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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10/A
AMENDMENT NO. 3
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------
GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 06-0868496
(State or other (I.R.S. Employer Identification
jurisdiction of No.)
incorporation or
organization)
ONE ROCKEFELLER PLAZA
NEW YORK, NY 10020
(Address of principal (Zip Code)
executive office)
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------------------------
Registrant's telephone number, including area code:
(860) 286-7660
------------------------
Securities to be registered pursuant to Section 12(b) of the Act.
None.
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, par value $0.01 per share
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GRIFFIN LAND & NURSERIES, INC.
INFORMATION INCLUDED IN INFORMATION STATEMENT AND
INCORPORATED IN FORM 10 BY REFERENCE.
CROSS-REFERENCE SHEET BETWEEN INFORMATION SHEET AND
ITEMS ON FORM 10.
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ITEM NO. ITEM CAPTION LOCATION IN INFORMATION STATEMENT
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1. Business............................................. BUSINESS
2. Financial Information................................ SELECTED COMBINED FINANCIAL DATA
3. Properties........................................... BUSINESS
4. Security Ownership of Certain Beneficial Owners and
Management.......................................... PRINCIPAL STOCKHOLDERS
5. Directors and Executive Officers..................... MANAGEMENT; CERTAIN EMPLOYEE BENEFIT MATTERS
6. Executive Compensation............................... MANAGEMENT; CERTAIN EMPLOYEE BENEFIT MATTERS
7. Certain Relationships and Related Transactions....... RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE
DISTRIBUTION; CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
8. Legal Proceedings.................................... BUSINESS
9. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters....... DIVIDEND POLICY; SHARES ELIGIBLE FOR FUTURE SALE
10. Recent Sales of Unregistered Securities.............. Part II
11. Description of Registrant's Securities to be
Registered.......................................... DESCRIPTION OF CAPITAL STOCK
12. Indemnification of Directors and Officers............ Part II
13. Financial Statements and Supplementary Data.......... INDEX TO FINANCIAL STATEMENTS
14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. N/A
15. Financial Statements and Exhibits
(a) Financial Statements............................. INDEX TO FINANCIAL STATEMENTS
(b) Exhibits......................................... Part II
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CULBRO CORPORATION
387 PARK AVENUE SOUTH
NEW YORK, NY 10016
June , 1997
To the Shareholders of Culbro Corporation:
Culbro Corporation ("Culbro") currently owns all of the outstanding shares
of Common Stock (the "Common Stock") of Griffin Land & Nurseries, Inc.
("Griffin"). Culbro has recently reorganized its subsidiaries so that Griffin
now holds and operates substantially all of Culbro's non-tobacco related
businesses. The enclosed Information Statement contains information regarding
the distribution of the Common Stock of Griffin to the shareholders of Culbro
(the "Distribution"). If you are a holder of Culbro common stock on June 23,
1997, the record date for the Distribution, you will be entitled to receive one
(1) share of Common Stock of Griffin for each share of Culbro common stock you
own on that date. Holders of Culbro common stock on the record date will not be
required to make any payment or take any other action in order to receive
Griffin shares in the Distribution. From the date which is two days prior to the
record date until the time of the Distribution, the Culbro common stock is
expected to trade on the New York Stock Exchange in a manner which transfers to
the buyer the right to receive Common Stock in the Distribution. We expect that
Griffin stock certificates will be mailed beginning on or about July 3, 1997.
The principal effect of the Distribution will be to separate Culbro's
tobacco related business from its other businesses. After the Distribution, each
business will be conducted by a separate, publicly held corporation, and Culbro
will merge (the "Merger") with and into its other subsidiary, General Cigar
Holdings, Inc. ("General Cigar").
The Board of Directors of Culbro, which approved the Distribution on
December 12, 1996, believes that the Distribution will enhance shareholder
values over the long term by allowing General Cigar and Griffin to concentrate
on their respective businesses and providing each company with greater
flexibility in pursuing its independent business objectives. The Culbro Board of
Directors believes that the Distribution, followed by the Merger, will enable
the investment community to analyze more effectively the investment
characteristics, performance and future prospects of each business, enhancing
the likelihood that each will achieve appropriate market recognition of its
value. The Board of Directors of Culbro has unanimously approved the
Distribution and the Merger. Shareholders of Culbro approved the Merger on June
2, 1997.
Details of the Distribution and other important information, including a
description of the business and management of Griffin after the Distribution,
are set forth in the accompanying Information Statement, which should be
reviewed carefully by shareholders. Shareholder approval of the Distribution is
not required, and we are not soliciting your proxy, with respect to the
Distribution.
Shareholders of Culbro with inquiries related to the Distribution should
contact A. Ross Wollen at (212) 448-3800.
Sincerely yours,
[SIGNATURE]
Edgar M. Cullman
CHAIRMAN
<PAGE>
PRELIMINARY INFORMATION STATEMENT DATED JUNE 4, 1997
A REGISTRATION STATEMENT ON FORM 10 RELATING TO STOCK OF GRIFFIN LAND &
NURSERIES, INC. HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT
HAS NOT YET BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION AND AMENDMENT.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT
------------------------
INFORMATION STATEMENT
---------------------
GRIFFIN LAND & NURSERIES, INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
This Information Statement is being furnished in connection with a special
distribution (the "Distribution") by Culbro Corporation ("Culbro") of one (1)
share of Common Stock, par value $0.01 per share (the "Common Stock"), of
Griffin Land & Nurseries, Inc. (formerly known as Culbro Land Resources, Inc.)
("Griffin") for each share of Culbro common stock, par value $1 per share (the
"Culbro Common Stock"), held of record as of the close of business on June 23,
1997 (the "Record Date"). The Common Stock initially is expected to trade in the
"over the counter" market as quoted on the automated quotation system Electronic
Bulletin Board of the National Association of Securities Dealers, Inc. ("NASD").
Griffin plans to apply to list the Common Stock on the Nasdaq National Market
("NASDAQ") or another securities exchange or stock market, subject to compliance
with the listing requirements of NASDAQ or such other exchange or market. See
"THE DISTRIBUTION--Listing and Trading of the Common Stock; No Prior Market for
the Common Stock." The Distribution will result in 100% of the outstanding
shares of Common Stock being distributed to the holders of Culbro Common Stock.
On July 3, 1997 (the "Distribution Date"), Culbro will deliver all of the issued
and outstanding shares of Common Stock to Chase Mellon Shareholder Services,
L.L.C., as distribution agent (the "Distribution Agent"), which in turn will
distribute such shares to the holders of Culbro Common Stock as of the Record
Date. It is expected that certificates representing shares of Common Stock will
be mailed by the Distribution Agent on or about July 3, 1997. See "INTRODUCTION"
and "THE DISTRIBUTION--Manner of Effecting the Distribution." Holders of Culbro
Common Stock on the Record Date will not be required to make any payment or take
any other action to receive Common Stock in the Distribution. Following the
Distribution Culbro is expected to merge with and into its subsidiary General
Cigar Holdings, Inc. ("General Cigar").
Griffin owns substantially all of Culbro's non-tobacco related assets and
liabilities, including all of its assets and liabilities relating to its
landscape nursery business and Connecticut- and Massachusetts-based real estate
business, together with Culbro's approximate 25% interest in Centaur
Communications Limited ("Centaur") and its approximate 50% interest in The Eli
Witt Company ("Eli Witt").
------------------------
NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE DISTRIBUTION.
NO PROXIES ARE BEING SOLICITED, AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY OTHER FEDERAL OR STATE AUTHORITY,
NOR HAS SUCH COMMISSION OR OTHER AUTHORITY PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
------------------------
The date of this Information Statement is , 1997
<PAGE>
SUMMARY OF CERTAIN INFORMATION
THIS SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION SET FORTH
ELSEWHERE IN THIS INFORMATION STATEMENT, WHICH SHOULD BE READ IN ITS ENTIRETY.
UNLESS THE CONTEXT OTHERWISE REQUIRES, (I) REFERENCES IN THE INFORMATION
STATEMENT TO CULBRO AND GRIFFIN SHALL INCLUDE THEIR RESPECTIVE SUBSIDIARIES AND
(II) REFERENCES TO A FISCAL YEAR ARE TO THE TWELVE-MONTH PERIOD ENDED THE
SATURDAY NEAREST NOVEMBER 30 OF THE YEAR REFERENCED. CERTAIN CAPITALIZED TERMS
USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS INFORMATION STATEMENT.
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Distributing Company.............. Culbro Corporation, a New York corporation ("Culbro").
Following the Distribution, Culbro is expected to merge
with and into General Cigar Holdings, Inc., ("General
Cigar"), a Delaware Corporation.
Distributed Company............... Griffin Land & Nurseries, Inc., a Delaware corporation
("Griffin"), which owns substantially all of the
Connecticut- and Massachusetts-based real estate and the
landscape nursery businesses previously operated by
Culbro, the approximate 25% interest in Centaur
Communications Limited ("Centaur") and the approximate
50% interest in The Eli Witt Company ("Eli Witt")
previously owned by Culbro. Griffin was incorporated
under the laws of Delaware on March 10, 1970.
The Distribution.................. On the Distribution Date, all of the outstanding shares
of Common Stock will be delivered to the Distribution
Agent. On or about July 3, 1997, the Distribution Agent
will mail stock certificates representing shares of
Common Stock to holders of record of Culbro Common Stock
as of the Record Date. See "THE DISTRIBUTION--Manner of
Effecting the Distribution."
Record Date....................... June 23, 1997.
Distribution Date................. July 3, 1997.
Distribution Ratio................ Each Culbro shareholder will receive one (1) share of
Common Stock for each share of common stock, $1 par
value, of Culbro (the "Culbro Common Stock") owned on
the Record Date.
Shares to be Distributed.......... The shares to be distributed to Culbro shareholders (the
"Distribution Shares") will constitute all of the shares
of Common Stock outstanding immediately after the
Distribution. The number of Distribution Shares will
equal the number of shares of Culbro Common Stock
outstanding on the Record Date.
Distribution Agent................ Chase Mellon Shareholder Services, L.L.C.
No Payment Required............... Culbro shareholders will not be required to make any
payment or to take any other action to receive their
portion of the Distribution. See "THE
DISTRIBUTION--Manner of Effecting the Distribution."
Conditions to the Distribution.... The Distribution is conditioned upon, among other
things, (1) declaration of the special dividend by the
Board of Directors of Culbro (the "Culbro Board") and
(2) the receipt of a private letter ruling from the
Internal Revenue Service (the "IRS") or
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2
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an opinion of counsel, in either case, in form and
substance satisfactory to the Culbro Board as to the tax
consequences of the Distribution (see "--Tax
Consequences"). The Culbro Board has reserved the right
to waive any conditions to the Distribution or, even if
the conditions to the Distribution are satisfied, to
abandon, defer or modify the Distribution at any time
prior to the Distribution Date. See "INTRODUCTION" and
"THE DISTRIBUTION--Manner of Effecting the
Distribution."
The Merger........................ Following the Distribution, but not before August 26,
1997 without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, Culbro will
merge with and into its subsidiary, General Cigar (the
"Merger").
Reasons for the Distribution...... The Distribution will formally separate Culbro's tobacco
and non-tobacco related businesses. After the
Distribution, each business will be conducted by a
separate, publicly held corporation. The Culbro Board
believes that the Distribution will enable the
management of each company to concentrate its attention
and financial resources on the core businesses of such
company, and enhance stockholder value over the
long-term by allowing the investment community to
analyze more effectively the investment characteristics,
performance and future prospects of the two distinct
business groups. The Culbro Board also believes that the
Distribution will provide each company with greater
flexibility in pursuing its independent business
objectives. See "THE DISTRIBUTION--Background and
Reasons for the Distribution."
Tax Consequences.................. The Culbro Board has conditioned the Distribution on
receipt of a private letter ruling from the IRS or an
opinion of counsel satisfactory to the Culbro Board, in
either case, to the effect, among other things, that
receipt of shares of Class B Common Stock by holders of
Culbro Common Stock will be tax free. See "THE
DISTRIBUTION--Federal Income Tax Aspects of the
Distribution."
Trading Market.................... There is currently no public market for the Common
Stock. The Common Stock initially is expected to trade
in the "over the counter" market as quoted on the NASD's
automated quotation system Electronic Bulletin Board.
Griffin plans to apply to list the Common Stock on
NASDAQ or another securities exchange or stock market,
subject to compliance with the listing requirements of
NASDAQ or such other exchange or market. See "THE
DISTRIBUTION--Listing and Trading of the Common Stock;
No Prior Market for the Common Stock," and "RISK
FACTORS--No Prior Market for Common Stock."
General Cigar..................... General Cigar Holdings, Inc., incorporated under the
laws of Delaware, is a publicly-held corporation which
conducts the tobacco related businesses of Culbro. In
February 1997, General Cigar consummated an initial
public offering (the "Offering") of
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6,900,000 shares of its Class A Common Stock, par value
$0.01 per share (the "Class A Common Stock").
Principal Office of Griffin....... The principal executive offices of Griffin will be
located at One Rockefeller Center, New York, New York,
10020.
Board of Directors................ Culbro, as the sole stockholder of Griffin, has elected
the following persons to constitute the Board of
Directors of Griffin; Edgar M. Cullman, Frederick M.
Danziger, John L. Ernst and Winston J. Churchill, Jr.
Risk Factors...................... See "RISK FACTORS" for a discussion of factors that
should be considered in connection with the Common Stock
received in the Distribution.
Financing......................... Prior to the Distribution, Griffin expects to establish
facilities for letters of credit and lines of credit.
See "DESCRIPTION OF CERTAIN INDEBTEDNESS."
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4
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INTRODUCTION
The Board of Directors of Culbro has declared a special distribution (the
"Distribution") of one share of Common Stock of Griffin, for each share of
Culbro Common Stock held as of the Record Date. Culbro will effect the
Distribution on the Distribution Date by delivering all of the issued and
outstanding shares of Common Stock to the Distribution Agent for transfer and
distribution to the holders of record of Culbro Common Stock as of the Record
Date. It is expected that certificates representing shares of Common Stock will
be mailed to Culbro shareholders beginning on or about July 3, 1997.
In the summer of 1996, Culbro began considering a major cigar business
acquisition and its financial consequences, including the desirability of making
a public offering of common stock. Culbro reviewed its capital structure with
both its financial advisors and potential underwriters for an offering of common
stock and concluded that the best structure for a public offering was a "pure
play" cigar company with no prior trading history. Culbro believed that this
structure would provide more net dollars than an offering of Culbro shares and,
therefore, was considered to be a more desirable way of raising capital that
would ultimately benefit Culbro shareholders. To achieve this, Culbro created
General Cigar to make the public offering. The underwriters and financial
advisors also agreed that added liquidity, through not having a holding company
structure with both Culbro and General Cigar as public companies traded on the
New York Stock Exchange ("NYSE"), was desirable. To achieve this end and to
reduce ongoing costs, Culbro proposed the Merger following the Distribution so
that the resulting structure would be two public companies, General Cigar and
Griffin, each pursuing its separate business with its separate resources. Culbro
believed that the cigar business thereby would be able to receive substantially
higher proceeds from the Offering because it would be viewed as a "pure play"
cigar company, and would eventually have greater share liquidity as the result
of the issuance of added public shares at the time of the Merger which the
underwriters viewed as desirable. In addition, the probable discount to (i)
Culbro Common Stock associated with holding the cigar business through a holding
company that did not own all of the cigar company stock and (ii) the Class A
Common Stock of General Cigar associated with owning stock of an entity
controlled by a single enterprise with potentially different expansion and
dividend policies, would be eliminated by the Merger.
Culbro declared the Distribution because it believes that it is in the best
interests of Culbro and General Cigar to separate the cigar business from the
unrelated businesses of Culbro. By effecting the Distribution, Culbro believes
that Culbro, General Cigar and their shareholders will benefit by allowing the
cigar business and non-tobacco related businesses to be evaluated on a
stand-alone basis.
After the Distribution, the tobacco business will be conducted by General
Cigar and the non-tobacco businesses will be conducted by Griffin, each as a
separate, publicly held corporation. Effective as of February 27, 1997, Culbro
transferred to Griffin, as a contribution to capital, substantially all of its
assets and liabilities relating to its landscape nursery and Connecticut- and
Massachusetts-based real estate businesses, as well as Culbro's interest in
Centaur and Eli Witt. Griffin will own and operate substantially all of the real
estate and nursery businesses while General Cigar will own and operate the
tobacco related businesses. See "BUSINESS." The Distribution is intended to
enhance shareholder value over the long term by allowing Griffin and Culbro (and
following the Merger, General Cigar) to concentrate on their respective
businesses, and by enabling the investment community to analyze more effectively
the investment characteristics, performance and future prospects of the two
distinct business groups. The Distribution is also intended to provide each
company with greater flexibility in pursuing its independent business
objectives.
For a description of risk factors in connection with the Distribution and
the related transactions described in this Information Statement, see "RISK
FACTORS."
Griffin was formed as a subsidiary of Culbro on March 10, 1970. There has
been no trading market in the Common Stock. The Common Stock initially is
expected to trade in the "over the counter" market as quoted on the NASD's
automated quotation system Electronic Bulletin Board. Griffin plans to apply to
list
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the Common Stock on NASDAQ or another securities exchange or stock market,
subject to compliance with the listing requirements of NASDAQ or such other
exchange or market.
The Distribution does not require shareholder approval and the Culbro Board
may abandon, defer or modify the Distribution prior to the Distribution Date.
Culbro shareholders will not be entitled to appraisal rights in connection with
the Distribution.
The principal executive offices of Griffin are located at One Rockefeller
Plaza, New York, New York 10020; telephone number (212) .
RISK FACTORS
Shareholders should note the following risk factors, as well as the other
information contained in this Information Statement.
COMPETITION
The landscape nursery business is competitive and Griffin competes against a
number of other companies, including local and regional nursery businesses. Some
of Griffin's competitors may be in a stronger financial position than Griffin.
Numerous real estate developers operate in the portion of Connecticut and
Massachusetts in which Griffin's holdings are concentrated. Some of such
businesses compete in each anticipated business of Griffin and may have greater
financial resources than Griffin. See "BUSINESS--Competition."
ASSUMED LIABILITIES; THE ELI WITT COMPANY
Pursuant to the terms of the Distribution Agreement, Tax Sharing Agreement
and Employee Benefits Allocation Agreement, certain liabilities of Culbro are
being assumed by Griffin, including liabilities relating to the real estate
business and the nursery business, certain specified tax liabilities,
liabilities relating to employees of Griffin and all of Culbro's interests
relating to Eli Witt. As a result of the Asset Transfers, Griffin acquired
Culbro's 50.1% interest in Eli Witt. In November 1996, Eli Witt filed for
protection under Chapter 11 of the Federal Bankruptcy Law. Prior to February
1993, Eli Witt was a wholly-owned subsidiary of Culbro and filed consolidated
tax returns with Culbro. Culbro, Eli Witt and other parties engaged in two
complex acquisitions and reorganizations in 1993 and 1994, pursuant to which
Culbro in 1993 received material distributions both to repay intercompany
indebtedness and as a return of capital from Eli Witt which was used to repay
Culbro's debt, including substantial amounts Culbro had previously borrowed from
unaffiliated third parties to fund Eli Witt's business. Culbro subsequently
loaned $5 million to Eli Witt. It is anticipated that these transactions
(including the transfer of funds to Culbro) will be reviewed by Eli Witt
creditors and other parties in interest in connection with the Chapter 11 case.
Griffin believes that Eli Witt was solvent at the time of the distributions to
Culbro in 1993, and therefore that such distributions would not constitute a
fraudulent conveyance under applicable federal and state insolvency laws.
Griffin is not entitled to contribution from Culbro or General Cigar for
liabilities assumed by Griffin relating to the Eli Witt matter. Griffin is
obligated to indemnify Culbro and General Cigar for any liability relating to
the Eli Witt matter. To date, one creditor has written to the unsecured
creditors committee proposing an inquiry into this matter. Any claim based on
the foregoing, if asserted and successfully prosecuted, could have a material
adverse effect on Griffin's financial condition. See "BUSINESS--Legal Matters."
NO OPERATING HISTORY AS AN INDEPENDENT COMPANY
Griffin does not have an operating history as an independent public company.
Griffin also will have a new management team in place at the commencement of its
operation as a public company. The Griffin business has historically relied on
Culbro for various financial and administrative services. After the
Distribution, Griffin will require its own lines of credit, banking
relationships and administrative functions
6
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although Culbro (and following the Merger, General Cigar) will continue to
provide Griffin with certain administrative services for a period of at least
one year following the Distribution Date. There can be no assurance that,
following the Distribution, and particularly following the termination of
administrative relations with Culbro (and following the Merger, General Cigar),
Griffin will be able to operate efficiently as an independent public
corporation.
DIVIDEND POLICY
Griffin's dividend policy will be established by the Griffin Board from time
to time based on the results of operations and financial condition of Griffin
and such other business considerations as the Griffin Board considers relevant.
It is not anticipated that dividends will be paid for a substantial period of
time following the Distribution. See "DIVIDEND POLICY" and "--Lack of Cash Flow
from Operations; Need for Additional Cash."
NO PRIOR MARKET FOR COMMON STOCK
There has been no prior trading market for the Common Stock and there can be
no assurance as to the prices at which the Common Stock will trade before or
after the Distribution Date. The Common Stock initially is expected to trade in
the "over the counter" market as quoted on the NASD's automated quotation system
Electronic Bulletin Board. Griffin plans to apply to list the Common Stock on
NASDAQ or another securities exchange or stock market, subject to compliance
with the listing requirements of NASDAQ or such other exchange or market.Until
the Common Stock is fully distributed and an orderly market develops, the prices
at which the Common Stock trades may fluctuate significantly. Prices for the
Common Stock will be determined in the trading markets and may be influenced by
many factors, including the depth and liquidity of the market for the Common
Stock, investor perceptions of Griffin and its business and general economic and
market conditions. See "THE DISTRIBUTION--Listing and Trading of the Common
Stock; No Prior Market for the Common Stock."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Culbro has applied for a Tax Ruling from the IRS to the effect that, among
other things, for United States federal income tax purposes the Distribution
will be tax-free under Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code"). See "THE DISTRIBUTION--Federal Income Tax Aspects of the
Distribution." The continuing validity of any such ruling, if granted, will be
subject to certain factual representations and assumptions. Neither Culbro nor
Griffin is aware of any facts or circumstances which should cause such
representations and assumptions to be untrue. The Distribution Agreement (as
defined below) provides that neither Culbro nor Griffin is to take any action
inconsistent with, nor fail to take any action required by, the request for the
Tax Ruling or the Tax Ruling unless required to do so by law or permitted to do
so by the prior written consent of the other party or, in certain circumstances,
a supplemental ruling or tax opinion. See "RELATIONSHIP BETWEEN CULBRO AND
GRIFFIN AFTER THE DISTRIBUTION--Distribution Agreement."
LACK OF CASH FLOW FROM OPERATIONS; NEED FOR ADDITIONAL CASH
Although neither Griffin nor any of its subsidiaries currently has
outstanding any material indebtedness, Griffin has operated during the last
several years with little positive net cash flow and losses. See "--Historical
Operating Losses and Net Deficit." In order to develop its real estate business,
Griffin either must sell assets or obtain debt financing. Griffin intends to
consider development opportunities, as well as a variety of financing options,
including the incurrence of one or more forms of indebtedness. There can be no
assurance, however, that any such financing can be obtained by Griffin on
commercially reasonable terms or at all, or that dispositions of assets, if any,
can be made in a sufficiently timely fashion to meet Griffin's cash needs, or at
prices that reflect the fair market value of such assets at the time of any such
7
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dispositions. The inability of Griffin to generate cash in the future could have
an adverse effect on Griffin's ability to develop its property, financial
condition or results of operations.
POTENTIAL RESTRICTIONS IMPOSED BY THE TERMS OF GRIFFIN'S FUTURE INDEBTEDNESS
The terms and conditions of future debt instruments of Griffin or its
subsidiaries may impose restrictions on Griffin and its subsidiaries that
affect, among other things, their ability to incur debt, pay dividends or make
distributions, make acquisitions, create liens, sell assets, and make certain
investments. The ability of Griffin and its subsidiaries to comply with the
terms of their respective debt instruments can be affected by events beyond
their control, including events such as changes in prevailing economic
conditions, changes in consumer preferences and changes in the competitive
environment, which could impair Griffin's operating performance. There can be no
assurance that the assets or cash flows of Griffin or its subsidiaries would be
sufficient to repay in full borrowings under their respective outstanding debt
instruments, whether upon maturity or in the event of acceleration upon an event
of default, or upon a required repurchase in the event of a change of control,
or that Griffin would be able to refinance or restructure the payments on such
indebtedness. See "DESCRIPTION OF CERTAIN INDEBTEDNESS."
HISTORICAL OPERATING LOSSES AND NET DEFICIT; RECENT FORECLOSURE
Griffin in recent years has experienced net losses before extraordinary
items. In 1996, an office building which had been owned by Griffin and leased to
the State of Connecticut was transferred to the lender to the building in a deed
in lieu of foreclosure. Although Griffin believes, based on the current level of
operations and anticipated growth, that cash flow from operations, cash on hand
and, if needed, borrowings under an anticipated credit facility will be
sufficient to fund its future operations in the near term, there can be no
assurance that Griffin will operate profitability. At present, 5 individual
buildings owned by Griffin are subject to mortgages aggregating $2.6 million.
Each of these buildings experiences net positive cash flow after mortgage
service expenses. There can be no assurance that such net positive cash flow
will continue with respect to all of the properties currently subject to
mortgages. See "--Lack of Cash Flow from Operations; Need for Additional Cash,"
"--Potential Restrictions Imposed by the Terms of Griffin's Future Indebtedness"
and "--General Real Estate Investment Risks; Adverse Impact on Ability to Make
Distributions."
LIMITED GEOGRAPHIC DIVERSIFICATION; DEPENDENCE ON CERTAIN REGIONS
Griffin's properties consist almost exclusively of real estate development
properties in the Hartford-Springfield corridor of Massachusetts and Connecticut
and landscape nursery properties in the New England, Mid-Atlantic and
Mid-Western states. Griffin's performance will therefore be linked to economic
conditions and the market for commercial real estate and landscape nursery
products in these regions.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate may be required to investigate and clean up
hazardous or toxic substances or petroleum product releases at such property and
may be held liable to a governmental entity or to third parties for property
damage and for investigation and clean-up costs incurred by such parties in
connection with contamination. The cost of investigation, remediation or removal
of such substances may be substantial, and the presence of such substances, or
the failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. In connection with the ownership (direct or indirect), operation,
management and development of real properties, Griffin may be considered an
owner or operator of such properties or as having arranged for the disposal or
treatment of hazardous or toxic substances and, therefore, potentially liable
for removal or remediation costs, as well as certain other related costs,
including governmental fines and injuries to persons and property. In Simsbury,
the value of Griffin's land is affected by the presence of chlordane on a
portion of
8
<PAGE>
the land which is intended for residential development. Griffin is experimenting
with means of remediation on such lands. Although Griffin believes that it will
be able to take steps to reduce chlordane contamination to levels below that
which would impede residential development of such properties, there can be no
assurance that Griffin will be able to do so in a timely or economic fashion or
at all. In the event that Griffin is unable adequately to remediate this
property, its ability to develop such property for its intended purposes would
be materially affected. In addition, Griffin is seeking to develop a joint
venture to process bulky waste and build a transfer station and recycling
operation on a portion of its land in East Granby, Connecticut. Although Griffin
intends to conduct such operations in compliance with all applicable
environmental laws, there can be no assurance that Griffin will not incur
incremental additional costs in connection with such operations resulting from
environmental compliance efforts, or as a result of any future noncompliance
with such laws.
Griffin periodically reviews its properties for the purpose of evaluating
such properties' compliance with applicable state and federal environmental
laws. See "BUSINESS--Real Estate Nursery Business" and "BUSINESS--Regulation;
Environmental Matters."
GENERAL REAL ESTATE INVESTMENT RISKS; ADVERSE IMPACT ON ABILITY TO MAKE
DISTRIBUTIONS; DEPRESSED MARKET FOR REAL ESTATE IN HARTFORD AREA
GENERAL. Income from real property investments may be adversely affected by
the general economic climate (particularly the economic climate of the New
England region, where Griffin's properties are located), the attractiveness of
Griffin's commercial development properties to tenants, competition from other
available commercial properties, the ability of Griffin to provide adequate
maintenance and insurance, and increased operating costs (including insurance
premiums and real estate taxes). In addition, the northwest quadrant of the
Hartford area is subject to material zoning and other regulatory restrictions,
which can affect Griffin's ability to develop properties in accordance with
their best use.
DEPRESSED MARKET FOR REAL ESTATE. During the last several years, the real
estate market in the Hartford area, particularly that in the northwest quadrant
where the majority of Griffin's acreage is located, has been depressed by a
number of factors, including the decline of employment in the defense and
insurance industries. There can be no assurance that the condition of the real
estate market in this region will improve in the near future.
UNINSURED LOSS. Griffin carries insurance with respect to its properties
which it deems reasonable. There may be, however, certain types of losses
against which Griffin may not presently be insured.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR
LAWS. Under the Americans with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. Although management believes that
its commercial real estate properties are substantially in compliance with
present requirements of the ADA, Griffin has not conducted an audit or
investigation to determine its compliance. There can be no assurance that
Griffin will not incur additional costs of complying with the ADA. A number of
additional federal, state and local laws exist which also may require
modifications to Griffin's commercial real estate properties, or restrict
certain further renovations thereof, with respect to access thereto by disabled
persons. The ultimate amount of the cost of compliance with the ADA or such
legislation is not currently ascertainable, and, while such costs are not
expected to have a material effect on Griffin, such costs could be substantial.
SEASONALITY
Sales in Griffin's landscape nursery business are seasonal, peaking in the
spring, and are affected by commercial and residential building activity as well
as weather conditions. Disruptions in such building activity, due to adverse
weather during the spring season or adverse economic conditions in the regions
in which Griffin conducts its landscape nursery operations, could have an
adverse effect on the results of operations of Griffin, taken as a whole.
9
<PAGE>
INABILITY TO PREDICT DEMAND
Many of the products developed and/or produced by the landscape nursery
business require significant time in order to mature. As a result, the landscape
nursery business is dependent upon the ability to accurately estimate demand
from one to five years in advance of actual demand, making it more difficult for
Griffin to react quickly to sudden changes in demand. A sharp increase in demand
which exceeded Griffin's projections would prevent Griffin from taking full
advantage of such increase and could have an adverse effect on Griffin's
reputation; conversely, a sharp decrease in demand might cause a loss of
inventory value, result in excess inventory and could otherwise have an adverse
effect on Griffin's results of operations.
THE DISTRIBUTION
GENERAL
On the Distribution Date, Culbro intends to distribute all of the
outstanding shares of Common Stock to holders of record on the Record Date of
Culbro Common Stock. Each holder of Culbro Common Stock will receive one (1)
share of Common Stock for each share of Culbro Common Stock held on the Record
Date. Holders of Culbro Common Stock on the Record Date will not be required to
make any payment or to take any other action to receive their portion of the
Distribution.
BACKGROUND AND REASONS FOR THE DISTRIBUTION
In the summer of 1996, Culbro began considering a major cigar business
acquisition and its financial consequences, including the desirability of making
a public offering of common stock. Culbro reviewed its capital structure with
both its financial advisors and potential underwriters for an offering of common
stock and concluded that the best structure for a public offering was a "pure
play" cigar company with no prior trading history. Culbro believed that this
structure would provide more net dollars than an offering of Culbro shares and,
therefore, was considered to be a more desirable way of raising capital that
would ultimately benefit Culbro shareholders. To achieve this, Culbro created
General Cigar to make the public offering. The underwriters and financial
advisors also agreed that added liquidity, through not having a holding company
structure with both Culbro and General Cigar as public companies traded on the
NYSE, was desirable. To achieve this end and to reduce ongoing costs, Culbro
proposed the Merger following the Distribution so that the resulting structure
would be two public companies, General Cigar and Griffin, each pursuing its
separate business with its separate resources. Culbro believed that the cigar
business thereby would be able to receive substantially higher proceeds from the
Offering because it would be viewed as a "pure play" cigar company, and would
eventually have greater share liquidity as the result of the issuance of added
public shares at the time of the Merger which the underwriters viewed as
desirable. In addition, the probable discount to (i) Culbro Common Stock of
General Cigar associated with holding the cigar business through a holding
company that did not own all of the cigar company stock and (ii) the Class A
Common Stock associated with owning stock of an entity controlled by a single
enterprise with potentially different expansion and dividend policies, would be
eliminated by the Merger.
Culbro declared the Distribution because it believes that it is in the best
interests of Culbro and General Cigar to separate the cigar business from the
unrelated businesses of Culbro. By effecting the Distribution, Culbro believes
that Culbro, General Cigar and their shareholders will benefit by allowing the
cigar business and non-tobacco related businesses to be evaluated on a
stand-alone basis.
After the Distribution, the tobacco business will be conducted by General
Cigar and the non-tobacco businesses will be conducted by Griffin, each as a
separate, publicly held corporation. The Culbro Board believes that the
Distribution will enable the management of each company to concentrate its
attention and financial resources on the core businesses of such company, and
enhance stockholder value over the long term by allowing the investment
community to analyze more effectively the investment characteristics,
performance and future prospects of the two distinct business groups. The Culbro
Board also believes that the Distribution will provide each company with greater
flexibility in pursuing its independent business objectives.
10
<PAGE>
MANNER OF EFFECTING THE DISTRIBUTION
On the Distribution Date, all of the outstanding shares of Common Stock will
be delivered to the Distribution Agent for transfer and distribution to the
holders of record of Culbro Common Stock as of the Record Date. It is expected
that certificates representing shares of Common Stock will be mailed by the
Distribution Agent to Culbro shareholders beginning on or about July 3, 1997.
The Board of Directors of Culbro has reserved the right to abandon, defer or
modify the Distribution and the related transactions described in this
Information Statement at any time prior to 11:59 p.m., New York time, on the day
immediately preceding the Distribution Date.
No holder of Culbro Common Stock will be required to pay any cash or other
consideration for the shares of Common Stock received in the Distribution or
surrender or exchange shares of Culbro Common Stock in order to receive Common
Stock. The Distribution will not affect the number of, or the rights attaching
to, outstanding shares of Culbro Common Stock. All shares of Common Stock will
be fully paid and non-assessable and the holders of those shares will not be
entitled to preemptive rights. See "DESCRIPTION OF CAPITAL STOCK--Common Stock."
LISTING AND TRADING OF THE COMMON STOCK; NO PRIOR MARKET FOR THE COMMON STOCK
The Common Stock initially is expected to trade in the "over the counter"
market as quoted on the NASD's automated quotation system Electronic Bulletin
Board. Griffin plans to apply to list the Common Stock on NASDAQ or another
securities exchange or stock market, subject to compliance with the listing
requirements of NASDAQ or such other exchange or market. NASDAQ has informed
Griffin that it expects to amend its listing requirements to provide that a
listed class of equity securities must have a minimum public float of 1.1
million shares, a minimum aggregate market value of $18 million, a minimum price
per share of $5, and a minimum of 400 holders. Griffin initially will have
approximately 830 shareholders of record, which does not include beneficial
owners whose shares are held of record in the names of brokers or nominees,
based upon the number of record shareholders of Culbro Common Stock as of April
23, 1997, and will have more than 1.1 million shares held by the public,
calculated in accordance with the listing requirements of NASDAQ. For certain
information regarding options to purchase Common Stock that will be outstanding
after the Distribution, see "RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE
DISTRIBUTION--Related Agreements--Benefits and Employment Matters Allocation
Agreement" and "CERTAIN EMPLOYEE BENEFIT MATTERS."
There is not currently a public market for the Common Stock. Prices at which
the Common Stock may trade cannot be predicted. Until the Common Stock is fully
distributed and an orderly market develops, the prices at which trading in such
Common Stock occurs may fluctuate significantly. The prices at which the Common
Stock trades will be determined by the marketplace and may be influenced by many
factors, including, among others, the depth and liquidity of the market for the
Common Stock, investor perception of Griffin and the industries in which Griffin
participates, Griffin's dividend policy and general economic and market
conditions. See "RISK FACTORS--No Prior Market for Common Stock."
Culbro and Griffin have received an opinion from Latham & Watkins, counsel
to Culbro, to the effect that, among other things, the Distribution does not
constitute a "sale" of the Common Stock to Culbro's shareholders under the
Securities Act. It is Griffin's belief that the Common Stock distributed to
Culbro's shareholders in the Distribution, and any Common Stock issued upon
exercise of Griffin Options, will be freely transferable, except for securities
received by persons who may be deemed to be "affiliates" of Culbro within the
meaning of Rule 144 of the Securities Act, which persons may not publicly offer
or sell Common Stock received in connection with the Distribution except
pursuant to a registration statement under the Securities Act or pursuant to
Rule 144 (without regard to holding period requirements thereunder). See "SHARES
ELIGIBLE FOR FUTURE SALE."
FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION
On December 16, 1996, Culbro filed a request for a ruling from the IRS to
the effect, among other things, that the Distribution will qualify as a tax free
spin-off under Section 355 of the Internal Revenue Code of 1986, as amended (the
"Code"), and that, for Federal income tax purposes:
11
<PAGE>
(1) No gain or loss will be recognized by (and no amount will be
included in the income of) a holder of Culbro Common Stock upon the receipt
of Common Stock in the Distribution.
(2) The aggregate basis of the Culbro Common Stock and the Common Stock
in the hands of the shareholders of Culbro immediately after the
Distribution will be the same as the aggregate basis of the Culbro Common
Stock held immediately before the Distribution, allocated in proportion to
the fair market value of each.
(3) The holding period of the Common Stock received by the shareholders
of Culbro will include the holding period of Culbro Common Stock with
respect to which the Distribution will be made, provided that such
shareholder held the Culbro Common Stock as a capital asset on the
Distribution Date.
(4) No gain or loss will be recognized by Culbro upon the Distribution.
The summary of federal income tax consequences set forth above does not
purport to cover all federal income tax consequences that may apply to all
categories of shareholders. All shareholders should consult their own tax
advisors regarding the particular federal, foreign, state and local tax
consequences of the Distribution to such shareholders.
For a description of the Tax Sharing Agreement pursuant to which Culbro and
Griffin have provided for various tax matters, see "RELATIONSHIP BETWEEN CULBRO
AND GRIFFIN AFTER THE DISTRIBUTION--Related Agreements--Tax Sharing Agreement."
REASONS FOR FURNISHING THE INFORMATION STATEMENT
This Information Statement is being furnished by Culbro solely to provide
information to Culbro shareholders who will receive Common Stock in the
Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of Culbro or Griffin. The
information contained in this Information Statement is believed by Culbro and
Griffin to be accurate as of the date set forth on its cover. Changes may occur
after that date, and neither Culbro nor Griffin will update the information
except in the normal course of their respective public disclosure practices.
12
<PAGE>
RELATIONSHIP BETWEEN CULBRO AND GRIFFIN AFTER THE DISTRIBUTION
For purposes of governing certain relationships between Culbro and Griffin
after the Distribution and providing for an orderly transition, Culbro and
Griffin have entered into various agreements, including those described below.
Copies of certain of the agreements are included as exhibits to Griffin's
Registration Statement on Form 10 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), relating to the Class A Common Stock, and the
following discussions with respect to such agreements are qualified in their
entirety by reference to the agreements as filed.
DISTRIBUTION AGREEMENT
In 1997, Culbro, Griffin and General Cigar entered into a distribution
agreement (the "Distribution Agreement") which provides for the pro rata
distribution by Culbro to the shareholders of Culbro of all issued and
outstanding shares of Common Stock. Pursuant to the Distribution Agreement,
Culbro transferred to General Cigar all of the common stock of General Cigar
Co., Inc., Club Macanudo, Inc., Club Macanudo (Chicago), Inc. and all of
Culbro's interest in the building located at 387 Park Avenue South, New York,
New York. In addition, Culbro transferred to General Cigar Co., Inc.
approximately 1,100 acres of its real estate holdings in the Connecticut River
Valley used to cultivate cigar wrapper tobacco. In connection with these
transfers, General Cigar received all licenses, permits, accounts receivable,
prepaid expenses, reserves and other assets related to the cigar business.
Pursuant to the Distribution Agreement, Culbro also transferred to Griffin
substantially all the non-tobacco related assets of Culbro, including: (i) all
of the common stock of Imperial Nurseries, Inc., a wholly-owned subsidiary of
Culbro; (ii) approximately 5,500 acres of land in Connecticut and Florida, as
well as several nursery wholesale and retail centers; (iii) Culbro's interests
in Eli Witt and assets previously owned by Eli Witt; (iv) Culbro's 25% interest
in Centaur; and (v) all licenses, permits, accounts receivable, prepaid
expenses, reserves and other assets (other than cash) related to the real estate
and nursery business. Culbro also transferred to Griffin $7.0 million in cash.
Griffin continues to operate the real estate business owned by it prior to these
Asset Transfers.
Pursuant to the Distribution Agreement, General Cigar assumed all of
Culbro's liabilities relating to the tobacco business and the assets transferred
to General Cigar and General Cigar Co., Inc., and all of Culbro's retained
indebtedness (other than those liabilities related to the assets transferred to
Griffin), including bank and corporate debt, all expenses related to the Asset
Transfers (as defined), the Offering, the Distribution and the Merger and
certain other contingent liabilities. Similarly, Griffin assumed all liabilities
relating to the real estate business and the nursery business and relating to
the assets transferred to Griffin. These liabilities include all of Griffin's
assumed and retained indebtedness, including bank and corporate debt, other
liabilities relating to the assets transferred to Griffin and certain additional
tax liabilities. Griffin also assumed all liabilities of Culbro related to Eli
Witt, which filed for relief from creditors under Chapter 11 of the Federal
Bankruptcy Code in 1996. See "RISK FACTORS--Assumed Liabilities; The Eli Witt
Company."
The transfer of certain assets and liabilities of Culbro referred to in the
previous two paragraphs are referred to herein as the "Asset Transfers."
As a result of the Asset Transfers, Culbro has become a holding company,
substantially all of the assets of which are the stock of General Cigar and
Griffin. Pursuant to the terms of the Distribution Agreement, General Cigar and
Griffin will operate independently of each other.
