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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
SUNBELT NURSERY GROUP, INC.
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(Name of Issuer)
Common Stock, $.01 Par Value Per Share
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(Title of Class of Securities)
866925100
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(CUSIP Number)
Timothy R. Duoos, 32382 Del Obispo Street,
San Juan Capistrano, CA 92675, 714/248-3811
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
January 7, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page should be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 866925100
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(1) Names of Reporting persons S.S. or I.R.S. Identification Nos, of Above
Persons
Timothy R. Duoos
###-##-####
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(2) Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [ X ]
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(3) SEC Use Only
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(4) Source of Funds
PF
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2 (d) or 2 (e) [ ]
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(6) Citizenship or Place of Organization
U.S.
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Number of (7) Sole Voting Power 3,560,500 shares
Shares Bene- ------------------------------------------------------
ficially (8) Shared voting Power -0- shares
Owned by ------------------------------------------------------
Each Report- (9) Sole Dispositive Power 3,560,500 shares
ing Person ------------------------------------------------------
with (10) Shared dispositive Power -0- shares
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
3,560,500 shares*
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
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(13) Percent of Class Represented by Amount in Row (11)
39.2%*
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(14) Type of Reporting Person (See Instructions)
IN
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* Assumes 300,000 Preferred Shares and 60,000 options to purchase Common Stock
will be converted to Common Stock at a conversion price of $1.00 per share.
Such Conversion price cannot be determined until after the required filing date
of this Schedule 13D (See Item 5).
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AMENDMENT NO.1
TO SCHEDULE 13D
The Reporting Person, Timothy R. Duoos, hereby amends its Schedule 13D relating
to the Common Stock, par value $.01 per share, of Sunbelt Nursery Group, Inc., a
Delaware corporation (Issuer) as set forth herein.
ITEM 2. IDENTITY AND BACKGROUND.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The securities of the Issuer acquired by Reporting Person as reported in
Item 5, were acquired with personal funds ($300,000).
ITEM 4. PURPOSE OF TRANSACTION.
The Reporting Person acquired the securities and holds the Issuer's common
stock for investment purposes.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
According to the information provided by the Issuer in its Amendment to the
Annual Report on Form 10K/A-1 dated as of September 30, 1997, there were
8,500,000 shares of the Issuer's common stock outstanding at the present
time:
Reporting Person, beneficially owns an aggregate of 3,650,500 shares of the
Issuer's common stock, constituting approximately 39.2% of the Issuer's
outstanding shares, including 360,000 shares that Reporting Person has the
right to acquire.
Effective January 7, 1998, Reporting Person purchased 300,000 shares of
Series A Cumulative Convertible Preferred Stock for $1.00 per share. These
shares are convertible into shares of common stock of the Issuer at a
conversion price to be based on the average sales price (or, if no sale, on
the average of the bid and asked prices) for the ten trading days following
the date of purchase. For purposes of this filing, the number of shares
into which the Preferred Stock may be converted is estimated to be 300,000
(based on a conversion price of $1.00 per share). The Common Stock
issuable upon exercise of the Warrants and conversion of the Preferred
Stock is subject to certain demand and participatory registration rights.
Effective December of 1997, Reporting Person received options to purchase
60,000 shares of the Company's Common Stock for $1.00 per share, in
exchange for a personal guarantee of debt incurred by the Company in
association with the purchase of equipment.
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The acquisition of the preferred stock of the Issuer of Reporting Person is
subject to a Stock Purchase Agreement dated December 30, 1997. Said
Agreement is attached hereto as an exhibit in Item 7.
The exercises of options are subject to an executive committee resolution
dated October 10, 1997. Said agreement is attached hereto as an exhibit in
Item 7.
ITEM 7. EXHIBITS.
99.1 Stock Purchase Agreement dated December 30, 1997.
99.2 Minutes of Executive Committee Resolution.
SIGNATURE
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Date: February 10, 1998 /s/ Timothy R. Duoos
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Timothy R. Duoos
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EXHIBIT INDEX
Exhibit
Number Description
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99.1 Stock Purchase Agreement dated December 30, 1997.
99.2 Minutes of Executive Committee Resolution.
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EXHIBIT 99.1
SUNBELT NURSERY GROUP, INC.
SERIES A CUMULATIVE CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
(the "Agreement"), is made and entered into as of the 30th day of December,
1997 by and among Sunbelt Nursery Group, Inc. (the "Company"), a Delaware
corporation, with offices at 32382 Del Obispo Street, San Juan Capistrano,
California 92675 and the persons and entities listed on the Schedule of
Investors attached as Exhibit A hereto (each individually is referred to as an
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"Investor" and collectively as the "Investors").
W I T N E S S E T H:
ARTICLE I
AUTHORIZATION OF PREFERRED STOCK;
PURCHASE AND SALE OF PREFERRED STOCK
Section 1.1. Authorization of Preferred Stock. The Company has authorized
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the issue and sale of up to 1,300,000 shares of its Series A Cumulative
Convertible Preferred Stock, $.01 par value (such Series A Cumulative
Convertible Preferred Stock being hereinafter referred to as the "Series A
Preferred Stock") to be issued under this Agreement. The rights, privileges, and
preferences of the Series A Preferred Stock are as set forth in the Company's
Certificate of Designations, Preferences and Rights of Series A Cumulative
Convertible Preferred Stock (the "Certificate of Designation") in the form
attached to this Agreement as Exhibit B.
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Section 1.2. Private Offering. The offer and sale of the Series A
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Preferred Stock is being made by the Company in an offering (the "Offering")
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities laws.
Section 1.3. Purchase and Sale of the Preferred Stock. Subject to the
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terms and conditions of this Agreement and on the basis of the representations
and warranties set forth herein, the Company agrees to sell to each Investor and
each Investor agrees to purchase from the Company the number of shares of
Series A Preferred Stock (the "Shares") at a purchase price of one dollar
($1.00) per share of Series A Preferred Stock set forth opposite such Investor's
name on Exhibit A hereto.
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Section 1.4. The Closing. Subject to Sections 4.1 and 4.2 hereof, the
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closing of the transactions contemplated hereby (the "Closing") shall occur
contemporaneous with the funding of the Loan and Security Agreements by and
among Paragon Capital LLC ("Paragon") and the Company's wholly-owned
subsidiaries, Wolfe Nursery, Inc., Tip Top Nurseries, Inc. and Nurseryland
Garden Centers (hereinafter the "Paragon Financing"), or at such other time and
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place as the parties shall mutually agree. At the Closing, the Company shall
deliver to each Investor a certificate or certificates, registered in such
Investor's name, representing the number of shares to be purchased by such
Investor pursuant to this Agreement against payment of the purchase price
thereof in lawful money of the United States of America by wire transfer or,
if acceptable to the Company, check payable to the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Representations and Warranties. The Company hereby represents and warrants
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to the Investors as follows:
Section 2.1. Organization and Good Standing. Each of the Company and its
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subsidiaries listed on Schedule 2.10 hereto (the "Subsidiaries") is a
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corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation which, in the case of the Company, is the
State of Delaware. Except as otherwise reflected on Schedule 2.10, each of the
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Company and the Subsidiaries has all requisite corporate power and authority and
holds all licenses, permits and other required authorizations from governmental
authorities necessary to conduct its business as it is now being conducted and
to own or lease the properties and assets it now owns or holds under lease, and
is duly qualified and in good standing as a foreign corporation in each
jurisdiction where the nature of the business transacted or the character of the
properties owned or leased makes such qualification necessary and where the
failure to qualify would have a material adverse effect upon the Company's
consolidated operations or consolidated financial condition.
