect to the return of inventory or products in the possession of any person
that obtained such inventory or products directly or indirectly from either FN
or FRN other than in the ordinary course of business and which liability or
obligation in the aggregate does not exceed $10,000; and
(e) (i) The enforceability of the other contracts included in
the Properties will not be affected in any manner by the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
and (ii) neither FN nor FRN is in default, nor is there any basis for a valid
claim of default, under any of such other contracts.
3.15 Labor Disagreements. To the FN Shareholders' Knowledge, no key
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employee (other than any FN Shareholder that is an employee of the Company) and
no group of employees has any plans to terminate employment with the Company.
The Company has complied in all material respects and is in material compliance
with all applicable laws relating to the employment of labor, including laws
relating to wages, hours, equal opportunity, collective bargaining, immigration
and the payment of social security and other taxes. There are no administrative
charges or court complaints pending or, to the FN Shareholders' Knowledge,
threatened against the Company before any government agency. Within the last
three (3) years, the Company has not experienced any union organization
attempts, labor disputes or work stoppage or slowdowns due to labor
disagreements. There is no labor strike, dispute, work stoppage or slowdown
pending or, to the FN Shareholders' Knowledge, threatened. There is no request
for representation pending and no question concerning representation has been
raised. There is no grievance or arbitration proceeding pending which might have
an adverse effect on the Company. Neither FN, FRN nor any of its subsidiaries is
a party to any labor, collective bargaining or union agreement. The Company has
not implemented any plant closing or mass layoff of employees as those terms are
defined in the
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Worker Adjustment Retraining and Notification ("WARN") Act of 1988, as amended,
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or any similar state or local law or regulation.
3.16 [INTENTIONALLY OMITTED]
3.17 Tax Matters.
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(a) The Company has timely filed all Tax Returns (as hereinafter
defined) required to be filed by it, each such Tax Return has been prepared in
compliance with all applicable laws and regulations, and all such Tax Returns
are true and accurate in all respects. All Taxes (as hereinafter defined) due
and payable by the Company (whether or not shown on any Tax Return) have been
paid. All Taxes accrued but not payable as of September 30, 1996 are accrued on
the Most Recent Financial Statements. The Company has not incurred any liability
for taxes since September 30, 1996, other than in the ordinary course of
business.
(b) Other than as set forth on Schedule 3.17 attached hereto: (i) no
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Tax has been proposed, asserted or assessed by any
taxing authority against the Company, (ii) there is no action, suit, taxing
authority proceeding or audit now in progress, pending or, to the FN
Shareholders' Knowledge, threatened against or with respect to the Company with
respect to any Tax, (iii) no claim has been made against the Company by a taxing
authority in a jurisdiction where the Company does not pay Tax or file Tax
Returns that the Company is or may be subject to Taxes assessed by this
jurisdiction within five years prior to the date hereof (iv) the Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party (v) the Company has not requested or been
granted an extension of time for filing any Tax Return which has not yet been
filed, and (vi) the Company has not consented to extend to a date later than the
date hereof the time in which any Tax may be assessed or collected by any taxing
authority.
(c) The Company will not be required (A) as a result of a change in
method of accounting for a taxable period ending on or prior to the Closing
Date, to include any adjustment in taxable income for any taxable period (or
portion thereof) ending after the Closing Date, (B) as a result of any "closing
agreement" as described in Code (S)7121 (or any corresponding provision of
state, local or foreign law), to include any item of income in, or exclude any
item of deduction from, taxable income for any period (or portion thereof)
ending after the Closing Date, or (C) as a result of any deferred intercompany
gain described in Treasury Regulation (S)1.1502-13 (or any corresponding or
similar provision of state, local or foreign law), to include any item of income
in taxable income for any period (or portion thereof) ending after the Closing
Date.
(d) The Company has not made any election under Section 341(f) of the
Code (or any corresponding provision of state, local, or foreign Tax law).
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(e) The Company has not made any payments, and is not and will not
become obligated (under any contract entered into on or before the Closing Date)
to make any payments, that will be non-deductible under Section 280G of the Code
(or any corresponding provision of state, local, or foreign income Tax law).
(f) The Company has not been a member of an Affiliated Group other
than the Affiliated Group of which FII is the parent.
(g) The Company is not a party to or bound by any Tax allocation or
Tax sharing agreement and has no contractual obligation to indemnify any other
person with respect to Taxes.
(h) On or before the Closing Date, each of the FN Shareholders will
provide to the Buyer a certification in the applicable form provided in section
1.1445-2(b)(2)(iii) of the United States Treasury regulations that such FN
Shareholder is not a foreign person.
(i) For purposes of this Agreement, "Affiliated Group" means an
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affiliated group as defined in Section 1504 of the Code (or any analogous
combined, consolidated or unitary group defined under state, local or foreign
income Tax law).
(j) For purposes of this Agreement "Tax" shall mean any federal,
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state, local or foreign income, gross receipts, franchise, estimated,
alternative minimum, add-on minimum, sales, use, transfer, real property gains,
registration, value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; the foregoing shall include any
transferee or secondary liability for a Tax and any liability assumed by
agreement or arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any Tax
Return relating thereto).
(k) For purposes of this Agreement "Tax Return" shall mean any
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return, declaration, report, claim for refund, information return or other
document (including any related or supporting schedule, statement or
information) filed or required to be filed in connection with the determination,
assessment or collection of any Tax of any party or the administration of any
laws, regulations or administrative requirements relating to any Tax.
3.18 Finders and Investment Bankers. All legal and accounting fees
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and expenses and all brokerage fees, commissions, finders' fees or other fees
and expenses any broker, finder or investment bankers for which the FN
Shareholders or the Company or any of its officers, employees, trustees or
agents has incurred liability in connection with the transactions contemplated
hereby, will be paid by and be the obligation of the FN Shareholders.
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3.19 Inventories. The inventories of the Company (a) are properly
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reflected on the Company's Most Recent Financial Statements in accordance with
generally accepted accounting principles consistently applied (using the
methodologies employed by the Company on a consistent basis with prior periods)
and (b) are not damaged, subject in the case of any plant inventories to normal
and ordinary overall rates of mortality. All of the inventories of the Company
(other than inventory in transit) are located on its premises (or those of Xxxxx
Rainbow Nurseries Oregon, Inc. ("FRNO")) in California and Oregon.
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3.20 Notes and Accounts Receivable. All notes and accounts receivable
-----------------------------
of the Company (a) are valid receivables incurred in the ordinary course of
business, (b) with respect to notes and accounts receivable existing as of the
date of the Company's Most Recent Financial Statements, are properly reflected
on the Most Recent Financial Statements in accordance with generally accepted
accounting principles consistently applied, (c) except to the extent reserved
for on the Most Recent Financial Statements, are not and will not be subject to
any valid counterclaim, deduction, credit, set-off or other offset, and (d) are
aged as shown on Schedule 3.20, are not more than 30 days past due and as of the
Closing Date and are collectible within a commercially reasonable period of time
at full face amounts without offset, subject to a reserve for bad debts
established in a manner consistent with the reserve for bad debts reflected on
the Most Recent Financial Statements, and not varying therefrom in any material
respect. Schedule 3.20 attached hereto contains a true and complete list of all
notes and accounts receivable of the Company as of the effective date of such
schedule.