The Distribution Agreement also contains general indemnities between Culbro
(or General Cigar, following the Merger) and Griffin and the procedures by which
indemnification may be claimed. The Distribution Agreement provides for, on the
one hand, Culbro and General Cigar to indemnify Griffin for any losses,
liabilities or damages (including attorneys fees) in connection with any claim
or action in respect of any of the liabilities to be assumed or retained by
Culbro and General Cigar and, on the other
13
<PAGE>
hand, Griffin to similarly indemnify Culbro and General Cigar in connection with
any claim or action in respect of any liabilities retained or assumed by
Griffin. In each instance, indemnities are limited by insurance proceeds
recovered by the indemnified party that reduce the amount of the loss, liability
or damage. In addition, the Distribution Agreement contains provisions for the
administration of insurance policies shared by the parties and provisions for
the sharing of information and related services among the parties. Upon
consummation of the Merger, Culbro's obligations with respect to such
indemnities will become the obligations of General Cigar. With respect to
corporate governance, the Distribution Agreement requires the resignation of all
Griffin directors and officers from any positions they previously held with
Culbro, General Cigar or General Cigar Co., Inc., and each of their respective
subsidiaries, and the resignation of all directors of Culbro, General Cigar or
General Cigar Co., Inc., from any positions they previously held with Griffin,
except that Edgar M. Cullman and John L. Ernst will retain their seats on the
Griffin board of directors notwithstanding their positions at Culbro and General
Cigar, and Edgar M. Cullman will be the Chairman of the Board of Griffin.
RELATED AGREEMENTS
TAX SHARING AGREEMENT
Culbro and Griffin have entered into a tax sharing agreement (the "Tax
Sharing Agreement") that defines the parties' rights and obligations with
respect to filing of returns, payments, deficiencies and refunds of federal,
state and other income or franchise taxes relating to Culbro's business for tax
years prior to and including the Distribution. In general, with respect to
periods ending on or before the last day of the taxable year in which the
Distribution occurs, Culbro is responsible for (i) filing both consolidated
federal tax returns for the Culbro affiliated group and combined or consolidated
state tax returns for any group that includes a member of the Culbro affiliated
group, including in each case Griffin and its subsidiaries for the relevant
periods of time that such companies were members of the applicable group and
(ii) paying the taxes relating to such returns. Generally, any subsequent
adjustments resulting from the redetermination of such tax liabilities by the
applicable taxing authorities will be paid by the member or affiliated group to
which the adjustment relates, with Griffin assuming responsibility for all
adjustments relating to Culbro and its affiliates other than General Cigar and
its subsidiaries. Griffin is responsible for filing returns and paying taxes
relating to any member of the Griffin affiliated group for periods that begin
before and end after the Distribution and for periods that begin after the
Distribution. Culbro and Griffin have agreed to cooperate with each other and to
share information in preparing such tax returns and in dealing with other tax
matters.
SERVICES AGREEMENT
Culbro and Griffin have entered into a services agreement (the "Services
Agreement") pursuant to which Culbro has agreed to provide a number of
administrative and other services to Griffin for a period of at least one year.
These services include administration of Griffin's insurance policies, internal
audit, preparation of tax returns, transportation and general in-house legal
services. Griffin will make an annual payment of approximately $550,000 to, and
will reimburse out-of-pocket expenses incurred by, Culbro and its subsidiaries,
in connection with such services. Culbro will make the above services available
to Griffin on an as-needed basis for a period of at least one year following the
Distribution. Pursuant to the Merger, Culbro's obligations under the Services
Agreement will be assumed by General Cigar.
BENEFITS AND EMPLOYMENT MATTERS ALLOCATION AGREEMENT
Culbro and Griffin have entered into the Benefits and Employment Matters
Allocation Agreement (the "Benefits Agreement") which provides generally for the
assumption by General Cigar of certain Culbro employee benefit plans and the
allocation of employee benefits liabilities among Culbro, Griffin and General
Cigar. In addition, the Benefits Agreement provides that upon the Distribution
each option exercisable for shares of Culbro Common Stock will be converted into
an option exercisable for shares of
14
<PAGE>
Culbro Common Stock and an option exercisable for shares of Common Stock of
Griffin. The Benefits Agreement further provides that, following the
Distribution upon consummation of the Merger, options then exercisable for
Culbro Common Stock will be converted into options exercisable for Common Stock
of General Cigar. See "CERTAIN EMPLOYEE BENEFITS MATTERS."
LEASES
Griffin as lessor and General Cigar Co., Inc. as lessee have entered into a
lease for certain agricultural real property in Connecticut and Massachusetts
(the "Agricultural Lease"). The Agricultural Lease is for approximately 500
acres of arable land allocated to Griffin for possible commercial development in
the long-term, but which provides General Cigar with a source of Connecticut
Shade wrapper tobacco. General Cigar Co., Inc.'s use of the land is limited to
the cultivation of cigar wrapper tobacco. The Agricultural Lease has an initial
term of ten years and will provide for the extension of the lease for additional
periods thereafter. In addition, at Griffin's option the Agricultural Lease may
be terminated with respect to 100 acres of such land annually upon one year's
prior notice. The rent payable by General Cigar Co., Inc. under the Agricultural
Lease will be principally equal to the aggregate amount of all taxes and other
assessments payable by Griffin attributable to the land leased. In addition,
Griffin and General Cigar are considering entering into a lease for the use by
General Cigar of certain commercial space in Connecticut (the "Commercial
Lease"). The Commercial Lease, if entered into, would be for approximately
25,000 square feet of office space in the Griffin Center South office complex in
Bloomfield, Connecticut. The Commercial Lease would have an initial term of ten
years and provide for the extension of the lease for additional annual periods
thereafter. The rent payable by General Cigar Co., Inc. under the Commercial
Lease would be at market rates.
15
<PAGE>
SELECTED FINANCIAL DATA
The Selected Combined Financial Data of Griffin for fiscal 1992 and fiscal
1993 have been derived from the unaudited combined financial statements of
Griffin. The Selected Combined Financial Data of Griffin for fiscal 1994, fiscal
1995 and fiscal 1996 have been derived from the audited Combined Financial
Statements of Griffin included elsewhere in this Information Statement. The
Selected Consolidated Financial Data of Griffin for the thirteen weeks ended
March 2, 1996 and March 1, 1997 have been derived from the unaudited
Consolidated Financial Statements of Griffin included elsewhere in this
Information Statement. The following Selected Financial Data should be read in
conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and the Financial Statements of Griffin and Notes
thereto included elsewhere in this Information Statement. The information
presented below reflects CMS Gilbreth Packaging Systems, Inc. ("CMS Gilbreth")
as a discontinued operation. The 1994, 1995, and 1996 information reflects the
deconsolidation of Eli Witt in April 1994 and subsequent accounting for the
investment in Eli Witt under the equity method. See Note 12 to the Combined
Financial Statements for fiscal 1994, fiscal 1995 and fiscal 1996 included
elsewhere in this Information Statement.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------
MARCH 2, MARCH 1,
1992 1993 1994 1995 1996 1996 1997
------------ ------------ ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA )
STATEMENT OF OPERATIONS DATA:
Net sales and other revenue......... $ 1,028,129 $ 1,239,855 $ 43,024 $ 41,756 $ 46,531 $ 3,352 $ 2,725
Operating profit (loss)............. 10,496 11,336 (4,867) 810 (1,245) (1,624) (2,426)
Loss from continuing operations..... (1,555) (2,632) (7,157) (4,265) (4,063) (1,967) (2,013)
Net income (loss)................... 344 (4,510) (3,833) (580) (4,606) (1,471) (2,013)
BALANCE SHEET DATA:
Total assets........................ 302,728 316,056 167,421 165,655 101,775 162,446 99,873
Working capital..................... 64,602 74,262 28,112 23,069 36,698 20,085 38,231
Long-term debt...................... 141,871 172,068 91,614 72,737 38,846 77,916 2,896
Culbro Investment................... 44,555 32,406 44,426 61,299 47,449 52,270 90,292
</TABLE>
16
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
In 1997, Culbro transferred to Griffin substantially all the non-tobacco
related assets of Culbro, including: (i) all of the common stock of Imperial
Nurseries, Inc., a wholly-owned subsidiary of Culbro; (ii) approximately 5,500
acres of land in Connecticut and Florida, as well as several landscape nursery
wholesale and retail centers; (iii) Culbro's interests in Eli Witt and assets
previously owned by Eli Witt; (iv) Culbro's 25% interest in Centaur; and (v) all
licenses, permits, accounts receivable, prepaid expenses, reserves and other
assets (other than cash) related to the real estate and nursery business. Culbro
also transferred to Griffin $7.0 million in cash. These transactions are
reflected in the Consolidated Financial Statements of Griffin. Griffin continues
to operate the real estate business owned by it prior to the Asset Transfers.
The Unaudited Pro Forma Combined Statement of Operations for fiscal 1996 was
prepared to reflect (i) the use of proceeds from the sale of CMS Gilbreth, (ii)
the exchange of the shares of preferred stock of Eli Witt in satisfaction of the
subordinated note issued by Culbro to a third party, (iii) the assumption of
certain liabilities by General Cigar as part of the Asset Transfers (the
"Liability Assumption") and the elimination of certain nonrecurring expenses
directly related to the Distribution and (iv) the effect of the Distribution on
Griffin's capital structure, as if these transactions had occured at the
beginning of fiscal 1996. The Unaudited Pro Forma Consolidated Statement of
Operations for the thirteen weeks ended March 1, 1997 was prepared to give
effect to the Liability Assumption by General Cigar as if it had been completed
at the beginning of the period and the elimination of pension expense which will
not be incurred in the future. The Unaudited Pro Forma Consolidated Balance
Sheet at March 1, 1997 was prepared to reflect the effect of the Distribution on
Griffin's capital structure as if the Distribution had occurred on March 1,
1997. The column designated Griffin Historical reflects the results of
operations and the assets and liabilities, as appropriate, of Griffin and
Imperial Nurseries on an historical combined basis.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The Unaudited Pro Forma Combined
Financial Statements are based upon, and should be read in conjunction with, the
Combined Financial Statements of Griffin and Notes thereto included elsewhere in
this document. The pro forma information does not purport to be indicative of
the results that would have been reported had such events actually occurred on
the dates specified, nor is it indicative of Griffin's future results.
17
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR FISCAL 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS FOR
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITY
ASSUMPTION
EXCHANGE OF ELI AND NON-
GRIFFIN SALE OF CMS WITT PREFERRED RECURRING GRIFFIN
HISTORICAL GILBRETH STOCK EXPENSES DISTRIBUTION PRO FORMA
----------- ------------- --------------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales and other
revenue.................... $ 46,531 $ 46,531
Costs and expenses:
Cost of goods sold.......... 34,210 34,210
Selling, general and
administrative expenses.... 12,666 12,666
Other nonrecurring
expense.................... 900 (900)(5)
----------- ------------- ------- ----------- ----------- ----------
Operating loss.............. (1,245 ) 900 (345)
Income from equity
investment................. 303 303
Other nonoperating income,
net........................ 1,917 (1,917 (3)
Interest expense............ 7,805 (2,859 (1) (2,167 (4) (2,271 (6) 508
----------- ------------- ------- ----------- ----------- ----------
Loss before income tax
benefit.................... (6,830 ) 2,859 250 3,171 (550)
Income tax benefit.......... (2,767 ) 1,115 (2) 98 (2) 1,237 (2) (317)
----------- ------------- ------- ----------- ----------- ----------
Loss from continuing
operations................. $ (4,063 ) $ 1,744 $ 152 $ 1,934 $ (233)
----------- ------------- ------- ----------- ----------- ----------
----------- ------------- ------- ----------- ----------- ----------
Loss per common share from
continuing operations...... $ (0.05)
----------
----------
Weighted average common
shares and equivalents
outstanding................ 4,664 (7) 4,664
----------- ----------
----------- ----------
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MARCH 1, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
FOR
------------------------
<S> <C> <C> <C> <C>
LIABILITY
ASSUMPTION
AND NON-
GRIFFIN RECURRING GRIFFIN
HISTORICAL EXPENSES DISTRIBUTION PRO FORMA
----------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales and other revenue................................ $ 2,725 $ 2,725
Costs and expenses:
Cost of goods sold......................................... 1,943 1,943
Selling, general and administrative expenses............... 3,208 3,208
----------- ----------- ----------- ----------
Operating loss............................................. (2,426) (2,426)
Loss from equity investment................................ (22) (22)
Interest expense........................................... 799 (730)(6) 69
----------- ----------- ----------- ----------
Loss before income tax benefit............................. (3,247 ) 730 (2,517)
Income tax benefit......................................... (1,234 ) 285 (2) (949)
----------- ----------- ----------- ----------
Loss from continuing operations............................ $ (2,013 ) $ 445 $ (1,568)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Loss per common share from continuing operations........... $ (0.33)
----------
----------
Weighted average common shares and equivalents
outstanding............................................... 4,803 (7) 4,803
----------- ----------
----------- ----------
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 1, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
GRIFFIIN FOR GRIFFIN PRO
HISTORICAL DISTRIBUTION FORMA
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................................... $ 6,498 $ 6,498
Accounts receivable, net................................................ 1,730 1,730
Inventories............................................................. 30,109 30,109
Deferred income taxes................................................... 2,783 2,783
Other current assets.................................................... 801 801
---------- ----------- -----------
Total current assets.................................................... 41,921 41,921
Property and equipment, net............................................. 12,671 12,671
Real estate held for sale or lease, net................................. 27,154 27,154
Investment in Centaur Communications, Ltd............................... 14,673 14,673
Other assets, including investment in real estate joint venture......... 3,454 3,454
---------- ----------- -----------
Total assets............................................................ $ 99,873 $ 99,873
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND CULBRO INVESTMENT/STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities................................ $ 3,448 $ 3,448
Long-term debt due within one year...................................... 242 242
---------- ----------- -----------
Total current liabilities............................................... 3,690 3,690
Long-term debt.......................................................... 2,896 2,896
Other noncurrent liabilities............................................ 2,995 2,995
---------- ----------- -----------
Total liabiities........................................................ 9,581 9,581
---------- ----------- -----------
Culbro Investment....................................................... 90,292 (90,292)(7)
Common stock............................................................ 45 (7) 45
Additional paid in capital.............................................. 90,247 (7) 90,247
---------- ----------- -----------
Total Culbro Investment/stockholders' equity............................ 90,292 90,292
---------- ----------- -----------
Total liabilities and Culbro Investment/stockholders' equity............ $ 99,873 $ 99,873
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(1) Reflects reduction of interest expense as a result of using the proceeds
from the sale of CMS Gilbreth Packaging Systems, Inc. to reduce debt. The
net proceeds of approximately $35 million from the sale, which was completed
on November 8, 1996, reduced debt under Culbro's Senior Notes and Credit
Agreement, which had interest rates of 9.9% and 7.0%, respectively.
(2) Reflects Federal income tax (35%) and state income tax (4%), which is net of
Federal tax benefits.
(3) Reflects the elimination of $2.167 million of income from accrued dividends
and accretion on shares of preferred stock of Eli Witt as a result of the
exchange of such preferred stock in satisfaction of a subordinated note
issued by Culbro to a third party, and elimination of other nonoperating
expense of $0.25 million which Griffin incurred in connection with its
investment in Eli Witt.
(4) Reflects the elimination of interest expense on a subordinated note issued
by Culbro to a third party that was satisfied by the exchange of such note
for shares of preferred stock issued by Eli Witt.
(5) Reflects elimination of the other nonrecurring expense directly related to
the Distribution of $0.9 million in 1996. This item represents Griffin's
allocated portion of Culbro's nonrecurring expense for the cost of
terminating a long-term compensation plan and severance for certain
employees in contemplation of the Distribution.
(6) Reflects the reduction of interest expense from the assumption by General
Cigar of the Culbro general corporate debt that was included on Griffin's
historical financial statements.
(7) Reflects the Distribution of Griffin's Common Stock to shareholders of
Culbro in a one-for-one ratio. The Common Stock has a par value of $0.01 per
share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE HISTORICAL FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF GRIFFIN SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS INFORMATION
STATEMENT (F-1 TO F-33). THE FOLLOWING DISCUSSION OF THE PRO FORMA FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF GRIFFIN SHOULD BE READ IN CONJUNCTION
WITH THE UNAUDITED PRO FORMA FINANCIAL DATA AND THE RELATED NOTES THERETO
INCLUDED ELSEWHERE IN THIS INFORMATION STATEMENT.
OVERVIEW
Griffin is a wholly owned subsidiary of Culbro. Prior to March 18, 1997,
Griffin was known as Culbro Land Resources, Inc. Griffin principally owns and
operates landscape nursery and Connecticut-and Massachusetts-based real estate
operations, and other non-tobacco related assets and investments, all of which
were held by Griffin or transfered to Griffin in the Asset Transfers effected
under the terms of the Distribution Agreement.
The historical financial statements of Griffin reflect the combined results
of the operations of all of these businesses and assets. Griffin's results in
each of the periods presented also include allocations to Griffin of Culbro
corporate overhead of $0.4 million in the thirteen weeks ended March 1, 1997
(the "1997 first quarter") and $0.4 million in the thirteen weeks ended March 2,
1996 (the "1996 first quarter") and $2.4 million, $2.1 million and $1.8 million
in fiscal 1994, fiscal 1995 and fiscal 1996, respectively. Additionally, $0.9
million of Culbro nonrecurring expense was allocated to Griffin in fiscal 1996.
These allocations, which may not necessarily reflect the additional expenses
Griffin would have incurred as a separate stand-alone entity, are deemed
reasonable by Griffin management. The combined financial statements include
interest expense on debt specifically incurred by Griffin, and interest expense
on Culbro general corporate debt. The Culbro debt is included in Griffin's
historical combined financial statements for the fiscal years ended 1994, 1995
and 1996. Pursuant to the Distribution Agreement entered into on February 27,
1997, between Culbro, Griffin and General Cigar, the Culbro general corporate
debt included in Griffin's historical financial statements was assumed by
General Cigar. This debt is excluded from Griffin's debt structure as of March
1, 1997, however, due to the fact that General Cigar did not assume the debt
until the end of the 1997 first quarter, the interest expense incurred on the
Culbro general corporate debt is included in Griffin's historical consolidated
statement of operations for the thirteen weeks ended March 1, 1997. This
interest expense will not be part of Griffin's results of operations on a
prospective basis. Therefore, Griffin's results of operations should be read in
conjunction with the unaudited combined pro forma results of operations in Note
4 of the Combined Financial Statements and the Unaudited Pro Forma Combined
Financial Statements included elsewhere in this Information Statement.
PRO FORMA 1996 COMPARED TO ACTUAL FISCAL 1996
The following summary financial information and discussion relate to
Griffin's 1996 results of operations on a pro forma basis. The pro forma
operating data is presented as if the Liability Assumption, the exchange of the
preferred stock of Eli Witt for the related subordinated note previously issued
by Culbro and the use of proceeds from the disposition of CMS Gilbreth had all
occurred at the beginning of fiscal 1996. The pro forma balance sheet reflects
the Liability Assumption as if it had occurred at the balance sheet date. The
effect of the sale of CMS Gilbreth and the exchange of the preferred stock are
reflected (eliminated) in Griffin's 1996 Combined Balance Sheet.
22
<PAGE>
1996 SUMMARIZED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1996 1996
HISTORICAL PRO FORMA
---------- -----------
<S> <C> <C>
Net sales................................................................................. $ 46,531 $ 46,531
---------- -----------
Operating loss............................................................................ (1,245) (345)
Other nonoperating income items........................................................... 2,220 303
Interest expense.......................................................................... 7,805 508
---------- -----------
Loss before income tax benefit............................................................ (6,830) (550)
Income tax benefit........................................................................ (2,767) (317)
---------- -----------
Loss from continuing operations........................................................... $ (4,063) $ (233)
---------- -----------
---------- -----------
Current assets............................................................................ $ 44,068 $ 42,491
---------- -----------
Total assets.............................................................................. $ 101,775 $ 100,198
---------- -----------
---------- -----------
Current liabilities....................................................................... $ 7,370 $ 5,836
---------- -----------
Long-term debt............................................................................ 38,846 2,846
---------- -----------
Culbro Investment/stockholders' equity.................................................... 47,449 87,854
---------- -----------
Total liabilities and Culbro Investment/stockholders' equity.............................. $ 101,775 $ 100,198
---------- -----------
---------- -----------
</TABLE>
Net sales remain unchanged because CMS Gilbreth was reported as a
discontinued operation in the historical financial statements. The lower
operating loss reflects the elimination of Griffin's allocated share of a
nonrecurring corporate expense incurred by Culbro that was directly related to
the Distribution. The lower nonoperating income reflects the elimination of the
accrued dividend income on the Eli Witt preferred stock that was exchanged for
Culbro's subordinated note payable (which was assumed by Griffin as part of the
Asset Transfers). The retirement of the subordinated note resulted in a
reduction of interest expense equal to the amount of the dividend income. The
disposition of the investment in Eli Witt also resulted in the elimination of
approximately $0.3 million of Eli Witt related expenses.
The reduction in debt from the proceeds from the sale of CMS Gilbreth and
the exchange of the preferred stock of Eli Witt is reflected in the historical
balance sheet. The lower debt balance and the increase in capital (Culbro
Investment) in the pro forma balance sheet reflect the assumption by General
Cigar of the allocated Culbro debt, certain of Griffin's employee retirement
obligations and other liabilities.
ACTUAL RESULTS OF OPERATIONS
The discussion set forth below relates to the financial condition and
results of operations of Griffin as of and for the thirteen weeks ended March 1,
1997 and March 2, 1996, fiscal 1996, fiscal 1995 and fiscal 1994.
THIRTEEN WEEKS ENDED MARCH 1, 1997 COMPARED TO THIRTEEN WEEKS ENDED MARCH 2,
1996
Net sales and other revenue decreased $0.6 million, to $2.7 million in the
1997 first quarter from $3.3 million in the 1996 first quarter. The decrease
reflected lower sales in the landscape nursery and real estate segments. In the
landscape nursery segment, net sales and other revenue decreased $0.2 million,
to $2.0 million in the 1997 first quarter from $2.2 million in the 1996 first
quarter. The decrease in the 1997 first quarter reflected lower sales of
hardgoods, including snow and ice removal products, due principally to the
milder weather and lower snowfall in the 1997 first quarter, which contrasted
sharply with the more severe weather in the 1996 first quarter. Due to the
seasonal nature of the business, first quarter sales of landscape nursery
products are typically less than 5% of annual sales. Net sales and other revenue
in the
23
<PAGE>
real estate segment decreased $0.4 million to $0.7 million in the 1997 first
quarter as compared to $1.1 million in the 1996 first quarter. The higher net
sales and other revenue in the 1996 first quarter included rental revenue from a
commercial property and income related to a real estate joint venture, both of
which were disposed of in the 1996 fourth quarter (see below). Additionally,
revenue from property management decreased, due principally to lower revenue
from services provided to tenants.
The operating loss in the landscape nursery segment increased $0.3 million
to $1.8 million in the 1997 first quarter from $1.5 million in the 1996 first
quarter. The increased loss reflects higher expenses, due principally to timing,
and the effect of the lower sales. The landscape nursery segment incurs an
operating loss in the first quarter because of the seasonality of its sales. The
real estate segment incurred an operating loss of $0.2 million in the 1997
quarter compared to an operating loss of $0.1 million in the 1996 quarter, due
principally to the lower net sales and other revenue.
Interest expense decreased $1.1 million to $0.8 million in the 1997 first
quarter from $1.9 million in the 1996 first quarter. The lower interest expense
reflects the lower debt level in the 1997 first quarter as a result of several
transactions that took place in the fourth quarter last year. These included the
reduction of debt through proceeds received from the sale of CMS Gilbreth and
the sale of Griffin's interest in a real estate joint venture, the exchange of
preferred stock in Eli Witt and the satisfaction of a nonrecourse mortgage on a
commercial property through the transfer of the property to the mortgage holder.
Other nonoperating income, net, in the 1996 first quarter reflected accrued
dividends and accretion income on the Eli Witt preferred stock, partially offset
by other expenses related to the investment in Eli Witt. As a result of the
exchange of Eli Witt preferred stock, there were no such items in the 1997 first
quarter.
Net loss in the 1996 first quarter included the results of CMS Gilbreth.
Since this company was sold, in the 1996 fourth quarter, its results are not
included in the 1997 first quarter.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales and other revenue increased 11.4% or $4.7 million, to $46.5
million in fiscal 1996 compared to $41.8 million in fiscal 1995. The increase in
net sales and other revenue was due to higher net sales and other revenue in
both the landscape nursery and real estate segments. In the landscape nursery
segment, net sales increased 6.2% or $2.1 million to $37.0 million in fiscal
1996 from $34.9 million in fiscal 1995. This increase reflected increased sales
at the wholesale landscape nursery sales and service centers. Net sales and
other revenue in the real estate business increased $2.6 million to $9.5 million
in fiscal 1996 from $6.9 million in fiscal 1995. The increase reflected the sale
of Griffin's 30% interest in a joint venture that owns commercial properties in
Griffin Center and Griffin Center South. The joint venture sale generated net
proceeds of $4.0 million and a pretax loss of $0.4 million. Excluding this
transaction, net sales and other revenue decreased by $1.8 million, due to lower
residential lot sales and lower sales of undeveloped commercial land.
Griffin incurred an operating loss of $1.2 million in fiscal 1996 compared
to an operating profit of $0.8 million in fiscal 1995. In the landscape nursery
segment, operating profit was $1.6 million in fiscal 1996 compared to $1.7
million in fiscal 1995, reflecting higher operating expenses, which offset the
effect of the higher sales. An increase in gross margins to 29.7% in fiscal 1996
from 29.1% in fiscal 1995 was due to the effect of a $1.0 million charge in 1995
to reserve for excess field-grown plant inventories offset by product mix and
competitive pricing pressures in fiscal 1996. Operating expenses in the
landscape nursery business increased to 25.7% of net sales in fiscal 1996 from
25.1% of net sales in fiscal 1995. The increase reflected higher selling
expenses, and the operating expenses of a new sales and service center. In the
real estate segment, Griffin incurred an operating loss of $0.3 million in
fiscal 1996 compared to an operating profit of $1.2 million in fiscal 1995. The
lower results reflected the loss of $0.4 million on the joint venture sale and
the effect of the lower residential and commercial land sales.
24
<PAGE>
General corporate expense, net, increased to $2.6 million in fiscal 1996
from $2.2 million in fiscal 1995. The increase in fiscal 1996 reflects Griffin's
allocated share of a Culbro nonrecurring corporate compensation expense item.
Results from Griffin's equity investment in Centaur increased to $0.3
million of equity income in fiscal 1996 from an equity loss of $0.2 million in
fiscal 1995. The increase reflected improved business conditions for Centaur's
publishing business in the United Kingdom. Other nonoperating income of $1.9
million in fiscal 1996 and $0.9 million in fiscal 1995 included principally
accretion and accrued dividend income on the preferred stock of Eli Witt of $2.2
million and $2.3 million in fiscal 1996 and fiscal 1995, respectively. In fiscal
1995 the income was partially offset by expenses incurred in connection with
Griffin's support for the refinancing of Eli Witt. The accretion and accrued
dividend income on the preferred stock equaled the interest expense recorded in
those years on a related exchangeable subordinated note payable. In the 1996
fourth quarter shares of preferred stock were exchanged in satisfaction of a
subordinated note issued by Culbro and all accrued interest thereon.
Interest expense decreased to $7.8 million in fiscal 1996 from $8.2 million
in fiscal 1995 due to lower debt levels, reflecting the proceeds from the sale
of CMS Gilbreth which was used to repay debt.
The results of the discontinued CMS Gilbreth operation in fiscal 1996
reflected a loss of $0.5 million, net of tax, compared to income of $3.7
million, net of tax, in fiscal 1995. The 1996 results included a net loss on the
sale of CMS Gilbreth of $1.3 million partially offset by income from this
business of $0.8 million prior to the sale.
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales and other revenue decreased 2.9% or $1.2 million, to $41.8 million
in fiscal 1995 from $43.0 million in fiscal 1994. The decrease was due to lower
net sales and other revenue in both the nursery products and real estate
business segments. In the landscape nursery segment, net sales decreased 1.2% or
$0.4 million to $34.9 million in fiscal 1995 from $35.3 million in fiscal 1994.
The decrease reflected slightly lower sales at the wholesale sales and service
centers. Net sales and other revenue in the real estate segment decreased $0.8
million to $6.9 million in fiscal 1995 from $7.7 million in fiscal 1994. The
decrease was due to lower residential lot sales in fiscal 1995 partially offset
by increased commercial land sales.
Operating profit in fiscal 1995 was $0.8 million compared to an operating
loss of $4.9 million in fiscal 1994. In the landscape nursery segment, operating
profit was $1.7 million in fiscal 1995 compared to an operating loss of $0.6
million in fiscal 1994. The increased operating profit reflected the effect of
higher margins, which increased to 29.1% in fiscal 1995 from 25.0% in fiscal
1994, and lower operating expenses, which decreased to 25.1% of net sales from
27.7% in fiscal 1994. The higher gross margins reflected improved pricing and
lower costs, partially offset by a $1.0 million charge to reserve for excess
field-grown plant inventories. The decrease in operating expenses reflected
lower selling expenses and improved cost containment measures at the wholesale
sales and service centers. In the real estate segment, operating profit was $1.2
million in fiscal 1995 as compared to an operating loss of $2.2 million in
fiscal 1994. The increase principally reflected the effect of a $3.6 million
charge recorded in 1994 to write off the costs of certain projects that were not
developed as originally planned. Excluding that item, operating results were
substantially unchanged in fiscal 1995 as compared to fiscal 1994. The effect of
lower sales of residential lots in fiscal 1995 was substantially offset by lower
general and administrative expenses, principally reflecting headcount reduction.
General corporate expense, net, which principally reflects general and
administrative expenses allocated to Griffin from Culbro, increased to $2.2
million in fiscal 1995 from $2.0 million in fiscal 1994.
The loss on equity investments was $0.2 million in fiscal 1995 as compared
to a $1.7 million equity loss in fiscal 1994. The change reflected the inclusion
in fiscal 1994 of results of Eli Witt prior to the deconsolidation of that
subsidiary (see Note 12 to the Combined Financial Statements). The investment in
25
<PAGE>
Centaur had an equity loss of $0.2 million in fiscal 1995 compared to equity
income of $0.4 million in fiscal 1994. The lower results from Centaur were
attributed to a downturn in the British economy.
Other nonoperating income, net, decreased to $0.9 million in fiscal 1995
from $1.4 million in fiscal 1994. The decrease reflected expenses in fiscal 1995
related to Griffin's support for the refinancing of Eli Witt, partially offset
by a full year of accretion and accrued dividend income on the Eli Witt
preferred stock in fiscal 1995 versus a partial year of such income in fiscal
1994. The accretion income and accrued dividends equaled the interest expense on
the exchangeable subordinated note payable.
Interest expense increased to $8.2 million in fiscal 1995 from $8.0 million
in fiscal 1994. The increase was due principally to a full year of interest
expense on the exchangeable subordinated note payable in fiscal 1995 versus a
partial year of interest expense on the subordinated note in fiscal 1994.
Income from the discontinued operation was $3.7 million, net of tax, in
fiscal 1995 compared to $3.3 million, net of tax, in fiscal 1994. The increase
reflected improved margins, due to sales mix, partially offset by higher
operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows used in operating activities of continuing operations were
$5.0 million in the 1997 first quarter compared to $0.5 million in the 1996
first quarter. The increased use of cash reflected principally a greater
increase in inventories, a greater reduction of accounts payable and accrued
liabilities, and a decrease in deferred income taxes as compared to an increase
in the 1996 first quarter. The lower net cash used in investing activities in
the 1997 first quarter reflected the effect of the cash used in the discontinued
operation in the 1996 first quarter partially offset by higher capital
expenditures in the landscape nursery business segment in the 1997 first
quarter. Net cash provided by financing activities in the 1997 first quarter
reflected an increase in Culbro's general corporate debt that was included in
Griffin's financial statements through the date that debt was assumed by General
Cigar (see below).
Net cash flows used in operating activities of continuing operations were
$2.2 million in fiscal 1996 compared to $3.9 million used in operating
activities in 1995. The lower use of cash reflected principally the benefit from
proceeds from sale of a real estate joint venture, partially offset by
reductions in liabilities, including $3.5 million of deferred taxes relating to
continuing operations, and reductions in accounts payable and accrued
liabilities. The net cash flows used in operating activities of continuing
operations in 1995 of $3.9 million compared to $11.6 million used in operating
activities in fiscal 1994 reflected the lower loss from continuing operations in
fiscal 1995 compared to fiscal 1994 which also included a noncash gain on sale
of Eli Witt stock.
Cash used in operating activities in each of the fiscal years 1994 through
1996 includes pretax interest expense of $8.0 million, $8.2 million and $7.8
million, respectively, principally on allocated Culbro debt which was used to
fund Griffin's operations including both continuing and discontinued operations.
Effective February 27, 1997, pursuant to the Distribution Agreement, the Culbro
debt allocated to Griffin in the historical Combined Financial Statements was
assumed by General Cigar and is not an obligation of Griffin.
Net cash flow provided by investing activities in 1996 included principally
the proceeds from the sale of CMS Gilbreth. The investing activities of 1995 and
1994 include transactions primarily relating to the investment in Eli Witt. In
February 1997, Eli Witt sold all of its assets in a court supervised bankruptcy
sale. Griffin has no investment related to Eli Witt in its 1996 Combined Balance
Sheet and does not expect to receive any proceeds from the sale. See Notes 12
and 14 to the Combined Financial Statements for fiscal 1994, fiscal 1995 and
fiscal 1996 contained elsewhere in this Information Statement.
Net cash relating to financing activities in each of the fiscal years 1994
through 1996 includes net payments of debt, principally the debt that was
allocated by Culbro to Griffin. As a result of the
26
<PAGE>
assumption by General Cigar on February 27, 1997, such debt will not be part of
Griffin's debt structure prospectively. Financing activities also included net
transactions with Culbro, including operating cash flow transferred to Culbro in
fiscal 1996 and cash flow transferred to Griffin by Culbro in fiscal 1995 and
fiscal 1994 to paydown the allocated debt and fund Griffin's operations.
Through the date of the Distribution Agreement, February 27, 1997, the cash
management and treasury activities of Griffin were integrated with those of
Culbro. Griffin's cash receipts were transferred daily into Culbro's cash
account and Griffin's cash disbursement accounts were reimbursed by Culbro on a
daily basis.
Griffin did not maintain its own separate credit facilities. Culbro
maintained credit facilities which it utilized to finance transactions relating
to Griffin. Borrowings under the Culbro credit facilities are reflected in
Griffin's Financial Statements through the date that this debt was assumed by
General Cigar, which was February 27, 1997. Subsequent to that date, Griffin's
cash flows are segregated from Culbro's other subsidiaries. Griffin maintained
an intercompany account with Culbro in which its net cash flow and other
intercompany transactions with Culbro were recorded. See Note 6 in the Financial
Statements for fiscal 1994, fiscal 1995 and fiscal 1996 and Note 4 in the
Financial Statements for the 1997 first quarter and the 1996 first quarter. The
intercompany account with Culbro and Griffin's retained earnings and capital
accounts are included in the Financial Statements as Culbro Investment.
Historically, Griffin depended on Culbro's credit facilities to fund its
operations. In accordance with the Distribution Agreement, Griffin received cash
of $7.0 million from General Cigar. Griffin intends to negotiate a line of
credit to fund future real estate projects and for general working capital
purposes. Management believes, based on the current level of operations and
anticipated growth, that the cash flow from operations, cash on hand and, if
needed, borrowings under an anticipated credit facility will be sufficient to
fund its future operations in the next twelve months. Over the long-term,
selective asset sales and additional credit facilities may be required to fund
capital projects. Griffin anticipates based on discussions to date with
potential lenders that it will be able to obtain adequate credit facilities.
Griffin also believes that it will be able adequately to administer its
operations following the Distribution and following the expiration of the
Services Agreement.
27
<PAGE>
BUSINESS
Griffin and its subsidiaries comprise principally a landscape nursery and
real estate business. At the end of its 1996 fiscal year Griffin engaged in two
principal lines of business: (1) landscape nursery products, comprised of
growing container and field-grown landscape nursery products for sale
principally to landscape nursery mass merchandisers, and owning and operating
wholesale sales and service centers; and (2) real estate, comprised of owning,
building and managing commercial and industrial properties and developing
residential subdivisions on real estate owned by Griffin in Connecticut and
Massachusetts.
LANDSCAPE NURSERY BUSINESS
The landscape nursery operations of Griffin are operated by its wholly-owned
subsidiary, Imperial Nurseries, Inc. ("Imperial"). Imperial is a grower,
distributor and broker of wholesale landscape nursery stock. The landscape
nursery industry is extremely fragmented, with the industry leader having less
than 1% of total market share. Imperial believes that its volume places it among
the ten largest landscape nursery companies in the country.
Imperial's growing operations are located on property owned partly by
Griffin and partly by Imperial, in Connecticut (1,000 in-ground acres and 400
acres for containers) and in northern Florida (350 acres for containers). The
largest portion of Imperial's container-grown product consists of broad leaf
evergreens, including azaleas and rhododendron. Container-grown product is held
principally from one to five years prior to its sale by Griffin. Its
field-grown, as opposed to container-grown, product includes principally
evergreen pines, hemlocks, spruce and arborvitae. Imperial also contracts with a
grower in the Mid-Atlantic states to grow field-grown product for Imperial. The
agreement provides for Imperial to purchase such product over a five year
period. This program is part of a program intended to reduce Imperial's
investment in field-grown plants and to shorten its product growing cycles to
increase the profitability of the field-grown business. Imperial is also
reviewing other approaches to increasing its return on assets. Among the
possible approaches are holding some of its containerized production for a
longer period and selling such plants in terra cotta or similar containers for
immediate use by customers and adding a broader selection of perennial flowers
directed at increasing both margin and selling price.
The combined field-grown and container operations serve a market comprised
principally of landscapers, retail chain store garden departments, retail
nurseries and garden centers, and wholesale nurseries and distributors.
Imperial-grown products are also distributed through its own wholesale
horticultural sales and service centers. Imperial's major markets service the
Northeast, Mid-Atlantic, Southeast and Mid-West. Nursery sales are seasonal,
peaking in spring, and are affected by commercial and residential building
activity as well as weather conditions. The largest portion of Imperial's assets
are represented by plant inventories.
Imperial operates eight wholesale horticultural sales and service centers
which sell a wide range of plant material, including a large portion purchased
from growers other than Imperial, and horticultural tools and products to the
trade. The centers owned by Imperial are located in Windsor, Connecticut; Aston,
Pennsylvania; Columbus and Cincinnati, Ohio; White Marsh, Maryland; and
Manassas, Virginia. In addition, Imperial leases centers in Pittsburgh,
Pennsylvania and Monroeville, Pennsylvania.
In 1996, Imperial continued to diversify its customer base in order to
reduce its dependence on a few large customers. Currently Imperial's sales are
made to a large variety of customers, none of whom represents more than 3% of
sales.
Containerized growing and shipping capacity has been increased to meet the
potential volume and quality needs of Imperial's customers and to capitalize on
any growth in the Mid-Atlantic and Mid-West markets.
28
<PAGE>
REAL ESTATE BUSINESS
Griffin is directly engaged in the real estate development business on
portions of its land in Connecticut, with headquarters in Bloomfield,
Connecticut. Griffin develops portions of its properties for commercial,
residential and industrial use.
During the last several years, the real estate market in the Hartford area,
particularly that in the northwest quadrant, where the majority of Griffin's
acreage is located, has been depressed by a number of factors, including the
decline of employment in the defense and insurance industries. There can be no
assurance that the condition of the real estate market in this region will
improve in the near future. The development of Griffin's land was also affected
by land planning issues, particularly in the town of Simsbury. In Simsbury, the
value of Griffin's land is affected by the presence of chlordane on a portion of
the land which is intended for residential development. Griffin is examining
means of remediation on its lands and will seek to subdivide certain of its
Simsbury properties over a reasonable period.
Griffin's most substantial development is Griffin Center in Windsor,
Connecticut and Griffin Center South in Bloomfield, Connecticut. Together these
master planned developments comprise approximately 600 acres, half of which have
been developed with nearly 1,750,000 square feet of office and industrial space.
Griffin Center currently includes nine corporate office buildings built by
Griffin. During the 1980's, Griffin sold 70% interests in five of the buildings
to a bank-managed real estate investment fund. In 1996, these buildings were
sold in a transaction initiated by the successor of that partner. Griffin
recorded a pre-tax loss as a result of this transaction. In the 1980's, Griffin
also sold 70% interests in two other office buildings to an insurance company.
Griffin currently maintains a 30% interest in those two office buildings in the
Griffin Center Office Complex which aggregate 160,000 square feet. One other
office building which had been leased to the State of Connecticut was
transferred to the lender to the building in a deed in lieu of foreclosure in
1996.
Griffin Center South, a 130-acre tract, comprises fifteen buildings of
industrial and research/development space. Nine of these buildings have been
retained by Griffin for rental and are 78% rented. The other buildings have been
built on land sold by Griffin to commercial users who own and occupy the space.
Griffin has a master plan state traffic certificate which allows for the
development of an additional 300,000 square feet of space.
Griffin owns a 600-acre tract of land near Bradley International Airport and
Interstate 91 known as the New England Tradeport. To date, 140,000 square feet
of warehouse and light manufacturing space have been developed and are 95%
occupied and a bottling and distribution plant for Pepsi-Cola has been built. A
state traffic control certificate for the future development of 1.3 million
square feet has been obtained for the New England Tradeport. Griffin intends to
direct its primary efforts at the construction and leasing of light industrial
and warehouse facilities at the New England Tradeport. Development at the New
England Tradeport will require investment in offsite infrastructure on behalf of
Windsor, Connecticut and improvement of some state or town roads.
Two additional Griffin parcels available for development include 28 acres in
the Day Hill Technology Center in Windsor, and 100 acres in the South Windsor
Technology Center. State traffic certificates have been obtained for these
parcels for 500,000 square feet and 200,000 square feet of development,
respectively.
In 1988, a subsidiary of Griffin began infrastructure work at Walden Woods,
a 153-acre site in Windsor, Connecticut which was planned to contain more than
365 residential units. Prior to 1992 Griffin had built and sold 45 homes before
discontinuing its home building operations at Walden Woods. Since then two
third-party home builders have completed an additional 64 homes.
Griffin is seeking to develop a joint venture to process bulky waste and
build a transfer station and recycling operation on a portion of its land in
East Granby, Connecticut. In addition, approximately 500 acres are leased for
tobacco growing to General Cigar at rentals approximating carrying cost. The
lease for
29
<PAGE>
these properties, which extends for 10 years, may be terminated, as to 100
acres, annually on one year's prior notice. Griffin also leases office space to
General Cigar.