Section 2.2. Capital Stock. The total authorized capital stock of the
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Company presently consists of (i) 25,000,000 shares of Common Stock, $.01 par
value per share (the "Common Stock"), of which 8,500,000 shares are issued and
outstanding, all of which have been duly authorized and are validly issued,
fully paid and nonassessable, and (ii) 5,000,000 shares of Preferred Stock, $.01
par value per share (the "Preferred Stock"), of which 1,300,000 shares have been
designated Series A Preferred Stock. No shares of the Preferred Stock are
presently issued and outstanding. The Shares when issued pursuant to this
Agreement will be duly authorized, fully paid and nonassessable.
Except for the conversion provisions of the Preferred Stock and as set
forth on Schedule 2.2 hereto, there are no outstanding warrants, options or
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other rights to purchase or acquire, or exchangeable for or convertible into,
any shares of Common Stock. There are no preemptive rights with respect to the
issuance or sale by the Company of the Shares. Except as provided in this
Agreement, there are no restrictions on the transfer or voting of any shares of
the Common Stock. Other than as set forth in this Agreement and on Schedule 2.2
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hereto, there are no existing rights with respect to registration under the
Securities Act, of any of the Company's Common Stock or Preferred Stock. No
shares of Common Stock or Preferred Stock that have been issued were issued in
violation of the preemptive rights of any person. Except as reflected on
Schedule 2.4 hereto, the issuance of the Shares in accordance with the
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provisions of this
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Agreement has been duly authorized by all necessary corporate action before the
Closing, and the Shares when issued and sold to the Investors and upon payment
in full of the Purchase Price as provided herein, will be duly authorized and
validly issued, fully paid and nonassessable, will be evidenced by certificates
duly and validly authorized by the Company, and will constitute valid and
legally binding obligations of the Company enforceable against it in accordance
with the terms of issuance, subject to the effect of equitable principals and
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
Section 2.3. Financial Statements. The Company's audited financial
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statements as of and for the year ended June 29, 1997, included in its Form 10-K
for such year (the "10-K"), filed with the Securities and Exchange Commission
(the "Commission") and the unaudited financial statements as of and for the
three month period ending September 28, 1997, included in its Form 10-Q for such
three month period (the "10-Q") filed with the Commission, filed copies of which
10-K and 10-Q's have heretofore been delivered to the Investors, are in
conformity with the books and records of the Company and the Subsidiaries, and
fairly present the consolidated financial condition of the Company and the
Subsidiaries as of each such date and fairly present the consolidated results of
the operations of the Company and the Subsidiaries for each period then ended,
in conformity with generally accepted accounting principles consistently
applied; provided however, that the unaudited financial statements included in
the 10-Q are subject to year-end audit adjustments and do not contain all
footnotes required under generally accepted accounting principles.
Section 2.4. Compliance with Other Instruments. Except as reflected on
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Schedule 2.4 hereto, neither the execution and delivery of this Agreement nor
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the fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby will: (i) conflict with the Certificate of
Incorporation or Bylaws of the Company; (ii) conflict with or constitute a
material breach of, or constitute a material default under or an event which,
with notice or lapse of time or both, would be a material breach of or material
default under or violation of any material agreement, indenture, mortgage, deed
of trust, loan agreement or other instrument or undertaking by which the Company
is bound or to which any of its properties are subject, or constitute a
violation of any law, administrative regulation, judgment, order decree or award
applicable to the Company; (iii) result in the creation or imposition of any
material lien or encumbrance upon any property or assets of the Company or any
of the Subsidiaries; (iv) result in the loss of any material license or
certificate enjoyed or possessed by the Company or any of the Subsidiaries, or
(v) give any party to any material agreement to which the Company is party the
right of termination.
Section 2.5. Authorization. Subject to the matters set forth on Schedule
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2.4 hereof, the Company has the full corporate power and authority to enter into
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this Agreement and to perform all of its obligations hereunder. Subject to
Schedule 2.4 hereto, the execution, delivery and performance of this Agreement
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by the Company has been duly authorized by all necessary corporate action, and
this Agreement constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to the
effect of
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equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws of general application relating to or affecting the
enforcement of creditors' rights generally.
Section 2.6. Taxes. Except as reflected on Schedule 2.10 hereto, each of
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the Company and the Subsidiaries has filed all necessary or appropriate federal,
state, local and foreign tax returns and reports and all taxes, fees,
assessments and governmental charges of a material nature which are due and
payable have been paid, except those being contested in good faith or for which
an adequate reserve has been set aside, and there is not material tax deficiency
which has been or, to the knowledge of the Company, might be asserted against
the Company or any of the Subsidiaries which would materially affect the
business or operations of the Company and the Subsidiaries considered as a
whole.
Section 2.7. Litigation. Except as otherwise reflected in the Disclosure
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Documents (defined below) and on Schedule 2.7 hereto, there is not now pending
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nor, to the knowledge of the Company, threatened, any litigation, action, suit
or proceeding to which the Company or any of the Subsidiaries is or will be a
party before or by any governmental or regulatory agency or body or arbitration
tribunal (i) which questions or affects the Company's ability to enter into and
perform its obligations under this Agreement or (ii) which, is adversely
determined, would have a material adverse effect on the Company and the
Subsidiaries considered as a whole for which the Company has not taken an
adequate reserve. In addition to the foregoing, there is no judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against the Company or any of
the Subsidiaries having, or that can be reasonably expected to have, any
material adverse effect on the business, properties, assets or condition,
financial or otherwise, of the Company and the Subsidiaries taken as a whole.
Section 2.8. Compliance with Law. To the best of the Company's knowledge,
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each of the Company and the Subsidiaries is, in the conduct of its business, in
compliance with all federal, state, local and other laws, statutes, ordinances
and regulations, the enforcement of which would materially adversely affect the
business or the value of the properties or assets of the Company and the
Subsidiaries taken as a whole.
Section 2.9. Licenses, Permits, Etc. To the best of the Company's
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knowledge, each of the Company and the Subsidiaries has all approvals,
authorizations, consents, licenses, orders and other permits of all governmental
agencies, whether federal, state or local, required to permit the operation of
its business as presently conducted. Except as otherwise reflected on Schedule
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2.9 hereto, there are no proceedings pending or, to the knowledge of the
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Company, threatened, looking toward revocation or limitation of any such
approvals, authorizations, consents, licenses, orders or permits, nor, to the
Company's knowledge, is there any basis or grounds for any such revocation or
limitation.
Section 2.10. Subsidiaries. Schedule 2.10 to this Agreement sets forth
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all of the wholly owned Subsidiaries of the Company as of the date of this
Agreement. Other than as stated above, "Subsidiaries" shall include all
companies in which the Company owns a majority interest.
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<PAGE>
Section 2.11. Securities Laws. Neither the Company nor any other person,
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firm or corporation acting on its behalf has offered any of the Shares for sale
to, or solicited any offers to purchase any thereof from, or otherwise
approached or negotiated (nor will the Company or any other person, firm or
corporation acting on its behalf sell, offer, solicit or otherwise approach or
negotiate) in respect thereof with, such number or character of persons in the
aggregate or in such manner, as would result in bringing the Shares, or any part
thereof, within the provisions of Section 5 of the Securities Act. The offer,
issuance and sale of the Shares are and will be exempt from the registration
requirements under the Securities Act, and have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws. The
Company has not retained a broker or finder in connection with the sale of the
Shares.
Section 2.12. Reports. To the best of the Company's knowledge, for the
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period commencing one (1) year prior to the date of Closing under this
Agreement, the Company reports filed under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and all amendments and supplements thereto
(collectively, the "Reports") complied as to form in all material respects with
the requirements of the 1934 Act, and the rules and regulations of the
Securities and Exchange Commission thereunder, as of their respective file
dates, except that the Company failed to timely file its amendment to the
Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1997.