3.21 Absence of Undisclosed Liabilities. With respect to the
----------------------------------
Properties the Real Property and the operation of the Company's businesses, the
Company has no debts, liabilities or obligations of any nature (whether accrued,
absolute, contingent, direct, indirect, perfected, inchoate, unliquidated or
otherwise, whether due or to become due) arising out of transactions entered
into at or prior to the Closing, or any transaction, series of transactions,
action or inaction at or prior to the Closing, or any state of facts or
condition existing at or prior to the Closing (regardless of when any such
liability or obligation is asserted), including, without limitation, taxes with
respect to or based upon transactions or events occurring on or prior to the
Closing, except (a) material liabilities and obligations under agreements,
contracts, leases or commitments, (b) liabilities and obligations reflected in
the audited financial statements (including the notes thereto) or in the Most
Recent Financial Statements, (c) liabilities and obligations expressly described
on the Schedule 3.21 or on any other Schedule attached hereto (provided that
with respect to liabilities and obligations that are of the same type as
liabilities and obligations addressed elsewhere in these representations and
warranties, the liability of the FN Shareholders shall be determined in
accordance with such other provisions without reference to this Section) and (d)
liabilities and obligations of the Company incurred in the ordinary course of
business since the date of the Most Recent Financial Statements.
-12-
3.22 No Material Adverse Changes. Except as set forth on Schedule
---------------------------
3.22 attached hereto, since the date of the Most Recent Financial Statements
there has been no material adverse change in the assets, liabilities, condition
(financial or otherwise), operating results, or employee or supplier relations
of the Company, and to the FN Shareholders' Knowledge the Company has not lost
any material customer (or any material portion of any material customer's
business).
3.23 Absence of Certain Developments. Except as set forth on Schedule
-------------------------------
3.23 attached hereto:
(a) Since the date of the Most Recent Financial Statements, except as
otherwise expressly provided herein, FN and FRN have:
(i) conducted the businesses of the Company only in the usual and
ordinary course of business in accordance with past custom and practice
(including placing purchase orders only for quantities and at prices and
accepting customer orders only for quantities on terms and at rates and in
amounts consistent with past custom and practice);
(ii) maintained all of the Properties in the same state as at the
date of the Most Recent Financial Statements, except for ordinary wear and
tear not caused by neglect, and maintained insurance reasonably comparable
to that in effect on the date of the Most Recent Financial Statements; and
(iii) conducted the cash management customs and practices of the
Company (including the collection of receivables and payment of payables
and maintenance of inventory control and pricing and credit practices) in
the usual and ordinary course of business in accordance with past custom
and practice.
(b) Since the date of the Most Recent Financial Statements, except
as otherwise provided herein, the Company has not:
(i) incurred any liability other than in the ordinary course of
business consistent with past custom and practice;
(ii) entered into any transaction, arrangement or contract (including,
without limitation, any transfer of the Properties or placing a lien
thereon) except on an arm's-length basis in the ordinary course of business
consistent with past custom and practice;
(iii) issued any notes, bonds or other debt securities or any capital
stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
-13-
(iv) declared or made any payment or distribution of cash or other
property to its stockholders with respect to its capital stock or other
equity securities or purchased or redeemed any shares of its capital stock
or other equity securities (including, without limitation, any warrants,
options or other rights to acquire its capital stock or other equity
securities);
(v) entered into any transaction, arrangement or contract with any
officer, director, partner, stockholder or other insider or affiliate of FN
or FRN including, without limitation, any sale, transfer, assignment or
conveyance of inventory;
(vi) instituted any material change in the conduct of business or in
its method of purchase, sale, lease, management, marketing, operation or
accounting;
(vii) made any purchases other than in the ordinary course of business
consistent with past custom and practice;
(viii) discharged or satisfied any material lien or encumbrance or paid
any material obligation or liability, other than current liabilities paid
in the ordinary course of business consistent with past custom and
practice, or canceled, compromised, waived or released any right or claim;
(ix) modified, sold, assigned, transferred, abandoned or permitted to
lapse any licenses or permits which, individually or in the aggregate, are
material to the Company and the operation of its businesses or any portion
thereof, or any intellectual property or other intangible assets, or
disclosed any material proprietary confidential information to any person,
except in the ordinary course of business consistent with past custom and
practice, or granted any license or sublicense of any rights under or with
respect to any intellectual property;
(x) made or granted any bonus or any wage or salary increase to any
employee, officer or director, or directly or indirectly made any other
material change in employment terms for any employee, officer or director,
other than bonuses and increases in the ordinary course of business or as
required by law to non-executive employees consistent with past custom and
practice;
(xi) made or granted any increase in, or amended or terminated, any
existing plan, program, policy or arrangement, including without
limitation, employee benefit plan or arrangement, or adopted any new
employee benefit plan or arrangement, or amended or renegotiated any
existing collective bargaining agreement or entered into any new collective
bargaining agreement or multiemployer plan;
-14-
(xii) made any capital expenditures or commitments therefor in excess
of $25,000;
(xiii) made any loans or advances to, or pledges or guarantees for the
benefit of, or entered into any transaction with any employee, officer or
director, except for the transactions contemplated by this Agreement, and
for advances consistent with past custom and practice made to employees,
officers and directors for expenses incurred in the ordinary course of
business;
(xiv) suffered any extraordinary loss, damage, destruction or casualty
loss, or waived any rights of material value expect in the ordinary course
of business and in a manner consistent with past custom and practice,
whether or not covered by insurance;
(xv) received notification that any supplier or material customer will
stop or decrease in any material respect the rate of business done with the
Company;
(xvi) borrowed any amount or incurred or become subject to any material
liabilities, except liabilities under the Credit Agreement or liabilities
incurred in the ordinary course of business and liabilities under contracts
entered into in the ordinary course of business consistent with past custom
and practice;
(xvii) pledged to make any charitable contribution;
(xviii) made any capital investment in, any loan to, or any acquisition
of the securities or assets of any other person or taken any steps to
incorporate any subsidiary;
(xix) entered into any other material transaction, other than in the
ordinary course of business consistent with past custom and practice; or
(xx) committed to any of the foregoing.
3.24 Product Warranty. Except for liabilities reserved for on the
----------------
Most Recent Financial Statements or incurred since that date in the ordinary
course of business, no material liability exists for replacement or other
damages in connection with such sales or deliveries of products sold and
delivered by the Company at any time prior to the Closing Date. No products
heretofore delivered or sold by the Company or products with respect to which
any offer or agreement to sell has been made by the Company are now subject to
any guarantee or warranty, except to the extent described on Schedule 3.24
attached hereto.
3.25 Licenses and Permits. Schedule 3.25 attached hereto contains a
--------------------
complete listing of all material permits, licenses, certificates, approvals and
other authorizations of foreign (if applicable), federal, state and local
governments or other similar rights (collectively, the "Licenses")
--------
-15-
used by Company in the conduct of its businesses or the ownership of its
Properties. Except as indicated on Schedule 3.25, the Company owns or possesses
all right, title and interest in and to all of the Licenses that are necessary
to own and operate the Properties and to conduct the businesses of the Company
as presently conducted, including, without limitation, all Licenses required
under any federal, state or local law relating to public health and safety,
employee health and safety, pollution or protection of the environment. The
Company is in compliance in all material respects with the terms and conditions
of such Licenses and has received no notices that it is in violation of any of
the terms or conditions of such Licenses. The Company has taken all necessary
action to maintain such Licenses. To the FN Shareholders' Knowledge no loss or
expiration of any such License is threatened, pending or reasonably foreseeable
other than expiration in accordance with the terms thereof. Except as indicated
on Schedule 3.25, all of the Licenses will remain in full force and effect for
the benefit of the Company immediately following the Closing.