EQUITY INVESTMENTS
ELI WITT
Griffin owns 50.1% of Eli Witt, a wholesale distributor of tobacco, sundries
and general merchandise. Griffin deconsolidated Eli Witt as of April 25, 1994
and subsequently has accounted for its investment in Eli Witt under the equity
method. In November 1996 Eli Witt filed for protection under Chapter 11 of the
Federal Bankruptcy Law. In connection with such filing Eli Witt sold all of its
operating assets to another wholesale distributor in March 1997. Shareholders of
Eli Witt are not expected to receive any proceeds from the sale. See "--Legal
Matters."
CENTAUR
Griffin owns approximately 25% of the stock of Centaur, a privately-held
publisher of business magazines in the United Kingdom. After a period of time
when results were adversely affected by a number of factors including adverse
business conditions in the United Kingdom, this business is now profitable. Two
members of Griffin's Board of Directors are on the Board of Directors of
Centaur. Griffin's investment in Centaur is carried at approximately $14.0
million.
FINANCIAL INFORMATION REGARDING INDUSTRY SEGMENTS
See Note 5 to the Combined Financial Statements of Griffin included
elsewhere herein for certain financial information regarding the landscape
nursery business and the real estate business.
PROPERTIES
COMMERCIAL REAL ESTATE
<TABLE>
<CAPTION>
LAND AREA
LOCATION OF PROPERTY (ACRES)
- ---------------------------------------------------------------------------------- -----------
<S> <C>
CONNECTICUT
Bloomfield, CT.................................................................... 220
East Granby, CT................................................................... 920
Simsbury, CT...................................................................... 860
South Windsor, CT................................................................. 103
Suffield, CT...................................................................... 350
Windsor, CT....................................................................... 1,220
MASSACHUSETTS
Southwick, MA..................................................................... 425
FLORIDA
Hillsborough County, Florida...................................................... 9
Leon County, Florida.............................................................. 6
</TABLE>
30
<PAGE>
NURSERY REAL ESTATE
<TABLE>
<CAPTION>
LAND AREA
LOCATION OF PROPERTY (ACRES)
- ---------------------------------------------------------------------------------- -----------
<S> <C>
FLORIDA
Quincy, FL........................................................................ 1,365
PENNSYLVANIA*
Aston, PA......................................................................... 17
Pittsburgh, PA.................................................................... 10
VIRGINIA
Manassas, VA...................................................................... 22
OHIO
Columbus, OH...................................................................... 12
Cincinnati, OH.................................................................... 11
MARYLAND
White Marsh, MD................................................................... 20
</TABLE>
*In addition Griffin leases property in Monroeville, PA.
LEGAL MATTERS
As a result of the Asset Transfers, Griffin has acquired Culbro's 50.1%
interest in Eli Witt. In November 1996, Eli Witt filed for protection under
Chapter 11 of the Federal Bankruptcy Law. Prior to February 1993, Eli Witt was a
wholly-owned subsidiary of Culbro and filed consolidated tax returns with
Culbro. Culbro, Eli Witt and other parties engaged in two complex acquisitions
and reorganizations in 1993 and 1994, pursuant to which Culbro received
significant distributions from Eli Witt to repay Culbro's debt, including
substantial amounts Culbro had previously borrowed from unaffiliated third
parties to fund Eli Witt's business. Culbro subsequently loaned $5 million to
Eli Witt. It is anticipated that these transactions (including the transfer of
funds to Culbro) will be reviewed by Eli Witt creditors and other parties in
interest in connection with the Chapter 11 case. Griffin believes that Eli Witt
was solvent at the time of the distributions to Culbro in 1993, and therefore
that such distributions would not constitute a fraudulent conveyance under
applicable federal and state insolvency laws. Griffin is not entitled to
contribution from Culbro or General Cigar for liabilities assumed by Griffin
relating to the Eli Witt matter. Griffin is obligated to indemnify Culbro and
General Cigar for any liability relating to the Eli Witt matter. To date, one
creditor has written to the unsecured creditors committee proposing an inquiry
into this matter. Although Griffin believes that any claim challenging the
distributions described above would be without merit, any such claim, if
asserted and successfully prosecuted, could have a material adverse effect on
Griffin's financial condition. See "RISK FACTORS--Assumed Liabilities; The Eli
Witt Company."
Certain parts of Griffin's property in Simsbury, Connecticut, are affected
by the presence of chlordane. Although the various federal, state and local
agencies may have an interest in the matter, there are no proceedings known by
Griffin to be contemplated by any of these agencies in connection with possible
chlordane exceedences on such properties.
EMPLOYEES
Griffin employs approximately 260 persons, including 11 in its real estate
business and 249 in its landscape nursery business. At present, none of these
employees is represented by a union. Griffin believes that its relations with
its employees are satisfactory.
31
<PAGE>
COMPETITION
The nursery business is competitive and Griffin competes against a number of
other companies, including local and regional nursery businesses. Some of
Griffin's competitors may be in a stronger financial position than Griffin.
Numerous real estate developers operate in the portion of Connecticut and
Massachusetts in which Griffin's holdings are concentrated. Some of such
businesses compete in each anticipated business of Griffin and may have greater
financial resources than Griffin. See "RISK FACTORS--Competition."
REGULATION; ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate may be required to investigate and clean up
hazardous or toxic substances or petroleum product releases at such property and
may be held liable to a govermental entity or to third parties for property
damage and for investigation and clean-up costs incurred by such parties in
connection with contamination. The cost of investigation, remediation or removal
of such substances may be substantial, and the presence of such substances, or
the failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. In connection with the ownership (direct or indirect), operation,
management and development of real properties, Griffin may be considered an
owner or operator of such properties or as having arranged for the disposal or
treatment of hazardous or toxic substances and, therefore, potentially liable
for removal or remediation costs, as well as certain other related costs,
including governmental fines and injuries to persons and property. In Simsbury,
the value of Griffin's land is affected by the presence of chlordane on a
portion of the land which is intended for residential use. Griffin is
experimenting with means of remediation on such lands. Although Griffin believes
that it will be able to take steps to reduce chlordane contamination to levels
below that which would impede residential development of such properties, there
can be no assurance that Griffin will be able to do so in a timely or economic
fashion or at all. In the event that Griffin is unable adequately to remediate
this property, its ability to develop such property for its intended purposes
would be materially affected. In addition, Griffin is seeking to develop a joint
venture to process bulky waste and build a transfer station and recycling
operation on a portion of its land in East Granby, Connecticut. Although Griffin
intends to conduct such operations in compliance with all applicable
environmental laws, there can be no assurance that Griffin will not incur
incremental additional costs in connection with such operations resulting from
environmental compliance efforts, or as a result of any future noncompliance
with such laws.
Griffin periodically reviews its properties for the purpose of evaluating
such properties' compliance with applicable state and federal environmenal laws.
Griffin does not anticipate experiencing in the immediate future material
expense in complying with such laws. See "RISK FACTORS--Environmental Matters."
32
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to Griffin's
executive officers, directors and certain other key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Edgar M. Cullman................................ 79 Chairman of the Board and Director
Frederick M. Danziger........................... 57 President, Chief Executive Officer and Director
Anthony J. Galici............................... 39 Chief Financial Officer
Richard L. Wyckoff.............................. 36 President of Imperial Nurseries, Inc.
John L. Ernst................................... 56 Director
Winston J. Churchill, Jr........................ 57 Director
</TABLE>
EDGAR M. CULLMAN has been the Chairman of the Board of Griffin since April,
1997. He has been Chairman of the Board of General Cigar since December, 1996.
From 1962 to 1996 he served as Chief Executive Officer of Culbro. Mr. Cullman
has served as a Director of Culbro since 1961 and has been Chairman of Culbro
since 1975. He also is a Director of Centaur Communications Limited,
Bloomingdale Properties, Inc. and Eli Witt. Eli Witt filed for relief from its
creditors under Chapter 11 of the Federal Bankruptcy Code in November 1996.
Edgar M. Cullman is the uncle of John L. Ernst and the father-in-law of
Frederick M. Danziger.
FREDERICK M. DANZIGER has been a Director and the President and Chief
Executive Officer of Griffin since April, 1997, and a director of Culbro since
1975. He was previously involved in the real estate operations of Griffin in the
early 1980s. Mr. Danziger has been Of Counsel to the law firm of Latham &
Watkins since 1995. From 1974 until 1995, Mr. Danziger was a Member of the law
firm of Mudge Rose Guthrie Alexander & Ferdon. Mr. Danziger also is a director
of Monro Muffler/Brake, Inc., Bloomingdale Properties, Inc., First Financial
Caribbean Corporation and Centaur Communications Limited, and is a general
partner of Ryan Instruments, L.P.
ANTHONY J. GALICI has been the Chief Financial Officer of Griffin since
April 1997. Mr. Galici has served as Vice President-Assistant Controller of
Culbro since 1995. Prior to 1995, he was Assistant Controller of Culbro.
RICHARD L. WYCKOFF has been the President of Imperial Nurseries, Inc. since
August 1991. From 1990 until August 1991 he served as Vice President-Corporate
and Business Development of Culbro. Mr. Wyckoff currently holds numerous
positions on industry associations including The American Association of
Nurserymen and Horticulture Research Institute.
JOHN L. ERNST is a Director of Griffin, General Cigar and Culbro. He has
been a Director of Griffin since April 1997, a director of General Cigar since
December 1996 and a Director of Culbro since 1983. He is the Chairman of the
Board and President of Bloomingdale Properties, Inc., an investment and real
estate company. Mr. Ernst also is a director of the First Financial Caribbean
Corporation.
WINSTON J. CHURCHILL, JR. has been a Director of Griffin since April 1997.
Mr. Churchill is also chairman of the board of Central Sprinkler Corporation and
IBAH, Inc. and a member of the board of Geotek Communications, Inc. and Tescorp,
Inc. He is a managing general partner of SCP Private Equity Partners, L.P., a
private equity fund sponsored by Safeguard Scientifics Inc., and is chairman of
Churchill Investment Partners, Inc. and CIP Capital, Inc.
EXECUTIVE COMPENSATION
From the time of its incorporation until the date hereof Griffin has been,
and following the date hereof until the consummation of the Distribution,
Griffin will be a wholly-owned subsidiary of Culbro
33
<PAGE>
whose policy decisions are made by Culbro. Neither the Chief Executive Officer
nor the Chief Financial Officer named above were employees of Griffin prior to
April 1997. Griffin had no Chief Executive Officer prior to April 1997, and no
current executive officer of Griffin received material compensation from Griffin
during the last three years.
COMPENSATION OF DIRECTORS
Directors who do not receive compensation as officers or employees of the
Company or any of its affiliates will be paid an annual retainer fee of $10,000
and a fee of $500 for each meeting of the Board of Directors or any committee
thereof they attend, plus reasonable out-of-pocket expenses. In addition, such
Directors will receive annually options exercisable for 2,000 shares of Common
Stock exercisable at market prices in existence at the time of grant pursuant to
the Griffin Stock Option Plan. See "CERTAIN EMPLOYEE BENEFIT MATTERS--Griffin
Stock Option Plan."
CERTAIN EMPLOYEE BENEFIT MATTERS
Griffin and Culbro have entered into the Benefits Agreement which provides
generally that following the date of the Asset Transfers or the Distribution, as
the case may be, persons employed by Griffin shall cease to be eligible to
participate in Culbro employee benefit plans and arrangements, and shall instead
become eligible to participate in certain employee benefit plans and
arrangements maintained or established by Griffin.
GRIFFIN 401(K) PLAN
In connection with the Distribution, Griffin will establish the Griffin Land
& Nurseries, Inc. 401(k) Savings Plan (the "Griffin 401(k) Plan"). Employees of
Griffin who participated in the Culbro Companies 401(k) Savings Plan immediately
prior to the Distribution will become participants in the Griffin 401(k) Plan
upon the Distribution Date, and as soon as practicable thereafter the account
balances of persons employed by Griffin after the Distribution will be
transferred from the Culbro Companies 401(k) Savings Plan to the Griffin 401(k)
Plan. Following the Distribution, employees of Griffin who are employed in the
United States, are at least age 21 and who have at least one year of service
will be eligible to participate in the Griffin 401(k) Plan. Subject to
applicable Internal Revenue Code limits, each participating employee will be
able to defer any portion of such participating employee's compensation through
salary deferrals. Griffin may in its discretion "match" employee deferrals each
year. Any such matching contributions made by Griffin become fully vested after
five years of service, which includes years of service with Culbro prior to the
Distribution.
GRIFFIN STOCK OPTION PLAN
Effective as of the Distribution Date, Griffin will establish the Griffin
Land & Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan").
A total of approximately 700,000 shares of Common Stock will be available for
issuance under the Griffin Stock Option Plan. Of such 700,000 shares, 250,000
will be available for issuance with respect to new options that may be granted
to certain officers, employees, consultants and directors of Griffin following
the Distribution. The Griffin Stock Option Plan will be administered by the
Compensation Committee of the Board of Directors of Griffin, and each option
granted under the Griffin Stock Option Plan will be evidenced by a written stock
option agreement that will set forth the material terms of the option, including
the exercise price and vesting schedule. Options granted under the Griffin Stock
Option Plan may be either incentive stock options or non-qualified stock
options. Incentive stock options issued under the Griffin Stock Option Plan will
satisfy certain Internal Revenue Code requirements applicable thereto.
34
<PAGE>
Immediately prior to the Distribution, Griffin intends to grant options to
the following persons in the amounts set forth below with exercise prices
determined by the mean between the opening representative bid and asked prices
for the Common Stock as quoted on the NASD's automated quotation system
Electronic Bulletin Board on the first trading day immediately following the
Distribution Date.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Frederick M. Danziger......................................................
Anthony J. Galici..........................................................
John Fletcher III..........................................................
Richard L. Wyckoff.........................................................
Martha Collier.............................................................
Jay Fisher.................................................................
</TABLE>
In addition to the 250,000 shares available for issuance with respect to
post-Distribution stock option grants, approximately 450,000 additional shares
will be available for issuance upon the exercise of Culbro stock options that
are reformed as Griffin Options (as defined below) pursuant to the Benefits
Agreement, and such reformed Griffin Options shall be administered under the
Griffin Stock Option Plan pursuant to the terms governing the original Culbro
options as in effect immediately prior to the Distribution.
The Benefits Agreement provides that as of the Distribution Date, each
current holder of an option to acquire shares of Culbro Common Stock under any
Culbro stock option plan or agreement will receive in exchange therefor two
separately exercisable options, one option to purchase shares of Culbro Common
Stock (a "Culbro Option") and one option to purchase shares of Common Stock (a
"Griffin Option"), each containing terms substantially equivalent in the
aggregate to those of such holder's pre-Distribution option. With respect to
each holder of a nonqualified option, the combined aggregate exercise price of
the Culbro Option and the Griffin Option shall be equal to the aggregate
exercise price of the pre-Distribution option. With respect to each holder of an
incentive stock option, the number of shares with respect to which each Culbro
Option and each Griffin Option are exercisable, and the exercise price for each
Culbro Option and each Griffin Option, will be set so as to preserve the
Exercise Ratio and the Aggregate Spread (both as defined below) attributed to
options currently outstanding, such determination to be based on the respective
trading prices of Culbro common stock and Griffin common stock following the
Distribution. The "Exercise Ratio" of the Culbro Option and the Griffin Option,
respectively, shall be set such that on a share by share basis, the ratio of the
exercise price of the Culbro Option and the Griffin Option to the value of
Culbro common stock or Griffin common stock, respectively, shall be equal to the
ratio of the pre-Distribution exercise price to the pre-Distribution value of
stock subject to the option. The "Aggregate Spread" of an option is an amount
equal to the difference between the exercise price of the option and the price
of a share of Culbro common stock immediately prior to the Distribution
multiplied by the number of shares underlying such option.
MISCELLANEOUS BENEFIT PLANS
Following the Asset Transfer Date, persons employed by Griffin who were
eligible to participate in any of the employee welfare benefit plans or
arrangements providing life, hospitalization, medical and long-term disability
insurance maintained by Culbro for its salaried and certain hourly paid
employees will continue to be eligible to participate in such plans and
arrangements for the remainder of the 1997 fiscal year, and Griffin will
participate in certain fee sharing arrangements with Culbro (or General Cigar,
following the Merger) with respect to such plans. Following the 1997 fiscal
year, Griffin intends to maintain substantially similar welfare benefit plans
and arrangements for the benefit of its eligible employees. Following the
Distribution Date, persons employed by Griffin shall cease to accrue any further
benefits under the Culbro Retirement Plan and Griffin will not assume any
liabilities or obligations with respect to the Culbro Retirement Plan. Griffin
will assume sole responsibility for any payment due to Anthony Galici under any
Culbro Annual Incentive Compensation Plan payable with respect to the 1997
fiscal year.
35
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since December 1, 1995, Frederick M. Danziger, President and Chief Executive
Officer of Griffin and a member of the Cullman & Ernst Group, the son-in-law of
Edgar M. Cullman and the husband of Lucy C. Danziger, has been Of Counsel to the
law firm of Latham & Watkins. During Culbro's 1996 fiscal year, such firm
received fees and disbursements of approximately $1.5 million from Culbro for
services rendered. See "PRINCIPAL STOCKHOLDERS."
Messrs. Cullman, Danziger and Ernst are members of the Board of Directors of
Bloomingdale Properties, Inc. of which Mr. Ernst is Chairman and President and
other members of the Cullman & Ernst Group are associated. Real estate
management and advisory services have been provided to Culbro by an affiliate of
Bloomingdale Properties, Inc. A fee of approximately $200,000 was paid by Culbro
in 1996 for management of Culbro's New York office building and for other real
estate advisory services. John Fletcher, an employee of Bloomingdale Properties,
Inc., was a director of Griffin until April 1997 and is expected to be retained
by Griffin as a consultant. The terms of his consulting arrangement have not yet
been determined.
36
<PAGE>
PRINCIPAL STOCKHOLDERS
Culbro beneficially owns all of the outstanding shares of Common Stock.
Following the Distribution the holders of Culbro Common Stock immediately
preceding the Distribution will own a number of shares of Common Stock equal to
the number of issued and outstanding shares of Culbro Common Stock, constituting
100% of the outstanding Common Stock. For a description of the Common Stock, see
"DESCRIPTION OF CAPITAL STOCK."
The following table sets forth certain information regarding beneficial
ownership of the Culbro Common Stock as of June 3, 1997 and by each person who
is known by Griffin to beneficially own more than 5% of the outstanding shares
of Culbro Common Stock, each director of Griffin and all directors of Griffin as
a group. There are no executive officers of Griffin who received material
compensation for services rendered to Griffin and whose ownership of any shares
of Common Stock would be required to be included in the following table. As of
May 5, 1997, on a pro forma basis after giving effect to the Distribution, the
persons listed below would have held Common Stock in the amounts and percentages
set forth below. Unless otherwise indicated, the address of each person named in
the table below is c/o Culbro Corporation, 387 Park Avenue South, New York, New
York, 10016-8899.
<TABLE>
<CAPTION>
CULBRO COMMON STOCK
PRIOR TO THE
DISTRIBUTION
------------------------
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED(1) TOTAL
- ------------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Edgar M. Cullman (2).................................................... 974,874 21.4%
Edgar M. Cullman, Jr. (2)............................................... 891,658 19.6
Louise B. Cullman (2)(3)................................................ 834,347 18.3
Susan R. Cullman (2)(3)................................................. 784,529 17.2
Lucy C. Danziger (2)(3)................................................. 1,051,264 23.1
John L. Ernst (2)....................................................... 420,271 9.2
Frederick M. Danziger (2)(3)............................................ 164,120 3.6
Anthony J. Galici (4)................................................... 5,673 *
B. Bros. Realty Limited Partnership (5)................................. 233,792 5.1
Gabelli Funds, Inc. (6)................................................. 882,200 19.4
All officers and directors as a group (2 persons)(7).................... 1,564,938 34.3
</TABLE>
- ------------------------
* less than 1%
(1) This information reflects the definition of beneficial ownership adopted by
the Securities and Exchange Commission (the "Commission"). Beneficial
ownership shown reflects sole investment and voting power, except as
reflected in footnote 2. Where more than one person shares investment and
voting power in the same shares such shares may be shown more than once.
Such shares are reflected only once, however, in the total for all directors
and officers. Excluded are shares held by charitable foundations and trusts
of which members of the Cullman and Ernst Group are officers and directors.
As of June 3, 1997, a group consisting of Messrs. Cullman, direct members of
their families and trusts for their benefit, Mr. Ernst, his sister and
direct members of their families and trusts for their benefit, a partnership
in which members of the Cullman and Ernst families hold substantial direct
and indirect interests and charitable foundations and trusts of which
members of the Cullman and Ernst families are directors or trustees, owned
an aggregate of approximately 2,235,020 shares of Culbro Common Stock
(approximately 50% of the outstanding shares of Culbro common stock). Among
others, Messrs. Cullman, Mr. Ernst and to a lesser extent Mr. Danziger (who
is a member of the Cullman & Ernst Group) hold investment and voting power
or shared investment and voting power over such shares. Certain of such
shares are pledged as security for loans payable under standard pledge
37
<PAGE>
arrangements. A form filed with the SEC on behalf of the Cullman & Ernst
Group states that there is no formal agreement governing the group's holding
and voting of such shares but that there is an informal understanding that
the persons and entities included in the group will hold and vote together
the shares owned by each of them in each case subject to any applicable
fiduciary responsibilities. Louise B. Cullman is the wife of Edgar M.
Cullman. Susan R. Cullman and Lucy C. Danziger are the daughters of Edgar M.
Cullman and Louise B. Cullman, and Lucy C. Danziger is the wife of Frederick
M. Danziger. Edgar M. Cullman Jr. is the son of Edgar M. Cullman and Louise
B. Cullman.
(2) Included within the Culbro shares shown as beneficially owned by Edgar M.
Cullman are 863,576 shares in which he holds shared investment and/or voting
power; included within the shares shown as beneficially owned by Mr. Ernst
are 411,321 shares in which he holds shared investment and/or voting power;
included within the shares shown as beneficiary owned by Mr. Danziger are
147,578 shares in which he holds shares investment and/or voting power; and
included within the shares shown as beneficially owned by Edgar M. Cullman,
Jr. are 751,490 shares in which he holds shared investment and/or voting
power. Included within the shares shown as beneficially owned by Louise B.
Cullman are 730,937 shares in which she holds shared investment and/or
voting power; included within the shares shown as beneficially owned by
Susan R. Cullman are 690,042 shares in which she holds shared investment
and/or voting power; included within the shares shown as beneficially owned
by Lucy C. Danziger are 969,422 shares in which she holds shared investment
and/or voting power. Excluded in each case are shares held by charitable
foundations and trusts in which such persons or their families or trusts for
their benefit are officers and directors. Messrs. Cullman, Ernst, Danziger
and Cullman, Jr. disclaim beneficial interest in all shares over which there
is shared investment and/or voting power and in all excluded shares.
(3) The address of each of Louise B. Cullman, Susan R. Cullman, Lucy C. Danziger
and Frederick M. Danziger is c/o 641 Lexington Avenue, New York, New York.
(4) Includes 4,400 shares subject to Culbro Options exercisable within 60 days.
Upon consummation of the Distribution such Culbro Options will be
exercisable for approximately the same number of shares of Class A Common
Stock. See "CERTAIN EMPLOYEE BENEFIT MATTERS--Griffin Stock Option Plan."
(5) The address of B. Bros. Realty Limited Partnership ("B. Bros.") is 641
Lexington Avenue, New York, New York. Lucy C. Danziger and John L. Ernst are
the general partners of B. Bros.
(6) The address of such person is Gabelli Funds, Inc., One Corporate Center,
Rye, New York, NY 10580. A form filed with the SEC in September 1991 by
Gabelli Funds, Inc. as subsequently amended indicates that the securities
have been acquired by Gabelli Funds, Inc. and its wholly-owned subsidiaries
on behalf of their investment advisory clients. Culbro has been informed
that no individual client of Gabelli Funds, Inc. has ownership of more than
5% of Culbro's common stock.
(7) Excluding shares held by certain charitable foundations the officers and/or
directors of which include certain officers and directors of the Company.
DESCRIPTION OF CAPITAL STOCK
Griffin's authorized capital stock consists of 10,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"). The following summary description of the capital stock of
Griffin is qualified in its entirety by reference to the form of Amended and
Restated Certificate of Incorporation of Griffin (the "Amended Certificate") and
By-Laws of Griffin (the "By-Laws"), a copy of each of which is filed as an
exhibit to the Registration Statement on Form 10 of which this Information
Statement forms a part.
38
<PAGE>
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, the holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive or conversion rights or other subscription rights. There
are no redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable, and the
shares of Common Stock to be issued in the Distribution will be fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors, without further stockholder authorization, is
authorized to issue, from time to time, Preferred Stock in one or more series,
to establish the number of shares to be included in any such series and to fix
the designations, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof, including
dividend rights and preferences over dividends on the Common Stock, conversion
rights, voting rights, redemption rights, the terms of any sinking fund therefor
and rights upon liquidation. The ability of the Griffin Board to issue Preferred
Stock, while providing flexibility in connection with financing, acquisitions
and other corporate purposes, could have the effect of discouraging, deferring
or preventing a change in control of Griffin or an unsolicited acquisition
proposal, since the issuance of Preferred Stock could be used to dilute the
share ownership of a person or entity seeking to obtain control of Griffin. In
addition, because the Griffin Board has the power to establish the preferences,
powers and rights of the shares of any such series of Preferred Stock, it may
afford the holders of any Preferred Stock preferences, powers and rights
(including voting rights) senior to the rights of the holders of Common Stock,
which could adversely affect the rights of holders of Common Stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 ("Section 203") of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in general, that a stockholder acquiring more
than 15% of the outstanding voting stock of a corporation subject to Section 203
(an "Interested Stockholder") but less than 85% of such stock may not engage in
certain Business Combinations (as defined in Section 203) with the corporation
for a period of three years subsequent to the date on which the stockholder
became an Interested Stockholder unless (i) prior to such date the corporation's
board of directors approved either the Business Combination or the transaction
in which the stockholder became an Interested Stockholder or (ii) the Business
Combination is approved by the corporation's board of directors and authorized
by a vote of at least 66 2/3% of the outstanding voting stock of the corporation
not owned by the Interested Stockholder. The Amended Certificate contains a
provision electing not to be governed by Section 203.
LIMITATIONS ON DIRECTORS' LIABILITY
The Amended Certificate contains a provision which eliminates the personal
liability of a director to Griffin and its stockholders for certain breaches of
his or her fiduciary duty of care as a director.
This provision does not, however, eliminate or limit the personal liability
of a director (i) for any breach of such director's duty of loyalty to Griffin
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Delaware statutory provisions making directors personally liable, under a
negligence standard, for unlawful dividends or unlawful stock repurchases or
redemptions or (iv) for any transaction from which the director derived an
39
<PAGE>
improper personal benefit. This provision offers persons who serve on the Board
of Directors of Griffin protection against awards of monetary damages resulting
from breaches of their duty of care (except as indicated above), including
grossly negligent business decisions made in connection with takeover proposals
for Griffin. As a result of this provision, the ability of Griffin or a
stockholder thereof to successfully prosecute an action against a director for a
breach of his duty of care has been limited. However, the provision does not
affect the availability of equitable remedies such as an injunction or recision
based upon a director's breach of his duty of care. The SEC has taken the
position that the provision will have no effect on claims arising under the
federal securities laws.
In addition, the Amended Certificate and By-Laws provide mandatory
indemnification rights, subject to limited exceptions, to any person who was or
is party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person is
or was a director or officer of Griffin, or is or was serving at the request of
Griffin as a director or officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. Such indemnification
rights include reimbursement for expenses incurred by such person in advance of
the final disposition of such proceeding in accordance with the applicable
provisions of the DGCL.
TRANSFER AGENT AND REGISTRAR
Chase Mellon Shareholder Services, LLC is the transfer agent and registrar
for the Common Stock.
POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK
Griffin believes that the power of the Griffin Board to issue additional
authorized but unissued shares of Common Stock and Preferred Stock and to
classify or reclassify unissued shares of Griffin capital stock and thereafter
to cause Griffin to issue such classified or reclassified shares of stock will
provide Griffin with increased flexibility in structuring possible future
financings and acquisitions and in meeting other needs which may arise. The
additional classes or series, as well as the Common Stock and Preferred Stock,
will be available for issuance without further action by Griffin's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which Griffin's securities may be
listed or traded. Although the Griffin Board has no intention at the present
time of doing so, it could authorize Griffin to issue a class or series that
could, depending upon the terms of such class or series, delay, defer or prevent
a transaction or a change in control of Griffin that might involve a premium
price for holders of Common Stock or otherwise be in their best interests.
DIVIDEND POLICY
The payment and amount of cash dividends on the Common Stock after the
Distribution will be subject to the discretion of the Griffin Board. Griffin's
dividend policy will be reviewed by Griffin's Board of Directors from time to
time as may be appropriate and payment of dividends on the Common Stock will
depend upon Griffin's financial position, capital requirements and other factors
as the Griffin Board deems relevant. Subject to the foregoing, Griffin presently
does not intend to pay cash dividends in the foreseeable future.
DESCRIPTION OF CERTAIN INDEBTEDNESS
Griffin presently does not have any material indebtedness. It is expected,
however, that Griffin will explore a variety of financing options, including the
possible establishment of a revolving credit facility, in order to fund future
real estate development opportunities. The terms and conditions of future debt
instruments of Griffin or its subsidiaries may impose restrictions on Griffin
and its subsidiaries that affect, among other things, their ability to incur
debt, pay dividends or make distributions, make acquisitions, create liens, sell
assets, and make certain investments. In addition, the terms and conditions of
such indebtedness may restrict the ability of Griffin to pay dividends except
under certain circumstances.
40
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after consummation of the Distribution, Griffin will have
outstanding a number shares of Common Stock equal to the number of shares of
Culbro Common Stock outstanding immediately prior to the Distribution. As of
June 2, 1997, there were 4,559,132 shares of Culbro Common Stock outstanding.
Griffin intends to file a registration statement on Form S-8 under the
Securities Act to register the sale of 700,000 shares of Common Stock reserved
for issuance under the Griffin Stock Option Plan, including 450,000 shares of
Common Stock issuable upon exercise of outstanding Culbro Options following the
Distribution and 250,000 shares of Common Stock issuable upon exercise of newly
issued options under the Griffin Stock Option Plan. See "CERTAIN EMPLOYEE
BENEFIT MATTERS--Griffin Stock Option Plan." As a result, any shares of Common
Stock issued upon exercise of such stock options will be available, subject to
special rules for affiliates, for resale in the public market.
In general, under Rule 144, as currently in effect, (i) a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares of
Common Stock as to which at least two years have elapsed since such shares were
sold by Griffin or by an affiliate of Griffin in a transaction or chain of
transactions not involving a public offering ("restricted securities") or (ii)
an affiliate of Griffin who holds shares of Common Stock that are not restricted
securities may sell, within any three-month period, a number of such shares that
does not exceed the greater of 1% of the Common Stock then outstanding or the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding the date on which notice of such sale required under Rule 144 was
filed. Sales under Rule 144 also are subject to certain provisions relating to
the manner and notice of sale and availability of current public information
about Griffin. Affiliates of Griffin must comply with the requirements of Rule
144, including the one-year holding period requirement, to sell shares of Common
Stock that are restricted securities. Furthermore, if a period of at least two
years has elapsed from the date restricted securities were acquired from Griffin
or an affiliate of Griffin, a holder of such restricted securities who is not an
affiliate of Griffin at the time of the sale and has not been an affiliate of
Griffin at any time during the three months prior to such sale would be entitled
to sell such shares without regard to the volume limitation and other conditions
described above.
All shares of Common Stock will be eligible for sale in the public market
immediately after consummation of the Distribution; PROVIDED, that all of such
shares held by the members of the Cullman & Ernst Group may be resold only
pursuant to, and in accordance with, the volume, manner of sale and other
conditions of Rule 144 described above.
Prior to the Distribution, there has been no public market for the Common
Stock. Although Griffin can make no prediction as to the effect, if any, that
sales of shares of Common Stock by the Cullman & Ernst Group or any other person
would have on the market price prevailing from time to time, sales of
substantial amounts of Common Stock (including shares issued upon the exercise
of stock options) or the perception that such sales could occur, could adversely
affect prevailing market prices.
41
<PAGE>
ADDITIONAL INFORMATION
Griffin has filed with the Commission a Registration Statement on Form 10
under the Exchange Act with respect to the Common Stock described herein. This
Information Statement does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Further
information may be obtained from the Registration Statement and such exhibits
and schedules. Copies of these documents may be inspected at and obtained at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at 7
World Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Such reports and other documents
may be obtained from the web site that the Commission maintains at
http://www.sec.gov. Copies of such information can also be obtained by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
Following the Distribution, Griffin will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. Additionally, Griffin will be subject to the
proxy solicitation requirements of the Exchange Act and will furnish annual
reports containing audited financial statements to its stockholders in
connection with its annual meetings of stockholders.
No person is authorized to give any information or to make any
representations other than those contained in this Information Statement. Any
other information or representations given or made must not be relied upon as
having been authorized. This Information Statement does not constitute an offer
to sell or a solicitation of an offer to buy any securities. The delivery of
this Information Statement must not under any circumstances be construed as an
implication that there has been no change in the affairs of Griffin subsequent
to the date of this Information Statement.
42
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INTERIM FINANCIAL STATEMENTS
Consolidated Statement of Operations for the Thirteen Weeks Ended March 2, 1996 and
March 1, 1997....................................................................... F-2
Consolidated Balance Sheet as of November 30, 1996 and March 1, 1997................. F-3
Consolidated Statement of Cash Flows for the Thirteen Weeks Ended March 2, 1996 and
March 1, 1997....................................................................... F-4
Notes to Consolidated Financial Statements........................................... F-5
ANNUAL FINANCIAL STATEMENTS
Report of Independent Accountants.................................................... F-9
Combined Statement of Operations for the Fiscal Years Ended December 3, 1994,
December 2, 1995 and November 30, 1996.............................................. F-10
Combined Balance Sheet as of December 2, 1995 and November 30, 1996 and Pro Forma
Combined Balance Sheet as of November 30, 1996...................................... F-11
Combined Statement of Cash Flows for the Fiscal Years Ended December 3, 1994,
December 2, 1995 and November 30, 1996.............................................. F-12
Notes to Combined Financial Statements............................................... F-13
</TABLE>
F-1
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED,
----------------------------
MARCH 2, 1996 MARCH 1, 1997
------------- -------------
<S> <C> <C>
Net sales and other revenue........................................................ $ 3,352 $ 2,725
Costs and expenses:
Cost of goods sold............................................................... 2,408 1,943
Selling, general and administrative expenses..................................... 2,568 3,208
------------- -------------
Operating loss..................................................................... (1,624) (2,426)
Loss from equity investments in Centaur............................................ (18) (22)
Other nonoperating income, net..................................................... 337 --
Interest expense................................................................... 1,902 799
------------- -------------
Loss before income tax benefit..................................................... (3,207) (3,247)
Income tax benefit................................................................. (1,240) (1,234)
------------- -------------
Loss from continuing operations.................................................... (1,967) (2,013)
Income from discontinued operation, net of taxes of $321........................... 496 --
------------- -------------
Net loss........................................................................... $ (1,471) $ (2,013)
------------- -------------
------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, 1996
----------------- MARCH 1, 1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................................... $ 7,371 $ 6,498
Accounts receivable, less allowance of $302 and $304........................... 3,962 1,730
Inventories.................................................................... 27,530 30,109
Deferred income taxes.......................................................... 4,047 2,783
Other current assets........................................................... 1,158 801
-------- -------------
TOTAL CURRENT ASSETS........................................................... 44,068 41,921
Property and equipment, net.................................................... 12,676 12,671
Real estate held for sale or lease, net........................................ 26,862 27,154
Investment in Centaur Communications, Ltd...................................... 14,695 14,673
Other assets, including investment in real estate joint venture of $3,403 and
$3,348....................................................................... 3,474 3,454
-------- -------------
TOTAL ASSETS................................................................... $ 101,775 $ 99,873
-------- -------------
-------- -------------
LIABILITIES AND CULBRO INVESTMENT
CURRENT LIABILITIES
Accounts payable and accrued liabilities....................................... $ 7,093 $ 3,448
Long-term debt due within one year............................................. 277 242
-------- -------------
TOTAL CURRENT LIABILITIES...................................................... 7,370 3,690
Long-term debt................................................................. 38,846 2,896
Other noncurrent liabilities................................................... 8,110 2,995
-------- -------------
TOTAL LIABILITIES.............................................................. 54,326 9,581
CULBRO INVESTMENT.............................................................. 47,449 90,292
-------- -------------
TOTAL LIABILITIES AND CULBRO INVESTMENT........................................ $ 101,775 $ 99,873
-------- -------------
-------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED,
----------------------------
<S> <C> <C>
MARCH 2, 1996 MARCH 2, 1997
------------- -------------
OPERATING ACTIVITIES:
Net loss........................................................................... $ (1,471) $ (2,013)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization...................................................... 575 504
Income from discontinued operation, before tax..................................... (817) --
Loss from equity investment in Centaur............................................. 18 22
Discount and interest on subordinated note......................................... 587 --
Accretion and dividend income on Series B preferred stock.......................... (587) --
Deferred income taxes.............................................................. 1,276 (313)
Changes in assets and liabilities, net of effect of Liability Assumption:
Accounts receivable.............................................................. 1,875 2,221
Inventories...................................................................... (1,778) (2,579)
Real estate held for sale or lease............................................... 112 (475)
Accounts payable and accrued liabilities......................................... (1,395) (2,111)
Other.............................................................................. 1,103 (252)
------------- -------------
Net cash used in operating activities of continuing operations..................... (502) (4,996)
Cash used in operating activities of discontinued operation........................ (317) --
------------- -------------
Net cash used in operating activities.............................................. (819) (4,996)
------------- -------------
INVESTING ACTIVITIES:
Additions to property and equipment................................................ (143) (327)
Investing activities of discontinued operation..................................... (321) --
------------- -------------
Net cash used in investing activities.............................................. (464) (327)
------------- -------------
FINANCING ACTIVITIES:
Net transactions with Culbro, excluding Liability Assumption....................... (7,558) (2,765)
Payments of debt................................................................... (81) (37)
Increase in debt................................................................... 5,000 7,252
------------- -------------
Net cash (used in) provided by financing activities................................ (2,639) 4,450
------------- -------------
Net decrease in cash and cash equivalents.......................................... (3,922) (873)
Cash and cash equivalents at beginning of period................................... 7,687 7,371
------------- -------------
Cash and cash equivalents at end of period......................................... $ 3,765 $ 6,498
------------- -------------
------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements of Griffin Land & Nurseries
("Griffin"), a wholly owned subsidiary of Culbro Corporation ("Culbro") have
been prepared in conformity with the standards of accounting measurement set
forth in Accounting Principles Board Opinion No. 28 and any amendments thereto
adopted by the Financial Accounting Standards Board. Also, the financial
statements have been prepared in accordance with the accounting policies stated
in Griffin's audited 1996 Combined Financial Statements and should be read in
conjunction with the Notes to Combined Financial Statements appearing in that
report. All adjustments, comprising only normal recurring adjustments, which
are, in the opinion of management, necessary for a fair presentation of results
for the interim periods have been reflected.
The results in the 1996 quarter include CMS Gilbreth Packaging Systems, Inc.
("CMS Gilbreth") as a discontinued operation. This business was sold in the 1996
fourth quarter.
The results of operations for the thirteen week period ended March 1, 1997
are not necessarily indicative of the results to be expected for the full year.
2. CERTAIN TRANSACTIONS
Griffin, Culbro and General Cigar Holdings, Inc. ("GC Holdings"), a Culbro
subsidiary, entered into a Distribution Agreement (the "Distribution Agreement")
on February 27, 1997. The Distribution Agreement provided for (i) the
consummation of the Asset Transfers (see below), (ii) the Distribution of
Griffin's common stock to the existing shareholders of Culbro (the
"Distribution") following the initial public offering (the "Offering") of GC
Holdings Class A common stock, and (iii) following the Distribution, the merger
of Culbro, subject to certain conditions, with and into GC Holdings (the
"Merger"). The Offering was completed on February 28, 1997. The Distribution is
principally contingent upon (i) either a favorable tax ruling (which Culbro has
applied for) or an opinion of counsel satisfactory to Culbro that the
Distribution constitutes a tax free organization under Section 355 of the
Internal Revenue Code and (ii) approval of the Merger by the holders of 66 2/3%
of the outstanding Culbro common stock.
Pursuant to the Distribution Agreement, Culbro transferred to Griffin
substantially all the non-tobacco related assets of Culbro, including: (i) all
of the outstanding common stock of Imperial Nurseries, Inc., a wholly owned
subsidiary of Culbro; (ii) approximately 5,500 acres of land in Connecticut and
Florida, as well as nursery wholesale service centers; (iii) Culbro's interests
in Eli Witt and assets previously owned by Eli Witt; (iv) its 25% interest in
Centaur Communications, Ltd. ("Centaur"); and (v) all licenses, permits,
accounts receivable, prepaid expenses, reserves and other assets (other than
cash) related to the real estate and nursery businesses. The Distribution
Agreement also provided for the assumption by Griffin of all of the liabilities
related to the businesses and assets transferred to Griffin from Culbro.
Pursuant to the Distribution Agreement, Griffin was given $7 million in cash.
All of the transferred assets and related liabilities are included in the
accompanying consolidated financial statements at Culbro's historical cost.
The Distribution Agreement also provided that, on February 27, 1997, GC
Holdings assumed all of Culbro general corporate debt and certain other
liabilities, principally retirement obligations, which are included in Griffin's
historical financial statements (the "Liability Assumption"). See Note 3 for the
pro forma effect of the Liability Assumption on Griffin's results of operations.
F-5
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. CERTAIN TRANSACTIONS (CONTINUED)
As a result of the transactions described above, Culbro is a holding
company, substantially all of the assets of which are the stock of Griffin and
GC Holdings. Pursuant to the terms of the Distribution Agreement, Griffin and GC
Holdings will operate independently of each other.
The Distribution Agreement also provides that Culbro undertake a pro rata
distribution of Griffin common stock to the shareholders of Culbro.
3. CONSOLIDATED CONDENSED PRO FORMA FINANCIAL INFORMATION
The following consolidated condensed unaudited pro forma statement of
operations of Griffin gives effect to the Liability Assumption by GC Holdings as
if it had been completed at the beginning of the respective periods. The
unaudited pro forma statement of operations for the 1996 first quarter also
gives effect to the use of the proceeds from the sale of CMS Gilbreth and the
exchange of Series B preferred stock of Eli Witt in satisfaction of Griffin's
obligations to a third party on the related subordinated note payable
(transactions which were completed in the 1996 fourth quarter) as if they had
been completed at the beginning of the 1996 first quarter. The Liability
Assumption is already reflected in Griffin's March 1, 1997 balance sheet. The
consolidated condensed unaudited pro forma statement of operations presented
herein may not necessarily reflect the results of operations had these
transactions actually taken place on the assumed dates.