ARTICLE III
REPRESENTATIONS OF THE INVESTORS
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Representations of the Investors. Each Investor represents and warrants to
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the Company as follow:
Section 3.1. Purchase for Own Account. Such Investor is acquiring the
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Shares for its own account for investment and not with a view to or in
connection with any distribution or resale thereof, provided that such Investor
retains the right to dispose of the Shares in accordance with applicable law,
including without limitation the Securities Act.
Section 3.2. Restrictions on Transfers. Such Investors understands that
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the Shares are not, and any Common Stock acquired on conversion thereof at the
time of issuance may not, be registered under either the Securities Act or any
applicable state securities laws and further understands that the Shares
constitute "restricted securities" within the meaning of Rule 144 under the
Securities Act. Such Investor understands that the Shares (or the Common Stock
issued on conversion thereof) may not be sold or otherwise transferred unless
subsequently registered under the Securities Act and registered or qualified
under any applicable state securities laws or, in the opinion of counsel (at the
expense of the Investor or transferee) for or reasonably acceptable to the
Company, an exemption from registration is available; provided, however, that no
such registration statement or opinion of counsel shall be necessary for a
transfer by an Investor pursuant to a Rule 144(k) promulgated under the
Securities Act or a
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transfer by an Investor to an affiliate (as defined in Rule 405 of the
Securities Act) of such Investor, if such affiliate is an accredited investor.
Such Investor further understands that, except pursuant to subsection (k) of
Rule 144, any routine sales of Shares (and any Common Stock issued upon
conversion thereof) made in reliance on Rule 144 can only be made if current
information about the Company is publicly available and then only in limited
amounts in accordance with that rule. Pursuant to the terms of the Certificate
of Designation no holder of shares of Series A Preferred Stock may transfer any
such shares except to an "accredited investor" as such term is defined in Rule
501(a) adopted by the Securities and Exchange Commission under the Securities
Act and then only in transactions involving the transfer of at least 50,000
shares of Series A Preferred Stock.
Section 3.3. Restrictive Legends. Until such time as the Shares have been
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registered under the Securities Act and registered or qualified under any
applicable state securities laws or until such time as the Company is provided
by the Purchaser with an opinion of counsel reasonably acceptable to the Company
to the effect that the transfer of the Shares may be made without any such
registration or qualification the certificates representing the Shares shall be
imprinted with a legend in substantially the following form;
"The shares of stock represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, (the "Act") or
registered or qualified under any applicable state securities laws, and the
holder hereof cannot make any sale, assignment or other transfer of any
shares of such stock except pursuant to an offering of such shares duly
registered under the Act and registered or qualified under any applicable
state securities laws, or under such other circumstances as in the opinion
of counsel for or reasonably acceptable to the issuer shall not (by virtue
of any applicable exemption under the Act and any applicable state
securities laws, any rule or regulation thereunder or the federal
bankruptcy laws) require such registration or qualification."
Section 3.4. Access to Information. Such Investor is able to fend for
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itself in the transactions contemplated by this Agreement, has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment, and has the ability to bear the economic
risks of its investment. Such Investor has had access, during the course of the
transaction and prior to its purchase of its Shares, to the same kind of
information that would be provided in a registration statement filed by the
Company under the 1933 Act and that it has had, during the course of the
transaction and prior to its purchase of its Shares, the opportunity to ask
questions of, and receive answers from, the Company concerning the terms and
conditions of the offering and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to it or to which it had access.
Section 3.5. Accredited Investor. Such Investor is an "Accredited
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Investor" as such term is defined in Rule 501(a) as adopted by the Securities
and Exchange Commission pursuant to the Securities Act, and has a net worth of
at least $1,000,000.
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Section 3.6. Authorizations. Such Investor has full power and authority to
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enter this Agreement and to fully perform the terms of this Agreement hereunder.
The execution, delivery, and performance of this Agreement by such Investor has
been (or will be duly) authorized by all necessary action of such Investor prior
to Closing, and this Agreement constitutes the legal, valid and binding
obligation of such Investor enforceable in accordance with its terms, and the
execution and delivery of this Agreement and the purchase of the shares
contemplated thereby by such Investor will not violate any applicable federal or
state law, regulation or rule.
Section 3.7. Broker's or Finder's Fees. Such Investor has not retained a
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broker or finder in connection with the purchase of the Shares.
Section 3.8. Receipt of Disclosure Documents. Such Investor acknowledges
-------------------------------
receipt of a copy of each of the following documents (the Disclosure Documents):
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
June 29, 1997, and Form 10-KA-1 filed with the Securities and
Exchange Commission on October 29, 1997;
(ii) The Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 28, 1997; and
(iii) The Company's Notice of Annual Meeting and Proxy Statement for the
annual meeting of Stockholders to be held December 12, 1997.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1. Conditions to the Obligations of the Investors. The
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obligation of the Investors to be bound by the provisions of this Agreement and
to purchase the Shares is subject to satisfaction of the following conditions
precedent, any or all of which may be waived in whole or in part by the
Investors:
(a) Representations and Warranties Correct. All of the representations
--------------------------------------
and warranties of the Company contained in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or otherwise delivered
to the Investors shall be true and correct on the date of Closing.
(b) Performance of Obligations. All of the obligations of the Company
--------------------------
shall have been performed pursuant to the terms and conditions hereof on or
prior to the date of Closing.
(c) Paragon Financing. All conditions to the closing of the Paragon
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Financing shall have been satisfied or waived by Paragon.
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<PAGE>
(d) Amex Listing. The Company shall have received written notice of
------------
approval for the listing of the Shares by the American Stock Exchange.
(e) Certificate of Designation. The Certificate of Designation shall have
--------------------------
been duly filed and accepted by the Delaware Secretary of State.
(f) Opinion of Counsel to the Company. The Investors shall have received
---------------------------------
an opinion of Murphy Mahon Keffler & Farrier, L.L.P., counsel to the Company,
based upon such counsel's best knowledge, addressed to the Purchaser, dated such
date, substantially in the form as set forth below:
1) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and that it has full
corporate power and authority to execute the Agreement and to consummate
the transactions contemplated thereby;
2) The Agreement has been duly authorized by the Company and its Board of
Directors and duly executed and delivered by an authorized officer of the
Company and constitutes a legal, valid, and binding obligation of the
Company and is enforceable in accordance with its terms, subject to
bankruptcy and other laws of general application affecting the rights and
remedies of creditors;
3) The offer, issuance, sale and delivery of the Shares in conformity
with the terms of the Agreement does not violate any provision of the
Company's Certificate of Incorporation or Bylaws;
4) To such counsel's knowledge, other than the conditions to closing and
the matters set forth on Schedule 2.4 hereto, no order, authorization,
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consent or approval of, or registration, declaration or filing with any
state or federal governmental authority or agency is required in connection
with the execution and delivery of the Agreement or the offer, sale or
issuance of the Shares by the Company or the consummation by the Company of
the transactions contemplated by the Agreement.
5) To such counsel's knowledge, except as otherwise set forth in the
Disclosure Documents and Schedule 2.7, neither Sunbelt nor any of its
------------
subsidiaries is a party to any pending or threatened action, suit,
proceeding or investigation before any court or governmental agency.