3.26 Environmental and Safety Requirements. Except as set forth and
-------------------------------------
described with particularity on Schedule 3.26 attached hereto:
(a) the Company has complied and is in compliance in all material
respects with all applicable Environmental and Safety Requirements (as
hereinafter defined);
(b) without limiting the generality of the foregoing, the Company has
obtained and complied with, and is in compliance with, all material permits,
licenses and other authorizations that are required pursuant to Environmental
and Safety Requirements for the occupation of its facilities and the operation
of the businesses, which such permits, licenses and authorizations may be relied
upon by the Buyer for the lawful operation by the Company of its businesses and
the Properties on and after the Closing without transfer, reissuance or other
governmental action;
(c) the Company has not received any written notice, report or other
information regarding any actual or alleged violation of Environmental and
Safety Requirements, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to the operation by
the Company of its businesses or the Properties and arising under Environmental
and Safety Requirements;
(d) none of the following exists at any property or facility owned or
operated by the Company (i) underground storage tanks that contain any hazardous
materials or substances including, without limitation, petroleum and petroleum
based products, (ii) asbestos-containing material in any form or condition,
(iii) materials or equipment containing polychlorinated biphenyls or (iv)
landfills, surface impoundments or disposal areas for hazardous materials or
substances or municipal solid waste;
-16-
(e) the Company has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any hazardous
substance or petroleum or petroleum based products, or owned or operated any
property or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, or any
investigative, corrective or remedial obligations, pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), or the Solid Waste Disposal Act, as amended ("SWDA"), or any other
------ ----
Environmental and Safety Requirements;
(f) neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental and Safety Requirements; and
(g) the Company has not expressly assumed or undertaken any
liability, including without limitation any obligation for corrective or
remedial action, of any other person relating to Environmental and Safety
Requirements.
(h) For purposes of this Agreement "Environmental and Safety
------------------------
Requirements" means all federal, state, local and foreign statutes, regulations,
------------
ordinances and similar provisions having the force or effect of law, all
judicial and administrative orders and determinations, all contractual
obligations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, agricultural chemicals, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
3.27 Insurance. Schedule 3.27 attached hereto lists each insurance
---------
policy to which the Company has been a party or a named insured or otherwise the
beneficiary of coverage at any time during the past five years. The Company
maintains insurance policies with respect to the Properties and the operation of
its businesses with coverage customary for entities engaged in similar lines of
business. All of such insurance policies are legal, valid, binding and
enforceable and in full force and effect and the Company is not in breach or
default with respect to its obligations under such insurance policies.
3.28 Customers. Schedule 3.28 attached hereto lists all material
---------
customers of the Company. Neither the Company nor the FN Shareholders have
received any notice and, to the FN
-17-
Shareholders' Knowledge no material customer of the Company intends to terminate
or materially reduce its business with the Company and no material customer has
terminated or materially reduced its business with the Company in the last
twelve (12) months.
3.29 Suppliers. Schedule 3.29 attached hereto lists the Company's ten
---------
(10) largest vendors. Neither the Company nor the FN Shareholders have received
any notice and, to the FN Shareholders' Knowledge no such vendor intends to
terminate or materially reduce its business with the Company and no such vendor
has terminated or materially reduced its business with the Company in the last
twelve (12) months.
3.30 Affiliate Transactions. Except as set forth on Schedule 3.30
----------------------
attached hereto, no officer, director or employee of the Company or any person
related by blood or marriage to any such person, or entity in which any such
person owns any beneficial interest, or any affiliate thereof, is a party to any
agreement, contract, commitment or transaction with the Company or which
pertains to the Company, the Real Property or the Properties, or has any
interest in any property, real or personal or mixed, intangible or tangible,
relating to the Company, the Real Property or the Properties. Schedule 3.30
describes all material intercompany or affiliated services provided to or on
behalf of the Company by its affiliates and to or on behalf of such affiliates
by the Company.
3.31 Real Property.
-------------
(a) Owned Properties. Schedule 3.31(a) sets forth the address and
----------------
a true, correct and complete legal description of all land included in the Owned
Real Property. For the purposes hereof, the term "Owned Real Property" shall
-------------------
mean all real property (including, without limitation, all land and all
buildings, fixtures and other improvements, and irrigation and other water
distribution systems located thereon, and all easements, rights of way,
tenements, hereditaments, appurtenances, privileges and other rights with
respect thereto) owned in fee by the Company and used or occupied in the
operation of the Company's business. With respect to each parcel of Owned Real
Property: (i) the Company has good and marketable fee simple title to such
parcel, free and clear of all liens and encumbrances as of the Closing Date,
except Permitted Encumbrances (as defined in Section 8.10 below); (ii) there are
no leases, subleases, licenses, concessions or other agreements (written or
oral) granting to any person the right to use or occupy such parcel or any
portion thereof; and (iii) there are no outstanding options, rights of first
offer or rights of first refusal to purchase such parcel or any portion thereof
or interest therein.
(b) Leased Properties. Schedule 3.31(b) sets forth a list of all
-----------------
leases, subleases, licenses, concessions and other agreements (collectively, the
"Real Property Leases") pursuant to which the Company has a leasehold,
--------------------
subleasehold, license, concession or other rights to use or occupy real property
(collectively, the "Leased Real Property"), and a true, correct and complete
--------------------
legal description of each parcel of such Leased Real Property. The Company has
delivered to the Buyer true, correct, complete and accurate copies of each of
the Real Property Leases. With respect
-18-
to each Real Property Lease: (i) the Real Property Lease is legal, valid,
binding, enforceable and in full force and effect; (ii) neither the Company nor
any other party to the Real Property Lease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration under the Real
Property Lease; (iii) neither the Company nor, to the FN Shareholders'
Knowledge, any other party to the Real Property Lease has repudiated any
provision thereof; (iv) there are no disputes, oral agreements, or forbearance
programs in effect as to the Real Property Lease; (v) the Real Property Lease
has not been modified in any respect, except to the extent that such
modifications are disclosed by the documents delivered to the Buyer; (vi) the
Company has not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Real Property Lease; and (vii) the purchase and
transfer of the Shares and change in control of the Company will not require the
consent of the landlords or any other party under the Real Property Lease.
(c) Real Property Purchase Options. With respect to each purchase
------------------------------
option under each of the Real Property Leases, (i) the Company has not received
any notice from the landlord under such Real Property Lease stating that the
purchase option has lapsed, been terminated or otherwise is no longer
exercisable by the Company, and to the FN Shareholders' Knowledge, no such
action has been threatened by such landlord; and (ii) to the FN Shareholders'
Knowledge, the purchase option is valid, binding and enforceable by the Company,
and no event has occurred or circumstance exists which could cause such purchase
option to lapse, terminate or otherwise not be exercisable by the Company.
(d) Real Property Disclosure. Other than the Owned Real Property and
------------------------
the Leased Real Property (collectively, the "Real Property"), except as
-------------
disclosed on Schedule 3.31, there is no real property leased or owned by the
Company used in the Company's business.
(e) No Proceedings. There are no proceedings in eminent domain or
--------------
other similar proceedings pending or, to the FN Shareholders' Knowledge,
threatened, affecting any portion of the Real Property. There exists no writ,
injunction, decree, order or judgment outstanding, nor any litigation, pending
or threatened, relating to the ownership, lease, use, occupancy or operation by
the Company of the Real Property.
(f) Current Use. The current use of the Real Property does not
-----------
violate in any material respect any instrument of record or agreement affecting
such Real Property. There is no violation of any covenant, condition,
restriction, easement, agreement or order of any governmental authority having
jurisdiction over any of the Real Property that adversely affects such real
property or the use or occupancy thereof. Since the date of the Most Recent
Financial Statements, no damage or destruction has occurred with respect to any
of the Real Property that, individually or in the aggregate, has had or resulted
in, or will have or result in, a significant adverse effect on the operation of
the Company's business.
-19-
(g) Condition of Improvements. All buildings, structures, fixtures
-------------------------
and other improvements and all components thereof included within the Owned Real
Property and Leased Real Property (including, without limitation, irrigation and
other water distribution systems) (collectively, the "Improvements") are in
------------
reasonably good condition and repair and sufficient for the continued operation
of the Company's business.