CONSOLIDATED CONDENSED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED,
----------------------------
<S> <C> <C>
MARCH 2, 1996 MARCH 1, 1997
------------- -------------
Net sales.......................................................................... $ 3,352 $ 2,725
------------- -------------
Operating loss..................................................................... (1,624) (2,426)
Loss from equity investment........................................................ (18) (22)
Interest expense................................................................... 153 69
------------- -------------
Loss before income tax benefit..................................................... (1,795) (2,517)
Income tax benefit................................................................. (689) (949)
------------- -------------
Loss from continuing operations.................................................... $ (1,106) $ (1,568)
------------- -------------
------------- -------------
</TABLE>
4. RELATED PARTY TRANSACTIONS
CULBRO INVESTMENT
Griffin maintained an intercompany account with Culbro in which intercompany
transactions, including cash transfers and the liability for benefit and
insurance costs and allocated general and administrative expenses described
below, were recorded. The balance in the intercompany account at the end of each
period presented has been included in Culbro Investment in the consolidated
balance sheet. The Culbro
F-6
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
Investment account also includes the cumulative net earnings of Griffin and its
capital stock. The changes in the Culbro Investment account are summarized as
follows:
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED
----------------------------
MARCH 2, 1996 MARCH 1, 1997
------------- -------------
<S> <C> <C>
Balance beginning of period........................................................ $ 61,299 $ 47,449
Net loss........................................................................... (1,471) (2,013)
------------- -------------
59,828 45,436
------------- -------------
Transactions with Culbro:
Liability Assumption............................................................. -- 47,621
Net operating cash flow transferred to Culbro.................................... (7,026) (1,957)
Allocated Culbro general and administrative expenses............................. 387 426
Intercompany income tax benefits................................................. (919) (1,234)
------------- -------------
Total transactions with Culbro, net................................................ (7,558) 44,856
------------- -------------
Balance end of period.............................................................. $ 52,270 $ 90,292
------------- -------------
------------- -------------
</TABLE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
A portion of Culbro management time and resources were related to Griffin's
operations, and Culbro also performed certain specific administrative functions
for Griffin, including legal, tax, treasury, human resources and internal audit.
The consolidated statement of operations reflects general and administrative
expenses of $0.4 million in each of the thirteen-week periods ended March 2,
1996 and March 1, 1997, allocated by Culbro to Griffin for these services. These
charges were based principally on Griffin's proportionate share of expenses
relating to the Culbro corporate activities associated with Griffin's operations
and are considered by management to be reasonable. These amounts may not
necessarily be indicative of the actual general and administrative expenses
Griffin would have incurred had it operated independently during the periods
presented.
5. LONG-TERM DEBT
Long-term debt includes:
<TABLE>
<CAPTION>
NOVEMBER 30, 1996 MARCH 1, 1997
----------------- -------------
<S> <C> <C>
Credit Agreement........................................... $ 36,000 $ --
Mortgages.................................................. 2,644 2,626
Capital leases............................................. 479 512
------- ------
Total...................................................... 39,123 3,138
Less: due within one year.................................. 277 242
------- ------
Total long-term debt....................................... $ 38,846 $ 2,896
------- ------
------- ------
</TABLE>
F-7
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
On February 27, 1997, pursuant to the Distribution Agreement, Culbro's
general corporate debt that had been included in Griffin's financial statements
was assumed by GC Holdings, and therefore will not be part of Griffin's debt
structure prospectively.
6. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
INVENTORIES
Inventories consists of:
<TABLE>
<CAPTION>
NOVEMBER 30, 1996 MARCH 1, 1997
----------------- -------------
<S> <C> <C>
Raw materials and supplies................................. $ 742 $ 1,126
Work-in-process............................................ 15,112 16,662
Finished goods............................................. 11,676 12,321
------- -------------
$ 27,530 $ 30,109
------- -------------
------- -------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIVES NOVEMBER 30, 1996 MARCH 1, 1997
---------------------- ----------------- -------------
<S> <C> <C> <C>
Land............................... $ 5,982 $ 5,998
Buildings and improvements......... 10 to 40 years 3,807 3,807
Machinery and equipment............ 3 to 20 years 12,337 12,438
------- -------------
22,126 22,243
Accumulated depreciation........... (9,450) (9,572)
------- -------------
$ 12,676 $ 12,671
------- -------------
------- -------------
</TABLE>
F-8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Griffin Land & Nurseries, Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations and of cash flows present fairly, in all material
respects, the combined financial position of Griffin Land & Nurseries, Inc. (a
wholly-owned subsidiary of Culbro Corporation) at December 2, 1995 and November
30, 1996 and the results of their combined operations and their combined cash
flows for each of the fiscal years ended December 3, 1994, December 2, 1995 and
November 30, 1996 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
April 7, 1997
F-9
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED,
--------------------------------
DEC. 3, DEC. 2, NOV. 30,
1994 1995 1996
---------- --------- ---------
<S> <C> <C> <C>
Net sales and other revenue..................................................... $ 43,024 $ 41,756 $ 46,531
Costs and expenses:
Cost of goods sold............................................................ 30,034 28,389 34,210
Selling, general and administrative expenses.................................. 14,257 12,557 12,666
Other nonrecurring expense.................................................... 3,600 -- 900
---------- --------- ---------
Operating (loss) profit......................................................... (4,867) 810 (1,245)
Gain on sale of Eli Witt stock.................................................. 2,691 -- --
(Loss) income from equity investments, net...................................... (1,728) (153) 303
Other nonoperating income, net.................................................. 1,446 923 1,917
Interest expense................................................................ 7,978 8,193 7,805
---------- --------- ---------
Loss before income tax benefit.................................................. (10,436) (6,613) (6,830)
Income tax benefit.............................................................. (3,279) (2,348) (2,767)
---------- --------- ---------
Loss from continuing operations................................................. (7,157) (4,265) (4,063)
---------- --------- ---------
Discontinued operation:
Loss on sale of discontinued operation, net of tax benefit and reversal of
deferred taxes of $4,182.................................................... -- -- (1,311)
Income from discontinued operation, net of taxes (1994--$2,273; 1995--$2,580;
1996--$527)................................................................. 3,324 3,685 768
---------- --------- ---------
Net income (loss) from discontinued operation................................... 3,324 3,685 (543)
---------- --------- ---------
Net loss........................................................................ $ (3,833) $ (580) $ (4,606)
---------- --------- ---------
---------- --------- ---------
</TABLE>
See Notes to Combined Financial Statements.
F-10
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 2, NOV. 30,
1995 1996
---------- ---------- PRO FORMA FOR
LIABILITY
ASSUMPTION (A)
NOV. 30, 1996
---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENTS ASSETS
Cash and cash equivalents................................................ $ 7,687 $ 7,371 $ 7,371
Accounts receivable, less allowance of $338 and $302..................... 3,961 3,962 3,962
Inventories.............................................................. 25,931 27,530 27,530
Deferred income taxes.................................................... -- 4,047 2,470
Other current assets..................................................... 1,572 1,158 1,158
---------- ---------- ---------------
TOTAL CURRENT ASSETS..................................................... 39,151 44,068 42,491
Property and equipment, net.............................................. 12,619 12,676 12,676
Real estate held for sale or lease, net.................................. 31,907 26,862 26,862
Investment in preferred stock of Eli Witt................................ 15,122 -- --
Investment in Centaur Communications, Ltd................................ 14,392 14,695 14,695
Other assets, including investments in real estate joint ventures of
$7,964 and $3,403...................................................... 10,356 3,474 3,474
Net assets of discontinued operation..................................... 42,108 -- --
---------- ---------- ---------------
TOTAL ASSETS............................................................. $ 165,655 $ 101,775 $ 100,198
---------- ---------- ---------------
---------- ---------- ---------------
LIABILITIES AND CULBRO INVESTMENT
CURRENT LIABILITIES
Accounts payable and accrued liabilities................................. $ 8,114 $ 7,093 $ 5,559
Long-term debt due within one year....................................... 7,968 277 277
---------- ---------- ---------------
TOTAL CURRENT LIABILITIES................................................ 16,082 7,370 5,836
Long-term debt........................................................... 72,737 38,846 2,846
Deferred income taxes.................................................... 3,692 -- --
Other noncurrent liabilities and deferred credit......................... 11,845 8,110 3,662
---------- ---------- ---------------
TOTAL LIABILITIES........................................................ 104,356 54,326 12,344
COMMITMENTS AND CONTINGENCIES (SEE NOTE 14) -- -- --
CULBRO INVESTMENT........................................................ 61,299 47,449 87,854
---------- ---------- ---------------
TOTAL LIABILITIES AND CULBRO INVESTMENT.................................. $ 165,655 $ 101,775 $ 100,198
---------- ---------- ---------------
---------- ---------- ---------------
</TABLE>
- ------------------------
(a) Reflects the reduction of certain liabilities that were transferred to and
assumed by General Cigar Holdings, Inc. pursuant to a Distribution
Agreement. The liabilities include principally the Culbro debt of $36
million, certain accrued retirement obligations and other items.
See Notes to Combined Financial Statements.
F-11
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED,
---------------------------------
DEC. 3, DEC. 2, NOV. 30,
1994 1995 1996
---------- --------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................................................ $ (3,833) $ (580) $ (4,606)
Adjustments to reconcile net loss to cash provided by (used in) operating
activities:
Depreciation and amortization................................................... 2,142 2,416 2,405
Loss (income) from discontinued operation, before tax........................... (5,597) (6,265) 4,198
Gain on sale of Eli Witt common stock........................................... (2,691) -- --
Loss (income) from equity investments........................................... 1,728 153 (303)
Discount and interest on subordinated note...................................... 1,446 2,349 2,167
Accretion and dividend income on preferred stock of Eli Witt.................... (1,446) (2,349) (2,167)
Proceeds from sale of investment in real estate joint venture................... -- -- 4,042
Deferred income taxes........................................................... (2,995) 1,533 (7,739)
Changes in assets and liabilities which increased (decreased) cash:
Accounts receivable........................................................... (991) (177) (303)
Inventories................................................................... (554) (1,159) (1,599)
Real estate held for sale or lease............................................ 3,248 611 506
Accounts payable and accrued liabilities...................................... (4,714) 499 (1,474)
Other, net...................................................................... 2,612 (902) 2,648
---------- --------- ----------
Net cash used in operating activities of continuing operations.................. (11,645) (3,871) (2,225)
Cash provided by operating activities of discontinued operation................. 10,235 9,435 3,547
---------- --------- ----------
Net cash (used in) provided by operating activities............................. (1,410) 5,564 1,322
---------- --------- ----------
INVESTING ACTIVITIES:
Proceeds from sale of discontinued operation.................................... -- -- 35,030
Additions to property and equipment............................................. (625) (847) (1,378)
Investment in Eli Witt subordinated note........................................ -- (5,000) --
Proceeds from Eli Witt repayment of a mortgage loan to the Company.............. 8,000 -- --
Proceeds from the sale of Eli Witt common stock................................. 672 -- --
Investing activities of discontinued operation.................................. (2,317) (1,450) (947)
---------- --------- ----------
Net cash provided by (used in) investing activities............................. 5,730 (7,297) 32,705
---------- --------- ----------
FINANCING ACTIVITIES:
Net transactions with Culbro.................................................... 15,854 17,453 (9,244)
Payments of debt................................................................ (27,928) (14,829) (25,099)
Increase in debt................................................................ 11,669 -- --
---------- --------- ----------
Net cash (used in) provided by financing activities............................. (405) 2,624 (34,343)
---------- --------- ----------
Net increase (decrease) in cash and cash equivalents............................ 3,915 891 (316)
Cash and cash equivalents at beginning of year.................................. 2,881 6,796 7,687
---------- --------- ----------
Cash and cash equivalents at end of year........................................ $ 6,796 $ 7,687 $ 7,371
---------- --------- ----------
---------- --------- ----------
</TABLE>
See Notes to Combined Financial Statements.
F-12
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. CERTAIN TRANSACTIONS
The accompanying combined financial statements include the accounts of
Griffin Land & Nurseries, Inc. ("Griffin") and reflect its financial position,
results of operations and cash flows after elimination of intercompany accounts
and transactions. Prior to March 18, 1997, Griffin was known as Culbro Land
Resources, Inc. Griffin is a wholly owned subsidiary of Culbro Corporation
("Culbro").
Griffin, Culbro and General Cigar Holdings, Inc. ("GC Holdings"), a Culbro
subsidiary, entered into a Distribution Agreement (the "Distribution Agreement")
on February 27, 1997. The Distribution Agreement provided for (i) the
consummation of the Asset Transfers (see below), (ii) the distribution of
Griffin's common stock to the existing shareholders of Culbro (the
"Distribution") following the initial public offering (the "Offering") of GC
Holdings Class A common stock, and (iii) following the Distribution, the merger
of Culbro, subject to certain conditions, with and into GC Holdings (the
"Merger"). The Offering was completed on February 28, 1997. The Distribution is
contingent principally upon (i) either a tax ruling (which has been applied for
by Culbro) or an opinion of counsel satisfactory to Culbro that the Distribution
constitutes a tax free organization under Section 355 of the Internal Revenue
Code and (ii) approval of the Merger by the holders of 66 2/3% of the
outstanding Culbro common stock.
Pursuant to the Distribution Agreement, Culbro transferred to Griffin
substantially all the non-tobacco related assets of Culbro, including: (i) all
of the outstanding common stock of Imperial Nurseries, Inc., a wholly owned
subsidiary of Culbro; (ii) approximately 5,500 acres of land in Connecticut and
Florida, as well as nursery wholesale service centers; (iii) Culbro's interests
in Eli Witt and assets previously owned by The Eli Witt Company ("Eli Witt")
(see Note 12); (iv) its 25% interest in Centaur Communications, Ltd.
("Centaur"); and (v) all licenses, permits, accounts receivable, prepaid
expenses, reserves and other current assets (other than cash) related to the
real estate and landscape nursery businesses. The Distribution Agreement also
provided for the assumption by Griffin of all of the liabilities related to the
businesses and assets transferred to Griffin from Culbro. Pursuant to the
Distribution Agreement, $7.0 million in cash was transferred to Griffin and is
reflected on the historical balance sheets. Griffin continues to operate the
real estate business owned prior to the Asset Transfers (see below). All of the
transferred assets and related liabilities are included in the accompanying
combined financial statements at Culbro's historical cost.
The Distribution Agreement also provided for the transfer to and assumption
by GC Holdings of all of Culbro's general corporate debt and certain other
liabilities, principally retirement obligations, which are included in Griffin's
historical financial statements. See Note 4 for the pro forma effect of these
liability transfers on Griffin's financial position and results of operations.
As a result of the transfers described above ( the "Asset Transfers"),
Culbro is a holding company, substantially all of the assets of which are the
stock of Griffin and GC Holdings. Pursuant to the terms of the Distribution
Agreement, Griffin and GC Holdings will operate independently of each other.
Prior to March 18, 1997, Culbro held all 1,000 then, issued and outstanding
shares of common stock, par value $0.01 per share, of Griffin (the "Original
Shares"). On March 18, 1997, pursuant to an amended and restated certificate of
incorporation of Griffin, each Original Share was exchanged for one share of
Class B Common Stock, par value $0.01 per share, of Griffin (the "Class B Common
Stock"). Prior to the Distribution Date, Griffin intends to file an Amended and
Restricted Certificate of Incorporation, the form of which is filed as an
exhibit to the Registration Statement on Form 10 of which this Information
Statement forms a part, pursuant to which each share of Class B Common Stock
will be exchanged for one
F-13
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. CERTAIN TRANSACTIONS (CONTINUED)
share of newly-authorized common stock, par value $0.01 per share (the "Common
Stock"). Prior to the Distribution, Griffin will effect a stock split such that
the number of issued and outstanding shares of Common Stock will equal the
number of then-outstanding shares of common stock, par value $1, of Culbro. The
Distribution Agreement provides for the pro rata distribution by Culbro to the
shareholders of Culbro of the Common Stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined financial statements of Griffin include the
accounts of Griffin's real estate operations, Imperial Nurseries, Inc.
("Imperial Nurseries") and CMS Gilbreth Packaging Systems, Inc. ("CMS
Gilbreth"), which was sold in 1996 (see Note 3) and is reported as a
discontinued operation in these statements. The combined financial statements
have been presented as if Griffin had operated as an independent stand-alone
entity for all periods presented. Such financial statements may not necessarily
present the financial position, results of operations and cash flows Griffin
would have reported had it actually operated as a stand-alone entity. See Note 4
for combined condensed unaudited pro forma financial information. All
intercompany transactions have been eliminated.
Griffin accounts for its investments in Centaur, Eli Witt and real estate
joint ventures under the equity method. Prior to April 1994, Eli Witt was a
consolidated subsidiary of Griffin. Results of real estate joint ventures are
included in operating profit.
BUSINESS SEGMENTS
Griffin is engaged in the landscape nursery and real estate businesses.
Imperial Nurseries, the landscape nursery segment, is engaged in growing plants
which are sold principally to garden centers, wholesalers and merchandisers, and
operating sales and service centers which sell principally to landscapers.
Griffin's real estate segment builds and manages commercial and industrial
properties and develops residential subdivisions on real estate in Connecticut
and Massachusetts that was previously owned by Culbro and transferred to Griffin
in accordance with the Distribution Agreement.
FISCAL YEAR
Griffin's fiscal year ends on the Saturday nearest November 30. Fiscal years
1994, 1995 and 1996 ended December 3, 1994, December 2, 1995 and November 30,
1996, respectively. Fiscal 1994 included 53 weeks, and fiscal 1995 and fiscal
1996 each contained 52 weeks.
INVENTORIES
Griffin's inventories are stated at the lower of cost or market using the
average cost method. Raw materials and work in process are landscape nursery
stock, a substantial amount of which will not be used or sold within one year.
It is industry practice to include such inventories in current assets.
F-14
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is determined on a
straight-line basis over the estimated useful asset lives for financial
reporting purposes and principally on accelerated methods for tax purposes.
REVENUE AND GAIN RECOGNITION
In the landscape nursery business, sales and the related cost of sales are
recognized upon shipment of products. Sales returns are not material. In the
real estate business, gains on real estate sales are recognized in accordance
with SFAS No. 66, "Accounting for Sales of Real Estate."
FAIR VALUE OF FINANCIAL INSTRUMENTS
The amounts included in the financial statements for accounts receivable,
accounts payable and accrued liabilities reflect their fair values because of
the short-term maturity of these instruments. The fair values of Griffin's other
financial instruments are discussed in Note 8.
EARNINGS PER SHARE
Griffin is a wholly owned subsidiary of Culbro and its historical capital
structure does not permit a meaningful presentation of earnings per share.
Accordingly, earnings per share are not presented herein.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This Statement requires that long-lived
assets and certain intangibles held and used by a business entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Prior to the issuance of
this Statement, Griffin periodically reviewed its long-lived assets, considering
future performance of those assets and the need for adjustments to their
carrying values. Griffin has adopted this Statement and performs such reviews in
accordance with the methods prescribed by SFAS No. 121.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation." This Statement establishes a fair value method of
accounting for, or disclosing, stock-based compensation plans. Griffin intends
to adopt the disclosure provisions of this statement which require disclosing
the pro forma effect on net income and earnings per share of the fair value
method of accounting for stock-based compensation. The adoption of the
disclosure provisions will not affect combined financial condition, results of
operations, or cash flows.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenue and expenses during the period reported. Actual results
could differ from those estimates.
F-15
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Estimates are used when accounting for allowance for uncollectible accounts
receivable, depreciation and amortization, employee benefit plans, taxes, and
contingencies, among others.
3. BUSINESS DISPOSITION
On November 8, 1996, Griffin completed the sale of its labeling and
packaging systems business, CMS Gilbreth. Net proceeds, after sale expenses,
were $35.0 million, and Griffin recorded a pretax loss of $5.5 million on the
sale, net of operating profit of $1.6 million earned during the phase-out
period. The sale proceeds were used to repay debt.
CMS Gilbreth is reported as a discontinued operation in the accompanying
financial statements. Net sales of CMS Gilbreth were $51.1 million and $51.0
million in 1994 and 1995, respectively, and $43.6 million in 1996 through the
date of sale.
4. COMBINED CONDENSED PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following combined condensed unaudited pro forma statement of operations
of Griffin gives effect to: (i) the assumption by GC Holdings of the liability
portion of the Asset Transfers, (ii) the use of proceeds from the sale of CMS
Gilbreth, (iii) the exchange of preferred stock of Eli Witt in satisfaction of
Griffin's obligations to a third party under an exchangeable subordinated note
and (iv) the elimination of the allocated portion of Culbro's nonrecurring
expense for the cost of terminating a long-term compensation plan and severance
for certain employees in contemplation of the Distribution, that will not be
incurred in the future as a result of the Distribution. The combined condensed
unaudited pro forma statement of operations assumes that these transactions took
place at the beginning of fiscal 1996. The combined condensed unaudited pro
forma balance sheet reflects the assumption by GC Holdings of the liability
portion of the Asset Transfers and its effect on related deferred taxes as if
they occurred at the balance sheet date. The effect of the sale of CMS Gilbreth
and the exchange of preferred stock of Eli Witt are reflected (eliminated) in
Griffin's historical 1996 combined balance sheet. The combined condensed
unaudited pro forma financial information presented herein may not necessarily
reflect the results of operations and financial position had these transactions
actually taken place on the assumed dates.
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Net sales.......................................................................... $ 46,531
---------
Operating loss..................................................................... (345)
Income from equity investment...................................................... 303
Interest expense................................................................... 508
---------
Loss before income tax benefit..................................................... (550)
Income tax benefit................................................................. (317)
---------
Loss from continuing operations.................................................... $ (233)
---------
---------
</TABLE>
F-16
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. COMBINED CONDENSED PRO FORMA FINANCIAL INFORMATION (UNAUDITED) (CONTINUED)
COMBINED CONDENSED PRO FORMA BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
NOV. 30,
1996
----------
<S> <C>
Current assets.................................................................... $ 42,491
Property and equipment, net....................................................... 12,676
Real estate held for sale or lease, net........................................... 26,862
All other assets.................................................................. 18,169
----------
Total assets...................................................................... $ 100,198
----------
----------
Current liabilities............................................................... $ 5,836
Long-term debt.................................................................... 2,846
Other noncurrent liabilities...................................................... 3,662
----------
Total liabilities................................................................. 12,344
Culbro Investment................................................................. 87,854
----------
Total liabilities and Culbro Investment........................................... $ 100,198
----------
----------
</TABLE>
F-17
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INDUSTRY SEGMENT INFORMATION
Griffin's businesses operate in two industry segments: landscape nursery and
real estate (see Note 2). Griffin has no operations outside of the United
States, and export sales are not material. Capital expenditures and depreciation
and amortization presented herein include amounts related to capital leases.
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES AND OTHER REVENUE
Landscape nursery.................................................. $ 35,315 $ 34,894 $ 37,045
Real estate........................................................ 7,709 6,862 9,486
---------- ---------- ----------
$ 43,024 $ 41,756 $ 46,531
---------- ---------- ----------
---------- ---------- ----------
OPERATING PROFIT (LOSS)
Landscape Nursery.................................................. $ (604) $ 1,732 $ 1,650
Real estate (a).................................................... (2,241) 1,228 (300)
---------- ---------- ----------
Industry segment totals............................................ (2,845) 2,960 1,350
General corporate expense, net (b)................................. 2,022 2,150 2,595
(Loss) income from equity investments, net......................... (1,728) (153) 303
Other nonoperating income, net..................................... 1,446 923 1,917
Gain on sale of Eli Witt common stock.............................. 2,691 -- --
Interest expense................................................... 7,978 8,193 7,805
---------- ---------- ----------
Loss before income tax benefit..................................... $ (10,436) $ (6,613) $ (6,830)
---------- ---------- ----------
---------- ---------- ----------
IDENTIFIABLE ASSETS
Landscape nursery.................................................. 40,636 42,881 43,948
Real estate........................................................ 42,455 41,228 31,664
---------- ---------- ----------
Industry segment totals............................................ 83,091 84,109 75,612
General corporate.................................................. 40,502 39,438 26,163
Net assets of discontinued operation............................... 43,828 42,108 --
---------- ---------- ----------
$ 167,421 $ 165,655 $ 101,775
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ------------------------
(a) Real estate segment operating loss in 1994 includes a $3.6 million charge
for the write off of development costs expended in earlier years.
(b) General corporate expense in 1996 includes an allocation to Griffin by
Culbro of $0.9 million for the termination of a compensation plan, severance
and other expenses in contemplation of the Distribution (see Note 1).
F-18
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INDUSTRY SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION
CAPITAL EXPENDITURES
------------------------------- -------------------------------
1994 1995 1996 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Landscape nursery...................... $ 594 $ 789 $ 1,258 $ 912 $ 1,132 $ 1,116
Real estate............................ 31 58 120 912 917 889
--------- --------- --------- --------- --------- ---------
Industry segment totals................ 625 847 1,378 1,824 2,049 2,005
General corporate...................... -- -- -- 318 367 400
--------- --------- --------- --------- --------- ---------
$ 625 $ 847 $ 1,378 $ 2,142 $ 2,416 $ 2,405
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
6. RELATED PARTY TRANSACTIONS
CULBRO INVESTMENT
The Company maintained an intercompany account with Culbro in which
intercompany transactions, including cash transfers and the liability for
benefit and insurance costs and allocated general and administrative expenses
described below, were recorded. The balance in the intercompany account at the
end of each period presented has been included in Culbro Investment in the
combined balance sheet. The Culbro Investment account also includes the
cumulative results of Griffin and its capital stock. The changes in the Culbro
Investment account are summarized as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED,
-------------------------------
DEC. 3, DEC. 2, NOV. 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Balance beginning of year.............................................. $ 32,406 $ 44,426 $ 61,299
Net loss............................................................... (3,833) (580) (4,606)
--------- --------- ---------
28,573 43,846 56,693
--------- --------- ---------
Transactions with Culbro:
Net operating cash flow transferred from (to) Culbro................. 14,420 15,141 (5,498)
Allocated Culbro general and administrative expenses................. 2,439 2,080 1,776
Allocated Culbro other nonrecurring expense.......................... -- -- 900
Intercompany income taxes (benefits)................................. (1,006) 232 (6,422)
--------- --------- ---------
Total transactions with Culbro, net.................................... 15,853 17,453 (9,244)
--------- --------- ---------
Balance end of year.................................................... $ 44,426 $ 61,299 $ 47,449
--------- --------- ---------
--------- --------- ---------
Average intercompany balance due to Culbro............................. $ 3,961 $ 20,614 $ 24,718
--------- --------- ---------
--------- --------- ---------
</TABLE>
TREASURY
Through February 27, 1997, Griffin's treasury activities were integrated
into Culbro's cash management system. Griffin's cash receipts were transferred
daily into Culbro's cash account and Griffin's cash disbursement accounts were
reimbursed by Culbro on a daily basis. The difference between cash transferred
by Griffin to Culbro and reimbursements by Culbro to Griffin's disbursement
accounts has been reflected in Culbro Investment in the combined balance sheet.
F-19
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
INTERCOMPANY ACTIVITIES
Griffin's employees participate in certain benefit programs which are
sponsored and administered by Culbro. See Note 9 for discussion of employee
benefit plan costs. Griffin's risk insurance and employee medical coverage are
provided through insurance policies and programs purchased by Culbro on behalf
of Griffin and Culbro's other subsidiaries. The cost of these items was
allocated based on the specific insurance data related to each subsidiary of
Culbro. All direct charges relating to Griffin for these services, and Griffin's
participation in these plans, have been charged to Griffin by Culbro and
included in Griffin's combined financial statements.
A portion of Culbro management time and resources were related to the
operations of Griffin, and Culbro also performed certain specific administrative
functions for Griffin, including legal, tax, treasury, human resources and
internal audit. In addition to the direct charges above for employee benefits
and risk insurance, the combined statement of operations reflects general and
administrative expenses of $2.4 million, $2.1 million and $1.8 million for
fiscal 1994, fiscal 1995 and fiscal 1996, respectively, allocated by Culbro to
Griffin for these services. These charges were based principally on Griffin's
proportionate share of expenses relating to the Culbro corporate activities
associated with Griffin's operations and are considered by management to be
reasonable. These amounts may not necessarily be indicative of the actual
general and administrative expenses Griffin would have incurred had it operated
independently during the years presented.
In lieu of Griffin being charged interest on its intercompany balance with
Culbro, all of the interest on Culbro's general corporate debt is included in
Griffin's statement of operations. All of the general corporate debt of Culbro
is included in Griffin's financial statements because management determined that
this debt related to Culbro's non-tobacco businesses. See Notes 4 and 8.
LEASES
Griffin as lessor and General Cigar Co., Inc. ("General Cigar"), a wholly
owned subsidiary of GC Holdings, as lessee, have entered into a lease for
certain agricultural land in Connecticut and Massachusetts (the "Agricultural
Lease") and, prior to the Distribution, will enter into a lease for certain
commercial space in Connecticut (the "Commercial Lease"). The Agricultural Lease
is for approximately 500 acres of arable land allocated to Griffin for possible
commercial development in the long-term, but which will provide General Cigar
with a source of growing Connecticut Shade wrapper tobacco. General Cigar's use
of the land is limited to the cultivation of cigar wrapper tobacco. The
Agricultural Lease has an initial term of ten years and provides for the
extension of the lease for additional periods thereafter. In addition, at
Griffin's option the Agricultural Lease may be terminated with respect to 100
acres of such land annually upon one year's prior notice. The rent payable by
General Cigar under the Agricultural Lease is approximately equal to the
aggregate amount of all taxes and other assessments payable by Griffin
attributable to the land leased. The Commercial Lease will be for approximately
25,000 square feet of office space in the Griffin Center South office complex in
Bloomfield, Connecticut. The Commercial Lease will have an initial term of ten
years and provides for the extension of the lease for additional annual periods
thereafter. The rent payable by General Cigar under the Commercial Lease will be
at market rates.
F-20
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. INTERCOMPANY INCOME TAXES
All tax liabilities were paid by Culbro and accordingly Griffin's tax
liabilities are reflected in the Culbro Investment account.
Historically, the combined results of operations of Griffin were included in
Culbro's consolidated U.S. federal income tax returns, and will be included in
such returns through the date the Distribution is consummated. The income tax
provisions and deferred tax liabilities have been calculated in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for
Income Taxes" as if Griffin had filed separate tax returns. The income tax
provision (benefit) for fiscal 1994, fiscal 1995 and fiscal 1996 are summarized
as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Continuing operations:
Current federal............................................. $ (2,229) $ (2,973) $ 1,788
Current state and local..................................... (18) (205) 138
Deferred, principally federal............................... (1,032) 830 (4,693)
--------- --------- ---------
Income tax benefit from continuing operations................. (3,279) (2,348) (2,767)
--------- --------- ---------
Discontinued operation:
Current federal............................................. 2,374 2,057 (553)
Current state and local..................................... 365 292 (277)
Deferred, principally federal............................... (466) 231 (2,825)
--------- --------- ---------
Income tax provision (benefit) from discontinued operation.... 2,273 2,580 (3,655)
--------- --------- ---------
Total income tax (benefit) provision.......................... $ (1,006) $ 232 $ (6,422)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reasons for the difference between the United States statutory income
tax rate and the effective rates for continuing operations are shown in the
following table:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax benefit at statutory rates................................ $ (3,548) $ (2,315) $ (2,391)
State and local income taxes.................................. (12) (133) 90
Foreign investment............................................ (119) 54 (106)
Subsidiary loss accounted for under the equity method......... 706 -- --
Other......................................................... (306) 46 (360)
--------- --------- ---------
$ (3,279) $ (2,348) $ (2,767)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-21
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. INTERCOMPANY INCOME TAXES (CONTINUED)
The significant components of the net deferred tax asset (liability) are as
follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Depreciation and amortization...................................................... $ (2,835) $ (1,390)
Postretirement benefit obligations................................................. 782 604
Pension liabilities................................................................ 754 668
Deferred income attributable to deconsolidated subsidiary.......................... (1,483) --
Inventories........................................................................ 1,751 1,880
Other.............................................................................. (2,661) 2,285
--------- ---------
$ (3,692) $ 4,047
--------- ---------
--------- ---------
</TABLE>
In connection with the Distribution Agreement, Culbro and Griffin entered
into a Tax Sharing Agreement which provides, among other things, for the
allocation between Culbro and Griffin of federal, state, local and foreign tax
liabilities for all periods through the Distribution and Merger. With respect to
the consolidated tax returns filed by Culbro, the Tax Sharing Agreement provides
that Griffin will be liable for any amounts that it would have been required to
pay with respect to any deficiencies assessed, generally as if it had filed
separate tax returns.
8. LONG-TERM DEBT
Long-term debt includes:
<TABLE>
<CAPTION>
DEC 2, NOV. 30,
1995 1996
----------- -----------
<S> <C> <C>
Credit Agreement.............................................................. $ 40,000 $ 36,000
Senior Notes.................................................................. 21,000 --
Exchangeable Subordinated Note, 10% (face value $15 million).................. 12,700 --
Mortgages..................................................................... 6,525 2,644
Capital leases................................................................ 480 479
----------- -----------
Total......................................................................... 80,705 39,123
Less: due within one year..................................................... 7,968 277
----------- -----------
Total long-term debt.......................................................... $ 72,737 $ 38,846
----------- -----------
----------- -----------
</TABLE>
F-22
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
8. LONG-TERM DEBT (CONTINUED)
As of November 30, 1996, the annual principal payment requirements under the
terms of the mortgages are $0.1 million for each of the years 1997 through 2001.
The mortgages are on two office buildings and three industrial buildings which
had a combined net book value of $4.4 million at November 30, 1996. The interest
rates on these mortgages range from 9.0% to 10.2%.
On June 5, 1996, Culbro and its banks entered into the Second Amended and
Restated Credit Agreement (the "1996 Credit Agreement") which replaced the
previous 1993 Credit Agreement that was scheduled to terminate in December 1996.
The 1996 Credit Agreement provided $65 million to Culbro and its subsidiaries
for general working capital purposes and an additional $20 million which was
used to repay the balance of Culbro's Senior Notes. Amounts borrowed by Culbro
under these credit facilities were used to fund Griffin's operations and are
reflected in the accompanying combined financial statements. As per the terms of
the Distribution Agreement, the entire amount borrowed under the Credit
Agreement as of the date of the Distribution Agreement was assumed by GC
Holdings, and therefore will not be part of Griffin's debt structure
prospectively.
In October 1996, Griffin's real estate business satisfied a nonrecourse
mortgage of approximately $3.8 million on a commercial property by transferring
the property to the lender in satisfaction of the outstanding mortgage. The net
book value of the property was substantially equal to the mortgage balance.
In November 1996, Griffin exchanged shares of preferred stock of Eli Witt in
satisfaction of the principal and accrued interest on a $15 million subordinated
note payable to a third-party originally due August 1998. Interest expense in
fiscal 1994, fiscal 1995 and fiscal 1996 included $0.5 million, $0.9 million and
$0.8 million, respectively, for amortization of the original issue discount on
the subordinated note.
In 1993, Culbro entered into two interest rate swap agreements with major
banks as a hedge against interest rate exposure on its variable rate debt. One
such agreement, to fix the borrowing rate at 4.74% on $30 million of variable
rate debt, expired in March 1996. A similar interest rate swap agreement, that
fixed the borrowing rate at 4.89% on an additional $20 million of variable rate
debt, expired in September 1995. The effect of these swap agreements was to
increase interest expense in fiscal 1994 by $0.4 million, reflecting the excess
of payments made to the banks over payments received. In fiscal 1995 and fiscal
1996, interest expense was reduced by $0.6 million and $0.1 million,
respectively, reflecting payments received from the banks under these
agreements.
Management believes that because the interest rate on the 1996 Credit
Agreement adjusts to current market rates, this debt, as stated on the November
30, 1996 balance sheet, approximated its fair market value. Management also
believes that the amounts reflected on the balance sheet for its other debt
facilities reflected their current market values based on market interest rates
for comparable risks, maturities and collateral.
9. RETIREMENT BENEFITS
PENSION PLAN
Griffin's employees participate in Culbro's noncontributory defined benefit
pension plan, which covers substantially all employees of Culbro and its
subsidiaries. The plan's benefits are based on employees' years of service and
compensation. Contributions to the plan are made in accordance with the
provisions of the Employee Retirement Income Security Act. Pension expense of
$0.2 million, $0.1 million
F-23
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
9. RETIREMENT BENEFITS (CONTINUED)
and $0.1 million for fiscal 1994, fiscal 1995 and fiscal 1996, respectively,
included in the combined statement of operations, reflects Griffin's direct
share of Culbro's consolidated pension expense based on the benefit costs
attributable to its employees, as determined by the plan's actuaries.
As per the terms of the Distribution Agreement, the plan will be assumed by
GC Holdings. Upon completion of the Distribution, Griffin will terminate its
participation in the plan, and Griffin's employees' years of service and
benefits accrued at that time will be frozen at the date of termination. All
vested pension obligations as of the date of the Distribution Agreement for
Griffin's current and former employees will be assumed by GC Holdings. In
connection with the Distribution and Merger, Griffin and GC Holdings entered
into an Employee Benefits Administration Agreement to define the
responsibilities for the administration of the plan.
In connection with the Distribution Griffin will establish the Griffin Land
& Nurseries, Inc. 401(k) Savings Plan. Griffin may at its discretion "match"
employee deferrals each year.
OTHER POSTRETIREMENT BENEFITS
Through the date of the Distribution, Griffin's employees will participate
in Culbro's postretirement benefits program which provides principally health
and life insurance benefits to certain of its retired employees. The annual cost
of such benefits attributable to Griffin's employees under the plan's benefit
formula was $0.1 million in fiscal 1994, fiscal 1995 and fiscal 1996. Griffin
expects that it will continue to provide its employees with the same level of
retiree medical benefits as those provided under the Culbro program.
Griffin's proportionate share of the present value of the liabilities for
accumulated postretirement benefits, as determined by the Plan's actuaries, is
shown below. None of these liabilities have been funded at December 2, 1995 and
November 30, 1996. Under the terms of the Distribution Agreement, the liability
for Griffin's current retirees postretirement benefits will be assumed by GC
Holdings.
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Retirees................................................................... $ 1,276 $ 905
Fully eligible active participants......................................... 416 317
Other active participants.................................................. 245 105
Unrecognized net gain from experience differences and assumption changes... 175 213
--------- ---------
Liability for other postretirement benefits................................ $ 2,112 $ 1,540
--------- ---------
--------- ---------
</TABLE>
Discount rates of 7.50% and 7.75% were used to compute the accumulated
postretirement benefit obligations at December 2, 1995 and November 30, 1996,
respectively. Because Griffin's obligation for retiree medical benefits is
fixed, any increase in the medical cost trend would have no effect on the
accumulated postretirement benefit obligation, service cost or interest cost.
F-24
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
10. STOCK OPTION PLANS
Upon consummation of the Distribution and Merger, Culbro will convert all
employee stock options outstanding under Culbro's stock option plans into
options to purchase shares of common stock, par value $0.01 per share, of
Griffin and shares of common stock of Culbro. The number of outstanding options
and exercise prices will be adjusted to preserve the value of the Culbro
options. The combined financial statements of Griffin do not reflect any effects
that these plans have had in Culbro's consolidated financial statements. The
status of, and transactions in, the Culbro employee stock option plans for the
periods presented are summarized below:
EMPLOYEES STOCK OPTION PLANS
The Culbro 1996 Stock Plan (the "1996 Plan"), the 1992 Stock Plan (the "1992
Plan") and the 1991 Employees Incentive Stock Option Plan (the "1991 Plan") for
officers and key employees, made available 500,000, 300,000 and 210,000 shares
of common stock, respectively, for purchase at prices equal to the fair market
value at date of grant. A portion of the options outstanding under these plans
may be exercised as incentive stock options, which under current tax laws do not
provide any tax deductions to Culbro.
Options are not exercisable until three years from the date of grant and may
be exercised over a period ending not later than ten years from the date of
grant. The exercise period for each grant was determined by Culbro's
Compensation Committee.
F-25
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
10. STOCK OPTION PLANS (CONTINUED)
At November 30, 1996, a total of 400,000 and 40,300 shares under the 1996
Plan and 1992 Plan, respectively, were available for future grant. There are no
shares available for future grant under the 1991 Plan. None of the options
outstanding at November 30, 1996 may be exercised as stock appreciation rights.
Transactions under the 1996, 1992 and 1991 Plans are summarized as follows:
<TABLE>
<S> <C>
Options outstanding at November 27, 1993.......................... 280,700
Granted during 1994............................................... 88,300
Expired, canceled and exercised................................... (33,400)
---------
Options outstanding at December 3, 1994........................... 335,600
Granted during 1995............................................... 68,000
Expired, canceled and exercised................................... (92,200)
---------
Options outstanding at December 2, 1995........................... 311,400
Granted during 1996............................................... 134,400
Expired, canceled and exercised................................... (103,286)
---------
Options outstanding at November 30, 1996.......................... 342,514
---------
---------
Option prices range between:...................................... $12.25
and
$80.00
Options exercisable:
December 3, 1994................................................ 109,000
December 2, 1995................................................ 86,100
November 30, 1996............................................... 78,114
Expiration date of the 1991 Plan.................................. 2001
Expiration date of the 1992 Plan.................................. 2002
Expiration date of the 1996 Plan.................................. 2006
Number of option holders at November 30, 1996..................... 13
</TABLE>
CULBRO NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
Options granted under the 1996 Stock Option Plan for Nonemployee Directors
(the "1996 Nonemployee Plan") and the 1992 Stock Option Plan for Nonemployee
Directors (the "1992 Nonemployee Plan") will also be converted into options to
purchase common shares of Griffin and shares of common stock of Culbro. Under
these plans 70,000 options have been made available to purchase shares of Culbro
common stock for purchase at prices equal to the fair market value at date of
grant. Options canceled become available for future grant. Options are not
exercisable until three years from the date of grant and may be exercised over a
period ending not later than eight years from the date of grant. As of November
30, 1996, 18,000 options remained available for future grant under the 1996
Nonemployee Plan and 3,000 options remained available for future grant under the
1992 Nonemployee Plan. None of the
F-26
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
10. STOCK OPTION PLANS (CONTINUED)
options outstanding at November 30, 1996 may be exercised as stock appreciation
rights. Transactions under the 1992 and 1996 Plans for Nonemployee Directors are
as follows:
<TABLE>
<S> <C>
Options outstanding at Nov. 27, 1993................................ 14,000
Granted during 1994................................................. 14,000
---------
Options outstanding at Dec. 3, 1994................................. 28,000
Granted during 1995................................................. 14,000
---------
Options outstanding at Dec. 2, 1995................................. 42,000
Granted during 1996................................................. 7,000
Exercised during 1996............................................... (6,000)
---------
Options outstanding at Nov. 30, 1996................................ 43,000
---------
---------
Options prices range between:....................................... $ 14.38
and
$ 63.81
Number of option holders at Nov. 30, 1996........................... 7
</TABLE>
EMPLOYMENT AGREEMENT
Upon consummation of the Distribution and Merger, stock options of Culbro
issued in accordance with the terms of an employment agreement entered into in
May 1994 between Culbro and an officer of Culbro will become stock options of
both Griffin and GC Holdings. The agreement provided for the issuance of 125,000
Culbro stock options, exercisable at the rate of 25,000 per year from 1995
through 1999 at an option price of $4.00 per share. Through November 30, 1996,
15,000 of these options have been exercised under this agreement. Griffin's
proportionate share of the annual compensation expense for this agreement is
less than $0.1 million, reflecting the difference between the option price and
the quoted market price at the date of grant, is included in the financial
statements for each of the years presented.