6) Except as set forth on Schedule 2.4 hereto, neither the execution,
------------
delivery or performance of the Agreement nor compliance by the Company with
all provisions thereof, nor consummation by the Company of the transactions
contemplated thereby conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the Certificate of
Incorporation or bylaws of the Company, or, to such counsel's knowledge,
any material contract to which it is a party, or will result in the
creation or
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<PAGE>
imposition of any lien, charge or encumbrance upon any property or assets
of the Company under any such material contract nor will any such action
result in any violation of any existing Delaware or Federal law, rule,
regulation (assuming compliance with all applicable state securities and
Blue Sky laws), or any ruling, judgment, injunction, order or decree of any
court or government entity or instrumentality known to such counsel, and
applicable to the Company or any of its properties;
7) To such counsel's knowledge, without undertaking any independent
investigation, the authorized, issued and outstanding capital stock of the
Company (i) is as set forth in Section 2.2 of the Agreement, (ii) has been
duly and validly authorized and issued and are fully paid and
nonassessable, and (iii) has not been issued in violation of any preemptive
right, co-sale right, or registration right.
8) Once issued and delivered for the consideration stated in the
Agreement, the Shares shall be duly and validly issued, fully paid and
non-assessable. To such counsel's knowledge, without undertaking any
independent investigation, there are no outstanding subscriptions, options
(other than employee stock options), warrants, rights or other written
agreements obligating the Company to issue or sell any shares of Common or
Preferred Stock of the Company other than as set forth on Schedule 2.2.
------------
(g) Consents Obtained. The Company shall have obtained in writing all
-----------------
consents, if any, needed to enable the Company to observe and comply with all of
its obligations hereunder.
(h) Other Documents. All instruments, documents and legal matters
----------------
reasonable and necessary to consummate the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the respective counsels
for the Investors and the Investors shall have received all documents reasonably
requested in connection with the purchase of the Shares.
Section 4.2. Conditions to the Obligations of the Company. The obligation
--------------------------------------------
of the Company to be bound by the provisions of this Agreement and to sell the
Shares is subject to satisfaction of the following conditions precedent:
(a) Representations and Warranties Correct. All of the representations
--------------------------------------
and warranties of the Investors contained in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or otherwise delivered
to the Company shall be true and correct on the date of Closing.
(b) Consents Obtained. Each Investor shall have obtained in writing all
-----------------
consents, if any, needed to enable such Investor to observe and comply with all
of its obligations hereunder.
(c) Corporate Resolutions Compliance Certificate and Certain Other
--------------------------------------------------------------
Documents. Each Investor that is a corporation or other business entity shall
- ---------
have delivered to the Company on such date certified copies of the resolutions
adopted by such Investor's Board of Directors or other governing body
authorizing the execution, delivery and performance of this Agreement and the
purchase and acceptance of the Shares.
-9-
<PAGE>
(d) Other Documents. All instruments, documents and legal matters
---------------
reasonable and necessary to consummate the transactions contemplated by this
Agreement shall be satisfactory in form and substance to counsel for the Company
and the Company shall have received all documents reasonably requested in
connection with the sale thereby of the Shares.
ARTICLE V
REGISTRATION RIGHTS
-------------------
Section 5.1. "Holder." As used in this Article V, the term "holder" shall
------
mean any person owing or having the right to acquire Registrable Securities (as
defined below), including any transferee of Registrable Securities to whom the
Purchaser has assigned its registration rights under this Article V, but only if
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
Registrable Securities with respect to which such registration rights are being
assigned; provided, however, that such assignment shall be effective only if
immediately following such transfer the transferee or assignee is the holder of
at least 50,000 Registrable Securities and the further disposition of such
Registrable Securities by the transferee or assignee is restricted under the
Securities Act.
Section 5.2. "Registrable Securities." As used in this Article V, the
----------------------
term "Registrable Securities" shall mean (1) the Common Stock issued or issuable
upon conversion of the Shares and (2) any Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such Shares; provided, however, that any shares previously
sold in the public pursuant to a registered public offering or pursuant to Rule
144 under the Securities Act shall cease to be Registrable Securities.
Section 5.3. Piggy-Back Registration. Whenever the Company proposes to
------------------------
register any shares of its capital stock for its own or others account under the
Securities Act for a public offering for cash, on a form that would also permit
the registration of the Registrable Securities, the Company shall give each
holder of Registrable Securities prompt written notice of its intent to do so.
Upon the written request of any such holder given within 15 days after receipt
of such notice, the Company will use its best efforts to cause to be included in
such registration all of the Registrable Securities which such holder requests.
If the Company is advised in writing in good faith by any managing underwriter
of the securities being offered pursuant to any registration statement under
this Section 5.3 that the number of shares to be sold by persons other than the
Company is greater than the number of such shares which can be offered without
adversely affecting the offering, the Company may reduce pro rata (based upon
the number of shares of the Company's capital stock held by all persons other
than the Company, who hold Registrable Securities) the number of shares offered
for the accounts of such persons to a number deemed satisfactory by such
managing underwriter. No agreement of the Company shall permit any person other
than the Company or holders of Registrable Securities to participate in any
registration under this paragraph except on the basis that any offering
limitation either applies
-10-
<PAGE>
only to such other persons or is apportioned according to the number of shares
held by each participant. Rights under this Section 5.3 are subject to the terms
and provisions of outstanding demand registration rights which are referenced in
Schedule 2.2.
- ------------
Section 5.4. Demand Registrations. If at any time after December 31, 1998,
--------------------
and prior to January 1, 2006, the holder(s) of at least twenty-five percent
(25%) of the Registrable Securities shall notify the Company in writing that
such holders intend to offer or cause to be offered for sale at least twenty-
five percent (25%) of such Registrable Securities and shall request the Company
to cause such Registrable Securities to be registered under the Securities Act,
the Company will use its best efforts as soon as practicable thereafter to
register such Registrable Securities (together with any other Registrable
Securities requested by the holders thereof to be included in such registration
pursuant to Section 5.3 within 15 days after receipt of a notice from the
Company pursuant to Section 5.3) in accordance with the registration procedures
set forth in Section 5.5 hereof.
Such rights to require registration shall be in addition to the rights of
the holders under Sections 5.3 and 5.5 and shall be available to holders, acting
pursuant to this Agreement, on not more than a cumulative total of two (2)
occasions; provided, however, that each such registration right shall be deemed
to have been used only upon such registration statement becoming and remaining
effective in accordance with the provisions hereof. The Company shall, within
five days of receipt of a request for registration pursuant to this Section 5.4,
notify each holder of such request and permit each holder to join such request;
provided, that such holder, within 15 days of receipt of such notification, so
indicates in writing to the Company. Notwithstanding the foregoing, the Company
shall not be obligated to effect a registration pursuant to this Section 5.4
during the period starting with the date thirty (30) days prior to the Company's
estimated date of filing of, and ending on a date three (3) months following the
effective date of, a registration statement pertaining to an underwritten pub1ic
offering of securities for the account of the Company provided that the Company
is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; provided,
however, that no such registration statements filed by the Company shall
preclude the holders of the Registrable Securities from exercising a
registration right hereunder this Section 5.4 for more than 90 days.
Section 5.5. Registration Procedures.
-----------------------
(a) All registration expenses incurred in connection with registrations
under Sections 5.3 and 5.4 (including all registration, filing, qualification,
printer's, accounting and legal fees) shall be borne by the Company. All selling
expenses, including underwriting commissions and discounts, relating to the
Registrable Securities shall be borne pro rata by the holders whose Registrable
Securities are to be registered.
(b) In connection with registrations under this Article 5, the Company
shall (i) use its best efforts to prepare and file with the Securities and
Exchange Commission (the "Commission") as soon as reasonably practicable, but
not later than 90 days, a registration statement with respect to the Registrable
Securities and use its best efforts to cause such
-11-
<PAGE>
registration to promptly become and remain effective for a period of at least 12
months or such shorter period during which holders shall have sold all
Registrable Securities which they requested to be registered); (ii) furnish to
each holder such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as such
holder may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such holder; (iii) use its best efforts to
register and qualify the Registrable Securities covered by such registration
statement under applicable state securities laws as shall be reasonably
appropriate for the distribution of the Registrable Securities; and (iv) take
such other actions as are reasonable and necessary to comply with the
requirements of the Securities Act and the regulations thereunder, or the
reasonable request of any holder, with respect to the registration and
distribution of the Registrable Securities. The Company is not obligated to
effect registration or qualification under this Article 5 in any jurisdiction
requiring it to qualify to do business or to execute a general consent to
service of process.