(h) Permits. All certificates of occupancy, permits, licenses,
-------
franchises, approvals and authorizations (collectively, the "Real Property
-------------
Permits") of all governmental authorities having jurisdiction over the Real
-------
Property, required to have been issued to the Company to enable the Real
Property to be lawfully occupied and used for all of the purposes for which it
is currently occupied and used have been lawfully issued and are, as of the date
hereof, in full force and effect. The Company has delivered complete and
correct copies of the Real Property Permits to the Buyer. The Company has not
received or been informed in writing by a third party of the receipt by it of
any notice from any governmental authority having jurisdiction over the Real
Property threatening a suspension, revocation, modification or cancellation of
any Real Property Permit and, to the FN Shareholders' Knowledge there is no
basis for the issuance of any such notice or the taking of any such action.
(i) Compliance with Laws. The Real Property is not in violation of
---------------------
any applicable building, zoning, subdivision, health and safety and other land
use and similar laws affecting the Real Property (collectively, the "Real
----
Property Laws"), and the Company has not received any notice of violation or
-------------
claimed violation of any Real Property Law. There is no pending or, to the FN
Shareholders' Knowledge, any anticipated change in any Real Property Law that
will have or result in a significant adverse effect upon the ownership,
alteration, use, occupancy or operation of the Real Properties or any portion
thereof. No current use by the Company of the Real Properties is dependent on a
nonconforming use or other approval from a governmental authority, the absence
of which would significantly limit the use of any of the properties or assets in
the operation of the Business.
(j) Water Rights. To the FN Shareholders' Knowledge, each parcel of
------------
Real Property has access to (although not necessarily the legal, enforceable
right to) water resources for irrigation purposes as reasonably required for the
cultivation of nursery stock in the ordinary course of the Company's business,
and such access to and use of such water resources is not dependent on the
ownership or lease of any real property or interest therein, contractual rights,
governmental permits or other rights or privileges of any kind which are not
included in this transaction.
-20-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the FN Shareholders as follows:
4.1 Organization. The Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of California and has
the corporate power and authority to carry on its business as presently
conducted, to enter into, execute and deliver this Agreement and to consummate
the transactions contemplated hereby.
4.2 Authority. The execution and delivery of this Agreement and the
---------
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of the Buyer. The Buyer will deliver to the FN
Shareholders at the Closing complete and correct copies, certified by its
Secretary or Assistant Secretary, of the resolutions duly and validly adopted by
its Board of Directors evidencing such authorization (which resolutions will not
have been modified, revoked or rescinded prior to and will be in full force and
effect at the Closing). No other corporate act or proceeding on the part of the
Buyer or its shareholders is necessary for the due and valid authorization of
this Agreement or the transactions contemplated hereby.
4.3 Binding Obligation. This Agreement constitutes the valid and
------------------
binding obligation of the Buyer enforceable against it in accordance with its
terms, except as they may be affected by bankruptcy, insolvency, moratorium or
similar laws related to or limiting creditors' rights generally or by general
equitable principles.
4.4 No Violation. Neither the execution and delivery of this
------------
Agreement nor the consummation by the Buyer of the transactions contemplated
hereby will (a) violate any statute or law, or any rule, regulation, order,
writ, injunction or decree of any court or governmental authority, or (b)
violate or conflict with or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or will result in
the termination of, or accelerate the performance required by, any term or
provision of the Certificate or Articles of Incorporation or By-Laws of the
Buyer.
4.5 Finders and Investment Bankers. All legal and accounting fees
------------------------------
and expenses and all brokerage fees, commissions, finders' fees or any other
fees and expenses of any broker, finder or investment banker, for which the
Buyer or any of its respective officers, trustees or agents has incurred
liability in connection with the transactions contemplated hereby, will be paid
by the Buyer.
4.6 Representations and Warranties Regarding Investment. Solely for
---------------------------------------------------
purposes of compliance with applicable securities laws, the Buyer hereby
represents and warrants to the FN Shareholders as follows:
-21-
(a) The Buyer understands and acknowledges that the offering and
sale of Shares pursuant to this Agreement will not be registered under the
Securities Act of 1933 on the basis that the offering and sale of the Shares
contemplated by this Agreement is exempt from registration under the Securities
Act and that the FN Shareholders' reliance upon such exemption is predicated
upon the Buyer's representations set forth in this Agreement.
(b) The Buyer has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
purchase of the Shares contemplated by this Agreement and the Buyer has the
ability to bear the economic risk of such an investment.
(c) The Buyer is acquiring the Shares for its own account, not
as nominee or agent and not with a view to the sale or distribution of any part
thereof and the Buyer has no agreement, understanding or arrangement to
subdivide, sell, assign, transfer, pledge or otherwise dispose of all or any
part of his interest in the shares to any other person.
(d) The Buyer acknowledges that it has examined and investigated
FN and FRN and has had access to such information as it deemed necessary to make
an investment in the Shares, and has had the opportunity to ask questions of and
receive answers from the FN Shareholders, the Company and its officers,
directors, employees and agents.
ARTICLE V
COVENANTS
5.1 Use of "Xxxxx" Name. From and after the Closing Date, FN and FRN
-------------------
will have the exclusive right to use the names "Xxxxx Nurseries," "Xxxxx Rainbow
Nurseries" and all derivations thereof and all related trademarks in connection
with the sale of nursery and other garden products within North America.
Notwithstanding the foregoing or anything contained in this Agreement, FII shall
retain full right to the logo and emblem used by FRN and identified in Schedule
3.11 other than in connection with, directly or indirectly, the sale of nursery
and other garden products within North America.
5.2 Information, Confidentiality and Record Retention.
-------------------------------------------------
(a) The FN Shareholders and the Company will permit the Buyer
and its counsel, accountants and other representatives and agents full access
during normal business hours to all of the plants, properties, books, contracts,
commitments and records of the Company (including, without limitation, the right
to conduct any physical inventory or otherwise be present at or participate in
any such activity at any time prior to the Closing) and will furnish the Buyer
and
-22-
its representatives during such period with all such information concerning the
affairs of the Company as the Buyer or its representatives may request
including, without limitation, all trade secrets, customer lists, and all
research documents which the FN Shareholders, FN or FRN have in their possession
regarding nursery markets, products and growing and production methods.
(b) Until the Closing, the Buyer and its affiliates and
associates will, and will cause their respective officers, employees and
authorized representatives and agents to, hold in strict confidence all
internal, non-public financial and business information obtained by them from
the FN Shareholders or the Company in connection with the transactions
contemplated by this Agreement and will reveal such confidential information
only to those persons, including counsel, accountants and investment bankers,
who have a need for such information in the performance of their duties for
their respective principals, unless after notice to the FN Shareholders,
disclosure of such material is compelled by judicial or administrative process,
or, in the opinion of the Buyer's counsel, by other requirements of law. In the
event of termination of this Agreement prior to the Closing, the Buyer and its
affiliates and associates will, and will cause their officers, employees and
authorized representatives to, return to the FN Shareholders and FN all
confidential documents and other material (including original copies and all
duplicates thereof) obtained from the FN Shareholders, FN and FRN in connection
with the transactions contemplated by this Agreement.
(c) For a period of three years following the Closing, upon
reasonable notice, each party to this Agreement shall have reasonable access to
books and records relating to the business of FN and FRN or which relate to the
Properties or the Real Property; provided that such party requesting access has
a valid business purpose unrelated to any matter that is the subject of
litigation between the parties. For such period, the Buyer and the FN
Shareholders also agree that prior to the destruction or disposition of any such
books or records pertaining to the business of FN or FRN or which relate to the
Properties, each party shall provide not less than 45 nor more than 90 days'
prior written notice to the other of any such proposed destruction or disposal.
If the recipient of such notice desires to obtain any of such documents, it may
do so by notifying the other party in writing at any time prior to the scheduled
date for such destruction or disposal. Such notice must specify the documents
which the requesting party wishes to obtain. The parties shall then promptly
arrange for the delivery of such documents. All out-of-pocket costs associated
with the delivery of the requested documents shall be paid by the requesting
party.