GRIFFIN STOCK OPTION PLAN
Effective as of the Distribution Date, Griffin will establish the Griffin
Land & Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan").
A total of approximately 700,000 shares of common stock will be available for
issuance under the Griffin Stock Option Plan. Of such 700,000 shares, 250,000
will be available for issuance with respect to new options that may be granted
to certain officers, employees, consultants and directors of Griffin following
the Distribution. The Griffin Stock Option Plan will be administered by the
Compensation Committee of the Board of Directors of Griffin. Options granted
under the Griffin Stock Option Plan may be either incentive stock options or
non-qualified stock options. Incentive stock options issued under the Griffin
Stock Option Plan will satisfy certain Internal Revenue Code requirements
applicable thereto.
F-27
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
11. LEASES
CAPITAL LEASES
Future minimum lease payments under capital leases for transportation
equipment and the present value of such payments as of November 30, 1996 were:
<TABLE>
<S> <C>
1997................................................................. $ 220
1998................................................................. 156
1999................................................................. 113
2000................................................................. 43
---------
Total minimum lease payments......................................... 532
Less: Amounts representing interest.................................. 53
---------
Present value of minimum lease payments (a).......................... $ 479
---------
---------
</TABLE>
- ------------------------
(a) Includes current portion of $0.2 million at November 30, 1996.
At December 2, 1995 and November 30, 1996, machinery and equipment included
capital leases amounting to $0.5 million, which is net of accumulated
depreciation at December 2, 1995 and November 30, 1996 of $1.6 million and $1.5
million, respectively. Depreciation expense relating to capital leases was $0.3
million, $0.2 million and $0.2 million in fiscal 1994, fiscal 1995 and fiscal
1996, respectively.
OPERATING LEASES
Future minimum rental payments under noncancellable leases as of November
30, 1996 were:
<TABLE>
<S> <C>
1997................................................................. $ 263
1998................................................................. 241
1999................................................................. 216
2000................................................................. 105
2001................................................................. 25
---------
Total minimum lease payments......................................... $ 850
---------
---------
</TABLE>
Total rental expense for all operating leases in fiscal 1994, fiscal 1995
and fiscal 1996 was $0.2 million, $0.3 million and $0.3 million, respectively.
F-28
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
11. LEASES (CONTINUED)
As lessor, Griffin's real estate activities consist of the leasing of office
and industrial space in Connecticut. Future minimum rentals to be received under
noncancellable leases as of November 30, 1996 were:
<TABLE>
<S> <C>
1997................................................................ $ 1,593
1998................................................................ 1,338
1999................................................................ 1,055
2000................................................................ 981
2001................................................................ 905
Later years......................................................... 1,546
---------
Total minimum rental revenue........................................ $ 7,418
---------
---------
</TABLE>
Total rental revenue from all leases in 1996 were $2.8 million, $2.8 million
and $2.5 million in fiscal 1994, fiscal 1995 and fiscal 1996, respectively.
12. INVESTMENTS
INVESTMENT IN CENTAUR
Griffin owns approximately 25% of the outstanding common stock of Centaur, a
publishing business in the United Kingdom. Approximately $6.6 million of the
book value of Griffin's investment, which was $14.7 million at November 30,
1996, represents the excess of the cost of Griffin's investment over the book
value of its equity in Centaur and is being amortized on a straight-line basis
over 40 years. Griffin's equity income (loss) from the investment in Centaur of
$0.4 million, $(0.2) million and $0.3 million in fiscal 1994, fiscal 1995 and
fiscal 1996, respectively, is included in the income (loss) from equity
investments on the combined statement of operations.
F-29
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
12. INVESTMENTS (CONTINUED)
Centaur's unaudited summarized statement of operations and balance sheet are
as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
-------------------------------
NOV. 30, NOV. 30, NOV. 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales.................................................... $ 55,929 $ 61,227 $ 69,450
Costs and expenses........................................... 52,790 60,816 65,932
--------- --------- ---------
Income before taxes.......................................... 3,139 411 3,518
Income taxes................................................. 1,071 387 1,544
--------- --------- ---------
Net income................................................... $ 2,068 $ 24 $ 1,974
--------- --------- ---------
--------- --------- ---------
<CAPTION>
NOV. 30, NOV. 30,
1995 1996
--------- ---------
<S> <C> <C> <C>
Current assets............................................... $ 18,480 $ 27,514
Publishing rights............................................ 20,529 21,278
Other noncurrent assets...................................... 5,014 6,270
--------- ---------
Total assets................................................. $ 44,023 $ 55,062
--------- ---------
--------- ---------
Current liabilities.......................................... $ 7,796 $ 15,246
Other noncurrent liabilities................................. 5,850 5,404
--------- ---------
Total liabilities............................................ 13,646 20,650
Shareholders' equity......................................... 30,377 34,412
--------- ---------
Total liabilities and shareholders' equity................... $ 44,023 $ 55,062
--------- ---------
--------- ---------
</TABLE>
INVESTMENT IN REAL ESTATE JOINT VENTURES
Included in other assets at December 2, 1995 and November 30, 1996 is $8.0
million and $3.4 million, respectively, for Griffin's 30% interest in a real
estate joint venture that owns commercial properties in Connecticut. Results of
these investments are included in operating profit. In 1996, all of the assets
of one of the real estate joint ventures were sold. Griffin received net
proceeds of $4.0 million from the sale and recorded a pretax loss on sale of
$0.4 million.
INVESTMENT IN ELI WITT
Griffin owns 50.1% of the outstanding common stock of Eli Witt, a wholesale
distribution company. Prior to 1994, Eli Witt was a consolidated subsidiary. In
April 1994, as a result of transactions related to an Eli Witt acquisition,
Griffin no longer had unilateral control of Eli Witt. Accordingly, Griffin
deconsolidated Eli Witt and accounted for its investment in the common stock of
Eli Witt under the equity method. Through November 30, 1996, Eli Witt was in a
common deficit position, and as such, Griffin has a negative basis in its common
equity investment in Eli Witt. Accordingly, Griffin has not recognized the
results of Eli Witt subsequent to its deconsolidation in April 1994. The equity
loss of $2.1 million through the deconsolidation date is included in net income
(loss) from equity investments in the 1994 combined statement of operations.
F-30
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
12. INVESTMENTS (CONTINUED)
In 1995, Griffin invested an additional $5 million in Eli Witt in the form
of a subordinated note receivable due August 1, 1998. Griffin applied this
additional investment to reduce the negative basis in its common equity
investment in Eli Witt from approximately $6.5 million to approximately $1.5
million.
In November 1996, Eli Witt filed for protection under Chapter 11 of the
Federal Bankruptcy Law. In connection with such filing Eli Witt sold all of its
operating assets to another wholesale distributor in March 1997. Shareholders of
Eli Witt are not expected to receive any proceeds from the sale. Griffin has no
investment related to Eli Witt on its 1996 combined balance sheet. See Note 14.
13. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
OTHER NONRECURRING EXPENSE
Other nonrecurring expense in 1996 includes the allocation to Griffin of
charges recorded by Culbro in connection with the termination of a management
long-term incentive compensation plan which was based on Culbro's stock price,
and the acceleration of the vesting of benefits under the plan and accurals for
severance and related expenses in connection with a headcount reduction at the
Culbro corporate office in anticipation of the Distribution. Griffin's allocable
share of these expenses was determined substantially on the same basis as the
allocation of Culbro's general and administrative expenses referred to in Note 6
and is considered by management to be reasonable.
The other nonrecurring expense of $3.6 million in the 1994 combined
statement of operations reflects a charge in the real estate business to write
off development costs expended in earlier years for certain discontinued
projects which management decided not to proceed with as originally planned.
OTHER NONOPERATING INCOME, NET
Included in other nonoperating income, net, in each of the three fiscal
years presented is the accrual of dividend and accretion income on the preferred
stock of Eli Witt held by Griffin, which is equal to the interest expense on the
subordinated note, that was satisfied by the exchange of the preferred stock in
1996. In 1995, other nonoperating income, net, also included expenses related to
Griffin's support of the refinancing of Eli Witt.
INVENTORIES
Inventories consists of:
<TABLE>
<CAPTION>
DEC. 2, NOV. 30,
1995 1996
--------- ---------
<S> <C> <C>
Raw materials and supplies.............................................. $ 523 $ 742
Work-in-process......................................................... 11,603 15,112
Finished goods.......................................................... 13,805 11,676
--------- ---------
$ 25,931 $ 27,530
--------- ---------
--------- ---------
</TABLE>
F-31
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
13. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
ESTIMATED USEFUL DEC. 2, NOV. 30,
LIVES 1995 1996
---------------- --------- ---------
<S> <C> <C> <C>
Land.................................................. $ 6,029 $ 5,982
Buildings and improvements............................ 10 to 40 years 3,912 3,807
Machinery and equipment............................... 3 to 20 years 11,901 12,337
--------- ---------
21,842 22,126
Accumulated depreciation.............................. (9,223) (9,450)
--------- ---------
$ 12,619 $ 12,676
--------- ---------
--------- ---------
</TABLE>
Total depreciation expense was $1.0 million, $1.2 million and $1.2 million
for fiscal 1994, fiscal 1995, and fiscal 1996, respectively.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses include trade payables of $1.7 million
and $2.0 million at December 2, 1995 and November 30, 1996, respectively,
accrued salaries, wages and other compensation of $0.9 million and $1.2 million
at December 2, 1995 and November 30, 1996, respectively, and other accrued
liabilities, primarily accrued worker's compensation and general liability
insurance, of $5.5 million and $3.9 million at December 2, 1995 and November 30,
1996, respectively.
SUPPLEMENTAL CASH FLOW INFORMATION
Interest and tax payments were made by Culbro on behalf of Griffin. Griffin
has been included in Culbro's consolidated federal income tax returns (see Note
7). Accordingly, tax and interest payments made by Culbro are reflected in Net
transactions with Culbro on the combined statement of cash flows. Interest
payments were $7.3 million, $6.0 million and $5.9 million in fiscal 1994, fiscal
1995 and fiscal 1996, respectively, including payments of $6.8 million, $5.4
million and $5.4 million in fiscal 1994, fiscal 1995 and fiscal 1996,
respectively under Culbro's general corporate debt facilities that were either
repaid by Griffin or transferred to GC Holdings pursuant to the Distribution
Agreement.
In 1996, Griffin's real estate business exchanged a commercial property in
satisfaction of the outstanding nonrecourse mortgage on that property. Also in
1996, Griffin exchanged preferred stock of Eli Witt that it held in satisfaction
of a subordinated note payable and all accrued interest thereon. There was no
cash paid or received in either of these transactions.
14. COMMITMENTS AND CONTINGENCIES
Culbro (or GC Holding's following the Merger) and Griffin entered into a
services agreement (the "Services Agreement") pursuant to which Culbro agreed to
provide a number of administrative and other services to Griffin for a period of
at least one year. These services include administration of Griffin's insurance
policies, internal audit, preparation of tax returns, transportation and general
in-house legal
F-32
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
services. Griffin will make an annual payment of approximately $0.6 million to,
and will reimburse out-of-pocket expenses incurred by, Culbro, in connection
with such services. Culbro will make the above services available to Griffin on
an as-needed basis for a period of at least one year following the Distribution.
As a result of the Asset Transfers described in Note 1, Griffin acquired
50.1% interest in Eli Witt. Culbro, Eli Witt and other parties engaged in two
complex acquisitions and reorganizations in 1993 and 1994, pursuant to which
Culbro received significant distributions from Eli Witt to repay debt, including
substantial amounts Culbro had previously borrowed from unaffiliated third
parties to fund Eli Witt's business. Culbro subsequently loaned $5 million to
Eli Witt. It is anticipated that these transactions (including the transfer of
funds to Culbro) will be reviewed by Eli Witt creditors and other parties in
interest in connection with Eli Witt's Chapter 11 filing. To date, one creditor
has written to the unsecured creditors committee proposing an inquiry into this
matter.
Management does not believe that the above referenced matter will have a
material adverse effect upon the financial condition of Griffin.
F-33
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
ADDITIONAL FINANCIAL DATA
The following additional financial data should be read in conjunction with
the financial statements included elsewhere herein.
<TABLE>
<CAPTION>
SCHEDULES PAGE
- --------------- ---------
<C> <S> <C>
II Valuation and Qualifying Accounts and Reserves........................................... S-2
III Real Estate and Accumulated Depreciation................................................. S-3/S-4
</TABLE>
S-1
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND CHARGED TO DEDUCTIONS BALANCE AT
DESCRIPTION OF YEAR EXPENSES OTHER ACCOUNTS FROM RESERVES END OF YEAR
- ---------------------------------------------------- ----------- ------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996
Reserves:
Uncollectible accounts--Trade..................... 338 70 22 128(1) 302
----- ----- --- --- -----
Inventories....................................... 1,000 16 300 351(2) 965
----- ----- --- --- -----
FOR THE FISCAL YEAR ENDED DECEMBER 2, 1995
Reserves:
Uncollectible accounts--Trade..................... 351 147 3 163(1) 338
----- ----- --- --- -----
Inventories....................................... 743 1,007 -- 750(2) 1,000
----- ----- --- --- -----
FOR THE FISCAL YEAR ENDED DECEMBER 3, 1994
Reserves:
Uncollectible accounts--Trade..................... 365 141 22 177(1) 351
----- ----- --- --- -----
Inventories....................................... 250 493 -- -- 743
----- ----- --- --- -----
</TABLE>
NOTES:
(1) Accounts receivable written off.
(2) Inventories disposed.
S-2
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
GROSS AMOUNT AT
SUBSEQUENT TO
INITIAL COST ACQUISITION NOVEMBER 30, 1996
---------------------- ------------------------ ----------------------
ENCUM- BLDG & CARRYING BLDG &
DESCRIPTION BRANCES LAND IMPROVE IMPROVE COSTS LAND IMPROVE
- ----------------------------------------- ----------- --------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Land - CT................................ $ $ 4,611 $ -- $ 6,976 $ 80 $ 4,691 $ 6,976
Restaurant
1936 Blue Hills Avenue
Bloomfield, CT........................... 1 -- 1,266 -- 1 1,266
Residential Develpment
Meadow Park
Culbro Homes
Windsor, CT.............................. 88 -- 1,518 2,156 88 3,674
Commercial Buildings
29 & 35 Griffin Road South
Bloomfield, CT........................... 696 47 -- 2,486 -- 47 2,486
Commercial Building
55 Griffin Road South
Bloomfield, CT........................... 3 -- 1,815 -- 3 1,815
Commercial Building
204 West Newberry
Bloomfield, CT........................... 1 -- 1,540 24 1 1,564
Commercial Building
206 West Newberry
Bloomfield, CT........................... 1 -- 1,452 23 1 1,475
Commercial Building
210 West Newberry
Bloomfield, CT........................... -- -- 666 -- -- 666
Commercial Building
310, 320, 330 West Newberry
Bloomfield, CT........................... 5 -- 2,938 40 5 2,978
Industrial Buildings
14, 15 & 16 International Drive
East Granby, CT.......................... 1,948 106 1,723 3,367 -- 106 5,090
----------- --------- ----------- ----------- ----------- --------- -----------
$ 2,644 $ 4,863 $ 1,723 $ 24,024 $ 2,323 $ 4,943 $ 27,990
----------- --------- ----------- ----------- ----------- --------- -----------
----------- --------- ----------- ----------- ----------- --------- -----------
<CAPTION>
ACCUM DATE OF
DESCRIPTION TOTAL DEPR CONSTR DATE OF ACQ DEPR LIFE
- ----------------------------------------- --------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Land - CT................................ 11,667 (361)
Restaurant
1936 Blue Hills Avenue
Bloomfield, CT........................... 1,267 (510) 1983 40 yrs
Residential Develpment
Meadow Park
Culbro Homes
Windsor, CT.............................. 3,762 --
Commercial Buildings
29 & 35 Griffin Road South
Bloomfield, CT........................... 2,533 (1,156) 1977 40 yrs
Commercial Building
55 Griffin Road South
Bloomfield, CT........................... 1,818 (553) 1985 40 yrs
Commercial Building
204 West Newberry
Bloomfield, CT........................... 1,565 (314) 1988 40 yrs
Commercial Building
206 West Newberry
Bloomfield, CT........................... 1,476 (332) 1988 40 yrs
Commercial Building
210 West Newberry
Bloomfield, CT........................... 666 (161) 1988 40 yrs
Commercial Building
310, 320, 330 West Newberry
Bloomfield, CT........................... 2,983 (477) 1991 40 yrs
Industrial Buildings
14, 15 & 16 International Drive
East Granby, CT.......................... 5,196 (2,207) 1978 1989 40 yrs
--------- ---------
$ 32,933 $ (6,071)
--------- ---------
--------- ---------
</TABLE>
S-3
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30, 1996 COST RESERVE
- --------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Balance at beginning of period............................................................... $ 38,086 $ (6,179)
Changes during the period:
Improvements............................................................................. 592
Additions to reserve charged to costs and expenses....................................... (822)
Disposals & retirements.................................................................. (4,648) 930
Cost of sales............................................................................ (1,097)
--------- ---------
Balance at end of period..................................................................... $ 32,933 $ (6,071)
--------- ---------
--------- ---------
<CAPTION>
FISCAL YEAR ENDED DECEMBER 2, 1995 COST RESERVE
- --------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Balance at beginning of period............................................................... $ 38,450 $ (5,118)
Changes during the period:
Improvements............................................................................. 802
Additions to reserve charged to costs and expenses....................................... (814)
Reclassification......................................................................... (247)
Cost of sales............................................................................ (1,166)
--------- ---------
Balance at end of period..................................................................... $ 38,086 $ (6,179)
--------- ---------
--------- ---------
<CAPTION>
FISCAL YEAR ENDED DECEMBER 3, 1994 COST RESERVE
- --------------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Balance at beginning of period............................................................... $ 41,698 $ (4,338)
Changes during the period:
Improvements............................................................................. 1,624
Additions to reserve charged to costs and expenses....................................... (780)
Cost of sales............................................................................ (4,872)
--------- ---------
Balance at end of period..................................................................... $ 38,450 $ (5,118)
--------- ---------
--------- ---------
</TABLE>
S-4
<PAGE>
PART II
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Prior to March 18, 1997, Culbro Corporation held all 1,000 then-issued and
outstanding shares of common stock, par value $0.01 per share, of Griffin (the
"Original Shares"). On March 18, 1997, pursuant to an amended and restated
certificate of incorporation of Griffin, each Original Share was exchanged for
one share of Class B Common Stock, par value $0.01 per share (the "Class B
Common Stock"). Prior to the Distribution Date, Griffin intends to file an
Amended and Restated Certificate of Incorporation, the form of which is filed as
an exhibit to this Registration Statement, pursuant to which each share of Class
B Common Stock will be exchanged for one share of newly-authorized common stock,
par value $0.01 per share (the "Common Stock"). Prior to the Distribution,
Griffin will effect a stock split such that the number of issued and outstanding
shares of Common Stock will equal the number of then-outstanding shares of
common stock, par value $0.01, of Culbro Corporation.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Griffin Land & Nurseries, Inc. is a Delaware corporation. Reference is made
to Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL"), which
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director for
violations of the director's fiduciary duty, except (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing
for liability of directors for unlawful payments of dividends of unlawful stock
purchase or redemptions) or (iv) for any transaction from which a director
derived an improper personal benefit.
Reference is also made to Section 145 of the DGCL, which provides that a
corporation may indemnify any person, including an officer or director, who is,
or is threatened to be made, party to any threatened, pending or completed legal
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the corporation's best interest and, for
criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify any officer or director in any
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses that
such officer or director actually and reasonably incurred.
Article VII of the Bylaws of Griffin Land & Nurseries, Inc. (filed as
Exhibit 3.2) provides for indemnification of the officers and directors to the
full extent permitted by applicable law.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements--see pages F-1 and S-1
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Form of Distribution Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, as amended)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Form of Amended and Restated Certificate of Incorporation of Griffin Land & Nurseries, Inc.
3.2 Form of Bylaws of Griffin Land & Nurseries, Inc.
10.1 Form of Tax Sharing Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.2 Form of Benefits and Employment Matters Allocation Agreement among Culbro Corporation, Griffin Land
& Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration
Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.3 Form of Services Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.4 Form of Agricultural Lease between Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc.
(incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings,
Inc., filed December 24, 1996, amended)
10.5 Employment Agreement between Culbro Corporation and Jay M. Green, dated as of April 8, 1994 and as
amended on January 11, 1997 (incorporated by reference to the Registration Statement on Form S-1
of General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.6 Form of 1997 Stock Option Plan of Griffin Land & Nurseries, Inc.
10.7 Form of 401(k) Plan of Griffin Land & Nurseries, Inc.
10.8 1996 Stock Plan of Culbro Corporation, dated as of March 15, 1996 (incorporated by reference to the
definitive proxy statement of Culbro Corporation, dated March 15, 1996, for its Annual Meeting of
Shareholders held on April 11, 1996)
10.9 1992 Stock Plan of Culbro Corporation, dated December 10, 1993 (incorporated by reference to the
definitive proxy statement of Culbro Corporation, dated March 3, 1993, for its Annual Meeting of
Shareholders held on April 8, 1993)
10.10 Stock Option Plan for Non-employee Directors of Culbro Corporation, dated December 10, 1993
(incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 3,
1993, for its Annual Meeting of Shareholders held on April 8, 1993)
10.11 1991 Employees Incentive Stock Option Plan of Culbro Corporation, dated as of January 31, 1991 and
as amended on February 12, 1985 (incorporated by reference to the definitive proxy statement of
Culbro Corporation, dated April 9, 1991, for its Annual Meeting of Shareholders held on May 9,
1993)
10.12 Annual Incentive Compensation Plan of Culbro Corporation, dated as of December 7, 1995 (incorporated
by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed
December 24, 1996, amended)
10.13 Annual Incentive Compensation Plan of General Cigar Co., Inc., dated as of December 7, 1995
(incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings,
Inc., filed December 24, 1996, amended)
10.14 Long Term Performance Plan of Culbro Corporation for the three-year period 1995-1997 (incorporated
by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed
December 24, 1996, amended)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
10.15 Deferred Incentive Compensation Plan of Culbro Corporation, dated as of December 13, 1982 and as
amended on February 12, 1985 (incorporated by reference to the Registration Statement on Form S-1
of General Cigar Holdings, Inc., filed December 24, 1996, amended)
21.1 Subsidiaries of Griffin Land & Nurseries, Inc.
</TABLE>
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the County of New
York, State of New York on June 3, 1997.
GRIFFIN LAND & NURSERIES, INC.
By: /s/ FREDERICK M. DANZIGER
-----------------------------------------
Frederick M. Danziger
PRESIDENT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Form of Distribution Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, as amended)
3.1 Form of Amended and Restated Certificate of Incorporation of Griffin Land & Nurseries, Inc.
3.2 Form of Bylaws of Griffin Land & Nurseries, Inc.
10.1 Form of Tax Sharing Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.2 Form of Benefits and Employment Matters Allocation Agreement among Culbro Corporation, Griffin Land
& Nurseries, Inc. and General Cigar Holdings, Inc. (incorporated by reference to the Registration
Statement on Form S-1 of General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.3 Form of Services Agreement among Culbro Corporation, Griffin Land & Nurseries, Inc. and General
Cigar Holdings, Inc. (incorporated by reference to the Registration Statement on Form S-1 of
General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.4 Form of Agricultural Lease between Griffin Land & Nurseries, Inc. and General Cigar Holdings, Inc.
(incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings,
Inc., filed December 24, 1996, amended)
10.5 Employment Agreement between Culbro Corporation and Jay M. Green, dated as of April 8, 1994 and as
amended on January 11, 1997 (incorporated by reference to the Registration Statement on Form S-1
of General Cigar Holdings, Inc., filed December 24, 1996, amended)
10.6 Form of 1997 Stock Option Plan of Griffin Land & Nurseries, Inc.
10.7 Form of 401(k) Plan of Griffin Land & Nurseries, Inc.
10.8 1996 Stock Plan of Culbro Corporation, dated as of March 15, 1996 (incorporated by reference to the
definitive proxy statement of Culbro Corporation, dated March 15, 1996, for its Annual Meeting of
Shareholders held on April 11, 1996)
10.9 1992 Stock Plan of Culbro Corporation, dated December 10, 1993 (incorporated by reference to the
definitive proxy statement of Culbro Corporation, dated March 3, 1993, for its Annual Meeting of
Shareholders held on April 8, 1993)
10.10 Stock Option Plan for Non-employee Directors of Culbro Corporation, dated December 10, 1993
(incorporated by reference to the definitive proxy statement of Culbro Corporation, dated March 3,
1993, for its Annual Meeting of Shareholders held on April 8, 1993)
10.11 1991 Employees Incentive Stock Option Plan of Culbro Corporation, dated as of January 31, 1991 and
as amended on February 12, 1985 (incorporated by reference to the definitive proxy statement of
Culbro Corporation, dated April 9, 1991, for its Annual Meeting of Shareholders held on May 9,
1993)
10.12 Annual Incentive Compensation Plan of Culbro Corporation, dated as of December 7, 1995 (incorporated
by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed
December 24, 1996, amended)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------
<C> <S>
10.13 Annual Incentive Compensation Plan of General Cigar Co., Inc., dated as of December 7, 1995
(incorporated by reference to the Registration Statement on Form S-1 of General Cigar Holdings,
Inc., filed December 24, 1996, amended)
10.14 Long Term Performance Plan of Culbro Corporation for the three-year period 1995-1997 (incorporated
by reference to the Registration Statement on Form S-1 of General Cigar Holdings, Inc., filed
December 24, 1996, amended)
10.15 Deferred Incentive Compensation Plan of Culbro Corporation, dated as of December 13, 1982 and as
amended on February 12, 1985 (incorporated by reference to the Registration Statement on Form S-1
of General Cigar Holdings, Inc., filed December 24, 1996, amended)
21.1 Subsidiaries of Griffin Land & Nurseries, Inc.
</TABLE>
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GRIFFIN LAND & NURSERIES, INC.
Griffin Land & Nurseries, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "DGCL"), does hereby certify as follows:
1. The present name of the Corporation is Griffin Land & Nurseries,
Inc. The Corporation was originally incorporated under the name "Culbro Realty
and Development Corporation" and its original certificate of incorporation was
filed with the office of the Secretary of State of the State of Delaware on
March 10, 1970.
2. This Amended and Restated Certificate of Incorporation was duly
adopted by the Board of Directors of the Corporation (the "Board") and by the
sole stockholder of the Corporation in accordance with Sections 228, 242, and
245 of the DGCL.
3. This Amended and Restated Certificate of Incorporation restates
and integrates and amends the certificate of incorporation of the Corporation,
as heretofore amended, supplemented and/or restated (the "Certificate of
Incorporation").
4. Upon the filing (the "Effective Time") of this Certificate of
Incorporation pursuant to the DGCL, each share of the Corporation's Class B
Common Stock, $0.01 par value per share, issued and outstanding immediately
prior to the Effective Time (the "Old Common Stock") shall be reclassified as
and changed into one validly issued, fully paid, and non-assessable share of
Common Stock authorized by subparagraph (a) of Article FOURTH of the Certificate
of Incorporation (totaling 1,000 shares of Common Stock), without any action by
the holder thereof (the "Reclassification"). Each certificate that theretofore
represented a share or shares of Old Common Stock shall thereafter represent
that number of shares of Common Stock into which the share or shares of Old
Common Stock represented by such certificate shall have been reclassified.
5. The text of the Certificate of Incorporation is amended and
restated in its entirety as follows:
FIRST: The name of the corporation (the "Corporation") is Griffin
Land & Nurseries, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, in the
City of Wilmington, County of New Castle. The name of its registered agent at
that address is The Corporation Trust Company.
<PAGE>
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the DGCL.
FOURTH: (a) Authorized Capital Stock. The Corporation is authorized
to issue 15 million shares of capital stock, of which 10 million shares shall be
shares of Common Stock, $0.01 par value ("Common Stock") and 5 million shares
shall be shares of Preferred Stock, $0.01 par value ("Preferred Stock").
(b) Preferred Stock. The Board is expressly authorized to provide
for the issuance of all or any shares of the Preferred Stock in one or more
classes or series, and to fix for each such class or series such voting powers,
full or limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board providing for
the issuance of such class or series, including, without limitation, the
authority to provide that any such class or series may be (i) subject to
redemption at such time or times and at such price or prices; (ii) entitled to
receive dividends (which may be cumulative or non-cumulative) at such rates, on
such conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or any other
series; (iii) entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation; or (iv) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any other
series of the same or any other class or classes of stock, of the Corporation at
such price or prices or at such rates of exchange and with such adjustments; all
as may be stated in such resolution or resolutions.
FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(b) The directors shall have concurrent power with the stockholders
to adopt, amend, or repeal the By-Laws of the Corporation.
(c) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the Corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
(d) No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from
which the director derived an improper personal benefit. If the DGCL is amended
hereafter to
2
<PAGE>
authorize the further elimination or limitation of liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent authorized by the DGCL, as so amended. Any repeal or
modification of this Article FIFTH by the stockholders of the Corporation shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
(e) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the DGCL,
this Certificate of Incorporation and any By-Laws adopted by the stockholders;
provided, however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if such
By-Laws had not been adopted.
(f) The Corporation expressly elects not to be governed by Section
203 of the DGCL.
SIXTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board or in the ByLaws.
SEVENTH: The Corporation shall indemnify its directors and officers
to the fullest extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors. The right to indemnification conferred by this
Article SEVENTH shall include the right to be paid by the Corporation the
expenses incurred in defending or otherwise participating in any proceeding in
advance of its final disposition.
The Corporation may, to the extent authorized from time to time by
the Board of Directors, provide rights to indemnification and to the advancement
of expenses to employees and agents of the Corporation similar to those
conferred in this Article SEVENTH to directors and officers of the Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Certificate of
Incorporation, the By-Laws, any statute, agreement, vote of stockholders or
disinterested directors or otherwise.
3
<PAGE>
Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or officer of
the Corporation existing at the time of such repeal or modification with respect
to any acts or omissions occurring prior to such repeal or modification.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed in this Certificate of Incorporation, the
By-Laws or the laws of the State of Delaware, and all rights herein conferred
upon stockholders are granted subject to such reservation.
4
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be duly executed this day of June __,
1997.
GRIFFIN LAND & NURSERIES, INC.
By: _______________________________
Name: Frederick M. Danziger
Title: President
5
<PAGE>
Exhibit 3.2
BY-LAWS
OF
GRIFFIN LAND & NURSERIES, INC.
------------------------------------------------------------
ARTICLE I
Offices
Section 1.1. Registered Offices. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
<PAGE>
ARTICLE II
Stockholders
Section 2.1. Annual Meetings. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 2.2. Special Meetings. Special meetings of stockholders for
any purpose or purposes may be called at any time by the Board of Directors, but
such special meetings may not be called by any other person or persons.
Section 2.3. Notice of Meetings. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given that shall state the place, date and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation or
these by-laws, the written notice of any meeting shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
Section 2.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.5. Quorum. Except as otherwise provided by law, the
certificate of incorporation or these by-laws, at each meeting of stockholders
the presence in person or by proxy of the holders of a majority in voting power
of the outstanding shares of stock entitled to vote at the meeting shall be
necessary and sufficient to constitute a quorum. In the absence of a quorum, the
stockholders so present may, by a majority in voting power thereof, adjourn the
meeting from time to time in the manner provided in Section 2.4 of these by-laws
until a quorum shall attend. Shares of its own stock belonging to the
corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be counted
for quorum purposes, provided, however, that the foregoing shall not limit the
right of the corporation or any subsidiary of the corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
Section 2.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by
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a chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
Section 2.7. Voting; Proxies. Except as otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A proxy shall be irrevocable if it states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary of the corporation. Voting
at meetings of stockholders need not be by written ballot. At all meetings of
stockholders for the election of directors a plurality of the votes cast shall
be sufficient to elect. All other elections and questions shall, unless
otherwise provided by law, the certificate of incorporation or these by-laws, be
decided by the affirmative vote of the holders of a majority in voting power of
the shares of stock which are present in person or by proxy and entitled to vote
thereon.
Section 2.8. Fixing Date for Determination of Stockholders of
Record. In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
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Section 2.9. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. Upon the willful
neglect or refusal of the directors to produce such a list at any meeting for
the election of directors, they shall be ineligible for election to any office
at such meeting. Except as otherwise provided by law, the stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list of stockholders or the books of the corporation, or to vote in
person or by proxy at any meeting of stockholders.
Section 2.10. Action By Written Consent of Stockholders. Unless
otherwise restricted by the certificate of incorporation, any action required or
permitted to be taken at any annual or special meeting of the stockholders may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of minutes of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall, to the extent required by law, be given to
those stockholders who have not consented in writing.
Section 2.11. Inspectors of Election. The corporation may, and shall
if required by law, in advance of any meeting of stockholders, appoint one or
more inspectors of election, who may be employees of the corporation, to act at
the meeting or any adjournment thereof and to make a written report thereof. The
corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. In the event that no inspector so appointed or
designated is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath to execute faithfully the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspector or
inspectors so appointed or designated shall (i) ascertain the number of shares
of capital stock of the corporation outstanding and the voting power of each
such share, (ii) determine the shares of capital stock of the corporation
represented at the meeting and the validity of proxies and ballots, (iii) count
all votes and ballots, (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number of shares of
capital stock of the corporation represented at the meeting and such inspectors'
count of all votes and ballots. Such certification and report shall specify such
other information as may be required by law. In determining the validity and
counting of proxies and ballots cast at any meeting of stockholders of the
corporation, the inspectors may consider such information as is permitted by
applicable law. No person who is a candidate for an office at an election may
serve as an inspector at such election.
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Section 2.12. Conduct of Meetings. The date and time of the opening
and the closing of the polls for each matter upon which the stockholders will
vote at a meeting shall be announced at the meeting by the person presiding over
the meeting. The Board of Directors of the corporation may adopt by resolution
such rules and regulations for the conduct of the meeting of stockholders as it
shall deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent determined by
the Board of Directors or the chairman of the meeting, meetings of stockholders
shall not be required to be held in accordance with the rules of parliamentary
procedure.
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ARTICLE III
Board of Directors
Section 3.1. Number; Qualifications. The Board of Directors shall
consist of one or more members, the number thereof to be determined from time to
time by resolution of the Board of Directors. Directors need not be
stockholders.
Section 3.2. Election; Resignation; Vacancies. The Board of
Directors shall initially consist of the persons named as directors in the
statement of sole incorporator, and each director so elected shall hold office
until the first annual meeting of stockholders or until his successor is elected
and qualified. At the first annual meeting of stockholders and at each annual
meeting thereafter, the stockholders shall elect directors each of whom shall
hold office for a term of one year or until his successor is elected and
qualified. Any director may resign at any time upon written notice to the
corporation. Any newly created directorship or any vacancy occurring in the
Board of Directors for any cause may be filled by a majority of the remaining
members of the Board of Directors, although such majority is less than a quorum,
or by a plurality of the votes cast at a meeting of stockholders, and each
director so elected shall hold office until the expiration of the term of office
of the director whom he has replaced or until his successor is elected and
qualified.
Section 3.3. Compensation of Directors. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, the Board of Directors
shall have the authority to fix the compensation of directors. The directors may
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 3.4. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined notices thereof need not be given.
Section 3.5. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary, or
by any member of the Board of Directors. Notice of a special meeting of the
Board of Directors shall be given by the person or persons calling the meeting
at least twenty-four hours before the special meeting.
Section 3.6. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 3.7. Quorum; Vote Required for Action. At all meetings of
the Board of Directors a majority of the whole Board of Directors shall
constitute a quorum for the transaction of business. Except in cases in which
the certificate of incorporation, these by-laws or applicable law otherwise
provides, the vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
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Section 3.8. Organization. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 3.9. Action by Written Consent of Directors. Unless
otherwise restricted by the certificate of incorporation or these by-laws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or such committee.
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ARTICLE IV
Committees
Section 4.1. Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it.
Section 4.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence of
such rules each committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article III of these
by-laws.
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ARTICLE V
Officers
Section 5.1. Executive Officers; Election; Qualifications; Term of
Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a
President and Secretary, and it may, if it so determines, choose a Chairman of
the Board and a Vice Chairman of the Board from among its members. The Board of
Directors may also choose one or more Vice Presidents, one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers. Each such officer
shall hold office until the first meeting of the Board of Directors after the
annual meeting of stockholders next succeeding his election, and until his
successor is elected and qualified or until his earlier resignation or removal.
Any officer may resign at any time upon written notice to the corporation. The
Board of Directors may remove any officer with or without cause at any time, but
such removal shall be without prejudice to the contractual rights of such
officer, if any, with the corporation. Any number of offices may be held by the
same person. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise may be filled for the unexpired portion of the
term by the Board of Directors at any regular or special meeting.
Section 5.2. Powers and Duties of Executive Officers. The officers
of the corporation shall have such powers and duties in the management of the
corporation as may be prescribed in a resolution by the Board of Directors and,
to the extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board of Directors. The Board of Directors may
require any officer, agent or employee to give security for the faithful
performance of his duties.
Section 5.3. Compensation. The rates and method of compensation of
all officers of the corporation shall be fixed by the Board of Directors or a
committee thereof.
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ARTICLE VI
Stock
Section 6.1. Certificates. Every holder of stock shall be entitled
to have a certificate signed by or in the name of the corporation by the
Chairman or Vice Chairman of the Board of Directors, if any, or the President or
a Vice President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, of the corporation certifying the number of
shares owned by him in the corporation. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
Section 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance
of New Certificates. The corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 6.3. Legends. If the corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in section 202 of the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights or each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 6.4. Transfer of Stock. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the corporation.
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ARTICLE VII
Indemnification
Section 7.1. Right to Indemnification. The corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person (an "Indemnitee")
who was or is made or is threatened to be made a party or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
corporation or, while a director or officer of the corporation, is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or nonprofit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Indemnitee. Notwithstanding the
preceding sentence, except as otherwise provided in Section 7.3, the corporation
shall be required to indemnify an Indemnitee in connection with a Proceeding (or
part thereof) commenced by such Indemnitee only if the commencement of such
Proceeding (or part thereof) by the Indemnitee was authorized by the Board of
Directors of the corporation.
Section 7.2. Prepayment of Expenses. The corporation shall pay the
expenses (including attorneys' fees) incurred by an Indemnitee in defending any
Proceeding in advance of its final disposition, provided, however, that, to the
extent required by law, such payment of expenses in advance of the final
disposition of the Proceeding shall be made only upon receipt of an undertaking
by the Indemnitee to repay all amounts advanced if it should be ultimately
determined that the Indemnitee is not entitled to be indemnified under this
Article VII or otherwise.
Section 7.3. Claims. If a claim for indemnification or payment of
expenses under this Article VII is not paid in full within sixty days after a
written claim therefor by the Indemnitee has been received by the corporation,
the Indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the corporation shall have the burden
of proving that the Indemnitee is not entitled to the requested indemnification
or payment of expenses under applicable law.
Section 7.4. Nonexclusivity of Rights. The rights conferred on any
Indemnitee by this Article VII shall not be exclusive of any other rights which
such Indemnitee may have or hereafter acquire under any statute, provision of
the certificate of incorporation, these by-laws, agreement, vote of stockholders
or disinterested directors or otherwise.
Section 7.5. Other Sources. The corporation's obligation, if any, to
indemnify or to advance expenses to any Indemnitee who was or is serving at its
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Indemnitee may collect as indemnification or
advancement of expenses from such other corporation, partnership, joint venture,
trust, enterprise or non-profit enterprise.
Section 7.6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VII shall not adversely affect any right or
protection hereunder of any
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Indemnitee in respect of any act or omission occurring prior to the time of such
repeal or modification.
Section 7.7. Other Indemnification and Prepayment of Expenses. This
Article VII shall not limit the right of the corporation, to the extent and in
the manner permitted by law, to indemnify and to advance expenses to persons
other than Indemnitees when and as authorized by appropriate corporate action.
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ARTICLE VIII
Miscellaneous
Section 8.1. Dividends. Dividends upon the capital stock of the
corporation subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 8.2. Reserves. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 8.3. Fiscal Year. The fiscal year of the corporation shall
be determined by resolution of the Board of Directors.
Section 8.4. Seal. The corporate seal shall have the name of the
corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 8.5. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 8.6. Interested Directors; Quorum. No contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (1) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (3) the contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
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Section 8.7. Form of Records. Any records maintained by the
corporation in the regular course of its business, including its stock ledger,
books of account, and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs, or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time.
Section 8.8. Amendment of By-Laws. These by-laws may be altered or
repealed, and new by-laws made, by the Board of Directors, but the stockholders
may make additional by-laws and may alter and repeal any by-laws whether adopted
by them or otherwise.
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Exhibit 10.6
GRIFFIN LAND & NURSERIES, INC.
1997 STOCK OPTION PLAN
Griffin Land & Nurseries, Inc., a Delaware corporation, has adopted
The Griffin Land & Nurseries, Inc. 1997 Stock Option Plan (the "Plan"),
effective as of the Distribution Date (as such term is defined below), for the
benefit of its eligible employees, consultants and directors. The Plan consists
of two plans, one for the benefit of key Employees (as such term is defined
below) and consultants and one for the benefit of Independent Directors (as such
term is defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees
and consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company Common Stock
and thus to benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own Common Stock of
the Company which will reflect the growth, development and financial success of
the Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used in this Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.
1.2 Award Limit. "Award Limit" shall mean 150,000 shares of Common
Stock, as adjusted pursuant to Section 7.3.