Section 5.6. Certain Delays: Notification.
----------------------------
(a) The Company shall have the right, on not more than two occasions, to
defer for a reasonable period (not to exceed 90 days) the filing of any
registration statement requested under Sections 5.4 or 5.5 if, in the reasonable
judgment of the Company's board of directors, such registration would materially
interfere with or materially and adversely affect any then existing negotiations
for financing arrangements or financing plans of the Company, or any arrangement
or plan of the Company, then pending or being negotiated in good faith, relating
to any acquisition, disposition, merger or similar transaction, or would require
an audit of the Company or any Subsidiary other than the regularly scheduled
annual audit (unless the requesting holder or holders and other parties joining
such request or otherwise participating in such registration agree to bear the
expenses of such audit), such right to defer a registration to be exercised by
the Company not more than once in any year period.
(b) The Company shall promptly notify each holder of Registrable
Securities covered by any registration statement of any event which results in
the prospectus included in such registration statement, as then in effect,
containing an untrue statement of a material fact or omitting to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing. The
Company shall forthwith prepare and furnish, after securing such approvals as
may be necessary, to such holder a reasonable number of copies of any supplement
to or amendment of such prospectus that may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(c) The Company shall promptly notify all selling holders of any stop
order or similar proceeding initiated by state or federal regulatory bodies and
use its best efforts to take all necessary steps expeditiously to remove such
stop order to similar proceeding.
-12-
<PAGE>
Section 5.7. Indemnification by the Company. To the extent permitted
------------------------------
by law, the Company will indemnify and hold harmless each participating holder
and each underwriter of the Registrable Securities being sold by such holder,
and each controlling person of such holder and underwriter, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement relating to such Registrable
Securities (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such holder and each such underwriter and
controlling person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action and will enter into an indemnification agreement with each
such holder and underwriter containing customary provisions, including
provisions for contribution, as any holder or underwriter shall reasonably
request; provided, however, that the Indemnity Agreement contained in this
Section 5.7 shall not apply to amounts paid in settlement of any such claim,
loss, damage, liability or action if such settlement is effected without the
consent of the Company (which consent will not be unreasonably withheld, nor
shall the Company be liable in any such case to the extent that any such claim,
loss, damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such holder
or underwriter and stated to be specifically for use therein.
Section 5.8. Indemnification by Holders. To the extent permitted by law,
--------------------------
each participating holder of Registrable Securities will indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, and each agent and any
underwriter for the Company (within the meaning of the Act) against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) or a material
fact contained in any registration statement relating to the Registrable
Securities (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such director, officer or controlling
person for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action and will enter into an indemnification agreement with the Company and
each such person containing customary provisions, including provisions for
contribution, as the Company or each such person shall reasonably request;
provided, however, that no holder of Registrable Securities will be liable in
any such case except to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such holder and stated to
be specifically for use therein; and provided, further, that no holder of
Registrable Securities will be liable under this section for any losses, costs,
damages or expenses exceeding in aggregate the proceeds to such holder in such
offering; and, provided further, however, that the indemnity contained in this
Section 5.8 shall not apply to amounts paid in settlement of any such loss,
claim, damage,
-13-
<PAGE>
liability, or action (if such settlement is effected without the consent of such
holder, which consent will not be unreasonably withheld).
Section 5.9. Reports under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the holders of Registrable Securities the benefits of Rule
144 promulgated under the Securities Act and any other rule or regulation of the
Commission that may at any time permit a holder to sell securities of the
Company to the public without registration or pursuant to registration on Form
S-3, the Company agrees to use its best efforts to satisfy the requirements of
all such rules and regulations (including the requirements for public
information, registration Under the Securities Exchange Act of 1934 and timely
reporting to the Commission).
Section 5.10. Preparation of Registration Statements. Whenever the Company
--------------------------------------
is registering any Common Stock under the Securities Act and a holder of
Registrable Securities is selling any securities under such registration or
determines that it may be a controlling person under such Act, the Company will
allow such holder to participate in the preparation of the registration
statement, will include in the registration statement such information as such
holder may reasonably request and will take all such other action as such holder
may reasonably request.
ARTICLE VI
INDEMNIFICATION
---------------
Section 6.1. Indemnification by the Company. The Company agrees to
------------------------------
indemnify and hold harmless each Investor from and against, and to reimburse
each Investor with respect to any and all loss, damage, liability, cost and
expense, including reasonable attorney's fees incurred by such Investor, by
reason of or arising out of or in connection with: (i) a material breach of any
representation or warranty contained in Article II hereof or in any certificate
delivered to the Investor pursuant to the provisions of this Agreement; or (ii)
the failure of the Company to perform any material agreement required by this
Agreement.
Section 6.2. Indemnification by the Investors. The Investors agree to
--------------------------------
indemnify and hold the Company harmless from and against, and to reimburse the
Company with respect to any and all loss, damage, liability, cost and expense,
including reasonable attorney's fees incurred by the Company by reason of or
arising out of or in connection with: (i) a material breach of any
representation or warranty contained in Article III hereof made by such Investor
or (ii) the failure of such Investor to perform any material agreement required
by this Agreement to be performed by it.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.1. Survival of Representations and Warranties. All representations
-----------------------------------------
and warranties contained herein or made in writing by the Company and the
Investors in connection
-14-
<PAGE>
with the transactions contemplated hereby shall survive any investigations made
by the Investors and the execution and delivery of this Agreement and the
Closing Date for a period of one year.
Section 7.2. Entire Agreement. This Agreement and the Exhibits and
----------------
Schedules hereto and thereto constitute the entire agreement among the Company
and the Investors with respect to the subject matter hereof. There are no
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein. This
Agreement supersedes all prior agreements between the parties with respect to
the Shares purchased hereunder and the subject matter hereof. The terms and
provisions of this Agreement may not be modified or amended, or any of the
provisions hereof waived, temporarily or permanently, except in the case of
modifications and amendments pursuant to the written consent of the parties to
this Agreement and in the case of waiver pursuant to a writing by the person so
waiving.
Section 7.3. Notices. All notices, requests, demands and other
-------
communications called for or contemplated hereunder shall be in writing and
shall be deemed duly given three days from the date such notice is deposited in
the United States mail, postage-paid and addressed to the proper parties at the
following addresses, or at such other addresses as the parties may designate by
written notice in the manner aforesaid:
If to an Investor: At such investor's address set forth on Exhibit A
hereto.
If to the Company: Sunbelt Nursery Group, Inc.
32382 Del Obispo Street
San Juan Capistrano, California 92675
Attn: Timothy R. Duoos, President
With a copy to:
Murphy Mahon Keffler & Farrier, L.L.P.
500 Throckmorton Street, Suite 1810
Fort Worth, Texas 76102
Attn: Robert J. Keffler
Section 7.4. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of the Company, the Investors and their respective legal successors.
Nothing contained herein, express or implied, is intended to confer upon any
person or entity other than the parties hereto and their legal successors, any
rights or remedies under or by reason of this Agreement unless so stated herein
to the contrary.
Section 7.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 7.6. Headings. The headings in this Agreement are for reference
----------
purposes only and shall not be deemed to have any substantive effect.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above,
COMPANY:
SUNBELT NURSERY GROUP. INC.
By: /s/ Timothy R. Duoos
----------------------------
Title: President
-------------------------
-16-
<PAGE>
SUNBELT NURSERY GROUP, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
JOHN TASTAD
/s/ John Tastad
-------------------------------
John Tastad
HEALTHY AMERICAN PRODUCTS. INC.