5.3 Employees. The FN Shareholders agree to cooperate with the Buyer
---------
by permitting the Buyer throughout the period prior to the Closing Date (i) to
meet with the employees of the Company at such times as shall be approved by a
representative of FII (which approval will not be unreasonably withheld) with
respect to the possibility that such employees will remain employees of the
Company after Closing or become employees of the Buyer and (ii) to distribute to
employees of the Company such forms and other documents relating to employment
after the Closing as the Buyer shall reasonably request.
-23-
5.4 Real Property Closing Deliveries. The Company and the FN
--------------------------------
Shareholders shall deliver to the Title Company, any affidavits, memorandums,
indemnities and agreements and provide such other assurances required by the
Company to issue the Title Policies.
5.5 Farm Credit "C" Stock. FN and FRN irrevocably assign their
---------------------
entire interest in the redemption proceeds in the C Stock (or any other proceeds
received at any time by FN or FRN derived in any way from the C Stock, including
any proceeds of any sale or disposition thereof) to FII as agent for the FN
Shareholders. FN and FRN agree that such proceeds and the C Stock shall be kept
free and clear of all liens and encumbrances of any kind. FN and FRN agree that
they shall not sell, transfer or otherwise dispose of the C Stock to any party
(other than Farm Credit) without the prior written consent of FII, and that they
shall not waive, compromise or release any right pertaining to such stock. The
Parties agree to use reasonable efforts to cause a letter agreement
substantially in the form of Exhibit G hereto to be executed by Farm Credit and
---------
the other parties thereto as promptly as practicable on or following the Closing
Date, and agree that, pending execution by Farm Credit, that such letter be
given effect to the maximum extent possible. Upon the written request of FII,
and if permitted by Farm Credit, FN and FRN agree to assign the C Stock to FII
as agent for the FN Shareholders. In the event Farm Credit fails to redeem such
C Stock for any reason, FN and FRN authorize FII, for itself and as agent for
the FN Shareholders, to bring an action in its own name or in the name of FRN or
FN, at the sole expense of the FN Shareholders, to enforce any right of FN or
FRN with regard to the C Stock
ARTICLE VI
INTENTIONALLY OMITTED
ARTICLE VII
OTHER OBLIGATIONS OF THE PARTIES
7.1 Disclosure Supplements. From time to time prior to the Closing,
----------------------
the FN Shareholders and FN will promptly supplement or amend the Schedules and
other written disclosures delivered pursuant to this Agreement with respect to
any material matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
the Schedules or such written disclosures or which is necessary to correct any
information in the Schedules or such written disclosures or in any
representation and warranty of the FN Shareholders which has been rendered
inaccurate thereby. Notwithstanding any supplemental disclosure made by the FN
Shareholders after the date of this Agreement, such disclosure will not affect
the liability of the FN Shareholders for the breach of any representation,
warranty or covenant made by the FN Shareholders and contained herein.
-24-
7.2 Public Announcements. Unless required by law, neither party
--------------------
hereto shall make any press release or public announcement related to this
Agreement or the transactions contem plated hereby without the written consent
of the other party.
7.3 Certain Tax Matters.
-------------------
(a) Except as otherwise provided herein, the Buyer shall cause to be
filed any Tax Returns required to be filed with respect to the Company after the
Closing Date. The Buyer shall be entitled to recover from the FN Shareholders
if and to the extent that any Taxes of the Company were not paid or adequately
accrued for periods (or partial periods) ending on the date of the Most Recent
Financial Statements, to the extent required by GAAP to be so accrued on such
statements.
(b) The Buyer shall cause to the Company to consent to join, for all
taxable periods of the Company ending on or before the Closing Date for which
the Company is eligible to do so, in any consolidated federal, state and local
income and franchise Tax Returns which FII shall request it to join. FII shall
cause to be prepared and filed all such consolidated or combined Tax Returns.
The Buyer agrees to take no position inconsistent with the Company's being a
member of the consolidated or combined groups of which FII is the common parent
for all such periods. FII and the other FN Shareholders shall cause to be
timely paid all Taxes to which such Tax Returns relate for all such periods
covered by such Tax Returns. The Buyer shall not permit the Company to make any
distributions on the Closing Date that could reasonably be expected to cause FII
or any member of its consolidated group to realize any gain on the FII
consolidated return for periods ending on or before the Closing Date.
(c) With respect to any Tax periods ending before or including the
Closing Date with respect to which the Buyer is responsible for filing Tax
Returns pursuant to Section 7.3(a) hereof, the Buyer may, or may cause the
Company to, make or change any election, file any amended Tax Return, enter into
any closing agreement, settle any Tax claim or assessment relating to the
Company, surrender any right to claim a refund of Taxes, or take any other
similar action, or omit to take any action relating to the filing of any Tax
Return or the payment of any Tax; provided, that the Buyer shall not take any
such action without the prior written consent of FII (which consent shall not be
unreasonably withheld) if any such action could reasonably be expected to
materially increase the Tax liability of FII or the Company with respect to any
Tax period (or partial period) ending on or before the Closing Date.
(d) The Buyer shall promptly pay or shall cause prompt payment to be
made to FII of all refunds of Taxes and interest thereon received by the Buyer,
any Affiliate of the Buyer or the Company which are attributable to any Tax
period (or partial period) ending on or before the Closing Date.
-25-
(e) FII agrees to, and hereby does, indemnify and hold harmless the
Buyer from and against any liability of the Company for Taxes of any Person
other than the Company with respect to any period (or any partial period) ending
on or before the Closing Date (i) under Treasury Regulation Section 1.1502-6,
(ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.
(f) All tax sharing agreements or similar agreements with respect to
or involving any of the FN Shareholders and the Company shall be terminated as
of the Closing Date and, after the Closing Date, neither the Company nor any
subsidiary shall be bound thereby or have any liability thereunder.
(g) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any gains, transfer or other Tax
imposed in any state or subdivision), shall be paid by the FN Shareholders when
due and the FN Shareholders will, at their own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, the Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
(h) FII shall accurately and completely prepare and file all required
federal, state, local and foreign Tax Returns and amendments thereto required to
be filed by it on or before the Closing Date which relate to the Company, the
operations thereof and the Properties. FII will ensure that the Buyer shall
have a reasonable opportunity to review each such return and amendment prior to
the filing thereof to the extent that such return or amendment relates to FN or
FRN, the operations thereof or the Properties.
7.4 Third Party Payments. If, after the Closing, the Buyer, FN or
--------------------
FRN receives any payment from a third party which is, in whole or in part,
designated by the payor as payment of an obligation owed to an FN Shareholder
and is not a payment received in connection with the operation by the Company of
its businesses, the Buyer, FN or FRN shall remit such payment to the appropriate
FN Shareholder.
7.5 Further Consents. At all times after the Closing Date, the FN
----------------
Shareholders shall take all actions requested reasonably by the Buyer to obtain
the consent of any third party necessary to cause any contract or agreement of
the Company in effect as of the date of this Agreement to be enforceable by the
Company without any material modification; provided, however, that nothing in
this Section 7.5 shall require the expenditure of any sum by any FN Shareholder
in excess of $5,000 in the aggregate among all FN Shareholders or the waiver or
compromise of any material right by any FN Shareholder.
-26-
ARTICLE VIII
CONDITIONS TO THE BUYER'S OBLIGATIONS
Except as may be waived by the Buyer, the obligations of the Buyer are
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions:
8.1 Representations and Warranties. The representations and
------------------------------
warranties made by the FN Shareholders in this Agreement, and the statements
contained in the Schedules annexed hereto or in any instrument, list,
certificate or writing delivered by the FN Shareholders pursuant to this
Agreement shall have been true in all material respects when made and as of the
Closing Date as though such representations and warranties were made at and as
of such date, except for any changes permitted by the terms of this Agreement or
consented to by the Buyer in writing.