1.3 Board. "Board" shall mean the Board of Directors of the Company.
1.4 Change in Control. "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions:
(a) any person or related group of persons (other than the Company
or a person that directly or indirectly controls, is controlled by, or is
under common control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding
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securities pursuant to a tender or exchange offer made directly to the
Company's stockholders which the Board does not recommend such
stockholders to accept; or
(b) there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months (or less) such that a majority of
the Board members (rounded up to the nearest whole number) ceases, by
reason of one or more proxy contests for the election of Board members, to
be comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least
a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
1.5 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.6 Committee. "Committee" shall mean the Compensation Committee of
the Board, or another committee or subcommittee of the Board, appointed as
provided in Section 6.1.
1.7 Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $0.01 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock. Debt
securities of the Company convertible into Common Stock shall be deemed equity
securities of the Company.
1.8 Company. "Company" shall mean Griffin Land & Nurseries, Inc., a
Delaware corporation.
1.9 Corporate Transaction. "Corporate Transaction" shall mean any of
the following stockholder-approved transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated, form a
holding company or effect a similar reorganization as to form whereupon
this Plan and all Options are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred or issued to a person or persons different from those who held
such securities immediately prior to such merger.
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1.10 Cullman Group. "Cullman Group" shall mean the group consisting
of Edgar M. Cullman, Edgar M. Cullman, Jr., Susan R. Cullman, John L. Ernst,
Frederick M. Danziger and the members of their families and trusts for their
benefit, partnerships in which they own substantial interests and charitable
foundations on whose boards of directors they sit.
1.11 Director. "Director" shall mean a member of the Board.
1.12 Distribution. "Distribution" shall mean the special
distribution by Culbro Corporation, a New York corporation, of one share of the
Company's Common Stock for each share of Culbro Corporation common stock, par
value $1.00 per share.
1.13 Distribution Date. "Distribution Date" shall mean the date the
Distribution is consummated.
1.14 Employee. "Employee" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company, or
of any corporation which is a Subsidiary.
1.15 Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.16 Fair Market Value. "Fair Market Value" of a share of Common
Stock as of a given date shall be (i) the closing price of a share of Common
Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares were
not traded on the trading day previous to such date, then on the next preceding
date on which a trade occurred, or (ii) if Common Stock is not traded on an
exchange but is quoted on Nasdaq or a successor quotation system, the mean
between the closing representative bid and asked prices for the Common Stock on
the trading day previous to such date as reported by Nasdaq or such successor
quotation system; or (iii) if Common Stock is not publicly traded on an exchange
and not quoted on Nasdaq or a successor quotation system, the Fair Market Value
of a share of Common Stock as established by the Committee (or the Board, in the
case of Options granted to Independent Directors) acting in good faith;
provided, however, that with respect to Options granted to any individual in
connection with the Distribution, the "Fair Market Value" of a share of Common
Stock shall be the mean between the opening representative bid and asked price
for the Common Stock as reported on Nasdaq on the first trading day immediately
following the date of the Distribution.
1.17 Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.
1.18 Independent Director. "Independent Director" shall mean a
member of the Board who is not an Employee of the Company and who is not a
member of the Cullman Group.
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1.19 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Committee.
1.20 Option. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as determined
by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
consultants shall be Non-Qualified Stock Options.
1.21 Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.22 Plan. "Plan" shall mean the Griffin Land & Nurseries, Inc. 1997
Stock Option Plan.
1.23 QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
1.24 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.
1.25 Section 162(m) Participant. "Section 162(m) Participant" shall
mean any key Employee designated by the Committee as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.
1.26 Subsidiary. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
1.27 Termination of Consultancy. "Termination of Consultancy" shall
mean the time when the engagement of an Optionee as a consultant to the Company
or a Subsidiary is terminated for any reason, with or without cause, including,
but not by way of limitation, by resignation, discharge, death or retirement;
but excluding terminations where there is a simultaneous commencement of
employment with the Company or any Subsidiary. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Terminations of Consultancy. Notwithstanding any other provision
of this Plan, the Company or any Subsidiary has an absolute and unrestricted
right to terminate a consultant's service at any time for any reason whatsoever,
with or without cause, except to the extent expressly provided otherwise in
writing.
1.28 Termination of Directorship. "Termination of Directorship"
shall mean the time when an Optionee who is an Independent Director ceases to be
a Director for any
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reason, including, but not by way of limitation, a termination by resignation,
failure to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors.
1.29 Termination of Employment. "Termination of Employment" shall
mean the time when the employee-employer relationship between an Optionee and
the Company or any Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether a particular leave of absence
constitutes a Terminations of Employment; provided, however, that, with respect
to Incentive Stock Options unless otherwise determined by the Committee in its
discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of
this Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate an Employee's employment at any time for any reason whatsoever,
with or without cause, except to the extent expressly provided otherwise in
writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Options shall be Common Stock,
initially shares of the Company's Common Stock, par value $0.01 per share. The
aggregate number of such shares which may be issued upon exercise of such
Options under the Plan shall not exceed
(i) seven hundred thousand (700,000), reduced by
(ii) the number of shares of Common Stock into which shares of
the par value $1.00 common stock of Culbro Corporation previously granted
and outstanding under the Culbro Corporation 1991 Employees Incentive
Stock Option Plan, the Culbro Corporation 1992 Stock Plan, the Culbro
Corporation 1996 Stock Plan, the 1993 Stock Option Plan for Non-Employee
Directors of Culbro Corporation, and the 1996 Stock
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Option Plan for Non-Employee Directors of Culbro Corporation are
redenominated as options with respect to the Company's Common Stock in
connection with the Distribution. The shares of Common Stock issuable upon
exercise of such Options may be either previously authorized but unissued
shares or treasury shares.
(b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any fiscal year shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Award
Limit and if, after grant of an Option, the price of shares subject to such
Option is reduced, the transaction is treated as a cancellation of the Option
and a grant of a new Option and both the Option deemed to be canceled and the
Option deemed to be granted are counted against the Award Limit.
2.2 Add-back of Options. If any Option expires or is canceled
without having been fully exercised, the number of shares subject to such Option
but as to which such Option was not exercised prior to its expiration,
cancellation or exercise may again be optioned hereunder, subject to the
limitations of Section 2.1. Furthermore, any shares subject to Options which are
adjusted pursuant to Section 7.3 and become exercisable with respect to shares
of stock of another corporation shall be considered cancelled and may again be
optioned hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Optionee or withheld by the Company upon the
exercise of any Option, in payment of the exercise price thereof, may again be
optioned subject to the limitations of Section 2.1. Notwithstanding the
provisions of this Section 2.2, no shares of Common Stock may again be optioned
if such action would cause an Incentive Stock Option to fail to qualify as an
incentive stock option under Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility. Any Employee or consultant selected by the
Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be granted
Options at the times and in the manner set forth in Section 3.4(d).
3.2 Disqualification for Stock Ownership. No person may be granted
an Incentive Stock Option under this Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any then existing Subsidiary or parent corporation (within the meaning of
Section 422 of the Code) unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.
3.3 Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted to any person who is not an Employee.
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3.4 Granting of Options
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select
from among the key Employees or consultants (including Employees or
consultants who have previously received Options under this Plan) such of
them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected key Employees
or consultants;
(iii) Subject to Section 3.3, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code.
(b) Upon the selection of a key Employee or consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it deems
appropriate. Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options which have been previously granted to him under this Plan or
otherwise. An Option, the grant of which is conditioned upon such surrender, may
have an Option price lower (or higher) than the exercise price of such
surrendered Option, may cover the same (or a lesser or greater) number of shares
as such surrendered Option, may contain such other terms as the Committee deems
appropriate, and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of such surrendered Option.
(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such Option from treatment as an
"incentive stock option" under Section 422 of the Code.
(d) During the term of the Plan, each person who is an Independent
Director on the date of the Distribution shall automatically be granted (i) an
Option to purchase three thousand (3,000) shares of Common Stock (subject to
adjustment as provided in Section 7.3) on the date of the Distribution and (ii)
an Option to purchase two thousand (2,000) shares of
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Common Stock (subject to adjustment as provided in Section 7.3) on the date of
each annual meeting of stockholders following the Distribution at which the
Independent Director is reelected to the Board. During the term of the Plan, a
person who is initially elected to the Board after the date of the Distribution
and who is an Independent Director at the time of such initial election
automatically shall be granted (i) an Option to purchase three thousand (3,000)
shares of Common Stock (subject to adjustment as provided in Section 7.3) on the
date of such initial election and (ii) an Option to purchase two thousand
(2,000) shares of Common Stock (subject to adjustment as provided in Section
7.3) on the date of each annual meeting of stockholders after such initial
election at which the Independent Director is reelected to the Board. Members of
the Board who are employees of the Company who subsequently retire from the
Company and remain on the Board will not receive an initial Option grant
pursuant to clause (i) of the preceding sentence, but to the extent that they
are otherwise eligible, will receive, after retirement from employment with the
Company, Options as described in clause (ii) of the preceding sentence. All the
foregoing Option grants authorized by this Section 3.4(d) are subject to
stockholder approval of the Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2 Option Price. The price per share of the shares subject to each
Option shall be set by the Committee; provided, however, that such price shall
be no less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and (i) in the case of Options intended to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code, such price shall not be less than 100% of the Fair Market Value of
a share of Common Stock on the date the Option is granted; (ii) in the case of
Incentive Stock Options such price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted (or
the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code); (iii) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code), such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is granted (or
the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code); and (iv) in the case of Options granted to Independent
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Directors, such price shall equal 100% of the Fair Market Value of a share of
Common Stock on the date the Option is granted.
4.3 Option Term. The term of an Option shall be set by the Committee
in its discretion; provided, however, that, (i) in the case of Options granted
to Independent Directors, the term shall be ten (10) years from the date the
Option is granted, without variation or acceleration hereunder, but subject to
Section 5.6, and (ii) in the case of Incentive Stock Options, the term shall not
be more than ten (10) years from the date the Incentive Stock Option is granted,
or five (5) years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of Section 422 of
the Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee may extend the term of any outstanding Option in
connection with any Termination of Employment or Termination of Consultancy of
the Optionee, or amend any other term or condition of such Option relating to
such a termination.
4.4 Option Vesting
(a) The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee and the Committee
may determine that an Option may not be exercised in whole or in part for a
specified period after it is granted; provided, however, that unless otherwise
determined by the Committee, Options granted to Employees and consultants shall
become fully exercisable upon the third anniversary of the date of the Option
grant, without variation or acceleration hereunder except as provided in Section
7.3(b); provided, further, that initial Option grants to Independent Directors
(upon the Distribution Date or initial election to the Board) shall be fully
exercisable immediately upon the date of the Option grant, and subsequent Option
grants to Independent Directors shall become fully exercisable upon the second
anniversary of the date of the Option grant, without variation or acceleration
hereunder except as provided in Section 7.3(b). At any time after grant of an
Option, the Committee may, in its sole and absolute discretion and subject to
whatever terms and conditions it selects, accelerate the period during which an
Option (except an Option granted to an Independent Director) vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any parent or subsidiary
corporation (within the meaning of Section 422 of the Code) of the Company)
exceeds $100,000, such Options shall be treated as Non-Qualified Options to the
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extent required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair Market Value of
stock shall be determined as of the time the Option with respect to such stock
is granted.
4.5 Consideration. In consideration of the granting of an Option,
the Optionee shall agree, in the written Stock Option Agreement, to remain in
the employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year (or
such shorter period as may be fixed in the Stock Option Agreement or by action
of the Committee following grant of the Option) after the Option is granted (or,
in the case of an Independent Director, until the next annual meeting of
stockholders of the Company). Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.
ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the Option,
a partial exercise be with respect to a minimum number of shares.
5.2 Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his office:
(a) A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise
the Option or such portion of the Option;
(b) Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may, in
its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars;
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(c) In the event that the Option shall be exercised pursuant to
Section 7.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised. However, the
Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow a delay in payment up to thirty (30)
days from the date the Option, or portion thereof, is exercised; (ii) allow
payment, in whole or in part, through the delivery of shares of Common Stock
owned by the Optionee, duly endorsed for transfer to the Company with a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board; (vi) allow payment, in whole
or in part, through the delivery of a notice that the Optionee has placed a
market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee (or
the Board, in the case of Options granted to Independent Directors) may also
prescribe the form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension of credit is
prohibited by law.
5.3 Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Committee or Board shall, in its absolute discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its absolute discretion,
determine to be necessary or advisable;
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(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of Options
granted to Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4 Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.
5.5 Ownership and Transfer Restrictions. The Committee (or Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The Committee
may require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.
5.6 Limitations on Exercise of Options Granted to Independent
Directors. No Option granted to an Independent Director may be exercised to any
extent by anyone after the first to occur of the following events:
(a) The expiration of twelve (12) months from the date of the
Optionee's death;
(b) the expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);
(c) the expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than such Optionee's
death or his permanent and total disability, unless the Optionee dies within
said three-month period; or
(d) The expiration of ten years from the date the Option was
granted.
12
<PAGE>
ARTICLE VI
ADMINISTRATION
6.1 Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under this Plan) shall consist solely of two or more Independent Directors
appointed by and holding office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.
6.2 Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options are granted, and to adopt such rules
for the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant under this
Plan need not be the same with respect to each Optionee. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.
6.3 Majority Rule; Unanimous Written Consent. The Committee shall
act by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.
6.4 Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan or Options and the Board shall be fully protected by the
Company in respect of any such action, determination or interpretation.
13
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Not Transferable. Options under this Plan may not be sold,
pledged, assigned, or transferred in any manner other than by will or the laws
of descent and distribution or pursuant to a QDRO, unless and until Options have
been exercised. No Option shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee, only he may exercise an Option
(or any portion thereof) granted to him under the Plan, unless it has been
disposed of pursuant to a QDRO. After the death of the Optionee, any exercisable
portion of an Option may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement, be
exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable laws of descent
and distribution.
7.2 Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 7.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 7.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan, and no action of
the Board or the Committee may be taken that would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. Furthermore, no
modification of the Award Limit shall be effective prior to the approval of the
Company's stockholders. No amendment, suspension or termination of this Plan
shall, without the consent of the holder of Options, alter or impair any rights
or obligations under any Options theretofore granted unless the Stock Option
Agreement (described in Section 4.1) itself otherwise expressly so provides. No
Options may be granted during any period of suspension or after termination of
this Plan, and in no event may any Incentive Stock Option be granted under this
Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 7.4.
14
<PAGE>
7.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 7.3(d), in the event that the Committee (or
the Board, in the case of Options granted to Independent Directors) determines
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, reclassification,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially all of the
assets of the Company (including, but not limited to, a Corporate Transaction),
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Committee's
sole discretion (or in the case of Options granted to Independent Directors, the
Board's sole discretion), affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Option, then the Committee (or the Board,
in the case of Options granted to Independent Directors) shall, in such manner
as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options may be granted under
the Plan, (including, but not limited to, adjustments of the limitations
in Section 2.1 on the maximum number and kind of shares which may be
issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, and
(iii) the exercise price with respect to any Option.
(b) Subject to Sections 7.3(b)(vi) and 7.3(d), in the event of any
Corporate Transaction or other transaction or event described in Section 7.3(a)
or any unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in the case
of Options granted to Independent Directors) determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to any Option granted under this Plan, to facilitate such transactions or events
or to give effect to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of the agreement or by action taken prior to the occurrence of
such transaction or event and either
15
<PAGE>
automatically or upon the optionee's request, for either the purchase of
any such Option, for an amount of cash equal to the amount that could have
been attained upon the exercise of such Option or realization of the
Optionee's rights had such Option been currently exercisable or the
replacement of such Option with other rights or property selected by the
Committee (or the Board, in the case of Options granted to Independent
Directors) in its sole discretion;
(ii) In its sole and absolute discretion, the Committee (or
the Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, or by action taken prior to
the occurrence of such transaction or event that it cannot vest, be
exercised or become payable after such event;
(iii) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in
the case of Options granted to Independent Directors) may provide, either
by the terms of such Option or by action taken prior to the occurrence of
such transaction or event, that for a specified period of time prior to
such transaction or event, such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in (i)
Section 4.4 or (ii) the provisions of such Option;
(iv) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in
the case of Options granted to Independent Directors) may provide, either
by the terms of such Option, or by action taken prior to the occurrence of
such transaction or event, that upon such event, such Option, be assumed
by the successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options, covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares
and prices; and
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make adjustments in
the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, and/or in the terms and
conditions of (including the exercise price), and the criteria included
in, outstanding Options, and Options which may be granted in the future.
(vi) None of the foregoing discretionary actions taken under
this Section 7.3(b) shall be permitted with respect to Options granted
under Section 3.4(d) to Independent Directors to the extent that such
discretion would be inconsistent with the applicable exemptive conditions
of Rule 16b-3. In the event of a Change in Control or a Corporate
Transaction, to the extent that the Board does not have the ability under
Rule 16b-3 to take or to refrain from taking the discretionary actions set
forth in Section 7.3(b)(iii) above, each Option granted to an Independent
Director shall be exercisable as to all shares covered thereby upon such
Change in Control or during the five days immediately preceding the
consummation of such Corporate Transaction and subject to such
consummation, notwithstanding anything to the contrary in Section 4.4 or
the
16
<PAGE>
vesting schedule of such Options. In the event of a Corporate Transaction,
to the extent that the Board does not have the ability under Rule 16b-3 to
take or to refrain from taking the discretionary actions set forth in
Section 7.3(b)(ii) above, no Option granted to an Independent Director may
be exercised following such Corporate Transaction unless such Option is,
in connection with such Corporate Transaction, either assumed by the
successor or survivor corporation (or parent or subsidiary thereof) or
replaced with a comparable right with respect to shares of the capital
stock of the successor or survivor corporation (or parent or subsidiary
thereof).
(c) Subject to Section 7.3(d) and 7.8, the Committee (or the Board,
in the case of Options granted to Independent Directors) may, in its discretion,
include such further provisions and limitations in any Option agreement or
certificate, as it may deem equitable and in the best interests of the Company.
(d) With respect to Options which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 7.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such Option to fail to so qualify under Section
162(m)(4)(C), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits liability under Section
16 or violate the exemptive conditions of Rule 16b-3 unless the Committee (or
the Board, in the case of Options granted to Independent Directors) determines
that the Option is not to comply with such exemptive conditions. The number of
shares of Common Stock subject to any Option shall always be rounded to the next
whole number.
7.4 Approval of Plan by Stockholders. This Plan will be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of this Plan. Options may be granted prior
to such stockholder approval, provided that such Options shall not be
exercisable prior to the time when this Plan is approved by the stockholders,
and provided further that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under this Plan shall
thereupon be canceled and become null and void.(1)
7.5 Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee of
any sums required by federal, state or local tax law to be withheld with respect
to exercise of any Option. The Committee (or the Board, in the case of Options
granted to Independent Directors) may in its discretion and in satisfaction of
the foregoing requirement allow such Optionee to elect to have the Company
withhold shares of Common Stock otherwise issuable under such Option (or allow
the return of shares of Common Stock) having a Fair Market Value equal to the
sums required to be withheld.
- ----------
(1) See note 2.
17
<PAGE>
7.6 Loans. The Committee may, in its discretion, extend one or more
loans to key Employees in connection with the exercise or receipt of an Option
granted under this Plan. The terms and conditions of any such loan shall be set
by the Committee.
7.7 Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options to
require the recipient to agree by separate written instrument, that (i) any
proceeds, gains or other economic benefit actually or constructively received by
the recipient upon any receipt or exercise of the Option, or upon the receipt or
resale of any Common Stock underlying such Option, must be paid to the Company,
and (ii) the Option shall terminate and any unexercised portion of such Option
(whether or not vested) shall be forfeited, if (a) a Termination of Employment,
Termination of Consultancy or Termination of Directorship occurs prior to a
specified date, or within a specified time period following receipt or exercise
of the Option, or (b) the recipient at any time, or during a specified time
period, engages in any activity in competition with the Company, or which is
inimical, contrary or harmful to the interests of the Company, as further
defined by the Committee (or the Board, as applicable).
7.8 Limitations Applicable to Section 16 Persons and
Performance-Based Compensation. Notwithstanding any other provision of this
Plan, this Plan, and any Option granted to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional limitations
set forth in any applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule. To the extent permitted
by applicable law, the Plan, Options granted hereunder shall be deemed amended
to the extent necessary to conform to such applicable exemptive rule.
Furthermore, notwithstanding any other provision of this Plan, any Option which
is granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
7.9 Effect of Plan Upon Options and Compensation Plans. The adoption
of this Plan shall not affect any other compensation or incentive plans in
effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary or (ii) to grant or assume options or other rights or
awards otherwise than under this Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.
18
<PAGE>
7.10 Compliance with Laws. This Plan, the granting and vesting of
Options under this Plan and the issuance and delivery of shares of Common Stock
and the payment of money under this Plan or under Options hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
7.11 Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Plan.
7.12 Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of Griffin Land & Nurseries, Inc. on ______________ ____,
1997.
Executed on this ____ day of _______________, 1997.
GRIFFIN LAND & NURSERIES, INC.
------------------------------
Secretary
19
<PAGE>
Exhibit 10.7
GRIFFIN LAND & NURSERIES, INC.
401(k) SAVINGS PLAN
<PAGE>
GRIFFIN LAND & NURSERIES, INC.
401(k) SAVINGS PLAN
TABLE OF CONTENTS
Page
----
Preamble.................................................................... 1
ARTICLE I
DEFINITIONS............................... 1
Section 1.1 - General................................................. 1
Section 1.2 - Accounts................................................ 1
Section 1.3 - Active Participant...................................... 2
Section 1.4 - Administrator........................................... 2
Section 1.5 - Annual Addition......................................... 2
Section 1.6 - Bargaining Unit......................................... 3
Section 1.7 - Beneficiary............................................. 3
Section 1.8 - Board................................................... 3
Section 1.9 - Break in Service Year................................... 3
Section 1.10 - Code.................................................... 4
Section 1.11 - Company; Company Affiliate.............................. 4
Section 1.12 - Compensation............................................ 5
Section 1.13 - Contribution Percentage................................. 5
Section 1.14 - Deferral Percentage..................................... 6
Section 1.15 - Deferred Compensation................................... 6
Section 1.16 - Deferred Compensation Account........................... 6
Section 1.17 - Direct Rollover......................................... 6
Section 1.18 - Disability Retirement................................... 7
Section 1.19 - Disability Retirement Date.............................. 7
Section 1.20 - Distributee............................................. 7
Section 1.21 - Distribution............................................ 7
Section 1.22 - Distribution Date....................................... 7
Section 1.23 - Eligible Retirement Plan................................ 7
Section 1.24 - Eligible Rollover Distribution.......................... 7
Section 1.25 - Employee................................................ 8
Section 1.26 - ERISA................................................... 8
Section 1.27 - Hardship................................................ 8
Section 1.28 - Highly Compensated Employee............................. 9
Section 1.29 - Hour of Service......................................... 10
Section 1.30 - Investment Fund......................................... 11
Section 1.31 - Leveling Method......................................... 11
Section 1.32 - Matching Account........................................ 11
Section 1.33 - Military Leave.......................................... 11
Section 1.34 - Normal Retirement....................................... 12
<PAGE>
Page
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Section 1.35 - Normal Retirement Date.................................. 12
Section 1.36 - Participant............................................. 12
Section 1.37 - Payday.................................................. 12
Section 1.38 - Plan.................................................... 12
Section 1.39 - Plan Representative..................................... 12
Section 1.40 - Plan Year............................................... 12
Section 1.41 - Qualified Account....................................... 13
Section 1.42 - Rollover Account........................................ 13
Section 1.43 - Rules of the Plan....................................... 13
Section 1.44 - Separation from the Service............................. 13
Section 1.45 - Service................................................. 13
Section 1.46 - Spousal Consent......................................... 14
Section 1.47 - Spouse; Surviving Spouse................................ 14
Section 1.48 - Statutory Compensation.................................. 14
Section 1.49 - Trust................................................... 14
Section 1.50 - Trust Agreement......................................... 15
Section 1.51 - Trust Fund.............................................. 15
Section 1.52 - Trustee................................................. 15
Section 1.53 - Vested.................................................. 15
Section 1.54 - Years of Vesting Service................................ 15
ARTICLE II
ELIGIBILITY............................... 15
Section 2.1 - Requirements for Participation........................... 15
Section 2.2 - Notice of Participation.................................. 16
Section 2.3 - Enrollment Form.......................................... 16
Section 2.4 - Inactive Status.......................................... 17
ARTICLE III
PARTICIPANTS' DEFERRALS......................... 17
Section 3.1 - Deferral of Compensation................................. 17
Section 3.2 - Suspension of Deferral................................... 17
Section 3.3 - Commencement, Resumption or
Change of Deferred Compensation........................ 18
Section 3.4 - Deposit in Trust......................................... 18
Section 3.5 - Withdrawal from Deferred Compensation
Account other than for Hardship........................ 18
Section 3.6 - Hardship Withdrawal from Deferred
Compensation Account................................... 19
Section 3.7 - Other Withdrawals Prohibited............................. 21
Section 3.8 - Deferral Percentage Fail-Safe Provisions................. 21
ii
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Page
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ARTICLE IV
CONTRIBUTIONS OF THE COMPANY...................... 24
Section 4.1 - Determination of Annual Contribution..................... 24
Section 4.2 - Maximum Annual Contribution.............................. 24
Section 4.3 - Contribution Date........................................ 24
ARTICLE V
PARTICIPATION IN COMPANY CONTRIBUTIONS AND FORFEITURES......... 25
Section 5.1 - Deferred Compensation Account............................ 25
Section 5.2 - Matching Account; Qualified Account...................... 25
Section 5.3 - Allocation of Company Contributions...................... 25
Section 5.4 - Allocation of Forfeitures................................ 26
Section 5.5 - Contribution Percentage Fail-Safe Provisions............. 26
Section 5.6 - Reemployment Rights after Qualified Military Service..... 28
ARTICLE VI
INVESTMENT OF ACCOUNTS......................... 29
Section 6.1 - Investment Options....................................... 29
Section 6.2 - Description of Investment Funds.......................... 30
Section 6.3 - Effect of Non-Election................................... 30
ARTICLE VII
VALUATION OF THE TRUST FUND AND ACCOUNTS................ 31
Section 7.1 - Determination of Values.................................. 31
Section 7.2 - Allocation of Values..................................... 31
Section 7.3 - Applicability of Account Values.......................... 31
ARTICLE VIII
VESTING OF INTERESTS.......................... 32
Section 8.1 - Vesting of Accounts...................................... 32
Section 8.2 - Additional Vesting of Accounts........................... 32
ARTICLE IX
EMPLOYMENT AFTER NORMAL RETIREMENT DATE................. 32
Section 9.1 - Continuation of Employment............................... 32
Section 9.2 - Continuation of Participation............................ 33
Section 9.3 - Mandatory In-Service Distributions....................... 33
iii
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Page
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ARTICLE X
BENEFITS UPON RETIREMENT........................ 33
Section 10.1 - Normal or Disability Retirement......................... 33
Section 10.2 - Rights Upon Normal or Disability Retirement............. 33
Section 10.3 - Distribution of Accounts................................ 33
Section 10.4 - Determination of Value of Accounts...................... 35
ARTICLE XI
BENEFITS UPON DEATH........................... 35
Section 11.1 - Designation of Beneficiary.............................. 35
Section 11.2 - Distribution on Death................................... 35
Section 11.3 - Determination of Value of Accounts...................... 36
ARTICLE XII
BENEFITS UPON RESIGNATION OR DISCHARGE................. 36
Section 12.1 - Distributions on Resignation or Discharge............... 36
Section 12.2 - Determination of Value of Accounts...................... 37
Section 12.3 - Forfeitures............................................. 37
Section 12.4 - Restoration of Forfeitures.............................. 37
ARTICLE XIII
TOP-HEAVY PROVISIONS........................... 38
Section 13.1 - Top-Heavy Determination................................. 38
Section 13.2 - Minimum Benefits........................................ 41
Section 13.3 - Vesting................................................. 41
Section 13.4 - Limitation on Benefits.................................. 42
ARTICLE XIV
ADMINISTRATIVE PROVISIONS........................ 43
Section 14.1 - Duties and Powers of the Administrator.................. 43
Section 14.2 - Expenses of Administration.............................. 43
Section 14.3 - Payments................................................ 44
Section 14.4 - Statement to Participants............................... 44
Section 14.5 - Inspection of Records................................... 44
Section 14.6 - Claims Procedure........................................ 44
Section 14.7 - Conflicting Claims...................................... 46
Section 14.8 - Effect of Delay or Failure to Ascertain
Amount Distributable or to Locate Distribute.......... 46
Section 14.9 - Service of Process...................................... 46
iv
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Page
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Section 14.10 - Limitations Upon Powers of the Administrator........... 46
Section 14.11 - Effect of Administrator Action......................... 47
Section 14.12 - Contributions to Rollover Accounts..................... 47
Section 14.13 - Direct Rollovers....................................... 48
Section 14.14 - Loans to Participants or Former
Participants, Spouses or Beneficiaries............... 48
Section 14.15 - Distributions Pursuant to
Qualified Domestic Relations Orders.................. 50
Section 14.16 - Correction of Administrative Error;
Special Contribution................................. 50
ARTICLE XV
TERMINATION, DISCONTINUANCE,
AMENDMENT, MERGER, ADOPTION OF PLAN................... 51
Section 15.1 - Termination of Plan; Discontinuance
of Contributions...................................... 51
Section 15.2 - Amendment of Plan....................................... 52
Section 15.3 - Retroactive Effect of Plan Amendment.................... 52
Section 15.4 - Consolidation or Merger; Adoption
of Plan by Other Companies............................ 52
ARTICLE XVI
MISCELLANEOUS PROVISIONS......................... 53
Section 16.1 - Identification of Fiduciaries........................... 53
Section 16.2 - Allocation of Fiduciary Responsibilities................ 53
Section 16.3 - Limitation on Rights of Employees....................... 54
Section 16.4 - Limitation on Annual Additions; Treatment
of Otherwise Excessive Allocations.................... 54
Section 16.5 - Governing Law........................................... 55
Section 16.6 - Genders and Plurals..................................... 56
Section 16.7 - Titles.................................................. 56
Section 16.8 - References.............................................. 56
v
<PAGE>
Griffin Land & Nurseries, Inc. (the "Company"), a corporation
organized under the laws of the State of Delaware, by resolution of its Board of
Directors adopted on _______________, 1997, adopted the Griffin Land &
Nurseries, Inc. 401(k) Savings Plan (the "Plan") and Trust for the exclusive
benefit of its eligible Employees, effective as of
________________, 19___.
The purposes of the Plan are:
(1) To permit Participants to share in the Company's success.
(2) To stimulate and maintain among Participants a sense of
responsibility, cooperative effort and a sincere interest in the progress
and success of the Company.
(3) To increase the efficiency of Participants and to
encourage them to remain with the Company until retirement from active
service.
(4) To provide security for Participants by establishing a
plan under which each Participant's share of Company contributions, his
deferrals and the earnings thereon will be invested and accumulated to
create a fund to benefit him in the event of his disability or other
termination of employment.
The Plan is intended to comply with the provisions of Sections 401,
401(k), 402(a) and other applicable provisions of the Internal Revenue Code,
similar provisions of applicable state law, the Employee Retirement Income
Security Act of 1974, as amended and Section 7(e)(4) of the Fair Labor Standards
Act of 1938, as amended.
ARTICLE I
DEFINITIONS
Section 1.1 - General
Whenever any of the following terms is used in the Plan with the
first letter or letters capitalized, it shall have the meaning specified below
unless the context clearly indicates to the contrary.
Section 1.2 - Accounts
"Account" or "Accounts" of a Participant or former Participant shall
mean, as the context indicates, any one or more of his Deferred Compensation
Account, his Rollover
<PAGE>
Account, his Qualified Account, or his Matching Account, if any, in the Trust
Fund established in accordance with Sections 5.1, 14.12, 5.2(b), and 5.2(a),
respectively.
Section 1.3 - Active Participant
"Active Participant" shall mean a Participant who is an Employee and
is not
(a) in a Bargaining Unit, or
(b) a non-resident alien who receives no earned income from
the Company which constitutes income from sources within the United
States.
Section 1.4 - Administrator
"Administrator" shall mean the Company acting through its chief
executive officer or his delegate.
Section 1.5 - Annual Addition
"Annual Addition" of a Participant for the Plan Year in question
shall mean the sum of
(a) Company contributions and forfeitures allocated to his
Matching Account and his Qualified Account for that Plan Year,
(b) Company contributions and forfeitures allocated to his
Deferred Compensation Account for that Plan Year (excluding any excess
amounts determined under Code Section 402(g) which are distributed to him
pursuant to Section 17.4(b) not later than the April 15 following the
calendar year in which such excess amounts were deferred),
(c) Company contributions and forfeitures allocated to his
accounts under all other qualified defined contribution plans, if any, of
the Company and any Company Affiliate for that Plan Year,
(d) His personal contributions under the Plan (excluding any
excess amounts distributed to him pursuant to Section 16.4(b)) and all
other qualified defined contribution plans, if any, of the Company and any
Company Affiliate for that Plan Year, and
(e) Except for purposes of Section 16.4(a)(i), the sum of
(i) Company contributions allocated after March 31, 1984
to an individual medical account as defined in Code Section
415(l)(1), if any, which is maintained under a qualified pension or
annuity plan, and
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(ii) Company contributions paid or accrued for Plan
Years ending after December 31, 1985, if any, and allocated to the
separate account of a Key Employee (as defined in Section
13.1(b)(iv)) for the purpose of providing post-retirement medical
benefits,
whether or not such allocations or contributions have been recharacterized or
distributed pursuant to Sections 3.5, 3.6, 3.8 or 5.5.
If, in a particular Plan Year, the Company contributes an amount to
a Participant's Accounts because of an erroneous forfeiture in a prior Plan
Year, or because of an erroneous failure to allocate amounts in a prior Plan
Year, the contribution shall not be considered an Annual Addition with respect
to the Participant for that particular Plan Year, but shall be considered an
Annual Addition for the Plan Year to which it relates. If the amount so
contributed in the particular Plan Year takes into account actual investment
gains attributable to the period subsequent to the Plan Year to which the
contribution relates, the portion of the total contribution which consists of
such gains shall not be considered as an Annual Addition for any Plan Year.
Section 1.6 - Bargaining Unit
"Bargaining Unit" shall mean a bargaining unit covered by a
collective bargaining agreement with the Company
(a) if retirement benefits were the subject of good faith
bargaining with respect to such agreement, and
(b) if such agreement does not provide for the coverage under
the Plan of Employees in such unit.
Section 1.7 - Beneficiary
"Beneficiary" shall mean a person or trust properly designated by a
Participant or former Participant to receive benefits, or such Participant's
Spouse or heirs at law, as provided in Article XI.
Section 1.8 - Board
"Board" shall mean the Board of Directors of the Company.
Section 1.9 - Break in Service Year
"Break in Service Year" of an Employee or former Employee shall mean
the three hundred and sixty-five day period
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(a) which begins on the later of
(i) the date of his last Separation from the Service, or
(ii) if the Employee furnishes to the Administrator such
timely information as the Administrator may reasonably require to
establish that the Employee's absence from work is for any of the
following reasons or purposes, the second anniversary of the first
day of his absence from work
a by reason of pregnancy of the Employee,
b by reason of the birth of a child of the
Employee,
c by reason of the placement of a child with the
Employee in connection with the adoption of such child by the
Employee, or
d for purposes of caring for such child for a
period beginning immediately following such birth or
placement, and
(b) during no part of which he was an Employee or employed by
a Company Affiliate.
Section 1.10 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.11 - Company; Company Affiliate
(a) "Company" shall mean Griffin Land & Nurseries, Inc. any other
company which subsequently adopts the Plan as a whole or as to any one or more
divisions, in accordance with Section 15.4(c), and any successor company which
continues the Plan under Section 15.4(a).
(b) "Company Affiliate" shall mean any employer which, at the time
of reference, was, with the Company, a member of a controlled group of
corporations or trades or businesses under common control, or a member of an
affiliated service group, as determined under regulations issued by the
Secretary of the Treasury or his delegate under Code Sections 414(b), (c), (m)
and 415(h) and any other entity required to be aggregated with the Company
pursuant to regulations issued under Code Section 414(o).
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Section 1.12 - Compensation
(a) "Compensation" of a Participant for any Plan Year shall mean his
wages and all other payments of compensation for that Plan Year as reported on
Form W-2 (currently entitled "wages, tips, other compensation") and as described
in Treas. Reg. Section 1.415-2(d)(11)(i), exclusive of reimbursed moving
expenses to the extent that at the time of payment it is reasonable to believe
that such expenses are deductible by the Participant under Code Section 217
(related to relocation expenses) and including amounts not includable in gross
income by reason of Code Sections 125 (cafeteria plans), 402(e)(3)(401(k)
plans), 402(h) or 403(b), but in no event greater than $160,000 (adjusted for
increases in the cost of living described in Code Section 401(a)(17) and, if the
Plan Year is less than twelve months, such limit shall be reduced to an amount
equal to such limit multiplied by a fraction, the numerator representing the
number of months in the Plan Year and the denominator of which is twelve).
(b) The Administrator may elect for any Plan Year and solely for the
purposes of Sections 1.13 and 1.14 to exclude from Compensation of Participants
that part thereof deferred under Article III and under cafeteria plans.
Section 1.13 - Contribution Percentage
(a) "Contribution Percentage" for a Plan Year shall mean, with
respect to eligible Participants who are Highly Compensated Employees as a group
and to eligible Participants who are not Highly Compensated Employees as a
group, the average of the decimal numbers obtained, as to each such Participant,
by dividing
(i) his allocations described in subsection (b), by
(ii) his Compensation for that Plan Year.
(b) The allocations described in this subsection are
(i) allocations to his Matching Account under Section 5.3(b)
(and, to the extent elected by the Administrator under Section 5.5(b),
amounts credited to his Qualified Account for that Plan Year), excluding
any amounts forfeited under Section 5.5(b)(vi), and
(ii) allocations to his Deferred Compensation Account, to the
extent that the Administrator elects to take such allocations into account
under Section 5.5.
(c) For purposes of this Section, all plans required to be taken
into account under Code Section 401(m)(2)(B) shall be treated as a single plan.
(d) The Administrator may elect to limit Compensation of a
Participant taken into account for purposes of subsection (a)(ii) to amounts
received by him for that
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portion of the Plan Year during which he was eligible to receive allocations to
his Matching Account; provided, however, that such determination shall be
applied uniformly to all Participants for the year in question.
Section 1.14 - Deferral Percentage
(a) "Deferral Percentage" for a Plan Year shall mean, with respect
to eligible Participants who are Highly Compensated Employees as a group and to
eligible Participants who are not Highly Compensated Employees as a group, the
average of the decimal numbers obtained, as to each such Participant, by
dividing
(i) the amount, if any, credited to his Deferred Compensation
Account for that Plan Year in question under this Plan and any other plans
which are aggregated with this Plan under Code Section 401(k)(3)(A)
(including any excess amounts described in Code Section 402(g) if he is a
Highly Compensated Employee but excluding any excess amounts distributed
to him pursuant to Section 16.4(b)) (and, to the extent elected by the
Administrator under Section 3.8(d), amounts credited to his Qualified
Account for that Plan Year), by
(ii) his Compensation for that Plan Year.
(b) The Administrator may elect to limit Compensation of a
Participant taken into account for purposes of subsection (a)(ii) to amounts
received by him for that portion of the Plan Year during which he was eligible
to defer Compensation; provided, however, that such determination shall be
applied uniformly to all Participants for the year in question.
Section 1.15 - Deferred Compensation
"Deferred Compensation" of a Participant shall mean an amount
contributed by the Company to the Plan for him under Section 4.1(a).
Section 1.16 - Deferred Compensation Account
"Deferred Compensation Account" of a Participant shall mean his
individual account in the Trust Fund established in accordance with Section 5.1.
Section 1.17 - Direct Rollover
"Direct Rollover" shall mean a payment by the Plan to an Eligible
Retirement Plan designated by a Distributee.
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Section 1.18 - Disability Retirement
"Disability Retirement" of a Participant shall mean his Separation
from the Service authorized by the Administrator upon its finding, based on
competent medical evidence, that the Participant, as a result of mental or
physical disease or condition, will be permanently unable to discharge his
assigned duties.
Section 1.19 - Disability Retirement Date
"Disability Retirement Date" of a Participant shall mean the date
(prior to his Normal Retirement Date) fixed by the Administrator for his
Disability Retirement.
Section 1.20 - Distributee
"Distributee" shall mean a Participant or former Participant,
Surviving Spouse of a Participant or former Participant, or a Spouse or former
Spouse of a Participant or former Participant who is an alternate payee under a
"qualified domestic relations order," as defined in Code Section 414(p).
Section 1.21 - Distribution
"Distribution" shall mean the special distribution by Culbro
Corporation, a New York corporation, of one share of Griffin Land & Nurseries,
Inc. common stock, par value $0.01 per share for each share of Culbro
Corporation common stock, par value $1.00 per share.
Section 1.22 - Distribution Date
"Distribution Date" shall mean the date the Distribution is
consummated.
Section 1.23 - Eligible Retirement Plan
"Eligible Retirement Plan" shall mean an individual retirement
account (described in Code Section 408(a)), an individual retirement annuity
(described in Code Section 408(b)), an annuity plan (described in Code Section
403(a)), or a qualified trust (described in Code Section 401(a)), that will
accept a Distributee's Eligible Rollover Distribution; provided, however, that
in the case of an Eligible Rollover Distribution to a Distributee who is a
Surviving Spouse of a Participant or former Participant, an "Eligible Retirement
Plan" shall mean only an individual retirement account or an individual
retirement annuity.
Section 1.24 - Eligible Rollover Distribution
(a) Except as provided in subsection (b), "Eligible Rollover
Distribution" shall mean any distribution of all or any portion of a
Participant's or former Participant's Accounts to a Distributee.
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(b) "Eligible Rollover Distribution" shall not mean any distribution
(i) that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's Beneficiary,
(ii) that is paid for a specified period of ten years or more,
(iii) that is part of a series of distributions during a
calendar year to the extent that such distributions are expected to total
less than $200 or a total lump sum distribution which is equal to less
than $200, as described in Temp. Reg. Section 1.401(a)(31)-1T A-11,
(iv) to the extent such distribution is required under Code
Section 401(a)(9), or
(v) to the extent such distribution is not includable in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
Section 1.25 - Employee
"Employee" shall mean any person who renders services to the Company
in the status of an employee as the term is defined in Code Section 3121(d).
Except as provided in subsection 1.28(b) and Section 1.29, "Employee" shall not
include leased Employees treated as Employees of the Company pursuant to Code
Sections 414(n) and 414(o), employees of a Company Affiliate or independent
contractors treated as Employees of the Company unless otherwise designated by
the Administrator.