By: /s/ Janet R. Leuman
----------------------------
Title: Vice President
-------------------------
TIMOTHY R. DUOOS
/s/ Timothy R. Duoos
-------------------------------
Timothy R. Duoos
-17-
<PAGE>
EXHIBIT "A"
Schedule of Investors
---------------------
<TABLE>
<CAPTION>
Shares of Series A
Preferred Stock
Investors Purchased Purchase Price
- --------- --------- --------------
<S> <C> <C>
John Tastad
c/o Energy Masters, Inc. 500,000 $500,000
1385 Mendola Heights Rd.
St. Paul, Minnesota 55120
Healthy American Products, Inc.
7901 Xerxes Ave. South, Suite 201
Minneapolis, Minnesota 54431 500,000 $500,000
Attn: Rodney Burwell
Timothy R. Duoos
32382 Del Obispo Street 300,000 $300,000
San Juan Capistrano, California 92675
</TABLE>
-i-
<PAGE>
Schedule 2.2
Outstanding Warrants, Options or Other
Rights to Purchase or Acquire, or Require
Registration of Common Stock of the Company
-------------------------------------------
1. 60,500 shares of Common Stock to be issued upon the exercise of stock
options under the Company's 1991 Stock Option Plan, as of June 28, 1997.
2. 125,000 shares of Common Stock to be issued upon the exercise of stock
options issued by the Company to its non-employee Directors, as of
September 1, 1997.
3. Demand and piggyback registration rights under certain Registration Rights
Agreements dated June 20, 1997 between the Company and Timothy R. Duoos and
Healthy American Products covering 3,200,000 shares and 1,000,000 shares,
respectively.
4. Piggyback registration rights under that certain Settlement and
Registration Rights Agreement with Mellon U.S. Leasing covering 50,000
shares. As of December 22, 1997, the stock certificate representing these
shares has not been delivered to Mellon U.S. Leasing.
5. Warrants to purchase 66,000 shares of Common Stock, and registration rights
associated therewith by Healthy American Products, Inc. pursuant to that
certain Warrant Agreement dated on or about the date of this Agreement.
6. Warrants to purchase 165,000 shares of Common Stock and registration rights
associated therewith by John Tastad pursuant to that certain Warrant
Agreement dated on or about the date of this Agreement,
-ii-
<PAGE>
Schedule 2.4
1. The consent of American National Bank of Chicago, or its assignee, is
required for the Company to complete the transactions contemplated by the Stock
Purchase Agreement and the Certificate of Designation.
2. The consent of the American Stock Exchange to the issuance of the Shares,
and its acceptance of the Company's listing application covering the Shares, is
required under the Rules of the American Stock Exchange's and the Company's
Listing Agreement.
-iii-
<PAGE>
Schedule 2.7
1. Sunbelt Nursery Group, Inc. is a defendant in litigation styled Principal
Financial Securities, Inc. and Loeb Partners Corporation v. Sunbelt Nursery
Group, Inc., General Host Corporation, Lyndale Garden Center, Inc., and Timothy
Duoos which is pending in the 352nd District Court of Tarrant County, Texas in
Cause No. 352-157413-95. This suit was filed on January 26, 1995, and is
currently scheduled for trial beginning June 15, 1998. In this lawsuit, the
Plaintiffs allege that they are entitled to payment as an assignee of Hamilton
Investments, Inc. According to the Plaintiffs, they are entitled to payment
based upon a contract between Hamilton and Sunbelt. The Plaintiffs allege that
Hamilton was entitled to a five percent (5%) commission on financing obtained by
Sunbelt from American National Bank of Chicago in 1994. Sunbelt disputes this
and contends that Hamilton was not a procuring cause of such financing, and,
therefore, is not entitled to a commission. Discovery has been commenced by all
parties but is not yet complete. The Plaintiffs seek actual damages which they
allege to be in excess of $700,000, plus punitive damages, court costs, and
attorney's fees. If this claim is not resolved by settlement, the Company has
indicated an intention to continue to vigorously contest this case.
2. Sunbelt Nursery Group, Inc. and Wolfe Nursery, Inc. are plaintiffs and
counter-defendants in litigation styled Sunbelt Nursery Group, Inc. and Wolfe
Nursery, Inc. v. Green Creek Nursery Inc. which is pending in the 352nd District
Court of Tarrant County, Texas in cause number 352-169556-97. This suit was
filed on June 20, 1997. In the lawsuit, the Plaintiffs (Sunbelt and Wolfe)
contend that the Defendant has failed to perform on a 1993 contract for delivery
on an ongoing basis of certain trees and shrubs and that the contract has been
modified as to amounts to be delivered and price based on later agreement of the
parties and subsequent conduct. Plaintiffs have sued Defendant for a declaratory
judgment that Plaintiffs have no further obligations under the contract and for
actual damages, attorneys' fees, and costs of court. Defendant has filed a
counterclaim against Plaintiffs for alleged breach of the contract by Plaintiffs
and seek actual and special damages from Plaintiffs in an unspecified amount;
plus attorney's fees. If the case is not resolved by settlement, the Company has
indicated an intention to vigorously pursue this case, and to vigorously contest
any counterclaims that may be filed.
-iv-
<PAGE>
Schedule 2.9
Attached correspondence dated October 21, 1997 and December 19, 1997
from the American Stock Exchange ("AMEX") to the Company regarding the Company's
continued listing eligibility under the AMEX Company Guide.
-v-
<PAGE>
Schedule 2.10
Subsidiaries of the Company
---------------------------
<TABLE>
<CAPTION>
State of
Name Ownership Incorporation
---- --------- -------------
<S> <C> <C>
Wolfe Nursery, Inc. 100% Delaware
Sunbelt Management, Inc. 100% Delaware
Tip Top Nurseries, Inc. 100% Arizona
Nurseryland Garden Centers, Inc. 100% California
Sunbelt Nursery Holdings, Inc. 100% Arizona
Houston Patio & Garden Centers, Inc. 100% Texas
Green Brothers Nursery, Inc. 100% Georgia
</TABLE>
Tip Top Nurseries, Inc. is not presently in good standing with the State of
Arizona by virtue of its failure to timely file an annual report due December 8,
1997. Neither Tip Top Nurseries, Inc. or Wolfe Nursery, Inc. are qualified to do
business in the State of California.
-vi-
<PAGE>
EXHIBIT "B"
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
SUNBELT NURSERY GROUP, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
We, the undersigned, the President and Secretary, respectively, of Sunbelt
Nursery Group, Inc., a Delaware corporation (the "Corporation"), DO HEREBY
CERTIFY that the following resolution was duly adopted by an independent
committee of the Board of Directors of the Corporation at a special meeting held
December 23, 1997:
"RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board of Directors by the Certificate of Incorporation, as
the same may heretofore have been amended, and pursuant to the provisions
of Section 151 of the General Corporation Law of the State of Delaware, the
Board of Directors does hereby provide for the issuance of a series of
preferred stock of the Corporation which is hereby given the designation of
Series A Cumulative Convertible Preferred Stock (the "Series A Preferred
Stock"), to consist of One Million Three Hundred Thousand (1,300,000)
shares, each of One Cent ($.01) par value, and the Board of Directors
hereby fixes the voting powers, preferences and relative, participating,
option or other special rights, and the qualifications, limitation or
restrictions thereof, of the shares of such series, as follows:
1. Dividends. The holders of shares of Series A Preferred Stock
---------
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for such purpose, cash dividends
at the annual rate of seven cents ($.07) per share, payable in arrears
annually on the thirty-first day of December of each year, commencing on
December 31, 1998. Cash dividends shall be cumulative for all periods as to
which the full cash dividend shall not have been paid. Such dividends may
be accrued by the Corporation without penalty. If the dividend on the
Series A Preferred Stock for any dividend period, and an amount equal to
all accrued but unpaid dividends relating to prior dividend periods, shall
not have been paid or set apart in full, the aggregate deficiency shall be
cumulative and shall be fully paid or set apart for payment before (i) any
dividend whatsoever is declared or paid upon, or any distribution is made
upon, any Common Stock or any other series of preferred stock or any
security convertible into Common Stock or preferred stock, whether in cash
or in property (other than a dividend or distribution payable in shares of
Common Stock), or (ii) any shares of Common Stock or any other series of
preferred stock are purchased or redeemed by the Corporation for cash or
property, or (iii) any moneys are paid to or made available for a
-vii-
<PAGE>
sinking fund for the purchase or redemption of any shares of Common Stock
or any other series of preferred stock. In the event any shares of Series A
Preferred Stock are issued, converted or redeemed on any date other than
the last day of the calendar year, the dividend payable with respect to
such year will be prorated and will accrue and be payable only with respect
to the portion of such year that such Series A Preferred Stock is
outstanding.