8.2 Performance. The FN Shareholders shall have performed and
-----------
complied with all covenants, agreements, obligations and conditions required by
this Agreement to be so performed or complied with by them, prior to or at the
Closing including delivering to the Buyer such stock certificates, the title
insurance policies and personal property lien record searches, and other
documents reasonably satisfactory in form and substance to the Buyer and its
counsel, as shall be necessary to consummate the transactions contemplated
hereby as shall have been reasonably requested by the Buyer.
8.3 Officers' Certificate. The FN Shareholders shall have delivered
---------------------
to the Buyer a certificate, dated the Closing Date, and executed by each FN
Shareholder and any principal executive officer of FII, certifying to the
fulfillment of the conditions specified in Sections 8.1, 8.2, 8.6 and 8.7
hereof.
8.4 Opinions of Counsel. The Buyer shall have received a legal
-------------------
opinion of Heller, Ehrman, White & XxXxxxxxx, California counsel to the FN
Shareholders, and Xxxxxxxx and Wedge, Nevada counsel to the FN Shareholders,
each dated the Closing Date and substantially in the form attached as Exhibit C
---------
to this Agreement.
8.5 Consents. All approvals of applicable governmental or regulatory
--------
authorities (federal, state or local, domestic or foreign), all corporate and
shareholder actions, and all consents of third parties under contract,
instrument or agreement, the approval, performance or grant of which are
necessary, in the reasonable opinion of the Buyer, for the consummation of the
transactions contemplated hereby shall have been obtained, and no such approval,
consent or action shall contain any condition which materially adversely affects
or will materially adversely affect the Properties, the Real Property or the
operations of the Company.
-27-
8.6 Litigation.
----------
(a) There shall be no order, decree or injunction of a court of
competent jurisdiction, including without limitation the entry of a preliminary
or permanent injunction, which (i) prevents or delays the performance by the
Buyer or the FN Shareholders of their obligations hereunder or (ii) would impose
any limitation on the ability of the Buyer effectively to exercise full rights
of ownership of the stock of FN or of FN and FRN to exercise the full rights of
ownership of the Properties and the goodwill associated therewith.
(b) No action, suit or proceeding before any court or
governmental or regulatory authority shall be pending against the Buyer, the FN
Shareholders or the Company challenging the validity or legality of the
transactions contemplated by this Agreement.
8.7 Material Adverse Change. Neither FN nor FRN shall have suffered
-----------------------
any material adverse change in the Properties or their operations, business or
prospects since the date of Most Recent Financial Statements.
8.8 Certificates. The FN Shareholders shall furnish such
------------
certificates to evidence compliance with the conditions set forth in this
Article VIII, as may be reasonably requested by the Buyer.
8.9 Non-Competition Agreement. FII and Xxxxxx Xxxxx shall have
-------------------------
entered into a Non-Competition, Non-Solicitation and Non-Disclosure Agreement
with the Buyer, substantially in the form of Exhibit D to this Agreement.
---------
8.10 Title Insurance. The Company shall have obtained, at its sole
---------------
cost and expense, a commitment for an ALTA Owner's or Leasehold Policy of Title
Insurance Form B-1970 (as the case may be), for each parcel of Real Property
(the "Title Commitments"), issued by a title insurer satisfactory to the Buyer
-----------------
and the Buyer's lender (the "Title Insurer"), in such amount as the Buyer
-------------
determines to be the fair market value (including all Improvements thereon),
insuring the Company's interest in such parcel as of the Closing Date, subject
only to the Permitted Encumbrances. The Company shall deliver at the time of
delivery of the Title Commitments, copies of all documents of record referred to
therein. The Company will provide the Buyer with title insurance policies
("Title Policies") on or before the Closing, from the Title Insurer based upon
--------------
the Title Commitments. Each such Title Policy will be dated as of the Closing
Date and (a) insure title to the applicable parcels of Real Property and all
recorded easements benefitting such parcels, subject only to Permitted
Encumbrances, (b) contain an "extended coverage endorsement" insuring over the
general exceptions contained customarily in such policies, (c) contain a CLTA
123.2 Endorsement, with parking (or equivalent), (d) contain an endorsement
insuring that the parcel described in such Title Policy is the parcel shown on
the Survey delivered with respect to such parcel and that the Survey is an
accurate survey thereof, (e) contain an endorsement insuring that there is
-28-
direct and unencumbered pedestrian and vehicular access to a street from such
parcel, (f) if the real estate covered by such policy consists of more than one
record parcel, contain a "contiguity" endorsement insuring that all of the
record parcels are contiguous to one another, (g) contain a non-imputation
endorsement insuring that coverage under the Title Policies will not be denied
on the basis of knowledge imputed to the Company based on the knowledge of any
shareholders, directors, officers or employees prior to the Closing Date, (h)
contain a tax number endorsement, (i) contain an endorsement insuring any option
to purchase such Real Property under the Lease and (j) contain such other
endorsements as the Buyer and the Buyer's lender may reasonably request.
For purposes hereof, "Permitted Encumbrances" shall mean: (a)
----------------------
statutory liens for current taxes or other governmental charges with respect to
the Real Property not yet due and payable or the amount or validity of which is
being contested in good faith by appropriate proceedings by the Company and for
which appropriate reserves have been established in accordance with GAAP; (b)
mechanics, carriers workers, repairers and similar statutory liens arising or
incurred in the ordinary course of business for amounts which are not delinquent
and which are not, individually or in the aggregate, material to the Company's
business; (c) zoning, entitlement, building and other land use regulations
imposed by governmental agencies having jurisdiction over the Real Property
which are not violated by the current use and operation of the Real Property;
(d) covenants, conditions, restrictions, easements and other similar matters of
record affecting title to the Real Property which do not materially impair the
occupancy or use of the Real Property for the purposes for which it is currently
used in connection with the Company's business; and (e) with respect to the
Leased Real Property, the Real Property Leases.
8.11 Surveys. The Company shall have procured, at its sole cost and
-------
expense, in preparation for the Closing, current surveys of each parcel of the
Real Property, prepared by a licensed surveyor, satisfactory to the Buyer, and
conforming to 1992 ALTA/ACSM Minimum Detail Requirements for Land Title Surveys
("Surveys"), and such standards as the Title Insurer may require as a condition
-------
to the removal of any survey exceptions from the Title Policy, and certified to
the Company, the Buyer, the Buyer's lender and the Title Insurer, within 30 days
of the Closing Date, in a form satisfactory to such parties. The Survey shall
disclose the location of all Improvements, easements, party walls, sidewalks,
roadways, utility lines and such matters shown customarily on such surveys, show
access affirmatively to public streets and roads, and include Table A Item Nos.
1-4 and 6-14. No Survey shall disclose any survey defect or encroachment from
or onto any of the Real Property which has not been cured or insured over prior
to the Closing.
8.12 Non-Disturbance Agreement. The Company shall have obtained and
-------------------------
delivered to the Buyer a non-disturbance agreement (the "Non-Disturbance
---------------
Agreements") in form and substance satisfactory to the Buyer and the Buyer's
----------
lender from each lender encumbering each parcel of Real Property. The Company
shall obtain a written consent for the stock purchase contemplated in this
Agreement, and if requested by the Buyer's lender, consent to a leasehold
mortgage, collateral assignment of lease or waiver of landlord liens from any
party whose consent
-29-
is required for the same under any of the Real Property Leases (the "Real
----
Property Lease Consents") in form and substance satisfactory to the Buyer and
-----------------------
the Buyer's lender. The Real Property Lease Consents shall not contain any terms
or conditions which are less favorable to the Company under such Lease after the
Closing Date.