Section 1.26 - ERISA
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
Section 1.27 - Hardship
(a) "Hardship" of a Participant as determined by the Administrator
in its discretion on the basis of all relevant facts and circumstances and in
accordance with the following nondiscriminatory and objective standards,
uniformly interpreted and consistently applied, and without regard to the
existence of other resources which are reasonably available to the Participant
in question, shall mean any one or more of the following:
(i) Unreimbursed expenses for medical care described in Code
Section 213(d) previously incurred by him, his spouse, or his dependent
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(as described in Code Section 152) or necessary for him, his spouse or his
dependent to obtain medical care.
(ii) Costs directly related to the purchase (excluding
mortgage payments) of a principal residence for him.
(iii) Payment of tuition and related educational fees for the
next twelve months of post-secondary education for him, his spouse,
children, or his dependents (as so described).
(iv) Payments necessary to prevent his eviction from his
principal residence, or foreclosure on the mortgage of his principal
residence.
(v) Any other event identified by the Commissioner of Internal
Revenue in revenue rulings, notices and/or other documents of general
applicability for inclusion in the foregoing list.
(b) A financial need shall not fail to qualify as immediate and
heavy merely because such need was reasonably foreseeable by the Participant or
voluntarily incurred by him.
Section 1.28 - Highly Compensated Employee
(a) For any current Plan Year, a "Highly Compensated Employee" shall
mean any Employee who
(i) in the previous Plan Year
a was a five percent owner of the Company or a Company
Affiliate (within the meaning of Code Section 416(i)(1)) at any time
during the Plan Year,
b had Statutory Compensation in excess of $80,000
(adjusted at the same time and in the same manner as under Code
Section 415(d), except that the base period shall be the calendar
quarter ending September 30, 1996), and
c if the Company elects, was in the group consisting of
the top twenty percent of Employees when ranked by Statutory
Compensation for the Plan Year in question,
(ii) in the current Plan Year was a five percent owner of the
Company or a Company Affiliate (within the meaning of Code Section
416(i)(1)) at any time during the Plan Year,
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and any former Employee, who during the Plan Year in which he separated from the
Service or during any Plan Year ending on or after his fifty-fifth birthday, was
described in paragraph (i) or (ii).
(b) For purposes of this Section, "Statutory Compensation" shall
include Compensation deferral amounts and other amounts required to be taken
into account pursuant to Code Section 414(q)(4), and "Employee" shall include
leased Employees treated as Employees of the Company pursuant to Code Section
414(n) or 414(o) and shall include Employees of a Company Affiliate, but shall
not include Employees on a leave of absence throughout the Plan Year, or
Employees who receive Statutory Compensation for the Plan Year in an amount less
than 50% of such Employee's average annual compensation for the three
consecutive calendar years preceding the Plan Year during which such Employee
received the greatest amount of Statutory Compensation.
Section 1.29 - Hour of Service
(a) "Hour of Service" of an Employee (including a leased Employee
pursuant to Code Sections 414(n) and (o)) shall mean the following:
(i) Each hour for which he is paid or entitled to payment by
the Company or a Company Affiliate for the performance of services.
(ii) Each hour in or attributable to a period of time during
which he performs no duties (irrespective of whether he has had a
Separation from the Service) due to a vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or a
leave of absence for which he is so paid or so entitled to payment by the
Company or a Company Affiliate, whether direct or indirect; provided,
however, that no such hours shall be credited to an Employee if
attributable to payments made or due under a plan maintained solely for
the purpose of complying with applicable workers' compensation,
unemployment compensation or disability insurance laws or to a payment
which solely reimburses the Employee for medical or medically related
expenses incurred by him.
(iii) Each hour for which he is entitled to back pay,
irrespective of mitigation of damages, whether awarded or agreed to by the
Company or a Company Affiliate.
(b) Hours of Service under subsections (a)(ii) and (a)(iii) shall be
calculated in accordance with 29 C.F.R. ss. 2530.200b-2(b). Each Hour of Service
shall be attributed to the Plan Year or initial eligibility year in which it
occurs except to the extent that the Company, in accordance with 29 C.F.R. ss.
2530.200b-2(c), credits such Hour to another computation period under a
reasonable method consistently applied.
(c) The Hours of Service of an Employee occurring prior to the
Distribution Date shall be determined by the Administrator from reasonably
accessible
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records by means of appropriate calculations and approximations or, if such
records are insufficient to make an appropriate determination, by reasonable
estimation.
(d) For purposes of Section 1.45, an Hour of Service of any Employee
who completes an Hour of Service as an Employee on the date immediately prior to
Distribution Date and who becomes an Employee of the Company on or prior to
December 31, 1998 shall also include each hour prior to such date that would be
described in subsection (a) above if the phrase "Culbro Corporation and its
affiliates under Code Sections 414(b), (c), (m), (o) and 414(h)" were
substituted in lieu of "the Company or a Company Affiliate" in each instance
where such phrase appears.
Section 1.30 - Investment Fund
"Investment Fund" shall mean one of the investment funds of the
Trust Fund which is authorized by the Administrator at the time of reference.
Section 1.31 - Leveling Method
"Leveling Method" shall mean the method of determining the excess
amounts under Section 3.8(a), 3.8(b) or 5.5(a) under which the actual deferral
ratio or the actual contribution ratio, as applicable, of the Highly Compensated
Employee with the highest dollar amount of deferrals or contributions, as
applicable, shall be reduced to the extent required to enable the Plan to
satisfy Section 3.8(a) or 3.8(b) or Section 5.5(a) or to cause such Highly
Compensated Employee's deferrals or contributions, as applicable, to equal the
deferrals or contributions of the Highly Compensated Employee with the next
highest dollar amount of deferrals or contributions, as applicable, or such
other method which is permitted under Code Section 401(k)(8)(C). This process
shall be repeated until Section 3.8(a), 3.8(b) or Section 5.5(a) is satisfied.
Section 1.32 - Matching Account
"Matching Account" of a Participant shall mean his individual
account established in accordance with Section 5.2(a).
Section 1.33 - Military Leave
Any Employee who leaves the Company or a Company Affiliate directly
to perform service in the Armed Forces of the United States or in the United
States Public Health Service under conditions entitling him to reemployment
rights, as provided in the laws of the United States, shall, solely for purposes
of the Plan and irrespective of whether he is compensated by the Company or a
Company Affiliate during such period of service, be on Military Leave. An
Employee's Military Leave shall expire if such Employee voluntarily resigns from
the Company or such Company Affiliate during such period of service or if he
fails to make application for reemployment within the period specified by such
laws for the preservation of his reemployment rights. For purposes of computing
an Employee's Service,
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no more than 365 days of Service shall be credited for any Military Leave except
as required by Treas. Reg. ss. 1.410(a)-7(b)(6)(iii).
Section 1.34 - Normal Retirement
"Normal Retirement" of a Participant shall mean his Separation from
the Service upon his Normal Retirement Date, or after such date (except by
death) as permitted under Article X.
Section 1.35 - Normal Retirement Date
"Normal Retirement Date" of a Participant shall mean the later of
(a) the first day of the calendar month coincident with or
next following his sixty-fifth birthday, or
(b) the fifth anniversary of the date he commences
participation in the Plan.
Section 1.36 - Participant
"Participant" shall mean any person included in the Plan as provided
in Article II.
Section 1.37 - Payday
"Payday" of a Participant shall mean the regular and recurring
established day for payment of Compensation to Employees in his classification
or position.
Section 1.38 - Plan
"Plan" shall mean the Griffin Land & Nurseries, Inc. 401(k) Savings
Plan.
Section 1.39 - Plan Representative
"Plan Representative" shall mean any person or persons designated by
the Administrator to function in accordance with the Rules of the Plan.
Section 1.40 - Plan Year
"Plan Year" shall be the twelve consecutive month period commencing
on January 1 and ending on December 31, except that the first "Plan Year" shall
be the period from the Distribution Date through December 31, 1997.
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Section 1.41 - Qualified Account
"Qualified Account" of a Participant shall mean his individual
account in the Trust Fund, if any, established in accordance with Section
5.2(b), pursuant to Sections 3.7 and 3.8.
Section 1.42 - Rollover Account
"Rollover Account" of a Participant shall mean his individual
account in the Trust Fund established in accordance with Section 14.12.
Section 1.43 - Rules of the Plan
"Rules of the Plan" shall mean the rules adopted by the
Administrator pursuant to Section 14.1(a)(ii) for the administration,
interpretation or application of the Plan.
Section 1.44 - Separation from the Service
(a) "Separation from the Service" of an Employee shall mean his
resignation from or discharge by the Company or a Company Affiliate, or his
death, Normal or Disability Retirement but not his transfer among the Company
and Company Affiliates.
(b) A leave of absence or sick leave authorized by the Company or a
Company Affiliate in accordance with established policies, a vacation period, a
temporary layoff for lack of work or a Military Leave shall not constitute a
Separation from the Service; provided, however, that
(i) continuation upon a temporary layoff for lack of work for
a period in excess of twelve months shall be considered a discharge
effective as of the twelve month anniversary of the date an Employee is
first absent (with or without pay) due to such layoff, and
(ii) failure to return to work upon expiration of any leave of
absence, sick leave, or vacation or within three days after recall from a
temporary layoff for lack of work, or upon expiration of a Military Leave
shall be considered a resignation effective as of the date of expiration
of any such leave of absence, sick leave, vacation, or Military Leave.
Section 1.45 - Service
"Service" of an Employee, expressed in days, shall mean the period
of elapsed time which, or the sum of such periods each of which, is measured
from
(a) his first Hour of Service, or his first Hour of Service
following a Break in Service Year, as the case may be, to
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(b)(i) the first day of his first subsequent Break in Service
Year, or
(ii) the first day of the twelve month period immediately
preceding the first day of his first subsequent Break in Service
Year if the Break in Service Year occurs for the reasons described
in Section 1.9(a)(ii).
Section 1.46 - Spousal Consent
"Spousal Consent" to an election, designation or other action of a
Participant, shall mean the written consent thereto of the Spouse of the
Participant, witnessed by a Plan Representative or a notary public, which
acknowledges the effect of such election on the rights of the Spouse, and, in
the case of consent to a Beneficiary designation, with such designation not
being changeable without further Spousal Consent unless the prior Spousal
Consent expressly permits such changes without the necessity of further Consent.
Spousal Consent shall be deemed to have been obtained if it is established to
the satisfaction of the Plan Representative that it cannot actually be obtained
because there is no Spouse, or because the Spouse could not be located, or
because of such other circumstances as the Secretary of the Treasury by
regulation may prescribe. Any Spousal Consent shall be effective only with
respect to the Spouse in question.
Section 1.47 - Spouse; Surviving Spouse
"Spouse" or "Surviving Spouse" of a Participant or former
Participant shall mean the spouse to whom he was married throughout the 365-day
period ending on the date of his death; provided, however, that to the extent
required by a qualified domestic relations order issued in accordance with Code
Section 414(p), a former Spouse shall be treated as a Surviving Spouse.
Section 1.48 - Statutory Compensation
"Statutory Compensation" of a Participant for any Plan Year shall
mean his wages and all other payments of compensation for that Plan Year as
reported on Form W-2 (currently entitled "wages, tips, other compensation") and
as described in Treas. Reg. Section 1.415-2(d)(11)(i) and, effective as of
January 1, 1998, including any elective deferral as defined in Code Section
402(g)(3) and any amounts not includable in gross income by reason of Code
Section 125 (cafeteria plan) or Code Section 457 (deferred compensation plan of
state and local governments and tax-exempt organizations).
Section 1.49 - Trust
"Trust" shall mean the trust established pursuant to the Trust
Agreement.
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Section 1.50 - Trust Agreement
"Trust Agreement" shall mean that certain Trust Agreement Pursuant
to Griffin Land & Nurseries, Inc. 401(k) Savings Plan Trust, providing for the
investment and administration of the Trust Fund. By this reference, the Trust
Agreement is incorporated herein.
Section 1.51 - Trust Fund
"Trust Fund" shall mean the fund established under the Trust
Agreement by contributions made by the Company and Participants pursuant to the
Plan and from which any distributions under the Plan are to be made. It shall be
composed of separate Investment Funds as permitted under the Rules of the Plan.
Section 1.52 - Trustee
"Trustee" shall mean the Trustee under the Trust Agreement.
Section 1.53 - Vested
"Vested," when used with reference to a Participant's Accounts,
shall mean non-forfeitable.
Section 1.54 - Years of Vesting Service
"Years of Vesting Service" of an Employee, measured in years and
determined as of the point in time in question, shall mean 1/365th of his days
of Service (ignoring any fraction in the result), excluding any days of Service
before any contributions are made to his Deferred Compensation Account and
before any portion of his Matching Account has become Vested and before five
consecutive Break in Service Years.
ARTICLE II
ELIGIBILITY
Section 2.1 - Requirements for Participation
(a) Employees of the Company on the Distribution Date who were
Participants in the Culbro Companies Incorporated 401(k) Savings Plan as of the
date immediately prior to the Distribution Date shall participate in this Plan
as of Distribution Date.
(b) Except as provided in subsections (c) and (d), any other person
who on _______________, 1997 or on the first day of any subsequent calendar
month
(i) is an Employee,
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(ii) has completed 365 days of Service,
(iii) is not employed in a Bargaining Unit,
(iv) has attained his twenty-first birthday, and
(v) is not a non-resident alien who receives no earned income
from the Company which constitutes income from sources within the United
States,
shall become a Participant on such day.
(c) Any Participant whose participation terminates shall again
become a Participant effective as of his first subsequent Hour of Service as an
Employee in a position or classification which is not within a Bargaining Unit
and who is not a non-resident alien described in Section 2.1(b)(v).
(d) A former Employee who was not an Employee on the first day of
the calendar month on which he first met all other eligibility requirements
shall become a Participant effective as of his first subsequent Hour of Service
as an Employee in a position or classification which is not within a Bargaining
Unit and who is not a non-resident alien described in Section 2.1(b)(v).
Section 2.2 - Notice of Participation
On or before the date on which an Employee becomes a Participant,
the Administrator shall give him written notice thereof.
Section 2.3 - Enrollment Form
The Administrator shall provide an enrollment form on which the
Participant should set forth
(a) his name, date of birth, name of Spouse and other such
relevant information,
(b) his consent that he, his successors in interest and
assigns and all persons claiming under him shall, to the extent consistent
with applicable law, be bound by the statements contained therein and the
provisions of the Plan and Trust Agreement as they now exist and as they
may be amended from time to time, and
(c) his statement as to whether he elects to defer
Compensation within the limits of Section 3.1, his selection of the amount
of his deferral within the limits of Section 3.1, and his authorization
for the Company to pay the same to the Trust Fund in accordance with
Section 4.1
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Section 2.4 - Inactive Status
(a) A Participant who is transferred directly to a Company Affiliate
or to a position or classification which is within a Bargaining Unit or who
becomes a non-resident alien described in Section 2.1(b)(v) shall thereupon
cease to be an Active Participant.
(b) All provisions of the Plan shall otherwise continue to apply to
such Participant, except that he shall not defer Compensation under Article III
or share in allocations under Article V and Section 16.4 while he is not an
Active Participant.
(c) If such a Participant is retransferred to a position or
classification with the Company which is not within a Bargaining Unit and is not
a non-resident alien described in Section 2.1(b)(v), he shall thereupon again be
an Active Participant, may again defer Compensation under Article III and shall
share in allocations under Article V and Section 16.4.
ARTICLE III
PARTICIPANTS' DEFERRALS
Section 3.1 - Deferral of Compensation
Each Participant may elect, in accordance with the Rules of the
Plan, to defer for any Plan Year, the lesser of
(a) any whole number percentage, which is not less than 1% of
his Compensation nor more than a percentage which may be established by
the Administrator, for each Payday after his election hereunder in such
Plan Year; and
(b) such amount as will not cause the total of such deferrals
for any calendar year to exceed the excess of $9,500 (adjusted for
increases in the cost of living for such calendar year as described in
Code Section 402(g)(5)) over any amounts described in Code Section
402(g)(3) for such calendar year and not deferred hereunder.
Section 3.2 - Suspension of Deferral
A Participant may, upon such prior written notice to the
Administrator as is required under the Rules of the Plan, elect to suspend
deferral of his Compensation commencing with the first day of next calendar
month subsequent to such notice.
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Section 3.3 - Commencement, Resumption or
Change of Deferred Compensation
As permitted under the Rules of the Plan,
(a) a Participant in the Plan who previously declined to defer
a percentage of his Compensation may, upon such prior written notice to
the Administrator as is required under the Rules of the Plan, elect to
commence deferral of his Compensation under Section 3.1 within the limits
thereof;
(b) after he has suspended deferral of his Compensation under
Section 3.2, a Participant may, upon notice to the Administrator, elect to
resume deferral of his Compensation under Section 3.1 within the limits
thereof; and
(c) a Participant may, upon prior written notice to the
Administrator, elect to change his rate of deferral of his Compensation
within the limits of Section 3.1.
Section 3.4 - Deposit in Trust
A Participant's deferrals shall be transmitted to the Trustee in
accordance with subsections 4.1(a) and 4.3(a) and shall be invested by the
Trustee in accordance with Article VI.
Section 3.5 - Withdrawal from Deferred Compensation
Account other than for Hardship
The Administrator may permit a Participant to make a lump sum
withdrawal from his Deferred Compensation Account in the event of
(a) a deferral in excess of the limitation of Section 3.1(b),
in the amount of principal and interest (computed in a consistent and
reasonable manner in accordance with Section 7.2 and Code Section
401(a)(4)) allowed by Code Section 402(g)(2)(A)(ii),
(b) a deferral in excess of the limitation of Section 3.8, in
the amount of principal and interest allowed by Code Section 401(k)(8) (in
which case the Participant shall be deemed to notify the Administrator of
such excess amounts made to the Plan and any other plans of the Company or
a Company Affiliate),
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(c) the circumstances specified in Code Section 401(k)(10), in
the amount of principal and interest allowed thereunder.
See also Section 9.3.
Section 3.6 - Hardship Withdrawal from Deferred
Compensation Account
A Participant may make a withdrawal from his Deferred Compensation
Account on account of Hardship, subject to the following requirements:
(a) A Participant's aggregate Hardship withdrawals shall not
exceed the lesser of
(i) the lesser of
a the amount by which
1 the aggregate principal amount of his
Deferred Compensation Account and his Qualified Account
exceeds
2 the unpaid amount due on his outstanding
loan or loans, if any under subsection (c)(i) or
subsection (d)(iv), and
b the amount which is necessary to satisfy the
Hardship (including any amounts necessary to pay any federal,
state or local income taxes or penalties reasonably
anticipated to result from the distribution), or
(ii) the amount which cannot be satisfied from other
resources which are reasonably available to the Participant.
(b) Unless the Participant elects that the conditions of
subsection (c) and (e) shall apply, the requirements of subsection (d)
must be satisfied.
(c) The conditions of this subsection are:
(i) the Participant shall obtain all distributions
(other than Hardship distributions), and all nontaxable loans
currently available under all plans maintained by the Company or any
Company Affiliate;
(ii) the Participant shall not be permitted to make
further deferrals of Compensation or voluntary contributions
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under the Plan (or other plan (whether or not qualified) maintained
by the Company or any Company Affiliate) for twelve months
thereafter; and
(iii) the sum of the Participant's deferrals of
Compensation under this Article (and other plans maintained by the
Company or any Company Affiliate) in his taxable year in which the
Hardship distribution is received and in his next taxable year shall
not exceed $9,500 (as adjusted for increases in the cost of living
as described in Code Section 402(g)(5)).
(d) To meet the requirements of this subsection the
Participant must certify to the Administrator in writing that the
financial need in question cannot be satisfied
(i) through reimbursement or compensation by insurance
or otherwise,
(ii) by reasonable liquidation of the assets of himself
or of those assets which he owns jointly or in common with his
spouse, a child, or any other person (but not of property held for
his spouse or child under an irrevocable trust or the Uniform Gifts
to Minors Act),
(iii) by cessation of deferrals under this Article,
(iv) by other distributions or nontaxable (at the time
of the loan) loans from plans maintained by the Company or by any
other employer, or
(v) by borrowing from commercial sources on reasonable
commercial terms,
and the Administrator reasonably relies on such certification and has no
actual knowledge to the contrary.
(e) The conditions of this subsection, if any, shall be those
prescribed by the Commissioner of Internal Revenue through the publication
of revenue rulings, notices, and/or other documents of general
applicability, as an alternate method under which a Hardship distribution
will be deemed to be necessary to satisfy an immediate and heavy financial
need.
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<PAGE>
(f) A Participant whose deferrals have been suspended under
subsection (c) nevertheless shall be included in determinations under
Sections 1.13 and 1.14 if he would otherwise be so included.
(g) Hardship withdrawals may not be made more frequently than
at twelve month intervals.
(h) The Participant's remaining Deferred Compensation Account
balance, or, if none, the withdrawal itself shall be reduced by the amount
of any administrative expenses charged to the Trust Fund by reason of the
withdrawal.
Section 3.7 - Other Withdrawals Prohibited
Except as provided in Sections 3.5, 3.6, 3.8, 5.5, and 9.3, no
distribution shall be made to any Participant from his Deferred Compensation
Account, his Qualified Account or any other Account prior to his Separation from
the Service.
Section 3.8 - Deferral Percentage Fail-Safe Provisions
(a) (i) For each Plan Year, the Deferral Percentage with respect to
Participants who are Highly Compensated Employees, shall be
a not more than 125 percent of, or
b not more than two percentage points higher than, and
not more than twice,
the Deferral Percentage for the preceding Plan Year with respect to
Participants who are not Highly Compensated Employees for the preceding
Plan Year (using the definition of such term that was in effect during
such preceding Plan Year), or such other amount as may be required by
Treasury Regulations under Code Section 401(m)(9). The Administrator may
elect to apply the current Plan Year's Deferral Percentage for the group
of Participants who are not Highly Compensated Employees (using the
definition of such term that was in effect during such Plan Year) rather
than that of the preceding Plan Year, except that if such election is
made, it may not be changed except as provided by the Secretary of the
Treasury.
(ii) Notwithstanding paragraph (i), for the Plan Year
commencing on the Distribution Date the amount taken into account as the
Deferral Percentage of Participants who are not Highly Compensated
Employees for the preceding Plan Year shall be
a 3 percent, or
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b if the Administrator makes the election permitted by
Section 401(k)(3)(E)(ii) of the Code, the actual Deferral Percentage
of such Participants determined for such first Plan Year.
To the extent necessary to achieve such result (and notwithstanding
Section 4.1(a)) as of the end of each Plan Year, the Administrator shall
take or cause to be taken one or more of the actions listed in subsection
(d).
(b) Except as provided in subsection (c), the limitations set forth
in subsection (a)(ii) and Section 5.5(a)(i)(a) shall not both be utilized for
any Plan Year.
(c) The limitation of subsection (b) shall not apply
(i) if after the application of subsection (d)(ii), (iii),
(iv), and (v) and Section 5.5(b)(ii) and (v) (but only to the extent
necessary to meet the requirements of Section 3.8(a)(i)(b) or Section
5.5(a)(i)(a), as applicable) and before the application of paragraph (ii),
the sum of the Deferral Percentage and the Contribution Percentage of
Participants who are Highly Compensated Employees does not exceed the sum
of the Deferral Percentage and the Contribution Percentage of Participants
who are not Highly Compensated Employees for the Plan Year in question by
more than two percentage points, or
(ii) if
a the limitation of paragraph (i) is exceeded, and
b the sum of the Deferral Percentage and the
Contribution Percentage of Participants who are Highly Compensated
Employees for such Plan Year does not exceed the greater of
1 the sum of
A 125 percent of the greater of the Deferral
Percentage, or the Contribution Percentage, of
Participants who are not Highly Compensated Employees
for the Plan Year in question, and
B that percentage which is not more than two
percentage points higher than, and not more than twice
the lesser of the Deferral Percentage, or the
Contribution Percentage, of such group of Participants
for such Plan Year, or
22
<PAGE>
2 the sum of
A 125 percent of the lesser of the Deferral
Percentage, or the Contribution Percentage, of the
Participants who are not Highly Compensated Employees
for the Plan Year in question, and
B that percentage which is not more than two
percentage points higher than, and not more than twice
the greater of the Deferral Percentage, or the
Contribution Percentage, of such group of Participants
for such Plan Year.
(d) In order to achieve the result described in subsections (a) and
(b), the following actions shall be taken, as provided under Code Section
401(k), the regulations thereunder and the Rules of the Plan, in the order
selected by the Administrator and to the extent necessary:
(i) The Administrator shall make the election provided in
Section 1.12(b).
(ii) Amounts otherwise to be credited under Section 5.3(b) to
Matching Accounts for such Plan Year shall be credited instead to
Qualified Accounts of the Participants in question.
(iii) To the extent permitted by Code Section 401(a)(4) and
Treas. Reg. ss. 1.401(k)-1(b)(5) (which are incorporated herein by this
reference), the Company may make an additional contribution to the
Qualified Accounts of certain Participants which contribution shall be
allocated to Participants in inverse order of Compensation received in the
Plan Year in question (lowest compensated Participant receiving the first
allocation) with each Participant who receives an allocation receiving the
maximum allocation permitted by Code Section 415 before any Participant
with greater Compensation receives any allocation, until such contribution
is fully allocated.
(iv) Prior to the end of the following Plan Year, certain
amounts described in Section 1.14(a) (and any income thereon earned to the
date of distribution computed in a consistent and reasonable manner in
accordance with Section 7.2 and Code Section 401(a)(4)) for Highly
Compensated Employees shall be reduced according to the Leveling Method
and distributed to the Highly Compensated Employees with respect to whom
the reduction is made.
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<PAGE>
(e) The amount of any distributions under subsection (d) with
respect to a Participant for a Plan Year shall be reduced by any distributions
made pursuant to Section 3.5(a) previously distributed to such Participant for
his taxable year ending with or within such Plan Year. The amount of any
distributions under Section 3.5(a) for any taxable year of a Participant shall
be reduced by amounts distributed to such Participant pursuant to subsection (d)
for the Plan Year beginning with or within such taxable year.
ARTICLE IV
CONTRIBUTIONS OF THE COMPANY
Section 4.1 - Determination of Annual Contribution
(a) Subject to Section 16.4, for each Payday, the Company shall
contribute to the Plan for each Participant an amount for his Deferred
Compensation Account which is the amount of Deferred Compensation elected by
such Participant under Section 3.1 or 3.3.
(b) It is the intention of the Company to make recurring and
substantial contributions to the Plan for allocation among Participants'
Matching Accounts. However, the Company in its sole and absolute discretion
reserves the right to fix the amount, if any, of its contribution.
Section 4.2 - Maximum Annual Contribution
Except for contributions described in Section 14.16, the Company's
contribution for any Plan Year shall not exceed the maximum amount deductible by
the Company for such Plan Year under Code Section 404(a)(3)(A) and, in any
event, shall be less than that amount which would initially result in an Annual
Addition of any Participant which exceeds the maximum permissible amount under
Section 16.4(a).
Section 4.3 - Contribution Date
(a) The Company's contributions
(i) under Section 4.1(a) shall be made as of the earliest date
on which such contributions can reasonably be segregated from the general
assets of the Company but not later than the 15th business day of the
month following the month in which the deferral is withheld by the Company
under Section 3.1 or 3.3, and
(ii) under Section 4.1(b) shall be made on a monthly basis, as
soon as administratively practicable after the last day of each calendar
month.
and shall be transmitted to the Trustee and held in the Trust Fund.
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<PAGE>
(b) If the Company makes a contribution after the end of the Plan
Year for which the contribution is made
(i) the Company shall notify the Trustee in writing that the
contribution is made for such Plan Year,
(ii) the Company shall claim such payment as a deduction on
its federal income tax return for its taxable year coinciding with such
Plan Year, and
(iii) the Administrator and the Trustee shall treat the
payment as a contribution by the Company to the Trust actually made on the
last day of such taxable year.
ARTICLE V
PARTICIPATION IN COMPANY CONTRIBUTIONS AND FORFEITURES
Section 5.1 - Deferred Compensation Account
The Administrator shall maintain for each Participant a Deferred
Compensation Account to which shall be credited the amounts determined under
Section 4.1(a), debited amounts withdrawn under Section 3.5, 3.6 and 9.3 and to
which shall be debited or credited the amounts determined under Section 7.2 and
16.4.
Section 5.2 - Matching Account; Qualified Account
(a) The Administrator shall maintain a Matching Account for each
Participant to which shall be credited the amounts allocated thereto under
Sections 5.3(b) and 5.4 and to which shall be debited or credited the amounts
determined under Sections 7.2 and 16.4.
(b) The Administrator shall maintain a Qualified Account for each
Participant to which shall be credited the amounts allocated thereto under
Sections 3.8 and 5.4 and to which shall be debited or credited amounts
determined under Sections 7.2 and 16.4.
Section 5.3 - Allocation of Company Contributions
(a) Except as provided in Section 16.4(a), Company contributions
under Section 4.1 shall be allocated as provided therein.
(b) Except as provided in Section 16.4(a) and Section 5.5(b)(v),
each Participant who deferred Compensation at any time during the Plan Year in
question shall share in any Company contribution made pursuant to Section 4.1(b)
as follows:
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<PAGE>
(i) a percentage (specified in the announcement by the Company
to Participants prior to the commencement of the applicable Plan Year) of
the amount of such Participant's Deferred Compensation which is less than
or equal to 6% of such Participant's Compensation; and
(ii) a percentage (specified in the announcement by the
Company to Participants prior to the commencement of the applicable Plan
Year, but which is not greater than the percentage specified in
subparagraph (i)) of the amount of such Participant's Deferred
Compensation which is greater that 6% of such Participant's Compensation.
Section 5.4 - Allocation of Forfeitures
Amounts forfeited in any Plan Year under Sections 11.2(a)(iii), 12.3
and 14.8 shall be applied under Section 4.1(b) to reduce the Company's
contribution for such Plan Year and shall be allocated under Section 5.3(b) as
if part of such contribution for such Plan Year.
Section 5.5 - Contribution Percentage Fail-Safe Provisions
(a) (i) For each Plan Year, the Contribution Percentage with respect
to Participants who are Highly Compensated Employees, shall be
a not more than 125 percent of, or
b (to the extent allowed by regulations under Code
Section 401(m)(9)) not more than two percentage points higher than,
and not more than twice,
the Contribution Percentage for the preceding Plan Year with respect to
Participants who are not Highly Compensated Employees for the preceding Plan
Year (using the definition of such term that was in effect during such preceding
Plan Year), or such other amount as may be required by Treasury Regulations
under Code Section 401(m)(9). The Administrator may elect to apply the current
Plan Year's Contribution Percentage for the group of Participants who are not
Highly Compensated Employees (using the definition of such term as in effect for
such Plan Year) rather than that of the preceding Plan Year, except that if such
election is made, it may not be changed except as provided by the Secretary of
the Treasury.
(ii) Notwithstanding paragraph (i), for the Plan Year
commencing on the Distribution Date, the amount taken into account as the
Contribution Percentage of Participants who are not Highly Compensated
Employees for the preceding Plan Year shall be
a 3 percent, or
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<PAGE>
b if the Administrator so elects, the actual
Contribution Percentage of such Participants for such first Plan
Year.
(b) In order to achieve the result described in subsections (a) and
(c) (and notwithstanding Sections 4.1(b), 5.3(b) and 5.4), as of the end of each
Plan Year, the Administrator shall take or cause to be taken any of the
following actions, in the order selected by the Administrator, (but after
application of Section 3.8) and to the extent necessary:
(i) The Administrator shall make the election provided in
Section 1.12(b).
(ii) Allocations to Deferred Compensation Accounts shall be
taken into account for purposes of calculating the Contribution
Percentage.
(iii) Amounts credited in accordance with Section 5.3(b) to
Matching Accounts for such Plan Year shall instead be allocated in
disproportionately higher amounts to Participants who are not Highly
Compensated Employees and in disproportionately lower amounts to
Participants who are Highly Compensated Employees using the same aggregate
dollar amounts that would otherwise have been allocated pursuant to
Section 5.3(b).
(iv) To the extent permitted by Code Section 401(a)(4) and
Treas. Reg. ss. 1.401(m)-1(b)(5) (which are incorporated herein by this
reference), the Company may make an additional contribution to the
Qualified Accounts of certain Participants which contribution shall be
allocated to Participants in inverse order of Compensation received in the
Plan Year in question (lowest compensated Participant receiving the first
allocation) with each Participant who receives an allocation receiving the
maximum allocation permitted by Code Section 415 before any Participant
with greater Compensation receives any allocation, until such contribution
is fully allocated.
(v) Prior to the end of the following Plan Year, allocations
described in Section 1.13(b) (and any income thereon earned to the date of
distribution or forfeiture computed in a consistent and reasonable manner
in accordance with Section 7.2 and Code Section 401(a)(4)) for Highly
Compensated Employees shall be reduced according to the Leveling Method
(and, with respect to matching contributions, in conformity with Treas.
Reg. ss. 1.401(m)-1(e)(iv)), and, to the extent Vested, shall be
distributed to Participants who are Highly Compensated Employees with
respect to whom the reduction is made, and to the extent not Vested shall
be forfeited and reallocated under Section 5.4 (as described in Treas.
Reg. ss. 1.401(m)-1(e)) but not to Highly Compensated Employees whose
allocations are reduced or forfeited under this paragraph.
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(c) If the limitation set forth in Section 3.8(a)(i)(b) is utilized
for any Plan Year, the limitation of subsection (a)(ii) shall not also be used
for such Plan Year, and vice versa, except as provided in Section 3.8(c).
Section 5.6 - Reemployment Rights after Qualified Military Service
(a) Solely for purposes of this Section 5.6, the following
definitions shall apply:
(i) "Qualified Military Service" shall mean any service in the
uniformed services (as defined in chapter 43 of title 38, United States
Code) by any individual if such individual is entitled to reemployment
rights under such chapter with respect to such service.
(ii) "Compensation" shall mean
a Compensation the Employee would have received
during his period of Qualified Military Service if the
Employee were not in Qualified Military Service, determined
based on the rate of pay the Employee would have received from
the Company but for absence during his period of Qualified
Military Service, or
b if the Compensation the Employee would have
received during his period of Qualified Military Service was
not reasonably certain, the Employee's average Compensation
from the Company during the 12-month period immediately
preceding the Qualified Military Service (or, if less, the
period of employment immediately preceding the Qualified
Military Service).
(b) A Participant who leaves the Company as a result of Qualified
Military Service and returns to employment with the Company may elect during the
period described in subsection (c) to make additional deferrals to his Deferred
Compensation Account under the Plan in the amount determined under subsection
(d) or such lesser amount, as elected by the Participant.
(c) The period determined under this subsection shall be the period
which begins on the date of the Employee's reemployment with the Company after
his Qualified Miliary Service that extends until the lesser of
(i) the product of 3 and the period of Qualified Military
Service, and
(ii) 5 years.
(d) The amount described in this subsection is the maximum amount of
deferrals to the Participant's Deferred Compensation Account that the
Participant would have
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been permitted to make in accordance with the limitations described in
subsection (f)(i) during the Participant's period of Qualified Military Service
if the Participant had continued to be employed by the Company during such
period and received Compensation. Proper adjustment shall be made for any
contributions actually made during the Participant's period of Qualified
Military Service.
(e) If the Participant elects to make deferrals to his Deferred
Compensation Account under subsection (b), the Company shall make such a
matching contribution to his Matching Account with respect to such deferrals
and/or contributions as would have been required under the Plan had such
deferrals and/or contributions actually been made during the period of such
Qualified Military Service.
(f) If any deferral or contribution is made by a Participant or the
Company pursuant to this Section,
(i) such deferral or contribution shall not be subject to any
otherwise applicable limitation contained in Code Section 402(g), 404(a)
or 415 and shall not be taken into account in applying such limitations to
other deferrals, contributions or benefits under the Plan or any other
plan, with respect to the Plan Year in which the deferral or contribution
is made,
(ii) such deferral or contribution shall be subject to the
limitations described in paragraph (i) with respect to the Plan Year to
which the deferral or contribution relates in accordance with the rules
prescribed by the Secretary of the Treasury,
(iii) the Plan shall not be treated as failing to meet the
requirements of Code Section 401(a)(4), 401(k)(3), 401(k)(11), 401(k)(12),
401(m), 410(b) or 416 by reason of the making of (or the right to make)
such deferral or contribution.
(g) The Company shall not credit earnings on any deferral or
contribution made under this Section before such deferral or contribution is
actually made.
(h) A Participant reemployed under subsection (b) shall be treated
as not incurring a Break in Service Year by reason of his period of Qualified
Military Service. For purposes of calculating the Participant's Years of Vesting
Service, the Participant shall be credited with an Hour of Service for each hour
which would have been credited to him but for his Qualified Military Service.
ARTICLE VI
INVESTMENT OF ACCOUNTS
Section 6.1 - Investment Options
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(a) As permitted under the Rules of the Plan and upon such prior
written notice to the Administrator as is required under the Rules of the Plan,
a Participant may elect
(i) effective upon becoming a Participant and as of the dates
set forth in the Rules of the Plan, to have contributions for such Plan
Year to his Accounts held and invested entirely in any one or more
Investment Funds in such proportions as are permitted under the Rules of
the Plan, or to change any prior such election, and/or
(ii) effective only as of the dates set forth in the Rules of
the Plan, to have his Accounts as then stated, held and invested under any
investment option or options available under paragraph (i) (which option
shall be the same option elected for current contributions to his Accounts
under paragraph (i)) or to change any prior such election.
(b) As permitted under the Rules of the Plan and upon such prior
written notice to the Administrator as is required under the Rules of the Plan,
a Beneficiary may elect to have his Accounts held and invested under any
investment option or options available under subsection (a) or to change any
prior such election.
(c) Any such election under subsection (a)(i) or subsection (b)
shall remain in effect until revoked or modified by the Participant or
Beneficiary, as applicable. In case Accounts are invested in more than one
Investment Fund, changes in proportions due to investment results shall not
require any transfer of values between Investment Funds unless the Participant
or Beneficiary so elects under subsection (a)(ii) or subsection (b), as
applicable.
(d) Purchases and sales of assets in the Investment Funds as
required under this Section shall be made within a reasonable time after the
election made in subsection (a), and Participants' or Beneficiaries' Accounts
shall be adjusted to reflect amounts actually realized or paid in such
transactions.
Section 6.2 - Description of Investment Funds
In making any investment election under Section 6.1, a Participant
or Beneficiary shall acknowledge receipt from the Administrator of a description
of the Investment Funds and the investment objectives thereof.
Section 6.3 - Effect of Non-Election
If a Participant or Beneficiary fails or declines to make an
election under Section 6.1, the Participant's or Beneficiary's Accounts shall be
held in one or more Investment Funds as directed by the Administrator.
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ARTICLE VII
VALUATION OF THE TRUST FUND AND ACCOUNTS
Section 7.1 - Determination of Values
As of the end of each business day, the Administrator shall
determine the fair market value of each asset in each Investment Fund in
compliance with the principles of Section 3(26) of ERISA and regulations issued
pursuant thereto, based upon information reasonably available to it including
data from, but not limited to, newspapers and financial publications of general
circulation, statistical and valuation services, records of securities
exchanges, appraisals by qualified persons, transactions and bona fide offers in
assets of the type in question and other information customarily used in the
valuation of property for purposes of the Code. The value of any real property
held in the Trust Fund determined as of the end of any Plan Year shall be
considered to remain unchanged until the end of the following Plan Year. With
respect to securities for which there is a generally recognized market, the
published selling prices on or nearest to such valuation date shall establish
the fair market value of such security. Fair market value so determined shall be
conclusive for all purposes of the Plan and Trust.
Section 7.2 - Allocation of Values
The difference between the total value of the assets of each
Investment Fund, as determined under Section 7.1, and the total of the Accounts
therein, shall be allocated by the Administrator among such Accounts in
proportion to their respective average stated values during the period since the
last allocation of values hereunder, as determined under the Rules of the Plan,
such values and determinations being made without taking into account deferrals
of Compensation or Company contributions attributable to the period as provided
under Section 7.1, ending on such valuation date or allocations of forfeitures
for the Plan Year under Article V; provided, however, that gains and losses
shall not be allocated with respect to amounts being held in suspense under
Section 16.4(b).
Section 7.3 - Applicability of Account Values
The value of an Account, as determined as of a given date under this
Article, plus any amounts subsequently credited thereto under Sections 5.1, 5.2,
5.3, 5.4, 5.5, 3.8, 7.2, 11.2(a)(iii), 12.3, 14.8 and 16.4 and less any amounts
withdrawn under Sections 3.5, 3.6, and 9.3 or transferred to suspense under
Section 16.4(b), shall remain the value thereof for all purposes of the Plan and
Trust until revalued hereunder.
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ARTICLE VIII
VESTING OF INTERESTS
Section 8.1 - Vesting of Accounts
(a) Each Participant's interest in his Rollover Account, his
Qualified Account, and his Deferred Compensation Account shall be Vested at all
times.
(b) Except as provided in Sections 8.2 and 13.3, the Vested portion
of a Participant's Matching Account shall be the percentage of such Account
shown on the following tables:
Years of Vesting Vested
Service Percentage
---------------- ----------
less than 5 0%
5 (or more) 100%
Section 8.2 - Additional Vesting of Accounts
The interest of a Participant in his Matching Account shall become
fully Vested upon the earliest to occur of
(a) his death,
(b) the later of his sixty-fifth birthday or the fifth
anniversary of the date he commences participation in the Plan,
(c) his Disability Retirement Date, or
(d) the termination or discontinuation of the Plan under
Section 15.1,
if he is then an affected Employee or employed by a Company Affiliate.
ARTICLE IX
EMPLOYMENT AFTER NORMAL RETIREMENT DATE
Section 9.1 - Continuation of Employment
(a) A Participant may, subject to subsection (b) and Section 16.3,
remain in the employ of the Company or a Company Affiliate after attaining his
Normal Retirement Date.
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(b) Notwithstanding subsection (a), the Company reserves the right
to require a Participant to retire in accordance with Section 12(c) of the Age
Discrimination in Employment Act of 1967, as amended and applicable state law.
Section 9.2 - Continuation of Participation
A Participant retained in the employ of the Company after his Normal
Retirement Date under Section 9.1 shall continue as an Active Participant
herein.
Section 9.3 - Mandatory In-Service Distributions
A Participant who is a five percent owner (as defined in Code
Section 416) with respect to the Plan Year ending in the calendar year in which
the Employee attains age seventy and one half shall receive or commence the
receipt of the entire amount credited to his Accounts in accordance with Section
10.3(a), (b), (c) and (d)(ii) on the April 1 following the end of the calendar
year in which he attains age seventy and one half.