2. Rights on Liquidation, Dissolution or Winding Up.
------------------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, the holders of shares of Series A Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, whether from
capital, surplus or earnings, before any payment shall be made to the
holders of any stock ranking, on liquidation, junior to the Series A
Preferred Stock, which must include any and all subsequent issuances of any
other series of preferred stock, the amount of One Dollar ($1.00) in cash
for each share of Series A Preferred Stock, plus an amount equal to the
dividends accumulated and unpaid on each such share, if any, up to the date
of payment.
(b) If upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to
its stockholders shall be insufficient to pay the holders of shares of
Series A Preferred Stock the full amounts to which they each shall be
entitled pursuant to subparagraph (a) above (as appropriately adjusted in
the event of any stock dividend, stock split or combination or similar
recapitalization of the Corporation's capital stock), the holders of shares
of Series A Preferred Stock shall be entitled to receive ratably all of the
assets of the Corporation then available for distribution to its
stockholders.
(c) In the event of any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holders of shares of
Series A Preferred Stock of the full amount to which they shall be entitled
as aforesaid, holders of any class or classes of stock ranking junior to
the Series A Preferred Stock shall be entitled, to the exclusion of the
holders of shares of Series A Preferred Stock, to share, according to their
respective rights and preferences, in all remaining assets of the
Corporation available for distribution to its stockholders.
(d) For purposes of this Section 3, a merger or consolidation of the
Corporation with or into any other corporation or corporations in which the
stockholders of the Corporation do not own more than fifty percent (50%) of
the outstanding voting power (assuming conversion of all convertible
securities and the exercise of all outstanding options and warrants) of the
surviving corporation, or the sale of all or substantially all of the
assets of the Corporation, shall be treated as a liquidation, dissolution,
or winding up of the Corporation.
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4. Conversion.
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(a) The holder of any shares of Series A Preferred Stock shall have the
right, at such holder's option, at any time or from time to time, to convert any
such shares into the whole number of fully paid and non-assessable shares of
Common Stock, with the Series A Preferred Stock valued at one dollar ($1.00) per
share, and the Common Stock valued at the average daily Market Price (defined in
subparagraph (e) below) for the ten (10) trading days following the Closing of
the sale of the Series A Preferred Stock, but in no event shall the Common Stock
be valued at greater than $1.00 per share ("Series A Preferred Conversion
Ratio"). Such conversion shall be effected by the surrendering of the
certificates representing the shares of Series A Preferred Stock to be converted
in the manner provided by Section 4(b). The holder of any shares of Series A
Preferred Stock exercising the aforesaid right to convert such shares into
shares of Common Stock shall be entitled to payment of all declared and unpaid
dividends and accrued and undeclared dividends payable with respect to such
shares up to and including the Conversion Date (as hereinafter defined).
Notwithstanding anything herein to the contrary, such accrued dividends shall be
payable only through the most recently ended quarter prior to the Conversion
Date.
(b) The holder of any shares of Series A Preferred Stock may exercise the
conversion right pursuant to Section 4(a) hereof as to any part thereof by
delivering to the Corporation during regular business hours, at the office of
any transfer agent of the Corporation for the Series A Preferred Stock or at any
such other place as may be designated from time to time by the Corporation, or
to the Corporation (if required by the Corporation), the certificate or
certificates for the shares to be converted or so converted, duly endorsed or
assigned in blank, accompanied by written notice stating that the holder elects
to convert such shares and stating the name or names (with address or addresses)
in which the certificate or certificates for the shares of Common Stock are to
be issued. Conversion shall be deemed to have been effected with respect to
conversion under Section 4(a) hereof on the date when the aforesaid delivery is
made (the "Conversion Date"). As promptly as practicable thereafter, the
Corporation shall issue and deliver to or upon the written order of such holder,
to the place designated by such holder, a certificate or certificates for the
number of full shares of Common Stock to which such holder is entitled, together
with a check or cash in respect of any fractional interest in a share of Common
Stock as provided in Section 4(c) hereof and a check or cash in payment of all
declared and unpaid dividends and accrued and undeclared dividends (to the
extent permitted by law), if any, payable with respect to the shares of Series A
Preferred Stock so converted, up to and including the Conversion Date, which
have accrued through the most recently ended fiscal quarter. The person in whose
names the certificate or certificates for shares of Common Stock are to be
issued shall be deemed to have become a stockholder of record on the applicable
Conversion Date unless the transfer books of the Corporation are closed on that
date, in which event he or it shall be deemed to have become a stockholder of
record on the next succeeding date on which the transfer books are open, but the
Series A Preferred Conversion Ratio shall be that in effect on the Conversion
Date. Upon conversion of only a portion of the number of
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shares covered by a certificate representing shares of Series A Preferred
Stock surrendered for conversion, the Corporation shall issue and deliver
to, or upon the written order of, the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Series A Preferred Stock,
representing the unconverted portion of the certificate so surrendered,
which new certificate shall entitle the holder thereof to dividends on, and
all other rights relating to, the shares of Series A Preferred Stock
represented thereby to the same extent as if the certificate theretofore
covering such unconverted shares had not been surrendered for conversion.
(c) No fractional shares of Common Stack or scrip shall be issued
upon conversion of any shares of Series A Preferred Stock. If more than one
(1) share of Series A Preferred Stock shall be surrendered for conversion
at any one time by the same holder, the number of full shares of Common
Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series A Preferred Stock so surrendered.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series A Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the closing price of the Common Stock as of
the last business day immediately prior to the surrender date.
(d) The Series A Preferred Conversion Ratio shall be subject to
adjustment from time to time as follows:
(i) If, at any time after an original date of issuance, the
number of shares of Common Stock issued and outstanding is increased
by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, following the
record date fixed for the determination of holders of Common Stock or
of those entitled to receive such stock dividend, subdivision or
split-up, the Series A Preferred Conversion Ratio shall be
appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of Series A Preferred Stock shall
be increased in proportion to such increase in outstanding shares.
(ii) If, at any time after the original date of issuance, the
number of shares of Common Stock issued and outstanding is decreased
by a combination of the issued and outstanding shares of Common Stock,
then, following the record date for such combination, the Series A
Preferred Conversion Ratio shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each
share of Series A Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
(iii) If, at any time after the original date of issuance, any
shares of Series A Preferred Stock are converted into such shares of
Common Stock, the Series A Preferred Conversion Ratio shall, at the
option of the holder, be
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<PAGE>
appropriately increased so as to account for the accrued and unpaid
dividends on the Series A Preferred Stock through the most recently
ended fiscal quarter, or, at the option of the holder, accrued and
unpaid dividends shall be paid in cash upon conversion as soon as
funds are legally available therefor.