8.13 Estoppel Letter. The Company shall have obtained and delivered
---------------
to the Buyer an estoppel letter (the "Estoppel Letter") with respect to each
---------------
parcel of Real Property from each of the landlords, lessors, sublessors or
licensors for such property in form and content reasonably satisfactory to the
Buyer (and the Buyer's lender), stating that: a copy of the Lease, attached to
the Estoppel Letter is a true, correct and complete copy of the lease, sublease,
license or tenancy agreement and represents the entire agreement between the
landlord and the Company; to the landlord's knowledge the Company is not in
breach or default under the Lease, and no event has occurred which would with
notice or passage of time, or both, constitute a breach or default or permit
termination, modification, or acceleration under any such lease, tenancy
agreement, license or sublease and the landlord has not repudiated any provision
of the lease, tenancy agreements, license or sublease; all rent and other
payments owed by the tenant to the landlord have been paid to date, to the
landlord's knowledge there are no disputes, oral agreements or forbearance
agreements in effect as to the Lease, that the landlord consents to the
assignment of the Lease, that identifies all mortgages, deeds of trust,
licenses, easements and other encumbrances affecting the real property leased to
the Company, and containing such other statements or agreements as the Buyer or
the Buyer's lender may reasonably request.
8.14 Oregon Equipment and Inventory Purchase Agreement. FRNO and FRN
-------------------------------------------------
shall have entered into an Equipment and Inventory Purchase Agreement
substantially in the form of Exhibit E to this Agreement.
---------
8.15 Oregon Custom Farming Agreement. FRNO and FRN shall have entered
-------------------------------
into a Custom Farming Agreement substantially in the form of Exhibit F to this
---------
Agreement, and such agreement shall be in full force and effect.
8.16 Xxx Xxxxx Shares. The Xxx Xxxxx Shares shall have been canceled
----------------
and the balance of the purchase price for the Xxx Xxxxx Shares shall have been
paid by the Company at or prior to the Closing.
8.17 Resignation of Officers and Directors. The officers and
-------------------------------------
directors of FN, FRN and FRN, Inc. immediately prior to the Closing shall have
resigned effective as of the Closing.
-30-
ARTICLE IX
CONDITIONS TO THE FN SHAREHOLDERS' OBLIGATIONS
Except as may be waived by the FN Shareholders, the obligations of the
FN Shareholders under this Agreement are subject to the fulfillment, prior to or
at the Closing, of each of the following conditions:
9.1 Representations and Warranties. The representations and
------------------------------
warranties made by the Buyer in this Agreement and the statements contained in
any instrument, list, certificate or writing delivered by the Buyer pursuant to
this Agreement shall be true in all material respects when made and at and as of
the Closing Date as though such representations and warranties were made at and
as of such date, except for any changes permitted by the terms of this Agreement
or consented to by the FN Shareholders in writing.
9.2 Performance. The Buyer shall have performed and complied with
-----------
all covenants, agreements, obligations and conditions required by this
Agreement to so be performed or complied with by it prior to or at the Closing.
9.3 Officers' Certificate. The Buyer shall have delivered to the FN
---------------------
Shareholders a certificate, dated the Closing Date, and executed by an officer
of the Buyer certifying to the fulfillment of the conditions specified in
Sections 9.1, 9.2 and 9.4 hereof.
9.4 Litigation.
----------
(a) There shall be no order, decree or injunction of a court of
competent jurisdiction, including without limitation the entry of a preliminary
or permanent injunction which prevents or delays the performance by the Buyer or
the FN Shareholders of their obligations hereunder.
(b) No action, suit or proceeding before any court or any
governmental or regulatory authority shall be pending against the Buyer or the
FN Shareholders, challenging the validity or legality of the transactions
contemplated by this Agreement, provided that the FN Shareholders shall use
their best efforts to consummate the transaction if it is reasonably prudent to
do so notwithstanding such action, suit or proceeding.
9.5 Oregon Equipment and Inventory Purchase Agreement. FRN shall
-------------------------------------------------
have entered into an Equipment and Inventory Purchase Agreement with FRNO
substantially in the form of Exhibit E to this Agreement.
9.6 Oregon Custom Farming Agreement. FRN shall have entered into a
-------------------------------
Custom Farming Agreement with FRNO substantially in the form of Exhibit F to
this Agreement.
-31-
9.7 Credit Agreement. (a) All of FII'S, FN's and FRN's indebtedness
----------------
under the Credit Agreement shall have been satisfied in a manner satisfactory to
the FN Shareholders in their sole discretion, and (b) all guarantees and grants
of security interest by any party in connection with the indebtedness under the
Credit Agreement shall have been extinguished and released by Farm Credit
Services.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
10.1 Survival of Representations. All representations and warranties
---------------------------
made by any party to this Agreement pursuant hereto shall survive the Closing
and any investigation made by or on behalf of any party hereto but shall
terminate one year from the Closing Date; provided that the representations of
the FN Shareholders contained in Sections 3.2, 3.4, 3.13 and 3.17 hereof, and in
Sections 3.1 and 3.5 hereof to the extent such representations relate to the
corporate existence of FN and FRN, title of the FN Shareholders to the Shares,
the authority of the FN Shareholders to convey the Shares to the Buyer or the
binding nature of their obligation to do so, shall survive until expiration of
the applicable statute of limitations, and the representations and warranties of
the FN Shareholders contained in Section 3.26 shall survive for a period of
three years following the date of this Agreement. The parties agree that so long
as written notice of a particular alleged breach of a representation is given on
or prior to the applicable date on which such representation terminates, which
notice shall describe such alleged breach in reasonable detail, the claim so
described shall be deemed to have been timely made.
10.2 Agreement to Indemnify.
----------------------
(a) Subject to the terms and conditions of this Article X, the
FN Shareholders agree to indemnify, defend and hold harmless the Buyer, FN and
any parent, subsidiary or affiliate of any thereof and any officer, director,
agent or executive employee thereof (the "Buyer Group"), from and against all
-----------
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties investigative costs, corrective or remedial action costs, fines and
attorneys' fees and expenses (collectively "Damages"), asserted against,
-------
relating to, imposed upon or incurred by the Buyer Group or any member thereof,
directly or indirectly, but reduced by the amount of any insurance proceeds
received on account of such Damage, less the reasonably anticipated present
value of any increase in insurance premiums to be incurred by the Buyer, by
reason of or resulting from any breach of any representation, warranty, covenant
or agreement of the FN Shareholders contained in or made pursuant to this
Agreement (determined without giving effect to any amendment to any Schedule
made pursuant to Section 7.1 hereof) or the instruments or agreements
contemplated hereby or any facts or circumstances constituting such a breach.
The indemnification obligations of the FN Shareholders are subject to the
following limitations:
-32-
(i) the FN Shareholders shall only be obligated to indemnify the
Buyer Group and any members thereof to the extent the aggregate amount of
all Damages suffered by the Buyer Group exceeds $100,000 (the "Basket"),
------
and the indemnification obligations of all of the FN Shareholders
collectively shall not exceed an aggregate (for all claims for breach of
representation) of $500,000 (the "Cap"); provided, however, that the Basket
---
and Cap shall apply only to Damages resulting from the breach of any
representation or warranty contained Article III hereof, and shall not
apply to (A) any Damages resulting from the breach of any representation or
warranty contained in Sections 3.2, 3.3, 3.4 or 3.18 of this Agreement and
the breach of any representation or warranty contained in Sections 3.1 and
3.5 hereof to the extent such representations relate to the corporate
existence of FN and FRN, title of the FN Shareholders to the Shares, the
authority of the FN Shareholders to convey the Shares to the Buyer or the
binding nature of their obligation to do so, (B) any Damages resulting from
the willful or fraudulent breach by the FN Shareholders of any
representation or warranty contained herein or (C) any Damages resulting
from the breach of any covenant or other agreement of the FN Shareholders
contained herein; and
(ii) each FN Shareholder shall be liable to the Buyer Group for
Damages under this Article X only in proportion to the share of
consideration paid by the Buyer to such FN Shareholder under this
Agreement.