ARTICLE X
BENEFITS UPON RETIREMENT
Section 10.1 - Normal or Disability Retirement
Subject to the provisions of Section 9.1, a Participant shall retire
upon his Normal or Disability Retirement Date.
Section 10.2 - Rights Upon Normal or Disability Retirement
Upon a Participant's Normal or Disability Retirement, he shall be
entitled to receive the entire amount credited to his Accounts in accordance
with Section 10.3.
Section 10.3 - Distribution of Accounts
(a) If the entire amount credited to a Participant's Accounts does
not exceed $3,500 (and did not exceed such amount at the time of a prior
distribution under Sections 3.5, 3.6, and 9.3), such Participant shall receive
such amount in one lump sum.
(b) If the entire amount credited to a Participant's Accounts
exceeds $3,500 (or exceeded such amount at the time of a prior distribution
under Section 3.5, 3.6 and 9.3), such Participant shall receive:
(i) Payment of such amount in one lump sum, or
(ii) If the Participant so elects, Payment of such amount
directly from the Trust Fund (as adjusted for gains and losses), in
uniform installments of at least $100 payable monthly, quarterly,
semi-annually, or
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annually (as to which the Participant (or his Spouse, if applicable) may
elect whether the recalculation rule of Code Section 401(a)(9)(D) shall
apply and provided, however, that the first installment may be larger than
the remaining installments) to such Participant over a period not longer
than the joint and last survivor expectancy of him and his Spouse, if any,
reasonably determined from the expected return multiples prescribed in
Treas. Reg. ss. 1.72-9, or, if he is not married, over a period not longer
than the lesser of
a the joint and last survivor expectancy of him and his
Beneficiary, reasonably determined from the expected return
multiples prescribed in Treas. Reg. ss. 1.72-9, or
b the period determined under Proposed Treas. Reg. ss.
1.401(a)(9)-2 A-4 which satisfies the minimum distribution
incidental benefit requirement of Code Section 401(a)(9)(G),
provided, however, if such Participant fails to make such an election, his
Accounts shall be distributed as provided in paragraph (i).
(c) At any time before distribution under subsection (b) is made or
commences, the Participant may elect to defer such distribution until such later
date as he shall then or subsequently specify; provided, however,
(i) such date shall be no later than the date referred to in
subsection (d)(ii) or (d)(iii), and
(ii) if no such date is specified, such amount shall be
distributed in one lump sum on the date specified in subsection (d)(ii) or
(d)(iii).
(d) Distribution under subsection (a) or (b) shall be made or
commence not later than the earliest to occur of
(i) sixty days after the end of the Plan Year in which such
Normal Retirement or Disability Retirement occurs, or
(ii) if he is not a five percent owner (as defined in Code
Section 416) of the Company with respect to a Plan Year ending in the
calendar year in which he attains age seventy and one half, the later of
a the April 1 following the calendar year in which his
Separation from the Service occurs, or
b the April 1 following the calendar year in which he
attains age seventy and one half,
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(iii) if he is such an owner, the April 1 following the
calendar year in which he attains age seventy and one half,
except as provided in subsection (c).
Section 10.4 - Determination of Value of Accounts
(a) If a distribution is made under Section 10.3(d), the value of
the Participant's Accounts shall be determined as of the valuation date under
Article VII next following the Participant's retirement; provided, however, if
the distribution is made under Section 10.3(d)(ii) or 10.3(d)(iii), the value of
the Participant's Accounts shall be determined as of the valuation date under
Article VII which precedes the date specified in Section 10.3(d)(ii) or
10.3(d)(iii) by a period of not less than 30 days or such longer period as is
administratively necessary.
(b) If a distribution is made under Section 10.3(c), the value of
the Participant's Accounts shall be determined as of the valuation date under
Article VII next following the date elected by him under Section 10.3(c);
provided, however, if the distribution is made under Section 10.3(c)(i), the
value of the Participant's Accounts shall be determined as of the valuation date
under Article VII which precedes the date specified in Section 10.3(c)(i) by a
period of not less than 30 days or such longer period as is administratively
necessary.
ARTICLE XI
BENEFITS UPON DEATH
Section 11.1 - Designation of Beneficiary
(a) Each Participant or former Participant shall have the right to
designate, revoke and redesignate Beneficiaries hereunder and to direct payment
of the Vested amount credited to his Accounts to such Beneficiaries.
(b) Designation, revocation and redesignation of Beneficiaries must
be made in writing in accordance with the Rules of the Plan on a form provided
by the Administrator and shall be effective upon delivery to the Administrator.
(c) A married Participant may not designate any Beneficiary other
than his Spouse without obtaining Spousal Consent thereto.
Section 11.2 - Distribution on Death
(a) Upon the death of a Participant or former Participant, the
Vested amount credited to his Accounts (as determined under Section 8.2) shall
be paid in one lump sum not later than ninety days following the Participant's
death (or such longer reasonable period as is permitted under Treas. Reg. ss.
1.401(a)-20 A-3(b)(1)) to his then Surviving Spouse, if any,
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except to the extent, if any, to which such Surviving Spouse has consented under
Section 11.1(c) to the designation of other beneficiaries and otherwise, to the
person or persons of highest priority who survive him by at least thirty days
determined as follows:
(i) First, to his then surviving highest priority Beneficiary
or Beneficiaries, if any.
(ii) Second, to his then surviving heirs at law, if any, as
determined in the reasonable judgment of the Administrator under the laws
governing succession to personal property of the last jurisdiction in
which the Participant was a resident.
(iii) Third, to Participants in the Plan to the Plan to be
applied to reduce the Company's contribution under Section 4.1(b).
(b) Members of a class shall cease to be entitled to benefits upon
the earlier of the Administrator's determination that no members of such class
exist or the Administrator's failure to locate any members of such class, after
making reasonable efforts to do so, within one year after the members of that
class became entitled to benefits hereunder had members existed.
(c) If payment has commenced prior to the Participant's death,
payment of the Participant's Accounts shall be made in such manner that the
remaining interest is distributed at least as rapidly as under the method being
used as of the date of the Participant's death.
Section 11.3 - Determination of Value of Accounts
For purposes of this Article, the value of a Participant's Accounts
shall be that determined as of the valuation date under Article VII next
following the date of the death of the Participant unless the distribution
occurs prior to the next following valuation date, in which case, such value
shall be determined as of the valuation date under Article VII which precedes
the distribution date by a period of not less than 30 days or such longer period
as is administratively necessary.
ARTICLE XII
BENEFITS UPON RESIGNATION OR DISCHARGE
Section 12.1 - Distributions on Resignation or Discharge
A Participant who has a Separation from the Service due to
resignation or discharge shall receive,
(a) if the Vested amount credited to his Accounts does not
exceed $3,500 (and did not exceed such amount at the time of a prior
distribution under Sections 3.5 and 3.6), such amount in one lump sum not
later than six months after the end of the Plan Year in which such
Separation from the Service
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occurs, or, if earlier, within sixty days after the end of the Plan Year
in which his sixty-fifth birthday occurs, or
(b) if the Vested amount credited to his Accounts exceeds
$3,500 (or exceeded such amount at the time of a prior distribution under
Sections 3.5 and 3.6), such amount in one lump sum payable on such date as
he shall at any time elect in writing in accordance with Code Section
411(a)(11) and the Rules of the Plan, but not earlier than the earliest
date described in subsection (a) and not later than the April 1 following
the calendar year of his attainment of age seventy and one half.
Section 12.2 - Determination of Value of Accounts
(a) If a distribution is made under Section 12.1(a), the value of
the Participant's Accounts shall be determined as of the valuation date under
Article VII next following the Participant's Separation from the Service.
(b) If a distribution is made under Section 12.1(b), the value of
the Participant's Accounts shall be determined as of the valuation date under
Article VII next following the date elected by him under Section 12.1(b);
provided, however, if the date elected by the Participant is the April 1
following the calendar year of his attainment of age seventy and one half, the
value of his Accounts shall be determined as of the valuation date under Article
VII which precedes such date by a period of not less than 30 days or such longer
period as is administratively necessary.
Section 12.3 - Forfeitures
(a) If a Participant has a Separation from the Service due to
resignation or discharge, the portion of his Matching Account which is not
Vested shall be forfeited upon the earlier of his receipt of his distribution
under this Article or his completion of five consecutive Break in Service Years.
Pending application under Section 5.4, forfeitures shall be held in suspense and
shall not be commingled with amounts held in suspense under Section 16.4.
(b) If a Participant has a Separation from the Service prior to
becoming Vested in any portion of his Matching Account under Section 8.1, a
distribution shall be deemed to have occurred upon such Separation from the
Service for purposes of subsection (a).
Section 12.4 - Restoration of Forfeitures
If a Participant whose Matching Account is not then fully Vested
(a) has a Separation from the Service,
(b) suffers a forfeiture under Section 12.3 of the portion of
such Account which is not Vested,
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(c) again becomes an Employee or employed by a Company
Affiliate before he has five consecutive Break in Service Years, and
(d) repays to the Plan the full amount, if any, distributed to
him from such Account before the end of five consecutive Break in Service
Years commencing after his distribution, or, if earlier, the fifth
anniversary of his reemployment,
then the amount forfeited under Section 12.3 by such Participant shall be
restored to his Matching Account, applying forfeitures pending application and
Company contributions, in that order, as necessary.
ARTICLE XIII
TOP-HEAVY PROVISIONS
Section 13.1 - Top-Heavy Determination
(a) Solely in the event that this Plan ever becomes Top-Heavy, as
defined herein, the provisions of this Article shall apply.
(b) Solely for the purposes of this Article, the following
definitions shall be used:
(i) "Aggregation Group" shall mean
a each plan of the Company or a Company Affiliate in
which a Key Employee is a Participant (including any such plan which
has been terminated if such plan was maintained by the Company or
Company Affiliate within the last five years ending on the
Determination Date for the Plan Year in question), and
b each other plan of the Company or a Company Affiliate
which enables any plan described in paragraph a to meet the
requirements of Code Section 401(a)(4) or 410.
(ii) "Determination Date" shall mean, with respect to any Plan
Year, the last day of the preceding Plan Year, or in the case of the first
Plan Year, the last day of such Plan Year.
(iii) "Controlled Group Employee" shall mean any person who
renders services to the Company or a Company Affiliate in the status of an
employee as the term is defined in Code Section 3121(d).
(iv) "Key Employee" shall mean a Controlled Group Employee, a
former Controlled Group Employee or the Beneficiary of a former Controlled
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Group Employee, if, in the Plan Year containing the Determination Date or
in any of the four preceding Plan Years, such Controlled Group Employee or
former Controlled Group Employee is or was
a an officer of the Company or a Company Affiliate whose
Statutory Compensation for the Plan Year in question exceeds fifty
percent of the amount in effect under Code Section 415(b)(1)(A) (not
more than fifty Controlled Group Employees or, if less, the greater
of three Controlled Group Employees or ten percent of the Controlled
Group Employees shall be treated as officers),
b one of the ten Controlled Group Employees owning (or
considered as owning within the meaning of Code Section 318) both
the largest interest in the Company or a Company Affiliate and more
than one-half of one percent interest therein and whose Statutory
Compensation for the Plan Year in question equals or exceeds the
amount in effect under Code Section 415(c)(1)(A); provided, however,
if two Controlled Group Employees have the same interest in the
Company or a Company Affiliate, the Controlled Group Employee with
the greater Statutory Compensation for such Plan Year shall be
treated as having the larger interest,
c a five percent owner (within the meaning of Code
Section 416(i)(1)(B) and (C)) of the Company or a Company Affiliate
or a one percent owner (within the meaning of Code Section
416(i)(1)(B) and (C)) of the Company or a Company Affiliate whose
Statutory Compensation for the Plan Year in question exceeds
$150,000.
(v) "Non-Key Employee" shall mean any Controlled Group
Employee who is not a Key Employee.
(vi) The Plan shall be Top-Heavy if, as of any Determination
Date, the aggregate of the Accounts of Key Employees under all plans in
the Aggregation Group (or under this Plan and such other plans as the
Company elects to take into account under Code Section 416(g)(2)(A)(ii))
exceeds sixty percent of the aggregate of the Accounts for all Key
Employees and Non-Key Employees. In making this calculation as of a
Determination Date,
a each Account balance as of the most recent valuation
date occurring within the Plan Year which includes the Determination
Date shall be determined,
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b an adjustment for contributions due as of the
Determination Date shall be determined,
c the Account balance of any Controlled Group Employee
or former Controlled Group Employee shall be increased by the
aggregate distributions made during the five-year period ending on
the Determination Date with respect to such Controlled Group
Employee or former Controlled Group Employee,
d the Account balance of
1 any Non-Key Employee who was a Key Employee for
any prior Plan Year, and
2 any former Controlled Group Employee who
performed no services for the Company or a Company Affiliate
during the five-year period ending on the Determination Date
shall be ignored, and
e if there have been any rollovers to or from any
Account, the balance of such Account shall be adjusted, as required
by Code Section 416(g)(4)(A).
Notwithstanding the foregoing, this Plan shall be Top-Heavy if, as of any
Determination Date, it is required by Code Section 416(g) to be included in an
Aggregation Group which is determined to be a Top-Heavy Group.
(vii) "Top-Heavy Group" shall mean any Aggregation Group if,
as of the Determination Date, the sum of
a the present value of the cumulative accrued benefits
for all Key Employees under all defined benefit plans in such
Aggregation Group, and
b the aggregate of the accounts of all Key Employees
under all defined contribution plans in such Aggregation Group
exceeds sixty percent of a similar sum determined for all Key Employees
and Non-Key Employees.
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(viii) "Statutory Compensation" shall have the meaning set
forth in Section 1.28(b).
Section 13.2 - Minimum Benefits
(a) For any Plan Year in which the Plan is Top-Heavy, the total
allocation to the Qualified Account and Matching Account of any Employee who is
a Non-Key Employee at the end of such Plan Year and is
(i) entitled to an allocation to such Account under Section
5.3, or
(ii) not entitled to an allocation under such Section solely
because he did not elect to defer Compensation under Section 3.1 or 3.3 of
the Plan,
shall not be less than that determined under subsection (b).
(b) The allocation determined under this subsection shall be a
percentage of the Statutory Compensation of such Non-Key Employee which is not
less than the lesser of
(i) three percent, or
(ii) that percentage reflecting the ratio of
a the allocations under Sections 5.3 and 5.4 to
b Statutory Compensation (not in excess of the limit in
effect under Code Section 401(a)(17) as adjusted for increases in
the cost of living)
for the Key Employee with respect to whom such ratio is highest for such
Plan Year.
(c) An Employee described in subsection (a)(ii) shall be treated as
a Participant hereunder.
Section 13.3 - Vesting
(a) For any Plan Year in which the Plan is Top-Heavy, the Vested
percentage of the Matching Account of each Participant who completes an Hour of
Service in such Plan Year shall be the percentage of such Account shown on the
following table:
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Years of Vested
Vesting Service Percentage
--------------- ----------
less than 2 0%
2 20%
3 40%
4 60%
5 (or more) 100%
(b) The Vested percentage of a Participant's Matching Account shall
be not less than the Vested percentage determined as of the last day of the last
Plan Year in which the Plan was not Top-Heavy.
(c) For any Plan Year in which the Plan is not Top-Heavy which
follows one or more Plan Years for which the Plan has been Top-Heavy, Article
VIII shall again become applicable as an amendment to the Plan; thus, each
Participant who has had his Vested percentage computed under subsection (a) and
who has completed at least three Years of Vesting Service shall be permitted to
elect to have his Vested percentage computed in accordance with subsection (a)
for such Plan Year and any subsequent Plan Year in which the Plan is no longer
Top-Heavy. Such Participant may make such election within an election period
beginning no later than the first day of the first Plan Year in which the Plan
is no longer Top-Heavy and ending no later than the later of
(i) the sixtieth day of such Plan Year, or
(ii) a date which is sixty days after the day the Participant
is issued written notice of his right to make such election by the
Administrator.
Section 13.4 - Limitation on Benefits
For any Plan Year in which the Plan is Top-Heavy,
(a) the denominator of both the defined benefit plan fraction
and the defined contribution plan fraction set forth in Code Sections
415(e)(2)(B) and 415(e)(3)(B), respectively, shall be adjusted by
substituting 1.0 for 1.25, and
(b) the numerator of the "transition fraction" described in
Code Section 415(e)(6)(B)(i) shall be calculated by substituting $41,500
for $51,875,
but only to the extent required by Code Section 416(h).
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ARTICLE XIV
ADMINISTRATIVE PROVISIONS
Section 14.1 - Duties and Powers of the Administrator
(a) The Administrator shall administer the Plan in accordance with
the Plan and ERISA and shall have full discretionary power and authority:
(i) To engage actuaries, attorneys, accountants, appraisers,
brokers, consultants, administrators, physicians or other firms or persons
and (with its officers, directors and Employees) to rely upon the reports,
advice, opinions or valuations of any such persons except as required by
law;
(ii) To adopt Rules of the Plan that are not inconsistent with
the Plan or applicable law and to amend or revoke any such rules;
(iii) To construe the Plan and the Rules of the Plan;
(iv) To determine questions of eligibility and vesting of
Participants;
(v) To determine entitlement to allocations of contributions
and forfeitures and to distributions of Participants, former Participants,
Beneficiaries, and all other persons;
(vi) To make findings of fact as necessary to make any
determinations and decisions in the exercise of such discretionary power
and authority;
(vii) To appoint claims and review officials to conduct claims
procedures as provided in Section 14.6; and
(viii) To delegate any power or duty to any firm or person
engaged under paragraph (i) or to any other person or persons.
(b) Every finding, decision, and determination made by the
Administrator shall, to the full extent permitted by law, be final and binding
upon all parties, except to the extent found by a court of competent
jurisdiction to constitute an abuse of discretion.
Section 14.2 - Expenses of Administration
(a) The Company shall indemnify and hold each Employee functioning
under Section 14.1(a) or person serving on an investment committee established
in accordance with the Trust Agreement harmless from all claims, liabilities and
costs (including reasonable attorneys' fees) arising out of the good faith
performance of his functions hereunder.
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(b) The Company may obtain and provide for any such Employee and
investment committee member described in subsection (a), at the Company's
expense, liability insurance against liabilities imposed on him by law.
(c) The Plan shall pay reasonable administrative expenses of the
Plan, including, but not limited to, expenses of any such Employee and
investment committee member described in subsection (a) and legal fees incurred
for services related to the administration of the Plan (including the amending
of the Plan); provided, however, that the Company may elect, in its sole and
absolute discretion, to pay such administrative expenses from its own assets.
Section 14.3 - Payments
In the event any amount becomes payable under the Plan to a minor or
a person who, in the sole judgment of the Administrator, is considered by reason
of physical or mental condition to be unable to give a valid receipt therefor,
the Administrator may direct that such payment be made to any person found by
the Administrator, in its sole judgment, to have assumed the care of such minor
or other person. Any payment made pursuant to such determination shall
constitute a full release and discharge of the Trustee, the Administrator and
the Company and their officers, directors, employees, owners, agents and
representatives.
Section 14.4 - Statement to Participants
Within one hundred eighty days after the end of each Plan Year, the
Administrator shall furnish to each Participant a statement setting forth the
value of his Accounts and the Vested percentage thereof and such other
information as the Administrator shall deem advisable to furnish.
Section 14.5 - Inspection of Records
Copies of the Plan and any other documents and records which a
Participant is entitled by law to inspect shall be open to inspection by such
Participant or such Participant's duly authorized representatives at any
reasonable business hour at the principal office of the Company, any Company
work site at which at least fifty Employees regularly perform services and such
other locations as the Secretary of Labor may require.
Section 14.6 - Claims Procedure
(a) A claim by a Participant, former Participant, Beneficiary or any
other person shall be presented to the claims official appointed by the
Administrator in writing within the maximum time permitted by law or under the
regulations promulgated by the Secretary of Labor or his delegate pertaining to
claims procedures.
(b) The claims official shall, within a reasonable time, consider
the claim and shall issue his determination thereon in writing.
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(c) If the claim is granted, the appropriate distribution or payment
shall be made from the Trust Fund or by the Company.
(d) If the claim is wholly or partially denied, the claims official
shall, within ninety days (or such longer period as may be reasonably
necessary), provide the claimant with written notice of such denial, setting
forth, in a manner calculated to be understood by the claimant
(i) the specific reason or reasons for such denial,
(ii) specific references to pertinent Plan provisions on which
the denial is based,
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why
such material or information is necessary, and
(iv) an explanation of the Plan's claim review procedure.
(e) The Administrator shall provide each claimant with a reasonable
opportunity to appeal the claims official's denial of a claim to a review
official (appointed by the Administrator in writing) for a full and fair review.
The claimant or his duly authorized representative
(i) may request a review upon written application to the
review official (which shall be filed with it),
(ii) may review pertinent documents, and
(iii) may submit issues and comments in writing.
(f) The review official may establish such time limits within which
a claimant may request review of a denied claim as are reasonable in relation to
the nature of the benefit which is the subject of the claim and to other
attendant circumstances but which, in no event, shall be less than sixty days
after receipt by the claimant of written notice of denial of his claim.
(g) The decision by the review official upon review of a claim shall
be made not later than sixty days after his receipt of the request for review,
unless special circumstances require an extension of time for processing, in
which case a decision shall be rendered as soon as possible, but not later than
one hundred twenty days after receipt of such request for review.
(h) The decision on review shall be in writing and shall include
specific reasons for the decision written in a manner calculated to be
understood by the claimant with specific references to the pertinent Plan
provisions on which the decision is based.
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(i) The claims official and the review official shall have full
discretionary power and authority to construe the Plan and the Rules of the
Plan, to determine questions of eligibility, vesting and entitlements and to
make findings of fact as under Section 14.1 and, to the extent permitted by law,
the decision of the claims official (if no review is properly requested) or the
decision of the review official on review, as the case may be, shall be final
and binding on all parties except to the extent found by a court of competent
jurisdiction to constitute an abuse of discretion.
Section 14.7 - Conflicting Claims
If the Administrator is confronted with conflicting claims
concerning a Participant's Accounts, the Administrator may interplead the
claimants in an action at law, or in an arbitration conducted in accordance with
the rules of the American Arbitration Association, as the Administrator shall
elect in its sole discretion, and in either case, the attorneys' fees, expenses
and costs reasonably incurred by the Administrator in such proceeding shall be
paid from the Participant's Accounts.
Section 14.8 - Effect of Delay or Failure to Ascertain
Amount Distributable or to Locate Distributee
(a) If an amount payable under Article X, XI or XII cannot be
ascertained or the person to whom it is payable has not been ascertained or
located within the stated time limits and reasonable efforts to do so have been
made, then distribution shall be made not later than sixty days after such
amount is determined or such person is ascertained or located, or as prescribed
in subsection (b).
(b) If, within one year after a Participant has a Separation from
the Service, the Administrator, in the exercise of due diligence, has failed to
locate him (or if such Separation from the Service is by reason of his death,
has failed to locate the person entitled to his Vested Accounts under Section
11.2), his entire distributable interest in the Plan shall be applied to reduce
the Company's contribution under Section 4.1(b); provided, however, that if the
Participant (or in the case of his death, the person entitled thereto under
Section 11.2) makes proper claim therefor under Section 14.6, the amount so
forfeited shall be restored to the Participant's Account or Accounts, as the
case may be, applying forfeitures pending application, Company contributions and
unallocated earnings and gains of the Trust Fund, in that order, as necessary.
Section 14.9 - Service of Process
The Secretary of the Company is hereby designated as agent of the
Plan for the service of legal process.
Section 14.10 - Limitations Upon Powers of the Administrator
The Plan shall not be operated so as to discriminate in favor of
Highly Compensated Employees. The Plan shall be uniformly and consistently
interpreted and applied
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with regard to all Participants in similar circumstances. The Plan shall be
administered, interpreted and applied fairly and equitably and in accordance
with the specified purposes of the Plan.
Section 14.11 - Effect of Administrator Action
Except as provided in Section 14.6, all actions taken and all
determinations made by the Administrator in good faith shall be final and
binding upon all Participants, the Trustee and any person interested in the Plan
or Trust Fund.
Section 14.12 - Contributions to Rollover Accounts
(a) A Participant may make a contribution to his Rollover Account if
such contribution meets the requirements of this Section and is in accordance
with the Rules of the Plan.
(b) Such contribution will meet the requirements of this Section if
(i) it is made by the Participant to the Trust in cash in a
lump sum not later than two months after his admission or re-admission to
the Plan, and
(ii) the amount contributed by the Participant consists of
a an Eligible Rollover Distribution as defined in Code
Section 402(c)(4) from
1 a qualified trust meeting the requirements of
Code Section 402(c)(8), or
2 an employee annuity plan meeting the
requirements of Code Section 403(a)(1), or
b a tax-free rollover distribution from an individual
retirement account or an individual retirement annuity which in turn
consisted entirely of an Eligible Rollover Distribution (as defined
in Code Section 402(c)(4) from a qualified trust under Code Section
401(a) or an annuity plan under which the Participant was an
employee within the meaning of Code Section 401(c)(1) at the time
contributions were made on his behalf under the Plan) together with
any earnings thereon, and which otherwise meets the requirements of
Code Section 408(d)(3).
(c) In addition, such contribution will meet the requirements of
this Section if
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(i) the contribution is made within sixty days following the
day on which the Participant received the distribution from a qualified
trust, annuity plan or individual retirement account or annuity,
(ii) such distribution was in the form of money, and
(iii) such distribution constituted an Eligible Rollover
Distribution within the meaning of Code Section 402(c)(4), no part of
which consists of employee contributions.
(d) The Administrator may require the Participant to supply
information sufficient to determine if his contribution meets the requirements
of this Section. If the Administrator determines that such contribution does not
meet the requirements of this Section, the contribution shall not be permitted.
(e) The Plan will also accept the direct transfer from a plan
qualified under Code Section 401(a) of an amount which if paid to the
Participant instead of the Plan would have constituted an Eligible Rollover
Distribution within the meaning of Code Section 402(c)(4). Such a plan-to-plan
transfer must be received by the Trustee within two months after the
Participant's admission or re-admission to the Plan. The transferred amount
shall be credited to the Participant's Rollover Account.
(f) If the Administrator accepts a contribution or transfer pursuant
to this Section and later determines that it was improper to do so, in whole or
in part, the Plan shall refund the necessary amount to the Participant.
Section 14.13 - Direct Rollovers
Notwithstanding any provision of the Plan to the contrary, a
Distributee may elect, at the time and in the manner prescribed by the
Administrator under the Rules of the Plan, to have all or any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement Plan
designated by the Distributee in a Direct Rollover.
Section 14.14 - Loans to Participants or Former
Participants, Spouses or Beneficiaries
(a) A Participant, former Participant, Spouse or Beneficiary
("Borrower") may borrow against his Deferred Compensation Account, and/or his
Matching Account, and/or his Qualified Account and/or his Rollover Account with
the approval of the Administrator in accordance with the provisions of
subsection (b).
(b) The Administrator shall establish by Rules of the Plan the
requirements for loans from the Trust Fund and conditions therefor. Such Rules
of the Plan shall be consistent with the following requirements:
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(i) The Borrower must be a "party in interest" within the
meaning of ERISA Section 3(14) on the date the loan is made.
(ii) Loans shall not be made available to an individual who is
an owner-employee (as defined in Code Section 401(c)(3)) of the Company or
a Company Affiliate or a shareholder-employee (as defined in Code Section
1379(d)) of the Company or a Company Affiliate or a member of the family
(as defined in Code Section 267(c)(4)) of an owner-employee or
shareholder- employee.
(iii) The minimum amount which a Borrower may borrow at any
one time under this Section is $1,000.00.
(iv) The maximum amount which a Borrower may borrow from the
Trust Fund shall be an amount which when added to the outstanding balance
of all other loans from the Plan and from other qualified plans of the
Company or a Company Affiliate does not exceed the lesser of
a $50,000 reduced by the excess (if any) of
1 the highest outstanding balance of loans from
the Plan during the one year period ending on the day before
the date on which the loan is made, over
2 the outstanding balance of loans from the Plan
on the date on which such loan was made; or
b half of his Vested interest in all of his Accounts.
(v) Loans shall not be made to a Borrower under this Section
more frequently than at twelve-month intervals.
(vi) Such loans must be available to all Borrowers on a
reasonably equivalent basis.
(vii) The Vested percentage of a Borrower's Deferred
Compensation Account, Matching Account, Qualified Account and Rollover
Account which is made available for borrowing shall not be higher for
Participants or former Participants who are Highly Compensated Employees,
officers or shareholders than for other Borrowers.
(viii) Such loans shall be made upon promissory notes
providing for substantially level amortization (with regular payments by
payroll deduction each Payday
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for a Participant or by direct payments if the Participant does not have a
sufficient paycheck on any Payday). A former Participant, Spouse or
Beneficiary shall make arrangements for regular direct payments on such
loans with the Administrator as provided in the Rules of the Plan.
(ix) Each such loan shall be secured by the lesser of the
amount of the loan or half of the Vested interest in the Borrower's
Accounts, including any such portion of a Borrower's Accounts which is
credited after the date of the loan. For purposes of Articles X, XI and
XII, the distributable balance of such Accounts shall be reduced by the
unpaid balance of the loan secured by such Accounts.
(x) Each such loan shall bear a reasonable interest rate,
which shall be commensurate with the interest rates charged by persons in
the business of lending money for loans which would be made under similar
circumstances. The Administrator may adopt a national or regional rate of
interest for this purpose.
(xi) Each such loan shall be repaid within five years unless
the loan is used to acquire any dwelling unit which within a reasonable
time is to be used as a principal residence of the Borrower.
(xii) The promissory note on any such loan shall be an
investment of the affected Accounts of the Borrower receiving such loan
and not an investment of the Trust Fund generally.
Section 14.15 - Distributions Pursuant to
Qualified Domestic Relations Orders
Notwithstanding any other provision of the Plan to the contrary,
upon receipt by the Administrator of a domestic relations order, as defined in
Code Section 414(p), which, but for the time of required payment to the
alternate payee, would be a qualified domestic relations order as defined in
Code Section 414(p), the amount awarded to the alternate payee shall promptly be
paid in the manner specified in such order; provided, however, that no such
distribution shall be made prior to the Participant's Separation from the
Service if such distribution could adversely affect the qualified status of the
Plan.
Section 14.16 - Correction of Administrative Error;
Special Contribution
Notwithstanding any other provision of the Plan to the contrary, the
Administrator shall take any and all appropriate actions to correct errors in
the administration of the Plan, including, without limitation, errors in the
allocation of contributions, forfeitures, and income, expenses, gains and losses
to the Accounts of the Participants or Beneficiaries under the Plan. Such
corrective actions may include debiting or crediting a Participant's or
Beneficiary's Accounts or allocating special contributions made by the Company
to the Plan for purposes of
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correcting any failure to make contributions on a timely basis or properly
allocate contributions, forfeitures, or income, expenses, gains and losses. The
Administrator shall determine the amount of any such special contributions
required to be made by the Company, which may be made in such approximate
amounts as the Administrator, acting in its sole discretion, shall determine. In
no event shall any corrective action taken by the Administrator under this
Section reduce any Participant's or Beneficiary's accrued benefit in violation
of Section 411(d)(6) of the Code and the Treasury Regulations thereunder.
ARTICLE XV
TERMINATION, DISCONTINUANCE,
AMENDMENT, MERGER, ADOPTION OF PLAN
Section 15.1 - Termination of Plan; Discontinuance
of Contributions
(a) The Plan is intended as a permanent program but the Board shall
have the right at any time to declare the Plan terminated completely as to the
Company or as to any division, facility or other operational unit thereof.
Discharge or layoff of Employees of the Company or any unit thereof without such
a declaration shall not result in a termination or partial termination of the
Plan except to the extent required by law. In the event of any termination or
partial termination:
(i) An allocation of amounts being held under Section 16.4(b)
shall be made in accordance with Section 16.4(c).
(ii) For each Participant who is then an affected Employee or
employed by a Company Affiliate with respect to whom the Plan is
terminated or partially terminated, the interest in his Matching Account,
including his interest in the forfeitures then held in suspense under
Section 12.3 (which shall be applied under Section 5.4), shall become
fully Vested.
(iii) The Administrator shall direct the Trustee to liquidate
the necessary portion of the Trust Fund and distribute it, less, to the
extent permitted by law, a proportionate share of the expenses of
termination, to the persons entitled thereto in proportion to their
Accounts.
(iv) Provided that the Company or a Company Affiliate does not
maintain another defined contribution plan other than an employee stock
ownership plan (as defined in Code Section 4975(e)(7)), such distributions
shall be made in the manner prescribed by Section 12.1(a), assuming for
such purpose that each person entitled to a distribution under the Plan is
a Participant who has had a Separation from the Service due to resignation
or discharge on the date of termination.
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(b) The Board shall have the right at any time to discontinue
contributions to the Plan completely as to the Company or as to any division,
facility or other operational unit thereof. In the event of complete
discontinuance of contributions to the Plan, the Plan and Trust shall otherwise
remain in full force and effect except that all Matching Accounts shall
thereupon become fully Vested.
Section 15.2 - Amendment of Plan
As limited in Section 15.1 of the Plan and Section 7.02 of the Trust
Agreement, complete or partial amendments or modifications to the Plan
(including retroactive amendments to meet governmental requirements or
prerequisites for tax qualification) may be made from time to time by the Board;
provided, however, that no amendment shall decrease the Vested percentage any
Participant has in his Accounts or his accrued benefit.
Section 15.3 - Retroactive Effect of Plan Amendment
(a) No Plan amendment, unless it expressly provides otherwise, shall
be applied retroactively to increase the Vested percentage of a Participant
whose Separation from the Service preceded the date such amendment became
effective unless and until he again becomes a Participant and additional
contributions are allocated to him.
(b) No Plan amendment, unless it expressly provides otherwise, shall
be applied retroactively to increase the amount of service credited to any
person for purposes of Plan participation, vesting or any other Plan purpose
with respect to his participation or employment before the date such amendment
became effective.
(c) Except as provided in subsections (a) and (b), all rights under
the Plan shall be determined under the terms of the Plan as in effect at the
time the determination is made.
Section 15.4 - Consolidation or Merger; Adoption
of Plan by Other Companies
(a) In the event of the consolidation or merger of the Company with
or into any other business entity, or the sale by the Company or its owner of
its assets, the successor may continue the Plan by adopting the same by
resolution of its board of directors or agreement of its partners or proprietor
and, if deemed appropriate, by executing a proper supplemental agreement to the
Trust Agreement with the Trustee. If, within ninety days from the effective date
of such consolidation, merger or sale of assets, such new corporation,
partnership or proprietorship does not adopt the Plan, the Plan shall be
terminated in accordance with Section 15.1.
(b) The Plan shall not be merged or consolidated with any other
plan, nor shall its assets or liabilities be transferred to any other plan,
unless each Participant in this Plan would have immediately after the merger,
consolidation or transfer (if the plan in question were then terminated)
accounts which are equal to or greater in amount than his corresponding Accounts
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under this Plan had the Plan been terminated immediately before the merger,
consolidation or transfer.
(c) Any Company Affiliate may, with the approval of the Board, adopt
the Plan as a whole company or as to any one or more divisions effective as of
the first day of any Plan Year by resolution of its own board of directors or
agreement of its partners. Such Company Affiliate shall give written notice of
such adoption to the Administrator and to the Trustee by its duly authorized
officers.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 - Identification of Fiduciaries
(a) The Administrator (with respect to control and management of
Plan assets and in general) and the Trustee shall be named fiduciaries within
the meaning of ERISA and, as permitted or required by law, shall have exclusive
authority and discretion to control and manage the operation and administration
of the Plan within the limits set forth in the Trust Agreement, subject to
proper delegation.
(b) Such named fiduciaries and every person who exercises any
discretionary authority or discretionary control respecting management of the
Trust Fund or Plan, or exercises any authority or control respecting the
management or disposition of the assets of the Trust Fund or Plan, or renders
investment advice for compensation, direct or indirect, with respect to any
moneys or other property of the Trust Fund or Plan or has authority or
responsibility to do so, or has any discretionary authority or discretionary
responsibility in the administration of the Plan, and any person designated by a
named fiduciary to carry out fiduciary responsibilities under the Plan, shall be
a fiduciary and, as such, shall be subject to provisions of the Plan, the Trust
Agreement, ERISA and other applicable laws governing fiduciaries. Any person may
act in more than one fiduciary capacity.
Section 16.2 - Allocation of Fiduciary Responsibilities
(a) Fiduciary responsibilities under the Plan are allocated as
follows:
(i) The sole power and discretion to manage and control the
Plan's assets including, but not limited to, the power to acquire and
dispose of Plan assets, is allocated to the Trustee, except to the extent
that another fiduciary is appointed in accordance with the Trust Agreement
with the power to control or manage (including the power to acquire and
dispose of) assets of the Plan.
(ii) The sole duties, responsibilities and powers allocated to
the Board shall be those expressly retained under Sections 15.1, 15.2 and
15.4.
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(iii) The sole duties, responsibilities and powers allocated
to the Company shall be those expressly retained under the Plan or the
Trust Agreement.
(iv) All fiduciary responsibilities not allocated to the
Trustee, the Board, the Company or any investment manager are hereby
allocated to the Administrator, subject to delegation in accordance with
Section 14.1(a)(viii).
(b) Fiduciary responsibilities under the Plan (other than the power
to manage or control the Plan's assets) may be reallocated among those
fiduciaries identified as named fiduciaries in Section 16.1 by amending the Plan
in the manner prescribed in Section 15.2, followed by such fiduciaries'
acceptance of, or operation under, such amended Plan.
Section 16.3 - Limitation on Rights of Employees
The Plan is strictly a voluntary undertaking on the part of the
Company and shall not constitute a contract between the Company and any
Employee, or consideration for, or an inducement or condition of, the employment
of an Employee. Except as otherwise required by law, nothing contained in the
Plan shall give any Employee the right to be retained in the service of the
Company or to interfere with or restrict the right of the Company, which is
hereby expressly reserved, to discharge or retire any Employee at any time,
without notice and with or without cause. Except as otherwise required by law,
inclusion under the Plan will not give any Employee any right or claim to any
benefit hereunder except to the extent such right has specifically become fixed
under the terms of the Plan and there are funds available therefor in the hands
of the Trustee. The doctrine of substantial performance shall have no
application to Employees or Participants. Each condition and provision,
including numerical items, has been carefully considered and constitutes the
minimum limit on performance which will give rise to the applicable right.
Section 16.4 - Limitation on Annual Additions; Treatment
of Otherwise Excessive Allocations
(a) In any Plan Year (which shall be the Plan's "limitation year"
within the meaning of Treas. Reg. ss. 1.415-2(b)), the Annual Addition of a
Participant shall not exceed the least of
(i) twenty-five percent of such Participant's Statutory
Compensation for such Plan Year,
(ii) $30,000.00 (or, if greater, one-quarter of the dollar
limitation in effect under Code Section 415(b)(1)(A)), or
(iii) the maximum allowed under Code Section 415 (utilizing
the adjustments to the "defined contribution fraction" allowed by Section
1106(i)(4) of the Tax Reform Act of 1986 and Code Section 415(e)).
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(b) If the Annual Addition of a Participant would exceed the limits
of subsection (a) as a result of an allocation of forfeitures, a reasonable
error in estimating a Participant's Statutory Compensation or under other
limited facts and circumstances found justifiable by the Commissioner of
Internal Revenue, it shall be reduced until it comes within such limits. Such
reduction shall be accomplished by debiting the necessary amount from
(i) his allocation of Company contributions for such Plan Year
to his Deferred Compensation Account,
(ii) his allocation of forfeitures for such Plan Year,
(iii) his allocation of Company contributions for such Plan
Year to his Matching Account, and
(iv) his allocation of Company contributions for such Plan
Year to his Qualified Account
in such order. The portion of such amount attributable to his Deferred
Compensation first shall, to the extent allowed by law, be refunded to him, and
otherwise any necessary remainder to the extent allowed by Section 403 of ERISA,
shall be returned to the Company and recontributed for the applicable Account of
the Participant in the first Plan Year in which allowed under subsection (a), or
otherwise held in suspense hereunder and applied to the applicable Account of
the Participant in the first Plan Year in which allowed under subsection (a).
The balance, if any, of such reduction shall be allocated to the Matching
Accounts of persons who are Active Participants at the end of the Plan Year in
proportion to their Compensation received while Active Participants in such Plan
Year. If any Participant's Annual Addition would, due to such special
allocation, exceed the limit of subsection (a), the excess shall be reallocated
by a second special allocation, and so on as necessary to allocate such amounts
within the limits of subsection (a). Any amounts which cannot be so allocated
because of the limitations of subsection (a), shall be held in suspense and
shall be allocated and reallocated in succeeding Plan Years, in the order of
time, prior to the allocation of any Company or personal contributions.
(c) In the event the Plan is terminated while excess amounts are
then held in suspense under subsection (b), such excess amounts shall be
allocated and reallocated as provided in subsection (b), as of the day before
the date of the termination as if such day were the last day of such Plan Year.
Any amounts which cannot then be so allocated because of the limits of
subsection (a) shall revert to the Company, as provided in the Trust Agreement.
Section 16.5 - Governing Law
The Plan and Trust shall be interpreted, administered and enforced
in accordance with the Code and ERISA, and the rights of Participants, former
Participants, Beneficiaries and all other persons shall be determined in
accordance therewith; provided, however, that, to the extent that state law is
applicable, the laws of the state of residence of the Participant in question,
or if none, the state in which the principal office of the Administrator is
located shall apply.
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Section 16.6 - Genders and Plurals
Where the context so indicates, the masculine pronoun shall include
the feminine pronoun and the singular shall include the plural.
Section 16.7 - Titles
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan or Trust Agreement.
Section 16.8 - References
Unless the context clearly indicates to the contrary, a reference to
a statute, regulation or document shall be construed as referring to any
subsequently amended, enacted, adopted or executed statute, regulation or
document.
Executed at _____________, ________________ this ____ day of
___________, 1997.
GRIFFIN LAND & NURSERIES, INC.
By
------------------------------
Officer
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Exhibit 21
Subsidiaries of Griffin Land & Nurseries, Inc.
State or Other Jurisdiction of
Name* Incorporation or Organization
- ---- -----------------------------
General Witt Receivables Corp. Delaware
Imperial Nurseries, Inc. Delaware
The Eli Witt Company Delaware
(50.1% interest)
Centaur Communications England and Wales
(25% interest)
Culbro Homes, Inc. Delaware
Culbro Homes II, Inc. Delaware
Culbro Properties, Inc. Delaware
Griffin Center Corporation Delaware
Meadow Park Associates, Inc. Delaware
River Bend Associates, Inc. Delaware
Treetop Incorporated Delaware
* The names listed are the only names under which the subsidiaries do business.