(iv) In case, at any time after the original date of issuance,
there occurs a capital reorganization, a reclassification of the stock
of the Corporation (other than a change in par value or from par value
to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), the
consolidation or merger of the Corporation with or into another entity
(other than a subsidiary merger or a consolidation or merger in which
the Corporation is the continuing corporation and which does not
result in any change in the Common Stock), or the sale or other
disposition of all or substantially all the properties and assets of
the Corporation to any other entity (each, an "Event"), each issued
and outstanding share of Series A Preferred Stock shall be convertible
after such Event (unless, in the case of an Event, payment shall have
been made to the holders of all shares of Series A Preferred Stock of
the full amount to which they shall have been entitled pursuant to
Section 3 hereof), into the kind and number of shares of stock or
other securities or property of the Corporation or of the corporation
resulting from such consolidation or surviving such merger or to which
such properties and assets shall have been sold or otherwise disposed,
to which the holder of the number of shares of Common Stock
deliverable (immediately prior to the time of such Event) upon
conversion of such share would have been entitled upon such Event. The
provisions of this Section 4(d)(iv) shall similarly apply to
successive Events.
(v) All calculations under this Section 4(e) shall be made to
the nearest 1/10 of a cent or to the nearest 1/10 of a share, as the
case may be.
(vi) For the purpose of any computation hereunder, Market Price
for any day shall mean the average sales prices on such day on all
domestic stock exchanges on which the Common Stock may then be listed,
or, if no sale took place on such day on any such exchange, the
average of the closing bid and asked prices on such day, as officially
quoted on such exchanges, or if the Common Stock is not at the time
listed or admitted for trading on any domestic stock exchange, then
the last sales price as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), if
available, or the average of the last bid and asked prices on such day
as reported by NASDAQ, as the case may be, or if, on any day in
question, the security shall not be quoted on the NASDAQ, then such
price shall be equal to the average of the last reported bid and asked
prices on such day as reported by the National Quotation Bureau, Inc.
(or any similar reputable quotation and reporting service), or if such
quotation is not reported by the National Quotation Bureau, Inc. or if
there is no such firm, then as furnished by any member of the National
Association of Securities Dealers, Inc. selected by the Corporation,
and if no such member is furnishing
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such quotation, then the Market Price for such shares shall be
established by the Board of Directors of the Corporation, utilizing
its reasonable good faith business judgment.
(vii) In any case in which the provisions of this Section 4(d)
require that an adjustment become effective immediately after a record
date for an event, the Corporation may defer until the occurrence of
such event (i) the issuance to the holder of any share of Series A
Preferred Stock converted after such record date, and before the
occurrence of such event, of such additional shares of capital stock
issuable upon such conversion by reason of the adjustment required by
such event over and above the shares of capital stock issuable upon
such conversion before giving effect to such adjustment, and (ii) the
payment to such holder of any amount in cash in lieu of a fractional
share of capital stock pursuant to Section 4(c); provided, however,
that the Corporation shall deliver to such holder an appropriate
instrument evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event requiring such
adjustment.
(e) Whenever the Series A Preferred Conversion Ratio (or Series A
Preferred Conversion Price) shall be adjusted as provided in Section 4(d),
the Corporation shall forthwith file, at the office of the transfer agent
for the Series A Preferred Stock or at such other place as may be
designated by the Corporation from time to time, a statement, signed by a
designated corporate officer, showing in reasonable detail the facts
requiring such adjustment and the Series A Preferred Conversion Ratio (or
Series A Preferred Conversion Price) that shall be in effect after such
adjustment. The Corporation shall also cause a copy of such statement to be
sent by first-class mail, postage prepaid, to each holder of shares of
Series A Preferred Stock at his or its address appearing on the
Corporation's records. Where appropriate, such copy may be given in advance
and may be included as part of a notice required to be mailed under the
provisions of Section 4(f).
(f) In the event the Corporation shall propose to take any action on
the type described in clauses (i), (ii), (iii) or (iv) of Section 4(d), the
Corporation shall give notice to each holder of shares of Series A
Preferred Stock, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take
place. Such notice shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Series A
Preferred Conversion Ratio (or Series A Preferred Conversion Price) and the
number, kind or class of shares or other securities or property which shall
be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Series A Preferred Stock, as the
case may be. In the case of any action which would require the fixing of a
record date, such notice shall be given at least twenty (20) days prior to
the date so fixed, and in case of all other action, such notice shall be
given at least thirty (30) days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.
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<PAGE>
(g) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any shares of Series A
Preferred Stock; provided, however, that the Corporation shall not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in
a name other than that of the holder of the Shares of Series A Preferred
Stock in respect of which such shares are being issued.
(h) All shares of Common Stock which may be issued in connection
with the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable and free from
all taxes, liens or charges with respect thereto, and will not be subject
to any sinking fund provision.
(i) The Corporation shall at all times reserve and keep available out
of its Common Stock (whether authorized but unissued shares reserved by
it free from preemptive rights or issued shares which have been reacquired
by it) the number of full shares of such Common Stock into which all shares
of Series A Perferred Stock from time to time outstanding are convertible.
5. Voting.
------
The holders of Series A Preferred Stock shall, by virtue of their
ownership thereof, have the same voting powers as holders of the Company's
Common Stock. Whenever the holders of the Corporation's Common Stock shall be
entitled to exercise voting rights, the holder of the Series A Perferred Stock
shall also be entitled to one vote per share of Series A Preferred Stock so
held.
6. Restrictions on Transfer.
------------------------
No holder of shares of Series A Preferred Stock may transfer any such
shares except to (i) an "Accredited Investor" as such term is defined in Rule
501(a) adopted by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (as the same may be modified from time to rime or in any
successor provision or statute) and then only in transactions aggregating fifty
thousand (50,000) shares or more, or (ii) an affiliate of the holder, which
affiliate is also an "Accredited Investor".
IN WITNESS WHEREOF, this Certificate has been made under the seal of the
said SUNBELT NURSERY GROUP, INC. and has been signed by Timothy R. Duoos,
its President, and attested to by Chad Ruth, its Secretary, this 30th day of
December, 1997.
/s/ Timothy R. Duoos
---------------------------------
Timothy R. Duoos, President
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<PAGE>
Attest:
/s/ Chad Ruth
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Chad Ruth, Secretary
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EXHIBIT 99.2
MINUTES OF EXECUTIVE COMMITTEE MEETING
OCTOBER 10, 1997
Mr. Timothy Duoos called the meeting to order at approximately 1:30 P.M. C.D.T..
The meeting of the Executive Committee was held via telephone with Directors
Duoos and Burwell present.
Mr. Duoos explained the current negotiations with Citicorp Resources Finance to
refinance the company's forklifts. Citicorp is requiring a limited one-year
guarantee from Mr. Duoos to provide a financing package. Mr Duoos is willing to
guarantee the debt and American National Bank has also approved of the
guarantee.
As a consideration for the guaranty, Mr. Burwell suggested that Mr. Duoos be
allocated 60,000 options to purchase Sunbelt Nursery Group stock at the trading
price of the Company's stock as of the guarantee date.
After discussing the terms further, Mr. Duoos agreed that these terms were
reasonable and it was therefor;
RESOLVED, that Mr. Duoos would agree to guarantee the debt in exchange for
options to purchase 60,000 shares of Sunbelt Nursery Group, Inc. (SBN) common
stock at the trading price at close of business the day before the effective
date of the guarantee.
There being no further business the Executive Committee meeting was adjourned at
approximately 1:45 P.M. C.D.T..
/s/ Timothy R. Duoos
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Timothy R. Duoos