(b) Subject to the terms and conditions of this Article X, the
Buyer, FN and FRN hereby agree to indemnify, defend and hold harmless the FN
Shareholders and any parent, subsidiary or affiliate thereof and any of officer,
director, agent or executive employee thereof (the "Selling Group"), from and
-------------
against all Damages asserted against, relating to, imposed upon or incurred by
the Selling Group or any member thereof, directly or indirectly, (i) by reason
of or resulting from any breach of any representation, warranty, covenant or
agreement of the Buyer contained in or made pursuant to this Agreement or the
instruments or agreements contemplated hereby or any facts or circumstances
constituting such a breach, and (ii) for claims against the Selling Group
arising out of the operations of FN and FRN as conducted by the Buyer after the
Closing Date. The Buyer shall only be obligated to indemnify the Selling Group
and any members thereof for Damages resulting from any the breach of any
representation or warranty contained in Article IV hereof (A) to the extent that
the amount of such Damages exceeds the Basket and (B) to the extent that the
amount of such Damages does not exceed the Cap.
10.3 Conditions of Indemnification. The obligations and liabilities
-----------------------------
of the FN Shareholders under Section 10.02(a) and those of the Buyer, FN and FRN
under Section 10.02(b) hereof with respect to claims for indemnification
("Claims") relating to third parties shall be subject to the following terms and
------
conditions:
(a) The party against which such claim has been asserted and
seeking to be indemnified (the "Indemnitee") will give the party from which
----------
indemnity is sought
-33-
("Indemnitor") prompt notice of any such Claim (provided, however, the failure
----------
to give such notice shall not relieve Indemnitor from its indemnity obligations
hereunder unless and only to the extent that the Indemnitor is prejudiced
thereby), and Indemnitor will undertake the defense thereof by representatives
chosen by it and approved by Indemnitee, which approval shall not be
unreasonably withheld. Indemnitee shall cooperate in the defense of and shall
have the right to participate in the defense of any such claim (including the
response to any tax audit), and shall provide Indemnitor and its representatives
with such access to Indemnitee's records and employees as may reasonably be
required.
(b) If Indemnitor, within a reasonable time after notice of any
such Claim, fails to defend, Indemnitee (upon further notice to Indemnitor)
shall have the right to undertake the defense, compromise or settlement of such
Claim on behalf of and for the account and risk of Indemnitor, subject to the
right of Indemnitor to assume the defense of such Claim, by representatives
chosen by it and approved by Indemnitee, in its sole discretion, at any time
prior to settlement, compromise or final determination thereof.
(c) Anything in this Section 10.3 to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect Indemnitee other than as a result of money
damages or other money payments, Indemnitee shall have the right, if it so
elects and at its own cost and expense, to defend or participate in the defense
of, and with the consent of Indemnitor to compromise or settle such Claim, (ii)
Indemnitor shall not, without the written consent of Indemnitee, settle or
compromise any Claim or consent to the entry of any judgment which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to Indemnitee, a release from all liability in respect of or related
to such Claim, and (iii) with respect to claims relating to any product, the
growth of which occurs both prior and subsequent to the Closing, the Selling
Group shall have no obligation of indemnity hereunder unless the Indemnitee
proves that any such claim is the result of conduct or activities of the Selling
Group in growing such product prior to the Closing.
10.4 Remedies Cumulative. Except as herein expressly provided, the
-------------------
remedies provided herein shall be cumulative and shall not preclude assertion by
any party hereto of any other rights or the seeking of any other remedies
against any other party.
ARTICLE XI
TERMINATION OF AGREEMENT
11.1 Termination of Agreement. This Agreement may be terminated at
------------------------
any time prior to the Closing:
(a) by mutual agreement of the FN Shareholders and the Buyer;
-34-
(b) by the Buyer, if there has been a material violation or
breach by the FN Shareholders of any of their agreements, representations or
warranties contained in this Agreement which has not been waived in writing;
(c) by the FN Shareholders, if there has been a material
violation or breach by the Buyer of any of the agreements, representations or
warranties contained in this Agreement which has not been waived in writing;
(d) by the Buyer in the event any supplemental disclosures made
by the FN Shareholders or FN in accordance with Section 7.1 hereof shall be
unacceptable to the Buyer in its sole discretion; or
(e) by the Buyer or by the FN Shareholders if a condition to
such parties obligation to consummate the Closing has not been satisfied.
ARTICLE XII
MISCELLANEOUS
12.1 Parties in Interest. This Agreement will be binding upon, inure
-------------------
to the benefit of, and be enforceable by the respective successors and assigns
of the parties hereto.
12.2 Entire Agreement; Amendments. This Agreement and the Exhibits,
----------------------------
Schedules, certificates, lists and other writings delivered pursuant hereto
which form a part hereof, together with the Confidentiality Agreement, dated
March 6, 1996, by and between Madison Dearborn Partners and FII, contain the
entire understanding of the parties with respect to the subject matter hereof.
This Agreement supersedes all prior agreements and understandings hereof,
between the parties with respect to the subject matter hereof. This Agreement
may be amended only by a written instrument duly executed by the parties to this
Agreement. Any condition to a party's obligations hereunder may be waived in
writing by such party.
12.3 Headings. The Article and Section headings contained in this
--------
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
12.4 Notices. All notices, claims, certificates, requests, demands
-------
and other communications hereunder will be in writing and will be deemed to have
been duly given if delivered personally, or by acknowledged facsimile, or mailed
(registered or certified mail, postage prepaid, return receipt requested) as
follows:
-35-
If to the Buyer, to:
Xxxxxxx X. Xxxxxxx
President
Xxxxx Horticulture, Inc.
00000 Xxxxxxx Xxxx Tel: 000-000-0000
Xxxxxx, Xxxxxxxxxx 00000 Fax: 000-000-0000
with copies to:
Xx. Xxxx X. Xxxx
Madison Dearborn Partners
0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 0000 Tel: 000-000-0000
Xxxxxxx, Xxxxxxxx 00000 Fax: 000-000-0000
and
Xxxxxxx X. Xxxx, P.C.
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx Tel: 000-000-0000
Xxxxxxx, Xxxxxxxx 00000 Fax: 000-000-0000
If to the FN Shareholders, to:
Xxxxxxx X. Xxxxx
Vice President
Xxxxx Industries, Inc.
000 Xxx Xxxx Xxxxxx Tel: 000-000-0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 Fax: 000-000-0000
with copies to:
Xxxxxx Xxxxx
0000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx Tel: 000-000-0000
Xxxxxx X0X 0X0 Fax: 000-000-0000
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and
Xxxxxxx X. Xxxx
President
Xxxxx Rainbow Nurseries, Inc.
0000 Xxxxxxx Xxxxxx Xxxx. Tel: 000-000-0000
Xxxxxxxxx, Xxxxxxxxxx 00000 Fax: 000-000-0000
and
Xxxxxxx X. Xxxxx, Esq.
Heller, Ehrman, White & XxXxxxxxx
000 Xxxx Xxxxxx, 00xx Xxxxx Tel: 000-000-0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 Fax: 000-000-0000
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
12.5 Governing Law. This Agreement will be governed by, and construed
-------------
and enforced in accordance with, the laws of, and shall be subject to the
exclusive jurisdiction of the courts of, the State of California applicable to
contracts to be performed in such state without giving effect to the provisions
thereof relating to conflicts of laws.
12.6 Counterparts. This Agreement may be executed simultaneously in
------------
several counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
* * * * *
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the Buyer and the FN Shareholders
as of the date first above written.
FN SHAREHOLDERS:
XXXXX INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
/s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
XXXXXX X. XXXXXXXX
/s/ Xxxxxxx X. Xxxx
----------------------------------------
XXXXXXX X. XXXX
/s/ Xxxx X. Xxxxxxxxxx
----------------------------------------
XXXX X. XXXXXXXXXX
/s/ Xxxxx X. Xxxxx
----------------------------------------
XXXXX X. XXXXX
BUYER:
XXXXX HORTICULTURE, INC.
By: /s/ Xxxx X. Xxxx
-------------------------------------
Name: Xxxx X. Xxxx
Title: Vice President
